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As filed with the Securities and Exchange Commission on October 13, 2000
Registration Number 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
ALAMOSA HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
Delaware 4812 75-2890997
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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5225 S. Loop 289
Lubbock, Texas 79424
(806) 722-1100
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
David E. Sharbutt
Chief Executive Officer
Alamosa Holdings, Inc.
5225 S. Loop 289
Lubbock, Texas 79424
(806) 722-1100
(Name, address, including zip code and telephone number, including area
code, of agent for service)
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Copies to:
Fred B. White, III, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effectiveness of this Registration Statement and all other
conditions to the proposed reorganization described herein have been satisfied
or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (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
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT (2) OFFERING PRICE (1) (2) FEE
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Common Stock, par value $.01 per share 67,966,589 $12.1875 $828,342,803 $218,682.50
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(1) Assumes that 67,680,089 shares of common stock, par value $0.01 per
share, of Alamosa PCS Holdings, Inc. are converted into shares of the
Registrant's common stock at the exchange ratio of one share of
Registrant's common stock for each share of Alamosa common stock
pursuant to the transaction to which this Registration Statement
relates. This number is based upon the number of shares of Alamosa
common stock issued and outstanding on October 11, 2000 and shares of
Alamosa common stock issuable pursuant to stock options and other
benefit plans on or prior to October 11, 2000.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), promulgated under the Securities Act, based on
the average of the high and low prices for the Alamosa common stock as
reported on The Nasdaq National Market for October 12, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, 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.
<PAGE>
[LOGO OF ALAMOSA PCS HOLDINGS, INC.]
TO THE STOCKHOLDERS OF ALAMOSA PCS HOLDINGS, INC.:
Alamosa PCS Holdings, Inc. has agreed to combine its operations with
Roberts Wireless Communications, L.L.C. and Washington Oregon Wireless, LLC in a
reorganization transaction in which Alamosa, Roberts and WOW will each become a
wholly-owned subsidiary of Alamosa Holdings, Inc., a newly formed Delaware
corporation ("Superholdings"). We are proposing the reorganization because we
believe that combining the strengths of Alamosa with Roberts and WOW will enable
us to better position ourselves to compete in the marketplace for wireless
personal communications services, commonly referred to as PCS, by expanding our
market presence, enhancing our scale economies and strengthening our
relationship with Sprint PCS. Following completion of the reorganization, we
would become the nation's largest Sprint PCS network partner.
When the reorganization is completed, you will receive one share of
Superholdings common stock for each share of Alamosa common stock you hold. We
expect that the exchange of your shares of Alamosa common stock for shares of
Superholdings common stock will be tax-free for federal income tax purposes. In
the reorganization, the former members of Roberts and WOW will receive a
combination of cash and Superholdings common stock in exchange for their
ownership interests in Roberts and WOW, as more fully described in the attached
proxy statement-prospectus. After completion of the reorganization, current
Alamosa stockholders will own approximately 75.8% of Superholdings, former
members of Roberts will own approximately 16.7% of Superholdings and former
members of WOW will own approximately 7.5% of Superholdings.
Alamosa's common stock is listed on The Nasdaq National Market under
the symbol "APCS." In connection with the reorganization, Superholdings will
apply to list its common stock on The Nasdaq National Market under the same
symbol.
YOUR VOTE IS IMPORTANT. WE CANNOT COMPLETE THE PROPOSED REORGANIZATION
WITHOUT THE APPROVAL OF OUR STOCKHOLDERS. OUR BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE REORGANIZATION TRANSACTIONS AND RECOMMENDS THAT YOU VOTE "FOR" THE
REORGANIZATION PROPOSALS DESCRIBED IN THE ATTACHED PROXY STATEMENT-PROSPECTUS.
To ensure that we will be able to grant sufficient future awards under
the long-term incentive plan to employees of Alamosa, and, if the reorganization
occurs, Roberts and WOW, our board of directors is also seeking your approval of
an amendment to Alamosa's 1999 long-term incentive plan to increase the number
of shares of common stock authorized for issuance under the plan and provide for
an automatic annual increase in shares available under the plan. In connection
with the reorganization, Superholdings will assume all of the obligations of
Alamosa under the long-term incentive plan and all awards granted thereunder.
Information about the proposed reorganization and the proposal to amend
the long-term incentive plan is contained in the attached proxy
statement-prospectus. We urge you to read this material, including the section
describing risk factors relating to the reorganization and the business of
Superholdings following the reorganization.
The date, time and place of the special meeting is as follows:
[ ], 2000
[ ] a.m. local time
5225 S. Loop 289
Lubbock, Texas
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We strongly support the reorganization and enthusiastically recommend
that you vote in favor of the reorganization proposals and the proposal to amend
the long-term incentive plan.
/s/ David E. Sharbutt
David E. Sharbutt
Chairman and Chief Executive Officer
Alamosa PCS Holdings, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED IN
CONNECTION WITH THE REORGANIZATION OR DETERMINED IF THIS PROXY
STATEMENT-PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This proxy statement-prospectus is dated [ ], 2000, and is first
being mailed to stockholders of Alamosa on or about [ ], 2000.
<PAGE>
[LOGO OF ALAMOSA PCS HOLDINGS, INC.]
ALAMOSA PCS HOLDINGS, INC.
5225 S. Loop 289
Lubbock, Texas 79424
Notice of Special Meeting of Alamosa PCS Holdings, Inc. Stockholders
[ ], 2000
at [ ] a.m. local time
To the stockholders of Alamosa PCS Holdings, Inc.:
Notice is hereby given that a special meeting of stockholders of
Alamosa PCS Holdings, Inc. will be held at Alamosa's executive offices at
5225 S. Loop 289, Lubbock, Texas on [ ], 2000 at [ ]
a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to adopt a reorganization
agreement between Alamosa and a newly-formed Delaware corporation named Alamosa
Holdings, Inc. ("Superholdings") pursuant to which:
o Alamosa will become a wholly-owned subsidiary of
Superholdings; and
o each share of Alamosa common stock will be automatically
converted into one share of Superholdings common stock.
2. To consider and vote upon a proposal to approve the issuance of
shares of Superholdings common stock in connection with the acquisition by
Superholdings of Roberts Wireless Communications, L.L.C. and Washington Oregon
Wireless, LLC pursuant to which:
o Roberts and WOW will become wholly-owned subsidiaries of
Superholdings; and
o the former members of Roberts and WOW will receive a
combination of cash and Superholdings common stock in exchange
for their ownership interests in Roberts and WOW, as more
fully described in the attached proxy statement-prospectus.
3. To consider and vote upon a proposal to approve the amendment to
Alamosa's 1999 long-term incentive plan to:
o increase the number of shares of Alamosa common stock reserved
for issuance under the long-term incentive plan by 6,000,000
shares, from 7,000,000 shares to 13,000,000 shares; and
o increase on December 31 of each year, from and including
December 31, 2000, the number of shares of Alamosa common
stock reserved for issuance under the long-term
<PAGE>
incentive plan by a number of shares equal to 1% of the total
number of shares of Alamosa (and after the assumption of the
long-term incentive plan, of Superholdings) outstanding on
such date.
4. To transact any other business as may properly come before the
special meeting or any adjournment or postponement of the special meeting.
These items of business are described in the attached proxy
statement-prospectus. Holders of record of Alamosa common stock at the close of
business on [ ], 2000, the record date, are entitled to notice of, and to
vote at, the special meeting and any adjournments or postponements of the
special meeting. A list of stockholders entitled to vote at the special meeting
will be available for examination by Alamosa stockholders, for any purpose
germane to the meeting, during ordinary business hours beginning 10 days prior
to the date of the special meeting, at Alamosa's executive offices at 5225 S.
Loop 289, Lubbock, Texas.
WE CANNOT COMPLETE THE PROPOSED REORGANIZATION UNLESS OUR STOCKHOLDERS
APPROVE BOTH THE ADOPTION OF THE ALAMOSA REORGANIZATION AGREEMENT AND THE
ISSUANCE OF SHARES OF SUPERHOLDINGS COMMON STOCK IN THE ROBERTS AND WOW MERGERS.
Adoption of the reorganization agreement between Alamosa and Superholdings
requires the affirmative vote of the holders of a majority of the shares of
Alamosa common stock outstanding as of the record date. Approval of the issuance
of the shares of Superholdings common stock in the Roberts and WOW acquisitions
requires the affirmative vote of the holders of a majority of the total votes
cast on the proposal at the special meeting.
We will implement the proposed amendment to the long-term incentive
plan if we receive stockholder approval, even if the reorganization does not
occur. Approval of the proposed amendment requires the affirmative vote of the
holders of a majority of the shares of Alamosa common stock present or
represented by proxy at the special meeting and entitled to vote.
To vote your shares, you may complete and return the enclosed proxy
card. If you are a holder of record, you may also cast your vote in person at
the special meeting. If your shares are held in an account at a brokerage firm
or bank, you must instruct them on how to vote your shares. If you do not vote
or do not instruct your broker or bank how to vote, it will have the same effect
as a vote against the adoption of the reorganization agreement between Alamosa
and Superholdings.
By order of the
Board of Directors
of Alamosa PCS
Holdings, Inc.
/s/ Kendall W. Cowan
Kendall W. Cowan
Chief Financial Officer and Secretary
Lubbock, Texas
[ ], 2000
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TABLE OF CONTENTS
Page
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QUESTIONS AND ANSWERS ABOUT THE REORGANIZATION....................................................................1
SUMMARY OF THE PROXY STATEMENT-PROSPECTUS.........................................................................4
RISK FACTORS.....................................................................................................24
Risks Relating to the Reorganization........................................................................24
Risks Relating to Superholdings' Business, Strategy and Operation...........................................28
Risks Related to the Relationships with Sprint PCS..........................................................34
Risks Particular to Indebtedness of Superholdings...........................................................39
Risks Related to the Wireless Personal Communications Services Industry.....................................42
THE SPECIAL MEETING..............................................................................................45
Date, Time and Place of the Special Meeting.................................................................45
Purpose of the Special Meeting..............................................................................45
Record Date for the Special Meeting.........................................................................45
Quorum; Votes Required for Approval of the Reorganization Proposals and the
Amendment to the Long-Term Incentive Plan..........................................................46
Proxies ....................................................................................................46
Solicitation of Proxies.....................................................................................47
THE REORGANIZATION...............................................................................................48
General ....................................................................................................48
Background of the Reorganization............................................................................49
Reasons for the Reorganization..............................................................................52
Opinions of Alamosa's Financial Advisor.....................................................................55
Interests of Alamosa Directors and Executive Officers in the Reorganization.................................63
Management of Superholdings after the Reorganization........................................................63
Superholdings Charter and By-Laws...........................................................................64
Citicorp Credit Facility....................................................................................64
Material United States Federal Income Tax Consequences of the Reorganization................................68
Regulatory Matters..........................................................................................71
Accounting Treatment........................................................................................71
Restrictions on Sales of Shares by Affiliates of Alamosa and Others.........................................72
The Nasdaq National Market Listing of Superholdings Common Stock to be Issued in the
Reorganization.................................................................................72
Appraisal Rights ..........................................................................................73
Delisting and Deregistration of Alamosa Common Stock after the Reorganization...............................73
THE ALAMOSA MERGER...............................................................................................74
The Alamosa Merger..........................................................................................74
Effective Time of the Alamosa Merger........................................................................74
Conditions to the Alamosa Merger............................................................................74
Procedure to Exchange Certificates..........................................................................75
Treatment of Alamosa Stock Options..........................................................................76
i
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Page
Covenants Regarding Completion of the Transaction...........................................................76
Termination and Amendment...................................................................................76
THE ROBERTS MERGER...............................................................................................77
The Roberts Merger..........................................................................................77
Effective Time of the Roberts Merger........................................................................77
Conditions to the Roberts Merger............................................................................77
Conversion of Membership Units..............................................................................77
Covenant Relating to Conduct of Business....................................................................81
Covenants Regarding Completion of the Transaction...........................................................81
Agreements with Michael and Steven Roberts..................................................................82
Covenants Regarding Compensation Matters....................................................................82
Termination ................................................................................................85
Representations and Warranties..............................................................................87
Survival of Representations.................................................................................89
Indemnification ............................................................................................89
Amendment, Extension and Waiver.............................................................................89
Expenses....................................................................................................90
Loan and Services Agreements................................................................................90
THE WOW MERGER...................................................................................................92
The WOW Merger .............................................................................................92
Conversion of Membership Units..............................................................................92
Effective Time of the WOW Merger............................................................................92
Conditions to the WOW Merger................................................................................92
Covenant Relating to Conduct of Business....................................................................96
Covenants Regarding Completion of the Transaction...........................................................96
Covenants Regarding Compensation Matters....................................................................97
Termination ................................................................................................98
Representations and Warranties.............................................................................100
Post-Closing Agreements....................................................................................101
Survival of Representations................................................................................102
Indemnification ...........................................................................................102
Amendment, Extension and Waiver............................................................................102
Expenses ..................................................................................................103
Loan and Services Agreements...............................................................................103
Voting Agreement Between Alamosa and Reagan N. Silber......................................................104
INFORMATION ABOUT ALAMOSA PCS HOLDINGS, INC.....................................................................105
ALAMOSA'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................................................124
DIRECTORS AND EXECUTIVE OFFICERS OF ALAMOSA.....................................................................139
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................................................................152
INFORMATION ABOUT ROBERTS WIRELESS COMMUNICATIONS, L.L.C........................................................157
ii
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Page
ROBERTS' MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................................................159
INFORMATION ABOUT WASHINGTON OREGON WIRELESS, LLC...............................................................166
WOW'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................................................167
AFFILIATION AGREEMENTS WITH SPRINT PCS..........................................................................174
REGULATORY ENVIRONMENT..........................................................................................187
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF ALAMOSA,
WOW HOLDINGS, ROBERTS HOLDINGS AND SUPERHOLDINGS................................................................193
Alamosa ........................................................................................................193
Roberts Holdings ...............................................................................................197
WOW Holdings ...................................................................................................198
Superholdings ..................................................................................................199
DESCRIPTION OF SUPERHOLDINGS CAPITAL STOCK......................................................................203
AMENDMENT TO ALAMOSA'S 1999 LONG-TERM INCENTIVE PLAN............................................................213
LEGAL MATTERS...................................................................................................219
EXPERTS .......................................................................................................219
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)...................................................220
NOTES TO PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS (UNAUDITED).......................................................................224
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION................................................................231
WHERE YOU CAN FIND MORE INFORMATION.............................................................................232
OTHER MATTERS...................................................................................................233
INDEX TO FINANCIAL STATEMENTS...................................................................................F-1
ALAMOSA FINANCIAL STATEMENTS....................................................................................F-3
ROBERTS FINANCIAL STATEMENTS...................................................................................F-46
WOW FINANCIAL STATEMENTS.......................................................................................F-61
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iii
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APPENDIX A - - Agreement and Plan of Reorganization - - Alamosa
APPENDIX B - - Agreement and Plan of Reorganization - - Roberts
APPENDIX C - - Agreement and Plan of Reorganization - - WOW
APPENDIX D - - Opinion of Salomon Smith Barney Inc. - - Roberts
APPENDIX E - - Opinion of Salomon Smith Barney Inc. - - WOW
APPENDIX F - - Form of Amended and Restated 1999 Long-Term Incentive Plan
iv
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QUESTIONS AND ANSWERS ABOUT THE REORGANIZATION
Q: WHY IS ALAMOSA PROPOSING THE REORGANIZATION?
A: By acquiring Roberts and WOW, Alamosa would become the nation's largest
Sprint PCS network partner, increasing its licensed population by 47%
from 8.4 million residents to 12.5 million residents. These
acquisitions are expected to produce significant value for Alamosa and
its stockholders by expanding Alamosa's market presence into several
highly attractive and growing markets in Missouri, Washington and
Oregon, enhancing Alamosa's scale economies, and strengthening
Alamosa's relationship with Sprint PCS.
Q: WHAT WILL I RECEIVE IN THE REORGANIZATION?
A: Each share of Alamosa common stock you own will be automatically
converted into one share of Superholdings common stock.
Q: WILL I RECOGNIZE GAIN OR LOSS IN CONNECTION WITH THE EXCHANGE OF MY
SHARES IN THE REORGANIZATION?
A: No. In general, you will not recognize gain or loss on the exchange of
your Alamosa common stock in the reorganization, except to the extent
you receive cash instead of fractional shares.
Q: WILL I RECEIVE DIVIDENDS ON MY SUPERHOLDINGS SHARES?
A: Like Alamosa, Superholdings does not currently expect to pay dividends
on its common stock in the foreseeable future.
Q: WHAT IS THE RELATIONSHIP AMONG THE THREE PROPOSALS TO BE VOTED UPON AT
THE SPECIAL MEETING?
A: Completion of the reorganization is conditioned upon approval by
Alamosa stockholders of both the proposal to adopt the Alamosa
reorganization agreement and the proposal to approve the issuance of
shares of Superholdings common stock in connection with the WOW and
Roberts acquisitions. Both of these proposals must be approved to
accomplish the reorganization. The amendment to Alamosa's long-term
incentive plan is not conditioned on the approval of either of the
other two proposals.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in
this proxy statement- prospectus, you should respond by completing,
signing and dating your proxy card and returning it in the enclosed
postage paid envelope as soon as possible so that your shares may be
represented at the special meeting.
Q: WHAT IF I DO NOT VOTE?
A: o Failure to return your proxy will (i) have the same effect
as a vote against the adoption of the reorganization agreement
between Alamosa and Superholdings and (ii) result in your
shares not being counted for purposes of determining the
presence of a quorum at the special
<PAGE>
meeting or determining whether we have received the votes
required to approve the issuance of Superholdings common stock
in the Roberts and WOW acquisitions or the amendment to the
long-term incentive plan.
o If you return your proxy card signed but do not indicate how
you want to vote, your proxy will be counted as a vote: (i)
"FOR" the adoption of the Alamosa reorganization agreement;
(ii) "FOR" the issuance of shares of Superholdings common
stock in the WOW and Roberts acquisitions; and (iii) "FOR" the
amendment to the long-term incentive plan.
o If you return your proxy card and abstain from voting, your
proxy will have the same effect as a vote against the adoption
of the Alamosa reorganization agreement and a vote against the
amendment to the long-term incentive plan but will not be
counted as a vote cast on, and therefore will not affect the
outcome of, the proposal to approve the issuance of shares of
Superholdings common stock in the Roberts and WOW
acquisitions.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES?
A: Your broker will vote your shares only if you provide instructions on
how to vote. You should follow the directions provided by your broker
regarding how to vote your shares. Without instructions, your shares
will not be voted by your broker, which will have the same effect as a
vote against the adoption of the Alamosa reorganization agreement but
will have no effect on the outcome of proposals to approve the issuance
of shares of Superholdings common stock in the WOW and Roberts
acquisitions or the amendment to the long-term incentive plan.
Q: CAN I CHANGE MY VOTE AFTER I HAVE DELIVERED MY PROXY?
A: Yes. You can change your vote at any time before your proxy is voted at
the special meeting. You can do this in one of three ways:
o If you are a holder of record, you can attend the special
meeting and vote in person.
o You can send a written notice that you are revoking your
proxy.
o You can complete and submit a new proxy.
If you choose either of these last two methods, you must submit your
notice of revocation or your new proxy to the secretary of Alamosa
before the special meeting at the address on page 47. If your shares
are held in an account at a brokerage firm or bank, you should contact
your brokerage firm or bank to change your vote.
Q: AM I ENTITLED TO APPRAISAL RIGHTS?
A: No. Under Delaware law, Alamosa stockholders are not entitled to
appraisal rights in connection with the reorganization.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
2
<PAGE>
A: No. After the reorganization is completed, you will receive written
instructions from the exchange agent on how to exchange your stock
certificates for shares of Superholdings common stock.
Q: WHERE WILL SHARES OF SUPERHOLDINGS COMMON STOCK BE LISTED?
A: Superholdings intends to apply to list its common stock on The Nasdaq
National Market under Alamosa's current symbol "APCS."
Q: WHEN DO YOU EXPECT THE REORGANIZATION TO BE COMPLETED?
A: Alamosa, Roberts and WOW are working to complete the reorganization as
quickly as possible. We currently expect to complete the reorganization
by December 31, 2000. However, we cannot assure you that we will be
able to complete the reorganization by that time.
Q: WHO CAN HELP ANSWER QUESTIONS?
A: Questions about the reorganization or how to submit proxies, or
requests for additional copies of this proxy statement-prospectus or
the enclosed proxy card, should be directed to:
Alamosa PCS Holdings, Inc.
5225 S. Loop 289
Lubbock, Texas 79424
(806) 722-1100
Attention: Kendall W. Cowan
Chief Financial Officer and Secretary
3
<PAGE>
SUMMARY OF THE PROXY STATEMENT-PROSPECTUS
This summary highlights selected information in the proxy
statement-prospectus. It does not contain all of the information that is
important to you. You should carefully read this entire proxy statement-
prospectus and the other documents we refer you to for a complete understanding
of the reorganization transactions. In particular, you should read the
agreements attached to this proxy statement-prospectus as Appendix A, Appendix B
and Appendix C. In addition, please also refer to the section which we have
entitled "Where You Can Find More Information" that begins on page 232 for
additional information about Alamosa PCS Holdings, Inc. on file with the
Securities and Exchange Commission. We encourage you to read this additional
information. Unless the context otherwise requires, references herein to
Superholdings after completion of the reorganization are to Alamosa Holdings,
Inc. and its subsidiaries, and references to Alamosa are to Alamosa PCS
Holdings, Inc. and its subsidiaries, whether before or after the reorganization.
THE COMPANIES (SEE PAGES 105, 157 AND 166)
ALAMOSA PCS HOLDINGS, INC.
5225 S. Loop 289
Lubbock, Texas 79424
(806) 722-1100
Alamosa is a provider of wireless personal communication services,
commonly referred to as PCS, in the Southwestern and Midwestern United States.
Alamosa is a network partner of Sprint PCS, the personal communications services
group of Sprint Corporation. Sprint PCS, directly and through affiliates such as
Alamosa, provides wireless services in more than 4,000 cities and communities
across the country. Alamosa has the exclusive right to provide digital wireless
personal communications services under the Sprint and Sprint PCS brand names in
a territory primarily located in Texas, New Mexico, Arizona, Colorado and
Wisconsin with approximately 8.4 million residents. Through December 31, 1999,
Alamosa was a development stage company.
Alamosa launched Sprint PCS service in Laredo, Texas in June 1999, and
has since commenced service in eleven additional markets: Albuquerque, Santa Fe
and Las Cruces, New Mexico, as well as El Paso, Lubbock, Amarillo, Midland,
Odessa, Abilene, San Angelo and Eagle Pass/Del Rio, Texas. Alamosa's systems
cover approximately 3.0 million residents out of approximately 3.9 million total
residents in those markets. The number of residents covered by Alamosa's systems
does not represent the number of Sprint PCS subscribers that Alamosa expects to
be based in its territory. As of June 30, 2000, 69,569 Sprint PCS subscribers
were based in Alamosa's territory.
ROBERTS WIRELESS COMMUNICATIONS, LLC
1408 North Kingshighway, Suite 300
St. Louis, Missouri 63113
(314) 367-4600
Based in St. Louis, Missouri, Roberts has an affiliation agreement with
Sprint PCS under which it has the exclusive right to provide wireless personal
communications services under the Sprint PCS brand name in a territory located
primarily in Missouri with approximately 2.5 million residents. Roberts provides
personal communications services in the areas surrounding Kansas City, the home
of Sprint PCS, and St. Louis, including the Interstate 70 corridor connecting
the two cities. Roberts currently provides service to
4
<PAGE>
approximately 12,000 customers and expects to be fully built out by December
2000 and to cover 1.5 million total residents.
WASHINGTON OREGON WIRELESS, LLC
5665 SW Meadows Road, Suite 100
Lake Oswego, Oregon 97035
(503) 431-2353
WOW, based in Lake Oswego, Oregon, has the exclusive right to provide
wireless personal communication services under the Sprint PCS brand name in
territories located primarily in Washington and Oregon with approximately 1.5
million residents. By the end of 2001, the WOW network is expected to cover
approximately 1.2 million people and will include the cities of Ellensburg,
Yakima, and Kennewick, Washington and Medford, Klamath Falls, Grants Pass and
Roseburg, Oregon, as well as key travel corridors within Washington and Oregon,
including portions of four interstate highways and 15 state and U.S. highways.
According to US Census projections, the population growth rate in the WOW
service area is over 1.5 percent per year as compared to a national average of
0.9 percent. WOW launched its first markets in September 2000 and is expected to
operate a network that will cover approximately 717,516 people by the end of
2000.
ALAMOSA HOLDINGS, INC.
5225 S. Loop 289
Lubbock, Texas 79424
(806) 722-1100
Superholdings is a newly formed corporation that has not, to date,
conducted any activities other than those incident to its formation. Upon
completion of the reorganization, Alamosa, Roberts and WOW will each become
wholly-owned subsidiaries of Superholdings. The business of Superholdings will
be the combined businesses currently conducted by Alamosa, Roberts and WOW.
After the reorganization described below, it is expected that
Superholdings will have a licensed service area covering approximately 12.5
million people.
STRUCTURE OF THE REORGANIZATION (SEE PAGE 48)
The "reorganization" is comprised of the following steps:
o Alamosa formed Superholdings and Alamosa Sub I, Inc., a
Delaware corporation and a wholly-owned subsidiary of
Superholdings.
o Roberts formed a holding company, Roberts Wireless Holdings,
LLC, a Missouri limited liability company, to hold all of the
membership interests of Roberts, and each member of Roberts
exchanged his membership interests in Roberts for membership
interests in Roberts Holdings.
o WOW formed a holding company, WOW Holdings, LLC, an Oregon
limited liability company, to hold all of the membership
interests of WOW, and each member of WOW exchanged its
membership interests in WOW for membership interests in WOW
Holdings.
5
<PAGE>
o In substantially simultaneous transactions on the closing date
of the reorganization, (i) Roberts Holdings will merge with
and into Superholdings, with Superholdings surviving the
merger,(ii) WOW Holdings will merge with and into
Superholdings with Superholdings surviving the merger, and
(iii) Alamosa Sub will merge with and into Alamosa, with
Alamosa surviving the merger. We refer to these transactions
as the "Roberts merger," the "WOW merger" and the "Alamosa
merger."
o Superholdings formed Alamosa Holdings, LLC, a Delaware limited
liability company, and, after the Roberts merger and the WOW
merger, Superholdings will contribute all of its ownership
interests in Roberts and WOW to Alamosa Holdings, LLC. Alamosa
Holdings, LLC will be the borrower under a new senior credit
facility of up to $200.0 million. See "The
Reorganization-Citicorp Credit Facility."
We have entered into three separate agreements providing for the
Roberts merger, the WOW merger and the Alamosa merger. We refer to these
agreements individually as the "Roberts reorganization agreement," the "WOW
reorganization agreement" and the "Alamosa reorganization agreement," and
together as the "reorganization agreements."
The organization of the companies before and after the reorganization
is illustrated in the reorganization chart on the following page.
6
<PAGE>
STRUCTURE BEFORE THE REORGANIZATION
<TABLE>
<CAPTION>
Roberts WOW Alamosa
<S> <C> <C>
Members of Roberts Members of WOW Stockholders of Alamosa
WOW Holdings LLC
Roberts Wireless ("WOW Holdings") Alamosa PCS Holdings, Inc.
Holdings LLC ("Alamosa")
("Roberts Holdings") 100%
100% Washington Oregon 100% 100%
Wireless, LLC
Roberts Wireless ("WOW") Alamosa PCS, Inc. Alamosa
Communications, LLC Operations, Inc.
("Roberts") 100%
Alamosa Operating Subs
</TABLE>
STRUCTURE AFTER THE REORGANIZATION
Former Roberts Members Former WOW Memebers Former Alamosa
Stockhodlers
16.7% 7.5% 75.8%
Alamosa Holdings, Inc.
("Superholdings")
100% 100%
Alamosa Holdings, LLC Alamosa PCS Holdings, Inc.
100% 100% 100% 100%
Roberts WOW Alamosa PCS, Inc. Alamosa
Operations, Inc.
100%
Alamosa Operating Subs
7
<PAGE>
SUPERHOLDINGS WILL ISSUE SHARES TO ALAMOSA STOCKHOLDERS AND WILL ISSUE SHARES
AND PAY CASH TO MEMBERS OF ROBERTS HOLDINGS AND WOW HOLDINGS (SEE
PAGES 77, 92 AND 74)
When the reorganization is complete:
o Each share of Alamosa common stock will automatically become
the right to receive one share of Superholdings common stock.
o The current members of Roberts Holdings will receive in the
aggregate 13.5 million shares of Superholdings common stock
and up to $4 million in cash.
o The current members of WOW Holdings will receive in the
aggregate 6.05 million shares of Superholdings common stock
and $12.5 million in cash.
ALAMOSA STOCKHOLDERS GENERALLY WILL NOT RECOGNIZE GAIN OR LOSS AS A RESULT OF
EXCHANGE OF THEIR SHARES (SEE PAGE 68)
Alamosa has structured the reorganization so that Alamosa stockholders
generally will not recognize gain or loss for United States federal income tax
purposes as a result of the exchange of their shares in connection with the
reorganization.
Tax matters are very complicated, and the tax consequences to you
resulting from the reorganization will depend on the facts of your own
situation. You should consult with your own tax advisor for a full understanding
of the tax consequences to you resulting from the reorganization.
ALAMOSA'S FINANCIAL ADVISOR HAS OPINED THAT THE EXCHANGE RATIO IN THE
REORGANIZATION IS FAIR TO ALAMOSA STOCKHOLDERS (SEE PAGE 55)
In deciding to approve the reorganization, the Alamosa board of
directors considered the separate opinions of its financial advisor, Salomon
Smith Barney Inc., that, as of the date of its opinions, and subject to and
based on the considerations referred to in its opinions, the exchange ratio of
1.0 share of Superholdings common stock for each share of Alamosa common stock
in connection with each of the Roberts merger and the WOW merger is fair, from a
financial point of view, to Alamosa stockholders. The full text of the written
opinions of Salomon Smith Barney is set forth as Appendix D and Appendix E to
this proxy statement-prospectus. Alamosa urges its stockholders to read the two
opinions of Salomon Smith Barney in their entirety.
WE CANNOT COMPLETE THE REORGANIZATION WITHOUT THE APPROVAL OF ALAMOSA'S
STOCKHOLDERS (SEE PAGE 45)
Alamosa is convening a special meeting of its stockholders to consider
and vote upon:
o a proposal to adopt the Alamosa reorganization agreement, and
o a proposal to approve the issuance of the shares of
Superholdings common stock in the Roberts and WOW mergers.
8
<PAGE>
We call these two proposals the "reorganization proposals." At the special
meeting, you will also be asked to consider and vote upon a proposal to amend
the long-term incentive plan as described below under the heading "We Are
Proposing an Amendment to Alamosa's 1999 Long-Term Incentive Plan to Increase
the Number of Shares Under the Plan."
We cannot complete the reorganization unless:
o the Alamosa reorganization agreement has been adopted by the
affirmative vote of the holders of a majority of the shares of
Alamosa common stock outstanding as of the record date, and
o the issuance of the shares of Superholdings common stock in
the Roberts and WOW mergers has been approved by the
affirmative vote of the holders of a majority of the votes
cast on the proposal at the special meeting.
As of [ ], 2000, the directors and executive officers of Alamosa and
their affiliates, including companies controlled by them, beneficially owned,
[ ] shares of Alamosa common stock or [ ]% of the outstanding shares of Alamosa
common stock entitled to vote at the special meeting. All such persons have
indicated a present intent to vote their shares in favor of the reorganization
proposals.
THE ALAMOSA BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE REORGANIZATION
PROPOSALS (SEE PAGE 52)
The Alamosa board of directors believes that the reorganization is
advisable and in your best interests, unanimously voted to approve the
reorganization transactions and unanimously recommends that you vote "FOR" the
adoption of the Alamosa reorganization agreement and "FOR" approval of the
issuance of the shares of Superholdings common stock in the Roberts and WOW
mergers.
ALAMOSA WILL HOLD A SPECIAL MEETING OF STOCKHOLDERS ON [__________], 2000
(SEE PAGE 45)
The Alamosa special meeting will be held at Alamosa's executive
offices at 5225 S. Loop 289, Lubbock, Texas on [ ], 2000
at [ ] a.m., local time.
ALAMOSA HAS SET [___________], 2000 AS THE RECORD DATE FOR THE SPECIAL
MEETING (SEE PAGE 45)
You can vote at the special meeting if you owned Alamosa common stock
at the close of business on [____________], 2000. On that date, there were
[_______] shares of Alamosa common stock outstanding and entitled to vote at the
special meeting.
ALAMOSA STOCKHOLDERS DO NOT HAVE APPRAISAL RIGHTS (SEE PAGE 73)
Under Delaware law, Alamosa stockholders are not entitled to appraisal
rights in connection with the reorganization.
9
<PAGE>
BOARD OF DIRECTORS AND MANAGEMENT FOLLOWING THE REORGANIZATION (SEE PAGE 63)
Following the reorganization, the Superholdings board of directors will
be comprised of eleven members and will be divided into three classes. The Class
I directors will stand for election at the annual meeting of stockholders to be
held in 2001. The Class II directors will stand for election at the annual
meeting of stockholders to be held in 2002. The Class III directors will stand
for election at the annual meeting of stockholders to be held in 2003. Each
director will serve for a term of three years, or until his or her successor has
been elected and qualified.
Class I: Class II: Class III:
Ray M. Clapp, Jr. Michael R. Budagher Tom M. Phelps
Jimmy R. White Schuyler B. Marshall David E. Sharbutt
Thomas Hyde Reagan W. Silber Scotty Hart
Steven C. Roberts Michael V. Roberts
After the reorganization, the following persons will serve as executive
officers of Superholdings:
<TABLE>
<CAPTION>
Name Position
<S> <C>
David E. Sharbutt....................Chairman of the Board of Directors and Chief Executive Officer
Jerry W. Brantley....................President and Chief Operating Officer
Kendall W. Cowan.....................Chief Financial Officer
Loyd I. Rinehart.....................Senior Vice President of Corporate Finance
Anthony Sabatino.....................Senior Vice President of Engineering and Network Operations
</TABLE>
ALAMOSA'S EMPLOYEE STOCK OPTIONS WILL BE ASSUMED BY SUPERHOLDINGS (SEE PAGE 76)
When the reorganization is completed, each outstanding Alamosa employee
stock option will be converted into an option to purchase shares of
Superholdings common stock at an exercise price per share equal to the exercise
price per share of Alamosa common stock before the conversion. The vesting of
the Alamosa employee stock options will not be accelerated by the
reorganization.
ALAMOSA OPERATIONS, INC. HAS ENTERED INTO SERVICES AGREEMENTS WITH ROBERTS AND
WOW (SEE PAGES 90 AND 103)
ROBERTS. On July 31, 2000, Alamosa Operations, Inc., a wholly-owned
subsidiary of Alamosa, entered into a services agreement with Roberts whereby,
effective July 31, 2000, Alamosa Operations began managing the operations of
Roberts pending completion of the Roberts merger. Under the Roberts services
agreement, Alamosa Operations provides various services in connection with the
management and operation of Roberts' business in consideration for a management
fee of $100,000 per month. Roberts also must reimburse Alamosa Operations for
certain costs and expenses incurred or paid by Alamosa Operations in providing
these services.
10
<PAGE>
WOW. On July 31, 2000, Alamosa Operations entered into a services
agreement with WOW whereby, effective September 1, 2000, Alamosa Operations
began managing the operations of WOW pending completion of the WOW merger. Under
the WOW services agreement, Alamosa Operations provides various services in
connection with the management and operation of WOW's business in consideration
for a management fee of $100,000 per month. WOW also must reimburse Alamosa
Operations for certain costs and expenses incurred or paid by Alamosa Operations
in providing these services.
ALAMOSA OPERATIONS HAS ENTERED INTO LOAN AGREEMENTS WITH ROBERTS AND WOW (SEE
PAGES 91 AND 104)
ROBERTS. On July 31, 2000, Roberts and Alamosa Operations also entered
into a loan agreement whereby Alamosa Operations agreed to lend up to $20.0
million to Roberts, to be used only for the purpose of funding Roberts' working
capital needs from July 31, 2000 through the completion of the Roberts merger.
As of the date of this proxy statement-prospectus approximately $[ ] million
has been funded under the loan agreement.
WOW. On July 31, 2000, WOW and Alamosa Operations also entered into a
loan agreement whereby Alamosa Operations agreed to lend up to $11.0 million to
WOW, to be used only for the purposes of (i) satisfying certain capital
contribution requirements under WOW's operating agreement, and (ii) funding
WOW's working capital needs from July 31, 2000 through the completion of the WOW
merger. As of the date of this proxy statement-prospectus approximately $[ ]
has been funded under the loan agreement.
COMPLETION OF THE REORGANIZATION IS SUBJECT TO SPECIFIED CONDITIONS (SEE
PAGES 77, 92 AND 74)
ROBERTS MERGER. Completion of the Roberts merger is subject to a number
of conditions, including:
o adoption of the Alamosa reorganization agreement and approval
of the issuance of the shares of Superholdings common stock in
the Roberts merger by the requisite votes of Alamosa
stockholders; and
o approval for listing on The Nasdaq National Market of the
Superholdings common stock to be issued to the members of
Roberts Holdings in the Roberts merger.
In addition, the obligation of each of Roberts, on the one hand, and
Alamosa and Superholdings, on the other, to complete the Roberts merger is
subject to a number of other conditions, including:
o accuracy of the representations and warranties made by the
other party, except where such inaccuracies do not have a
"material adverse change" on such other party;
o compliance by the other party with all of its covenants,
except where any noncompliance has not had a "material adverse
change" on such other party; and
o absence of any lawsuit, proceeding or injunction with respect
to the reorganization, except for such as would not have a
"material adverse change" on such other party.
11
<PAGE>
The Roberts reorganization agreement contains specific conditions that must be
met in order for a "material adverse change" with respect to Roberts or
Superholdings to exist. See "The Roberts Merger-Conditions to the Roberts
Merger."
WOW MERGER. Completion of the WOW merger is subject to a number of
conditions, including:
o adoption of the Alamosa reorganization agreement and approval
of the issuance of the shares of Superholdings common stock in
the WOW merger by the requisite votes of Alamosa stockholders;
o approval of the Federal Communications Commission of the
transfer of certain microwave licenses held by WOW; and
o approval for listing on The Nasdaq National Market of the
Superholdings common stock to be issued to the members of WOW
Holdings in the WOW merger.
In addition, the obligation of each of WOW, on the one hand, and
Alamosa and Superholdings, on the other, to complete the WOW merger is subject
to a number of other conditions, including:
o accuracy of the representations and warranties made by the
other party, except where such inaccuracies do not have a
"material adverse change" on such other party;
o compliance by the other party with all of its covenants,
except where any noncompliance has not had a "material adverse
change" on such other party; and
o absence of any lawsuit, proceeding or injunction with respect
to the reorganization, except as they would not have a
"material adverse change" on such other party.
The WOW reorganization agreement contains specific conditions that must be met
in order for a "material adverse change" with respect to WOW or Superholdings to
exist. See "The WOW Merger-Conditions to the WOW Merger."
ALAMOSA MERGER. Completion of the Alamosa merger is subject to a
number of conditions, including:
o adoption of the Alamosa reorganization agreement by the
requisite vote of the Alamosa stockholders; and
o completion of either the Roberts merger or the WOW merger.
THE AGREEMENTS PROVIDING FOR THE REORGANIZATION MAY BE TERMINATED UNDER CERTAIN
CIRCUMSTANCES (SEE PAGES 85, 98 AND 76)
ROBERTS MERGER. Alamosa and Roberts may mutually agree to terminate the
Roberts reorganization agreement at any time. Either Alamosa or Roberts may
unilaterally terminate the Roberts reorganization agreement if:
12
<PAGE>
o any of the other party's representations and warranties are
inaccurate, unless such inaccuracies in the aggregate have not
had a "material adverse change" on such other party;
o the other party fails to perform any of its covenants or
agreements in the Roberts reorganization agreement, unless
such failure to perform has not had a "material adverse
change" on such other party;
o any of the conditions to its obligations to complete the
Roberts merger has become impossible to satisfy;
o any governmental entity or court has issued a final,
non-appealable order or ruling permanently restraining or
prohibiting the Roberts merger; or
o the Roberts merger has not been completed by March 31, 2001.
WOW MERGER. Alamosa and WOW may mutually agree to terminate the WOW
reorganization agreement at any time. Either Alamosa or WOW may unilaterally
terminate the WOW reorganization agreement if:
o any of the other party's representations and warranties are
inaccurate, unless such inaccuracies in the aggregate have not
had a "material adverse change" on such other party;
o the other party fails to perform any of its covenants or
agreements in the WOW reorganiza tion agreement, unless such
failure to perform has not had a "material adverse change" on
such other party;
o any of the conditions to its obligations to complete the WOW
merger has become impossible to satisfy;
o any governmental entity or court has issued a final,
non-appealable order or ruling permanently restraining or
prohibiting the WOW merger; or
o the WOW merger has not been completed by March 31, 2001.
ALAMOSA MERGER. Alamosa and Superholdings may terminate the Alamosa
reorganization agreement only if all of the other reorganization agreements have
been validly terminated.
WE CANNOT COMPLETE THE REORGANIZATION UNLESS WE RECEIVE ALL REQUIRED REGULATORY
APPROVALS (SEE PAGE 71)
We may not complete the Alamosa merger until after notification to the
Antitrust Division of the Department of Justice and the Federal Trade Commission
and the expiration or early termination of the applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The applicable waiting
period under the Hart-Scott-Rodino Act with respect to the Alamosa merger
expired on September 9, 2000.
13
<PAGE>
The completion of the WOW merger is subject to obtaining the approval
of the FCC to the transfer of control of certain microwave licenses held by WOW.
On or about October 5, 2000, Alamosa and WOW filed appropriate applications with
the FCC seeking the necessary approval for the transfer of control to
Superholdings of the applicable FCC licenses and authorizations. The FCC has not
completed its review of the applications for consent to these transfers.
We currently anticipate FCC approval of all applications necessary for
completion of the reorganization by the end of the fourth quarter of 2000.
However, we cannot assure you that we will receive approval from the FCC.
We know of no other regulatory approvals necessary to complete the
reorganization.
WE HAVE RECEIVED A COMMITMENT FROM CITICORP TO PROVIDE A NEW SENIOR CREDIT
FACILITY (SEE PAGE 64)
Superholdings has entered into a commitment letter with Citicorp, North
America, Inc. and Salomon Smith Barney providing for a new senior credit
facility of up to $200.0 million to be made to Alamosa Holdings, LLC, a
wholly-owned subsidiary of Superholdings, to be used to fund the cash portion of
the consideration to be paid in the Roberts and WOW mergers and to fund the
working capital and build-out needs of Roberts and WOW, including the
refinancing of existing indebtedness of Roberts and WOW. The definitive
agreements providing for the Citicorp credit facility have not been completed.
The credit facility also will provide for the issuance to the lenders of
warrants to purchase up to 2% of Superholdings fully diluted common stock,
unless Superholdings contributes an additional $75.0 million of equity into
Alamosa Holdings, LLC by certain specified dates.
Citicorp's obligation to complete and fund under the Citicorp credit
facility is subject to a number of conditions, some of which are beyond the
control of Superholdings and Alamosa. Superholdings' and Alamosa's obligations
to complete the reorganization are not conditioned upon closing and funding
under the Citicorp credit facility. See "Risk Factors-Risks Relating to the
Reorganization: Superholdings will be contractually obligated to complete the
reorganization even if it is unable to obtain funding under the Citicorp credit
facility."
ACCOUNTING TREATMENT (SEE PAGE 71)
Each of the Roberts merger and the WOW merger will be accounted for
under the purchase method of accounting.
YOUR RIGHTS AS A STOCKHOLDER OF SUPERHOLDINGS WILL BE SUBSTANTIALLY THE SAME AS
YOUR RIGHTS AS A STOCKHOLDER OF ALAMOSA (SEE PAGE 64)
The amended and restated certificate of incorporation and the amended
and restated by-laws of Superholdings following completion of the reorganization
will be substantially identical to the certificate of incorporation and by-laws
of Alamosa today, except that stockholders of Superholdings will not have the
right to call a special stockholders meeting. Each of Superholdings and Alamosa
is a Delaware corporation. Accordingly, your rights as a stockholder of
Superholdings will be substantially the same as your rights as a stockholder of
Alamosa.
14
<PAGE>
WE ARE PROPOSING AN AMENDMENT TO ALAMOSA'S 1999 LONG-TERM INCENTIVE PLAN TO
INCREASE THE NUMBER OF SHARES UNDER THE PLAN (SEE PAGE 213)
To ensure that Alamosa, or, if the reorganization occurs,
Superholdings, will be able to grant sufficient future awards under the
long-term incentive plan to employees of Alamosa, and, if the reorganization
occurs, Roberts and WOW, the Alamosa board of directors is seeking stockholder
approval of an amendment to the long-term incentive plan to:
o increase the number of shares of common stock reserved for
issuance under the long-term incentive plan by 6,000,000
shares, from 7,000,000 shares to 13,000,000 shares; and
o increase on December 31 of each year, from and including
December 31, 2000, the number of shares of Alamosa's common
stock reserved for issuance under the long-term incentive plan
by a number of shares equal to 1% of the total number of
shares of Alamosa, and, after the assumption of the long-term
incentive plan, of Superholdings, outstanding on such date.
We have attached a form of the proposed amendment as Appendix F to this
proxy statement-prospectus and encourage you to review it. Approval of the
proposed amendment requires the affirmative vote of the holders of a majority of
the shares of Alamosa common stock present or represented by proxy at the
special meeting and entitled to vote.
15
<PAGE>
MARKET PRICES AND DIVIDENDS
MARKET PRICES
Alamosa common stock began trading on The Nasdaq National Market on
February 3, 2000, under the symbol "APCS." Prior to that date, there was no
public market for Alamosa common stock.
On July 28, 2000, the last trading day prior to announcement of the
execution of the reorganization agreements, the last reported sale price per
share of Alamosa common stock on The Nasdaq National Market was $21.00. On
[__________], 2000, the last trading day before the date of this proxy
statement-prospectus, the last reported sale price per share of Alamosa common
stock on The Nasdaq National Market was $[_______]. On [______], 2000, there
were [____] holders of record of Alamosa common stock.
The following table lists the high and low bid prices for Alamosa
common stock for the periods indicated, as reported by The Nasdaq National
Market.
<TABLE>
<CAPTION>
2000 HIGH LOW
------------------------------------------------------------------------------------ --------------- -----------------
<S> <C> <C>
First Quarter (from February 3, 2000 through March 31, 2000)...................... $ 43 5/8 $ 22 3/16
Second Quarter (ended June 30, 2000).............................................. $ 41 $ 11 13/16
Third Quarter (ended September 30, 2000).......................................... $ 27 1/2 $ 12 1/2
Fourth Quarter (through [ ], 2000)......................................... $ $
</TABLE>
Superholdings currently has no outstanding stock and, accordingly,
there is no established public trading market for the Superholdings common
stock. Superholdings will apply to list its common stock on The Nasdaq National
Market under Alamosa's current symbol, "APCS," effective upon completion of the
reorganization.
We are unable to provide information with respect to the market prices
of the Roberts Holdings and WOW Holdings membership interests because there is
no established trading market for them.
DIVIDENDS
ALAMOSA. Alamosa has never declared or paid any cash dividends on its
common stock or other securities and does not expect to pay cash dividends on
its capital stock in the foreseeable future. Alamosa currently intends to retain
its future earnings, if any, to fund the development and growth of its business.
Future dividends, if any, will be determined by the Alamosa board of directors
and will depend upon the restrictions contained in Alamosa's existing
indebtedness and Alamosa's results of operations, financial condition, capital
expenditure plans, contractual restrictions and business prospects, as well as
other factors that the Alamosa board of directors considers relevant.
The senior discount notes indenture, dated as of February 8, 2000,
between Alamosa and Norwest Bank Minnesota, N.A., as trustee, restricts Alamosa
and subsidiaries of Alamosa from paying dividends or making distributions,
except (i) for any dividend or distribution that is made solely to Alamosa or a
subsidiary of Alamosa or (ii) when the payment of such dividend or distribution
would not cause Alamosa and subsidiaries of Alamosa to fail to meet certain
financial tests that are stated in the senior discount notes indenture. The
credit agreement, dated as of June 23, 2000, between Alamosa PCS, Inc., a
subsidiary of
16
<PAGE>
Alamosa, as borrower, and Export Development Corporation, as administrative
agent, prohibits Alamosa PCS, Inc. and other subsidiaries of Alamosa from paying
dividends or making distributions, except for distributions to fund the payment
of the interest on the Alamosa senior discount notes. Accordingly, the senior
discount notes indenture and the EDC credit facility make it very difficult for
Alamosa to pay any cash dividends to its stockholders.
SUPERHOLDINGS. Following the reorganization, Superholdings does not
expect to pay cash dividends in the foreseeable future. Superholdings currently
intends to retain its future earnings, if any, to finance the expansion of its
business. Any future determination to pay dividends will be at the discretion of
the Superholdings board of directors and will be dependent upon then existing
conditions, including restrictions contained in the indebtedness of Alamosa,
Alamosa Holdings, LLC and their subsidiaries and Superholdings' results of
operations, financial condition, capital expenditure plans, contractual
restrictions, business prospects and other relevant factors.
The Citicorp credit facility will contain restrictions on the ability
of Alamosa Holdings, LLC and its subsidiaries (including Roberts and WOW) to pay
dividends or make distributions on their capital stock. The EDC credit facility
will continue to make it very difficult for Alamosa PCS, Inc. to pay any cash
dividends to Alamosa, its sole stockholder. Furthermore, the senior discount
notes indenture will continue to make it very difficult for Alamosa to pay any
cash dividends to Superholdings, its sole stockholder after the reorganization.
Accordingly, Superholdings will only be able to pay dividends to the extent that
Alamosa, Alamosa Holdings, LLC and their subsidiaries are permitted to do so
under the terms of the Alamosa senior discount notes indenture, the EDC credit
facility and the Citicorp credit facility.
17
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected financial data presented below under the captions
"Statement of Operations Data," "Per Share Data," and "Balance Sheet Data" as of
and for the year ended December 31, 1999 and as of and for the period ended
December 31, 1998 have been derived from the audited consolidated financial
statements of Alamosa and the notes thereto appearing elsewhere herein.
The selected financial data presented below under the captions
"Statement of Operations Data," "Per Share Data" and "Balance Sheet Data" as of
and for the six months ended June 30, 2000 and for the six months ended June 30,
1999 are derived from the unaudited financial statements of Alamosa included
elsewhere herein. The unaudited financial statements of Alamosa include all
adjustments, consisting only of normal accruals, that management considers
necessary for a fair presentation of financial position and results of
operations for the unaudited interim periods. Operating results for the six
month period ended June 30, 2000 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 2000.
It is important that you also read "Alamosa's Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the financial
statements for the periods ended December 31, 1998 and 1999 and June 30, 2000
and the related notes appearing elsewhere herein.
18
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
SELECTED HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FOR THE
PERIOD
JULY 16, 1998
FOR THE SIX MONTHS (INCEPTION)
ENDED JUNE 30, FOR THE THROUGH
----------------------- YEAR ENDED DECEMBER 31,
2000 1999 DECEMBER 31, 1999 1998
----------- --------- ------------------ ---------------
(Dollars in thousands except for per share data and other data)
STATEMENT OF OPERATIONS DATA:
Revenues:
<S> <C> <C> <C> <C>
Service............................... $ 25,146 $ 1 $ 6,534 $ -
Product sales......................... 3,773 34 2,450 -
----------- --------- ------------------ ---------------
Total revenue....................... 28,919 35 8,984 -
----------- --------- ------------------ ---------------
Cost and expenses:
Cost of service and operations........ 18,451 668 7,441 -
Cost of product sales................. 9,294 75 7,427 -
Selling and marketing................. 11,933 913 9,323 -
General and administration............ 8,351 4,220 12,408 956
Depreciation and amortization 4,748 127 3,057 2
----------- --------- ------------------ ---------------
Total costs and expenses............ 52,777 6,003 39,656 958
Loss from operations.................. (23,858) (5,968) (30,672) (958)
Net loss................................ (28,488) (5,763) (32,836) (924)
PER SHARE DATA:
Basic and diluted net loss per share
common stock..........................of $ (0.48) $ (0.12)(1) $ (0.68)(1) $ (0.02)(1)
Pro forma net loss per share of common stock $ (0.48) $ (0.12)(1) $ (0.68)(1) $ (0.02)(1)
OTHER DATA:
Number of subscribers at end of period 69,569 219 31,876 -
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AS OF
JUNE 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------- --------------------- ---------------------
(Dollars in thousands)
BALANCE SHEET DATA:
<S> <C> <C> <C>
Cash and cash equivalents..................... $ 241,038 $ 5,656 $ 13,529
Property and equipment, net................... 142,220 84,714 2,093
Total assets.................................. 428,691 104,492 15,674
Short-term debt (2)........................... 23 385 44
Long-term debt................................ 201,914 (5) 72,753 (4) 708 (3)
Total liabilities............................. 246,439 93,052 1,598
Equity........................................ 182,252 11,440 14,076
</TABLE>
----------
(1) Diluted weighted average shares outstanding exclude the common shares
issuable on the exercise of stock options because inclusion would have
been antidilutive. Pro forma net loss per share of common stock has
been presented for the latest two fiscal years. The presentation of the
pro forma net loss per share of common stock gives effect to
adjustments for federal and state income taxes as if Alamosa had been
taxed as a C Corporation for the periods presented.
(2) Reflects notes payable of $363,665 and capital lease obligations of
$21,818 as of December 31, 1999, notes payable of $23,637 and capital
lease obligations of $20,145 as of December 31, 1998, and capital lease
obligations of $22,932 of June 30, 2000.
(3) Reflects capital lease obligations of $708,074.
(4) Reflects indebtedness incurred under the EDC credit facility of
$71,876,379, capital lease obligations of $827,024 and other long term
notes payable of $50,035.
(5) Reflects indebtedness incurred under the senior discount notes of
$196,574,501, EDC credit facility of $4,523,841, and capital lease
obligations of $815,272.
19
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected financial data presented below under the captions
"Statement of Operations Data," and "Balance Sheet Data" as of and for the year
ended December 31, 1999 and for the period from May 6, 1998 (inception) to
December 31, 1998 have been derived from the audited consolidated financial
statements of Roberts and the notes thereto appearing elsewhere herein.
The selected financial data presented below under the captions
"Statement of Operations Data," and "Balance Sheet Data" as of and for the six
months ended June 30, 2000 and for the six months ended June 30, 1999 are
derived from the unaudited condensed consolidated financial statements of
Roberts included elsewhere herein. The unaudited condensed consolidated
financial statements of Roberts include all adjustments, consisting only of
normal accruals, that management considers necessary for a fair presentation of
financial position and results of operations. Operating results for the six
month period ended June 30, 2000 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 2000.
It is important that you also read "Roberts' Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the financial
statements of Roberts for the periods ended December 31, 1998 and 1999 and June
30, 2000, and the related notes appearing elsewhere herein.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MONTHS MAY 6, 1998
ENDED JUNE 30, FOR THE (INCEPTION)
YEAR ENDED THROUGH
--------------------------- DECEMBER 31, DECEMBER 31,
2000 1999 1999 1998
------------- ----------- ------------------- ------------------
(Dollars in thousands)
STATEMENT OF OPERATIONS DATA:
Revenues:
<S> <C> <C> <C> <C>
Service revenue.......................... $ 4,733 $ 102 $ 2,495 $ -
Product sales............................ 426 175 379 -
Rental tower income...................... 19 - - -
------------- ----------- ------------------- ------------------
Total revenue.......................... 5,178 277 2,874 -
Costs and expenses:
Cost of services....................... 3,323 554 1,749 -
Cost of product sold................... 781 351 834 -
Selling and marketing.................. 2,171 221 2,026 -
General and administrative............. 809 117 703 433
Depreciation and amortization.......... 3,176 49 1,799 2
------------- ----------- ------------------- ------------------
Total costs 10,260 1,292 7,111 435
Operating loss............................. (5,082) (1,015) (4,237) (435)
Net loss................................... (5,392) (1,014) (4,588) (432)
AS OF AS OF
JUNE 30, 2000 DECEMBER 31, 1999
----------------------------- ----------------------------
(Dollars in thousands)
BALANCE SHEET DATA:
Cash......................................$ 338 $ 3,145
Fixed assets, net......................... 50,669 13,331
Total assets.............................. 61,539 27,343
Short-term debt........................... - -
Long-term debt............................ 56,000 25,011
Total liabilities......................... 65,771 27,383
Members' deficit.......................... (4,232) (40)
</TABLE>
20
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected financial data presented below under the captions "Statement of
Operations Data," and "Balance Sheet Data" as of and for the year ended December
31, 1999 as of and for the period from July 8, 1998 (inception) to December 31,
1998 have been derived from the audited financial statements of WOW and the
notes thereto appearing elsewhere herein.
The selected financial data presented below under the captions "Statement of
Operations Data," and "Balance Sheet Data" as of and for the six months ended
June 30, 2000 and for the six months ended June 30, 1999 are derived from the
unaudited financial statements of WOW included elsewhere herein. The unaudited
financial statements of WOW include all adjustments, consisting only of normal
accruals, that management considers necessary for a fair presentation of
financial position and results of operations. Operating results for the six
month period ended June 30, 2000 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 2000.
It is important that you also read "WOW's Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements of WOW for the periods ended December 31, 1998 and 1999 and June 30,
2000 and the related notes appearing elsewhere herein.
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 8, 1998
FOR THE SIX MONTHS (INCEPTION)
ENDED JUNE 30, FOR THE THROUGH
-------------------------- YEAR ENDED DECEMBER 31,
2000 1999 DECEMBER 31, 1999 1998
------------ ----------- ------------------- -----------------
(Dollars in thousands)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C>
Revenues.................................... $ 37 $ - $ - $ -
------------ ----------- ------------------- -----------------
Cost and expenses...........................
Operations................................ 1,190 153 - -
Sales and marketing....................... 198 - - -
General and administrative................ 1,710 220 986
Depreciation and amortization............. 62 - 1 -
------------ ----------- ------------------- -----------------
3,160 373 987 60
Operating loss.............................. (3,123) (373) (987) (60)
Net loss.................................... (3,050) (373) (980) (45)
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AS OF
JUNE 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ---------------------- ---------------------
(Dollars in thousands)
BALANCE SHEET DATA:
<S> <C> <C> <C>
Cash and cash equivalents................... $ 540 $ 596 $ 4
Fixed assets, net........................... 24,742 10,413 -
Total assets................................ 27,033 11,010 4
Short-term debt............................. - - -
Long-term debt.............................. 9,460 - -
Total liabilities........................... 16,418 8,206 17
Members' equity (deficit)................... 10,615 2,804 (13)
</TABLE>
21
<PAGE>
ALAMOSA HOLDINGS, INC.
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data combines the
historical consolidated balance sheets and statements of operations of Alamosa,
Roberts and WOW. These unaudited pro forma financial statements give effect to
the acquisitions of Roberts and WOW using the purchase method of accounting.
We derived this information from the unaudited consolidated financial
statements of Alamosa, Roberts and WOW as of and for the six months ended June
30, 2000 and from the audited consolidated financial statements of Alamosa,
Roberts and WOW for the year ended December 31, 1999. This information is only a
summary and should be read in conjunction with the historical financial
statements and related notes contained elsewhere herein for the periods
presented. For presentation of the pro forma financial aspects of these
transactions, see "Pro Forma Condensed Combined Financial Statements
(Unaudited)."
The unaudited pro forma condensed combined statements of operations for
the six months ended June 30, 2000 and the year ended December 31, 1999 assume
the reorganization was effected on January 1, 1999. The unaudited pro forma
condensed combined balance sheet as of June 30, 2000 gives effect to the
reorganization as if it had occurred on June 30, 2000. The accounting policies
of Alamosa, Roberts and WOW are comparable. Certain reclassifications have been
made to Roberts' and WOW's historical presentation to conform to Alamosa's
presentation. These reclassifications do not materially impact Alamosa's,
Roberts', or WOW's operations or financial position for the periods presented.
Alamosa is providing the unaudited pro forma condensed combined
financial information for illustrative purposes only. The companies may have
performed differently had they always been combined. You should not rely on the
unaudited pro forma condensed combined financial information as being indicative
of the historical results that would have been achieved had the companies always
been combined or the future results that the combined company will experience.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, 2000 DECEMBER 31, 1999
---------------------------------- -------------------------------
PRO FORMA PRO FORMA
HISTORICAL AS ADJUSTED HISTORICAL AS ADJUSTED
--------------- ---------------- -------------- ---------------
SELECTED OPERATING DATA:
Revenues:
<S> <C> <C> <C> <C>
Service revenue..............................$ 25,146,175 $ 29,916,395 $ 6,533,623 $ 9,028,061
Product sales................................ 3,772,424 4,198,650 2,450,090 2,829,349
--------------- ---------------- -------------- ---------------
Total revenue............................. 28,918,599 34,115,045 8,983,713 11,857,410
Costs and expenses.............................. 52,776,538 83,409,899 39,655,669 82,279,892
Interest and other income/(expense)............. (4,629,736) (6,387,823) (2,163,903) (5,589,067)
Income tax benefit.............................. - 19,406,519 - 25,378,697
--------------- ---------------- -------------- ---------------
Net income/(loss)...............................$ (28,487,675) $ (36,276,158) $ (28,508,053) $ (50,632,852)
Other Financial Data:
Capital expenditures (1)........................$ 62,239,964 $ 116,797,526 $ 85,677,885 $ 110,821,566
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
-------------------------------------------------------------------
PRO FORMA
HISTORICAL AS ADJUSTED
-------------------------------- -------------------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.....................$ 241,038,281 $ 217,990,042
Short-term investments........................ 21,840,763 21,840,763
Property and equipment, net................... 142,219,575 213,210,806
Total assets.................................. 428,691,385 1,106,075,007
Accounts payable and accrued expenses......... 42,140,014 59,140,467
Long-term debt................................ 201,098,342 266,558,660
Total liabilities............................. 246,438,998 499,718,370
Total shareholders' equity.................... 182,252,387 606,356,637
</TABLE>
------------------
(1) Capital expenditures represent additions to property and equipment.
22
<PAGE>
COMPARATIVE PER SHARE DATA
The following table reflects the historical net income and book value
per share of Alamosa common stock in comparison with the pro forma net income
and book value per share after giving effect to the proposed mergers with
Roberts and WOW on a purchase accounting basis. The information presented in
this table should be read in conjunction with the pro forma combined financial
statements and the separate financial statements of the respective companies and
the notes thereto appearing elsewhere herein. Alamosa has not paid any dividends
to its stockholders during the periods presented.
Given that Roberts and WOW are private limited liability companies, per
share data is not available.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
----------------------------- -----------------------------
PRO FORMA PRO FORMA
HISTORICAL AS ADJUSTED HISTORICAL AS ADJUSTED
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Net loss per share........... $ (0.48) $ (0.46) $ (0.68) $ (0.74)
Book value per share......... 3.09 7.72 0.24 n/a
</TABLE>
23
<PAGE>
RISK FACTORS
You should carefully consider the risks described below as well as all
of the other information in this proxy statement-prospectus - including the
financial statements and related notes - before deciding how to vote on the
reorganization proposals. All reference in this section to Superholdings and its
subsidiaries are to Superholdings and its consolidated subsidiaries following
completion of the reorganization. For a chart reflecting the organization of
Superholdings following the reorganization, see "Structure After the
Reorganization" on page 7.
RISKS RELATING TO THE REORGANIZATION
SUPERHOLDINGS' STOCK PRICE MAY BE VOLATILE AND YOU MAY LOSE ALL OR PART
OF YOUR INVESTMENT.
There has not been a previous market for Superholdings common stock.
Superholdings cannot predict the extent to which there will be a trading market
for Superholdings common stock or how liquid the market might become. In
addition, the market price of Superholdings common stock is likely to be highly
volatile and could be subject to wide fluctuations in response to factors such
as the following, some of which are beyond Superholdings' control:
o quarterly variations in Superholdings' operating results;
o operating results that vary from the expectations of
securities analysts and investors;
o changes in expectations as to Superholdings' future financial
performance, including financial estimates by securities
analysts and investors;
o changes in Superholdings' relationship with Sprint PCS;
o changes in law and regulation;
o announcements by third parties of significant claims or
proceedings against Superholdings;
o changes in market valuations of other PCS companies, including
Sprint PCS and its network partners;
o announcements of technological innovations or new services by
Superholdings or its competitors;
o announcements by Superholdings or its competitors of
significant contracts, acquisitions, strategic partnerships,
joint ventures or capital commitments;
o announcements by Sprint PCS concerning developments or changes
in its business, financial condition or results of operations,
or in its expectations as to future financial performance;
o additions or departures of key personnel; and
o stock market price and volume fluctuations.
24
<PAGE>
SUPERHOLDINGS MAY FAIL TO REALIZE THE ANTICIPATED BENEFITS OF THE
REORGANIZATION.
The success of the reorganization will depend, in part, on
Superholdings' ability to realize the anticipated growth opportunities,
economics of scale and other benefits from combining the business of Alamosa
with the businesses of Roberts and WOW. To realize the anticipated benefits of
this combination, Superholdings' management team must develop strategies and
implement a business plan that will:
o effectively manage the network build-out, networks and markets
of Roberts, WOW and Alamosa;
o effectively manage the marketing and sales of the services of
Roberts, WOW and Alamosa;
o successfully retain and attract key employees of the combined
company, including management, during a period of transition
and in light of the competitive employment market; and
o maintain adequate focus on existing business and operations
while working to integrate the three companies.
If Superholdings does not realize economies of scale and other anticipated
benefits as a result of the reorganization, the value of Superholdings common
stock may decline.
SUPERHOLDINGS WILL BE CONTRACTUALLY OBLIGATED TO COMPLETE THE
REORGANIZATION EVEN IF IT IS UNABLE TO OBTAIN FUNDING UNDER THE
CITICORP CREDIT FACILITY.
On July 31, 2000, Superholdings entered into a commitment letter with
Citicorp, North America, Inc. and Salomon Smith Barney providing for a new
senior credit facility of up to $200.0 million to be used to fund the cash
portion of the consideration to be paid in the Roberts and WOW mergers and to
fund the working capital and build-out needs of Roberts and WOW, including the
refinancing of existing indebtedness of Roberts and WOW. Furthermore,
Superholdings has agreed to refinance Roberts' indebtedness under its credit
facility with DLJ Capital Funding, Inc. within 90 days after the closing of the
Roberts merger. See "The Reorganization-Citicorp Credit Facility."
Citicorp's commitment to provide the Citicorp credit facility is
subject to a number of conditions, some of which are outside of the control of
Alamosa and Superholdings. However, the reorganization agreements do not
condition Superholdings' obligation to complete the reorganization on its
obtaining the necessary funds, whether from the Citicorp credit facility or
otherwise. If the conditions to funding under the Citicorp credit facility are
not satisfied, Superholdings may be unable to make an initial borrowing under
the Citicorp credit facility at the time of closing of the reorganization, and
might not have access to sufficient funds to complete the reorganization, the
refinancing of the debt of Roberts and WOW or the build-out of Roberts and WOW's
networks. In such a situation, Superholdings would have to seek a waiver from
Citicorp under the Citicorp credit facility or obtain funding from another
source in order to complete the reorganization and avoid both a breach of the
reorganization agreements and, following the closing, a default under WOW's and
Roberts' existing indebtedness. Such a waiver from Citicorp or a new credit
facility might only be available to Superholdings on terms less attractive than
those under the Citicorp commitment letter, which could have adverse effects on
Superholdings' financial condition and results of operations.
25
<PAGE>
THE REORGANIZATION COULD BE COMPLETED NOTWITHSTANDING SIGNIFICANT
ADVERSE CHANGES IN THE BUSINESS AND OPERATIONS OF WOW AND ROBERTS.
ROBERTS. Alamosa Operations is currently managing the operations of
Roberts pursuant to a services agreement entered into in connection with the
execution of the Roberts reorganization agreement. Pursuant to the Roberts
reorganization agreement, Alamosa has assumed a substantial portion of the risk
associated with the operation of the business of Roberts prior to completion of
the Roberts merger. Generally, subject to other conditions to closing, Alamosa
will be required to complete the Roberts merger, even if one or more of Roberts'
representations, warranties or covenants in the Roberts reorganization agreement
is breached and such breaches would constitute a "Roberts material adverse
change," unless such "Roberts material adverse change":
o occurred on or prior to July 31, 2000;
o was caused after July 31, 2000 by the actions of the members
of Roberts Holdings, by the board of managers of Roberts or
Roberts Holdings, or by any agent of Roberts or Roberts
Holdings (if such agent is not under the supervision of
Alamosa pursuant to the services agreement between Roberts and
Alamosa Operations); or
o was caused by the failure of any of the persons identified in
the prior bullet point to take actions that (i) would be taken
in the ordinary course of business of Roberts and Roberts
Holdings and (ii) have not been delegated to Alamosa under the
services agreement between Alamosa Operations and Roberts.
The Roberts reorganization agreement defines a "Roberts material
adverse change" as a change that would reasonably be expected to: (i) result in
liabilities to Superholdings (on a consolidated basis) at or after completion of
the Roberts merger of at least $40.0 million, (ii) result in a reduction in cash
flow or increased losses of Superholdings (on a consolidated basis) at or after
completion of Roberts merger, discounted at 10%, having net present value of at
least $40.0 million, or (iii) materially impair or delay the ability of Alamosa,
Superholdings, Alamosa Sub or Roberts to complete the Roberts merger and the
Alamosa merger.
WOW. Alamosa Operations is currently managing the operations of WOW
pursuant to a services agreement entered into in connection with the execution
of the WOW reorganization agreement. Pursuant to the WOW reorganization
agreement, Alamosa has assumed a substantial portion of the risk associated with
the operation of the business of WOW prior to completion of the WOW merger.
Generally, subject to other conditions to closing, Alamosa will be required to
complete the WOW merger, even if one or more of WOW's representations,
warranties or covenants in the WOW reorganization agreement is breached and such
breaches would constitute a "WOW material adverse change," unless:
o the representations and warranties which were breached by WOW
were untrue or incorrect as of September 1, 2000;
o such breaches of representations and warranties resulted from
(i) actions taken by the members of WOW Holdings who are
parties to the WOW reorganization agreement, by the board of
managers of WOW or WOW Holdings, or by any employee or agent
of WOW or WOW Holdings or (ii) by the failure of any such
person or entity to take any action that would be taken
in the ordinary course of WOW's or WOW Holdings' business and
that has
26
<PAGE>
not been delegated to Alamosa pursuant to the services
agreement between Alamosa Operations and WOW; or
o in the case of breaches of covenants, the WOW material
adverse change is not proximately caused by actions of
Alamosa, or any agent or employee of WOW under Alamosa's
supervision, pursuant to the WOW services agreement, or
by any breach of the WOW services agreement by Alamosa
or any agent or employee of WOW under Alamosa's supervision.
The WOW reorganization agreement defines a "WOW material adverse
change" as any change that would reasonably be expected to (i) result in
liabilities to Superholdings (on a consolidated basis) at or after the
completion of the WOW merger, of at least $20.0 million, (ii) result in a
reduction of cash flow or increased losses of Superholdings (on a consolidated
basis) at or after the completion of the WOW merger, discounted at 10%, having a
net present value of at least $20.0 million, or (iii) materially impair or delay
the ability of Alamosa, Superholdings, Alamosa Sub or WOW to complete the WOW
merger and the Alamosa merger.
DIRECTORS AND EXECUTIVE OFFICERS OF SUPERHOLDINGS AND STOCKHOLDERS
AFFILIATED WITH THEM MAY BE ABLE TO CONTROL THE OUTCOME OF SIGNIFICANT
MATTERS PRESENTED TO SUPERHOLDINGS STOCKHOLDERS FOLLOWING THE
REORGANIZATION.
Upon completion of the reorganization, the persons who will become
executive officers and directors of Superholdings, and stockholders of
Superholdings who are affiliated with them, taken together, will own or have
effective voting control over approximately 66% of the shares of Superholdings
common stock outstanding on a pro forma basis giving effect to the
reorganization. Consequently, those persons, to the extent their interests are
aligned, may be able to control the outcome of matters submitted for stockholder
action, including the election of Superholdings' board of directors and the
approval of significant transactions.
FUTURE SALES OF SHARES OF SUPERHOLDINGS COMMON STOCK FOLLOWING THE
EXPIRATION OF "LOCK-UP" ARRANGEMENTS MAY NEGATIVELY AFFECT
SUPERHOLDINGS' STOCK PRICE.
In connection with the reorganization, current members of Roberts
Holdings and WOW Holdings will receive approximately 19,549,993 shares of
Superholdings common stock, representing approximately 24.2% of the shares of
Superholdings common stock outstanding immediately following the reorganization.
As a condition to the obligation of Alamosa to complete the Roberts and
WOW mergers, each of the members of Roberts Holdings and WOW Holdings must agree
to a "lock-up" arrangement under which such holder will be prohibited from
selling or disposing of shares of Superholdings common stock received in the
reorganization until September 30, 2001, without the prior written consent of
Superholdings. Superholdings has agreed to file a registration statement on Form
S-1 no later than July 31, 2001 and to keep such registration statement
effective for a period of one year after the later of: (i) the first day the
registration statement becomes effective and (ii) October 1, 2001. Such
registration statement will allow the members of WOW Holdings and Roberts
Holdings to freely resell the shares of Superholdings that they receive pursuant
to the reorganization. Accordingly, following expiration of the "lock-up"
arrangements on September 30, 2001, all members of Roberts Holdings and WOW
Holdings will be in a position to sell their shares of Superholdings common
stock without restriction if the registration statement has been declared
effective by the SEC.
Sales of substantial amounts of shares of Superholdings common stock
after September 30, 2001, or even the potential for such sales, could lower the
market price of the Superholdings common stock and impair the ability of
Superholdings to raise capital through the sale of equity securities.
27
<PAGE>
SUPERHOLDINGS' CERTIFICATE OF INCORPORATION AND BY-LAWS WILL INCLUDE
PROVISIONS THAT MAY DISCOURAGE A CHANGE OF CONTROL TRANSACTION AND MAKE
REMOVAL OF SUPERHOLDINGS' MANAGEMENT MORE DIFFICULT.
Some provisions of Superholdings' certificate of incorporation and
by-laws could have the effect of delaying, discouraging or preventing a change
in control of Superholdings and which could make removal of management of
Superholdings more difficult.
These provisions include the following:
o a classified board, with each board member serving a
three-year term;
o no authorization for stockholders to call a special meeting;
o no ability of stockholders to remove directors;
o prohibition of action by written consent of stockholders; and
o advance notice for nomination of directors and for stockholder
proposals.
These provisions, among others, may have the effect of discouraging a
third party from making a tender offer or otherwise attempting to obtain control
of Superholdings, even though a change in ownership might be economically
beneficial to Superholdings and its stockholders.
RISKS RELATING TO SUPERHOLDINGS' BUSINESS, STRATEGY AND OPERATIONS
EACH OF ALAMOSA, ROBERTS AND WOW HAS VERY LIMITED OPERATING HISTORIES
AND MAY NOT ACHIEVE OR SUSTAIN OPERATING PROFITABILITY OR POSITIVE CASH
FLOWS, WHICH WOULD LIKELY RESULT IN A DROP IN SUPERHOLDINGS' STOCK
PRICE.
Each of Alamosa, Roberts and WOW has a limited operating history. Each
of Alamosa, Roberts and WOW expects to continue to incur significant operating
losses and to generate significant negative cash flow from operating activities
at least through the year ending December 31, 2001. Superholdings' operating
profitability will depend upon many factors, including, among others,
Superholdings' ability to market Sprint PCS services, achieve projected market
penetration and manage customer turnover rates. If Superholdings does not
achieve and maintain operating profitability and positive cash flow from
operating activities on a timely basis, Superholdings' stock price could fall
and you could lose all or part of your investment. Superholdings will have to
dedicate a substantial portion of any cash flow from operations to make interest
and principal payments on its consolidated debt, which will reduce funds
available for other purposes. If Superholdings does not achieve and maintain
positive cash flow from operations on a timely basis, Superholdings may be
unable to develop its network or conduct its business in an effective or
competitive manner.
SUPERHOLDINGS' FAILURE TO OBTAIN ADDITIONAL CAPITAL, IF NEEDED TO
COMPLETE THE BUILD-OUT OF ITS SUBSIDIARIES' PORTIONS OF THE SPRINT PCS
NETWORK, COULD CAUSE DELAY OR ABANDONMENT OF SUPERHOLDINGS' DEVELOPMENT
PLANS.
28
<PAGE>
The build-out of Alamosa's, Roberts' and WOW's portions of the Sprint
PCS network will require substantial capital. Superholdings estimates that
through December 31, 2001, Alamosa, Roberts and WOW will have spent $457.0
million in total capital expenditures for the build-out of their portions of the
Sprint PCS network. Superholdings plans to fund these requirements using
existing cash and funds available from the EDC credit facility and the Citicorp
credit facility. Additional funds could be required for a variety of reasons,
including unforeseen delays, unanticipated expenses, higher than expected
operating losses, engineering design changes and other technology risks or other
corporate purposes. In addition, if the build- out is completed more rapidly
than currently anticipated, or if Superholdings contracts to develop additional
markets, Superholdings will need to raise additional equity or debt capital.
These additional funds may not be available. Even if these funds are available,
Superholdings may not be able to obtain them on a timely basis, on terms
acceptable to Superholdings or within limitations permitted under the covenants
contained in the Alamosa senior discount notes indenture and the EDC credit
facility and the covenants to be contained in the Citicorp credit facility.
Failure to obtain additional funds, should the need for funds develop, could
result in the delay or abandonment of Superholdings' development and expansion
plans and Superholdings may be unable to fund its ongoing operations.
EACH OF ALAMOSA, ROBERTS AND WOW MAY ENCOUNTER DIFFICULTIES IN
COMPLETING THE BUILD-OUT OF ITS PORTION OF THE SPRINT PCS NETWORK,
WHICH COULD INCREASE COSTS AND DELAY COMPLETION OF ITS BUILD-OUT.
As part of its build-out, each of Alamosa, Roberts and WOW 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 Alamosa, Roberts or WOW
to obtain zoning variances or other local governmental or third party approvals
or permits. Additionally, each of Alamosa, Roberts and WOW must obtain rights to
a sufficient number of tower sites, which will require it to obtain local
regulatory approvals. The local governmental authorities in various locations in
Alamosa's, Roberts' and WOW's markets have, at times, placed moratoriums on the
construction of additional towers and radio communica tions sites. Alamosa,
Roberts and WOW may also have to make changes to its radio base station network
design as a result of difficulties in the site acquisition process.
Additionally, the FCC requires that each of Alamosa's, Roberts' and WOW's
portion of the PCS network must not interfere with the operations of microwave
radio systems, and Sprint PCS may be required to relocate incumbent microwave
operations to enable Alamosa, Roberts or WOW, as the case may be, to complete
its build-out. Any of the foregoing developments could increase the costs and
delay the completion of Alamosa's, Roberts' or WOW's network build-out. Any
failure by Alamosa, Roberts or WOW to construct its portion of the Sprint PCS
network on a timely basis may limit such party's network capacity and may reduce
such party's number of new Sprint PCS subscribers. Any significant delays could
have a material adverse effect on Superholdings' business.
BECAUSE SUPERHOLDINGS' SUBSIDIARIES WILL DEPEND HEAVILY ON OUTSOURCING,
THE INABILITY OF THIRD PARTIES TO FULFILL THEIR CONTRACTUAL OBLIGATIONS
TO SUPERHOLDINGS' SUBSIDIARIES MAY DISRUPT THEIR SERVICES OR THE
BUILD-OUT OF THEIR PORTIONS OF THE SPRINT PCS NETWORK.
Because Alamosa, Roberts and WOW outsource portions of their
businesses, Superholdings will depend heavily on third-party vendors, suppliers,
consultants, contractors and local exchange carriers. These parties:
o design and engineer the systems of Alamosa, Roberts and WOW;
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o construct base stations, switch facilities and towers;
o install T-1 lines; and
o deploy the wireless personal communications services network
systems of Alamosa, Roberts and WOW.
ALAMOSA. Alamosa's financing arrangements with EDC make Alamosa
especially dependent on Nortel for network equipment. Pursuant to the EDC credit
facility of $175.0 million, Alamosa is required to purchase a total of $167.0
million of equipment and services from Nortel. As of June 30, 2000, Alamosa had
remaining commitments of $64.5 million under the Nortel equipment agreement. In
addition, Alamosa leases some tower sites for its wireless systems through a
master lease agreement with OmniAmerica Development Corp. and a master design
build agreement with SBA Towers, Inc. Each of OmniAmerica and SBA in turn have
separate leasing arrangements with each of the owners of the sites. If
OmniAmerica or SBA were to become insolvent or OmniAmerica or SBA were to breach
its leasing arrangements, Alamosa may experience extended service interruption
in the areas serviced by those sites. Alamosa relies on CHR Solutions, Inc. for
engineering, marketing, operating and other consulting services. The failure by
any of Alamosa's vendors, suppliers, consultants, contractors or local exchange
carriers to fulfill their contractual obligations to Alamosa could materially
delay build out or adversely affect the operations of its portion of the Sprint
PCS network.
ROBERTS. Roberts does not own any of the towers used to provide service
in its operating areas. Roberts leases its tower sites for its wireless system
through a master lease agreement with Roberts Tower. If Roberts Tower were to
become insolvent or breach its agreement with Roberts, Roberts might lose access
to its base stations and experience extended service interruption in the areas
serviced by those sites.
WOW. WOW does not own any of the towers used to provide service in its
operating areas. WOW leases a substantial number of tower sites for its wireless
systems through a master lease site agreement with WesTower Communications,
Inc., now known as SpectraSite Communications Inc. WOW's remaining tower leases
are with American Tower Corporation, as well as a variety of individual
collocations. If SpectraSite Communications Inc. or American Tower Corporation
were to become insolvent or breach its arrangements with WOW, WOW might lose
access to its base stations and experience extended service interruption in the
areas serviced by those sites.
Many of the development functions performed on behalf of WOW are
provided through a master network development agreement with SpectraSite.
Construction services for these sites are provided directly by subsidiaries of
SpectraSite, with the assistance from additional subcontractors. Site
acquisition, RF engineering, and fixed network design are provided via
subcontracts with Mericom Corporation, JMS
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Worldwide, Inc. (d/b/a MLJ), and Gillespie, Prudhon & Associates, respectively.
The failure by any of WOW's vendors, suppliers, consultants, contractors or
local exchange carriers to fulfill their contractual obligations to WOW could
materially delay construction and adversely affect the operations of WOW's
segment of the Sprint PCS network.
THE ALAMOSA, ROBERTS AND WOW ROAMING ARRANGEMENTS MAY NOT BE
COMPETITIVE WITH OTHER WIRELESS SERVICE PROVIDERS, WHICH MAY RESTRICT
SUPERHOLDINGS' ABILITY TO ATTRACT AND RETAIN CUSTOMERS AND THUS MAY
ADVERSELY AFFECT SUPERHOLDINGS' OPERATIONS.
Alamosa, WOW and Roberts rely on roaming arrangements with other
wireless service providers for coverage in some areas. Some risks related to
these arrangements are as follows:
o the quality of the service provided by another provider during
a roaming call may not approximate the quality of the service
provided by Sprint PCS;
o the price of a roaming call may not be competitive with prices
charged by other wireless companies for roaming calls;
o customers may have to use a more expensive dual-band/dual mode
handset with diminished standby and talk time capacities;
o customers must end a call in progress and initiate a new call
when leaving the Sprint PCS network and entering another
wireless network; and
o Sprint PCS customers may not be able to use Sprint PCS
advanced features, such as voicemail notification, while
roaming.
If Sprint PCS customers are not able to roam instantaneously or
efficiently onto other wireless networks, Superholdings' subsidiaries may lose
current Sprint PCS subscribers and Sprint PCS services will be less attractive
to potential new customers.
SUPERHOLDINGS IS LIKELY TO RECEIVE VERY LITTLE NON-SPRINT PCS ROAMING
REVENUE SINCE THE SPRINT PCS NETWORK IS NOT COMPATIBLE WITH MANY OTHER
NETWORKS.
A portion of Superholdings' revenue may be derived from payments by
other wireless service providers for use by their subscribers of the Sprint PCS
network in the territories of Alamosa, WOW and Roberts. However, the technology
used in the Sprint PCS network is not compatible with the technology used by
many other systems, which diminishes the ability of other wireless service
providers' subscribers to use Sprint PCS services. Sprint PCS has entered into
few agreements that enable customers of other wireless service providers to roam
onto the Sprint PCS network. As a result, the actual non-Sprint PCS roaming
revenue that Superholdings receives in the future is likely to be low relative
to that of other wireless service providers.
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IF SUPERHOLDINGS' SUBSIDIARIES RECEIVE LESS REVENUES OR INCUR MORE FEES
THAN SUPERHOLDINGS ANTICIPATES FOR SPRINT PCS ROAMING, ITS RESULTS OF
OPERATIONS MAY BE NEGATIVELY AFFECTED.
Alamosa, Roberts and WOW are each paid a fee from Sprint PCS or a
Sprint PCS affiliate for every minute that a Sprint PCS subscriber based outside
of its territory uses the Sprint PCS network in its territory. Similarly,
Alamosa, Roberts and WOW pay a fee to Sprint PCS for every minute that a Sprint
PCS subscriber based in its territory uses the Sprint PCS network outside its
territory. Sprint PCS customers from Alamosa, Roberts and WOW territories may
spend more time in other Sprint PCS coverage areas than Superholdings
anticipates, and Sprint PCS customers from outside the Alamosa, Roberts and WOW
territories may spend less time in the Alamosa, Roberts and WOW territories or
may use the Alamosa, Roberts and WOW services less than Superholdings
anticipates. As a result, Superholdings may receive less Sprint PCS roaming
revenue than Superholdings anticipates or Superholdings may have to pay more
Sprint PCS roaming fees than it collects. In addition, Sprint PCS could change
the current fee for each Sprint PCS roaming minute used. If Superholdings were
to receive less Sprint PCS roaming net revenue than anticipated, its results of
operations may be negatively affected.
SUPERHOLDINGS MAY NOT BE ABLE TO MANAGE ITS RAPID GROWTH SUCCESSFULLY.
Following the reorganization, Superholdings expects to experience rapid
growth and development in a relatively short period of time as its subsidiaries
complete the build-out of their portions of the Sprint PCS network. The
management of this anticipated growth will require, among other things:
o continued development of Superholdings' operational and
administrative systems;
o stringent control of costs and timing of network build-out;
o increased marketing activities;
o the ability to attract and retain qualified management,
technical and sales personnel; and
o the training of new personnel.
Superholdings' failure to successfully manage its expected rapid growth
and development could impair its ability to complete the build-out of Alamosa's,
WOW's and Roberts' portions of the Sprint PCS network, manage the expanding
systems in those territories and achieve profitability.
SUPERHOLDINGS' PROJECTED BUILD-OUT PLAN FOR ALAMOSA, ROBERTS AND WOW
DOES NOT COVER ALL AREAS OF THEIR TERRITORIES, WHICH COULD MAKE IT
DIFFICULT TO MAINTAIN A PROFITABLE CUSTOMER BASE.
Superholdings' projected build-out plan for Alamosa, Roberts and WOW
does not cover all areas of their territories. Upon completion of the current
build-out plans of Alamosa, Roberts and WOW, Superholdings expects to cover 70%
of the resident population in the territories serviced by Alamosa, Roberts and
WOW. As a result, the build-out plans of Alamosa, Roberts and WOW may not
adequately serve the needs of the potential customers in their respective
territories or attract enough subscribers to operate their businesses
successfully. To correct this potential problem, Superholdings may have to cover
a greater percentage of its subsidiaries' territories than Superholdings
currently anticipates, which it may not have the financial resources to complete
or may be unable to do profitably.
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SUPERHOLDINGS MAY HAVE DIFFICULTY OBTAINING EQUIPMENT THAT IS IN SHORT
SUPPLY, WHICH COULD CAUSE DELAYS IN THE BUILD-OUT OF ITS SUBSIDIARIES'
NETWORKS.
Alamosa, WOW and Roberts depend on their relationships with
manufacturers of equipment used by them to construct their portions of the
Sprint PCS network. The demand for this equipment is considerable, and some
manufacturers could have substantial order backlogs. If Superholdings is unable
to rely on these manufacturers, Superholdings could have difficulty obtaining
necessary equipment in a timely manner and its costs for obtaining necessary
equipment could increase. As a result, Superholdings could suffer increased
costs, delays in the build-out of the Alamosa, Roberts and WOW portions of the
Sprint PCS network, disruptions in customer service and a reduction in
subscribers.
PARTS OF ALAMOSA'S TERRITORY HAVE LIMITED LICENSED SPECTRUM, AND THIS
MAY AFFECT THE QUALITY OF SUPERHOLDINGS' SERVICE OR RESTRICT ITS
ABILITY TO PURCHASE SPECTRUM LICENSES FROM SPRINT PCS IN THOSE AREAS.
While Sprint PCS has licenses to use 30 MHZ of spectrum throughout most
of Alamosa's territory, it has licenses covering only 10 MHZ in New Mexico and
Durango and 20 MHZ in El Paso. In the future, as the number of Alamosa's
subscribers in those areas increases, this limited licensed spectrum may not be
able to accommodate increases in call volume and may lead to more dropped calls
than in other parts of Alamosa's territory. In addition, if Sprint PCS were to
terminate its affiliation agreements with Alamosa, Sprint PCS would have no
obligation to sell spectrum licenses to Superholdings or Alamosa in areas where
Sprint PCS owns less than 20 MHZ of spectrum. Accordingly, if Sprint PCS were to
terminate the affiliation agreements with Alamosa, it is likely that
Superholdings would be unable to operate its business in New Mexico and Durango.
THE TECHNOLOGY THAT ALAMOSA, WOW AND ROBERTS USE MAY BECOME OBSOLETE,
WHICH WOULD LIMIT SUPERHOLDINGS' ABILITY TO COMPETE EFFECTIVELY WITHIN
THE WIRELESS INDUSTRY.
The wireless telecommunications industry is experiencing significant
technological change. Alamosa, WOW and Roberts employ code division multiple
access ("CDMA") digital technology, the digital wireless communications
technology selected by Sprint PCS for its nationwide network. CDMA technology
may not ultimately provide all of the advantages expected by Superholdings or
Sprint PCS. If another technology becomes the preferred industry standard,
Superholdings would be at a competitive disadvantage and competitive pressures
may require Sprint PCS to change its digital technology, which in turn could
require Superholdings to make changes to its network at substantial costs.
Superholdings may be unable to respond to these pressures and implement new
technology on a timely basis or at an acceptable cost.
UNAUTHORIZED USE OF, OR INTERFERENCE WITH, THE SPRINT PCS NETWORK COULD
DISRUPT SUPERHOLDINGS' SERVICE AND INCREASE SUPERHOLDINGS' COSTS.
Superholdings may incur costs associated with the unauthorized use of
the Sprint PCS network, including administrative and capital costs associated
with detecting, monitoring and reducing the incidence of fraud. Fraudulent use
of the Sprint PCS network may impact interconnection costs, capacity costs,
administrative costs, fraud prevention costs and payments to other carriers for
unbillable fraudulent roaming. In addition, some of Superholdings' border
markets are susceptible to uncertainties related to areas not governed by the
FCC. For example, unauthorized microwave radio signals near the border in Mexico
could disrupt Superholdings' service in the United States.
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POTENTIAL ACQUISITIONS MAY REQUIRE SUPERHOLDINGS TO INCUR SUBSTANTIAL
ADDITIONAL DEBT AND INTEGRATE NEW TECHNOLOGIES, OPERATIONS AND
SERVICES, WHICH MAY BE COSTLY AND TIME CONSUMING.
Superholdings intends to continually evaluate opportunities for the
acquisition of businesses that are intended to complement or extend its existing
operations. If Superholdings acquires new businesses, it may encounter
difficulties that may be costly and time-consuming, may slow its growth or may
lower the market value of Superholdings common stock. Examples of such
difficulties are that Superholdings may have to:
o assume and/or incur substantial additional debt to finance the
acquisitions and fund the ongoing operations of the acquired
companies;
o integrate new technologies with its existing technology;
o integrate new operations with its existing operations;
o integrate new services with its offering of services; or
o divert the attention of its management from other business
concerns.
RISKS RELATED TO THE RELATIONSHIPS WITH SPRINT PCS
IF ANY OF ALAMOSA, ROBERTS OR WOW FAILS TO COMPLETE THE BUILD-OUT OF
ITS PORTION OF THE SPRINT PCS NETWORK IN ACCORDANCE WITH THE TERMS OF
ITS MANAGEMENT AGREEMENT WITH SPRINT PCS, OR IF AN ACCELERATION IS
DECLARED UNDER THE EDC CREDIT FACILITY OR, AFTER THE COMPLETION OF THE
REORGANIZATION, THE CITICORP CREDIT FACILITY, SPRINT PCS MAY PURCHASE
THE OPERATING ASSETS OF ALAMOSA, ROBERTS OR WOW, AS THE CASE MAY BE, AT
A DISCOUNT TO MARKET VALUE WITHOUT FURTHER APPROVAL BY SUPERHOLDINGS'
STOCKHOLDERS.
The affiliation agreements between Sprint PCS and each of Alamosa,
Roberts and WOW require that each of Alamosa, Roberts and WOW provide network
coverage to a minimum network coverage area within specified time frames. Each
of Alamosa, Roberts and WOW may amend its agreement with Sprint PCS in the
future to expand network coverage. A failure by Alamosa, Roberts or WOW to meet
the build-out requirements for any one of its markets could constitute an event
of termination under its management agreement with Sprint PCS, and (in the case
of Alamosa) an event of default under the EDC credit facility or, after the
completion of the reorganization (in the case of Roberts or WOW), the Citicorp
credit facility, and could provide Sprint PCS the right to purchase the
operating assets of such party without further stockholder approval and for a
price equal to 72% of the "entire business value" of Alamosa, Roberts or WOW, as
the case may be. The "entire business value" includes the spectrum licenses,
business operations and other assets of Alamosa, Roberts or WOW, as the case may
be.
Sprint's right to purchase Alamosa's assets is subject to the
provisions of the consent and agreement entered into by Sprint with EDC as
administrative agent under the EDC credit facility, and its right to purchase
Roberts' and WOW's assets following the reorganization will be subject to the
provisions of any consent and agreement entered into by Sprint with Citicorp in
connection with the Citicorp credit facility. Pursuant to the terms of these
consents and agreements, Sprint may not purchase the operating assets of
Alamosa, Roberts or WOW until all of such party's obligations pursuant to its
credit facility have been paid in full in cash and all commitments to advance
credit under such facility have been terminated or have
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expired. However, Sprint may purchase Alamosa's, Roberts' or WOW's assets if it
first pays all obligations due under the appropriate credit facility, and such
facility is terminated in connection with such payment. Furthermore, Sprint also
has the right to purchase Alamosa's, Roberts' or WOW's assets upon receipt of a
notice of acceleration under the appropriate credit facility following an event
of default thereunder. Such right to purchase is subject to time limitations,
and the purchase price must be the greater of AN AMOUNT EQUAL TO 72% OF
ALAMOSA'S, ROBERTS' OR WOW'S "ENTIRE BUSINESS VALUE" OR THE AMOUNT ALAMOSA,
ROBERTS OR WOW OWES UNDER ITS CREDIT FACILITY.
IF SPRINT PCS DOES NOT COMPLETE THE CONSTRUCTION OF ITS NATIONWIDE PCS
NETWORK, ALAMOSA, ROBERTS AND WOW 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 Alamosa's, Roberts'
and WOW's with companies in other markets under its nationwide PCS build-out
strategy. Alamosa's, Roberts' and WOW's 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 Alamosa's, Roberts'
and WOW's ability to attract and retain customers.
SPRINT PCS' VENDOR DISCOUNTS MAY BE DISCONTINUED, WHICH COULD INCREASE
SUPERHOLDINGS' EQUIPMENT COSTS AND REQUIRE MORE CAPITAL THAN
SUPERHOLDINGS PROJECTS TO BUILD-OUT ALAMOSA'S, ROBERTS' AND WOW'S
NETWORK.
Superholdings intends to continue to purchase infrastructure equipment
under Sprint PCS' vendor agreements that include significant volume discounts.
If Sprint PCS were unable to continue to obtain vendor discounts for its
affiliates, the loss of vendor discounts could increase Superholdings' equipment
costs for its new markets.
SPRINT PCS MAY MAKE DECISIONS THAT COULD INCREASE SUPERHOLDINGS'
EXPENSES, REDUCE SUPERHOLDINGS' REVENUES OR MAKE THE ALAMOSA, ROBERTS
OR WOW AFFILIATE RELATIONSHIPS WITH SPRINT PCS LESS COMPETITIVE.
Sprint PCS, under its affiliation agreements with each of Alamosa,
Roberts and WOW, has a substantial amount of control over factors which will
significantly affect the conduct of Superholdings' business after the
reorganization. Accordingly, Sprint PCS may make decisions that adversely affect
Superholdings' business, such as the following:
o Sprint PCS prices its national plans based on its own
objectives and could set price levels that may not be
economically sufficient for Superholdings' business.
o Sprint PCS could change the per minute rate for Sprint PCS
roaming fees and increase the costs for Sprint PCS to perform
back office services.
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o Sprint PCS may alter its network and technical requirements or
request that Alamosa, Roberts or WOW build out additional
areas within their territory, which could result in increased
equipment and build-out costs or in Sprint PCS building out
that area itself or assigning it to another affiliate.
THE TERMINATION OF ANY OF THE AFFILIATION AGREEMENTS BETWEEN SPRINT PCS
AND EACH OF ALAMOSA, ROBERTS AND WOW WOULD SEVERELY RESTRICT
SUPERHOLDINGS' ABILITY TO CONDUCT ITS BUSINESS.
Superholdings' relationship with Sprint PCS will be governed by the
affiliation agreements between Sprint PCS and each of Alamosa, Roberts and WOW.
Since Alamosa, Roberts and WOW do not own any licenses to operate a wireless
network, Superholdings' business will depend on the continued effectiveness of
these affiliation agreements. However, Sprint PCS may be able to terminate its
affiliation agreement with Alamosa, Roberts or WOW if such party materially
breaches the agreement. Among other things, a failure by Alamosa, Roberts or WOW
to meet the build-out requirements for any one of the individual markets in its
territory or to meet Sprint PCS's technical or customer service requirements
contained in its affiliation agreement would constitute a material breach of
that agreement, which could lead to its termination. If Sprint PCS terminates
any of these affiliation agreements, Alamosa, Roberts or WOW may not be a part
of the Sprint PCS network and Superholdings would have extreme difficulty
conducting that part of its business. Sprint's right to terminate the
affiliation agreement with Alamosa is subject to the terms of the consent and
agreement entered into by Sprint and EDC, and its right to terminate the
affiliation agreements with Roberts and WOW will be subject to the provisions of
any consent and agreement entered into by Sprint with Citicorp in connection
with the Citicorp credit facility. See "Affiliation Agreements with Sprint
PCS-Consent and Agreement for the Benefit of the Holders of the EDC Credit
Facility."
IF SPRINT PCS DOES NOT RENEW THE ALAMOSA, ROBERTS OR WOW AFFILIATION
AGREEMENTS, SUPERHOLDINGS' ABILITY TO CONDUCT ITS BUSINESS WOULD BE
SEVERELY RESTRICTED.
The affiliation agreements between Sprint PCS and each of Alamosa,
Roberts and WOW are not perpetual, and will eventually expire. Sprint PCS can
choose not to renew these agreements at the expiration of the 20-year initial
term or any ten-year renewal term. If Sprint PCS decides not to renew the
Alamosa, Roberts or WOW affiliation agreements, Alamosa, Roberts or WOW may no
longer be a part of the Sprint PCS network and Superholdings would have extreme
difficulty conducting some or all of its business.
CERTAIN PROVISIONS OF THE ALAMOSA, ROBERTS AND WOW AFFILIATION
AGREEMENTS WITH SPRINT PCS MAY DIMINISH THE VALUE OF SUPERHOLDINGS AND
RESTRICT THE SALE OF SUPERHOLDINGS' BUSINESS.
Under specific circumstances and without further stockholder approval,
Sprint PCS may purchase the operating assets or capital stock of Alamosa,
Roberts or WOW at a discount. In addition, Sprint PCS must approve any change of
control of the ownership of Alamosa, Roberts or WOW and must consent to any
assignment of their affiliation agreements. Sprint PCS also has a right of first
refusal if Alamosa, Roberts or WOW decides to sell its operating assets to a
third party. Each of Alamosa, Roberts and WOW is also subject to a number of
restrictions on the transfer of its business, including a prohibition on the
sale of Alamosa, Roberts or WOW or their operating assets to competitors of
Sprint or Sprint PCS. These restrictions and other restrictions contained in
these affiliation agreements with Sprint PCS could adversely affect the value of
Superholdings' common stock, may limit Superholdings' ability to sell its
business, may reduce the value a buyer would be willing to pay for
Superholdings' business and may reduce the "entire business value" of Alamosa,
Roberts or WOW.
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PROBLEMS EXPERIENCED BY SPRINT PCS WITH ITS INTERNAL SUPPORT SYSTEMS
COULD LEAD TO CUSTOMER DISSATISFACTION OR INCREASE SUPERHOLDINGS'
COSTS.
Alamosa, Roberts and WOW rely on Sprint PCS's internal support systems,
including customer care, billing and back-office support. As Sprint PCS has
expanded, its internal support systems have been subject to increased demand
and, in some cases, suffered a degradation in service. Superholdings cannot
assure you that Sprint PCS will be able to successfully add system capacity or
that its internal support systems will be adequate. It is likely that problems
with Sprint PCS's internal support systems could cause:
o delays or problems in Superholdings' operations or services;
o delays or difficulty in gaining access to customer and
financial information;
o a loss of Sprint PCS customers; and
o an increase in the costs of customer care, billing and back
office services.
SUPERHOLDINGS' COSTS FOR INTERNAL SUPPORT SYSTEMS MAY INCREASE IF
SPRINT PCS TERMINATES ALL OR PART OF THE ALAMOSA, ROBERTS OR WOW
SERVICES AGREEMENTS.
Superholdings estimates that the costs for the services provided by
Sprint PCS under the Alamosa, Roberts and WOW services agreements in the year
2000 will be approximately $6.7 million. Superholdings expects this number to
significantly increase as the number of Sprint PCS subscribers based in the
territories of Alamosa, WOW and Roberts increases. The Alamosa, Roberts and WOW
services agreements with Sprint PCS provide that, upon nine months' prior
written notice, Sprint PCS may terminate any service provided under that
agreement. Superholdings does not expect to have a contingency plan if Sprint
PCS terminates any such service. If Sprint PCS terminates a service for which
Superholdings has not developed a cost- effective alternative or increases the
amount it charges for these services, Superholdings' operating costs may
increase beyond its expectations and its operations may be interrupted or
restricted.
SUPERHOLDINGS MAY HAVE DIFFICULTY IN OBTAINING HANDSETS FROM SPRINT
PCS, WHICH ARE IN SHORT SUPPLY.
Alamosa, WOW and Roberts depend on their relationships with Sprint PCS
to obtain handsets. The demand for specific types of handsets is considerable
and the manufacturers of those handsets may have to distribute their limited
supply of products among their numerous customers. If Sprint PCS modifies its
handset logistics and delivery plan or if Superholdings is not able to continue
to rely on Sprint PCS's relationships with suppliers and vendors, Superholdings
could have difficulty obtaining specific types of handsets in a timely manner.
As a result, Superholdings could suffer disruptions in customer service and a
reduction in subscribers.
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IF SUPERHOLDINGS OR ANY OF ITS SUBSIDIARIES FAILS TO PAY ITS
OBLIGATIONS UNDER EITHER THE EDC CREDIT FACILITY OR THE CITICORP CREDIT
FACILITY, SPRINT PCS WILL HAVE THE RIGHT TO EITHER PURCHASE THE ASSETS
OF THE DEFAULTING PARTIES OR PURCHASE THE OUTSTANDING DEBT OBLIGATIONS
UNDER SUCH FACILITY AND FORECLOSE ON THE ASSETS OF THE DEFAULTING
PARTIES.
Pursuant to the consent and agreement entered into by Sprint PCS in
connection with the EDC credit facility, Sprint PCS has certain contractual
rights to purchase Alamosa's assets or the indebtedness under the EDC credit
facility following an acceleration of such indebtedness. See "Affiliation
Agreements with Sprint PCS-Consent and Agreement for the Benefit of the Holders
of the EDC Credit Facility." As a condition precedent to the closing and funding
of the Citicorp credit facility, Citicorp must enter into a similar consent and
agreement with Sprint PCS in connection with the Roberts and WOW management
agreements.
If an event of default occurs under the EDC credit facility or the
Citicorp credit facility following completion of the reorganization and the
appropriate administrative agent accelerates the obligations outstanding under
such facility, Sprint PCS will have the right to either:
o purchase the operating assets of Alamosa, or Roberts and WOW,
as the case may be, for an amount equal to the greater of (i)
72% of the "entire business value" of such entity, and (ii)
the aggregate amount of the outstanding obligations under the
appropriate credit facility; or
o purchase the obligations under the appropriate credit facility
by repaying the lenders in full in cash. To the extent Sprint
PCS purchases these obligations from EDC or Citicorp, Sprint
PCS's rights as a senior lender would enable it to foreclose
on the assets of Superholdings in a manner not otherwise
permitted under the affiliation agreements between Sprint PCS
and each of Roberts, WOW and Alamosa.
IF SPRINT PCS DOES NOT MAINTAIN CONTROL OVER ITS LICENSED SPECTRUM, THE
AFFILIATION AGREEMENTS WITH SPRINT PCS MAY BE TERMINATED.
Sprint PCS, not Alamosa, WOW or Roberts, owns the licenses necessary to
provide wireless services in Alamosa's, WOW's and Roberts' territories. The FCC
requires that licensees like Sprint PCS maintain control of their licensed
systems and not delegate control to third party operators or managers. The
Alamosa, Roberts and WOW affiliation agreements with Sprint PCS reflect an
arrangement that the parties believe meets the FCC requirements for licensee
control of licensed spectrum. However, if the FCC were to determine that any of
the Alamosa, Roberts or WOW affiliation agreements with Sprint PCS needs to be
modified to increase the level of licensee control, Alamosa, WOW and Roberts
have agreed with Sprint PCS to use their best efforts to modify the agreements
to comply with applicable law. If Alamosa, WOW or Roberts cannot agree with
Sprint PCS to modify the agreements, they may be terminated. If the agreements
are terminated, Superholdings would no longer be a part of the Sprint PCS
network and Superholdings would not be able to conduct its business.
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THE FCC MAY FAIL TO RENEW THE SPRINT PCS LICENSES UNDER CERTAIN
CIRCUMSTANCES, WHICH WOULD PREVENT SUPERHOLDINGS FROM PROVIDING
WIRELESS SERVICES.
Superholdings, Alamosa, WOW and Roberts do not own any licenses to
operate a wireless network. Superholdings is dependent on Sprint PCS's licenses,
which are subject to renewal and revocation by the FCC. Sprint PCS's licenses in
Superholdings' territories will expire in 2005 or 2007 but may be renewed for
additional ten-year terms. The FCC has adopted specific standards that apply to
wireless personal communications services license renewals. Any failure by
Sprint PCS or Superholdings to comply with these standards could cause
nonrenewal of the Sprint PCS licenses for the Superholdings territory.
Additionally, if Sprint PCS does not demonstrate to the FCC that Sprint PCS has
met the five-year and ten-year construction requirements for each of its
wireless personal communications services licenses, it can lose those licenses.
If Sprint PCS loses its licenses in Superholdings' territory for any of these
reasons, Superholdings and its subsidiaries would not be able to provide
wireless services without obtaining rights to other licenses.
RISKS PARTICULAR TO INDEBTEDNESS OF SUPERHOLDINGS
SUPERHOLDINGS EXPECTS TO INCUR SUBSTANTIAL DEBT AS A RESULT OF THE
REORGANIZATION, WHICH WILL REQUIRE SIGNIFICANT PAYMENTS AND MAY RESULT
IN ITS LENDERS CONTROLLING ITS ASSETS UPON ANY DEFAULT.
As of June 30, 2000, Superholdings' outstanding long-term debt, on a
pro forma consolidated basis giving effect to the reorganization, totaled
approximately $267.0 million. In addition, Superholdings expects to incur
substantial additional debt following completion of the reorganization before
achieving break-even operating cash flow.
Superholdings' substantial debt will have a number of important
consequences for its operations and its investors, including the following:
o Superholdings will have to dedicate a substantial portion of
any cash flow from operations to the payment of interest on,
and principal of, its debt, which will reduce funds available
for other purposes;
o Superholdings may not have sufficient funds to pay interest
on, and principal of, its debt;
o Superholdings may not be able to obtain additional financing
for currently unanticipated capital requirements, capital
expenditures, working capital requirements or other corporate
purposes; and
o due to the liens on substantially all of Alamosa's assets that
secure the EDC credit facility and the liens on the assets of
Roberts and WOW that will secure the Citicorp credit facility,
Superholdings' lenders may control the assets of Superholdings
or its subsidiaries upon a default.
The ability to make payments on Superholdings' debt will depend upon
Superholdings' future operating performance which is subject to general economic
and competitive conditions and to financial, business and other factors, many of
which Superholdings cannot control. If the cash flow from Superholdings'
operating activities is insufficient, Superholdings may take actions, such as
delaying or reducing capital expenditures, attempting to restructure or
refinance its debt, selling assets or operations or seeking additional
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equity capital. Any or all of these actions may not be sufficient to allow
Superholdings to service its debt obligations. Further, Superholdings may be
unable to take any of these actions on satisfactory terms, in a timely manner or
at all. The EDC credit facility, the Citicorp credit facility and the Alamosa
senior discount notes indenture will limit Superholdings' and its subsidiaries'
ability to take several of these actions. Superholdings' failure to generate
sufficient funds to pay its debts or to successfully undertake any of these
actions could, among other things, materially adversely affect the market value
of Superholdings common stock.
IF SUPERHOLDINGS AND ITS SUBSIDIARIES DO NOT MEET ALL OF THE CONDITIONS
REQUIRED UNDER THE EDC CREDIT FACILITY AND CITICORP CREDIT FACILITY,
SUPERHOLDINGS MAY NOT BE ABLE TO DRAW DOWN ALL OF THE FUNDS IT
ANTICIPATES RECEIVING FROM EDC AND CITICORP AND MAY NOT BE ABLE TO
COMPLETE THE BUILD- OUT OF ITS SUBSIDIARIES' PORTIONS OF THE SPRINT PCS
NETWORK.
EDC CREDIT FACILITY. As of June 30, 2000, approximately $4.5 million of
the $175.0 million EDC credit facility had been drawn. Any additional borrowing
is subject at each funding date to Alamosa's meeting several conditions,
including:
o acquiring minimum numbers of Sprint PCS subscribers;
o providing coverage to a minimum number of residents; and
o adhering to financial covenants.
If Alamosa does not meet these conditions at each funding date, EDC may
choose not to lend any or all of the remaining amounts. If other sources of
funds are not available, Alamosa may be unable to complete the build-out of its
portions of the Sprint PCS network. If Alamosa does not have sufficient funds to
complete its network build-out, it may be in breach of its management agreements
with Sprint PCS.
CITICORP CREDIT FACILITY. On the date on which the definitive
documentation for the Citicorp credit facility is executed and the
reorganization is completed, $100.0 million must be drawn under the Citicorp
term facility. An additional $75.0 million in term debt will be available for
multiple drawings for a period of 18 months thereafter. The Citicorp revolving
facility of $25.0 million will be available for multiple drawings prior to its
final maturity if all amounts under the Citicorp term facility have been fully
drawn.
Alamosa Holdings, LLC, as borrower under the Citicorp credit facility
will be subject to selected financial covenants that must be satisfied at each
funding date. If Alamosa Holdings, LLC does not meet these conditions at each
funding date, Citicorp may choose not to lend any or all of the remaining
amounts. If other sources of funds are not available, Roberts and WOW may be
unable to complete the build-out of their portions of the Sprint PCS network. If
Roberts and WOW do not have sufficient funds to complete their network
build-out, Roberts and WOW may be in breach of their management agreements with
Sprint PCS.
IF SUPERHOLDINGS DOES NOT HAVE ACCESS TO THE CAPITAL MARKETS ON TERMS
REASONABLY SATISFACTORY TO IT, IT MAY BE UNABLE TO REPAY THE EDC CREDIT
FACILITY AT MATURITY, OR ASSURE THAT ALAMOSA HOLDINGS,
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LLC AS BORROWER UNDER THE CITICORP CREDIT FACILITY WILL REPAY THE
CITICORP CREDIT FACILITY AT MATURITY, OR TO REFINANCE THE EDC CREDIT
FACILITY OR THE CITICORP CREDIT FACILITY.
Failure to repay either the EDC credit facility or the Citicorp credit
facility at maturity will result in a default under that facility.
EDC CREDIT FACILITY. A default under the EDC credit facility could:
o prevent Alamosa from operating or completing the build-out of
its portion of the Sprint PCS network;
o constitute a default under the senior discount notes indenture
or a default under Alamosa's affiliation agreements with
Sprint PCS; and
o make it extremely difficult for Superholdings to obtain any
future financing.
CITICORP CREDIT FACILITY. A default under the Citicorp credit facility
could:
o prevent Alamosa Holdings, LLC and its subsidiaries (including
Roberts and WOW) from operating or completing the build-out of
their portions of the Sprint PCS network;
o constitute a default under Roberts' or WOW's affiliation
agreements with Sprint PCS; and
o make it extremely difficult for Superholdings to obtain any
future financing.
THE INDEBTEDNESS OF SUPERHOLDINGS AND ITS SUBSIDIARIES WILL PLACE
RESTRICTIONS ON SUPERHOLDINGS AND ITS SUBSIDIARIES WHICH MAY LIMIT
THEIR OPERATING FLEXIBILITY AND THEIR ABILITY TO PAY DIVIDENDS.
The senior discount notes indenture, the EDC credit facility and the
Citicorp credit facility will impose material operating and financial
restrictions on Superholdings and its subsidiaries. These restrictions, subject
to ordinary course of business exceptions, may limit the ability of Roberts,
WOW, Alamosa and Superholdings to engage in some transactions, including the
following:
o designated types of mergers or consolidations;
o paying dividends or other distributions to their stockholders;
o making investments;
o selling assets;
o repurchasing their common stock;
o changing lines of business;
o borrowing additional money; and
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o engaging in transactions with affiliates.
These restrictions could limit the ability of Superholdings, Alamosa,
Roberts and WOW to obtain debt financing, repurchase stock, refinance or pay
principal or interest on their outstanding debt, complete acquisitions for cash
or debt, or react to changes in their operating environment.
RISKS RELATED TO THE WIRELESS PERSONAL COMMUNICATIONS SERVICES INDUSTRY
SUPERHOLDINGS' SUBSIDIARIES MAY EXPERIENCE A HIGH RATE OF CUSTOMER
TURNOVER WHICH WOULD INCREASE SUPERHOLDINGS COSTS OF OPERATIONS AND
REDUCE ITS REVENUE.
The wireless personal communications services industry in general and
Sprint PCS in particular have experienced a higher rate of customer turnover as
compared to cellular industry averages. In particular, the customer turnover
experienced by Superholdings' subsidiaries may be high because:
o Sprint PCS does not require its customers to sign long-term
contracts; and
o Sprint PCS's handset return policy allows customers to return
used handsets within 14 days of purchase and receive a full
refund.
A high rate of customer turnover could adversely affect Superholdings'
competitive position, results of operations and its costs of, or losses incurred
in, obtaining new subscribers, especially because its subsidiaries subsidize
some of the costs of initial purchases of handsets by customers.
REGULATION BY GOVERNMENT AGENCIES AND TAXING AUTHORITIES MAY INCREASE
SUPERHOLDINGS' COSTS OF PROVIDING SERVICE OR REQUIRE IT TO CHANGE ITS
SERVICES.
Superholdings' operations and those of Sprint PCS may be subject to
varying degrees of regulation by the FCC, the Federal Trade Commission, the
Federal Aviation Administration, the Environmental Protection Agency, the
Occupational Safety and Health Administration and state and local regulatory
agencies and legislative bodies. Adverse decisions or regulations of these
regulatory bodies could negatively impact Sprint PCS's operations and
Superholdings' costs of doing business. For example, changes in tax laws or the
interpretation of existing tax laws by state and local authorities could subject
Superholdings to increased income, sales, gross receipts or other tax costs or
require it to alter the structure of its current relationship with Sprint PCS.
CONCERNS OVER HEALTH RISKS POSED BY THE USE OF WIRELESS HANDSETS MAY
REDUCE THE CONSUMER DEMAND FOR THE SERVICES OF SUPERHOLDINGS'
SUBSIDIARIES.
Media reports have suggested that radio frequency emissions from
wireless handsets may:
o be linked to various health problems resulting from continued
or excessive use, including cancer;
o interfere with various electronic medical devices, including
hearing aids and pacemakers; and
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o cause explosions if used while fueling an automobile.
Widespread concerns over radio frequency emissions may expose
Superholdings and its subsidiaries to potential litigation or discourage the use
of wireless handsets. Any resulting decrease in demand for these services could
impair Superholdings' ability to profitably operate its business.
WORSE THAN EXPECTED FOURTH QUARTER RESULTS MAY SIGNIFICANTLY REDUCE
SUPERHOLDINGS' OVERALL RESULTS OF OPERATIONS AND CAUSE ITS STOCK PRICE
TO DROP.
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.
Superholdings' overall results of operations could be significantly
reduced, and the price of its common stock may drop, if Superholdings has a
worse than expected fourth quarter for any reason, including the following:
o Superholdings' subsidiaries' inability to match or beat
pricing plans offered by competitors;
o the failure to adequately promote Sprint PCS's products,
services and pricing plans;
o the inability of Superholdings to obtain an adequate supply or
selection of handsets;
o a downturn in the economy of some or all markets in its
territory; or
o a poor holiday shopping season.
SIGNIFICANT COMPETITION IN THE WIRELESS COMMUNICATIONS SERVICES
INDUSTRY MAY RESULT IN SUPERHOLDINGS' COMPETITORS OFFERING NEW SERVICES
OR LOWER PRICES, WHICH COULD PREVENT SUPERHOLDINGS FROM OPERATING
PROFITABLY.
Competition in the wireless communications services industry is
intense. Superholdings anticipates that competition will cause the market prices
for two-way wireless products and services to decline in the future.
Superholdings' ability to compete will depend, in part, on its ability to
anticipate and respond to various competitive factors affecting the
telecommunications industry.
Superholdings' dependence on Sprint PCS to develop competitive products
and services and the requirement that it obtain Sprint PCS's consent for its
subsidiaries to sell non-Sprint PCS approved equipment may limit its ability to
keep pace with its competitors on the introduction of new products, services and
equipment. Some of Superholdings' competitors are larger than it, possess
greater resources and more extensive coverage areas, and may market other
services, such as landline telephone service, cable television and Internet
access, with their wireless communications services. In addition, Superholdings
may be at a competitive disadvantage since it may be more highly leveraged than
some of its competitors.
Furthermore, there has been a recent trend in the wireless
communications industry towards consolidation of wireless service providers
through joint ventures, reorganizations and acquisitions. Superholdings expects
this consolidation to lead to larger competitors over time. Superholdings may be
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unable to compete successfully with larger competitors who have substantially
greater resources or who offer more services than it does.
A LACK OF SUITABLE TOWER SITES MAY DELAY THE BUILD-OUT OF THE
SUPERHOLDINGS SUBSIDIARIES' PORTIONS OF THE SPRINT PCS NETWORK AND
RESTRICT SUPERHOLDINGS' OPERATING CAPACITY.
Alamosa, Roberts and WOW have experienced difficulty, and may continue
to have difficulty, in obtaining tower sites in some areas of their territories
on a timely basis. For example, the local governmental authorities in various
locations in these territories have at times placed moratoriums on the
construction of additional towers and base stations. These moratoriums may
materially and adversely affect the timing of the planned build-out and quality
of the network operations in those markets. A lack of tower site availability
due to difficulty in obtaining local regulatory approvals, or for any other
reasons, may delay the build-out of Superholdings' subsidiaries' portions of the
Sprint PCS network, delay the opening of markets, limit network capacity or
reduce the number of new Sprint PCS subscribers in the territories serviced by
Superholdings' subsidiaries.
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THE SPECIAL MEETING
This proxy statement-prospectus is being furnished to you in connection
with the solicitation of proxies by the Alamosa board of directors in connection
with the proposed reorganization and the proposed amendment to the long-term
incentive plan.
This proxy statement-prospectus is first being furnished to
stockholders of Alamosa on or about [__________], 2000.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting is scheduled to be held as follows:
[ ], 2000
[ ] a.m., local time
5225 S. Loop 289
Lubbock, Texas
PURPOSE OF THE SPECIAL MEETING
At the special meeting, Alamosa stockholders will be asked to:
o consider and vote upon a proposal to adopt the reorganization
agreement between Alamosa and Superholdings pursuant to which
Alamosa will become a wholly-owned subsidiary of
Superholdings;
o consider and vote upon a proposal to approve the issuance of
the shares of Superholdings common stock in the reorganization
to the current members of Roberts Holdings and WOW Holdings;
o consider and vote upon a proposal to amend Alamosa's long-term
incentive plan to increase the number of shares of Alamosa
common stock reserved for issuance under the long-term
incentive plan and to provide for an automatic annual
increase in shares available under the plan;
o act on any other business that properly comes before the
special meeting or any adjournment or postponement of the
special meeting.
RECORD DATE FOR THE SPECIAL MEETING
The Alamosa board of directors has fixed the close of business on
[_________], 2000 as the record date for determination of Alamosa stockholders
entitled to notice of, and to vote at, the special meeting. On the record date,
there were [__________] shares of Alamosa common stock outstanding, held by
approximately [____] holders of record. At the special meeting, each holder of
Alamosa common stock will have one vote for each share of Alamosa common stock
held.
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QUORUM; VOTES REQUIRED FOR APPROVAL OF THE REORGANIZATION PROPOSALS AND THE
AMENDMENT TO THE LONG-TERM INCENTIVE PLAN
If a majority of the shares of Alamosa common stock outstanding on the
record date is represented either in person or by proxy at the special meeting,
a quorum will be present at the special meeting. Shares held by persons
attending the special meeting but not voting, and shares represented in person
or by proxy and for which the holder has abstained from voting, will be counted
as present at the special meeting for purposes of determining the presence or
absence of a quorum. Brokers who hold shares in nominee or "street name" for
customers who are the beneficial owners of those shares are prohibited from
giving a proxy to vote shares held for those customers on the reorganization
proposals without specific instructions from those customers. If the brokers do
not receive instructions with respect to such shares, the shares will not be
voted. These so-called "broker non-votes" will also be counted as present for
purposes of determining whether a quorum exists.
The adoption of the Alamosa reorganization agreement requires the
affirmative vote of the holders of a majority of the shares of Alamosa common
stock outstanding as of the record date. Approval of the issuance of the shares
of Superholdings common stock in the Roberts and WOW mergers requires the
affirmative vote of the holders of a majority of the total votes cast on the
proposal at the special meeting. Approval of the proposed amendment to the
long-term incentive plan requires the affirmative votes of the holders of a
majority of the shares of Alamosa common stock present or represented by proxy
at the meeting and entitled to vote.
Abstentions and "broker non-votes" will have the same effect as a vote
against the adoption of the Alamosa reorganization agreement but will not be
counted as "votes cast", and therefore will have no effect on the proposal to
approve the issuance of shares of Superholdings common stock in the Roberts and
WOW mergers. Abstentions will have the same effect as a vote against the
proposal to approve the amendment to the long-term incentive plan, but "broker
non-votes" will have no effect on such proposal.
As of the record date, directors and executive officers of Alamosa and
their affiliates, including companies controlled by them, owned approximately
[ ] shares of Alamosa common stock, entitling them to exercise approximately
[ ]% of the voting power of Alamosa common stock entitled to vote at the
special meeting. We expect that all of these persons will vote their shares of
Alamosa common stock in favor of the reorganization proposals and the proposal
to amend the long-term incentive plan.
PROXIES
All shares of Alamosa common stock represented by properly executed
proxies received before or at the special meeting will, unless revoked, be voted
in accordance with the instructions indicated on those proxies. If no
instructions are indicated on a properly executed proxy card, the shares
represented by such proxy card will be voted: (i) "FOR" adoption of the Alamosa
reorganization agreement; (ii) "FOR" approval of the issuance of the shares of
Superholdings common stock in the Roberts and WOW mergers; and (iii) "FOR"
approval of the amendment to the long-term incentive plan. You are urged to mark
the box on your proxy card to indicate how to vote your shares.
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Alamosa does not expect that any other matters will be brought before
the special meeting. If, however, other matters are properly presented, the
persons named as proxies will vote the shares represented by properly executed
proxies in accordance with their judgment with respect to those matters. No
proxy that is voted against all of the proposals will be voted in favor of any
adjournment or postponement of the special meeting for the purpose of soliciting
additional proxies.
You may revoke your proxy at any time before it is voted by:
o submitting a written notice of revocation to the Secretary of
Alamosa at 5225 S. Loop 289, Lubbock, Texas 79424;
o executing and delivering a subsequently dated proxy; or
o appearing in person and voting at the special meeting if you
are a holder of record.
Attendance at the special meeting will not in and of itself constitute
revocation of a proxy.
SOLICITATION OF PROXIES
Alamosa will pay for the expenses incurred in connection with the
printing and mailing of this proxy statement-prospectus. Alamosa will also
request banks, brokers and other intermediaries holding shares of Alamosa common
stock beneficially owned by others to send this proxy statement-prospectus to,
and obtain proxies from, the beneficial owners and will reimburse the holders
for their reasonable expenses in so doing.
You should not send in any stock certificates with your proxy card. A
transmittal letter with instructions for the surrender of stock certificates
will be mailed to you as soon as practicable after completion of the
reorganization.
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THE REORGANIZATION
GENERAL
As more fully described herein, the reorganization consists of a series
of transactions pursuant to which Alamosa will acquire Roberts and WOW and
simultaneously form a new public holding company. After completion of the
reorganization, Alamosa, Roberts and WOW will be wholly-owned subsidiaries of
Superholdings, and the former members of Roberts Holdings and WOW Holdings and
the former stockholders of Alamosa will be stockholders of Superholdings.
The "reorganization" is comprised of the following steps:
o Alamosa formed Superholdings and Alamosa Sub, a wholly-owned
subsidiary of Superholdings.
o Roberts formed a holding company, Roberts Holdings to hold all
of the membership interests of Roberts, and each member of
Roberts exchanged his membership interests in Roberts for
membership interests in Roberts Holdings.
o WOW formed a holding company, WOW Holding to hold all of the
membership interests of WOW, and each member of WOW exchanged
its membership interests in WOW for membership interests in
WOW Holdings.
o In substantially simultaneous transactions on the closing date
of the reorganization, (i) Roberts Holdings will merge with
and into Superholdings, with Superholdings surviving the
merger,(ii) WOW Holdings will merge with and into
Superholdings with Superholdings surviving the merger, and
(iii) Alamosa Sub will merge with and into Alamosa, with
Alamosa surviving the merger.
o Superholdings formed Alamosa Holdings, LLC and, after the
Roberts merger and the WOW merger, Superholdings will
contribute all of its ownership interests in Roberts and WOW
to Alamosa Holdings, LLC. Alamosa Holdings, LLC will be the
borrower under a new senior credit facility of up to $200.0
million. See "-Citicorp Credit Facility."
The persons currently serving on the board of directors of Alamosa,
together with Michael and Steven Roberts (the members of Roberts Holdings) will
serve on the board of directors of Superholdings following completion of the
reorganization. The current executive officers of Alamosa will be the executive
officers of Superholdings after completion of the reorganization. For more
information concerning the executive officers of Alamosa and the persons
currently serving on the board of directors of Alamosa, see "Directors and
Executive Officers of Alamosa." For more information concerning Michael and
Steven Roberts, see "Information About Roberts Wireless Communications, LLC
-- Members."
The reorganization will be completed when all of the conditions to
completion of the transactions comprising the reorganization are satisfied or
waived. We are working toward completing the reorganization
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and expect to complete the reorganization by December 31, 2000. However, we
cannot assure you that all conditions to completion of the reorganization will
be satisfied or that we will complete the reorganization by that time.
BACKGROUND OF THE REORGANIZATION
In the fall of 1999 representatives of Alamosa's predecessor company,
Alamosa PCS LLC,and representatives of WOW discussed WOW's capital needs and
mutually considered the possibility of a business combination transaction
between the two parties. Alamosa PCS LLC determined not to pursue further
discussions with WOW at that time in light of its plans to complete an initial
public offering in early 2000.
Later in the fall of 1999 and continuing into January 2000, Regan W.
Silber, Trevor Pearlman and several other individuals engaged in discussions
with WOW concerning a proposed equity investment by such persons in WOW. Mr.
Silber is a director of Alamosa, and each of Messrs. Silber and Pearlman is a
director, officer and 50% stockholder of Tregan International Corp., a
stockholder of Alamosa. In late January 2000, Messrs. Silber and Pearlman and
others agreed to make an equity investment in WOW through WOW Investment
Partners, L.P. constituting a 44.4% membership interest in WOW.
Alamosa completed its initial public offering on February 3, 2000. In the
evening on the same day, following an awards dinner organized by Sprint PCS at
which Alamosa received the "Sprint PCS Affiliate of the Year" award, David E.
Sharbutt, the Chairman of the Board and Chief Executive Officer of Alamosa, and
Mr. Silber discussed with Michael and Steven Roberts, the owners of Roberts
Wireless, L.L.C., the possibility of a business combination transaction between
Alamosa and Roberts.
On February 16, 2000, representatives of Salomon Smith Barney Inc.,
Alamosa's financial advisor, met with members of Alamosa's senior management and
Ray M. Clapp and Schuyler B. Marshall, two directors of Alamosa, to discuss
potential strategic initiatives aimed at enhancing value for Alamosa
stockholders, including potential merger and acquisition opportunities involving
other network partners of Sprint PCS. Thereafter, Alamosa's senior management,
with the assistance of its financial advisor, continued to consider and discuss
these possibilities.
On March 9, 2000, Messrs. Sharbutt and Silber, together with
representatives of Salomon Smith Barney Inc., met with Michael and Steven
Roberts to discuss preliminarily the possibility of a business combination
transaction and the potential terms upon which the parties would be willing to
consider engaging in such a transaction. Periodically thereafter throughout
March and April 2000, representatives of Alamosa's senior management and Michael
and Steven Roberts discussed further the proposed terms of a potential business
combination transaction between the parties, including proposed loan and
services agreements pursuant to which Alamosa would provide interim financing to
Roberts and would manage Roberts' operations pending any proposed merger.
At a retreat for the Alamosa board of directors held on March 30 and 31,
2000 in Santa Fe, New Mexico, the Alamosa board, together with a representative
of Alamosa's financial advisor, reviewed and discussed the strategic direction
of the company and potential merger and acquisition opportunities with other
Sprint PCS network partners, including Roberts and WOW. Following the board
retreat, Alamosa's senior management, with the advice and assistance of its
financial advisor, continued its efforts to identify and explore merger and
acquisition opportunities with other Sprint PCS network partners.
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On April 3, 2000, Mitchell A. Moore, the Chairman of the board of managers
and the Chief Executive Officer of WOW, together with Jeff Howard, Howard Mandel
and Mr. Silber, each of whom is a principal in WOW Investment Partners, L.P.,
met with Mr. Sharbutt. The meeting was initiated by WOW in order to ascertain
Alamosa's interest in a potential business combination transaction with WOW.
Later that week and periodically thereafter throughout April 2000,
representatives of Alamosa's senior management and certain members and managers
of WOW held further discussions concerning the proposed terms of a potential
business combination transaction between the parties.
On May 7, 2000, Alamosa and WOW executed an exclusivity and confidentiality
agreement relating to the exchange of information between Alamosa and WOW in
connection with their proposed transaction and the agreement by WOW not to
discuss or consider any competing transactions during a specified exclusivity
period. Also on May 7, representatives of Alamosa and its legal and financial
advisors began their due diligence investigation of WOW.
On May 11, 2000, Alamosa and Roberts executed an exclusivity and
confidentiality agreement relating to the exchange of information between the
two companies in connection with their proposed transaction and the agreement by
Roberts not to discuss or consider any competing transactions during a specified
exclusivity period. On May 16, 2000, representatives of Alamosa and its legal
and financial advisors began their due diligence investigation of Roberts.
On or about May 16, 2000, Alamosa notified Sprint PCS that it was in the
process of conducting its due diligence reviews of Roberts and WOW in connection
with potential business combination transactions involving the two companies and
began requesting information about Roberts and WOW from Sprint PCS.
On May 24 and May 25, 2000, representatives of Alamosa's senior management
and its legal advisors and representatives of WOW's senior management and its
legal advisors met at the offices of Alamosa's legal advisors to further discuss
and negotiate the terms and conditions of the proposed WOW merger and related
loan and services agreements pursuant to which Alamosa would provide WOW with
interim financing and would manage WOW's operations pending the proposed merger.
On May 30, 2000, Alamosa held a meeting of its Board of Directors. At the
meeting, senior management of Alamosa reviewed with the board the status of the
proposed transactions with Roberts and WOW, including its ongoing due diligence
review of the two companies and the discussions between the parties concerning
the terms of the proposed merger transactions and related loans and services
agreements. At the meeting, the Alamosa board designated Ray Clapp, Scotty Hart
and Michael Budagher to serve as members of a due diligence committee of the
board to oversee the due diligence efforts of Alamosa in connection with any
proposed acquisitions or mergers with other Sprint PCS network partners
(including Roberts and WOW).
Discussions between the parties to the two transactions continued
throughout June and early July 2000. These discussions included a request by the
Roberts brothers for a loan from Alamosa to fund the working capital needs of
Roberts and Roberts Tower Company to continue the build-out of the Roberts
network. Also during this time, Alamosa began discussing with Citicorp and
Salomon Smith Barney the proposed terms of the $200 million Citicorp credit
facility.
On June 15, 2000, representatives of Alamosa's senior management and
Roberts' senior management met in St. Louis to further discuss the terms of the
proposed transactions between the parties. On the same day, Alamosa's legal
advisors and Roberts' legal advisors met at the offices of Alamosa's legal
advisors to further discuss and negotiate the terms of the proposed transactions
between Alamosa and Roberts.
On June 30, 2000, Alamosa Operations, Inc. entered into a loan agreement
with Michael and Steven Roberts providing for a loan of up to $10.0 million from
Alamosa Operations to Michael and Steven Roberts for the purpose of funding
capital contributions to Roberts and to Roberts Tower Company to be used for
working capital and build-out obligations and other expenses. On July 5, 2000,
Alamosa Operations commenced funding under the loan agreement.
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On July 5, 2000, the due diligence committee of the board of directors of
Alamosa held a meeting to review and discuss the due diligence investigation
conducted by Alamosa's management and its legal and financial advisors with
respect to both Roberts and WOW. Representatives of Alamosa's management and its
outside legal counsel were present at the meeting. Among the matters discussed
at the meeting were the progress of Roberts' build-out and the status of its
relationship with Sprint PCS. It was noted that Roberts had not previously met
any of its "hard-launch" or "full build-out" requirements for its network that
had previously been agreed to with Sprint PCS and that Roberts was presently
operating under an extension from Sprint PCS on its most recently negotiated
build-out and market launch dates, which had been agreed to with Sprint PCS in
February 2000. It was also noted that in connection with agreeing to these most
recent build-out and market launch date extensions, Sprint PCS had required
Roberts to waive any rights to the cure periods previously provided for in its
management agreement with Sprint PCS. Accordingly, any further failure by
Roberts to meet its agreed-upon market launch and build-out deadlines would
result in Sprint PCS having the right to terminate its management agreement with
Roberts without Roberts having any opportunity to cure.
On July 17, 2000, the board of directors of Alamosa met to review and
consider the proposed merger transactions with Roberts and WOW and the related
loan and services agreements and the proposed terms of the $200 million credit
facility to be provided by Citicorp. At the meeting:
o Senior management of Alamosa reviewed the terms of the proposed
transactions with Roberts and WOW.
o Representatives of Salomon Smith Barney made a presentation to the Alamosa
board of directors regarding the financial terms of the proposed
transactions and delivered their oral opinion that, as of such date and
subject to and based on the considerations referred to therein and the
terms of the Roberts and WOW transactions as currently proposed, the
exchange ratio in the Alamosa merger in connection with each of the Roberts
merger and the WOW merger is fair to Alamosa's stockholders from a
financial point of view.
o Senior management of Alamosa reviewed the terms of the proposed Citicorp
credit facility.
o Members of the board's due diligence committee reviewed a summary of the
discussions held at its July 5 meeting.
o Alamosa's legal advisors reviewed the terms of the proposed reorganization
agreements and related agreements with Roberts and WOW.
Members of Alamosa's management and its board of directors also discussed the
terms of the current arrangements between Roberts and Sprint PCS concerning the
Roberts build-out plan and the risks associated with any default or failure by
Roberts to meet the hard-launch and full build-out dates in its management
agreement with Sprint PCS.
Following the discussion, the board of directors of Alamosa (with Mr.
Silber excusing himself from the meeting and abstaining) unanimously approved
the WOW reorganization agreement and the related loan and services agreements.
The Alamosa board of directors (with Mr. Silber having excused himself from the
meeting and abstaining) also unanimously approved the Roberts reorganization
agreement and the related loan and services agreements, subject to satisfactory
completion of discussions with Roberts and Sprint PCS regarding the possibility
of agreeing to new cure periods and penalty payments in connection with any
failure by Roberts to meet the market launch and build-out dates and any related
cure periods in its build-out plan. The Alamosa board's approval of each
transaction also was conditioned on the concurrent execution of definitive
documentation with respect to the other transaction.
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<PAGE>
On July 19, 2000, representatives of Alamosa and Sprint PCS met in order to
discuss the current build-out and market launch date schedule for Roberts, the
possibility of adopting cure periods and related penalty payments in connection
with Roberts' failure to meet its scheduled market launch and build-out dates,
and the consent required from Sprint PCS in order to complete the Roberts and
WOW transactions. During the following several days, Alamosa further discussed
with each of Roberts and Sprint PCS, and Roberts and Sprint PCS also discussed,
potential extensions on Roberts' hard-launch and full-build-out target dates and
the adoption of related cure periods and penalty payments.
On July 25, 2000, at a special meeting of the Alamosa board of directors,
the Alamosa board approved a proposed schedule of hard-launch and full build-out
dates, and related cure periods and penalty payments associated with any failure
to meet such dates, to be contained in an amendment to the management agreement
between Sprint PCS and Roberts and authorized Alamosa's management to execute
and deliver the Roberts reorganization agreement and the related loan and
services agreement (including an agreement by Alamosa to pay some or all of such
penalty payments under certain circumstances). The Alamosa board's approvals
were conditioned upon Alamosa and Roberts entering into an agreement containing
substantially the same terms as the new target dates, cure periods and penalty
payments approved by Alamosa's board. The Alamosa board also approved the terms
of a commitment letter for the Citicorp credit facility and the formal
engagement of Salomon Smith Barney as Alamosa's financial advisor in connection
with the proposed transactions with Roberts and WOW and possible future
acquisitions involving other Sprint PCS network partners.
On July 27, 2000 Roberts and Sprint PCS executed an amendment to the
management agreement between Roberts and Sprint PCS providing for new hard
launch and full build-out dates, cure periods and penalty payments. See
"Affiliation Agreements with Sprint PCS--Management Agreements: Network
Build-Out" for a description of these arrangements.
On July 31, 2000, the applicable parties executed the Roberts
reorganization agreement and the WOW reorganization agreement and the related
loan and services agreements. Also on July 31, 2000, Alamosa, Salomon Smith
Barney and Citicorp executed the commitment letter for the Citicorp credit
facility (see "--Citicorp Credit Facility"), and Salomon Smith Barney delivered
its written opinions discussed under "--Opinions of Alamosa's Financial
Advisor."
On July 31, 2000, Alamosa Operations began to manage the operations of
Roberts pursuant to the services agreement between Alamosa Operations and
Roberts. See "The Roberts Merger--Loan and Services Agreements."
On September 1, 2000, Alamosa Operations began to manage the operations of
WOW pursuant to the services agreement between Alamosa Operations and WOW. See
"The WOW Merger--Loan and Services Agreements."
REASONS FOR THE REORGANIZATION
The Alamosa board of directors (with one director abstaining) has
unanimously determined that the reorganization agreements and the transactions
contemplated by the reorganization agreements are advisable and in the best
interests of Alamosa and its stockholders and unanimously recommends that you
vote "FOR" approval and adoption of the reorganization proposals.
In reaching its decision to approve the reorganization agreements, the
Alamosa board of directors
52
<PAGE>
consulted with its legal and financial advisors and with senior management and
considered a number of factors, including the following material factors:
o Information concerning the business, results of operations,
financial condition and capital structure of Alamosa, both on
an historical and prospective basis, and the performance of
and current market prices for Alamosa common stock;
o Information concerning the financial performance and
condition, business, results of operations, capital and
prospects of each of Roberts and WOW on a stand-alone basis as
well as on a combined basis with Alamosa;
o The Alamosa board's belief, after consideration of the advice
of its financial advisor, that the pursuit of merger and
acquisition opportunities involving other Sprint PCS network
partners would enhance stockholder value;
o The scale economies that Alamosa expects to achieve through
the reorganization, and the expectation that these scale
economics will yield enhanced purchasing power, improved
marketing and access to financing and capital on more
attractive terms;
o The opportunity that the reorganization provides for Alamosa
to expand its footprint to attractive and rapidly growing
markets within Washington and Oregon and in nearly all areas
of Missouri other than Kansas City and St. Louis, and in a
manner consistent with Alamosa's strategy of expanding into
areas bordering on key Sprint PCS cities to provide the
potential for roaming travel traffic from Sprint PCS customers
and marketing overlap by Sprint PCS into Alamosa territories;
o The fact that after completion of the reorganization, Alamosa
expects to become the nation's largest Sprint PCS network
partner, increasing its licensed population by 47%, from 8.4
million residents to 12.5 million residents;
o The fact that Alamosa's decentralized management model
together with the advantages of the Sprint PCS affiliate
program facilitates Alamosa's expansion into, and operation of
properties in, non-contiguous footprints;
o The expectation that the increased scale and scope resulting
from the reorganization will provide Alamosa with a
significantly stronger capital structure and financial
resources and will strengthen Alamosa's relationship with
Sprint PCS;
o The relative contributions of Alamosa, Roberts and WOW to the
total revenues, average revenue per user ("ARPU") (without
roaming) and EBITDA of Superholdings;
o Current industry, economic and market trends, including the
likelihood of increasing and broadening competition in the
wireless PCS industry;
o The financial presentation made by Salomon Smith Barney at the
July 17, 2000 meeting of the Alamosa board of directors and
the oral opinion delivered by Salomon Smith Barney to the
Alamosa board of directors on July 31, 2000 to the effect
that, as of the date thereof and
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<PAGE>
based on and subject to the assumptions, limitations and
qualifications set forth in such opinion, the exchange ratio
in the Alamosa merger in connection with the Roberts merger
and in connection with the WOW merger is fair, from a
financial point of view, to Alamosa's stockholders;
o The terms of the proposed Citicorp credit facility, as set
forth in the Citicorp commitment letter;
o The expectation that the Alamosa merger would be accomplished
on a tax-free basis for federal income tax purposes for
Alamosa and its stockholders; and
o The structure of the reorganization and the terms of the
reorganization agreements and the related agreements,
including the loan agreements and services agreements with
each of Roberts and WOW and the addition of Michael and Steven
Roberts to serve on the Superholdings board of directors.
The Alamosa board of directors also considered potential risks relating
to the reorganization, including:
o the risk that the benefits sought from the reorganization
would not be fully achieved;
o the management distraction inherent in integrating Roberts and
WOW with Alamosa;
o the risk that the reorganization would not be completed, or
would be completed notwith standing significant adverse
changes in the businesses of Alamosa, Roberts or WOW;
o the length of time projected for satisfying all closing
conditions;
o the fact that neither the Roberts reorganization agreement nor
the WOW reorganization agreement contains a financing
condition to Alamosa's obligation to complete the
transactions;
o the risk that the Roberts or WOW build-out obligations under
the Sprint agreements would not be achieved;
o the risks inherent in managing Roberts and WOW and making
loans to Roberts and WOW before closing the reorganization;
and
o the number of shares of Superholdings common stock issuable in
connection with the reorganization and related transactions
and the consequent reduction in the voting power of Alamosa's
current stockholders.
The foregoing discussion of the information and factors considered by
the Alamosa board of directors is not intended to be exhaustive but includes all
material factors considered by the Alamosa board of directors. In view of the
wide variety of information and factors considered, the Alamosa board of
directors did not find it practical to, and did not, assign any relative or
special weights to the foregoing factors, and individual directors may have
given differing weights to different factors. The Alamosa board of directors
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<PAGE>
adopted the reorganization agreements and approved the transactions contemplated
thereby in consideration of all of the facts, matters and information brought to
its attention. Taking into account all of the material facts, matters and
information, including those described above, the Alamosa board of directors
believes that the terms of the reorganization agreements and the transactions
provided for therein are fair to and in the best interests of Alamosa's
stockholders.
THE ALAMOSA BOARD UNANIMOUSLY RECOMMENDS THAT ALAMOSA'S STOCKHOLDERS
VOTE "FOR" THE ADOPTION OF THE ALAMOSA REORGANIZATION AGREEMENT AND "FOR" THE
ISSUANCE OF SHARES OF SUPERHOLDINGS COMMON STOCK IN THE ROBERTS AND WOW MERGERS.
OPINIONS OF ALAMOSA'S FINANCIAL ADVISOR
On July 31, 2000, Salomon Smith Barney delivered its separate written
opinions to the Alamosa board of directors that, as of that date:
o the exchange ratio of 1.0 share of Superholdings common stock
for each share of Alamosa common stock in the reorganization
in connection with the Roberts merger is fair to the holders
of Alamosa common stock from a financial point of view, and
o the exchange ratio of 1.0 share of Superholdings common stock
for each share of Alamosa common stock in the reorganization
in connection with the WOW merger is fair to the holders of
Alamosa common stock from a financial point of view.
The Alamosa board did not impose any limitations upon Salomon Smith
Barney with respect to the investigation made or the procedures followed by
Salomon Smith Barney in rendering its opinions.
THE FULL TEXT OF THE WRITTEN OPINIONS OF SALOMON SMITH BARNEY IS SET
FORTH AS APPENDIX D AND APPENDIX E TO THIS PROXY STATEMENT-PROSPECTUS AND SETS
FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED AND MATTERS CONSIDERED BY
SALOMON SMITH BARNEY. HOLDERS OF ALAMOSA COMMON STOCK ARE URGED TO READ SALOMON
SMITH BARNEY'S OPINIONS IN THEIR ENTIRETY.
In connection with rendering its opinions, Salomon Smith Barney
reviewed publicly available information concerning Alamosa, Roberts and WOW and
certain other financial information concerning Alamosa, Roberts and WOW,
including financial forecasts, that were provided to Salomon Smith Barney by
Alamosa, Roberts and WOW, respectively. Salomon Smith Barney discussed the past
and current business operations, financial condition and prospects of Alamosa,
Roberts and WOW with certain officers and employees of Alamosa, Roberts and WOW,
respectively. Salomon Smith Barney also considered other information, financial
studies, analyses, investigations and financial, economic and market criteria
that it deemed relevant.
In its review and analysis and in arriving at its opinion, Salomon
Smith Barney assumed and relied upon the accuracy and completeness of the
information it reviewed, and Salomon Smith Barney did not assume any
responsibility for independent verification of such information. With respect to
the financial forecasts of Alamosa, Roberts and WOW, Salomon Smith Barney
assumed that such forecasts were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the respective managements
of Alamosa, Roberts and WOW. Salomon Smith Barney expressed no opinion with
respect
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<PAGE>
to such forecasts or the assumptions on which they were based. Salomon
Smith Barney did not make or obtain, or assume any responsibility for making or
obtaining, any independent evaluation or appraisal of any of the assets
(including properties and facilities) or liabilities of Alamosa, Roberts or WOW.
Salomon Smith Barney's opinions were necessarily based upon conditions
as they existed and could be evaluated on the date of the opinions. Neither of
Salomon Smith Barney's opinions implied any conclusion as to the likely trading
range for Superholdings common stock following the completion of the
reorganization which may vary depending upon, among other factors, changes in
interest rates, dividend rates, market conditions, general economic conditions
and other factors that generally influence the price of securities. Salomon
Smith Barney's opinions did not address Alamosa's underlying business decision
to effect the reorganization. Salomon Smith Barney expressed no view on the
effect on Alamosa of the reorganization and related transactions. Further,
Salomon Smith Barney's opinions were directed only to the fairness, from a
financial point of view, of the exchange ratios applicable to holders of Alamosa
common stock in the reorganization in connection with the Roberts merger and the
WOW merger, respectively, and did not constitute a recommendation concerning how
those holders should vote with respect to the reorganization proposals.
The material portions of the financial analyses performed by Salomon
Smith Barney in connection with the rendering of its opinions dated July 31,
2000, are summarized below. THE SUMMARIES INCLUDE INFORMATION PRESENTED IN
TABULAR FORMAT. IN ORDER TO FULLY UNDERSTAND THE FINANCIAL ANALYSES, THE TABLES
MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE TABLES ALONE DO NOT
CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES. CONSIDERING THE
DATA SET FORTH BELOW WITHOUT CONSIDERING THE FULL NARRATIVE DESCRIPTION OF THE
FINANCIAL ANALYSES, INCLUDING THE METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE
ANALYSES, COULD CREATE A MISLEADING OR INCOMPLETE VIEW OF THE FINANCIAL ANALYSES
OF SALOMON SMITH BARNEY.
ROBERTS MERGER
RELATIVE VALUATION ANALYSIS. Salomon Smith Barney performed a relative
valuation analysis the purpose of which was to compare the percentage in
Superholdings that Roberts Holdings members would receive based on the Roberts
reorganization agreement to the ownership percentage implied by certain
financial statistics. The following table sets forth the range of ownership
percentages for Roberts implied by Roberts' POPs, Roberts' covered POPs,
Roberts' implied public market valuation range and Roberts' implied discounted
cash flow valuation range as compared to the same statistics for Alamosa.
Implied Ownership Percentage
-----------------------------------------------------------------------------
POPs 23.5%
Covered POPs 23.5
Public market valuation range 15.2 - 20.8
Discounted cash flow valuation range 19.2 - 24.2
Salomon Smith Barney noted that this analysis demonstrated that the
approximately 17.7% ownership interest in Superholdings that Roberts Holdings
members would receive based on the Roberts reorganization agreement, assuming an
all-stock transaction (and without giving effect to the WOW merger), was within
the 15.2% to 24.2% range of implied ownership based on the foregoing statistics.
Salomon Smith Barney used the 17.7% ownership interest for Roberts Holdings
members because it allowed Salomon Smith Barney
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<PAGE>
to eliminate the impact of cash to be received by Roberts Holdings members in
analyzing implied relative ownership interests.
IMPLIED VALUATION ANALYSIS. Salomon Smith Barney derived a range of
values for Roberts using the three valuation methodologies described below:
o PUBLIC MARKET VALUATION ANALYSIS. A public market analysis
reviews a business' operating performance and outlook relative
to a group of publicly traded peer companies to determine an
implied unaffected market trading valuation range.
o PRIVATE MARKET VALUATION ANALYSIS. A private market analysis
provides a valuation range based upon financial information of
companies involved in selected recent business combination
transactions or in business combination transactions that have
been publicly announced and are in the same or similar
industries as the business being valued.
o DISCOUNTED CASH FLOW ANALYSIS. A discounted cash flow analysis
derives the intrinsic value of a business based on the net
present value of the future cash flow anticipated to be
generated by the assets of the business.
The valuation ranges for each of these analyses are set forth below:
<TABLE>
<CAPTION>
Low High
---------------------- ------------------
(in millions)
<S> <C> <C>
Public market value $325 $400
Private market value 280 380
Discounted cash flow 442 516
</TABLE>
Salomon Smith Barney noted that this analysis demonstrated that the
approximately $369.0 million in consideration that Roberts Holdings members
would receive based on the Roberts reorganization agreement, assuming a July 14,
2000 closing price of Alamosa common stock on The Nasdaq National Market of
$27.00, was within the $280.0 million to $516.0 million range of implied
valuation based on these methodologies.
PUBLIC MARKET VALUATION ANALYSIS. Salomon Smith Barney performed an
analysis the purpose of which was to compare certain financial statistics of
Roberts with the corresponding financial statistics for the following four PCS
companies: Airgate PCS, Alamosa, Ubiquitel and US Unwired. Salomon Smith Barney
analyzed, among other things, firm value (the sum of the equity market
capitalization for a company and its total non-convertible debt, minority
interest, preferred stock and "out-of-the-money" convertible debt less
investments in unconsolidated affiliates and cash) as a multiple of total POPs
(number of persons within a license's coverage area), covered POPs (number of
POPs within the license area served by the operating network), estimated 2000
service revenues, estimated 2001 service revenues and estimated 2002 service
revenues. This analysis was performed using share prices as of July 14, 2000.
Salomon Smith Barney then used these multiples to determine a range of implied
valuations for Roberts as set forth above. The statistics derived from this
analysis are set forth below:
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<PAGE>
<TABLE>
<CAPTION>
Multiple Range
----------------------------------------------------------------------------------------------------------
Low High
-------------------- ---------------------
<S> <C> <C>
Firm value / POPs $ 135 $ 165
Firm value / covered POPs $ 175 $ 205
Firm value / estimated 2000 service revenues 30.0x 40.0x
Firm value / estimated 2001 service revenues 8.5x 9.5x
Firm value / estimated 2002 service revenues 5.0x 6.0x
</TABLE>
Because of the inherent differences in the businesses, operations,
financial conditions and prospects of Alamosa, Roberts and the comparable
companies, Salomon Smith Barney believed that it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the comparable
companies analysis, and, accordingly, also made qualitative judgments concerning
differences between the characteristics of the comparable companies, Alamosa and
Roberts that would affect the trading values of Alamosa, Roberts and the
comparable companies. In particular, Salomon Smith Barney considered the size
and desirability of the markets of operation and current levels and historical
rates of growth of Alamosa, Roberts and the comparable companies.
PRIVATE MARKET VALUATION ANALYSIS. As part of its analysis, Salomon
Smith Barney reviewed the following 6 transactions involving PCS companies to
determine a valuation range for Roberts based on the multiples of firm value to
adjusted POPs (number of POPs adjusted for POPs representing 10 MHz or less)
implied in those transactions:
o May 2000--Sonera Corporation / Powertel
o May 2000--CFW Communications / PrimeCo. - Richmond BTA
o February 2000--TeleCorp PCS / Tritel
o September 1999--Voicestream / Aerial Communications
o June 1999--Voicestream / Omnipoint
o October 1998--Sprint PCS / PrimeCo. - Honolulu MTA
The analysis revealed multiples ranging from $60 per adjusted POP to
$375 per adjusted POP for these transactions with a mean per adjusted POP
multiple of $166 and a median per adjusted POP multiple of $152. Because the
reasons for and the circumstances surrounding each of the transactions analyzed
were specific to each transaction and because of the inherent differences
between the businesses, operations and prospects of Alamosa, Roberts and the
businesses, operations and prospects of the acquired companies included in the
selected transactions, Salomon Smith Barney believed that it was inappropriate
to, and therefore did not, rely solely on the quantitative results of the
precedent transactions analysis, and accordingly also made qualitative judgments
concerning differences between the characteristics of these transactions and the
proposed merger that would affect the values of Alamosa, Roberts and such
acquired companies. In particular, Salomon Smith Barney considered the size and
desirability of the markets of operation, the strategic fit of the acquired
company, the form of consideration offered and the tax characteristics of the
transactions. Based on this analysis, Salomon Smith Barney determined a private
market multiple range,
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<PAGE>
which it used to calculate the implied valuation range for Roberts set forth in
the table above.
DISCOUNTED CASH FLOW ANALYSIS. Salomon Smith Barney performed a
discounted cash flow analysis of Roberts to estimate a range of intrinsic values
of Roberts. Salomon Smith Barney applied a terminal value multiple range of
11.0x to 13.0x to Roberts' forecasted EBITDA for the period of 2000 through
2007. The free cash flows were then discounted to present value using rates
ranging from 12.0% to 14.0%. This analysis yielded the range of values set forth
in the table above.
OTHER ANALYSIS. Salomon Smith Barney performed such other analyses as
it deemed appropriate, including an analysis comparing the relative
contributions of revenue, EBITDA and other items of Roberts and Alamosa to the
combined company.
WOW MERGER
RELATIVE VALUATION ANALYSIS. Salomon Smith Barney performed a relative
valuation analysis the purpose of which was to compare the percentage in
Superholdings that WOW Holdings members would receive based on the WOW
reorganization agreement to the ownership percentage implied by certain
financial statistics. The following table sets forth the range of ownership
percentages for WOW implied by WOW's POPs, WOW's covered POPs, WOW's implied
public market valuation range and WOW's implied discounted cash flow valuation
range as compared to the same statistics for Alamosa.
Implied Ownership Percentage
---------------------------------------------------------------------------
POPs 15.0%
Covered POPs 13.5
Public market valuation range 8.3 - 11.6
Discounted cash flow valuation range 9.9 - 12.9
Salomon Smith Barney noted that this analysis demonstrated that the
approximately 9.4% ownership interest in Superholdings that WOW Holdings members
would receive based on the WOW reorganization agreement, assuming an all-stock
transaction (and without giving effect to the Roberts merger), was within the
8.3% to 15.0% range of implied ownership based on the foregoing statistics.
Salomon Smith Barney used the 9.4% ownership for WOW Holdings members because it
allowed Salomon Smith Barney to eliminate the impact of cash to be received by
WOW Holdings members in analyzing implied relative ownership interests.
IMPLIED VALUATION ANALYSIS. Salomon Smith Barney derived a range of
values for WOW using the three valuation methodologies described below:
o PUBLIC MARKET VALUATION ANALYSIS. A public market analysis
reviews a business' operating performance and outlook relative
to a group of publicly traded peer companies to determine an
implied unaffected market trading valuation range.
o PRIVATE MARKET VALUATION ANALYSIS. A private market analysis
provides a valuation range based upon financial information of
companies involved in selected recent business combination
transactions or in business combination transactions that have
been publicly announced and are in the same or similar
industries as the business being valued.
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<PAGE>
o DISCOUNTED CASH FLOW ANALYSIS. A discounted cash flow analysis
derives the intrinsic value of a business based on the net
present value of the future cash flow anticipated to be
generated by the assets of the business.
The valuation ranges for each of these analyses are set forth below:
Low High
--------------------- -------------------
(in millions)
Public market value $165 $200
Private market value 162 214
Discounted cash flow 204 240
Salomon Smith Barney noted that this analysis demonstrated that the
approximately $176.0 million in consideration that WOW Holdings members would
receive based on the reorganization agreement, assuming a July 14, 2000 closing
price of Alamosa common stock on The Nasdaq National Market of $27.00
determination, was within the $162.0 million to $240.0 million range of implied
valuation based on these methodologies.
PUBLIC MARKET VALUATION ANALYSIS. Salomon Smith Barney performed an
analysis the purpose of which was to compare certain financial statistics of WOW
with the corresponding financial statistics for the following four PCS
companies: Airgate PCS, Alamosa, Ubiquitel and US Unwired. Salomon Smith Barney
analyzed, among other things, firm value (the sum of the equity market
capitalization for a company and its total non-convertible debt, minority
interest, preferred stock and "out-of-the-money" convertible debt less
investments in unconsolidated affiliates and cash) as a multiple of total POPs
(number of persons within a license's coverage area), covered POPs (number of
POPs within the license area served by the operating network), estimated 2001
service revenues and estimated 2002 service revenues. This analysis was
performed using share prices as of July 14, 2000. Salomon Smith Barney then used
these multiples to determine a range of implied valuations for WOW as set forth
above. The statistics derived from this analysis are set forth below:
<TABLE>
<CAPTION>
Multiple Range
-------------------------------------------------------------------------------------------------------------------
Low High
---------------------- -------------------
<S> <C> <C>
Firm value / POPs $ 120 $ 150
Firm value / covered POPs $ 155 $ 185
Firm value / estimated 2001 service revenues 7.5x 8.5x
Firm value / estimated 2002 service revenues 4.0x 5.0x
</TABLE>
Because of the inherent differences in the businesses, operations,
financial conditions and prospects of Alamosa, WOW and the comparable companies,
Salomon Smith Barney believed that it was inappropriate to, and therefore did
not, rely solely on the quantitative results of the comparable companies
analysis, and, accordingly, also made qualitative judgments concerning
differences between the characteristics of the comparable companies, Alamosa and
WOW that would affect the trading values of Alamosa, WOW and the comparable
companies. In particular, Salomon Smith Barney considered the size and
desirability of the markets of operation and current levels and historical rates
of growth of WOW, Alamosa and the comparable companies.
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<PAGE>
PRIVATE MARKET VALUATION ANALYSIS. As part of its analysis, Salomon
Smith Barney reviewed the following 6 transactions involving PCS companies to
determine a valuation range for WOW based on the multiples of firm value to
adjusted POPs (number of POPs, adjusted for POPs representing 10 MHz or less)
implied in those transactions:
o May 2000--Sonera Corporation / Powertel
o May 2000--CFW Communications / PrimeCo. - Richmond BTA
o February 2000--TeleCorp PCS / Tritel
o September 1999--Voicestream / Aerial Communications
o June 1999--Voicestream / Omnipoint
o October 1998--Sprint PCS / PrimeCo. - Honolulu MTA
The analysis revealed multiples ranging from $60 per adjusted POP to
$375 per adjusted POP for these transactions with a mean per adjusted POP
multiple of $166 and a median per adjusted POP multiple of $152. Because the
reasons for and the circumstances surrounding each of the transactions analyzed
were specific to each transaction and because of the inherent differences
between the businesses, operations and prospects of Alamosa, WOW and the
businesses, operations and prospects of the acquired companies included in the
selected transactions, Salomon Smith Barney believed that it was inappropriate
to, and therefore did not, rely solely on the quantitative results of the
precedent transactions analysis, and accordingly also made qualitative judgments
concerning differences between the characteristics of these transactions and the
proposed merger that would affect the acquisition values of Alamosa, WOW and
such acquired companies. In particular, Salomon Smith Barney considered the size
and desirability of the markets of operation, the strategic fit of the acquired
company, the form of consideration offered and the tax characteristics of the
transactions. Based on this analysis, Salomon Smith Barney determined a private
market multiple range, which it used to calculate the implied valuation range
for WOW set forth in the table above.
DISCOUNTED CASH FLOW ANALYSIS. Salomon Smith Barney performed a
discounted cash flow analysis of WOW to estimate a range of intrinsic values of
WOW. Salomon Smith Barney applied a terminal value multiple range of 11.0x to
13.0x to WOW's forecasted EBITDA for the period of 2000 through 2007. The free
cash flows were then discounted to present value using rates ranging from 12.0%
to 14.0%. This analysis yielded the range of values set forth in the table
above.
OTHER ANALYSIS. Salomon Smith Barney performed such other analyses as
it deemed appropriate, including an analysis comparing the relative
contributions of revenue, EBITDA and other items of WOW and Alamosa to the
combined company.
* * *
The preparation of a fairness opinion is a complex process not
susceptible to partial analysis or summary descriptions. The summaries set forth
above are not and do not purport to be a complete description of the analyses
underlying Salomon Smith Barney's opinions. Salomon Smith Barney believes that
its
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<PAGE>
analyses and the summaries set forth above must be considered as a whole and
that selecting portions of its analyses and factors or focusing on information
presented in tabular format, without considering all analyses and factors or the
narrative description of the analyses, could create a misleading or incomplete
view of the processes underlying its analyses and opinions.
In performing its analyses, Salomon Smith Barney made numerous
assumptions with respect to industry performance, general business, financial,
market and economic conditions and other matters, many of which are beyond the
control of Alamosa, Roberts or WOW. The analyses which Salomon Smith Barney
performed are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Such analyses were prepared solely as part of Salomon Smith
Barney's analysis of the fairness, from a financial point of view, of the
consideration to be received by the holders of Alamosa common stock in the
reorganization in connection with the Roberts merger and the WOW merger,
respectively. The analyses do not purport to be appraisals or to reflect the
prices at which a company might actually be acquired or the prices at which any
securities may trade at the present time or at any time in the future.
Pursuant to an engagement letter dated May 2, 2000, Alamosa agreed to
pay to Salomon Smith Barney an initial fee of $10,000, and an additional fee for
certain transactions involving Sprint network partners, based on a percentage
of the transaction's value at the time of consummation of the transaction. Based
on the estimated transaction value of the reorganization, Salomon Smith Barney
expects that the its total fee will be approximately $4.0 million. Alamosa also
agreed, under certain circumstances, to reimburse Salomon Smith Barney for all
reasonable fees and expenses of Salomon Smith Barney's counsel and all of
Salomon Smith Barney's reasonable travel and other out-of-pocket expenses
incurred pursuant to Salomon Smith Barney's engagement, and agreed to indemnify
Salomon Smith Barney and certain related persons against various liabilities,
including liabilities under the federal securities laws, relating to or arising
out of its engagement.
Salomon Smith Barney is an internationally recognized investment
banking firm that provides financial services in connection with a wide range of
business transactions. As part of its business, Salomon Smith Barney regularly
engages in the valuation of companies and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and other purposes. In the past, Salomon Smith Barney and its affiliates have
rendered certain investment banking and financial advisory services to Alamosa
for which they received compensation, including acting as lead underwriter in
connection with Alamosa's initial public offering in February 2000 and acting as
lead underwriter in connection with Alamosa's offering of its senior
discount notes in February 2000. In addition, in the ordinary course of their
business, Salomon Smith Barney and its affiliates may actively trade the
securities of Alamosa for their own account and the accounts of their customers
and, accordingly, may at any time hold a long or short position in such
securities. Salomon Smith Barney and its affiliates (including Citigroup) may
have other business relationships with Alamosa and its affiliates, Citicorp. In
connection with the reorganization, Salomon Smith Barney and Citicorp, North
America, Inc. have entered into a commitment letter with Superholdings pursuant
to which a syndicate of banking and financial institutions will provide up to
$200.0 million in debt financing to be used to fund the cash portion of the
consideration to be paid in the Roberts and WOW mergers and to fund the working
capital and build-out needs of Roberts and WOW, including the refinancing of any
debt assumed. Citicorp USA, Inc. will act as administrative agent and collateral
agent and Salomon Smith Barney will act as advisor, lead arranger and book
manager, for which each will receive substantial fees. The Alamosa board
retained Salomon Smith Barney based on Salomon Smith Barney's expertise in the
valuation of companies as well
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as its substantial experience in the wireless industry and in transactions such
as the Roberts merger and the WOW merger.
INTERESTS OF ALAMOSA DIRECTORS AND EXECUTIVE OFFICERS IN THE REORGANIZATION
Reagan W. Silber, one of the members of the Alamosa board of directors,
is a member of the board of managers of WOW. Mr Silber is also a principal of
WOW Investment Partners, L.L.C., an affiliate of WOW Investment Partners, L.P.,
which owns approximately 44.4% of the outstanding membership interests of WOW
Holdings. WOW INVESTMENT PARTNERS, L.L.C. HOLDS THE SOLE GENERAL PARTNER
INTEREST OF WOW INVESTMENT PARTNERS, L.P. THE SOLE MEMBERSHIP INTEREST OF WOW
INVESTMENT PARTNER L.L.C. IS HELD BY SILPEARL ASSOCIATES, LLC. MR. SILBER
INDIRECTLY OWNS 50% OF THE MEMBERSHIP INTERESTS, AND IS THE PRESIDENT, OF
SILPEARL ASSOCIATES, LLC. WOW Investment Partners, L.P. will receive
approximately 2,683,940 shares of Superholdings common stock and $5,544,000 in
cash if the WOW merger is completed. The Alamosa board of directors was aware of
these relationships during its consideration of the WOW reorganization agreement
and in determining to recommend to the stockholders of Alamosa that they vote
"FOR" the reorganization proposals.
MANAGEMENT OF SUPERHOLDINGS AFTER THE REORGANIZATION
BOARD OF DIRECTORS OF SUPERHOLDINGS. The Superholdings board of
directors will be comprised of eleven members and the Superholdings board of
directors will be divided into three classes. The Class I directors will stand
for election at the annual meeting of stockholders to be held in 2001. The Class
II directors will stand for election at the annual meeting of stockholders to be
held in 2002. The Class III directors will stand for election at the annual
meeting of stockholders to be held in 2003. Each director will serve for a term
of three years, or until his or her successor has been elected and qualified,
and will be compensated at the discretion of the board of directors. See
"Directors and Executive Officers of Alamosa -Compensation of Directors."
Class I: Class II: Class III:
Ray M. Clapp, Jr. Michael R. Budagher Tom M. Phelps
Jimmy R. White Schuyler B. Marshall David E. Sharbutt
Thomas Hyde Reagan W. Silber Scotty Hart
Steven C. Roberts Michael V. Roberts
EXECUTIVE OFFICERS OF SUPERHOLDINGS. Upon completion of the
reorganization, the following persons will serve as executive officers of
Superholdings:
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------- ----------- -----------------------------------------------------------------------------
<S> <C> <C>
David E. Sharbutt........... 51 Chairman of the Board of Directors and Chief Executive Officer
Jerry W. Brantley........... 54 President and Chief Operating Officer
Kendall W. Cowan............ 46 Chief Financial Officer
Loyd I. Rinehart............. 45 Senior Vice President of Corporate Finance
Anthony Sabatino............. 38 Senior Vice President of Engineering and Network Operations
</TABLE>
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SUPERHOLDINGS CHARTER AND BY-LAWS
The amended and restated certificate of incorporation and the amended
and restated by-laws of Superholdings following completion of the reorganization
will be substantially identical to the certificate of incorporation and by-laws
of Alamosa today, except that stockholders of Superholdings will not have the
right to call a special stockholders meeting. Each of Superholdings and Alamosa
is a Delaware corporation. Accordingly, your rights as a stockholder of
Superholdings will be substantially the same as your rights as a stockholder of
Alamosa. For a summary of the material provisions of the amended and restated
certificate of incorporation and the amended and restated by-laws of
Superholdings, and the rights of stockholders of Superholdings under the amended
and restated certificate of incorporation and the amended and restated by-laws,
see "Description of Superholdings Capital Stock."
CITICORP CREDIT FACILITY
CREDIT FACILITY. On July 31, 2000, Superholdings entered into a
commitment letter with Citicorp, North America, Inc. and Salomon Smith Barney
providing for a new senior credit facility of up to $200.0 million to be made
to Alamosa Holdings, LLC, a wholly-owned subsidiary of Superholdings. The
proceeds of the Citicorp credit facility will be used to fund the cash portion
of the consideration in the Roberts and WOW mergers and to fund the working
capital and build-out needs of Roberts and WOW, including the refinancing of
their existing debt. The definitive agreements providing for the senior credit
facility have not been completed. The Citicorp commitment letter will terminate
on the earlier of December 31, 2000 and the date of execution and delivery of
definitive documentation with respect to the Citicorp credit facility, unless
Citicorp and Salomon Smith Barney consent to an extension which, in any event
will be no longer than March 31, 2001.
The Citicorp credit facility will be embodied in an agreement among
Citicorp USA, Inc., as administrative agent and collateral agent, Alamosa
Holdings, LLC, a wholly owned subsidiary of Superholdings, as borrower, Salomon
Smith Barney, as advisor, lead arranger and book manager, and a syndicate of
banking and financial institutions reasonably acceptable to Citicorp and Alamosa
Holdings, LLC. In connection with the closing of the Citicorp credit facility
and the reorganization, Alamosa Holdings, LLC will also receive an equity
contribution or a subordinated loan for approximately $47.0 million from Alamosa
or a subsidiary of Alamosa (the "APCS Contribution").
Under the commitment letter the obligations of Citicorp and Salomon
Smith Barney to close and fund the Citicorp credit facility are subject to a
number of conditions, including the following, some of which are beyond the
control of Superholdings and its subsidiaries:
o Citicorp's and Salomon Smith Barney's completion of, and
satisfaction in all respects with, the results of their
ongoing due diligence investigation of Superholdings and its
subsidiaries, taken as a whole, and Roberts and WOW;
o there not having occurred any material adverse change in the
business, assets, operations, properties, condition (financial
or otherwise), contingent liabilities, prospects and material
agreements of Superholdings and its subsidiaries, taken as a
whole, or Roberts or WOW, since December 31, 1999;
o there not having occurred any disruption of or change in loan
syndication, financial, banking
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or capital market conditions that, in Citicorp's and Salomon
Smith Barney's reasonable judgment, could materially impair
the syndication of the Citicorp credit facility;
o the accuracy and completeness in all material respects of all
representations that Superholdings, Alamosa Holdings, LLC and
their affiliates make to Citicorp and Salomon Smith Barney and
all information that Superholdings, Alamosa Holdings, LLC and
their affiliates furnish to Citicorp and Salomon Smith Barney;
o the payment in full of all fees, expenses and other amounts
payable under the commitment letter;
o Citicorp's and Salomon Smith Barney's satisfaction in all
respects with (i) the structure of the Roberts merger, the WOW
merger, the Alamosa Merger, the APCS contribution and the
Citicorp credit facility and all related tax, legal and
accounting matters, (ii) the material terms of the definitive
documentation with respect to the Citicorp credit facility and
all other agreements to be entered into in relation to the
reorganization and (iii) the capitaliza tion, structure and
ownership of Superholdings, Alamosa Holdings, LLC, Roberts and
WOW after giving effect to the reorganization and the Citicorp
credit facility;
o Citicorp's and Salomon Smith Barney's satisfaction that
Superholdings, Alamosa Holdings, LLC, Roberts and WOW are not
subject to material contractual or other restrictions that
would be violated by the reorganization or the Citicorp credit
facility, including the granting of security interests and
guarantees and the payment of dividends by subsidiaries; and
o Citicorp's entering into a consent and agreement with Sprint
PCS that modifies Sprint PCS's rights and remedies under
Roberts' and WOW's affiliation agreements with Sprint PCS,
for the benefit of Citicorp and future holders of the Citicorp
credit facility and any refinancing thereof.
Superholdings' and Alamosa's obligations to complete the reorganization
are not conditional upon receipt of funds under the Citicorp credit facility.
See "Risk Factors-Risks Relating to the Reorganiza tions-Superholdings will be
contractually obligated to complete the reorganization even if it is unable to
obtain funding under the Citicorp credit facility."
The following is a summary of the anticipated principal terms of the
Citicorp credit facility as contained in the Citicorp commitment letter.
The Citicorp credit facility will consist of:
o a 7-year senior secured term loan facility in an aggregate
principal amount of up to $175.0 million; and
o a 7-year senior secured revolving credit facility in an
aggregate principal amount of up to $25.0 million, part of
which will be available in the form of letters of credit.
The proceeds of the Citicorp credit facility, together with the
proceeds of the APCS Contribution, may be used for:
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o paying the cash portion of the merger consideration in the WOW
and Roberts mergers;
o refinancing existing indebtedness of Roberts and WOW (other
than the loans made by Alamosa or its affiliates);
o paying the fees and expenses associated with the Roberts and
WOW mergers and the Citicorp credit facility; and
o capital expenditures, subscriber acquisition and marketing
costs, working capital and other general corporate purposes of
Roberts and WOW.
Alamosa Holdings, LLC will be required to pay a fee on the unfunded
portion of the commitment of each lender. Alamosa Holdings, LLC will also be
required to pay a separate annual administration fee and a fee on the aggregate
face amount of outstanding letters of credit, if any, under the Citicorp
revolving facility.
On the date on which the definitive documentation for the Citicorp
credit facility is executed and the reorganization is completed, $100.0 million
must be drawn under the Citicorp term facility while an additional $75.0 million
in term debt will be available for multiple drawings for a period of 18 months
thereafter. Any amount outstanding at that time will amortize beginning at the
end of the first quarter of the fourth year following the completion of the
reorganization. The Citicorp revolving credit facility of $25.0 million will be
available for multiple drawings prior to its final maturity, provided that no
amounts under the Citicorp revolving credit facility will be available until all
amounts under the Citicorp term facility have been fully drawn. The Citicorp
revolving credit facility will begin reducing at the end of the first quarter of
the fourth year following the completion of the reorganization. All advances
under the Citicorp credit facility are subject to actual and pro forma covenant
compliance.
All obligations of Alamosa Holdings, LLC under the Citicorp credit
facility will be unconditionally guaranteed on a senior basis by Superholdings
and by each current and future subsidiary of Alamosa Holdings, LLC, including
Roberts and WOW.
The Citicorp credit facility will be secured by a first priority pledge
of all of the capital stock of Alamosa Holdings, LLC and each current and future
subsidiary of Alamosa Holdings, LLC including, Roberts and WOW, and all
intercompany indebtedness, as well as a first priority interest in all assets of
Alamosa Holdings, LLC and each current and future subsidiary of Alamosa
Holdings, LLC.
The Citicorp credit facility contains customary events of default,
including, but not limited to:
o the non-payment of the loans;
o the inaccuracy of representations and warranties contained in
the final credit agreement or the violation of covenants
contained in the final credit agreement;
o cross default and cross acceleration to other indebtedness;
and
o the occurrence of a termination event or a material breach of
or other event that could reasonably be expected to result in
the loss of material rights under the management,
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licences and other agreements between any of Alamosa Holdings,
LLC, WOW, Roberts and their subsidiaries and Sprint PCS or
under the consent and agreement to be entered into between
Citicorp, acting for the lenders, and Sprint PCS.
Alamosa Holdings, LLC will also be subject to numerous covenants for an
initial period of time until it anticipates achieving positive cash flows,
including:
o acquiring minimum numbers of Sprint PCS subscribers;
o providing coverage to a minimum number of residents;
o minimum revenue; and
o maximum negative EBITDA.
So long as no loans are outstanding under the Citicorp credit facility, however,
no event of default will occur if Alamosa Holdings, LLC and its subsidiaries are
not in compliance with such financial covenants.
After Alamosa Holdings, LLC has achieved positive cash flows, it will
be subject to numerous covenants, including:
o ratio of senior debt to EBITDA for the most recent period of
four fiscal quarters;
o ratio of total debt to EBITDA for the most recent period of
four fiscal quarters;
o ratio of fixed charges (the sum of debt service, capital
expenditures and taxes) to EBITDA for the most recent period
of four fiscal quarters;
o ratio of EBITDA to total cash interest expense for the most
recent period of four fiscal quarters; and
o minimum EBITDA.
In addition Alamosa Holdings, LLC will be subject to numerous covenants
during all periods for which the Citicorp credit facility remains in place,
including:
o a ratio of senior debt to total capital;
o a ratio of total debt to total capital; and
o maximum capital expenditures.
CITICORP WARRANTS. In connection with the closing of the Citicorp
credit facility, Superholdings will place into an escrow account warrants to
purchase a number of shares of common stock equal to 2% of the fully diluted
common equity of Superholdings as of the date of the closing for the Citicorp
credit facility. The Citicorp warrants will have an exercise price equal to 20%
over the average closing price per share of Alamosa common stock for the 20 days
prior to but excluding the closing date of the Citicorp credit facility as
quoted on
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The Nasdaq National Market, subject to adjustment pursuant to customary
antidilution provisions. Each Citicorp warrant will be exercisable for a period
of ten years.
Unless Superholdings makes a cash contribution to the common equity
capital of Alamosa Holdings, LLC of at least $75.0 million within one year of
the closing of the Citicorp credit facility, which amount may not include the
APCS Contribution or any conversion into equity of Alamosa Holdings, LLC of
outstanding loans theretofore made by Superholdings or an affiliate of Alamosa
Holdings, LLC, its subsidiaries, WOW or Roberts, after the date of the closing
for the Citicorp credit facility and prior to the dates specified below (each a
"Determination Date"), the Citicorp warrants will be immediately released to
each lender from the escrow account on such date in an amount equal to the
product of (i) the corresponding percentage specified below and (ii) such
lender's pro rata share of such Citicorp warrants.
<TABLE>
<CAPTION>
<S> <C>
Six months following the date of the closing for the Citicorp credit facility 50.0%
Six months following the initial Determination Date 50.0%
</TABLE>
Any Citicorp warrant to which none of the lenders is, or may become,
entitled shall be returned to Superholdings for cancellation.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
The reorganization has been structured so that U.S. holders of Alamosa
common stock who exchange their shares for shares of Superholdings common stock
will not recognize gain or loss for United States federal income tax purposes in
connection with the Alamosa merger, except for taxes payable because of cash
received by Alamosa stockholders in lieu of fractional shares.
Tax matters are very complicated, and the tax consequences to you
resulting from the Alamosa merger will depend on the facts of your own
situation. You should consult with your own tax advisor for a full understanding
of the tax consequences to you resulting from the Alamosa merger.
The following summary discusses the material U.S. federal income tax
consequences of the Alamosa merger to U.S. holders of Alamosa common stock.
For purposes of this discussion, a U.S. holder means:
o a citizen or resident of the United States;
o a corporation or other entity taxable as a corporation created
or organized under the laws of the United States or any of its
political subdivisions;
o a trust, if a U.S. court is able to exercise primary
supervision over the administration of the trust and one or
more U.S. fiduciaries have the authority to control all
substantial decisions of the trust; or
o an estate that is subject to U.S. federal income tax on its
income regardless of its source.
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This discussion is based upon the Internal Revenue Code of 1986, as
amended, Treasury regulations, administrative rulings and judicial decisions
currently in effect, all of which are subject to change, possibly with
retroactive effect. The discussion assumes that Alamosa stockholders hold their
Alamosa common stock and will hold their Superholdings common stock as a capital
asset within the meaning of Section 1221 of the Internal Revenue Code. Further,
the discussion does not address all aspects of U.S. federal income taxation that
may be relevant to a particular stockholder in light of his, her or its personal
investment circumstances or to stockholders subject to special treatment under
the U.S. federal income tax laws, including:
o insurance companies;
o tax-exempt organizations;
o dealers in securities or foreign currency;
o banks or trusts;
o persons that hold their Alamosa common stock as part of a
straddle, a hedge against currency risk or a constructive sale
or conversion transaction;
o persons that have a functional currency other than the U.S.
dollar;
o investors in pass-through entities;
o stockholders who acquired their Alamosa common stock through
the exercise of options or otherwise as compensation or
through a tax-qualified retirement plan; or
o holders of options granted under any Alamosa benefit plan.
Furthermore, this discussion does not consider the potential effects of any
state, local or foreign tax laws.
Neither Alamosa nor Superholdings has requested a ruling from the
United States Internal Revenue Service with respect to any of the U.S. federal
income tax consequences of the Alamosa merger and, as a result, there can be no
assurance that the Internal Revenue Service will not disagree with or challenge
any of the conclusions described below.
THE ALAMOSA MERGER. Haynes and Boone, LLP, counsel to Alamosa, has
delivered its opinion to Alamosa to the effect that the direct merger of Alamosa
Sub with and into Alamosa, with Alamosa surviving the merger, and the conversion
of each share of Alamosa common stock issued and outstanding immediately prior
to the Alamosa merger into the right to receive one share of Superholdings
common stock will qualify as a tax-free reorganization within the meaning of
Section 368(a)(1)(A) and (a)(2)(E) of the Internal Revenue Code. Any change in
currently applicable law, which may or may not be retroactive, or the failure of
any factual representations or assumptions to be true, correct and complete in
all material respects, could affect the continuing validity of the Haynes and
Boone, LLP tax opinion.
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Based on such tax opinion, the following tax consequences would arise:
o no gain or loss will be recognized by Superholdings, Alamosa
or Alamosa Sub in connection with the Alamosa merger;
o no gain or loss will be recognized by U.S. holders of Alamosa
common stock on the exchange of their Alamosa common stock for
Superholdings common stock (except with respect to cash
received by U.S. holders of Alamosa common stock in lieu of
fractional shares of Superholdings common stock);
o the aggregate adjusted basis of the Superholdings common stock
received in the Alamosa merger by a U.S. holder of Alamosa
common stock will be equal to the aggregate adjusted basis of
the U.S. holder's Alamosa common stock exchanged for that
Superholdings common stock (reduced by any amount allocable to
the fractional share interests in Superholdings common stock
for which cash is received); and
o the holding period of the Superholdings common stock received
in the Alamosa merger by a U.S. holder of Alamosa common stock
will include the holding period of the U.S. holder's Alamosa
common stock exchanged for that Superholdings common stock.
CASH INSTEAD OF FRACTIONAL SHARES. The receipt of cash instead of a
fractional share of Superholdings common stock by a U.S. holder of Alamosa
common stock will result in taxable gain or loss to such U.S. holder for U.S.
federal income tax purposes based upon the difference between the amount of cash
received by such U.S. holder and the U.S. holder's adjusted tax basis in the
fractional share as set forth above. The gain or loss will constitute capital
gain or loss and will constitute long-term capital gain or loss if the U.S.
holder's holding period is greater than twelve months as of the date of the
Alamosa merger. For non-corporate U.S. holders, this long-term capital gain
generally will be taxed at a maximum U.S. federal income tax rate of 20%. The
deductibility of capital losses is subject to limitations.
BACKUP WITHHOLDING. Certain non-corporate Alamosa stockholders may be
subject to backup withholding at a 31% rate on cash payments received instead of
fractional shares of Superholdings common stock. Backup withholding will not
apply, however, to an Alamosa stockholder who:
o furnishes a correct taxpayer identification number and
certifies that he, she or it is not subject to backup
withholding on the substitute Form W-9 or successor form
included in the letter of transmittal to be delivered to
Alamosa stockholders following the date of completion of the
Alamosa merger;
o provides a certification of foreign status on Form W-8 or
successor form; or
o is otherwise exempt from backup withholding.
REPORTING REQUIREMENTS. A U.S. holder of Alamosa common stock receiving
Superholdings common stock as a result of the Alamosa merger may be required to
retain records related to such U.S. holder's Alamosa common stock, as the case
may be, and file with its federal income tax return, a statement setting forth
facts relating to the Alamosa merger.
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This summary of material U.S. federal income tax consequences is
intended to provide only a general summary and is not intended to be a complete
analysis or description of all potential federal income tax consequences of the
Alamosa merger. In addition, the summary does not address tax consequences that
may vary with, or are contingent on, individual circumstances. Moreover, the
summary does not address any non-income tax or any foreign, state or local tax
consequences of the Alamosa merger. The summary does not address the tax
consequences of any transaction other than the Alamosa merger. Accordingly, each
Alamosa stockholder is strongly urged to consult with a tax advisor to determine
the particular federal, state, local or foreign income or other tax consequences
of the Alamosa merger to the stockholder.
REGULATORY MATTERS
HART-SCOTT-RODINO ACT AND STATE ANTITRUST LAWS. We may not complete the
Alamosa merger until after notification to the Antitrust Division of the
Department of Justice and the Federal Trade Commission and the expiration or
early termination of the applicable waiting period under the Hart-Scott-Rodino
Act. The applicable waiting period under the Hart-Scott-Rodino Act with respect
to the Alamosa merger expired on September 9, 2000.
FEDERAL COMMUNICATIONS COMMISSION. Pursuant to the Communications Act
of 1934 and FCC rules, the transfer of control of companies holding, or the
assignment of, licenses issued by the FCC typically requires prior FCC approval.
WOW holds certain microwave FCC licenses which require the approval of the FCC
before the licenses can be transferred to Superholdings. On or about October 5,
2000, Alamosa and WOW filed appropriate applications with the FCC seeking the
necessary approval for the transfer of control to Superholdings of the
applicable FCC licenses and authorizations. The FCC has not completed its review
of the applications for consent to these transfers.
Completion of the WOW merger is conditioned upon, among other factors,
grants of the requisite FCC consents becoming final. A "final" FCC order is one
that has not been stayed and is no longer subject to review by the FCC or the
courts because the statutory period for seeking such review has expired without
any request for review or stay pending. Following the FCC's grants of consents
to the transfers, there may be post-grant challenges by private parties or
actions by the FCC or the courts that would delay or prevent finality.
We currently anticipate FCC approval of all applications necessary for
completion of the reorganization by the end of the fourth quarter of 2000.
However, we cannot assure you that we will receive approval from the FCC.
We know of no other regulatory approvals necessary to complete the
reorganization.
ACCOUNTING TREATMENT
Each of the Roberts merger and the WOW merger will be accounted for
under the purchase method of accounting. See "Pro Forma Condensed Combined
Financial Statements (Unaudited)."
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RESTRICTIONS ON SALES OF SHARES BY AFFILIATES OF ALAMOSA AND OTHERS
The shares of Superholdings common stock to be issued to Alamosa
stockholders in connection with the reorganization will be registered under the
Securities Act of 1933 and will be freely transferable under the Securities Act
of 1933, except for shares of Superholdings common stock issued to any person
who is deemed to be an "affiliate" of Alamosa. Persons who may be deemed to be
affiliates include individuals or entities that control, are controlled by, or
are under the common control of Alamosa and may include Superholdings' executive
officers and directors, as well as its significant stockholders. Affiliates may
not sell their shares of Superholdings common stock acquired in connection with
the reorganization except pursuant to:
o an effective registration statement under the Securities Act
of 1933 covering the resale of those shares;
o paragraph (d) of Rule 145 under the Securities Act of 1933; or
o any other applicable exemption under the Securities Act of
1933.
Superholdings' registration statement on Form S-4, of which this proxy
statement-prospectus forms a part, does not cover the resale of shares of
Superholdings common stock to be received by an affiliate of Alamosa in the
reorganization.
The shares of Superholdings common stock to be issued to the current
members of Roberts Holdings and WOW Holdings in connection with the
reorganization are not being registered under the Securities Act of 1933 and,
accordingly, may only be sold pursuant to an effective registration statement
under the Securities Act covering the resale of those shares or an applicable
exemption under the Securities Act. It is a condition to Alamosa's obligation to
complete each of the Roberts and WOW mergers that each of the members of Roberts
Holdings and WOW Holdings must agree to a "lock-up" arrangement under which they
will be prohibited from selling or disposing of their shares of Superholdings
common stock until September 30, 2001, without the prior written consent of
Superholdings. Superholdings has agreed to file a registration statement on Form
S-1 no later than July 31, 2001 and to keep such registration statement
effective for a period of one year after the later of: (i) the first day the
registration statement becomes effective and (ii) October 1, 2001. Such
registration statement will allow the members of WOW Holdings and Roberts
Holdings to freely resell the shares of Superholdings common stock that they
receive pursuant to the reorganization. Accordingly, following expiration of the
"lock-up" arrangements on September 30, 2001, all members of Roberts Holdings
and WOW Holdings will be in a position to sell their shares of Superholdings
common stock without restriction if the registration statement has been declared
effective by the SEC. See "The Roberts Merger--Agreements with Michael and
Steve Roberts: "Lock-up" Agreement." and "The WOW Merger--Covenants Regarding
Completion of the Transactions: "Lock-up" Agreement."
THE NASDAQ NATIONAL MARKET LISTING OF SUPERHOLDINGS COMMON STOCK TO BE ISSUED
IN THE REORGANIZATION
Alamosa has agreed to use its reasonable best efforts to cause the
shares of Superholdings common stock to be issued in the reorganization to
Alamosa stockholders and to members of Roberts Holdings and WOW Holdings to be
approved for listing on The Nasdaq National Market under Alamosa's current
symbol "APCS", subject to official notice of issuance, before the completion of
the reorganization.
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APPRAISAL RIGHTS
Under Delaware law, Alamosa stockholders are not entitled to appraisal
rights in connection with the reorganization.
DELISTING AND DEREGISTRATION OF ALAMOSA COMMON STOCK AFTER THE REORGANIZATION
When the reorganization is completed, Alamosa common stock will be
delisted from The Nasdaq National Market and will be deregistered under the
Securities Exchange Act of 1934.
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THE ALAMOSA MERGER
The following summary of the Alamosa reorganization agreement is
qualified in its entirety by reference to the complete text of the Alamosa
reorganization agreement, which is incorporated herein by reference and attached
as Appendix A to this proxy statement-prospectus. You are urged to read the full
text of the Alamosa reorganization agreement.
THE ALAMOSA MERGER
Pursuant to the Alamosa reorganization agreement, Alamosa Sub will
merge with and into Alamosa. As a result of the Alamosa merger, Alamosa Sub will
cease to exist as a separate corporate entity and Alamosa will continue as the
surviving corporation under the laws of the State of Delaware and a wholly-
owned subsidiary of Superholdings. The merger will have the effects specified in
Section 259 and Section 261 of the Delaware General Corporation Law.
At the effective time of the Alamosa merger, each share of Alamosa
common stock issued and outstanding immediately prior to the merger will be
converted into the right to receive one share of Superholdings common stock.
The officers and directors of Alamosa immediately prior to the Alamosa
merger will be the officers and directors of the surviving corporation until
their respective successors are duly elected or appointed and qualified. The
certificate of incorporation and by-laws of Alamosa in effect at the effective
time will be certificate of incorporation and by-laws of the surviving
corporation.
The closing of the Alamosa merger will occur on the third business day
after the satisfaction or written waiver of all the conditions contained in the
Alamosa reorganization agreement (other than execution, filing or delivery of
agreements, certificates, legal opinions or other instruments to be delivered at
the closing of the Alamosa merger). However, Superholdings or Alamosa may delay
the closing in order to achieve satisfaction or waiver of the conditions
contained in one or more "sister agreements," but not later than March 31, 2001.
The Alamosa reorganization agreement defines "sister agreements" to include the
Roberts reorganization agreement, the WOW reorganization agreement and any other
agreements entered into by Alamosa, Superholdings and Alamosa Sub pursuant to
which other business entities join the reorganization.
EFFECTIVE TIME OF THE ALAMOSA MERGER
The Alamosa merger will be effective as of the date and time set forth
in the Certificate of Merger that will be filed with the Secretary of State of
the State of Delaware.
CONDITIONS TO THE ALAMOSA MERGER
The obligations of Alamosa, Superholdings and Alamosa Sub to complete
the Alamosa merger are subject to the following conditions:
o the adoption of the Alamosa reorganization agreement by the
affirmative vote of the holders of the requisite number of
shares of Alamosa common stock pursuant to Alamosa's
certificate of incorporation, by-laws and applicable law;
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o the waiting period prescribed by the Hart-Scott-Rodino Act
shall have expired or early termination of the waiting period
thereunder shall have been granted;
o there is no action, suit or other legal restraint or
prohibition threatened or pending in connection with the
execution of the Alamosa reorganization agreement or the
completion of the Alamosa merger; and
o all conditions precedent to the completion of at least one of
the "sister agreements" must have been satisfied or waived.
PROCEDURE TO EXCHANGE CERTIFICATES
Prior or concurrently with the Alamosa merger, Superholdings will enter
into an agreement with a bank or trust company which will act as exchange agent.
Such agreement will provide that Superholdings will deposit at the effective
time of the Alamosa merger, through the exchange agent, the certificates of
Superholdings common stock and any dividends or distributions with respect
thereto with a record date after the effective time of the Alamosa merger, to be
issued to Alamosa stockholders in the Alamosa merger.
After completion of the Alamosa merger, each holder of certificates of
Alamosa common stock should surrender such certificates to the exchange agent,
together with a release and an indemnification agreement. At the time of such
surrender or delivery, such holder will receive the certificates representing
shares of Superholdings common stock it is entitled to receive, and a check in
the amount of cash the holder is entitled to receive, including any dividends or
other distributions paid in respect of the shares of Superholdings common stock
after the effective time of the Alamosa merger.
In each case, taxes will be withheld as required. No interest will be
paid or accrue on any cash payable upon the surrender of any certificate of
Alamosa common stock. No dividends or other distributions with respect to
Superholdings common stock will be paid to the holders of any unsurrendered
certificates of Alamosa common stock until the surrender of such certificates.
No holder of an unsurrendered Alamosa common stock certificate will be entitled,
until surrender of such certificate, to vote the shares of Superholdings common
stock into which the shares of Alamosa common stock represented thereby have
been converted.
As of the effective time of the Alamosa merger, all shares of Alamosa
common stock and Alamosa Sub common stock issued and outstanding immediately
prior to the merger will cease to be outstanding and will automatically be
cancelled and retired and will cease to exist.
Any portion of the exchange fund which remains undistributed to the
holders of shares of Alamosa common stock for 180 days after the completion of
the Alamosa merger will be delivered to Superholdings, upon demand, and any
holder of shares of Alamosa that has not complied with the exchange procedure
may look only to Superholdings, and only as a general creditor thereof, for
payment of the merger consideration and any cash instead of fractional shares
and unpaid dividends or distributions on the shares of Superholdings common
stock.
Neither Superholdings, Alamosa, Alamosa Sub nor the exchange agent will
be liable to any person in respect of any payments or distributions payable from
the exchange fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. Any amounts remaining unclaimed
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by former Alamosa stockholders five years after the completion of the Alamosa
merger will become the property of Superholdings to the extent permitted by
applicable law, free and clear of all claims or interests of any persons
previously entitled thereto.
TREATMENT OF ALAMOSA STOCK OPTIONS
At the effective time of the Alamosa merger, each then outstanding
option to purchase Alamosa common stock under the long-term incentive plan,
whether or not then exercisable or fully vested, will be assumed by
Superholdings and will constitute an option to acquire, on substantially the
same terms and subject to substantially the same conditions as were applicable
under that option, shares of Superholdings common stock. The number of shares of
Superholdings common stock to which each holder of Alamosa stock options is
entitled will be the same as the number of shares of Alamosa common stock
subject to such Alamosa option immediately prior to the effective time of the
Alamosa merger. In addition, the term, vesting, exercisability, status as an
"incentive stock option," if applicable, under Section 422 of the Code or as an
employee stock purchase plan option, if applicable, under Section 423 of the
Code, and termination provisions of the Alamosa options will remain the same for
the substitute options.
COVENANTS REGARDING COMPLETION OF THE TRANSACTION
CONSENTS. The parties to the Alamosa reorganization agreement have
agreed to use their reasonable best efforts to obtain all approvals, and all
consents of third parties to contracts as are necessary for the consummation of
the reorganization.
SECTION 16(B) RESOLUTION - SUPERHOLDINGS. The parties to the Alamosa
reorganization agreement have agreed that prior to the completion of the
reorganization, the board of directors of Superholdings will pass a resolution
approving, for purposes of Rule 16b-3 of the Exchange Act of 1934, the issuance
of Superholdings common stock and other equity securities (derivative and
nonderivative) pursuant to the Alamosa merger, to the directors, officers and
other persons subject to potential liability under Section 16(b) of the Exchange
Act of 1934.
SECTION 16(B) RESOLUTION - ALAMOSA. The parties to the Alamosa
reorganization agreement have agreed that prior to the completion of the
reorganization, the board of directors of Alamosa will pass a resolution
approving, for purposes of Rule 16b-3 of the Exchange Act of 1934, the
disposition of Alamosa common stock and other equity securities (derivative or
nonderivative) pursuant to the Alamosa merger, by the directors, officers and
other persons subject to potential liability under Section 16(b) of the Exchange
Act of 1934.
TERMINATION AND AMENDMENT
TERMINATION. The Alamosa reorganization agreement may be terminated if
the Roberts reorganization agreement, the WOW reorganization agreement and all
other "sister agreements" are terminated prior to completion of the Alamosa
merger.
AMENDMENT. The parties may amend the Alamosa reorganization agreement
in writing at any time prior to the time of the Alamosa merger. However, after
stockholder approval, the parties will not make any amendment which would reduce
the amount or change the type of consideration into which the shares of Alamosa
common stock will be converted upon completion of the Alamosa merger.
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THE ROBERTS MERGER
The following summary of the Roberts reorganization agreement is
qualified in its entirety by reference to the complete text of the Roberts
reorganization agreement, which is incorporated herein by reference and attached
as Appendix B to this proxy statement-prospectus. You are urged to read the full
text of the Roberts reorganization agreement. As used herein the term "Roberts
parties" means each of Roberts, Roberts Holdings and the members of Roberts
Holdings.
THE ROBERTS MERGER
Pursuant to the Roberts reorganization agreement, the members of
Roberts have formed Roberts Holdings, which holds all of the outstanding
membership interests of Roberts. At the effective time of the Roberts merger,
Roberts Holdings will merge with and into Superholdings. As a result, Roberts
Holdings will cease to exist as a separate legal entity and Superholdings will
continue as the surviving corporation under Delaware law and will retain its
name. The merger will have the effects provided in Section 264 of the Delaware
General Corporation Law and Sections 347.700 through 347.735 of the Missouri
Limited Liability Company Act and other applicable provisions of both statutes.
CONVERSION OF MEMBERSHIP UNITS
Upon completion of the Roberts merger, each unit of membership interest
of Roberts Holdings will be converted into the right to receive (i) 675 shares
of Superholdings common stock and (ii) up to $200 in cash, without any interest
thereon. The aggregate consideration to be paid to the members of Roberts
Holdings in the Roberts merger will be $13.5 million shares of Superholdings
common stock and up to $4.0 million in cash. No holder of membership interests
of Roberts Holdings will have any rights as a member of Roberts Holdings or
Roberts following the Roberts merger.
Superholdings will have the right to withhold from the aggregate amount
of the cash consideration to be paid pursuant to the Roberts merger the amounts,
including interest, then owing from the members of Roberts Holdings to Alamosa
pursuant to any outstanding borrowings, as well as the amount of any transfer
taxes owed as a result of the formation of Roberts Holdings or Roberts' or
Roberts Holdings' participation in the Roberts merger.
EFFECTIVE TIME OF THE ROBERTS MERGER
The Roberts merger will be effective as of the date and time set forth
in the certificate of merger that will be filed with the Secretary of State of
the State of Delaware.
CONDITIONS TO THE ROBERTS MERGER
MUTUAL CONDITIONS. The obligations of Alamosa, Superholdings, Alamosa
Sub, Roberts, Roberts Holdings and the members of Roberts Holdings to complete
the Roberts merger are subject to the following conditions:
o the adoption of the Alamosa reorganization agreement by the
affirmative vote of the holders of the requisite number of
shares of Alamosa common stock pursuant to Alamosa's
certificate of incorporation, by-laws and applicable law;
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o the approval of the issuance of shares of Superholdings common
stock in the Roberts merger by the requisite vote of the
stockholders of Alamosa pursuant to the rules of The Nasdaq
National Market;
o the approval for listing on The Nasdaq National Market of
Superholdings common stock issuable to the Roberts Holdings
members in the Roberts merger;
o the acceptance for filing by the secretaries of state of the
State of Delaware and the State of Missouri of the
certificates of merger for the Alamosa merger and the Roberts
merger; and
o all conditions to the completion of the Alamosa merger must be
satisfied, except that the condition precedent of the Alamosa
reorganization agreement which states that all conditions
precedent to the completion of the Roberts reorganization
agreement or a "sister agreement" will have been satisfied or
duly waived need not be satisfied or duly waived.
CONDITIONS TO THE OBLIGATIONS OF SUPERHOLDINGS AND ALAMOSA. The
obligations of Superholdings, Alamosa and Alamosa Sub to complete the Roberts
merger are subject to the satisfaction or waiver of the following additional
conditions:
o The representations and warranties made by the Roberts parties
in the Roberts reorganiza tion agreement must be true and
correct at the closing, except as affected by the Roberts
merger and except as will not constitute a "Roberts material
adverse change."
o The Roberts parties must have performed and complied with all
agreements and covenants to be performed or complied with by
them on or prior to the closing date under the Roberts
reorganization agreement or any related agreement, except as
will not constitute a "Roberts material adverse change."
o The Roberts parties must have obtained all consents, approvals
and authorizations of third parties required in connection
with the Roberts merger and the Alamosa merger, except for
those consents which, if not obtained, would not constitute a
"Roberts material adverse change."
o Alamosa must have obtained all consents, approvals and
authorizations of third parties required in connection with
the Roberts reorganization agreement or any related agreement,
except for those consents which, if not obtained, would not
constitute an "Alamosa material adverse change."
o Superholdings must have obtained all governmental licenses and
permits necessary to enable Superholdings to conduct the
business of Roberts after the closing as previously conducted,
except for those licenses and permits that if not obtained
would not constitute a "Roberts material adverse change."
o No stop order suspending the effectiveness of the Form S-4, of
which this proxy statement-prospectus forms a part, has been
issued and no proceedings for that purpose have been initiated
or threatened by the SEC.
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o No action, suit or proceeding is threatened or pending, and no
preliminary or permanent injunction or order is in effect,
seeking to restrain or prohibit, or to obtain damages or other
relief in connection with, the Roberts reorganization
agreement or any related agreement or the completion of the
transactions contemplated by those agreements, except as would
not cause a "Roberts material adverse change."
o The members of Roberts Holdings have repaid to Roberts all
amounts owed by them other than unpaid capital contributions
called and payable after the date of the Roberts
reorganization agreement.
o The Roberts parties must have entered into all other
agreements provided for in the Roberts reorganization
agreement, including:
o a "lock-up" agreement between Superholdings and each
of the members of Roberts Holdings,
o a release by each of the members of Roberts Holdings,
o a master lease agreement between Superholdings and
the members of Roberts Holdings, (see "--Agreements
with Michael and Steven Roberts--Master Lease
Agreement"), and
o a joint venture development agreement between
Superholdings and the members of Roberts Holdings, or
an entity controlled by them. For more information
about these agreements, see "--Agreements with
Michael and Steven Roberts."
o The members of Roberts Holdings must have delivered to
Superholdings all necessary landlord agreements, waivers and
consents and all mortgage holder non-disturbance agreements
for all tower properties they or their affiliates own that are
leased to Roberts, and must have used their reasonable best
efforts to obtain landlord consents for all other tower
properties that Roberts leases.
The first two conditions listed above will be satisfied even when a
"Roberts material adverse change" has occurred, unless the "Roberts material
adverse change":
o occurred on or prior to July 31, 2000;
o was caused after July 31, 2000 by the actions of the members
of Roberts Holdings, the board of managers of Roberts or
Roberts Holdings, or any agent of Roberts or Roberts Holdings
(if such agent is not under the supervision of Alamosa
pursuant to the services agreement between Roberts and Alamosa
Operations); or
o was caused by the failure of any of the persons identified in
the prior bullet point to take actions that (i) would be taken
in the ordinary course of business of Roberts and Roberts
Holdings and (ii) have not been delegated to Alamosa under the
services agreement between Alamosa Operations and Roberts.
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The Roberts reorganization agreement defines a "Roberts material
adverse change" as any change, effect, event or occurrence that would reasonably
be expected to:
o result in liabilities to Superholdings (on a consolidated
basis), at or after completion of Roberts merger, of at least
$40.0 million;
o result in a reduction of cash flow or increased losses of
Superholdings, at or after the completion of the Roberts
merger, discounted at 10%, having a net present value of at
least $40.0 million; or
o materially impair or delay the ability of Superholdings,
Alamosa, Alamosa Sub or the Roberts parties to complete the
Roberts merger and the Alamosa merger.
CONDITIONS TO THE OBLIGATIONS OF ROBERTS. The obligations of the
Roberts parties to complete the Roberts merger and the related transactions are
subject to the satisfaction or waiver of the following additional conditions:
o The representations and warranties made by Alamosa,
Superholdings and Alamosa Sub in the Roberts reorganization
agreement must be true and correct at the closing, except as
affected by the reorganization and except as will not
constitute an "Alamosa material adverse change," with certain
exceptions.
o Alamosa, Superholdings and Alamosa Sub must have performed and
complied with all agreements and covenants to be performed or
complied with by them on or prior to the closing date under
the Roberts reorganization agreement or any related agreement,
except as will not constitute an "Alamosa material adverse
change."
o No action, suit or proceeding is threatened or pending, and no
preliminary or permanent injunction or order is in effect,
seeking to restrain or prohibit or to obtain damages or other
relief in connection with the execution and delivery of the
Roberts reorganization agreement, or any related agreement or
the completion of the transactions contemplated by those
agreements, except as will not cause an "Alamosa material
adverse change."
o Alamosa must have obtained all consents, approvals and
authorizations of third parties required in connection with
the transactions contemplated by the Roberts reorganization
agreement or any related agreement, except for those consents
that, if not obtained, would not constitute an "Alamosa
material adverse change."
o Alamosa must have made all filings that are required to be
made with any governmental authority in connection with the
Roberts merger, except for those filings that, if not made,
would not constitute an "Alamosa material adverse change."
The Roberts reorganization agreement defines an "Alamosa material
adverse change" as any change, effect, event or occurrence that would reasonably
be expected to:
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o result in liabilities to Superholdings (on a consolidated
basis), at or after completion of the Roberts merger, of at
least $190.0 million;
o result in a reduction of cash flow or increased losses of
Superholdings, at or after completion of the Roberts merger,
discounted at 10%, having a net present value of at least
$190.0 million; or
o materially impair the ability of Alamosa, Superholdings or
Alamosa Sub to complete the Roberts merger and the Alamosa
merger, including the failure to deliver the merger
consideration.
COVENANT RELATING TO CONDUCT OF BUSINESS
Roberts has agreed that from July 31, 2000 to the effective time of the
Roberts merger, it will conduct its business and operations only in the ordinary
course of business and consistent with past practices. The members of Roberts
Holdings also have agreed to cause all indebtedness that any of them or any of
Roberts', Roberts Holdings' or their subsidiaries' affiliates owes to Roberts,
Roberts Holdings or any subsidiary to be paid in full prior to closing. See
"--Covenants Regarding Completion of the Transaction."
COVENANTS REGARDING COMPLETION OF THE TRANSACTION
SATISFACTION OF CONDITIONS TO CLOSING. The parties to the Roberts
reorganization agreement have agreed to use their reasonable best efforts to
satisfy the conditions to the obligations of the parties under the Roberts
reorganization agreement, and to complete the transactions provided for under
the Roberts reorganization agreement as promptly as practicable.
FILINGS AND APPROVALS. The parties have agreed to cooperate and use
their best efforts to make all applicable state and federal filings and obtain
all approvals and consents of all governmental entities and third parties
necessary to complete the Roberts merger and the Alamosa merger.
NO SOLICITATION. In the Roberts reorganization agreement, the Roberts
parties have agreed that they will not, and will not authorize or permit any
subsidiary or any of their affiliates, officers, directors, employees, agents or
representatives to, directly or indirectly, initiate, solicit, encourage, or
take any action to facilitate any acquisition proposal from a third party.
VOTING AGREEMENT. If requested by Alamosa, the members of Roberts
Holdings have agreed to:
o vote in favor of the Roberts merger and against any
acquisition proposal by a third party;
o take all reasonable actions in support of or to complete as
promptly as practicable the transactions contemplated by the
Roberts reorganization agreement;
o take no action that will impair the completion of the Roberts
merger or the Alamosa merger;
o not grant to any other person or entity a proxy or other right
to vote their membership interests;
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o transfer or agree to transfer any membership interest; and
o not exercise dissenters' rights to receive cash or other
consideration instead of Superholdings stock.
COVENANTS REGARDING COMPENSATION MATTERS
EMPLOYMENT AGREEMENT. Each party to the Roberts reorganization
agreement has agreed to use its reasonable best efforts to cause Superholdings
or any of its subsidiaries and Suzanne Mears to execute and deliver an
employment agreement reasonably acceptable to Superholdings. The employment
agreement will provide that Ms. Mears will be eligible for compensation,
benefits and stock options under Superholdings' guidelines and policies (which
will be substantially identical to Alamosa's guidelines and policies existing on
July 31, 2000) for similarly situated employees. The failure to enter into the
employment agreement, for any reason, will not be a breach of the Roberts
reorganization agreement.
CONSULTING AGREEMENT WITH KAY GABBERT. Alamosa and the members of
Roberts Holdings have agreed to use their reasonable best efforts to enter into
a five-year consulting agreement with Kay Gabbert. Ms. Gabbert's consulting
agreement will:
o be effective as of July 1, 2000;
o provide that she receive monthly compensation of $1,000 until
the closing of the Roberts merger; and
o provide that she receive options for 40,000 shares of Alamosa
common stock vesting over five years, at an exercise price of
$18.79.
At the closing, Superholdings will offer Ms. Gabbert a five-year
consulting agreement with annual compensation of $100,000, payable monthly. The
consulting agreement will also provide that Ms. Gabbert will be reimbursed for
reasonable, approved expenses incurred by her while conducting business for
Superholdings. The failure to enter into this consulting agreement, for any
reason, will not be a breach of the Roberts reorganization agreement.
STOCK OPTIONS. At the closing of the Roberts merger, Superholdings will
issue stock options to purchase a total of 75,000 shares of Superholdings common
stock to certain employees and consultants of Roberts to be identified by
Michael and Steven Roberts prior to closing. The options will have an exercise
price of 90% of the market value of Superholdings common stock on the date of
grant. These options will be subject to other terms to be provided by Michael
and Steven Roberts prior to closing.
AGREEMENTS WITH MICHAEL AND STEVEN ROBERTS
CONSULTING AGREEMENTS. Alamosa and the members of Roberts Holdings have
agreed to use their reasonable best efforts to enter into five-year consulting
agreements with Michael Roberts and Steven Roberts. Michael and Steven Roberts'
consulting agreements will provide each of them with an annual compensation of
$125,000, to be paid monthly.
The consulting agreements will also provide that the consultants will
be reimbursed for
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reasonable, approved expenses incurred by
them while conducting business for Superholdings. The failure to enter into any
of these consulting agreements, for any reason, will not be a breach of the
Roberts reorganization agreement.
MASTER LEASE AGREEMENT. Superholdings and Michael and Steven Roberts,
through one or more entities controlled by them, have agreed to use their
reasonable best good faith efforts to enter into a master lease agreement
reasonably acceptable to Superholdings. The master lease agreement will provide
those entities with the first right to negotiate tower space leases on a
"build-to-suit" basis within Superholdings' present and future territory with
terms similar to Alamosa's current leases for towers. The master lease agreement
will provide:
o have a five-year term, will not terminate during that term if
Superholdings retains its Sprint PCS affiliation, and will be
subject to five-year extensions if agreed by all parties to
the master lease agreement;
o be subject to performance criteria;
o provide that new contracts with Michael and Steven Roberts
will be negotiated after the Phase I build-out under existing
contracts is complete; and
o extend to any acquisitions by Superholdings.
The master lease agreement will also provide that from time to time as
Superholdings determines that it requires additional tower sites, it will notify
Roberts Tower Company, a corporation owned and operated by Michael and Steven
Roberts, and provide Roberts Tower Company with information concerning the
proposed locations of such sites, the technical requirements and any available
search rings. After Roberts Tower Company has been provided with that
information, Superholdings will grant Roberts Tower Company the exclusive right
for a period of 30 days to negotiate with Superholdings for Roberts Tower
Company to provide those tower sites. Superholdings agrees that during such
30-day period it will negotiate with Roberts Tower Company in good faith for
Roberts Tower Company to provide such tower sites. After the 30 day period,
Superholdings may obtain the tower sites from third parties. If Superholdings
has not entered into an agreement to obtain the tower sites within 12 months
after the notice to Roberts Tower Company, then Superholdings must again comply
with the notice and negotiation procedure.
LEASES. Superholdings and the members of Roberts Holdings, through one
or more entities controlled by them, have agreed to enter into agreements
providing for the lease by Roberts of certain assets, including the principal
executive offices of Roberts in St. Louis and certain tower assets to be
transferred by Roberts to Michael and Steven Roberts prior to the completion of
the Roberts merger. These leases will provide that:
o Roberts will pay $1,400 per month for the initial term of the
leases for towers within the Roberts footprint;
o the initial term of the leases will be for five years, with
renewal options;
o there will be a return based on dollars invested in the switch
and retail locations that is consistent with comparable lease
rates in the respective markets; and
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o the leases will be on terms reasonably satisfactory to
Superholdings that are similar to those found on comparable
leases entered into by Alamosa and Roberts with nonaffiliates.
The failure to enter into these leases for any reason will not
constitute a breach of the Roberts reorganization agreement.
ASSET TRANSFERS. Before the closing date of the Roberts merger, Roberts
will transfer to Michael and Steven Roberts, Roberts Tower Company or other
entities controlled by them, certain assets that will include certain real
estate, towers, Nortel base stations and retail store sites that were funded
directly or indirectly with capital contributions to Roberts by Michael and
Steven Roberts. The total fair market value of the assets so transferred plus
the aggregate cash to be received by Michael and Steven Roberts as part of their
consideration in the Roberts merger will not exceed $12.0 million or such other
amount equal to Michael and Steven Roberts' actual capital investment. The total
amount of cash to be received in conjunction with the asset transfers and merger
consideration will not exceed $4.0 million. If any assets of Roberts or Roberts
Holdings other than those specified in the Roberts reorganization agreement are
transferred to Michael and Steven Roberts or Roberts Tower Company, then the
aggregate cost of those assets will be deducted from the amount of cash to be
received by Michael and Steven Roberts as part of their consideration in the
Roberts merger.
JOINT VENTURE DEVELOPMENT AGREEMENT. Superholdings and Michael and
Steven Roberts or an entity controlled by them have agreed to use their
reasonable best good faith efforts to enter into a joint venture development
agreement reasonably acceptable to Superholdings, providing for the formation of
international joint ventures on a non-exclusive basis. The joint venture
development agreement will provide that:
o entry by Superholdings into any specific joint venture will be
conditioned upon and subject to Superholdings' approval of a
business plan for the joint venture;
o Superholdings will finance all costs of any joint venture into
which it enters; and
o each joint venture will be owned 50% by Michael and Steven
Roberts and 50% by Superholdings provided that Superholdings
is the manager of the joint venture.
RESALE AGREEMENT. Superholdings and its subsidiaries and Michael and
Steven Roberts or an entity controlled by them have agreed to use their
reasonable best good faith efforts to enter into a resale agreement reasonably
acceptable to Superholdings and its subsidiaries permitting Michael and Steven
Roberts or entities controlled by them to buy air time at a discount for resale
on a basis no less favorable than any other similar agreement Superholdings may
have. The failure to enter into this resale agreement, for any reason, will not
be a breach of the Roberts reorganization agreement.
LOCK-UP AGREEMENT. As a condition to Alamosa's obligation to complete
the Roberts merger, Michael and Steven Roberts must enter into a "lock-up"
agreement with Superholdings, which agreement will prohibit the sale or other
disposition of their shares of Superholdings common stock received in the
Roberts merger until September 30, 2001, without the prior written consent of
Superholdings. However, each of them may pledge up to 40% of his Superholdings
stock as collateral for margin loans.
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PAYMENT OF PENALTIES TO SPRINT PCS. At the closing, Superholdings has
agreed to make certain payments to Sprint PCS pursuant to the Roberts management
agreement with Sprint Spectrum, LP and SprintCom, Inc. For more information on
these penalties, see "Affiliations Agreements with Sprint PCS--The Management
Agreements--Network Build Out."
MEMBERS' RELEASES. As a condition to Alamosa's obligation to complete
the Roberts merger, Michael and Steven Roberts must execute and deliver at
closing releases of any present or future claims by them against Roberts,
Roberts Holdings and their successors, assigns, officers, directors, employees
and agents, other than claims for unpaid compensation and benefits.
DIRECTORS. Steven Roberts and Michael Roberts will be appointed to the
Superholdings board of directors as Class II and Class III directors,
respectively, effective upon completion of the Roberts merger, with Michael
Roberts nominated to serve as vice-chairman of the board. Class II directors
will stand for election at the annual meeting of Superholdings stockholders to
be held in 2002. Class III directors of Superholdings will stand for election at
the annual meeting of Superholdings stockholders to be held in 2003.
USE OF NAME. After the closing Michael and Steven Roberts will have the
right to conduct business under the name "Roberts Wireless Communications" and
all derivatives thereof.
PREPARATION OF FORM S-1. Subject to certain limitations, Alamosa,
Superholdings and Roberts must jointly prepare a registration statement on Form
S-1 to be filed with the SEC by Superholdings in connection with the resale by
Michael and Steven Roberts of the shares of Superholdings common stock that they
receive in the Roberts merger. Such registration statement must be filed no
later than July 31, 2001 and Superholdings will use reasonable best efforts to
have it declared effective by October 1, 2001. Superholdings will use its best
efforts to keep any such Form S-1 effective for at least one year after the
later of (i) the first day the registration statement becomes effective and (ii)
October 1, 2001. These registration rights may be substituted for any more
beneficial terms that may be contained in any reorganization agreement whereby
another business entity joins the reorganization.
TERMINATION
The Roberts reorganization agreement may be terminated before the
effective time of the Roberts merger by the mutual written consent of Alamosa,
Superholdings, Roberts and Roberts Holdings.
The Roberts reorganization agreement also may be terminated before the
effective time of the Roberts merger by Alamosa or Superholdings if:
o any one or more of the Roberts parties' representations or
warranties in the Roberts reorganization agreement is untrue
or incorrect, except as will not constitute a "Roberts
material adverse change";
o any of the Roberts parties fails to perform any of their
covenants or agreements contained in the Roberts
reorganization agreement, except as will not constitute a
"Roberts material adverse change"; or
o any of Alamosa's, Superholdings' or Alamosa Sub's conditions
to the completion of the
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transactions provided for in the Roberts reorganization agreement
becomes impossible to satisfy.
For purposes of the first two bullet points above, a "Roberts material
adverse change" will be deemed to have occurred only if it:
o occurred on or prior to July 31, 2000;
o was caused after July 31, 2000 by the actions of the members
of Roberts Holdings, the board of managers of Roberts or
Roberts Holdings, or any agent of Roberts or Roberts Holdings
(if such agent is not under the supervision of Alamosa
pursuant to the services agreement between Roberts and Alamosa
Operations described below); or
o was caused by the failure of any of the persons identified in
the prior bullet point to take actions that would be taken in
the ordinary course of business of Roberts and Roberts
Holdings and have not been delegated to Alamosa under the
services agreement between Alamosa Operations and Roberts.
The Roberts reorganization agreement also may be terminated before the
effective time of the Roberts merger by Roberts if:
o any of Alamosa's, Superholdings' or Alamosa Sub's
representations or warranties contained in the Roberts
reorganization agreement is untrue or incorrect, except as
will not have an "Alamosa material adverse change";
o Alamosa, Superholdings or Alamosa Sub fails to perform its
covenants or agreements contained in the Roberts
reorganization agreement, except as will not have an "Alamosa
material adverse change"; or
o any of Roberts's conditions to the completion of the
transactions provided for in the Roberts reorganization
agreement becomes impossible to satisfy.
The Roberts reorganization agreement also may be terminated by any of
Alamosa, Superholdings or Roberts if:
o the Roberts merger and the Alamosa merger are not effective on
or before March 31, 2001; or
o any federal or state court of competent jurisdiction or other
governmental entity issues an order or ruling permanently
restraining, enjoining or otherwise prohibiting the Roberts
merger and such order or ruling or other action becomes final
and non-appealable.
Except in the case of a termination for failure to close by March 31,
2000, the right to terminate the Roberts reorganization agreement is not
available to any party that is in material breach of its obligations under the
Roberts reorganization agreement or whose failure to fulfill its obligations or
to comply with its covenants under the Roberts reorganization agreement has been
the cause of, or resulted in, the failure to satisfy any condition to the
obligations of either party under the Roberts reorganization agreement.
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EFFECT OF TERMINATION. In the event of a termination of the Roberts
reorganization agreement, no party will have any liability or continuing
obligation to any other party arising out of the Roberts reorganization
agreement, except in connection with indemnification and certain other
provisions. However, termination of the Roberts reorganization agreement will
not relieve any party from its liability for (i) failure, prior to termination,
to perform or comply with its covenants or agreements, or (ii) the
representations or warranties made by such party being untrue or incorrect when
made.
ALAMOSA TERMINATION FEE. If Alamosa terminates the Roberts
reorganization agreement because it was not adopted by the requisite number of
member interests of Roberts Holdings in the manner required pursuant to Roberts
Holdings' organizational documents and applicable law, if such approval is
necessary, and all other conditions to closing have been satisfied or waived,
then the Roberts parties will be obligated to pay a termination fee of $7.5
million to Alamosa. Alamosa has been advised by Roberts' counsel that the
Roberts reorganization agreement has been adopted by the members of Roberts
Holdings in the manner required pursuant to the Roberts Holdings organizational
documents and applicable law.
ROBERTS TERMINATION FEE. If Roberts terminates the Roberts
reorganization agreement because the issuance of the shares of Superholdings
common stock pursuant to the Roberts reorganization agreement or the Alamosa
reorganization agreement has not been approved by the affirmative vote of the
holders of the requisite number of shares of Alamosa common stock pursuant to
Alamosa's certificate of incorporation and by-laws, Delaware law or The Nasdaq
National Market, as applicable, or other applicable law, and all other
conditions to closing have been satisfied or waived, then Alamosa will be
obligated to pay a termination fee of $7.5 million to the Roberts parties.
REIMBURSEMENT OF CONSENT FEE AND MANAGEMENT FEES. If the Roberts merger
fails to occur due to the breach of the Roberts reorganization agreement by one
or more of the Roberts parties, on the one hand, or Superholdings, Alamosa or
Alamosa Sub, on the other hand, then the non-breaching parties will be entitled
to receive from the breaching parties an aggregate amount equal to the fee paid
by Roberts to obtain the consent under the credit agreement between Roberts and
DLJ. If the Roberts merger fails to occur for any reason other than the breach
of the Roberts reorganization agreement by any of its parties, then each of the
Roberts parties, on the one hand, and Superholdings, Alamosa and Alamosa Sub, on
the other hand, will be entitled to receive an amount equal to one half of the
consent fee paid to obtain such consent.
If the closing does not occur due to a breach of the Roberts
reorganization agreement by Superholdings, Alamosa or Alamosa Sub, then the
Roberts parties will be entitled to receive from either Superholdings or Alamosa
the total amount of management fees paid to Alamosa Operations under the
services agreement between Roberts and Alamosa Operations.
REPRESENTATIONS AND WARRANTIES
The Roberts reorganization agreement contains representations and
warranties made by each of Alamosa, Superholdings, Alamosa Sub and the Roberts
parties, including representations and warranties relating to:
o organization, good standing and other corporate matters;
o power and authority to enter into and complete the
transactions under the Roberts reorganization agreement;
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o absence of conflicts between organizational documents, laws,
agreements and restrictions applicable to the parties and the
transactions under the Roberts reorganization agreement;
o required consents, approvals and authorizations of third
parties;
o brokers' fees and commissions with respect to the Roberts
merger;
o absence of any material adverse change;
o capital structure;
o liabilities;
o compliance with laws;
o litigation; and
o accuracy of the representations and warranties contained in
all the transaction documents.
Alamosa, Superholdings, and Alamosa Sub also made additional representations and
warranties to the Roberts parties relating to the following matters:
o Alamosa's prospectus dated February 3, 2000, and all reports
required to be filed by Alamosa with the SEC; and
o the information to be supplied by Alamosa, Superholdings and
Alamosa Sub for inclusion in this proxy statement-prospectus
and Form S-4 of which it is a part, as well as any Form S-1
prepared pursuant to the Roberts reorganization agreement, and
compliance of this proxy statement-prospectus with applicable
SEC rules.
The Roberts parties also made additional representations and warranties to
Alamosa, Superholdings and Alamosa Sub relating to the following matters:
o ownership of subsidiaries;
o applicable state takeover laws;
o financial statements;
o absence of certain changes or events;
o personal, real and intellectual property;
o material contracts, including certain agreements with Sprint
Corporation and the credit agreement between Roberts and DLJ;
o tax matters;
o warranties and products liability;
o relationship with significant suppliers, significant
customers and alliance parties;
o insurance;
o employees and labor matters;
o ERISA matters;
o conflicts of interest;
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o compliance with applicable laws;
o permits and licenses;
o environmental matters;
o accuracy of the documents and information furnished to
Alamosa; and
o investment matters.
SURVIVAL OF REPRESENTATIONS
The representations and warranties of Alamosa, Superholdings, Alamosa
Sub and the members of Roberts Holdings who are parties to the Roberts
reorganization agreement will survive the completion of the Roberts merger,
except that, subject to certain exceptions, claims for indemnification for
breaches of representations or warranties must be commenced prior to the closing
or withheld against the merger consideration in order to survive the closing.
Effective at the closing, the members of Roberts Holdings waive and release any
claim for breach of the Roberts reorganization agreement or any related
agreement by Roberts, Roberts Holdings or their subsidiaries, including any
claim for indemnification or contribution.
INDEMNIFICATION
Before the closing, all the Roberts parties and, after the closing,
Michael and Steven Roberts, will defend, indemnify and hold harmless
Superholdings, its affiliates, and their respective directors, officers,
employees, stockholders, members and certain representatives against any loss or
liability, including investigative costs, costs of defense, settlement costs and
attorneys' and accountants' fees that any such party suffers or incurs as a
result of, among other things, the breach of the Roberts reorganization
agreement by the Roberts parties and certain legal proceedings. At the closing,
Superholdings may put in escrow up to $40.0 million in Superholdings common
stock to satisfy losses for which it is indemnified and withhold that amount
from the Roberts merger consideration.
Alamosa, before the closing, and Superholdings, after the closing, will
defend, indemnify and hold harmless Michael and Steven Roberts from and against
any losses that they incur or to which they become subject in connection with
any breach of the Roberts reorganization agreement by Alamosa, Alamosa Sub or
Superholdings or any claim asserted by any third party that, assuming the truth
thereof, would constitute a breach by Alamosa, Alamosa Sub or Superholdings of
the Roberts reorganization agreement.
Roberts, Roberts Holdings and the former members of Roberts will not
have any obligation to indemnify Superholdings and its affiliates until the
losses incurred by Superholdings and its affiliates exceeds $1.0 million, at
which time Roberts, Roberts Holdings and the former members of Roberts will
indemnify Superholdings and its affiliates for the full amount of all losses,
with certain exceptions. Also, after the closing no party will incur any
liability for losses in excess of the aggregate dollar value of the
consideration paid or received by such party pursuant to the Roberts merger.
AMENDMENT, EXTENSION AND WAIVER
The parties may amend the Roberts reorganization agreement at any time
prior to the completion of the Roberts merger by written agreement executed by
all of the parties.
At any time prior to the completion of the Roberts merger, any of the
parties may:
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o extend the time for the performance of any of the obligations
of the other parties;
o waive any inaccuracies in the representations and warranties
of the other parties contained in the Roberts reorganization
agreement or in any document delivered pursuant to such
agreement; or
o subject to certain conditions, waive compliance with any of
the agreements or conditions of the other parties contained in
the Roberts reorganization agreement.
EXPENSES
Each party to the Roberts reorganization agreement will bear its own
expenses (third-party or otherwise) incurred in connection with the preparation,
execution and performance of the Roberts reorganization agreement and all
related agreements and transactions. Except for certain instances, the Roberts
parties have agreed not to utilize the assets of Roberts to pay their expenses.
LOAN AND SERVICES AGREEMENTS
The following summaries of the loan agreement and services agreement
between Alamosa Operations and Roberts are qualified in their entirety by
reference to the complete text of the loan agreement and services agreement
between Alamosa Operations and Roberts, which are included as exhibits to the
registration statement on Form S-4 of which this proxy statement-prospectus
forms a part.
SERVICES AGREEMENT BETWEEN ALAMOSA OPERATIONS AND ROBERTS. On July 31,
2000, Roberts and Alamosa Operations entered into a services agreement whereby,
effective July 31, 2000, Alamosa Operations began to manage the operations of
Roberts, pending completion of the Roberts merger. Under the Roberts services
agreement, Alamosa Operations provides various services in connection with the
operation of Roberts' business, including:
o all network management services for the operation of Roberts'
wireless telecommunications network within the Roberts basic
trading areas;
o management of all sales and marketing services;
o management of the network build-out;
o through Roberts' management agreement with Sprint PCS,
customer care, billing and other services; and
o certain general and administrative, executive, financial and
accounting, human resources, legal and other professional and
forecasting services.
Alamosa Operations is entitled to receive a management fee of $100,000
per month for the services it provides to Roberts and is entitled to be
reimbursed for certain reimbursable costs and expenses incurred or paid by it in
providing these services.
The term of the Roberts services agreement began on July 31, 2000 and
will end upon the completion
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of the Roberts merger, subject to earlier termination in certain circumstances.
LOAN AGREEMENT BETWEEN ALAMOSA OPERATIONS AND ROBERTS. On July 31,
2000, Roberts and Alamosa Operations entered into a loan agreement whereby
Alamosa Operations has agreed to lend up to $20.0 million to Roberts, to be used
only for the purpose of funding Roberts' working capital needs from July 31,
2000 through the completion of the Roberts merger. As of the date of this proxy
statement-prospectus approximately $[ ] million has been funded under the
loan agreement. In connection with entering into the Roberts loan agreement,
Roberts assumed approximately $6.0 in debt obligations of Steven and Michael
Roberts under the loan agreement dated June 30, 2000, between Steven and Michael
Roberts (as borrowers) and Alamosa Operations (as lender), to the extent the
proceeds of that loan were used to make capital contributions to Roberts.
The loan bears interest at the prime rate and is due six months after
the termination of the Roberts reorganization agreement, upon acceleration, or
in certain circumstances upon demand. Alamosa Operations is not obligated to
make any advances under the Roberts loan agreement until it has received certain
documents under the Roberts reorganization agreement.
Pursuant to the Roberts loan agreement, Michael and Steven Roberts have
entered into an agreement providing that, if the Roberts merger is not
completed, all sums due under the Roberts loan agreement and related documents
are not paid in full to Alamosa Operations, and certain liens and security
interests are not released, Michael and Steven Roberts will jointly and
severally convey to Alamosa Operations all or a portion of their respective
membership interests in Roberts so that Alamosa Operations owns, on a fully
diluted basis, 15% of the total membership interests in Roberts, free and clear
of all liens and encumbrances.
When the Roberts merger and the Alamosa merger are completed, all
amounts due to Alamosa Operations by Roberts under the Roberts loan agreement
may, at Alamosa Operations' option, either (i) be deemed paid in full (in such
case, this loan will be characterized as capital contributions by Alamosa
Operations to Roberts), or (ii) remain a debt obligation of Roberts, subject to
a subordination agreement in favor of the senior lender to Superholdings.
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THE WOW MERGER
The following summary of the WOW reorganization agreement is qualified
in its entirety by reference to the complete text of the WOW reorganization
agreement, which is incorporated herein by reference and attached as Appendix C
to this proxy statement-prospectus. You are urged to read the full text of the
WOW reorganization agreement. As used herein the term "WOW parties" means each
of WOW, WOW Holdings and certain members of WOW Holdings.
THE WOW MERGER
Pursuant to the WOW reorganization agreement, the members of WOW have
formed WOW Holdings, which holds all of the outstanding membership interests of
WOW. At the effective time of the WOW merger, WOW Holdings will merge with and
into Superholdings. As a result, WOW Holdings will cease to exist as a separate
legal entity and Superholdings will continue as the surviving corporation under
Delaware law and will retain its name. The merger will have the effects provided
in Section 264 of the Delaware General Corporation Law and Section 63.481 of the
Oregon Limited Liability Company Act and other applicable provisions of both
statutes.
CONVERSION OF MEMBERSHIP UNITS
Upon completion of the WOW merger, each unit of membership interest of
WOW Holdings will be converted into the right to receive (i) 0.19171 shares of
Superholdings common stock and (ii) $0.396 in cash, without any interest
thereon. The aggregate consideration to be paid to the members of WOW Holdings
in connection with the WOW merger will be equal to 6.05 million shares of
Superholdings common stock and $12.5 million in cash. No holder of membership
interests of WOW Holdings will have any rights as a member of WOW Holdings or
WOW following the WOW merger.
Superholdings will have the right to withhold from the aggregate amount
of the cash consideration to be paid pursuant to the WOW merger the amount of
any transfer taxes owed as a result of the formation of WOW Holdings or WOW's or
WOW Holdings' participation in the WOW merger.
EFFECTIVE TIME OF THE WOW MERGER
The WOW merger will be effective as of the date and time set forth in
the certificate of merger that will be filed with the Secretary of State of the
State of Delaware.
CONDITIONS TO THE WOW MERGER
MUTUAL CONDITIONS. The obligations of Alamosa, Superholdings, Alamosa
Sub, WOW, WOW Holdings and certain members of WOW Holdings to complete the WOW
merger are subject to the following conditions:
o the adoption of the Alamosa reorganization agreement by the
affirmative vote of the holders of the requisite number of
shares of Alamosa common stock pursuant to Alamosa's
certificate of incorporation, by-laws and applicable law;
o the approval of the issuance of shares of Superholdings common
stock in the WOW merger
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by the requisite vote of the stockholders of Alamosa pursuant
to the rules of The Nasdaq National Market;
o the approval for listing on The Nasdaq National Market of
Superholdings common stock issuable to the members of WOW
Holdings in the WOW merger;
o the acceptance for filing by the secretaries of state of the
State of Delaware and the State of Oregon of the certificates
of merger for the Alamosa merger and the WOW merger; and
o all conditions to the completion of the Alamosa merger must be
satisfied, except that the condition precedent of the Alamosa
reorganization agreement which states that all conditions
precedent to the completion of the WOW reorganization
agreement or a "sister agreement" will have been satisfied or
duly waived need not be satisfied or duly waived.
CONDITIONS TO THE OBLIGATIONS OF SUPERHOLDINGS AND ALAMOSA. The
obligations of Superholdings, Alamosa and Alamosa Sub to complete the WOW merger
are subject to the satisfaction or waiver of the following additional
conditions:
o The representations and warranties made by the WOW parties in
the WOW reorganization agreement or any related agreement must
be true and correct as of September 1, 2000, except as
affected by the WOW merger and except as will not constitute a
"WOW material adverse change," with certain exceptions.
o Actions by the members of WOW Holdings, the board of managers
of WOW or WOW Holdings, or any employee or agent of WOW or WOW
Holdings have not caused the WOW parties' representations and
warranties to be untrue or incorrect on the date the WOW
merger is completed, except as affected by the WOW merger and
except as will not constitute a "WOW material adverse change."
o The failure by any person identified in the prior bullet point
to take any action that would be taken in the ordinary course
of WOW's or WOW Holdings' business and that has not been
delegated to Alamosa pursuant to the services agreement
between Alamosa Operations and WOW has not caused the WOW
parties' representations and warranties to be untrue or
incorrect on the date of completion of the WOW merger, except
as affected by the WOW merger and except as will not
constitute a "WOW material adverse change."
o The WOW parties must have performed and complied with all
agreements and covenants to be performed or complied with by
them on or prior to the closing date under the WOW
reorganization agreement or any related agreement, except as
will not constitute a "WOW material adverse change." However,
this condition will be satisfied even if a "WOW material
adverse change" has occurred, if the "WOW material adverse
change" is proximately caused by:
o actions of Alamosa pursuant to the services agreement
between Alamosa Operations and WOW;
o actions of any employee or agent of WOW or WOW
Holdings under the supervision of Alamosa Operations
pursuant to the WOW services agreement; or
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o Alamosa's breach of its obligations under the
services agreement between Alamosa Operations and
WOW.
o The WOW parties must have obtained all consents, approvals and
authorizations of third parties required in connection with
the WOW merger and the Alamosa merger, except for those
consents which, if not obtained, would not constitute a "WOW
material adverse change." Failure to obtain the following
consents would constitute a "WOW material adverse change":
o consent from CoBank under a credit agreement between
WOW (as borrower) and CoBank (as lender); and
o consent from Lucent.
o Alamosa must have obtained all consents, approvals and
authorizations of third parties required in connection with
the WOW merger and the Alamosa merger, except for those
consents which, if not obtained, would not constitute an
"Alamosa material adverse change."
o Superholdings must have obtained all governmental licenses and
permits necessary to enable Superholdings to conduct the
business of WOW after the closing as previously conducted,
except for those licenses and permits that if not obtained
would not constitute a "WOW material adverse change."
o No stop order suspending the effectiveness of the Form S-4, of
which this proxy statement-prospectus forms a part, has been
issued and no proceedings for that purpose have been initiated
or threatened by the SEC.
o No action, suit or proceeding is threatened or pending, and no
preliminary or permanent injunction or order is in effect,
seeking to restrain or prohibit, or to obtain damages or other
relief in connection with the WOW reorganization agreement,
any related agreement or the completion of the transactions
contemplated by those agreements, except as would not cause a
"WOW material adverse change."
o All consents and approvals of and filings with any
governmental authority that are necessary in connection with
the transactions contemplated by the WOW reorganization
agreement and to enable Superholdings to operate the business
of WOW after the closing in substantially the same manner as
such business was conducted before closing (including the
approval of the FCC, see "The Reorganization--Regulatory
Matters"), must have been obtained, except for those approvals
that, if not obtained, would not constitute a "WOW material
adverse change."
o The members of WOW Holdings must have repaid to WOW all
amounts owed by them other than unpaid capital contributions
called and payable after July 31, 2000.
o The WOW parties must have entered into all other agreements
provided for in the WOW reorganization agreement, including,
an agreement between Superholdings, each member
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of WOW Holdings and such member's direct or indirect owners,
which agreement contains a "lock-up" provision, an indemnity
clause and a release against certain future claims.
The WOW reorganization agreement defines a "WOW material adverse
change" as any change, effect, event or occurrence that would reasonably be
expected to:
o result in liabilities to Superholdings (on a consolidated
basis), at or after completion of the WOW merger, of at least
$20.0 million;
o result in a reduction of cash flow or increased losses of
Superholdings (on a consolidated basis), at or after the
completion of the WOW merger, discounted at 10%, having a net
present value of at least $20.0 million; or
o materially impair or delay the ability of Superholdings,
Alamosa, Alamosa Sub or the WOW parties to complete the WOW
merger and the Alamosa merger.
CONDITIONS TO THE OBLIGATIONS OF WOW. The obligations of the WOW
parties to complete the WOW merger and the related transactions are subject to
the satisfaction or waiver of the following additional conditions:
o The representations and warranties made by Alamosa,
Superholdings and Alamosa Sub in the WOW reorganization
agreement must be true and correct at the effective date of
the services agreement between WOW and Alamosa Operations,
except as affected by the WOW merger and except as will not
constitute an "Alamosa material adverse change," with certain
exceptions.
o Alamosa, Superholdings and Alamosa Sub must have performed and
complied with all agreements and covenants to be performed or
complied with by them on or prior to the closing date under
the WOW reorganization agreement or any related agreement,
except as will not constitute an "Alamosa material adverse
change."
o No action, suit or proceeding is threatened or pending, and no
preliminary or permanent injunction or order is in effect,
seeking to restrain or prohibit or to obtain damages or other
relief in connection with the execution and delivery of the
WOW reorganization agreement any related agreement or the
completion of the transactions contemplated by those
agreements, except as would not cause an "Alamosa material
adverse change."
o Alamosa must have obtained all consents, approvals and
authorizations of third parties required in connection with
the transactions contemplated by the WOW reorganization
agreement or any related agreement, except for those consents
that, if not obtained, would not constitute an "Alamosa
material adverse change."
o Alamosa must have made all filings that are required to be
made with any governmental authority in connection with the
WOW merger, except for those filings that, if not made, would
not constitute an "Alamosa material adverse change."
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The WOW reorganization agreement defines an "Alamosa material adverse
change" as any change, effect, event or occurrence that would reasonably be
expected to:
o result in liabilities to Superholdings (on a consolidated
basis), at or after completion of the WOW merger, of at least
$130.0 million;
o result in a reduction of cash flow, or increased losses of
Superholdings (on a consolidated basis), at or after
completion of the WOW merger, discounted at 10%, having a net
present value of at least $130.0 million; or
o materially impair the ability of Alamosa, Superholdings or
Alamosa Sub to complete the WOW merger and the Alamosa merger,
including the failure to deliver the merger consideration.
COVENANT RELATING TO CONDUCT OF BUSINESS
WOW has agreed that, from July 31, 2000 to the effective time of the
WOW merger, it will conduct its business and operations only in the ordinary
course of business and consistent with past practices. The members of WOW
Holdings that are party to the WOW reorganization agreement also have agreed to
cause all indebtedness that any of such members or any of WOW, WOW Holdings or
their subsidiaries or affiliates owes to WOW, WOW Holdings or any subsidiary to
be paid in full prior to closing. See "--Covenants Regarding Completion of the
Transaction."
COVENANTS REGARDING COMPLETION OF THE TRANSACTION
SATISFACTION OF CONDITION TO CLOSING. The parties to the WOW
reorganization agreement have agreed to use their reasonable best efforts to
satisfy the conditions to the obligations of the parties under the WOW
reorganization agreement, and to complete the transactions provided under the
WOW reorganization agreement as promptly as practicable.
FILINGS AND APPROVALS. The parties have agreed to cooperate and use
their best efforts to make all applicable state and federal filings and obtain
all approvals and consents of all governmental entities and third parties
necessary to complete the WOW merger and the Alamosa merger.
NO SOLICITATION. In the WOW reorganization agreement, the WOW parties
have agreed that they will not, and will not authorize or permit any subsidiary
or any of their affiliates, officers, directors, employees, agents or
representatives to, directly or indirectly, initiate, solicit, encourage or take
any action to facilitate any acquisition proposal from a third party.
"LOCK-UP" AGREEMENT. As a condition to Alamosa's obligation to complete
the WOW merger, each member of WOW Holdings must enter into a "lock-up"
agreement with Superholdings, which agreement will prohibit the sale or other
disposition of such member's holdings of Superholdings common stock received in
the WOW merger until September 30, 2001, without the prior written consent of
Superholdings. If Superholdings enters into a "lock-up" agreement with any
person who receives at least 25% of the Superholdings common stock issued
pursuant to an agreement whereby another entity merges with Superholdings
simultaneously with the Alamosa merger, and such "lock-up" agreement contains
terms more beneficial to such person than any "lock-up" agreement that the
members of WOW Holdings execute, then
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each WOW member may substitute such "lock-up" agreement in its entirety for the
more preferable "lock-up" agreement. If Superholdings does not enter into a
"lock-up" agreement with any person who receives at least 25% of the
Superholdings common stock issued pursuant to an agreement whereby another
entity merges with Superholdings simultaneously with the Alamosa merger, then
each WOW Holdings member will be immediately and forever released from any and
all obligations and duties under its respective lock-up agreement.
MEMBERS' RELEASES. As a condition to Alamosa's obligation to complete
the WOW merger, the members of WOW Holdings must execute and deliver at closing
releases of any present or future claims against WOW, WOW Holdings and their
successors, assigns, officers, directors, employees and agents, other than
claims for unpaid compensation and benefits and any obligation of such members
under the operating agreements of WOW or WOW Holdings.
VOTING AGREEMENT. Members of WOW Holdings owning in excess of
two-thirds of the membership interests of WOW Holdings have approved the WOW
merger as required under applicable Oregon law. If requested by Alamosa, the
members of WOW Holdings who are party to the WOW reorganization agreement have
agreed to:
o vote in favor of the WOW merger and against any acquisition
proposal by a third party;
o take all reasonable actions in support of or to complete as
promptly as practicable the WOW merger or the Alamosa merger;
o take no action that will impair the completion of the WOW
merger or the Alamosa merger;
o not grant to any other person or entity a proxy or other right
to vote their membership interests;
o not transfer or agree to transfer any membership interests;
and
o not exercise dissenters' rights to receive cash or other
consideration instead of Superholdings common stock.
COVENANTS REGARDING COMPENSATION MATTERS
EMPLOYMENT AGREEMENT. At the completion of the WOW merger,
Superholdings or one of its subsidiaries will offer to enter into an employment
agreement with Johnny Calderon reasonably acceptable to Superholdings. The
failure to enter into the employment agreement, for any reason, will not be a
breach of the WOW reorganization agreement.
CONSULTING AGREEMENT. At the completion of the WOW merger,
Superholdings or one its subsidiaries will offer to enter into a one-year
consulting agreement with Mitchell Moore, the Chairman and Chief Executive
Officer of WOW, reasonably acceptable to Superholdings. This consulting
agreement will provide that Mr. Moore receive aggregate compensation of
$100,000. The failure to enter into the consulting agreement, for any reason,
will not be a breach of the WOW reorganization agreement.
VALUE APPRECIATION PLAN. At the request of Superholdings, WOW will
terminate all or any portion
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of its value appreciation plan before completion of the WOW merger. On the
closing date, Superholdings will:
o assume the obligations owed under the value appreciation plan
to the WOW employees whom Superholdings elects to employ; and
o either assume the value appreciation plan as it relates to
Mitchell Moore or satisfy and pay the obligations owed to him
under the value appreciation plan.
On the date of completion of the WOW merger, Superholdings will pay:
o to each WOW employee whom Superholdings elects to employ,
one-third of the value appreciation plan obligations owed to
each such WOW employee; and
o to Mr. Moore, the amount of value appreciation plan
obligations attributable to him.
On each of the dates six and twelve months after the date of completion
of the WOW merger, Superholdings will pay to each of the WOW employees other
than Mr. Moore whom Superholdings elects to employ one-third of the value
appreciation plan obligations owed to each such WOW employee.
TERMINATION
The WOW reorganization agreement may be terminated before the effective
time of the WOW merger by the mutual written consent of Alamosa, Superholdings,
WOW and WOW Holdings.
The WOW reorganization agreement also may be terminated before the
effective time of the WOW merger by Alamosa and Superholdings if:
o any one or more of the WOW parties' representations or
warranties in the WOW reorganization agreement is untrue or
incorrect, except as affected by the WOW merger or the Alamosa
merger and except as will not constitute a "WOW material
adverse change";
o actions by the members of WOW Holdings, the board of managers
of WOW or WOW Holdings, or any employee or agent of WOW or WOW
Holdings causes the WOW parties' representations and
warranties under the WOW reorganization agreement or any
related agreement to be untrue or incorrect in any respect,
except as affected by the WOW merger or the Alamosa merger and
except as will not constitute a "WOW material adverse change";
o either the members of WOW Holdings party to the WOW
reorganization agreement, the board of managers of WOW or WOW
Holdings, or any employee or agent of WOW or WOW Holdings
fails to takes any action that cause the WOW parties'
representations and warranties made in the WOW reorganization
agreement or any related agreement to be untrue or incorrect
in any respect, except as affected by the WOW merger or the
Alamosa merger and except as will not constitute a "WOW
material adverse change";
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o any of the WOW parties fails to perform any of their covenants
or agreements contained in the WOW reorganization agreement or
any related agreement, except as will not constitute a "WOW
material adverse change," with certain exceptions; or
o any of Alamosa's, Superholdings' or Alamosa Sub's conditions
to the completion of the transactions provided for in the WOW
reorganization agreement becomes impossible to satisfy.
The WOW reorganization agreement also may be terminated before the
effective time of the WOW merger by WOW if:
o any of Alamosa's, Superholdings' or Alamosa Sub's
representations or warranties contained in the WOW
reorganization agreement is or becomes untrue or incorrect,
except as will not have an "Alamosa material adverse change";
o Alamosa, Superholdings or Alamosa Sub fails to perform its
covenants or agreements contained in the WOW reorganization
agreement, except as will not have an "Alamosa material
adverse change"; or
o any of WOW's conditions to the completion of the transactions
provided for in the WOW reorganization agreement becomes
impossible to satisfy.
The WOW reorganization agreement also may be terminated by any of
Alamosa, Superholdings or WOW if:
o the WOW merger and the Alamosa merger are not effective on or
before March 31, 2001; or
o any federal or state court of competent jurisdiction or other
governmental entity issues an order or ruling or takes any
other action permanently restraining, enjoining or otherwise
prohibiting the WOW merger and such order or ruling becomes
final and non-appealable.
The right to terminate the WOW reorganization agreement is not
available to any party that is in material breach of its obligations under the
WOW reorganization agreement or whose failure to fulfill its obligations or to
comply with its covenants under the WOW reorganization agreement has been the
cause of, or resulted in, the failure to satisfy any condition to the
obligations of either party under the WOW reorganization agreement.
EFFECT OF TERMINATION. In the event of a termination of the WOW
reorganization agreement, no party will have any liability or continuing
obligation to another party arising out of the WOW reorganization agreement,
except in connection with indemnification and certain other provisions.
However, termination of the WOW reorganization agreement will not relieve any
party from its liability for (i) the failure, prior to termination, of such
party to perform or comply with its covenants or agreements, or (ii) the
representations or warranties made by such party being untrue or incorrect when
made.
ALAMOSA TERMINATION FEE. If Alamosa terminates the WOW reorganization
agreement because it
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was not adopted by the requisite number of member interests of WOW Holdings in
the manner required pursuant to WOW Holdings' organizational documents and
applicable law, if such approval is necessary, and all other conditions to
closing have been satisfied or waived, then the WOW parties will be obligated to
pay a termination fee of $5.0 million to Alamosa. Alamosa has been advised by
WOW's counsel that the WOW reorganization agreement has been adopted by the
members of WOW Holdings in the manner required pursuant to the WOW Holdings
organizational documents and applicable law.
WOW TERMINATION FEE. If WOW terminates the WOW reorganization agreement
because the issuance of shares of Superholdings common stock pursuant to the WOW
reorganization agreement or the Alamosa reorganization agreement has not been
approved by the affirmative vote of the holders of the requisite number of
shares of Alamosa common stock pursuant to Alamosa's certificate of
incorporation and by-laws, Delaware law and The Nasdaq National Market, as
applicable, or other applicable law, and all other conditions to closing have
been satisfied or waived, then Alamosa will be obligated to pay a termination
fee of $5.0 million to the WOW parties.
REPRESENTATIONS AND WARRANTIES
The WOW reorganization agreement contains representations and
warranties made by each of Alamosa, Superholdings, Alamosa Sub and the WOW
parties to each other, including representations and warranties relating to:
o organization and other corporate matters;
o power and authority to enter into and complete the
transactions under the WOW reorganization agreement;
o absence of conflicts between organizational documents, laws,
agreements and restrictions applicable to the parties and the
transactions under the WOW reorganization agreement;
o required consents, approvals and authorizations of third
parties;
o brokers' fees and commissions with respect to the WOW merger;
o absence of any material adverse change;
o capital structure;
o liabilities;
o compliance with laws;
o litigation;
o accuracy of the representations and warranties contained in
all the transaction documents.
Alamosa, Superholdings and Alamosa Sub also made additional representations and
warranties to the WOW parties relating to the following matters:
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o Alamosa's prospectus dated February 3, 2000, and all reports
required to be filed by Alamosa with the SEC; and
o the information to be supplied by Alamosa, Superholdings and
Alamosa Sub for inclusion in this proxy statement-prospectus
and Form S-4 of which it is a part, as well as any Form S-1
prepared pursuant to the WOW reorganization agreement, and
compliance of this proxy statement-prospectus with applicable
SEC rules.
The WOW parties also made additional representations and warranties to Alamosa,
Superholdings and Alamosa Sub relating to the following matters:
o ownership of subsidiaries;
o applicable state takeover laws;
o financial statements;
o absence of certain changes or events;
o personal, real and intellectual property;
o material contracts, including certain agreements with Sprint
PCS and a credit agreement between WOW (as borrower) and
CoBank (as lender);
o tax matters;
o warranties;
o relationship with significant suppliers and alliance parties;
o insurance;
o employees and labor matters;
o ERISA matters;
o conflicts of interest;
o litigation;
o compliance with applicable laws;
o permits and licenses;
o environmental matters;
o accuracy of the documents and information furnished to
Alamosa; and
o investment matters.
POST-CLOSING AGREEMENTS
WOW NOMINEES. If Superholdings determines that WOW will have board
representation on the board of directors of Superholdings, then WOW will deliver
to Superholdings the name of the person, subject to Superholdings' reasonable
approval, who will serve as a director of Superholdings. Superholdings will
include the WOW nominee in management's slate of nominees for the Superholdings
board of directors and will solicit proxies in favor of the election of the WOW
nominee for any annual or special meeting of Superholdings' stockholders.
PREPARATION OF FORM S-1. Subject to certain conditions, Alamosa,
Superholdings and WOW must jointly prepare a registration statement on Form S-1
to be filed with the SEC by Superholdings in connection with the resale by the
WOW Holdings members of the shares of Superholdings common stock that they
receive in the WOW merger. Such registration statement must be filed no later
than July 31, 2001 and Superholdings will use reasonable best efforts to have it
declared effective by October 1, 2001. Superholdings will use its reasonable
best efforts to keep any such Form S-1 effective for at least one year after the
later of
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(i) the first day the registration statement becomes effective and (ii) October
1, 2001. These registration rights may be substituted for any more beneficial
terms that may be contained in any reorganization agreement whereby another
business entity joins the reorganization.
SURVIVAL OF REPRESENTATIONS
The representations and warranties of Alamosa, Superholdings, Alamosa
Sub and the members of WOW Holdings who are parties to the WOW reorganization
agreement will survive the completion of the WOW merger. The representations and
warranties of WOW and WOW Holdings will be extinguished at the closing of the
WOW merger, except that, subject to certain exceptions, claims for
indemnification for breaches of representations or warranties must be commenced
prior to the closing or withheld against the merger consideration in order to
survive the closing. Effective at the closing, the members of WOW Holdings waive
and release any claim for breach of the WOW agreement or any related agreement
by WOW, WOW Holdings or their subsidiaries, including any claim for
indemnification or contribution.
INDEMNIFICATION
All of the WOW parties, before the closing, and the members of WOW
Holdings, after the closing, will defend, indemnify and hold harmless
Superholdings, its affiliates, and their respective directors, officers,
employees, stockholders, members and certain of their representatives against
any loss, expense or liability including investigative costs, costs of defense,
settlement costs and attorneys' and accountants' fees that any such party
suffers or incurs as a result of, among other things, the breach of the WOW
reorganization agreement by any of the WOW parties or any claim asserted by any
third party that, assuming the truth thereof, would constitute such a breach. At
the closing, Superholdings may put in escrow up to $20.0 million in
Superholdings common stock to satisfy losses for which it is indemnified and
withhold that amount from the WOW merger consideration.
Alamosa, before the closing, and Superholdings, after the closing, will
defend, indemnify and hold harmless the WOW Holdings members from and against
any losses that they incur or to which they become subject in connection with
any breach of the WOW reorganization agreement by Alamosa, Alamosa Sub or
Superholdings or any claim asserted by any third party that, assuming the truth
thereof, would constitute a breach by Alamosa, Alamosa Sub or Superholdings of
the WOW reorganization agreement.
WOW, WOW Holdings and the former members of WOW will not have any
obligation to indemnify Superholdings and its affiliates until the losses
incurred by Superholdings and its affiliates exceeds $2.0 million, at which time
WOW, WOW Holdings and the former members of WOW will indemnify Superholdings and
its affiliates for the amount of such losses in excess of $1.0 million. Also,
after the closing no party will incur any liability for losses in excess of the
aggregate dollar value of the consideration paid or received by such party
pursuant to the WOW merger.
AMENDMENT, EXTENSION AND WAIVER
The parties may amend the WOW reorganization agreement at any time
prior to the completion of the WOW merger by written agreement executed by all
of the parties.
At any time prior to the completion of the WOW merger the parties may:
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o extend the time for the performance of any of the obligations
of the other parties;
o waive any inaccuracies in the representations and warranties
of the other parties contained in the WOW reorganization
agreement or in any document delivered pursuant to such
agreement; or
o subject to certain conditions, waive compliance with any of
the agreements or conditions of the other parties contained in
the WOW reorganization agreement.
EXPENSES
Each party to the WOW reorganization agreement will bear its own
expenses (third-party or otherwise) incurred in connection with the preparation,
execution and performance of the WOW reorganization agreement and all related
agreements and transactions. With certain exceptions, the WOW parties have
agreed not to utilize assets of WOW to pay their expenses.
LOAN AND SERVICES AGREEMENTS
The following summaries of the loan agreement and services agreement
between Alamosa Operations and WOW are qualified in their entirety by reference
to the complete text of the loan agreement and services agreement between
Alamosa Operations and WOW, which are included as exhibits to the registration
statement on Form S-4 of which this proxy statement-prospectus forms a part.
SERVICES AGREEMENT BETWEEN ALAMOSA OPERATIONS AND WOW. On July 31,
2000, WOW and Alamosa Operations entered into a services agreement whereby,
effective September 1, 2000, Alamosa Operations began to manage the operations
of WOW, pending completion of the WOW merger. Under the WOW services agreement,
Alamosa Operations provides various services in connection with the operation of
WOW's business, including:
o all network management services for the operation of WOW's
wireless telecommunications network within the WOW basic
trading areas;
o management of the network build-out;
o management of all sales and marketing services;
o through the WOW management agreement with Sprint PCS, customer
care, billing, and other services, and
o certain general and administrative, executive, financial and
accounting, human resources, legal and other professional and
forecasting services.
Alamosa Operations is entitled to receive a management fee of $100,000
per month for the services it provides to WOW and is entitled to be reimbursed
for certain reimbursable costs and expenses incurred or paid by it in providing
these services.
The term of the WOW services agreement began on September 1, 2000 and
will end upon the
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completion of the WOW merger, subject to earlier termination in certain
circumstances.
LOAN AGREEMENT BETWEEN ALAMOSA OPERATIONS AND WOW. On July 31, 2000,
WOW and Alamosa Operations entered into a loan agreement whereby Alamosa
Operations has agreed to lend up to $11.0 million to WOW, to be used only for
the purposes of (i) satisfying certain capital contribution requirements under
WOW's operating agreement, and (ii) funding WOW's working capital needs from
July 31, 2000, through the completion of the WOW merger. As of the date of this
proxy statement-prospectus approximately $[ ] has been funded under the loan
agreement.
The loan bears interest at the prime rate and is due 30 days after the
termination of the WOW reorganization agreement, upon acceleration or, in
certain circumstances upon demand. Alamosa Operations is not obligated to make
any advances under the WOW loan agreement until it has received consents to the
WOW reorganization agreement and certain documents under the WOW loan agreement.
This loan is guaranteed by members of WOW Holdings owning in excess of 67% of
the membership interest in WOW holdings.
When the WOW merger is completed, all amounts due to Alamosa Operations
by WOW under the WOW loan agreement may, at Alamosa Operations' option, either
(i) be deemed paid in full (in such case, this loan will be characterized as
capital contributions by Alamosa Operations to WOW), or (ii) remain a debt
obligation of WOW, subject to a subordination agreement in favor of the senior
lender to Superholdings.
VOTING AGREEMENT BETWEEN ALAMOSA AND REAGAN W. SILBER
On July 31, 2000, Reagan W. Silber entered into a voting agreement with
Alamosa whereby Mr. Silber has agreed among other things to vote all shares of
Alamosa common stock beneficially owned by him in favor of approval of the
Alamosa merger and the issuance of Superholdings common stock pursuant to the
WOW merger.
Mr. Silber, one of the members of the Alamosa board of directors, is a
member of the board of managers of WOW. Mr Silber is also a principal of WOW
Investment Partners, L.L.C., an affiliate of WOW Investment Partners, L.P. WOW
Investment Partners, L.P. owns approximately 44.4% of the outstanding membership
interests of WOW Holdings.
Tregan International is the record owner of 3,017,647 shares of Alamosa
common stock. Mr. Silber is director, the President and 50% stockholder of
Tregan International and is deemed to be a beneficial owner of the shares held
by Tregan International.
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INFORMATION ABOUT ALAMOSA PCS HOLDINGS, INC.
References in this proxy statement-prospectus to Alamosa as a provider
of wireless personal communications services or similar phrases generally refer
to Alamosa's building, owning and managing its portion of the Sprint PCS network
pursuant to Alamosa's affiliation agreements with Sprint PCS. Sprint PCS holds
the spectrum licenses and controls the network through its agreements with
Alamosa.
All references contained in this proxy statement-prospectus to resident
population and residents are based on projections of year-end 2000 population
counts calculated by applying the annual growth rate from 1990 to 1999 to
estimates of 1999 population counts compiled by the U.S. Census Bureau.
OVERVIEW
Alamosa is a provider of wireless personal communication services,
commonly referred to as PCS, in the Southwestern and Midwestern United States.
Alamosa is a network partner of Sprint PCS, the personal communications services
group of Sprint Corporation. Sprint PCS, directly and through affiliates such as
Alamosa, provides wireless services in more than 4,000 cities and communities
across the country. Alamosa has the exclusive right to provide digital wireless
personal communications services under the Sprint and Sprint PCS brand names in
a territory primarily located in Texas, New Mexico, Arizona, Colorado and
Wisconsin with approximately 8.4 million residents. Through December 31, 1999,
Alamosa was a development stage company.
Alamosa launched Sprint PCS service in Laredo, Texas in June 1999, and
has since commenced service in eleven additional markets: Albuquerque, Santa Fe
and Las Cruces, New Mexico, as well as El Paso, Lubbock, Amarillo, Midland,
Odessa, Abilene, San Angelo and Eagle Pass/Del Rio, Texas. Alamosa's systems
cover approximately 3.0 million residents out of approximately 3.9 million total
residents in those markets. The number of residents covered by Alamosa's systems
does not represent the number of Sprint PCS subscribers that Alamosa expects to
be based in its territory. As of June 30, 2000, 69,569 Sprint PCS subscribers
were based in Alamosa's territory.
ALAMOSA'S BACKGROUND
Alamosa was formed in July 1998 as a Texas limited liability company.
Prior to the closing of Alamosa's initial public offering in February 2000,
Alamosa was comprised of Alamosa PCS LLC, a Texas limited liability company,
Alamosa Wisconsin Limited Partnership, a Wisconsin limited partnership and a
99.75% owned subsidiary of Alamosa PCS LLC, and Texas Telecommunications, LP, a
Texas limited partnership and wholly-owned subsidiary of Alamosa PCS LLC.
Immediately prior to the closing of Alamosa's initial public offering, Alamosa
reorganized the business into a holding company structure. The members of
Alamosa PCS LLC received shares of common stock of Alamosa PCS Holdings, Inc. in
the same proportion to their membership interests in Alamosa PCS LLC.
Alamosa PCS Holdings, Inc., a Delaware corporation, was formed in
October 1999 to operate as a holding company. Texas Telecommunications, LP was
formed in December 1999. In connection with the original Alamosa reorganization,
Texas Telecommunications, LP received the assets of Alamosa PCS LLC related to
operations in the Southwest United States and operated the business of Alamosa
PCS LLC. Alamosa PCS, Inc. held a 99% limited partnership interest in Texas
Telecommunications, LP. Alamosa Delaware GP, LLC, a wholly-owned subsidiary of
Alamosa PCS, Inc., held a 1% general partnership interest
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in Texas Telecommunications, LP. Currently Alamosa Limited, LLC, a wholly-owned
subsidiary of Alamosa PCS, Inc., holds the 99% limited partnership interest in
Texas Telecommunications, LP. and Alamosa Delaware GP, LLC continues to hold the
1% general partnership interest in Texas Telecommunica tions, LP.
Alamosa Wisconsin Limited Partnership was formed in December 1999. In
connection with the original Alamosa reorganization, Alamosa Wisconsin Limited
Partnership received the assets of Alamosa PCS LLC related to operations in
Wisconsin. After the original Alamosa reorganization, Alamosa Wisconsin Limited
Partnership commenced Alamosa's business operations in Wisconsin. Alamosa PCS,
Inc. holds the 98.75% Class A limited partnership interests in Alamosa Wisconsin
Limited Partnership and Alamosa holds the .25% Class B limited partnership
interests in Alamosa Wisconsin Limited Partnership. Alamosa Wisconsin GP, LLC, a
wholly-owned subsidiary of Alamosa PCS, Inc., holds a 1% general partnership
interest in Alamosa Wisconsin Limited Partnership.
ALAMOSA'S RELATIONSHIP WITH SPRINT PCS
Sprint is a diversified telecommunications service provider whose
principal activities include:
o long distance service;
o local service;
o wireless telephone products and services;
o product distribution and directory publishing activities; and
o other telecommunications activities, investments and alliances.
Sprint PCS is a wholly-owned operating unit of Sprint and operates the
only 100% digital wireless personal communications services network in the
United States with licenses to provide service nationwide using a single
technology. Sprint PCS has licenses to provide wireless service to an area
containing over 270 million residents located throughout the United States,
including Puerto Rico and the U.S. Virgin Islands. The Sprint PCS network uses
code division multiple access technology nationwide.
Alamosa is one of the largest affiliates of Sprint PCS based on the
resident population in Alamosa's territory, and Alamosa's territory adjoins
several major Sprint PCS markets. The build-out of Alamosa's territory will
significantly extend Sprint PCS's coverage in the Southwestern and Midwestern
United States. Due to Alamosa's relationship with Sprint PCS, Alamosa benefits
from:
BRAND RECOGNITION. Alamosa markets products and services directly under
the Sprint and Sprint PCS brand names. Alamosa benefits from the recognizable
Sprint and Sprint PCS brand names and national advertising as Alamosa opens
markets. Alamosa offers pricing plans, promotional campaigns and handset and
accessory promotions of Sprint PCS.
EXISTING DISTRIBUTION CHANNELS. Alamosa benefits from relationships
with major national retailers who distribute Sprint PCS products and services
under existing Sprint PCS contracts. These national retailers have approximately
470 retail outlets in Alamosa's territory. Furthermore, Alamosa will benefit
from sales made by Sprint PCS to customers in Alamosa's territory through its
national telemarketing sales force, national account sales team and Internet
sales capability. These existing distribution channels provide immediate access
to customers as Alamosa's services become available in their area. For more
information on Alamosa's distribution plan, see "--Sales and Distribution."
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SPRINT PCS'S NATIONAL NETWORK. Alamosa offers access to Sprint PCS's
wireless network. Sprint PCS's network offers service in 280 major metropolitan
areas across the country. Alamosa expects to derive additional revenue from
Sprint PCS when its customers based outside of Alamosa's territory roam on
Alamosa's portion of the Sprint PCS network.
HIGH CAPACITY NETWORK. Sprint PCS built its network around code
division multiple access digital technology, which Alamosa believes provides
advantages in capacity, voice-quality, security and handset battery life. For
more information on the benefits of this technology, see "--Technology--Code
Division Multiple Access Technology."
SPRINT PCS'S LICENSED SPECTRUM. Sprint PCS has invested approximately
$100.0 million to purchase the wireless personal communications services
licenses in Alamosa's territory and to pay costs to remove sources of microwave
signals that interfere with the licensed spectrum, a process generally referred
to as microwave clearing.
BETTER EQUIPMENT AVAILABILITY AND PRICING. Alamosa expects to be able
to acquire handsets and network equipment more quickly and at a lower cost than
it would without its affiliation with Sprint PCS. For example, Sprint PCS will
use commercially reasonable efforts to obtain for Alamosa the same discounted
volume-based pricing on wireless-related products and warranties as Sprint PCS
receives from its vendors.
ESTABLISHED BACK OFFICE SUPPORT SERVICES. Alamosa has contracted with
Sprint PCS to provide critical back office services, including customer
activation, handset logistics, billing, customer care and network monitoring
services. Because Alamosa does not have to establish and operate its own
systems, it is able to accelerate its market launches and capitalize upon Sprint
PCS's economies of scale.
ACCESS TO THE SPRINT PCS WIRELESS WEB. Alamosa supports the recently
announced Sprint PCS Wireless Web service in Alamosa's portion of the Sprint PCS
network. For more information on the Sprint PCS Wireless Web, see "--Products
and Services--Access to the Sprint PCS Wireless Web."
Statements in this proxy statement-prospectus regarding Sprint or
Sprint PCS are derived from information contained in Alamosa's affiliation
agreements with Sprint and Sprint PCS and periodic reports and other documents
filed with the Securities and Exchange Commission by, or press releases issued
by, Sprint and Sprint PCS.
MARKETS
The following table lists the location, basic trading area number and
estimated total residents for each of the markets that comprise Alamosa's
territory under Alamosa's affiliation agreements with Sprint PCS. As of June 30,
2000, Alamosa had 69,569 Sprint PCS subscribers.
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<TABLE>
<CAPTION>
BTA NO. (1) TERRITORY STATE ESTIMATED TOTAL RESIDENTS (2)
<S> <C> <C> <C>
3 Abilene Texas 255,799
8 Albuquerque New Mexico 812,923
13 Amarillo Texas 403,843
18 Appleton-Oshkosh Wisconsin 447,389
40 Big Spring Texas 33,788
68 Carlsbad New Mexico 53,893
87 Clovis New Mexico 74,139
89 Colorado Springs (3) Colorado 9,007
121 Eagle Pass-Del Rio Texas 121,835
123 Eau Claire Wisconsin 192,729
124 El Centro-Calexico California 152,149
128 El Paso Texas 782,452
139 Farmington, NM-Durango Colorado 206,156
144 Flagstaff Arizona 117,700
148 Fond du Lac Wisconsin 95,582
162 Gallup New Mexico 137,758
168 Grand Junction Colorado 247,279
173 Green Bay Wisconsin 347,601
191 Hobbs New Mexico 54,955
234 La Crosse - Winona Wisconsin / Minnesota 312,401
242 Laredo Texas 228,076
244 Las Cruces New Mexico 251,570
245 Las Vegas (3) Arizona 142,327
264 Lubbock Texas 395,253
272 Madison (3) Wisconsin 148,946
276 Manitowoc Wisconsin 83,106
296 Midland Texas 125,531
297 Milwaukee (3) Wisconsin 84,676
298 Minneapolis-St. Paul (3) Minnesota 84,823
327 Odessa Texas 216,772
347 Phoenix (3) Arizona 15,937
362 Prescott Arizona 161,907
366 Pueblo Colorado 308,640
386 Roswell New Mexico 80,827
400 San Angelo Texas 162,093
402 San Diego (3) California 3,481
407 Santa Fe New Mexico 213,873
417 Sheboygan Wisconsin 111,186
420 Sierra Vista - Douglas Arizona 115,420
432 Stevens Point-Marshfield-Wisconsin Wisconsin 214,597
Rapids
447 Tucson (3) Arizona 17,285
466 Wausau-Rhinelander Wisconsin 245,229
486 Yuma Arizona 140,949
268 McAllen Texas
378 Rochester Minnesota
-------------------------------------------------------------------------------------------------
TOTAL 8,411,882
</TABLE>
(1) BTA No. refers to the basic trading area number assigned to that market
by the FCC for the purposes of issuing licenses for wireless services.
(2) Estimated total residents is based on projections of year-end 2000
population counts calculated by applying the annual growth rate from
1990 to 1999 to estimates of 1999 population counts compiled by the
U.S. Census Bureau.
(3) Estimated total residents for these markets reflect only those
residents contained in our territory, not the total residents in the
entire basic trading area.
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The following table lists the launch dates, network coverage that
Alamosa expects will be operational, the estimated total residents and the
estimated covered residents for each of the markets that comprise Alamosa's
territory under Alamosa's affiliation agreement with Sprint PCS. The number of
estimated covered residents does not represent the number of Sprint PCS
subscribers that Alamosa expects to be based in its territory.
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED CUMULATIVE COVERED
TOTAL CUMULATIVE RESIDENTS
EXPECTED COMMERCIAL LICENSED COVERED AS A % OF TOTAL
LAUNCH DATE BY QUARTER (1) TERRITORY STATE RESIDENTS (2) RESIDENTS (3) RESIDENTS
<S> <C> <C> <C> <C> <C>
CURRENTLY LAUNCHED POPS 3,970,019 3,033,409 36%
Abilene Texas
Albuquerque New Mexico
Amarillo Texas
El Paso Texas
Laredo Texas
Las Cruces New Mexico
Lubbock Texas
Midland Texas
Odessa Texas
San Angelo Texas
Santa Fe New Mexico
Eagle Pass-Del Rio Texas
4TH QUARTER 2000 2,307,172 4,748,401 56%
Colorado Springs (4) Colorado
Flagstaff Arizona
Grand Junction Colorado
Prescott Arizona
Pueblo Colorado
Appleton-Oshkosh Wisconsin
El Centro-Calexico California
Fond du Lac Wisconsin
Green Bay Wisconsin
Manitowoc Wisconsin
Milwaukee (4) Wisconsin
Sheboygan Wisconsin
Yuma Arizona
2ND QUARTER 2001 1,862,212 5,810,023 69%
Big Spring Texas
Clovis New Mexico
Eau Claire Wisconsin
Farmington, NM-
Durango Colorado
Hobbs New Mexico
La Crosse - Winona Wisconsin / Minnesota
Las Vegas (4) Arizona
Madison (4) Wisconsin
Minneapolis-St. Paul (4) Minnesota
Phoenix (4) Arizona
San Diego (4) California
Sierra Vista - Douglas Arizona
Stevens Point-
Marshfield-
Wisconsin Rapids Wisconsin
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ESTIMATED ESTIMATED CUMULATIVE COVERED
TOTAL CUMULATIVE RESIDENTS
EXPECTED COMMERCIAL LICENSED COVERED AS A % OF TOTAL
LAUNCH DATE BY QUARTER (1) TERRITORY STATE RESIDENTS (2) RESIDENTS (3) RESIDENTS
Tucson (4) Arizona
Wausau-Rhinelander Wisconsin
3RD QUARTER 2001 272,478 5,966,023 71%
Carlsbad New Mexico
Gallup New Mexico
Roswell New Mexico
</TABLE>
(1) Launch dates may be affected by a number of factors, including shifts
in populations or network focus, changes or advances in technology,
acquisition of other markets and delays in market build-out due to
reasons identified in "Risk Factors--Risks Particular to Superholdings'
Business, Strategy and Operations."
(2) Estimated total residents is based on projections of year-end 2000
population counts calculated by applying the annual growth rate from
1990 to 1999 to estimates of 1999 population counts compiled by the
U.S. Census Bureau.
(3) Estimated covered residents are based on our actual or projected
network coverage in markets at the launch date using current
projections of year-end 2000 population counts calculated by applying
the annual growth rate from 1990 to 1999 to estimates of 1999
population counts compiled by the U.S. Census Bureau.
(4) Total residents, covered residents and actual customers for these
markets reflect only those residents or customers contained in our
territory, not the total residents, covered residents and actual
customers in the entire basic trading area.
Pursuant to Alamosa's affiliation agreements with Sprint PCS, Alamosa
has agreed to cover a minimum percentage of the resident population in Alamosa's
territory within specified time periods. Alamosa plans to build out its
territory more rapidly than those network build-out requirements. For more
information on the network build-out requirements, see "Affiliation Agreements
with Sprint PCS--The Management Agreements-Network Build-Out." Alamosa believes
that its build-out plan is achievable based on Alamosa's progress to date, the
proven digital wireless personal communications services technology Alamosa will
use to build its portion of the Sprint PCS network and the established standards
of Sprint PCS. However, Alamosa's build-out plan may change for a number of
reasons. See "Risk Factors--Risk Particular to Superholdings' Business, Strategy
and Operation" and "Financial Statements" commencing on page F-1 hereof.
NETWORK OPERATIONS
GENERAL. The effective operation of Alamosa's portion of the Sprint PCS
network requires:
o public switched and long distance interconnection;
o the implementation of roaming arrangements; and
o the development of network monitoring systems.
Alamosa's network connects to the public switched telephone network to
facilitate the origination and termination of traffic between Alamosa's network
and both local exchange and long distance carriers. Sprint provides preferred
rates for long distance services. Through Alamosa's arrangements with Sprint PCS
and Sprint PCS's arrangements with other wireless service providers, Sprint PCS
subscribers based in
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Alamosa's territory have roaming capabilities on other networks. Alamosa has a
network monitoring system in all of its switching centers, where Alamosa
monitors its portion of the Sprint PCS network during normal business hours. For
after hours monitoring, Sprint PCS's Network Operation Center provides 24 hour,
seven day a week monitoring of Alamosa's portion of the Sprint PCS network and
notification to Alamosa's designated personnel. This network monitoring process
assists Alamosa's staff in improving Alamosa's network reliability without
having to staff 24 hours a day.
As of June 30, 2000, Alamosa's portion of the Sprint PCS network
included 227 base stations and four switching centers. As of December 31, 2000,
Alamosa anticipates its portion of the Sprint PCS network will include 547 base
stations and seven switching centers.
NORTEL EQUIPMENT AGREEMENT. On December 21, 1998, Alamosa entered into
a three year equipment agreement with Nortel for purchases of Alamosa's network
equipment and infrastructure, including switches, base stations and controllers.
Pursuant to the Nortel equipment agreement, Nortel provides installation and
optimization services, such as network engineering and radio frequency
engineering, for the equipment and granted to Alamosa a nonexclusive license to
use all the software associated with the equipment. Pursuant to the Nortel
equipment agreement, Alamosa is required to purchase a total of $167.0 million
of equipment and services from Nortel. As of June 30, 2000, Alamosa had
remaining commitments of $64.5 million under the Nortel equipment agreement.
These purchases may be financed pursuant to the EDC credit facility described in
"Alamosa's Management's Discussion and Analysis of Financial Condition and
Results of Operations--Description of Our Indebtedness: The EDC Credit
Facility." Alamosa submits purchase orders to Nortel for the equipment and
services as needed. If Alamosa's affiliation with Sprint PCS ends, Nortel has
the right to either terminate the equipment agreement or, with Alamosa's
consent, modify the equipment agreement to establish new prices, terms and
conditions.
TOWER AGREEMENT WITH OMNIAMERICA. In August 1998, Alamosa entered into
a nonexclusive master site development and lease agreement for tower sites with
OmniAmerica Development Corp., formerly known as Specialty Capital Services,
Inc., a subsidiary of Specialty Teleconstructors, Inc. which has since merged
with America Tower Corporation. Pursuant to the agreement, OmniAmerica arranges
for collocation of Alamosa's equipment, or constructs new facilities, in areas
Alamosa identifies for build-out. Subject to Alamosa's approval, OmniAmerica
provides site acquisition, leasing and construction services and secures zoning,
permitting and surveying approvals and licenses for each base station location.
The initial term of the master agreement expires in August 2003, with automatic
renewal for three additional terms of five years each. Alamosa leases all
individual tower sites that OmniAmerica provides for an initial term of five
years, with automatic renewals at Alamosa's option for three additional terms of
five years each. The agreement provides for monthly payment aggregating to
approximately $5.0 million per year, subject to an annual adjustment based on
the Consumer Price Index. In any situation where OmniAmerica's rights in a site
are derived from a lease with a third party, the terms of Alamosa's agreement
with OmniAmerica, including the lease term, are subordinate to the terms of that
lease.
TOWER AGREEMENT WITH SBA. On February 22, 2000, two of Alamosa's
subsidiaries, Texas Telecommunications, L.P. and Alamosa Wisconsin Limited
Partnership, entered into a master site agreement and a master design build
agreement with SBA Towers, Inc. The master design build agreement was amended
and restated on March 21, 2000. The term of the master design agreement expires
in December 2001. Pursuant to the agreement, SBA arranges for collocation of
Texas Telecommunications' and Alamosa Wisconsin's equipment, or constructs new
facilities, in areas Texas Telecommunications and Alamosa Wisconsin identify for
build-out. Subject to the approval of Texas Telecommunications and Alamosa
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Wisconsin, SBA provides site acquisition, leasing and construction services and
secures zoning, permitting and surveying approvals and licenses for each base
station location. The term of the master design agreement expires in December
2001. Texas Telecommunications and Alamosa Wisconsin lease all individual tower
sites that SBA provides for an initial term of five years, with automatic
renewals at their option for four additional terms of five years each. Texas
Telecommunications and Alamosa Wisconsin pay rental payments to SBA monthly, in
the amounts indicated on each individual leased site schedule, subject to an
annual adjustment. In any situation where SBA's rights in a site are derived
from a lease with a third party, the terms of the master site agreement,
including the lease term, are subordinate to the terms of that lease.
AGREEMENTS WITH CHR SOLUTIONS. Alamosa has entered into a number of
agreements with CHR Solutions to perform aspects of Alamosa's network build-out.
CHR Solutions resulted from a merger between Hicks & Ragland Engineering Co.,
Inc., and Cathey, Hutton & Associates, Inc. effective as of November 1, 1999.
David Sharbutt, our Chairman and Chief Executive Officer, was at the time
agreements were executed, the Chairman, Chief Executive Officer, a director and
shareholder of CHR Solutions. Those agreements include the following:
o ENGINEERING SERVICE CONTRACT. Pursuant to an engineering
service contract dated July 27, 1998, as amended, CHR
Solutions performs design and construction inspection services
in connection with the deployment of switching centers and
base stations. The term of the contract covers three periods
through August 2001, though either party may terminate the
agreement for cause before August 2001. Alamosa pays CHR
Solutions hourly rates for the employees who work on the
project as well as the employees' associated expenses. Alamosa
also pays CHR Solutions for the costs of test equipment and
computer usage. The hourly rates and the test equipment and
computer usage costs are reviewed and modified by mutual
agreement annually until completion of the services or
termination of the agreement. An estimated fee amount has been
set for each period of the contract, and those fees aggregate
to approximately $7.0 million, excluding taxes. This agreement
lasts until the project is completed unless either party
terminates it earlier.
o TEXAS MARKETING AND OPERATIONS CONSULTING SERVICES AGREEMENT.
Pursuant to a special service agreement dated as of November
20, 1999, CHR Solutions provides Alamosa with marketing and
operations consulting services for a maximum amount of
$100,000, excluding taxes.
o NETWORK PARTNERSHIP AGREEMENT. Pursuant to a professional
services agreement dated as of January 28, 2000, CHR Solutions
has agreed to develop for Alamosa the sub-affiliate program
from development of a model through the execution of the
sub-affiliate program. The estimated probable costs of the
services is $248,000. Either party may terminate the agreement
without penalty at any time with or without cause upon giving
the other party 30 days prior written notice.
PRODUCTS AND SERVICES
Alamosa offers products and services throughout its territory under the
Sprint and Sprint PCS brand names. Alamosa's products and services are designed
to mirror the service offerings of Sprint PCS and to integrate with the Sprint
PCS network. The Sprint PCS service packages Alamosa currently offers include
the following:
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100% DIGITAL WIRELESS NETWORK WITH SERVICE ACROSS THE COUNTRY. Alamosa
is part of the largest 100% digital wireless personal communications services
network in the country. Sprint PCS customers based in Alamosa's territory may
access Sprint PCS services throughout the Sprint PCS network, which includes
more than 4,000 cities and communities across the United States.
Dual-band/dual-mode handsets allow roaming on wireless networks where Sprint PCS
has roaming agreements.
ACCESS TO THE SPRINT PCS WIRELESS WEB. Alamosa supports the recently
announced Sprint PCS Wireless Web offer in Alamosa's portion of the Sprint PCS
network. The Sprint PCS Wireless Web allows customers with data capable handsets
to connect their portable computers or personal digital assistants to the
Internet. Sprint PCS customers with data capable handsets also have the ability
to receive periodic information updates such as stock prices, sports scores and
weather reports. Sprint PCS customers with web-browser enabled handsets have
the ability to connect to and browse specially designed text-based Internet
sites on an interactive basis. Sprint PCS has agreements with Internet providers
including America Online, Amazon.com, Yahoo!, Fidelity.com, Bloomberg.com and
Goto.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" plans or a bundle of
minutes for a set price that can be used for either data or voice.
PRICING AND FEATURES. Sprint PCS's consumer pricing plans are typically
structured with:
o monthly recurring charges;
o large local calling areas;
o bundles of minutes; and
o service features such as voicemail, caller ID, call waiting,
call forwarding and three-way calling.
The increased capacity of code division multiple access technology
allows Alamosa to market high usage customer plans at per minute rates lower
than analog cellular and certain digital providers. All of Sprint PCS's current
national plans:
o include minutes on any portion of the Sprint PCS network with
no roaming charges for the customer;
o offer advanced features and generally require no long-term
contracts;
o offer a selection of handsets to meet the needs of individual
consumers and businesses;
o provide a limited-time money back guarantee on Sprint PCS
handsets; and
o provide the first incoming minute free.
In addition, Sprint PCS's "Free and Clear" calling plans include free
long distance calling from anywhere on its national network to anywhere in the
United States.
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ADVANCED HANDSETS. Alamosa offers a selection of single and dual-band
handsets with various advanced features and technology, such as Internet
readiness described in "--Products and Services: Access to the Sprint PCS
Wireless Web" above. All handsets are sold under the Sprint and Sprint PCS brand
names and are equipped with preprogrammed features such as:
o caller ID;
o call waiting;
o phone books;
o speed dial; and
o last number redial.
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. Alamosa also offers
dual-band/dual-mode handsets that allow customers to make and receive calls on
both wireless personal communications services 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.
PRIVACY AND SECURITY. Sprint PCS provides voice transmissions encoded
into a digital format with a significantly lower risk of fraud and eavesdropping
than on analog-based systems. Sprint PCS customers using dual-band/dual-mode
handsets in analog mode do not have the benefit of digital security.
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.
CUSTOMER CARE. Sprint PCS provides customer care services to customers
based in Alamosa's territory under Alamosa's services agreement. Sprint PCS
offers customer care 24 hours a day, seven days a week. Customers can call the
Sprint PCS toll-free customer care number from anywhere in the country. All
Sprint PCS handsets are preprogrammed with a speed dial feature that allows
customers to easily reach customer care at any time.
OTHER SERVICES. In addition to these services, Alamosa may also offer
wireless local loop services in its territory, but only where Sprint is not a
local exchange carrier. Wireless local loop is a wireless substitute for the
landline-based telephones in homes and businesses. Alamosa also believes that
new features and services will be developed on the Sprint PCS network to take
advantage of code division multiple access technology. Sprint PCS conducts
ongoing research and development to produce innovative services that are
intended to give Sprint PCS a competitive advantage. Alamosa may incur
additional expenses in modifying its technology to provide these additional
features and services.
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ROAMING
SPRINT PCS ROAMING. Sprint PCS roaming includes both inbound Sprint PCS
roaming, when a Sprint PCS subscriber based outside of Alamosa's territory uses
Alamosa's portion of the Sprint PCS network, and outbound Sprint PCS roaming,
when a Sprint PCS subscriber based in Alamosa's territory uses the Sprint PCS
network outside of Alamosa's territory. Sprint PCS pays Alamosa a per minute fee
for inbound Sprint PCS roaming. Similarly, Alamosa pays a per minute fee to
Sprint PCS for outbound Sprint PCS roaming. Pursuant to Alamosa's affiliation
agreements with Sprint PCS, Sprint PCS has the discretion to change the per
minute rate for Sprint PCS roaming fees.
NON-SPRINT PCS ROAMING. Non-Sprint PCS roaming includes both inbound
non-Sprint PCS roaming, when a non-Sprint PCS subscriber uses Alamosa's portion
of the Sprint PCS network, and outbound non-Sprint PCS roaming, when a Sprint
PCS subscriber based in Alamosa's territory 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 Alamosa's
portion of the Sprint PCS network, Alamosa earns inbound non-Sprint PCS roaming
revenue. These wireless service providers must pay fees for their subscribers'
use of Alamosa's portion of the Sprint PCS network, and as part of Alamosa's
collected revenues, Alamosa is entitled to 92% of these fees. Currently,
pursuant to Alamosa's 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
Alamosa's territory, Alamosa pays outbound non-Sprint PCS roaming fees directly
to that provider. Sprint PCS, pursuant to Alamosa's 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 Alamosa 100% of this
outbound non-Sprint PCS roaming revenue collected from that subscriber on a
monthly basis. As a result, Alamosa retains the collection risk for outbound
non-Sprint PCS roaming fees incurred by the subscribers based in Alamosa's
territory.
MARKETING STRATEGY
Alamosa's marketing strategy is to complement Sprint PCS's national
marketing strategies with techniques tailored to each of the specific markets in
Alamosa's territory.
USE SPRINT PCS'S BRAND EQUITY. Alamosa features exclusively and
prominently the nationally recognized Sprint and Sprint PCS brand names in
Alamosa's marketing and sales effort. From the customers' point of view, they
use Alamosa's portion of the Sprint PCS network and the rest of the Sprint PCS
network as a unified national network.
ADVERTISING AND PROMOTIONS. Sprint PCS promotes its products through
the use of national as well as regional television, radio, print, outdoor and
other advertising campaigns. In addition to Sprint PCS's national advertising
campaigns, Alamosa advertises and promotes Sprint PCS products and services on a
local level in Alamosa's markets at Alamosa's cost. Alamosa has the right to use
any promotion or advertising materials developed by Sprint PCS and only has 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. Alamosa also benefits from any
advertising or promotion of Sprint PCS products and services by third party
retailers in Alamosa's territory, such as RadioShack, Circuit City and Best Buy.
Alamosa must pay the cost of specialized Sprint PCS print advertising by third
party retailers. Sprint PCS also runs numerous promotional campaigns which
provide customers with benefits such as additional features at the same rate or
free minutes of use for limited time periods. Alamosa
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offers these promotional campaigns to potential customers in Alamosa's
territory.
SPONSORSHIPS. Sprint PCS is a sponsor of numerous national, regional
and local events. These sponsorships provide Sprint PCS with brand name and
product recognition in high profile events and provide a forum for sales and
promotions. Additionally, Alamosa has been a sponsor for events and activities
in Alamosa's territory such as:
o the Albuquerque Balloon Fest;
o the Western Professional Hockey League;
o minor league baseball teams;
o local school programs;
o March of Dimes; and
o other charity events.
BUNDLING OF SERVICES. Alamosa expects to take advantage of the complete
array of communications services offered by Sprint PCS and Sprint, which may
include bundling wireless personal communications services with other Sprint
products, such as long distance and Internet access.
SALES FORCE WITH LOCAL PRESENCE. Alamosa has established local sales
forces to execute its marketing strategy through direct business-to-business
contacts, its company-owned retail stores, local distributors and other
channels. In addition, Alamosa has targeted maquiladoras, which are factories
with locations on both sides of the border, and the numerous college campuses in
its territory. Alamosa's market teams also participate in local clubs and civic
organizations such as the Chamber of Commerce, Rotary and Kiwanis.
SALES AND DISTRIBUTION
Alamosa's sales and distribution plan is designed to exploit Sprint
PCS's multiple channel sales and distribution plan and to enhance it through the
development of local distribution channels. Key elements of Alamosa's sales and
distribution plan consist of the following:
SPRINT PCS RETAIL STORES. As of June 30, 2000, Alamosa owned and
operated 13 Sprint PCS stores and two kiosks at military base locations. These
stores provide Alamosa with a local presence and visibility in the markets
within Alamosa's territory. Following the Sprint PCS model, these stores are
designed to facilitate retail sales, activation, bill collection and customer
service, although Alamosa currently does not have direct electronic access to
Sprint PCS customer care at these stores. Alamosa plans to open an additional 30
retail stores throughout its territory by year-end 2001.
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 wireless personal communications services using CDMA
technology in the 1900 MHZ spectrum and products sold through RadioShack stores.
As of June 30, 2000, RadioShack had approximately 219 stores in Alamosa's
territory.
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OTHER NATIONAL THIRD PARTY RETAIL STORES. In addition to RadioShack,
Alamosa benefits from the distribution agreements established by Sprint PCS with
other national and regional retailers which currently include:
o AAFES; o Edge in Communications;
o Audio Express; o K-Mart;
o Best Buy; o Dillards;
o Circuit City; o Montgomery Wards;
o Office Depot; o Foley's;
o Office Max; o Ritz Camera;
o Staples; o Kaufmann's; and
o Heilig Meyer; o TSR Wireless.
o Target;
As of June 30, 2000, these retailers had approximately 263 stores in Alamosa's
territory.
NATIONAL ACCOUNTS AND DIRECT SELLING. Alamosa participates in Sprint
PCS's national accounts program. Sprint PCS has a national accounts team, which
focuses on the corporate headquarters of large companies. Once a representative
reaches an agreement with the corporate headquarters, Alamosa services the
offices of that corporation located in Alamosa's territory. Alamosa's direct
sales force targets the employees of these corporations in Alamosa's territory
and contacts other local business clients.
TELEMARKETING. Sprint PCS provides telemarketing sales when customers
call from Alamosa's territory. As the exclusive provider of Sprint PCS products
and services in Alamosa's market, Alamosa will benefit from the national Sprint
PCS 1-800-480-4PCS number campaigns that generate call-in leads. These leads are
then handled by Sprint PCS's inbound telemarketing group.
ELECTRONIC COMMERCE. Sprint PCS maintains an Internet site,
www.sprintpcs.com, which contains information on Sprint PCS products and
services. A visitor to Sprint PCS's Internet site can order and pay for a
handset and select a rate plan. Sprint PCS customers visiting the site can
review the status of their account, including the number of minutes used in the
current billing cycle. Alamosa will recognize the revenues generated by Sprint
PCS customers in Alamosa's territory who purchase products and services over the
Sprint PCS Internet site.
TECHNOLOGY
GENERAL. In the commercial wireless communication industry there are
two principal services licensed by the FCC for transmitting two-way, real time
voice and data signals: "cellular" and wireless "personal communications
services." In addition, enhanced specialized mobile radio service, a new but not
yet widely used technology, also allows for interconnected two-way real time
voice and data services. The FCC licenses these applications, each of which
operates in a distinct radio frequency block. Cellular, which uses the 800 MHZ
frequency block, was the original form of widely-used commercial wireless voice
communications. Cellular systems are predominantly analog-based, but over the
last several years cellular operators have started to use digital service in the
800 MHZ frequency block. Digital services have been deployed, as a complement to
the analog based services, in most of the major metropolitan markets.
In 1993, the FCC allocated the 1900 MHZ frequency block of the radio
spectrum for wireless
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personal communications services. Wireless personal communications services
differ from traditional analog cellular telephone service principally in that
wireless personal communications services systems operate at a higher frequency
and employ advanced digital technology. Analog-based systems send signals in
which the transmitted signal resembles the input signal, the caller's voice.
Digital systems convert voice or data signals into a stream of digits that
permit a single radio channel to carry multiple simultaneous transmissions.
Digital systems also achieve greater frequency reuse than analog systems
resulting in greater capacity than analog systems. This enhanced capacity, along
with enhancements in digital protocols, allows digital-based wireless
technologies, whether using wireless personal communications services or
cellular frequencies, to offer new and enhanced services, including greater call
privacy and more robust data transmission, such as facsimile, electronic mail
and connecting notebook computers with computer/data networks.
Wireless communications systems, whether wireless personal
communications services or cellular, 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 "base station." The base station is connected
by microwave or landline telephone lines to a switch that uses computers to
control the operation of the cellular or wireless personal communications
services system. The system:
o controls the transfer of calls from cell to cell as a
subscriber's handset travels;
o coordinates calls to and from handsets;
o allocates calls among the cells within the system; and
o connects calls to the local landline telephone system or to a
long distance carrier.
Wireless communications providers establish interconnection agreements
with local exchange carriers and interexchange carriers, thereby integrating
their system with the existing landline communica tions system. Because the
signal strength of a transmission between a handset and a base station declines
as the handset moves away from the base station, the switching office and the
base station 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 base station where the signal strength is
stronger.
Wireless digital signal transmission is accomplished through the use of
various forms of frequency management technology or "air interface protocols."
The FCC has not mandated a universal air interface protocol for wireless
personal communications services systems. Wireless personal communications
systems operate under one of three principal air interface protocols, code
division multiple access, time division multiple access, commonly referred to as
TDMA, or global system for mobile communications, commonly referred to as GSM.
Time division multiple access and global system for mobile communications are
both time division multiple access systems but are incompatible with each other.
The code division multiple access system is incompatible with both global system
for mobile communications and time division multiple access systems.
Accordingly, a subscriber of a system that utilizes code division multiple
access technology is unable to use a code division multiple access handset when
traveling in an area not served by code division multiple access-based wireless
personal communications services operators, unless the customer carries a
dual-band/dual-mode handset that permits the customer to use the analog cellular
system in that area. The same issue would apply to users of time division
multiple access or global system for mobile communications systems. All of the
wireless personal communications services operators now have dual-mode or
tri-mode
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handsets available to their customers. Because digital networks do not cover all
areas in the country, these handsets will remain necessary for segments of the
subscriber base.
CODE DIVISION MULTIPLE ACCESS TECHNOLOGY
Sprint PCS's network and its affiliates' networks all use digital code
division multiple access technology. Alamosa believes that code division
multiple access provides important system performance benefits such as:
GREATER CAPACITY. Alamosa believes, 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 base
station while maintaining a connection with the base station currently in use.
Code division multiple access networks monitor the quality of the transmission
received by multiple base stations simultaneously to select a better
transmission path and to ensure that the network does not disconnect the call in
one cell unless replaced by a stronger signal from another base station. Analog,
time division multiple access and global system for mobile communications
networks use a "hard hand-off" and disconnect the call from the current base
station as it connects with a new one without any simultaneous connection to
both base stations.
SIMPLIFIED FREQUENCY PLANNING. Frequency planning is the process used
to analyze and test alternative patterns of frequency used within a wireless
network to minimize interference and maximize capacity. Unlike time division
multiple access and global system for mobile communications based systems, code
division multiple access based systems can reuse the same subset of allocated
frequencies in every cell, substantially reducing the need for costly frequency
reuse patterning and constant frequency plan management.
LONGER BATTERY LIFE. Due to their greater efficiency in power
consumption, code division multiple access handsets can provide longer standby
time and more talk time availability when used in the digital mode than handsets
using alternative digital or analog technologies.
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, unlike code division
multiple access, allows multi-vendor equipment to be used in the same network.
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
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division multiple access handsets that support either the time division multiple
access or global system for mobile communications technologies.
COMPETITION
Competition in the wireless communications services industry is
intense. Alamosa competes with a number of wireless service providers in
Alamosa's markets. Alamosa believes that its primary competition is with
national wireless providers such as:
o Nextel Communications, Inc.;
o ALLTEL Mobile Communications;
o Verizon Wireless Inc.;
o VoiceStream Wireless Corporation; and
o AT&T Wireless Services, Inc.
Alamosa also competes with regional wireless providers. The principal
regional wireless competitors are:
o SBC Communications Inc. and Ameritech Corporation, its
wholly-owned subsidiary;
o Western Wireless Corporation; and
o United States Cellular Corporation.
Furthermore, a number of wireless service providers compete with
Alamosa on a local basis, such as:
o Airadigm Communications;
o Poka Lambro PCS, Inc.; and
o Amarillo CellTelCo.
Alamosa also faces competition from resellers, which provide wireless
services to customers but do not hold FCC licenses or own facilities. Instead,
the resellers buy blocks of wireless telephone numbers and capacity from a
licensed carrier and resell services through their own distribution network to
the public. The FCC currently requires all cellular and wireless personal
communications services licensees to permit resale of carrier services to a
reseller.
In addition, Alamosa competes with existing communications technologies
such as paging, enhanced specialized mobile radio service dispatch and
conventional landline telephone companies in Alamosa's markets. Potential users
of wireless personal communications services systems may find their communica
tions needs satisfied by other current and developing technologies. One or
two-way paging or beeper
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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, Alamosa expects to face increased competition from
entities providing similar services using other communications technologies,
including satellite-based telecommunications and wireless cable systems. While
some of these technologies and services are currently operational, others are
being developed or may be developed in the future.
Many of Alamosa's competitors have access to more licensed spectrum
than the 10 MHZ licensed to Sprint PCS in New Mexico and Durango and the 20 MHZ
licensed to Sprint PCS in El Paso. Among other things, increased spectrum allows
for higher call volume and fewer dropped calls. Cellular service providers have
licenses covering 25 MHZ of spectrum, and three competing wireless personal
communications services providers have licenses to use 30 MHZ in New Mexico.
Except for New Mexico (10 MHZ), Durango (10 MHZ) and El Paso (20 MHZ), Sprint
PCS has licenses to use 30 MHZ of spectrum throughout Alamosa's territory.
Many of Alamosa's competitors have significantly greater financial and
technical resources and subscriber bases than Alamosa does. AT&T Wireless has
over 11 million subscribers and Verizon Wireless, Inc. has over 23 million
combined subscribers. Some of Alamosa's competitors also have established
infrastructures, marketing programs and brand names. In addition, some of
Alamosa's 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 Alamosa offers. Wireless personal communications services
operators will likely compete with Alamosa in providing some or all of the
services available through the Sprint PCS network and may provide services that
Alamosa does not. Additionally, Alamosa expects 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. Alamosa expects 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 FCC has auctioned and will continue to
auction large amounts of wireless spectrum that could be used to compete with
Sprint PCS services. Based upon increased competition, Alamosa anticipates that
market prices for two-way wireless services generally will decline in the
future. Alamosa will compete to attract and retain customers principally on the
basis of:
o the strength of the Sprint and Sprint PCS brand names,
services and features;
o the size of Alamosa's territory;
o the location of Alamosa's markets;
o Alamosa's network coverage and reliability;
o customer care; and
o pricing.
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Alamosa's ability to compete successfully will also depend, in part, on
Alamosa's ability to anticipate and respond to various competitive factors
affecting the industry, including:
o new services and technologies that may be introduced;
o changes in consumer preferences;
o demographic trends;
o economic conditions; and
o discount pricing strategies by competitors.
INTELLECTUAL PROPERTY
The Sprint diamond design logo is a service mark registered with the
United States Patent and Trademark Office. The service mark is owned by Sprint.
Alamosa uses 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 Alamosa's territory. Under the terms of the
trademark and service mark license agreements with Sprint and Sprint PCS,
Alamosa does not pay a royalty fee for the use of the Sprint and Sprint PCS
brand names and Sprint service marks.
Except in certain instances and other than in connection with the
national distribution agreements, Sprint PCS has agreed not to grant to any
other person a right or license to use the licensed marks in Alamosa's
territory. In all other instances, Sprint PCS reserves the right to use the
licensed marks in providing its services within or without Alamosa's territory.
The trademark license agreements contain numerous restrictions with
respect to the use and modification of any of the licensed marks. See
"Affiliation Agreements with Sprint PCS-The Trademark and Service Mark License
Agreements" for more information on this topic.
EMPLOYEES
As of June 30, 2000, Alamosa employed 371 full-time employees. None of
Alamosa's employees are represented by a labor union. Alamosa believes that its
relations with its employees are good.
PROPERTIES
Alamosa's headquarters are located in Lubbock, Texas and Alamosa leases
space in a number of locations, primarily for Alamosa's Sprint PCS stores, base
stations and switching centers. As of June 30, 2000, Alamosa had 13 Sprint PCS
retail stores and four switching centers. As of June 30, 2000, Alamosa leased
space on 227 towers and owned one tower. Alamosa collocates with other wireless
service providers on approximately 37% of Alamosa's towers. Alamosa believes
that its facilities are adequate for Alamosa's current operations and that
additional leased space can be obtained if needed on commercially reasonable
terms.
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LEGAL PROCEEDINGS
Alamosa and its subsidiaries are not parties to any pending legal
proceedings that Alamosa believes would, if adversely determined, individually
or in the aggregate, have a material adverse effect on Alamosa's, or Alamosa's
subsidiaries', financial condition or results of operations.
ENVIRONMENTAL COMPLIANCE
Alamosa's environmental compliance expenditures primarily result from
the operation of standby power generators for Alamosa's telecommunications
equipment and compliance with various environmental rules during network
build-out and operations. The expenditures arise in connection with standards
compliance or permits which are usually related to generators, batteries or fuel
storage. Alamosa's environmental compliance expenditures have not been material
to Alamosa's financial statements or to Alamosa's operations and are not
expected to be material in the future.
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ALAMOSA'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This discussion includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Exchange Act of 1934, which can be identified by the use of
forward-looking terminology such as, "may," "might," "could," "would,"
"believe," "expect," "intend," "plan," "seek," "anticipate," "estimate,"
"project" or "continue" or the negative thereof or other variations thereon or
comparable terminology.
These forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from those referred to in
the forward-looking statements. Factors that might cause such a difference
include, but are not limited to those discussed in "Statements Regarding
Forward-Looking Information."
Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis only as of the
date hereof. Alamosa does not undertake any obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date hereof. Readers should carefully review the disclosure under the
section "Risk Factors" in this proxy statement-prospectus and the risk factors
described in other documents Alamosa files from time to time with the SEC.
OVERVIEW
Prior to January 1, 2000, we had very limited operations, very limited
revenues, significant losses, substantial future capital requirements and an
expectation of continued losses. As a result of significant operational results
reflected in the June 30, 2000 financial statements presented in this document,
beginning on page F-3, a comparison of these results to the same period for
1999 may not be meaningful.
Since our inception, we have incurred substantial costs to negotiate
our contracts with Sprint PCS and our debt financing, to raise funds in the
public market, to engineer our wireless system, to develop our business
infrastructure and distribution channels and to begin the build-out of our
portion of the Sprint PCS network. As of June 30, 2000, our accumulated deficit
was $62.2 million. Through June 30, 2000, we incurred $142.0 million of capital
expenditures and construction in progress related to the build-out of our
portion of the Sprint PCS network. While we anticipate operating losses to
continue, we expect revenue to increase substantially as the base of Sprint PCS
subscribers located in our territory increases.
On July 17, 1998, we entered into our affiliation agreements with
Sprint PCS. We subsequently amended our affiliation agreements with Sprint PCS
to expand our territory so that it will include approximately 8.4 million
residents.
As a Sprint PCS affiliate, we have the exclusive right to provide
digital wireless personal communication services under the Sprint and Sprint PCS
brand names in our territory. We are responsible for building, owning and
managing the portion of the Sprint PCS network located in our territory. We
market wireless products and services in our territory under the Sprint and
Sprint PCS brand names. We offer national plans designed by Sprint PCS and
intend to offer specialized local plans tailored to our market demographics. Our
portion of the Sprint PCS network is designed to offer a seamless connection
with Sprint
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PCS's 100% digital wireless network. We market wireless products and services
through a number of distribution outlets located in our territory, including our
own Sprint PCS stores, major national distributors and third party local
representatives.
We launched Sprint PCS service in our first market, Laredo, Texas, in
June 1999, and have since commenced service in eleven additional markets:
Albuquerque, Santa Fe and Las Cruces, New Mexico, and El Paso, Lubbock,
Amarillo, Midland, Odessa, Abilene, San Angelo and Eagle Pass/Del Rio, Texas.
Our systems cover approximately 3.0 million residents out of approximately 3.9
million total residents in those markets. The number of residents covered by our
systems does not represent the number of Sprint PCS subscribers that we expect
to be based in our territory. As of June 30, 2000, 69,569 Sprint PCS subscribers
were based in our territory.
We recognize 100% of revenues from Sprint PCS subscribers based in our
territory, proceeds from the sales of handsets and accessories and fees from
Sprint PCS and other wireless service providers when their customers roam onto
our portion of the Sprint PCS network. Sprint PCS retains 8% of all collected
revenue from Sprint PCS subscribers based in our territory and fees from
wireless service providers other than Sprint PCS when their subscribers roam
onto our portion of the Sprint PCS network. We report the amount retained by
Sprint PCS as an operating expense.
As part of our affiliation agreements with Sprint PCS, we have the
option of contracting with Sprint PCS to provide back office services such as
customer activation, handset logistics, billing, customer service and network
monitoring services. We have elected to outsource the performance of these
services to Sprint PCS to take advantage of Sprint PCS's economies of scale, to
accelerate our build-out and market launches and to lower our initial capital
requirements. The cost for these services is primarily calculated on a per
subscriber and per transaction basis and is recorded as an operating expense.
SEASONALITY
Our business is subject to seasonality because the wireless industry is
heavily dependent on fourth quarter results. Among other things, the industry
relies on significantly higher customer additions and handset sales in the
fourth quarter as compared to the other three fiscal quarters. A number of
factors contribute to this trend, including:
o the increasing use of retail distribution, which is dependent
upon the year-end holiday shopping season;
o the timing of new product and service announcements and
introductions;
o competitive pricing pressures; and
o aggressive marketing and promotions.
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RESULTS OF OPERATIONS - FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 2000
COMPARED TO THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1999
Alamosa launched its first wireless PCS network in Laredo, Texas, on
June 21, 1999. Because of this very limited time of operations for the quarter
and six months ended June 30, 1999, comparisons with the same period of 2000 may
not be meaningful.
NET LOSS. Our net loss for the quarter ended June 30, 2000 was
$12,907,801 compared to our net loss of $4,017,573 for the quarter ended June
30, 1999. Our net loss for the six months ended June 30, 2000 was $28,487,675
compared to our net loss of $5,762,562 for the six months ended June 30, 1999.
SERVICE REVENUES. Service revenues during the quarter and six months
ended June 30, 1999 and 2000 in the amounts of $15,044,154 and $25,146,175,
respectively, were comprised of subscriber revenue of $10,733,552 and
$17,830,120, respectively, and roaming revenue of $4,310,602 and $7,316,055,
respectively. Subscriber revenue consists of payments received from Sprint PCS
subscribers based in our territory for monthly Sprint PCS service in our
territory under a variety of service plans. These plans generally reflect the
terms of national plans offered by Sprint PCS and are issued on a month-to-month
basis. We receive Sprint PCS roaming revenue at a per minute rate from Sprint
PCS or another Sprint PCS affiliate when Sprint PCS subscribers based outside of
our territory use our portion of the Sprint PCS network.
Non-Sprint PCS roaming revenue primarily consists of fees collected
from Sprint PCS customers based in our territory when they roam on non-Sprint
PCS networks. These fees are based on rates specified in the customers'
contracts. However, it is possible that in some cases these fees may be less
than the amount we must pay to other wireless service providers that provide
service to Sprint PCS customers based in our territory. Non-Sprint PCS roaming
revenue also includes payments from wireless service providers, other than
Sprint PCS, when those providers' customers roam on our portion of the Sprint
PCS network.
For the six months ended June 30, 2000, average monthly revenue per
user including roaming revenue was approximately $83. Without roaming revenue,
average monthly revenue per unit was $59. For the quarter ended June 30, 2000,
our average monthly revenue per user including roaming revenue, was
approximately $83 and without roaming revenue was approximately $60.
PRODUCT SALES. 100% of the revenue from the sale of handsets and
accessories net of an allowance for returns, are recorded as product sales. The
amount recorded during the quarter ended June 30, 2000 totaled $2,189,066 as
compared to $33,588 for the quarter ended June 30, 1999. For the six months
ended June 30, 2000, product sales totaled $3,772,424 compared to $33,588 for
the same period of 1999. Sprint PCS's handset return policy allows customers to
return their handsets for a full refund within 14 days of purchase. When
handsets are returned to us, we may be able to reissue the handsets to customers
at little additional cost to us. However, when handsets are returned to Sprint
PCS for refurbishing, we receive a credit from Sprint PCS, which is less than
the amount we originally paid for the handset.
COST OF SERVICE AND OPERATIONS. Expenses totaling $11,048,705 during
the quarter ended June 30, 2000 related to providing wireless services to
customers. These expenses totaled $668,319 for the quarter ended June 30, 1999.
For the six months ended June 30, 2000 and 1999, these expenses totaled
$18,450,562 and $668,319, respectively. Among these costs are the cost of
operations, fees related to data transfer via T-1 and other transport lines,
inter-connection fees, Sprint PCS roaming fees, non-Sprint PCS roaming fees and
other expenses related to operations. We pay Sprint PCS roaming fees when Sprint
PCS subscribers
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based in our territory use the Sprint PCS network outside of our territory.
Pursuant to our affiliation agreements with Sprint PCS, Sprint PCS can change
this per minute rate. We pay non-Sprint PCS roaming fees to other wireless
service providers when Sprint PCS customers based in our territory use their
network.
COST OF PRODUCTS SOLD. The cost of products sold totaled $4,821,896
during the quarter ended June 30, 2000 and $75,181 for the quarter ended June
30, 1999. The cost of products sold totaled $9,293,840 and $75,181 for the six
months ended June 30, 2000 and 1999, respectively. These amounts include the
total cost of accessories and the cost of handsets up to the retail sales price.
The cost of handsets exceeds the retail sales price because we subsidize the
price of handsets for competitive reasons. For the quarter ended June 30, 2000,
the handset subsidy totaled $2,758,617 and $42,723 for the quarter ended June
30, 1999. Handset subsidy for the six months ended June 30, 2000 totaled
$5,618,843 as compared to $42,723 for the six months ended June 30, 1999.
SELLING AND MARKETING. Selling and marketing expenses totaled
$6,621,766 during the quarter ended June 30, 2000 and $913,155 during the
quarter ended June 30, 1999. For the six months ended June 30, 2000 and 1999,
selling and marketing expenses totaled $11,933,253 and $913,155, respectively.
Sales and marketing expenses include advertising expenses, promotion costs,
sales commissions and expenses related to our distribution channels.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses include corporate costs and expenses other than those related to Cost
of Operations and Selling and Marketing. These expenses totaled $2,072,436 for
the quarter ended June 30, 2000 and $450,518 for the quarter ended June 30,
1999. For the six months ended June 30, 2000, these expenses amounted to
$3,457,200 and $1,425,803 for the six months ended June 30, 1999. During the
quarter ended June 30, 1999, we incurred significant general and administrative
expenses related to the development of our system. Virtually all of these
expenses related to the start-up of the business and were expensed according to
American Institute of Certified Public Accountants Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities."
NON-CASH COMPENSATION EXPENSE. Non-cash compensation expense totaled
$921,116 for the quarter ended June 30, 2000 and $1,802,578 for the quarter
ended June 30, 1999. For employees and non- employee directors, 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 estimated
intrinsic value of the options at the measurement date. The estimated intrinsic
value represents the excess of the estimated fair value over the exercise price
of the option. For other non-employees, this expense was determined using
provisions of SFAS No. 123, "Accounting for Stock Based Compensation." Total
non-cash compensation expense recognized for the six months ended June 30, 2000
was $4,893,746 and $2,793,832 for the six months ended June 30, 1999.
RELATED PARTY EXPENSES. Related party expenses totaled $577,261 for the
quarter ended June 30, 2000 and $117,327 for the quarter ended June 30, 1999.
Related party expenses totaled $916,207 and $225,152 for the six month periods
ended June 30, 2000 and 1999, respectively, and was primarily comprised of
information technology and other professional consulting expenses incurred in
connection with a contract between us and a telecommunications engineering and
consulting firm. Several key officers and owners of this consulting firm have an
equity ownership interest in us.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization during the
quarter ended June 30, 2000 totaled $2,490,990 and $118,432 for the quarter
ended June 30, 1999. For the six month periods ended
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June 30, 2000 and 1999, depreciation and amortization expenses totaled
$4,747,937 and $127,056, respectively. Depreciation is calculated using the
straight-line method over the useful life of the asset. We begin to depreciate
the assets for each market only after we launch that market.
INTEREST AND OTHER INCOME. Interest and other income totaled $4,407,978
and $103,803 during the quarters ended June 30, 2000 and 1999, respectively, and
$6,722,463 and $341,071 for the six months ended June 30, 2000 and 1999,
respectively. Interest and other income generally have been generated from the
investment of equity and loan proceeds held in liquid accounts waiting to be
deployed.
INTEREST EXPENSE. Interest expense totaled $6,572,090 during the
quarter ended June 30, 2000 and $128,285 for the quarter ended June 30, 1999.
For the six months ended June 30, 2000, interest expense totaled $11,352,199 as
compared to $135,379 for the same period of 1999. Interest expense in 2000 is
primarily due to the accretion of interest related to the senior discount notes.
Interest expense in 1999 was the result of debt outstanding on a bank line of
credit.
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 1999
NET LOSS. Our net loss for the year ended December 31, 1999 was
$32,835,859 and was comprised primarily of the continued incurrence of start-up
expenses relative to the preparation of our initial commercial market launch in
June 1999 and 10 other market launches during the period.
SERVICE REVENUES. Service revenues during the period in the amount of
$6,533,623 are comprised of subscriber revenue, Sprint PCS roaming revenue,
non-Sprint PCS roaming revenue and long distance revenue, all of which initially
began accruing to us at or near our first initial commercial launch in June
1999. Subscriber revenue consists of payments received from Sprint PCS
subscribers based in our territory for monthly Sprint PCS service in our
territory under a variety of service plans. These plans generally reflect the
terms of national plans offered by Sprint PCS and are issued on a month-to-month
basis. We receive Sprint PCS roaming revenue at a per minute rate from Sprint
PCS or another Sprint PCS affiliate when Sprint PCS subscribers based outside of
our territory use our portion of the Sprint PCS network.
Pursuant to our affiliation agreements with Sprint PCS, Sprint PCS can
change this per minute rate. Non-Sprint PCS roaming revenue primarily consists
of fees collected from Sprint PCS customers based in our territory when they
roam on non-Sprint PCS networks. These fees are based on rates specified in the
customers' contracts. However, it is possible that in some cases these fees may
be less than the amount we must pay to other wireless service providers that
provide service to Sprint PCS customers based in our territory. Non-Sprint PCS
roaming revenue also includes payments from wireless service providers, other
than Sprint PCS, when those providers' customers roam on our portion of the
Sprint PCS network. Our average monthly revenue per user for Sprint PCS
customers in our territory, including long distance and roaming revenue, was
approximately $96.00 for the period from June 26, 1999 to December 31, 1999.
PRODUCT SALES. 100% of the revenue from the sale of handsets and
accessories are recorded, net of an allowance for returns, as product sales. The
amount recorded during this period totaled $2,450,090. Sprint PCS's handset
return policy allows customers to return their handsets for a full refund within
30 days of purchase. When handsets are returned to us, we may be able to reissue
the handsets to customers at little additional cost to us. However, when
handsets are returned to Sprint PCS for refurbishing, we receive a credit from
Sprint PCS, which is less than the amount we originally paid for the handset.
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COST OF SERVICE AND OPERATIONS. Expenses totaling $7,440,476 during
this period related to providing wireless services to customers and are included
in cost of services. Among these costs are the cost of operations, fees related
to data transfer via T-1 and other transport lines, inter-connection fees,
Sprint PCS roaming fees, non-Sprint PCS roaming fees and other expenses related
to operations. We pay Sprint PCS roaming fees when Sprint PCS subscribers based
in our territory use the Sprint PCS network outside of our territory. Pursuant
to our affiliation agreements with Sprint PCS, Sprint PCS can change this per
minute rate. We pay non-Sprint PCS roaming fees to other wireless service
providers when Sprint PCS customers based in our territory use their network.
COST OF PRODUCT SALES. The cost of equipment sold totaling $7,426,736
during this period includes the cost of accessories and the cost of handsets
sold. We expect the cost of handsets to exceed the retail sales price because we
subsidize the price of handsets for competitive reasons. For the year ended
December 31, 1999, the handset subsidy totaled $5,023,430.
SELLING AND MARKETING. Selling and marketing expenses totaled
$9,323,048 during the period. Sales and marketing expenses include advertising
expenses, promotion costs, sales commissions and expenses related to our
distribution channels.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses include corporate costs and expenses other than those related to Cost
of Operations and Selling and Marketing. We have incurred significant general
and administrative expenses related to the development of our system. Virtually
all of these expenses are related to the start-up of the business and were
expensed according to American Institute of Certified Public Accountants
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities."
NON-CASH COMPENSATION EXPENSE. Non-cash compensation expense totaled
$8,199,511 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 estimated intrinsic value of the options at
December 31, 1999. The estimated intrinsic value represents the excess of the
estimated fair value over the exercise price of the option.
RELATED PARTY EXPENSES. Related party expenses totaled $1,726,198 for
the period and was primarily comprised of information technology and other
professional consulting expenses incurred in connection with a contract between
us and a telecommunications engineering and consulting firm. Several key
officers and owners of this consulting firm have an equity ownership interest in
us.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization during the
period totaled $3,056,923. Depreciation is calculated using the straight line
method over the useful life of the asset. We begin to depreciate the assets for
each market only after we open that market.
INTEREST AND OTHER INCOME. Interest and other income totaling $477,390
during this period generally have been generated from the investment of equity
and loan proceeds held in liquid accounts waiting to be deployed.
INTEREST EXPENSE. Interest expense totaled $2,641,293 during this
period and primarily related to the EDC credit facility. Interest on the EDC
credit facility may be paid with loans obtained under the Tranche C Commitment
of the EDC credit facility until, in most circumstances, February 2002. See
"--Description of Our Indebtedness: The EDC Credit Facility." Gains or losses on
hedging transactions related to interest rates will be included in interest
expense.
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RESULTS OF OPERATIONS - FOR THE PERIOD JULY 16, 1998 (INCEPTION) THROUGH
DECEMBER 31, 1998
REVENUES, DIRECT COSTS AND NET LOSS. From inception through December
31, 1998, our operating activities were directed towards the development of our
business. During July 1998, we signed our affiliation agreements with Sprint PCS
to operate as the exclusive affiliate of Sprint PCS in our territory. Our
operating activities were focused on executing our build-out plan and developing
our network infrastructure. As our first market did not launch until June 1999,
the 1998 period reflects no service revenues, product sales or related costs
associated with services or products. Our net loss for the period was $923,822,
which was principally comprised of general and administrative expenses.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the period in the amount of $956,331 were comprised primarily of
legal and other professional services of $704,381 related to the start up of our
business and the development of our systems. In addition, we incurred $166,850
of human resource costs related to preparation for the 1999 launch of our
network. Virtually all general and administrative expenses during this period
related to the start-up of the business and were expensed according to American
Institute of Certified Public Accountants Statement of Position 98-5, "Reporting
on the Costs of Start-up Activities."
INCOME TAXES
We account for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." The deferred tax
asset generated, primarily from temporary differences related to the treatment
of start-up costs, unearned compensation and from net operating loss carry
forwards, was offset by a full valuation allowance.
Our financial statements for the periods ended December 31, 1999 and
December 31, 1998 did not report any benefit for federal and state income taxes
since we had elected to be taxed as a partnership prior to the original Alamosa
reorganization. For the periods presented, the members of the limited liability
company recorded our tax losses on their own income tax returns. Subsequent to
the original Alamosa reorganization, we account for income taxes in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Had we applied the provisions of SFAS No. 109 for the period from
inception on July 16, 1998 through December 31, 1999, the deferred tax asset
generated, primarily from temporary differences related to the treatment of
start-up costs, unearned compensation and from net operating loss carry
forwards, would have been offset by a full valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations through capital
contributions from our owners through debt financing and through proceeds
generated from our initial public offering. We entered into a credit agreement
with Nortel effective June 10, 1999, which was amended and restated on February
8, 2000. On June 23, 2000, Nortel assigned the entirety of its loans and
commitments to EDC, and Alamosa and EDC entered into the EDC credit facility.
The EDC credit facility was reduced by $75.0 million from the issuance
of Alamosa's senior discount notes, such that the EDC credit facility provides
for advancing term loan facilities in the aggregate principal
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amount of $175.0 million. The terms and conditions of the EDC credit facility
after entering into the credit agreement with EDC are substantially the same as
the terms and conditions of the Nortel credit agreement before the assignment
and the amendments. However, Alamosa is no longer required to maintain a $1.0
million cash balance as collateral against the EDC credit facility.
As of June 30, 2000, approximately $4.5 million of the $175.0 million
EDC credit facility had been drawn.
The terms of the facility do not require cash interest payments until
after the earlier of:
o February 8, 2001, if we have not borrowed at least an
additional approximately $45.5 million under the EDC credit
facility by that time;
o August 8, 2002; and
o the date the Tranche C Commitment is fully funded.
Principal payments are scheduled to begin on:
o March 31, 2001, if we have not borrowed at least an additional
approximately $45.5 million under the EDC credit facility by
February 8, 2001; or
o September 30, 2002.
The EDC credit facility will be used to purchase equipment, pay
interest and cover approved working capital costs. Pursuant to the Nortel
equipment agreement, we are required to purchase a total of $167.0 million of
equipment and services from Nortel. As of June 30, 2000, we had remaining
commitments of $64.5 million under the Nortel equipment agreement. These
purchases from Nortel may be financed pursuant to the EDC credit facility. See
"--Description of Our Indebtedness: The EDC Credit Facility."
Net cash used in operating activities was $2,769,666 and $3,106,121 for
the six months ended June 30, 2000 and 1999, respectively, and were primarily
attributable to operating losses and working capital needs.
Net cash used in operating activities was $127,954 for the inception
period ending December 31, 1998, and $17,089,704 for the year ended December 31,
1999. Cash used in operating activities for the periods were attributable to
operating losses and working capital needs.
Net cash used in investing activities was $65,271,540 for the six
months ended June 30, 2000, and $5,914,605 for the six months ended June 30,
1999. The cash used for the six months ended June 30, 2000 was related primarily
to the purchase of office equipment, and network infrastructure needed to
construct our portion of the Sprint PCS network and the purchase of short-term
investments of $21,840,763. The cash used for the six months ended June 30, 1999
was primarily related to constructing our portion of the Sprint PCS network and
office equipment.
Net cash used in investing activities was $1,366,606 for the inception
period ending December 31, 1998, and $77,219,021 for the year ended December 31,
1999. The expenditures were related primarily to
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the purchase of office equipment, telephone equipment and network infrastructure
needed to begin construction of our portion of the Sprint PCS network.
Net cash provided by financing activities for the six months ended June
30, 2000 was $303,423,776, consisting primarily of net proceeds of approximately
$195.0 million from our initial public offering and net proceeds of
approximately $181.0 million related to the issuance of senior discount notes,
both of which occurred in February 2000. Net cash provided by financing
activities was $3,568,744 for the six months ended June 30, 1999 and was
primarily related to capital contributions by our investors.
Net cash provided by financing activities was $15,023,637, consisting
primarily of capital contributions, for the inception period ending December 31,
1998 and $86,435,359 for the year ended December 31, 1999 consisting primarily
of capital contributions of $22,000,000 and Nortel draws of $65,967,777.
As of December 31, 1999, the primary sources of liquidity for Alamosa
were $5.7 million in cash and $51.1 million of unused capacity under the $123.0
million EDC credit facility.
As of June 30, 2000, the primary sources of liquidity for Alamosa were
approximately $261.8 million in cash and short-term investments, and
approximately $170.0 million of unused capacity under the $175.0 million EDC
credit facility.
We estimate that through December 31, 2001, we will have spent $335.0
million in total capital expenditures for the build-out of our portion of the
Sprint PCS network. The actual funds required to build- out our portion of the
Sprint PCS network and to fund operating losses and working capital needs may
vary materially from this estimate, and additional funds could be required. For
information see "Risk Factors--Risks Particular to Alamosa's Operations:
Superholdings' failure to obtain additional capital, if needed to complete the
build-out of its subsidiaries' portion of the Sprint PCS network, could cause
delay or abandonment of Superholdings' development plans." See also "Statements
Regarding Forward-Looking Information."
We include capital leases related to network equipment and build-out in
construction in progress until service has commenced in their respective
markets. Once that service has commenced, those capital leases are reclassified
to property and equipment. At December 31, 1998, capital leases totaled $728,219
and included long-term capital lease obligations of $708,074. At December 31,
1999 the capital leases totaled $848,842 and included long-term capital lease
obligations of $827,024. At June 30, 2000 the capital leases totaled $838,204
and included long-term capital lease obligations of $815,272. See "--Description
of Our Indebtedness: The EDC Credit Facility."
INFLATION
Management believes that inflation has not had, and is not likely to
have, a material adverse effect on our results of operations.
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EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 44, ("FIN 44"), "Accounting for Certain Transactions
Involving Stock Compensation--an Interpretation of APB 25." This Interpretation
clarifies (i) the definition of employee for purposes of applying Opinion 25,
(ii) the criteria for determining whether a plan qualifies as a noncompensatory
plan, (iii) the accounting consequence of various modifications to the terms of
a previously fixed stock option or award, and (iv) the accounting for an
exchange of stock compensation awards in a business combination. FIN 44 is
effective July 1, 2000; however, certain conclusions in this Interpretation
cover specific events that occur after either December 15, 1998, or January 12,
2000. To the extent that this Interpretation covers events occurring during the
period after December 15, 1998, or January 12, 2000, but before the effective
date of July 1, 2000, the effects of applying this Interpretation will be
recognized on a prospective basis from July 1, 2000. We do not expect FIN 44 to
have a material effect on our financial position, results of operations or cash
flows.
On December 3, 1999, the SEC released Staff Accounting Bulletin 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). This bulletin
established more clearly defined revenue recognition criteria than previously
existing accounting pronouncements, and specifically addresses revenue
recognition requirements for nonrefundable fees, such as activation fees,
collected by a company upon entering into an arrangement with a customer, such
as an arrangement to provide telecommunications services. On June 26, 2000, the
SEC released S101B, which delays the required implementation of SAB 101 until no
later than the fourth quarter of fiscal years ending December 31, 2000. We
believe that the effects of this bulletin will not be material to our financial
position, results of operations or cash flows.
We do not believe that any other recently issued accounting
pronouncements will have a material impact on our financial position, results of
operations or cash flows.
DESCRIPTION OF OUR INDEBTEDNESS: THE EDC CREDIT FACILITY
We entered into a credit agreement effective June 10, 1999 with Nortel
for $123.0 million. On February 8, 2000, we entered into an amended and restated
credit agreement with Nortel to increase the amount to $250.0 million. As of
June 23, 2000, we had borrowed $79.6 million under the credit facility and
repaid $75.0 million, which reduced the facility to $175.0 million. On June 23,
2000, Nortel assigned the entirety of its loans and commitments under the credit
facility to EDC. On the same date, we entered into a credit agreement with EDC.
The terms and conditions of the EDC credit facility after entering into the
credit agreement with EDC are substantially the same as the terms and conditions
of the Nortel credit facility before the assignment and the amendments. However,
Alamosa is no longer required to maintain a $1.0 million cash balance as
collateral against the EDC credit facility.
As part of the EDC credit facility, we agreed that the $75.0 million
that we had prepaid would not be reborrowed from EDC. As of June 30, 2000,
approximately $4.5 million of the $175.0 million EDC credit facility had been
drawn. Pursuant to our equipment agreement with Nortel, we are required to
purchase a total of $167.0 million of equipment and services from Nortel. As of
June 30, 2000, we had remaining commitments of $64.5 million under the Nortel
equipment agreement. These purchases from Nortel may be financed pursuant to the
EDC credit facility.
The EDC credit facility constitutes senior debt secured by a first
priority security interest in substantially all of our assets, including all the
assets of Texas Telecommunications, LP and Alamosa
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Wisconsin Limited Partnership, our operating subsidiaries. The EDC credit
facility is between EDC, as lender and administrative agent, and our subsidiary,
Alamosa PCS, Inc., a Delaware corporation, as borrower. Alamosa Wisconsin GP,
LLC, Alamosa Delaware GP, LLC, Alamosa Finance, LLC and Alamosa Limited LLC
became parties to the EDC credit facility and therefore guaranteed this facility
and pledged their assets. We have agreed, and our current and future
subsidiaries have agreed, to guarantee this facility.
The EDC credit facility provides for three different tranches of
borrowings evidenced by three promissory notes totaling $175.0 million. The
Tranche A Commitment and Tranche A Note provide for borrowings up to $116.9
million, the Tranche B Commitment and Tranche B Note provide for borrowings up
to $40.6 million and the Tranche C Commitment and Tranche C Note provide for
borrowings up to $17.5 million. This facility is used to purchase equipment and
services from Nortel, to fund other costs of the build-out of our portion of the
Sprint PCS network and to fund costs associated with the financing. Nortel is
the primary vendor of the equipment and services necessary to install our
portion of the Sprint PCS network.
We have multiple interest rate options available under the EDC credit
facility. At the termination of the Tranche A and Tranche B Commitments, we must
begin to repay, in quarterly installments, the principal of all borrowings made
under that commitment. A fixed percentage is due each quarter. Any principal
that has not been paid by the maturity date is due at that time. We may
voluntarily prepay any of the loans at any time, but any amount repaid may not
be reborrowed since there are no revolving credit features. We also must make
mandatory prepayments under certain circumstances.
We are required to pay a fee on the unfunded portion of each
commitment. We must also pay a separate, annual agent's fee.
The EDC credit facility is secured by:
o a perfected first priority lien on substantially all of
Alamosa PCS Holdings, Inc.'s, Alamosa PCS, Inc.'s and the
operating subsidiaries' current and future assets, and the
assets of future subsidiaries;
o a collateral assignment of our affiliation agreements with
Sprint PCS;
o a pledge by Alamosa PCS Holdings, Inc. to EDC, as
administrative agent, of shares of Alamosa PCS, Inc.'s capital
stock owned by Alamosa and by Alamosa PCS, Inc. of its
ownership interests in the operating subsidiaries; and
o guarantees from Alamosa PCS Holdings, Inc., the operating
subsidiaries and all future direct or indirect subsidiaries of
Alamosa PCS, Inc.
We are obligated to grant to the administrative agent a first lien
mortgage on any real property we acquire, together with a mortgagee policy of
title insurance, a survey, an appraisal and an environmental survey.
Alamosa PCS, Inc. must meet certain conditions before it may obtain any
future borrowings under the credit agreement, including, but not limited to,
that there has been no event of default, a reaffirmation of representations, and
that Alamosa PCS, Inc. has a debt to contributed capital ratio of less than or
equal to 1.5 to 1.
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Alamosa PCS, Inc. is subject to financing and operating covenants
including, but not limited to, a maximum ratio of total debt to total
capitalization, a maximum ratio of total debt to annualized earnings before
interest, taxes, depreciation and amortization, referred to as EBITDA, for each
quarter and minimum number of subscribers.
In addition to failing to perform, observe or comply with the
covenants, agreements and terms of the credit agreement, it is an event of
default under the credit agreement if any party with financial responsibility
for the loans or the outstanding, unsecured equity commitments, or Sprint PCS
signatory to the management agreement with Sprint PCS becomes insolvent,
commences or suffers bankruptcy proceedings or suffers other indicia of extreme
financial duress. Other events of default include, but are not limited to, an
attachment against Alamosa PCS, Inc.'s or its subsidiaries' property that is not
released within 30 days and the amount of the proceedings is greater than
$500,000 and a judgment against Alamosa PCS, Inc. or its subsidiaries of greater
than $500,000.
CONSENT AND AGREEMENT FOR THE BENEFIT OF THE HOLDERS OF THE EDC CREDIT FACILITY
Sprint PCS has entered into a consent and agreement with Nortel, that
Nortel assigned to EDC which has been acknowledged by us, that modifies Sprint
PCS's rights and remedies under our affiliation agreements with Sprint PCS for
the benefit of EDC, as administrative agent, and future holders of the EDC
credit facility and any refinancing thereof, which was a condition to the
funding of any amounts under the EDC credit facility. The consent and agreement
with EDC generally provides, among other things, Sprint PCS's consent to the
pledge of substantially all of our assets, including our rights in our
affiliation agreements with Sprint PCS, and that our affiliation agreements with
Sprint PCS generally may not be terminated by Sprint PCS until the EDC credit
facility is satisfied in full pursuant to the terms of the consent and
agreement.
Subject to the requirements of applicable law, so long as the EDC
credit facility remains outstanding, Sprint PCS has the right to purchase our
operating assets or the partnership interests of our operating subsidiaries,
upon its receipt of notice of an acceleration of the EDC credit facility, under
certain terms.
If Sprint PCS does not purchase our operating assets or the partnership
interests of our operating subsidiaries after an acceleration of the obligations
under the EDC credit facility, then the administrative agent may sell the
operating assets or partnership interests.
For a more complete description of the Alamosa consent and agreement,
see "Affiliation Agreements with Sprint PCS--Consent and Agreement for the
Benefit of the Holders of the EDC Credit Facility."
DESCRIPTION OF OUR INDEBTEDNESS: SENIOR DISCOUNT NOTES
On December 23, 1999, Alamosa filed a registration statement with the
SEC for the issuance of $350.0 million face amount of senior discount notes. The
offering of senior discount notes was completed on February 4, 2000 and
generated net proceeds of approximately $181.0 million after underwriters'
commissions and expenses of approximately $6.5 million. The senior discount
notes mature in ten years (February 15, 2010), carry a coupon rate of 12 7/8%,
and provide for interest deferral for the first five years. The senior discount
notes will accrete to their $350.0 million face amount by February 8, 2005,
after which interest will be paid in cash semiannually. The senior discount
notes are unsecured obligations, rank equally with all our existing and future
senior debt and rank senior to all our existing and future subordinated debt.
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The senior discount notes are fully and unconditionally, jointly and
severally guaranteed on a senior subordinated basis by our current subsidiaries
and our future restricted subsidiaries. See "Information About Alamosa PCS
Holdings, Inc.--Alamosa's Background" regarding the ownership structure of our
subsidiaries. The guarantees are unsecured obligations and:
o are subordinate to each subsidiary guarantor's obligations
under the EDC credit facility and other credit facilities with
banks or institutional lenders;
o rank equally with all existing and future senior subordinated
debt of each subsidiary guarantor; and
o are senior to all existing and future subordinated debt of
each subsidiary guarantor.
We may redeem some or all of the senior discount notes beginning in
2005, and until 2003 we may redeem a portion of the senior discount notes with
the net proceeds of an equity offering.
The senior discount notes were issued at a discount to their principal
amount and accrete in value until 2005, at which time their accreted value will
equal their principal amount. Interest will begin to accrue at this time and
will be payable semi-annually. The senior discount notes contain covenants
limiting our ability and the ability of our subsidiaries to:
o incur additional debt or issue preferred stock;
o pay dividends, redeem capital stock or make other restricted
payments or investments;
o create liens on assets;
o merge, consolidate or dispose of assets;
o enter into transactions with affiliates; and
o change lines of business.
Holders of the senior discount notes have the right to require us to
repurchase all or any part of their senior discount notes, at 101% of the
accreted value, if before 2005, or 101% of the aggregate principal amount
thereafter, together with accrued and unpaid interest, upon a change of control
of Alamosa.
Events of default in respect of the senior discount notes include,
among others, failure to pay interest or principal on the senior discount notes
when due, failure to perform covenants, acceleration of the maturity of other
debt, events of bankruptcy, certain judgments against us and the occurrence of
any event of default pursuant to our affiliation agreements with Sprint PCS.
We anticipate that the proceeds from our offering of senior discount
notes will not be needed to fund the required capital expenditures, working
capital requirements, operating losses and other cash needs of our current
business plan. We used a portion of the proceeds of that offering to prepay
$75.0 million of indebtedness outstanding under the EDC credit facility (and
under the EDC credit facility, we may not borrow those prepaid amounts in the
future). We may decide to use the remaining proceeds of that offering to:
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o accelerate coverage within our existing territory;
o build-out additional areas within our existing territory;
o expand our existing territory;
o pursue additional telecommunications business opportunities or
acquire other telecommunications businesses or assets; or
o cover general corporate purposes.
However, if we do not use the remaining proceeds of our notes offering
for these purposes, we may decide to:
o prepay additional debt outstanding under the EDC credit
facility; or
o avoid drawing additional amounts under the EDC credit
facility.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not engage in commodity futures trading activities and do not
enter into derivative financial instrument transactions for trading or other
speculative purposes. We also do not engage in transactions in foreign
currencies that could expose us to market risk.
We are subject to some interest rate risk on our financing from EDC and
any future floating rate financing.
The following table presents the estimated future outstanding long-term
debt at the end of each year and future required annual principal payments for
each year then ended associated with the senior discount notes, capital leases
and the EDC financing based on our projected level of long-term indebtedness:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 THEREAFTER
----------- -------------- --------------- ------------ ------------- ------------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C> <C>
Fixed Rate Instruments:
Senior discount notes................ $ 210 $ 239 $ 272 $ 309 $ 350 $ 350
Fixed interest rate............... 12.875% 12.875% 12.875% 12.875% 12.875% 12.875%
Principal payments................ - - - - - $ 350
Capital Leases - Annual Minimum
Lease Payments (1)................ $ 0.11 $ 0.11 $ 0.11 $ 0.11 $ 0.11 $ 1.09
Average Interest Rate............. 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Variable Rate Instruments:
EDC Senior Debt (2).................. $ 25 $ 97 $ 162 $ 126 $ 90 $ 72
Average Interest Rate (3)......... 9.75% 9.75% 9.75% 9.75% 9.75% -
Principal payments................ $ 75 - $ 13 $ 36 $ 36 $ 90
</TABLE>
----------
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(1) These amounts represent the estimated minimum annual payments due under
our estimated capital lease obligations for the periods presented.
(2) The amounts represent estimated year-end balances under the EDC credit
facility based on a projection of the funds borrowed under that
facility pursuant to our current plan of network build-out.
(3) Interest rate on the EDC credit facility equals, at our option, either
the London Interbank Offered Rate (LIBOR) + 3.75%, or the prime or base
rate of Citicorp, N.A. plus 2.75%. LIBOR is assumed to equal 6.0% for
all periods presented.
Our primary market risk exposure relates to:
o the interest rate risk on long-term and short-term borrowings;
o our ability to refinance our senior discount notes at maturity
at market rates; and
o the impact of interest rate movements on our ability to meet
interest expense requirements and meet financial covenants.
The carrying value of the financial instruments approximates fair
value.
As a condition to the EDC credit facility, we must maintain one or more
interest rate protection agreements in an amount equal to 50% of the total debt
under the financing. We do not hold or issue financial or derivative financial
instruments for trading or speculative purposes. While we cannot predict our
ability to refinance existing debt or the impact that interest rate movements
will have on our existing debt, we continue to evaluate our financial position
on an ongoing basis.
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DIRECTORS AND EXECUTIVE OFFICERS OF ALAMOSA
DIRECTORS AND EXECUTIVE OFFICERS
The persons currently serving on the board of directors of Alamosa,
together with Michael and Steven Roberts (the current members of Roberts
Holdings), will constitute the board of directors of Superholdings following
completion of the reorganization. The current executive officers of Alamosa will
be the executive officers of Superholdings following completion of the
reorganization.
The following table presents information with respect to Alamosa's
current directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
-------------------------------------- ------------- -----------------------------------------------------------------------
<S> <C> <C>
David E. Sharbutt................... 51 Chairman of the Board of Directors and Chief Executive Officer
Jerry W. Brantley................... 54 President and Chief Operating Officer
Kendall W. Cowan.................... 46 Chief Financial Officer
Loyd I. Rinehart.................... 45 Senior Vice President of Corporate Finance
Anthony Sabatino.................... 38 Senior Vice President of Engineering and Network Operations
Michael R. Budagher................. 41 Director
Ray M. Clapp, Jr.................... 39 Director
Scotty Hart......................... 49 Director
Thomas Hyde......................... 54 Director
Schuyler B. Marshall................ 54 Director
Tom M. Phelps....................... 50 Director
Reagan W. Silber.................... 39 Director
Jimmy R. White...................... 60 Director
</TABLE>
DAVID E. SHARBUTT. Mr. Sharbutt has been Chairman and a director since
Alamosa was founded in July 1998 and was named Chief Executive Officer in
October 1999. Mr. Sharbutt was formerly the President and Chief Executive
Officer of Hicks & Ragland Engineering Co., an engineering consulting company,
now known as CHR Solutions. Mr. Sharbutt is currently employed by CHR Solutions
as a Senior Consultant. He has been at CHR Solutions since 1977, where he has
worked with independent telephone companies in developing strategic, engineering
and implementation plans for various types of telecommunications services.
Before he joined CHR Solutions, Mr. Sharbutt was employed with Southwestern
Bell.
JERRY W. BRANTLEY. Mr. Brantley has been President and Chief Operating
Officer of Alamosa since October 1998. He is responsible for overseeing all
aspects of operations including market operations, network build-out, human
resources, marketing and distribution. From June 1996 to October 1998 he was
General Manager of the H&R Strategic Group of Hicks & Ragland Engineering Co.
From December 1994 to June 1996 Mr. Brantley was Executive Vice President and
General Manager for Mainstreet Wireless, a national PCS consortium of
independent telecommunications companies. From May 1993 to November 1994 Mr.
Brantley, was President and General Manager of the Business Crime Council of
South Texas, Inc., a crime prevention organization. From 1984 to 1993, Mr.
Brantley held various executive management positions in sales, marketing, public
relations and regulatory matters for Southwestern Bell Mobile Systems.
KENDALL COWAN. Mr. Cowan has been Chief Financial Officer of Alamosa
since December 1999. From October 1993 to December 1999, he was a partner in the
public accounting firm of Robinson Burdette Martin & Cowan, L.L.P. and from
January 1986 to September 1993, he was a partner in the Lubbock and
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Dallas offices of Coopers & Lybrand. He provided consulting and accounting
services to a wide range of clients at both firms including public companies. He
is a Certified Public Accountant and a member of both the American Institute of
Certified Public Accountants and the Texas Society of Certified Public
Accountants. Mr. Cowan is Chairman of the Board and a stockholder of ShaCo
Xpress, Inc., a director of Robert Heath Trucking, Inc., and a member of C.C. &
Co., L.L.C., all of which are non-public companies.
LOYD I. RINEHART. Mr. Rinehart became Alamosa's Senior Vice President
of Corporate Finance in June 2000. From June 1998 to June 2000, Mr. Rinehart
served as Chief Financial Officer of Affordable Residential Communities, the
fourth largest owner of manufactured housing land-lease communities and one of
the top three largest independent retailers of manufactured homes. From June
1995 to June 1998, Mr. Rinehart served as Executive Vice President of Plains
Capital Corporation, a bank holding company based in Lubbock, Texas. He was
responsible for all non-Lubbock banking operations, including due diligence,
modeling, the purchase or the establishment of additional locations and
ultimately management. Prior to his employment with Plains Capital Corporation,
Mr. Rinehart served as Chief Financial Officer of First Nationwide, a $15
billion thrift, and its predecessor financial institutions. Mr. Rinehart is a
Certified Public Accountant.
ANTHONY SABATINO. Mr. Sabatino became Alamosa's Senior Vice President
of Engineering and Network Operations in July 2000. From 1995 to July 2000, he
was the National Radio Frequency (RF) Engineering Director for Sprint PCS and
was an initial member of the SPCS corporate launch team. Mr. Sabatino developed
all SPCS National RF Engineering Standards. He also acted as design lead for a
SPCS new RF Interference Analysis Tool. Mr. Sabatino is a director and President
of the PCIA Cost Sharing Clearinghouse and a member of the University of Kansas
Advisory Committee representing electrical engineering.
MICHAEL R. BUDAGHER. Mr. Budagher has served as a director of Alamosa
since December 1998. Mr. Budagher was the founder of Specialty Constructors, a
wholly owned subsidiary of Specialty Teleconstructors, Inc., a wireless
infrastructure installation company. He served as the President, Chairman of the
Board, Chief Executive Officer and Chief Operating Officer of Specialty from
1990 to1999. Mr. Budagher is also a founder, stockholder and the President of
Specialty Antenna Site Resources, Inc. and was a founder and served as the
President of Specialty Constructors Coatings, Inc. until March 1997. He also
serves as the Managing Member and President of the Budagher Family LLC as well
as a Manager of West Texas PCS, LLC, both non-public limited liability
companies.
RAY M. CLAPP, JR. Mr. Clapp has served as a director since Alamosa was
founded in July 1998. Since 1995, Mr. Clapp has been Managing Director,
Acquisitions and Investments for the Rosewood Corporation, the primary holding
company for the Caroline Hunt Trust Estate. From 1989 to 1995 he has held
various officer level positions with the Rosewood Corporation and its
subsidiaries. Prior to his employment with the Rosewood Corporation, Mr. Clapp
was a consultant with Booz, Allen & Hamilton, a management consulting firm. Mr.
Clapp received his Bachelor of Science and Engineering degree, with honors, from
Princeton University and earned a Master of Business Administration from the
University of Texas at Austin.
THOMAS HYDE. Mr. Hyde has served as a director since Alamosa was
founded in July 1998. From 1996 to 1997, Mr. Hyde served as an Assistant Manager
of Taylor Telephone Cooperative, Inc., a landline telephone service provider,
and has served as Manager of that company since 1998. He has also served as
Manager of Taylor Telecommunications, Inc., a cellular service provider. Prior
to 1996, Mr. Hyde was self-
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employed in the farming and ranching business. Mr. Hyde was also Secretary of
Alamo IV LLC until its dissolution in November 1999. Mr. Hyde currently serves
as a director of Alamo Cellular, Inc., and was a director of Taylor Telephone
Cooperative, Inc. and Taylor Telecommunications, Inc. from 1979 to 1996.
SCHUYLER B. MARSHALL. Mr. Marshall has served as a director of Alamosa
since November 1999. He has served as President of the Rosewood Corporation, the
primary holding company for the Caroline Hunt Trust Estate, since January 1999.
From 1996 through 1998, he served as Senior Vice President and General Counsel,
and Executive Director of the Rosewood Corporation, and as director and
president of various of its subsidiaries. He currently serves as a member of the
advisory board of Rosewood Capital IV, L.P., a San Francisco based venture
capital fund that will focus on e-commerce, telecommunications and other
consumer oriented investments. Prior to his employment with the Rosewood
Corporation, Mr. Marshall was a senior shareholder with Thompson & Knight, P.
C., in Dallas, where he practiced law since 1970.
SCOTTY HART. Mr. Hart has served as a director since Alamosa was
founded in July 1998. He has also served as General Manager of South Plains
Telecommunications Cooperative, a wireline and wireless telecommunications
company, since April 1995, and previously as Assistant Manager of South Plains
Telecommunications Cooperative. Mr. Hart is currently Vice President of SPPL,
Inc., Chairman of the General Partners Committee for Caprock Cellular Limited
Partnership and past Chairman for Texas RSA3 Limited Partnership, all affiliates
of South Plains Telecommunications Cooperative. He is also General Manager of
South Plains Advanced Communications & Electronics, Inc., a wholly owned
subsidiary of South Plains Telecommunications Cooperative, and Secretary of
Alamo Cellular, Inc., a non-public holding company with interests in a wireless
telecommunications service provider and an affiliate of South Plains Advanced
Communications & Electronics, Inc. In addition, he is the general partner and a
limited partner of Lubbock HLH, Ltd. He was President of Alamo IV LLC until its
dissolution in November 1999. Mr. Hart also serves as a director of Texas
Statewide Telephone Cooperative, Inc., a non-public company.
TOM M. PHELPS. Mr. Phelps has served as a director of Alamosa since
December 1998. He has served as Executive Vice President and General Manager of
ENMR Telephone Cooperative, a telecommuni cations services provider, and of
Telecommunications Holdings East, since September 1997. Mr. Phelps is also
currently Executive Vice President of Plateau Telecommunications, Inc., a
wireless and wireline telecommunications provider and wholly owned subsidiary of
Telecommunications Holdings East. Additionally, Mr. Phelps served as Assistant
Manager of ENMR Telephone Cooperative and its wholly owned subsidiaries from
1995 to 1997, and as Area Manager of GTE Corporation, a telephone service
provider, from 1994 to 1995. He is currently a director of Rocky Mountain
Telecommunications Association, a non-public company.
REAGAN W. SILBER. Mr. Silber has served as a director since Alamosa was
founded in July 1998. He is also managing partner of Tregan Partners, Ltd., a
director and president of BPS Realty, Inc. and a director of 1st Independent
National Bank of Plano, all non-public companies. Previously, Mr. Silber was the
founder and managing shareholder of Silber Pearlman, L. L. P., a business and
litigation law firm.
JIMMY R. WHITE. Mr. White has served as a director since Alamosa was
founded in July 1998. He has served as the General Manager of XIT Rural
Telephone Cooperative, Inc. and its subsidiaries, XIT Telecommunication &
Technology, Inc., XIT Cellular, and XIT Fiber, Inc., all wireline and wireless
telecommunications services providers, since1975. He was also the Treasurer of
Alamo IV LLC until its dissolution in November 1999. Mr. White currently serves
as the President of Alamo Cellular, Inc., He also currently serves as a director
of Texas Telephone Association, a non-public company, and Forte of Colorado, a
general partnership.
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BOARD OF DIRECTORS
The size of Alamosa's board of directors is fixed at nine members and
our board of directors is divided into three classes. Ray M. Clapp, Jr., Jimmy
R. White and Thomas Hyde constitute Class I and will stand for election at the
annual meeting of stockholders to be held in 2001. Michael R. Budagher, Schuyler
B. Marshall and Reagan W. Silber constitute Class II and will stand for election
at the annual meeting of stockholders to be held in 2002. Tom M. Phelps, David
E. Sharbutt, and Scotty Hart constitute Class III and will stand for election at
the annual meeting of stockholders to be held in 2003. Directors in each class
will serve for a term of three years, or until his or her successor has been
elected and qualified, and will be compensated at the discretion of the board of
directors. Executive officers are ordinarily elected annually and serve at the
discretion of the board of directors.
BOARD COMMITTEES
Our board of directors has established five committees. They are the:
o audit committee;
o compensation committee;
o finance committee;
o stock option plan committee; and
o nominating committee.
The audit committee is responsible for recommending to the board of
directors the engagement of our independent auditors and reviewing with the
independent auditors the scope and results of the audits, our internal
accounting controls, audit practices and the professional services furnished by
the independent auditors. The current members of the audit committee are Messrs.
White, Phelps, Budagher and Clapp.
The compensation committee is responsible for reviewing and approving
all compensation arrangements for our officers. The current members of the
compensation committee are Messrs. Silber, Marshall and Hyde.
The finance committee is responsible for providing budget oversight and
dealing with capital structure issues. The current members of the finance
committee are Messrs. Clapp, White, Sharbutt and Hart.
The stock option plan committee is responsible for reviewing and
approving the terms of any stock option grants or other awards under the
long-term incentive plan and reviewing and approving the terms of any future
stock option plans. The current members of the stock option plan committee are
Messrs. Silber, Marshall and Hyde.
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The nominating committee is responsible for:
o seeking out possible candidates for the board of directors;
o reviewing the slate of directors to be elected by the
stockholders;
o reviewing the qualifications for candidates for corporate
officers recommending the officers for approval by the board
of directors; and
o evaluating the performance of current directors.
The current members of the nominating committee are Messrs. Phelps,
Budagher, White, Clapp, Silber, Marshall, Hyde and Sharbutt.
Effective upon completion of the reorganization, Superholdings' board
of directors will establish board committees substantially identical to those of
Alamosa.
EXECUTIVE COMPENSATION
The following table presents summary information with respect to the
compensation paid to David E. Sharbutt, Jerry W. Brantley, Kendall W. Cowan and
W. Don Stull during the period from the inception of Alamosa, July 16, 1998, to
December 31, 1998 and for the year ended December 31, 1999. We had no chief
executive officer during the period from inception, July 16, 1998, to December
31, 1998. Mr. Brantley, as Chief Operating Officer, acted in a capacity similar
to that of chief executive officer during that period. None of our other
executive officers had a salary and bonus which exceeded $100,000 during this
period. David E. Sharbutt became our chief executive officer effective as of
October 1, 1999, and has served as our chief executive officer since that time.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation
-------------------------------- ---------------------------------------------
Restricted Securities
Stock Underlying All Other
Name and Principal Position Year Salary Bonus Awards Options Compensation
-------------------------------- ------- ---------- ----------- ----------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
David E. Sharbutt
Chief Executive Officer (1)... 1999 $ 43,750 $ 43,750 - 1,697,500(2) $ 3,750(3)
Jerry W. Brantley
President and Chief Operating
Officer....................... 1999 $ 175,000 $ 142,309 - 1,697,500(4) $ 7,200(5)
1998 $ 43,077 $ 25,823 - -(4) $ 1,662(5)
Kendall W. Cowan
Chief Financial Officer (6)... 1999 $ 12,500 $ 12,500 - 1,455,000 $ 600(5)
W. Don Stull
Former Chief Technology
Officer (7)................... 1999 $ 90,000 $ 58,875 - 145,500(8) $ 4,800(5)
1998 $ 16,108 $ 0 - -(8) $ 554(5)
</TABLE>
----------
(1) Mr. Sharbutt became Chief Executive Officer on October 1, 1999.
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(2) In connection with these options, we will record compensation expense
totaling $3,116,125.
(3) Consists of a monthly car and club dues allowance.
(4) During 1998, we granted Mr. Brantley three series of options to
purchase up to an aggregate 1.5% membership interest in Alamosa PCS,
LLC. The exercise price per share was $1.08 for the first of these
series, $1.15 for the second series and $1.25 for the third series. We
will record compensation expense totaling $9,341,100 in connection with
these options. As part of the original Alamosa reorganization, these
options were terminated and replaced by two series of options to
purchase an aggregate of 1,697,500 shares of Alamosa common stock. The
first series of options became exercisable immediately prior to the
completion of our initial public offering. The first series covered
242,500 shares of our common stock at an exercise price of $1.15 per
share. The second series of options covers a total of 1,455,000 shares
of our common stock at an exercise price equal to $17.00 per share. The
second series of options vests in four equal installments on each of
September 30, 2000, September 30, 2001, September 30, 2002 and
September 30, 2003, respectively.
(5) Consists of a monthly car allowance.
(6) Mr. Cowan became Chief Financial Officer on December 1, 1999.
(7) Mr. Stull served as Chief Technology Officer of Alamosa from October
29, 1998 until his resignation on August 6, 2000.
(8) In 1998, Mr. Stull was granted three series of options to purchase up
to an aggregate of a 0.3% membership interest in Alamosa PCS, LLC. The
options provided for monthly vesting, commencing six months after the
date Mr. Stull was hired, and were to terminate on December 31, 2006.
As part of the original Alamosa reorganization, these options were
terminated and replaced by three series of options to purchase an
aggregate of 145,500 shares of our common stock. The exercise price per
share was $1.1296 for the first series, $1.2477 for the second series
and $1.4238 for the third series. Each series of options were to vest
in one-third installments on each of October 29, 1999, October 29, 2000
and October 29, 2001, respectively. The first installment of each
series vested on October 29, 1999. Alamosa is currently in
negotiations with Mr. Stull regarding the exercisability of the second
and third installment of each series of options.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The table below provides information regarding stock options granted to
the named executive officers in fiscal year 1999. None of the named executive
officers received stock appreciation rights.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------------------------------------------------------------------------------
Potential
Potential Realizable
% of Total Realizable Value at Assumed
Number of Options Value at Annual Rates of
Securities Granted to Exercise Initial Public Stock Price
Underlying Employees in Price Expiration Offering Price Appreciation
Name Options (1) Fiscal Year (Per Share) Date Of $17($) For Option Term (2)
--------------------- ------------- --------------- ------------- --------------- ------------------- ---------------------------
5%($) 10%($)
-------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
David E. Sharbutt... 242,500 5% $ 1.15 1/5/2009 3,843,625 6,436,243 10,413,828
1,455,000 29% $ 17.00 1/5/2009 - 15,555,709 39,421,220
Jerry W. Brantley... 242,500 5% $ 1.15 1/5/2009 3,843,625 6,436,243 10,413,828
1,455,000 29% $ 17.00 1/5/2009 - 15,555,709 39,421,220
Kendall W. Cowan.... 1,455,000 29% $ 17.00 1/5/2009 - 15,555,709 39,421,220
W. Don Stull (3).... 48,500 1% $ 1.13 12/31/2006 769,714 1,288,238 2,083,755
48,500 1% $ 1.25 12/31/2006 763,987 1,282,510 2,078,027
48,500 1% $ 1.42 12/31/2006 755,446 1,273,969 2,069,486
</TABLE>
----------
(1) The options were granted with terms substantially similar to the terms
providing for option grants in the long-term incentive plan. The
long-term incentive plan provides for the automatic vesting and
exercisability of options upon a Change in Control (as defined in the
long-term incentive plan).
(2) Based on the initial public offering price of $17.00.
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(3) Mr. Stull served as Chief Technology Officer of Alamosa from October
29, 1998 until his resignation on August 6, 2000.
AGGREGATED FISCAL YEAR-END OPTION VALUES
The following table provides summary information regarding options held
by Alamosa's named executive officers as of December 31, 1999. There was no
public market for Alamosa's common stock as of December 31, 1999. Accordingly,
the value of unexercised in-the-money options is based on the initial public
offering price of $17.00, less the exercise price payable for such shares.
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Options/SARs at Fiscal In-the-money Options/
On Value Year-end(#) SARs at Fiscal Year-end
Name Exercise(#) Realized (Exercisable/Unexercisable) (Exercisable/Unexercisable)
------------------- ------------- ------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
David E. Sharbutt....... - - /1,697,500 $0/$3,843,625
Jerry W. Brantley....... - - /1,697,500 $0/$3,843,625
Kendall W. Cowan........ - - /1,455,000 /$0
W. Don Stull (1)........ - - 48,498/97,002 $763,017/$1,526,129
</TABLE>
(1) Mr. Stull served as Chief Technology Officer of Alamosa from October
29, 1998 until his resignation on August 6, 2000.
BENEFIT PLANS
1999 LONG-TERM INCENTIVE PLAN. The long-term incentive plan was adopted
by Alamosa's board of directors and stockholders. The purpose of the long-term
incentive plan is to attract and retain the services of key management
employees, outside directors and consultants by providing those persons with a
proprietary interest in us. For a description of the long-term incentive plan,
see "Amendment to Alamosa's 1999 Long-Term Incentive Plan."
In connection with the reorganization, Superholdings will assume all of
the obligations of Alamosa under the long-term incentive plan and all awards
granted thereunder. To ensure that Alamosa will be able to grant sufficient
awards under the long-term incentive plan to employees of Alamosa and, if the
reorganization occurs, Roberts and WOW, the Alamosa board of directors intends
to authorize and is seeking stockholder approval of an amendment to the
long-term incentive plan to increase the number of shares authorized for
issuance under the long-term incentive plan and to provide for an automatic
annual increase in shares available under the long-term incentive plan. For more
information concerning the amendment to the long-term incentive plan, see
"Amendment to Alamosa's 1999 Long-Term Incentive Plan."
401(K) RETIREMENT PLAN. We have established a tax-qualified employee
savings and retirement plan. Employees may elect to contribute up to 20% of
their annual compensation on a pre-tax basis and up to an additional 10% of
their annual compensation on an after-tax basis to the retirement plan. "Highly
Compensated Employees," as defined in the retirement plan, are subject to
certain other provisions regarding the amount of eligible contributions.
Employee contributions may begin from the date of hire and are immediately
vested. Currently, we do not make matching or profit-sharing contributions to
the retirement plan.
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EMPLOYMENT AGREEMENTS
DAVID E. SHARBUTT. We are a party to an employment agreement with David
E. Sharbutt, effective October 1, 1999. This employment agreement has a
three-year term and provides that Mr. Sharbutt receive a minimum base salary of
$175,000, payable no less often than semi-monthly, subject to increases at our
discretion. Mr. Sharbutt is entitled to receive a bonus of up to $43,750 for
each calendar quarter in which we meet certain corporate milestones. In
addition, the employment agreement also provides for Mr. Sharbutt to be granted
a total of $1,697,500 stock options, with one-third of the options vesting on
each September 30th during the employment term. Mr. Sharbutt is also entitled to
$5,000,000 in term life insurance coverage, reimbursement for reasonable
expenses, $1,250 per month as a vehicle and club dues allowance, reimbursement
for vehicle business mileage at the standard rate set by the Internal Revenue
Service, and incentive, retirement, profit-sharing, life, medical, disability
and other benefit plans as may be available to our other executives with
comparable responsibilities, subject to the terms of those programs.
If we terminate Mr. Sharbutt's employment other than for cause or
non-performance, all as defined in the employment agreement, we would be
required to pay him severance pay equal to one year's base salary and all stock
options granted to him under the agreement become vested and exercisable. If Mr.
Sharbutt should terminate his employment agreement for cause, as defined in the
employment agreement, he will be entitled to severance pay equal to the lessor
of one year's base salary and the unpaid balance of his salary that would be
payable to him through September 30, 2002 and he will be entitled to a pro rata
vesting of the options that would have become vested in the first September 30th
following the date of his termination. If Mr. Sharbutt is terminated by us
within one year after a change in control or any reason other than cause, he
will be entitled to severance pay equal to the unpaid balance of the base salary
which would have been payable to him through September 30, 2002 and all stock
options granted to him under the agreement will become vested and exercisable.
Pursuant to the employment agreement, Mr. Sharbutt has agreed not to
compete with us during his employment and not to compete with us within a
defined area for a period of two years following termination of his employment.
Mr. Sharbutt's employment by CHR Solutions, Mr. Sharbutt's investment in the
securities of any public company where such investment does not represent
greater than five percent of the outstanding stock of that company and Mr.
Sharbutt's investment in any company or entity in which Mr. Sharbutt was an
owner or stockholder at the time of entering into the employment agreement are
exceptions to the non-competition covenant. Further, Mr. Sharbutt has agreed not
to disclose any of our confidential information at any time during or subsequent
to his employment with us without our written consent.
JERRY W. BRANTLEY. We are a party to an amended and restated employment
agreement with Jerry W. Brantley, effective October 1, 1999. This employment
agreement has a four-year term and provides that Mr. Brantley receive a minimum
base salary of $175,000, payable no less often than semi-monthly, subject to
increases at our discretion. Mr. Brantley is entitled to receive a bonus of up
to $30,000 for each calendar quarter in which we meet certain corporate
milestones. In addition, the employment agreement provides for Mr. Brantley to
be granted a total of 1,697,000 stock options, with one-fourth of the options
vesting on each September 30th during the employment term. Mr. Brantley is also
entitled to reimbursement for reasonable expenses, $600 per month as a vehicle
allowance, reimbursement for vehicle business mileage at the standard rate set
by the Internal Revenue Service, and incentive, retirement, profit-sharing,
life, medical, disability and other benefit plans as may be available to our
other executives with comparable responsibilities, subject to the terms of those
programs.
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If we terminate Mr. Brantley's employment other than for cause or
non-performance, all as defined in the employment agreement, we would be
required to pay him severance pay equal to one year's base salar and all stock
options granted to him under the agreement become vested and exercisable. If Mr.
Brantley should terminate his employment agreement for cause, as defined in the
employment agreement, he will be entitled to severance pay equal to the lessor
of one year's base salary and the unpaid balance of his salary that would be
payable to him through September 30, 2003 and he will be entitled to a pro rata
vesting of the options that would have become vested in the first September 30th
following the date of his termination. If Mr. Brantley is terminated by us
within one year after a change in control or any reason other than cause, he
will be entitled to severance pay equal to the unpaid balance of the base salary
which would have been payable to him through September 30, 2003 and all stock
options granted to him under the agreement will become vested and exercisable.
Pursuant to the employment agreement, Mr. Brantley has agreed not to
compete with us during his employment and not to compete with us within a
defined area for a period of two years following termination of employment. Mr.
Brantley's investment in the securities of any public company where such
investment does not represent greater than five percent of the outstanding stock
of that company and Mr. Brantley's investment in any company or entity in which
Mr. Brantley was an owner or stockholder at the time of entering into the
employment agreement are exceptions to the non-competition covenant. Further,
Mr. Brantley has agreed not to disclose any of our confidential information at
any time during or subsequent to his employment with us without our written
consent.
KENDALL W. COWAN. We are a party to an employment agreement with
Kendall Cowan, effective December 1, 1999. This employment agreement has a
five-year term and provides that Mr. Cowan receive a minimum base salary of
$150,000, subject to increases at our discretion. In addition, the employment
agreement provides for Mr. Cowan to be granted a total of 1,455,000 stock
options, with one-fifth of the options vesting on each November 30th during the
employment term. Mr. Cowan is entitled to receive a bonus of up to $37,500 for
each calendar quarter in which we meet certain corporate milestones. Mr. Cowan
is also entitled to reimbursement for reasonable expenses, a $600 per month
vehicle allowance, reimbursement for vehicle business mileage at the standard
mileage rate set by the Internal Revenue Service, and incentive, retirement,
profit-sharing, life, medical, disability and other benefit plans as may be
available to our other executives with comparable responsibilities, subject to
the terms of those programs. Pursuant to the employment agreement, we will pay
the costs of all continuing professional education courses required for Mr.
Cowan to maintain his certified public accountant license, as well as all
professional dues and licenses attributable to his certified public accountant
license.
If we terminate Mr. Cowan's employment for other than cause or
non-performance, both as defined in the employment agreement, we would be
required to pay him severance pay equal to one year's base salary and all stock
options granted to him under the agreement will become vested and exercisable.
If Mr. Cowan should terminate his employment for cause, as defined in the
employment agreement, he will be entitled to severance pay equal to the lesser
of one year's base salary and the unpaid balance of his salary which would be
payable to him through November 30, 2004 and he will be entitled to a pro rata
vesting of the options that would become vested on the first November 30th
following the date of his termination.
Mr. Cowan has agreed, pursuant to the employment agreement, not to
compete with us during employment and for a period of two years following
termination of his employment. Mr. Cowan's investment in the securities of any
publicly traded company where such investment does not represent greater than
five percent of the outstanding stock of that company, and Mr. Cowan's
investment in any company or entity in which Mr. Cowan is an owner or
stockholder at the time of entering into the employment agreement are, however,
exceptions to the non-competition covenant. Further, Mr. Cowan has agreed not to
disclose any
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of our confidential information at any time during or subsequent to his
employment with us without our written consent.
LOYD I. RINEHART. We are party to an employment agreement with Loyd I.
Rinehart effective June 1, 2000. This employment agreement has a five-year term
and provides that Mr. Rinehart receive a minimum base salary of $150,000,
payable no less often than semi-monthly, subject to increases at our discretion.
Mr. Rinehart is entitled to receive bonuses of up to (i) $25,000 for each
calendar quarter in which we meet certain corporate milestones and (ii) $200,000
based on the acquisitions of POPs (not including POPs assigned by Sprint) in any
calender year, reduced by bonuses paid under (i) above. The maximum bonus Mr.
Rinehart can receive in one calender year will be the greater of (i) or (ii)
above. Mr. Rinehart is also entitled to reimbursement for reasonable expenses,
relocation from Denver, Colorado to Lubbock, Texas, a $600 per month vehicle
allowance, reimbursement for vehicle business mileage at the standard mileage
rate set by the Internal Revenue Service, and incentive, retirement,
profit-sharing, life, medical, disability and other benefit plans as may be
available to our other executives with comparable responsibilities, subject to
the terms of those programs. Pursuant to the employment agreement, we will pay
the costs of all continuing professional education courses required for Mr.
Rinehart to maintain his certified public accountant license, as well as all
professional dues and licenses attributable to his certified public accountant
license.
If we terminate Mr. Rinehart's employment for other than cause or
non-performance, both as defined in the employment agreement, we would be
required to pay him severance pay equal to one year's base salary. If Mr.
Rinehart should terminate his employment for cause, as defined in the employment
agreement, he will be entitled to severance pay equal to the lesser of one
year's base salary and the unpaid balance of his salary which would be payable
to him through May 31, 2005. Mr. Rinehart has agreed, pursuant to the employment
agreement, not to compete with us during employment and for a period of two
years following termination of his employment. Mr. Rinehart's investment in the
securities of any publicly traded company where such investment does not
represent greater than five percent of the outstanding stock of that company,
and Mr. Rinehart's investment in any company or entity in which Mr. Rinehart is
an owner or stockholder at the time of entering into the employment agreement
are, however, exceptions to the non-competition covenant. Further, Mr. Rinehart
has agreed not to disclose any of our confidential information at any time
during or subsequent to his employment with us without our written consent.
W. DON STULL. Before his departure from Alamosa, we were a party to an
amended and restated employment agreement with W. Don Stull, effective October
29, 1999. This amended employment agreement provided that Mr. Stull receive a
minimum base salary of $90,000, certain bonus payments and participation in
incentive, retirement, profit-sharing, life, medical, disability and other
benefit plans as may be available to our other executives with comparable
responsibilities, subject to the terms of those programs. We are currently in
the course of discussions with Mr. Stull regarding the effect of the employment
agreement upon benefits which may be payable to him in light of his departure.
If Mr. Stull is determined to have voluntarily terminated his employment for
cause, as defined in the employment agreement, he will be entitled to severance
pay equal to lesser of one year's base salary or the unpaid balance of the base
salary that would be payable to him through September 30, 2001, and he shall be
vested in the portion of his options that would have vested on the October 29
immediately following such termination.
COMPENSATION OF DIRECTORS
Currently, we do not pay cash fees to our directors. No director who is
also our officer or employee receives separate compensation for services
rendered as a director. Starting in June 1999, we had an
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arrangement with Hicks & Ragland, now known as CHR Solutions, to pay $175 per
hour for Mr. Sharbutt's services as Chairman of our board of directors. This
arrangement with Hicks & Ragland, however, ended on October 1, 1999, when Mr.
Sharbutt became our Chief Executive Officer.
Pursuant to the long-term incentive plan, each of our current directors
who is an independent director because he or she is not also our officer or
employee has received an initial option to purchase 28,000 shares of our common
stock. We granted an option to purchase an additional 15,000 shares of our
common stock to Mr. Clapp for his performance of additional duties as director
with respect to our initial public offering and our debt offering. These initial
options became exercisable with respect to 100% of the shares covered thereby
upon completion of our initial public offering in February 2000. Independent
directors joining us after our initial public offering will automatically
receive an initial option to purchase 28,000 shares of our common stock on the
date he or she becomes one of our directors. All initial options will expire on
the tenth anniversary of the date of grant. In addition to the initial option,
each independent director will receive a grant pursuant to the long-term
incentive plan of an annual option to purchase that number of shares of our
common stock equal to $60,000 divided by the fair market value of our common
stock on the date of grant. The annual option will be automatically granted on
the date of the first full meeting of our board of directors following the end
of each fiscal year. The annual option will immediately vest on the date of
grant and will expire on the tenth anniversary of the date of grant. The
exercise price of options granted to independent directors must be equal to the
fair market value of our common stock on the date of grant. All of our directors
are entitled to reimbursement of their reasonable out-of-pocket expenses in
connection with their travel to, and attendance at, meetings of the board of
directors or committees thereof.
Superholdings intends to adopt these same compensation policies and
practices for its board of directors following completion of the reorganization.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of our board of directors currently consists
of Messrs. Silber, Marshall and Hyde. None of these committee members are or
have been executive officers of us or our subsidiaries. From our inception on
July 16, 1998 through December 9, 1999, our board of directors determined the
compensation of our executive officers. David Sharbutt, our Chief Executive
Officer, is Chairman of our board of directors. He is also employed as a Senior
Consultant and is a director and shareholder of CHR Solutions, an engineering
consulting firm that provides services to us. See "Certain Relationships and
Related Transactions" for more details regarding these transactions. Mr.
Sharbutt has also served on the board of directors of Alamo Cellular, Inc.
Currently Scotty Hart is Secretary of Alamo Cellular, Inc. and Jimmy R. White is
President of Alamo Cellular, Inc. Both Mr. Hart and Mr. White are also on our
board of directors. In addition, Alamo IV LLC, prior to its dissolution in
November 1999, had been controlled by its members. Mr. Sharbutt represented a
company called Harlamo LLC, prior to its dissolution in November 1999 that was a
member of Alamo IV LLC and he also served as Vice President of Alamo IV LLC.
Thomas Hyde, who is one of our directors, along with Scotty Hart and Jimmy R.
White, served as executive officers of Alamo IV LLC.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Alamosa's full board of directors addressed all matters concerning
executive compensation until December 9, 1999, when Alamosa formed an executive
compensation committee consisting of Messrs. Silber, Marshall and Hyde. Since
its formation, the compensation committee has addressed executive compensation
matters.
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Our executive compensation philosophy reflects our belief that the
compensation of executives should:
o be linked to achievement of our business and strategic goals;
o be aligned with the interests of stockholders through awards
of stock options and other stock-based compensation;
o recognize individual contributions, as well as overall
business results; and
o result in attracting, motivating and retaining highly-talented
executives to serve us.
To achieve these objectives, our current compensation program consists
of the following elements:
o base salary;
o annual incentive compensation, the receipt of which is based
on:
o our financial performance from year to year; and/or
o significant individual contributions; and
o long-term incentive compensation, primarily in the
form of stock options.
Jerry Brantley, as Chief Operating Officer, acted in a capacity similar
to that of Chief Executive Officer during the period from the inception of
Alamosa, July 16, 1998, to October 1, 1999, when David E. Sharbutt was hired to
be the Chief Executive Officer. Mr. Sharbutt has served as our Chief Executive
Officer since that time. The structure of Mr. Brantley's fiscal 1999
compensation was based in part on comparisons to the compensation of executives
in similar positions with other companies in the industry, as well as Mr.
Brantley's level of responsibility, experience and contribution to our business
objectives and the board's ongoing assessment of our operations. In accordance
with such factors, we entered into an amended and restated employment agreement
with Mr. Brantley, effective October 1, 1999. This agreement provides for a base
salary of $175,000, subject to increases at our board's discretion. In addition,
the agreement provides that Mr. Brantley is eligible for quarterly bonuses upon
the achievement of certain performance targets established by our board, and
grants Mr. Brantley stock options that vest over three years. See "- Employment
Agreements-Jerry W. Brantley." Pursuant to this employment agreement, Mr.
Brantley received compensation totaling $324,509 for fiscal 1999, representing a
salary of $175,000, a bonus of $142,309 and a car allowance of $7,200. Our board
believes that the structure of Mr. Brantley's compensation, with its emphasis on
our performance, is in the best interest of our stockholders because it more
closely aligns the interests of Mr. Brantley and our stockholders.
The structure of Mr. Sharbutt's fiscal 1999 compensation was also based
in part on comparisons to the compensation of executives in similar positions
with other companies in the industry, as well as Mr. Sharbutt's level of
responsibility, experience and contribution to our business objectives and the
board's ongoing assessment of our operations. In accordance with such factors,
we entered into an employment
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agreement with Mr. Sharbutt, effective October 1, 1999. This agreement provides
for a base salary of $175,000, subject to increases at our board's discretion.
In addition, the agreement provides that Mr. Sharbutt is eligible for quarterly
bonuses upon the achievement of certain performance targets established by our
board. See "-Employment Agreements-David E. Sharbutt". Pursuant to this
employment agreement, Mr. Sharbutt received compensation totaling $91,250 for
fiscal 1999, representing a salary of $43,750, a bonus of $43,750 and a car/club
dues allowance of $3,750. Our board believes that the structure of Mr.
Sharbutt's compensation, with its emphasis on our performance, is in the best
interest of our stockholders because it more closely aligns the interests of Mr.
Sharbutt and our stockholders.
Our philosophy for the compensation of our executive officers focuses
on each individual's level of responsibility, experience and contribution to our
business objectives and the board's ongoing assessment of our operations. The
board places emphasis on compensation that closely aligns the executive's
interests with the stockholders' interests. Therefore, a significant percentage
of each executive officer's total compensation is tied to our performance
through:
o bonus eligibility, based on a combination of our performance
and individual achievement; and
o stock option awards.
In August 1993, as part of the Omnibus Budget Reconciliation Act of
1993, Section 162(m) of the Internal Revenue Code was enacted, which section
provides for an annual 1.0 million dollar limitation on the deduction that an
employer may claim for compensation of certain executives. Section 162(m) of the
Internal Revenue Code provides an exception to the deduction limitation for
certain performance-based compensation, and it is the intent of the board to
qualify executive compensation for such exception to the extent necessary,
feasible and in our best interests.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FORMATION OF ALAMOSA PCS, LLC
On July 24, 1998, Alamo IV LLC, Rosewood Telecommunications, L.L.C.,
Tregan International Corp., West Texas PCS, LLC and Longmont PCS, LLC formed
Alamosa PCS, LLC. Those investors received membership interests in exchange for
their capital commitments. The investors amended the formation documents on
December 11, 1998 to allow for a new member, Yellow Rock PCS, L.P., and to
modify their membership interests and capital commitments. Yellow Rock agreed to
contribute a total of $400,000 of capital in exchange for a 0.82% membership
interest in Alamosa PCS, LLC. Pursuant to the agreement, Yellow Rock committed
to a funding schedule beginning with a payment of $123,711 on December 15, 1998
and ending on January 1, 2001. The original investors retained the remaining
99.18% membership interest in Alamosa PCS, LLC in exchange for their capital
commitments of $48,100,000. In November 1999, the members of Alamo IV LLC
dissolved Alamo IV LLC and distributed Alamo IV's membership interest in Alamosa
PCS, LLC to Alamo IV's members.
The obligations to commit capital and the other regulations under the
formation documents were eliminated when we reorganized from a limited liability
company to a holding company structure prior to the closing of our initial
public offering in February 2000.
EDC CREDIT FACILITY GUARANTEES
In connection with the credit agreement entered into between Nortel and
Alamosa, which Nortel assigned to EDC and Alamosa acknowledged, each of our
stockholders pledged its ownership interest in Alamosa to Nortel to guaranty our
obligations under the Nortel credit agreement. The rights and obligations of
Nortel under the credit agreement were assigned to EDC. Our stockholders were
required to secure their unfunded contributions with either a letter of credit
or a marketable securities pledge agreement. Each guaranty, pledge, letter of
credit and marketable securities pledge agreement terminated prior to the
closing of our initial public offering.
AGREEMENTS WITH CHR SOLUTIONS
We have entered into a number of arrangements with CHR Solutions as
described in more detail below. David Sharbutt, our Chairman and Chief Executive
Officer, was at the time the agreements were executed the President, Chief
Executive Officer, a director and a shareholder of CHR Solutions. Mr. Sharbutt
is currently employed as a Senior Consultant by CHR Solutions.
o On July 27, 1998, we entered into an engineering service
agreement with CHR Solutions that is to last through August
2001 for a maximum fee of approximately $7.0 million,
excluding taxes. We paid $902,243 in 1998 and $2,951,476 in
1999 for these services.
o As of April 6, 1999, we entered into a telecommunications
service agreement with Tech Telephone Company Limited
Partnership, an affiliate of CHR Solutions, to install and
provide DS1 telecommunications lines between Sprint PCS and
our Lubbock operations and between our Lubbock operations and
our other markets. The original term of the agreement is three
years, with automatic renewal for successive 30-day terms
until terminated by either party. The total amount of fees
paid through the end of 1999 was approximately $212,000.
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o As of April 9, 1999, Alamosa entered into a data
communications services agreement with CHR Solutions to
perform design and implementation services for Alamosa in
connection with Alamosa's wide area network and local area
networks for a maximum fee of $262,040, excluding taxes. The
agreement lasts until the project is completed, unless either
party terminates it earlier for cause.
o As of August 13, 1999, Alamosa entered into a distribution
agreement with TechTel Communications Corporation, an
affiliate of CHR Solutions, authorizing it to become a third
party distributor of Sprint PCS products and services for
Alamosa in Lubbock. This is a standard agency agreement
identical with numerous other agreements between Alamosa and
other third party distributors, under which TechTel
Communications Corporation is obligated to purchase ten
handsets from us every quarter for the term of one year.
o As of October 8, 1999, Alamosa entered into a special service
agreement with CHR Solutions to perform marketing and
operations consulting services in selected areas in Wisconsin
for a maximum fee of $100,000, excluding taxes. This agreement
lasts until the project is completed, unless either party
terminates it earlier.
o As of October 8, 1999, Alamosa entered into a special service
agreement with CHR Solutions to perform business planning and
consulting services and a feasibility study in selected areas
of Wisconsin for a fixed fee of $81,000. This agreement lasts
until the project is completed, unless either party terminates
it earlier.
o As of October 8, 1999, Alamosa entered into a special service
agreement with CHR Solutions to perform business planning and
consulting services and a feasibility study in selected areas
of our territory for an estimated probable cost of $200,000,
excluding taxes. This agreement lasts until the project is
completed, unless either party terminates it earlier.
o As of October 8, 1999, Alamosa entered into a special service
agreement with CHR Solutions to provide us with radio
frequency "drive testing" to predict the propagation
characteristics of given areas in our territory for an
estimated probable cost of $62,085, excluding taxes. This
agreement lasts until the project is completed, unless either
party terminates it earlier.
o As of November 20, 1999, we entered into a special service
agreement with CHR Solutions, who provided us with marketing
and operations consulting services for a maximum amount of
$100,000, excluding taxes.
o As of January 28, 2000, CHR Solutions entered into a
professional services agreement with CHR Solutions to develop
the sub-affiliate program from the development of a model
through the execution of the sub-affiliate program. The
estimated probable costs of the services is $248,000. Either
party may terminate the agreement without penalty at any time
with or without cause upon giving the other party 30 days
prior written notice.
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AGREEMENT WITH AMERICAN TOWER CORPORATION
In August 1998, Alamosa entered into a nonexclusive master site
development and lease agreement for tower sites with OmniAmerica Development
Corp., formerly known as Specialty Capital Services, Inc., a subsidiary of
Specialty Teleconstructors, Inc. that has since merged with American Tower
Corporation. Pursuant to the agreement, American Tower arranges for collocation
of our equipment, or constructs new facilities, in areas Alamosa identifies for
build-out. The initial term of the master agreement expires in August 2003, with
automatic renewal for three additional terms of five years each. The agreement
provides for monthly payments aggregating to approximately $5.0 million per
year, subject to an annual adjustment based on the Consumer Price Index.
Michael Budagher, who is one of Alamosa's directors and a manager of
West Texas PCS, LLC, one of Alamosa's stockholders, was, at the time the
agreement was entered into the Vice Chairman, Chief Operating Officer and a
director of Specialty Teleconstructors, Inc., and the Chief Executive Officer,
President and sole director of Specialty Capital Services, Inc. Michael Budagher
is also a member and the General Manager of the Budagher Family, LLC, which was,
at the time the agreement was entered into, a stockholder of Specialty
Teleconstructors, Inc. Mr. Budagher no longer holds any of these positions at
Specialty Capital Services, Inc. or Specialty Teleconstructors, Inc. However, he
is a stockholder of American Tower Corporation. Additionally, Jeff Howard, who
was one of our directors at the time the agreement was entered into, is a
manager of Longmont PCS, LLC, one of our stockholders, is a stockholder of
Specialty Teleconstructors, Inc. and acts as a Vice President of American Tower
Corporation though he has not been designated as an officer by American Tower
Corporation's board of directors and has no management authority.
RESERVE OF SHARES BY UNDERWRITERS
As part of the initial public offering of our common stock, the
underwriters reserved a maximum of 10% of the shares of our common stock sold in
the offering for sale to the persons who were stockholders of Alamosa at the
time prior to the offering at a price per share of $15.8525, the public offering
price less the underwriting discount. The underwriters were not entitled to any
discount or commission on these shares and the proceeds to us were the same as
if the shares were sold to the general public. The persons who were stockholders
of Alamosa at the time prior to the offering purchased 757,589 shares pursuant
to this arrangement.
In connection with our initial public offering, Salomon Smith Barney
Inc. reserved up to approximately five percent of the shares being offered as
directed shares for sale at the initial public offering price to persons who
were directors, officers or our employees, or who were otherwise associated with
us and our affiliates or employees, and who advised us of their desire to
purchase these shares. The number of shares of common stock available for sale
to the general public was reduced to the extent of sales of directed shares to
any of the persons for whom they were reserved. A total of 535,000 shares of
common stock were so purchased by such persons.
OTHER RELATED PARTY TRANSACTIONS
In November 1998, Alamosa entered into an agreement to lease space for
telephone switching equipment in Albuquerque with SASR Limited Partnership, 50%
owned by one of our directors and a manager of West Texas PCS, LLC and Budagher
Family, LLC, two of our interest holders. The lease has
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a term of five years with two optional five-year terms. The lease provides for
monthly payments aggregating to $18,720 a year with 10% increase at the
beginning of the two option periods, as well as a pro rata portion of real
estate taxes on the property.
In connection with Alamosa's distribution and sales of Sprint PCS
wireless communications equipment, on December 28, 1998, we entered into a
long-term agreement to lease space for a retail store in Lubbock, Texas with
Lubbock HLH, Ltd., principally owned by one of our directors and the general
manager of South Plains Advance Communications & Electronics, Inc. ("SPACE").
SPACE is one of our stockholders. This lease has a term of 15 years and provides
for monthly payments aggregating to approximately $110,000 a year, subject to
adjustment based on the Consumer Price Index on the first day of the sixth lease
year and on the first day of the eleventh lease year. No amounts were paid or
outstanding under this lease at December 31, 1998. During 1999, $73,233 was paid
under this lease. No amount was payable at December 31, 1999.
AGREEMENTS WITH MICHAEL AND STEVEN ROBERTS
LOAN AGREEMENT. On June 30, 2000, Alamosa Operations (as lender)
entered into a loan agreement with Steven and Michael Roberts (as borrowers). In
connection with the loan agreement that was entered into on July 31, 2000
between Alamosa Operations (as lender) and Roberts (as borrower), Roberts
assumed certain obligations of Steven and Michael Roberts under the June 30 loan
agreement to the extent the proceeds of that loan were used to make capital
contributions to Roberts.
Furthermore, pursuant to the Roberts reorganization agreement, Alamosa
and Superholdings have agreed to enter into certain agreements with Michael and
Steven Roberts, who will be appointed directors of Superholdings effective upon
completion of the reorganization:
CONSULTING AGREEMENTS. Alamosa and the members of Roberts Holdings have
agreed to use their reasonable best efforts to enter into five-year consulting
agreements with Michael and Steven Roberts. The consulting agreements will
provide each of them with an annual compensation of $125,000, to be paid
monthly.
MASTER LEASE AGREEMENT. Superholdings and Michael and Steven Roberts,
through one or more entities controlled by them, have agreed to use their
reasonable best good faith efforts to enter into a master lease agreement
reasonably acceptable to Superholdings. The master lease agreement will provide
for the first right to negotiate tower space leases on a "build-to-suit" basis
within Superholdings' present and future territory with terms similar to
Alamosa's current leases for towers.
JOINT VENTURE DEVELOPMENT AGREEMENT. Superholdings and Michael and
Steven Roberts or an entity controlled by them have agreed to use their
reasonable best good faith efforts to enter into a joint venture development
agreement reasonably acceptable to Superholdings, providing for the formation of
international joint ventures on a non-exclusive basis.
RESALE AGREEMENT. Superholdings and its subsidiaries and Michael and
Steven Roberts or an entity controlled by them have agreed to use their
reasonable best good faith efforts to enter into a resale agreement reasonably
acceptable to Superholdings and its subsidiaries permitting Michael and Steven
Roberts or their controlled entities to buy air time at a discount for resale on
a basis no less favorable than any other similar agreement Superholdings may
have.
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For a more complete description of these and other agreements between
Superholdings and Michael and Steven Roberts, see "The Roberts Merger-Agreements
with Michael and Steven Roberts."
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INFORMATION ABOUT ROBERTS WIRELESS COMMUNICATIONS, L.L.C.
References in this proxy statement-prospectus to Roberts as a provider
of wireless personal communications services or similar phrases generally refer
to Roberts's building, owning and managing its portion of the Sprint PCS network
pursuant to Roberts's affiliation agreements with Sprint PCS. Sprint PCS holds
the spectrum licenses and controls the network through its agreements with
Roberts.
GENERAL
Roberts is a provider of wireless personal communications services,
commonly referred to as PCS, primarily in the state of Missouri, and also in
bordering communities in Illinois and Kansas and a portion of Oklahoma and
Arkansas. Roberts is part of the Sprint PCS network. Roberts has the exclusive
right to provide digital personal communications services under the Sprint and
Sprint PCS brand names in a territory comprising approximately 2.5 million
residents. These residents are located in cities outside the St. Louis and
Kansas City metropolitan areas in communities known as: Springfield, Joplin,
Columbia, Jefferson City, St. Joseph, Cape Girardeau, Kirksville, Sedalia,
Hannibal, Poplar Bluff, Sikeston, and West Plains, Missouri; Carbondale, Marion,
and Quincy, Illinois; Pittsburg, Kansas; and Miami, Oklahoma. Roberts has
limited revenues, significant losses, substantial future capital requirements
and an expectation of continued significant losses.
Roberts entered into affiliation agreements with Sprint PCS in June
1998. Roberts launched its Sprint PCS service in Jefferson City and Columbia,
Missouri in January 1999, and has since commenced service in three additional
markets: St. Joseph, Sedalia, and Lake of the Ozarks. Roberts' systems covers
approximately 394,000 residents out of approximately 636,500 total residents in
those markets. Roberts expects to cover a total of approximately 1.5 million
residents by December 2000, at which point it expects to have completed its
build-out obligations to Sprint PCS and expects to have covered approximately
52% of the resident population in its territory. As of June 30, 2000, Roberts
served approximately 12,000 Sprint PCS subscribers based in its territory.
Roberts was formed in May 1998, as a Missouri limited liability
company. Roberts' principal executive office is located at 1408 North
Kingshighway, Suite 300, St. Louis, Missouri 63113. Roberts' telephone number is
(314) 367-4600.
MEMBERS
Michael V. Roberts, age 51, is co-founder of Roberts Broadcasting
Company which owns several television stations in medium-sized markets in the
U.S. and has served as that company's Chairman and Chief Executive Officer since
its founding in 1989. Mr. Roberts is also the founder of companies involved in
commercial real estate development, construction management, corporate
management consulting and communications towers. He is a director of ACME
Communications, Inc. which owns and operates broadcast television stations. He
is also a managing member of Roberts.
Steven C. Roberts, age 48, is co-founder of Roberts Broadcasting
Company and has served as that company's President and Chief Operating Officer
since its founding. Mr. Roberts is the founder of companies involved in
commercial real estate development and communications towers. He is also a
managing member of Roberts.
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Michael V. Roberts and Steven C. Roberts are brothers.
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ROBERTS' MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with "Selected Historical Financial Data of Roberts Wireless Communications,
LLC" and other financial statements and notes thereto included elsewhere in this
proxy statement-prospectus. Much of the discussion in this section involves
forward-looking statements. Actual results may differ significantly from the
results suggested by the forward-looking statements.
OVERVIEW
Since its inception, Roberts has incurred substantial costs to
negotiate its contracts with Sprint PCS and obtain its debt financing from
Lucent, to engineer its wireless system, to develop its business infrastructure
and distribution channels, and to begin the build-out of its portion of the
Sprint PCS network. Roberts obtained a $56.0 million credit facility from
Lucent. Lucent later assigned all of its rights and obligations under the credit
facility to DLJ.
Prior to the opening of the Jefferson City market on January 21, 1999,
Roberts did not have any markets in operation. As of June 30, 2000, its
accumulated deficit was $13.61 million. Through June 30, 2000, Roberts incurred
$59.0 million of capital expenditures and construction in progress related to
the build-out of its portion of the Sprint PCS network. While Roberts
anticipates operating losses to continue, it expects revenue to increase
substantially as the base of Sprint PCS subscribers located in its territory
increases.
On June 8, 1998, Roberts entered into affiliation agreements with
Sprint PCS. As a Sprint PCS affiliate, Roberts has the exclusive right to
provide digital wireless personal communication services under the Sprint and
Sprint PCS brand names in its territory. Roberts is responsible for building,
owning and managing the portion of the Sprint PCS network located in its
territory. Roberts markets wireless products and services in its territory under
the Sprint and Sprint PCS brand names. Roberts offers national plans designed by
Sprint PCS and intends to offer specialized local plans tailored to its market
demographics. Roberts' portion of the Sprint PCS network is designed to offer a
seamless connection with Sprint PCS's national, 100% digital wireless network.
Roberts markets wireless products and services through a number of distribution
outlets located in its territory, including its own Sprint PCS stores, major
national distributors and third party local representatives.
Roberts launched Sprint PCS service in its first markets, Jefferson
City and Columbia, Missouri, in January 1999, and has since commenced service in
three additional markets: St. Joseph, Sedalia, and Lake of the Ozarks. Roberts'
systems cover approximately 390,000 residents out of approximately 636,500 total
residents in those markets.
Roberts' original affiliation agreement with Sprint PCS provided that
it could purchase assets located in its service area if it could reasonably use
such assets in the construction of its service area network. On January 21,
1999, Roberts exercised this right and Sprint PCS assigned the Columbia,
Missouri and the Jefferson City, Missouri service areas to Roberts by amending
the original management agreement with Sprint PCS. The assets assigned consisted
of both service areas (markets) plus all hardware owned by Sprint PCS for
operation of each cell site and all leases for each cell site in the two service
areas. Neither the Columbia, Missouri nor the Jefferson City, Missouri markets
had any Sprint PCS subscribers at the time of
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this assignment. In anticipation of invoking this provision, in late 1998
Roberts rented a retail store facility, hired sales employees, purchased phones
and accessories, and placed local advertising.
The amendment to the Sprint PCS management agreement did not change the
management fee structure as defined in the original management agreement, and
Roberts began receiving 92% of billed revenue generated by subscribers in these
markets, plus 20 cents per minute travel revenue as of January 21, 1999. At the
time of this assignment, Roberts was in the process of building its master
switching center and was not yet capable of receiving, placing and switching
calls on its network. Roberts and Sprint entered into an Interim Network
Operating Agreement whereby the twenty-three cell sites located in the Columbia
and Jefferson City, Missouri service areas would remain on the Sprint PCS St.
Louis switch, and Sprint PCS would continue to maintain such properties until:
(i) all leases for cell sites in both service areas had been transferred from
Sprint PCS to Roberts, and (ii) Roberts paid Sprint PCS in full for the purchase
of these assets. On September 8, 1999, the purchase of these assets was
completed although three of the total twenty- three leases had not been
transferred. From January 21, 1999 through April 4, 2000, Roberts paid interim
network operating fees of varying amounts based upon the number of cell site
leases not transferred, and the use of Sprint PCS St. Louis switch. On May 19,
2000, all cell sites in the Columbia and Jefferson City service areas were taken
off the Sprint PCS switch and connected to the Roberts switch. After that time,
no further interim network operating fees were due.
Roberts recognizes 100% of revenues from Sprint PCS subscribers based
in its territory, proceeds from the sales of handsets and accessories and fees
from Sprint PCS and other wireless service providers when their customers roam
onto its portion of the Sprint PCS network. Sprint PCS handles its billing and
collections and retains 8% of all collected revenue from Sprint PCS subscribers
based in Roberts' territory and fees from wireless service providers other than
Sprint PCS when their subscribers roam onto Roberts' portion of the Sprint PCS
network. Roberts reports the amount retained by Sprint PCS as an operating
expense.
As part of Roberts' affiliation agreements with Sprint PCS, it has the
option of contracting with Sprint PCS to provide back office services such as
customer activation, handset logistics, billing, customer service and network
monitoring services. Roberts has elected to delegate the performance of these
services to Sprint PCS to take advantage of Sprint PCS's economies of scale, to
accelerate its build-out and market launches and to lower its initial capital
requirements. The cost for these services is primarily calculated on a per
subscriber and per transaction basis and is recorded as an operating expense.
For more information concerning the affiliation agreements between
Roberts and Sprint, see "Affiliation Agreements with Sprint PCS."
REGULATORY DEVELOPMENTS
See "Regulatory Environment-Regulation of the Wireless
Telecommunications Industry" for a discussion of regulatory developments that
could have a future impact on Roberts.
RESULTS OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 1999
NET LOSS. Roberts' net loss for the six months ended June 30, 2000 was
$5,391,619 and consisted primarily of the cost of launching its St. Joseph, Lake
of the Ozarks, and Sedalia markets, plus operation of
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its master switching center. Roberts' net loss for the six months ended June 30,
1999 was $1,013,836 and was comprised primarily of the incurrence of start-up
expenses relative to the preparation of its master switching operation center,
and launch and operation of its Columbia and Jefferson City markets.
SERVICE REVENUES. Service revenues during the first six months ended
June 30, 2000 and June 30, 1999, were in the amount of $4,733,415 and $102,090,
respectively. Service revenues were comprised of subscriber revenue, Sprint PCS
roaming revenue, non-Sprint PCS roaming revenue and long distance revenue, all
of which initially began accruing to Roberts at or near its first initial
commercial launch in January 1999.
Subscriber revenue consists of payments received from Sprint PCS
subscribers based in Roberts' territory for monthly Sprint PCS service in its
territory under a variety of service plans. These plans generally reflect the
terms of plans offered by Sprint PCS nationally and are issued on a
month-to-month basis. Roberts receives Sprint PCS roaming revenue at a per
minute rate from Sprint PCS or another Sprint PCS affiliate when Sprint PCS
subscribers based outside of its territory use its portion of the Sprint PCS
network. Pursuant to Roberts' affiliation agreements with Sprint PCS, Sprint PCS
can change this per minute rate. Non-Sprint PCS roaming revenue primarily
consists of fees collected from Sprint PCS customers based in Roberts' territory
when they roam on non-Sprint PCS networks. These fees are based on rates
specified in the customer contracts. However, it is possible that in some cases
these fees may be less than the amount Roberts must pay to other wireless
service providers that provide service to Sprint PCS customers based in its
territory. Non-Sprint PCS roaming revenue also includes payments from wireless
service providers, other than Sprint PCS, when those providers' customers roam
on Roberts' portion of the Sprint PCS network.
Roberts' average monthly revenue per user for Sprint PCS customers in
its territory, including long distance and roaming revenue, was approximately
$76 for the period from January 1 to June 30, 2000 and approximately $110 for
the period from January 21 to June 30, 1999.
PRODUCT SALES. 100% of the revenue from the sale of handsets and
accessories are recorded, net of an allowance for returns, as product sales. The
amount recorded during the six month period ended June 30, 2000 totaled $426,226
as compared to $174,926 for the six month period ended June 30, 1999. Sprint
PCS's handset return policy allows customers to return their handsets for a full
refund within 30 days of purchase. When handsets are returned to Roberts, it may
be able to reissue the handsets to customers at little additional cost to it.
However, when handsets are returned to Sprint PCS for refurbishing, Roberts
receives a credit from Sprint PCS, which is less than the amount it originally
paid for the handset.
TOWER INCOME. 100% of the revenue from leasing space on Roberts' towers
is recorded as rental tower income. The amount recorded during the six month
period ended June 30, 2000 was $18,613. The cost of maintaining the towers is
recorded in cost of services and prepaid ground leases are recorded on the
balance sheet as a current asset. Roberts will have no further tower income
because effective July 1, 2000, it transferred all the towers it owns to Roberts
Towers and commenced leasing all of the towers it uses.
COST OF SERVICES. Expenses totaling $3,322,934 during the six month
period ended June 30, 2000 related to providing wireless services to customers.
These expenses totaled $553,996 for the six month period ended June 30, 1999.
Among these costs are the cost of operations, fees related to data transfer via
T-1 and other transport lines, inter-connection fees, Sprint PCS roaming fees,
non-Sprint PCS roaming fees and other
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expenses related to operations. Roberts pays Sprint PCS roaming fees when Sprint
PCS subscribers based in its territory use the Sprint PCS network outside of its
territory. Pursuant to Roberts' affiliation agreements with Sprint PCS, Sprint
PCS can change this per minute rate. Roberts pays non-Sprint PCS roaming fees to
other wireless service providers when Sprint PCS customers based in its
territory use their network.
COST OF PRODUCTS SOLD. The cost of products sold totaled $780,728
during the six month period ended June 30, 2000 and $351,526 for the six month
period ended June 30, 1999. These amounts include the cost of accessories and
the cost of handsets sold. Roberts expects the cost of handsets to exceed the
retail sales price because Roberts subsidizes the price of handsets for
competitive reasons. For the six months ended June 30, 2000, the handset subsidy
totaled $354,502 as compared to $176,600 for the six months ended June 30, 1999.
SELLING AND MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES. Expenses
totaled $2,980,302 during the six month period ended June 30, 2000 and $337,735
during the six month period ended June 30, 1999. For the period ended June 30,
2000, these expenses included sales and marketing expenses of $2,171,422,
collected revenue retained by Sprint PCS of $255,044, amounts retained by Sprint
PCS for customer service, billing, and network monitoring of $1,492,549, and
other services. Sales and marketing expenses include advertising expenses,
promotion costs, sales commissions and expenses related to its distribution
channels. Roberts has incurred significant expenses related to the development
of its system. Virtually all of these expenses are related to the start-up of
the business and were expensed according to American Institute of Certified
Public Accountants Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities."
DEPRECIATION AND AMORTIZATION. Depreciation and amortization during the
six month period ended June 30, 2000 totaled $3,176,256 and $48,643 for the six
month period ended June 30, 1999. Depreciation was calculated using the straight
line and accelerated methods over the useful life of the asset. Roberts begins
to depreciate the assets for each market only after it opens that market.
INTEREST AND OTHER INCOME. Interest and other income totaled $37,720
during the six month period ended June 30, 2000 and $1,048 during the six month
period ended June 30, 1999. Interest and other income generally have been
generated from the investment of equity and loan proceeds held in liquid
accounts waiting to be deployed.
INTEREST EXPENSE. Interest expense during the six month period ended
June 30, 2000 totaled $347,373 and is related primarily to the DLJ credit
facility. Interest on the DLJ credit facility may be paid with capital
contributions by its members.
RESULTS OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1999
NET LOSS. Roberts net loss for the twelve months ended December 31,
1999 was $4,588,241 and was comprised primarily of the incurrence of start-up
expenses relative to the preparation of its master switching operation center,
and launch and operation of its Columbia and Jefferson City markets.
SERVICE REVENUES. Service revenues during the period in the amount of
$2,494,438 were comprised of subscriber revenue, Sprint PCS roaming revenue,
non-Sprint PCS roaming revenue and long distance revenue, all of which initially
began accruing to Roberts at or near its first initial commercial launch in
January 1999. Roberts average monthly revenue per user for Sprint PCS customers
in its territory, including long distance and roaming revenue, was approximately
$93 for the period from January 21 to December 31, 1999.
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PRODUCT SALES. 100% of the revenue from the sale of handsets and
accessories are recorded, net of an allowance for returns, as product sales. The
amount recorded during this period totaled $379,259. Sprint PCS's handset return
policy allows customers to return their handsets for a full refund within 30
days of purchase. When handsets are returned to Roberts, it may be able to
reissue the handsets to customers at little additional cost to Roberts. However,
when handsets are returned to Sprint PCS for refurbishing, Roberts receives a
credit from Sprint PCS, which is less than the amount it originally paid for the
handset.
COST OF SERVICES. Expenses totaling $1,748,565 during this period
related to providing wireless services to customers and are included in cost of
services. Among these costs are the cost of operations, fees related to data
transfer via T-1 and other transport lines, inter-connection fees, Sprint PCS
roaming fees, non- Sprint PCS roaming fees and other expenses related to
operations. Roberts pays Sprint PCS roaming fees when Sprint PCS subscribers
based in its territory use the Sprint PCS network outside of its territory.
Pursuant to its affiliation agreements with Sprint PCS, Sprint PCS can change
this per minute rate. Roberts pays non-Sprint PCS roaming fees to other wireless
service providers when Sprint PCS customers based in its territory use their
network.
COST OF PRODUCTS SOLD. The cost of products sold totaling $834,236
during this period includes the cost of accessories and the cost of handsets
sold. Roberts expects the cost of handsets to exceed the retail sales price
because it subsidizes the price of handsets for competitive reasons. For the
year ended December 31, 1999 the handset subsidy totaled $454,977.
SELLING AND MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES. Expenses
totaling $2,728,258 during the period include sales and marketing expenses of
$702,829, collected revenue retained by Sprint PCS of $151,634 and amounts
retained by Sprint PCS for customer service, billing, and network monitoring of
$1,378,774, and other services. Sales and marketing expenses include advertising
expenses, promotion costs, sales commissions and expenses related to its
distribution channels. Roberts has incurred significant expenses related to the
development of its system. Virtually all of these expenses are related to the
start-up of the business and were expensed according to American Institute of
Certified Public Accountants Statement of Position 98-5, "Reporting on the Costs
of Start-up Activities."
DEPRECIATION AND AMORTIZATION. Depreciation and amortization during the
period totaled $1,799,281. Depreciation was calculated using the straight line
and accelerated methods over the useful life of the asset. Roberts begins to
depreciate the assets for each market only after it opens that market.
INTEREST AND OTHER INCOME. Interest and other income totaling $65,739
during this period generally have been generated from the investment of equity
and loan proceeds held in liquid accounts waiting to be deployed.
INTEREST EXPENSE. Interest expense totaled $417,337 during this period
and is related to the DLJ credit facility. Interest on the DLJ credit facility
may be paid with capital contributions by its members.
RESULTS OF OPERATIONS - FOR THE PERIOD MAY 6, 1998 (INCEPTION) THROUGH DECEMBER
31, 1998
SELLING AND MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES,
DEPRECIATION AND AMORTIZATION. Expenses for the period in the amount of $435,412
were comprised of start up expenses.
INTEREST AND OTHER INCOME. Interest income totaling $3,499 during this
period generally have been
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generated from the investment of equity in liquid accounts waiting to be
deployed.
INCOME TAXES
Roberts' financial statements did not report any benefit for federal
and state income taxes since Roberts had elected to be taxed as a partnership.
For the period presented, the members of the limited liability company recorded
its tax losses on their own income tax returns.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, Roberts has financed its operations through capital
contributions from its members, in-kind contributions from related entities
owned by its members, and through debt financing provided by Lucent. Roberts
obtained a $56.0 million credit facility from Lucent and Lucent subsequently
assigned its rights under the credit facility to DLJ. As of June 30, 2000
Roberts had a $56.0 million credit facility with DLJ, and the entire amount of
available funding under the facility had been drawn. The terms of the facility
require cash interest payments each quarter. Principal payments are scheduled to
begin three years from the date of the first drawdown. Roberts' financing with
DLJ was used to purchase equipment and services, and provide working capital
related to construction costs.
Net cash provided by operating activities was $5,171,412 for the period
ending June 30, 2000.
Net cash used in operating activities was $838,473 for the year ended
December 31, 1999. Cash used in operating activities for the period was
attributable to operating losses and working capital needs.
Net cash used in operating activities was $650,329 for the six months
ended June 30, 1999.
Net cash used in investing activities was $40,166,623 for the six
months ended June 30, 2000. These expenditures were related primarily to the
purchase of network infrastructure needed to begin construction of Roberts'
portion of the Sprint PCS network. Net cash used in investing activities was
$709,187 for the six months ended June 30, 1999.
Net cash used in investing activities was $22,489,025 for the year
ended December 31, 1999. The expenditures were related primarily to the purchase
of office equipment, telephone equipment and network infrastructure needed to
begin construction of its portion of the Sprint PCS network.
For the six month period ended June 30, 2000, net cash provided by
financing activities was $32,188,561, consisting of capital contributions of
$1,200,000 and a DLJ draw of $30,988,561. For the six month period ended June
30, 1999, net cash provided by financing activities was $1,279,860, consisting
of capital contributions from its members.
For the year ended December 31, 1999, net cash provided by financing
activities was $26,392,598, consisting of capital contributions of $2,903,000, a
DLJ draw of $25,011,439 and increase in loan costs of $1,521,841.
As of June 30, 2000, Roberts' primary source of liquidity was $338,106
in cash. As of December 31, 1999, its primary sources of liquidity were $3.1
million in cash and $30.9 million of unused capacity under the DLJ credit
facility.
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The management of Roberts currently believes that Roberts may not have
sufficient funds available to fund future required capital expenditures, working
capital requirements, operating losses and other cash needs of the business with
the result that Roberts will be dependent upon cash advances from Alamosa.
Actual amounts of funds required to build out the Roberts segment of the Sprint
PCS wireless network and to fund operating losses and working capital needs may
vary materially from estimates, and additional funds may be necessary.
Under the terms of the Roberts reorganization agreement, Alamosa
Operations has agreed to extend credit to Roberts and the members of Roberts
Holdings in order for the capital contribution requirements of the DLJ credit
facility to be met without requiring the contribution of such amounts by the
members of Roberts Holdings. See "The Roberts Merger-Loan and Services
Agreements." Roberts intends to rely on the Alamosa credit extension and the DLJ
credit facility to meet its current operational and capital procurement
requirements. Each of the agreements contemplated under the Roberts
reorganization agreement and the Alamosa credit extension is subject to the
customary conditions to closing, and there is no guarantee that they will close
on schedule, or at all.
In connection with the entering into the Roberts reorganization
agreement, Superholdings entered into a commitment letter with Citicorp, North
America, Inc. and Salomon Smith Barney providing for a senior credit facility of
up to $200.0 million to be made to Alamosa Holdings, LLC to fund the cash
portion of the consideration in the Roberts and WOW mergers and to fund the
working capital and build-out needs of Roberts and WOW, including the
refinancing of existing indebtedness of Roberts and WOW. See "The
Reorganization-Citicorp Credit Facility."
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Roberts does not engage in commodity futures trading activities and
does not enter into derivative financial instrument transactions for trading or
other speculative purposes. Roberts also does not engage in transactions in
foreign currencies that could expose it to market risk.
Roberts is subject to some interest rate risk on its debt financing with
DLJ and any future floating rate financing it may obtain. However, Roberts does
not expect to have any such risks after its acquisition by Alamosa because
Alamosa will be required to payoff the DLJ credit facility at that time and any
future financing that is required will be obtained through Alamosa.
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INFORMATION ABOUT WASHINGTON OREGON WIRELESS, LLC
References in this proxy statement-prospectus to WOW as a provider of
wireless personal communications services or similar phrases generally refer to
WOW's building, owning and managing its portion of the Sprint PCS network
pursuant to WOW's affiliation agreements with Sprint PCS. Sprint PCS holds the
spectrum licenses and controls the network through its agreements with WOW.
GENERAL
WOW is a limited liability company formed and owned by 17
Northwest-based incumbent rural telephone service providers plus an electric
utility cooperative and several private investors connected with the wireless
industry. WOW is the exclusive Sprint PCS affiliate in a territory comprised of
significant portions of Washington and Oregon. Under long-term agreements with
Sprint PCS, WOW will market PCS services under the Sprint and Sprint PCS brand
names. WOW plans to build its network in an attempt to meet or exceed the
standards for technical and service quality established by Sprint PCS. WOW will
utilize Sprint PCS' back office services to handle customer activation, billing
and customer care. WOW expects to benefit from Sprint PCS's national advertising
campaigns and to have access to major national retailers for distribution of
equipment under existing Sprint PCS contracts. WOW also expects to receive
technical and marketing support from Sprint PCS as well as substantial discounts
through equipment purchasing contracts Sprint PCS has with Lucent Technologies,
Inc. and other vendors.
The WOW territory has a resident population of 1.5 million and covers
nine basic trading areas in Eastern Washington (except for Spokane), Eastern
Oregon and Southwest Oregon, as well as portions of the Portland, Oregon basic
trading area. The territory covers well-traveled corridors along Interstate 90,
Interstate 94 in Washington, and Interstate 84 and Interstate 5 in Oregon. WOW
believes that the markets it serves are fast-growing and diversified with a
significant travel and tourism component. WOW expects to generate significant
roaming revenues from visitors and travelers to its territory who will use WOW's
PCS network for Sprint PCS services.
WOW initiated discussions with Sprint PCS to provide wireless service
in early 1998 and in February 1999 executed a management agreement with Sprint
PCS. WOW launched Phase I of its service covering the I-90 (Washington State)
and I-5 (Oregon) corridors and the surrounding population centers in September
2000 and plans to complete its coverage build-out by March 2001. As of September
2000, WOW has completed substantially all of its Phase I site construction and
network interconnection, including the installation of switching equipment in
the switching center. WOW has begun preliminary Phase II and Phase III site
location surveys and securing permits and leases for tower construction and/or
co-location. Tower construction is expected to begin for Phase II sites in the
fourth quarter of 2000.
WOW's investors have committed to provide nearly $33.4 million in
equity and have contributed $15.3 million as of August 2000 to fund
organizational costs and site location-development expenses, equipment purchases
and site construction. WOW has raised another $45.0 million in debt commitments
from CoBank, of which $9.4 million had been drawn as of June 30, 2000.
WOW's principal executive office is located at 5665 SW Meadows Road,
Suite 100, Lake Oswego, Oregon 97035. WOW's telephone number is (503) 431-2353.
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WOW'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
In February 1999, WOW entered into its affiliation agreements with
Sprint PCS. As a Sprint PCS affiliate, WOW has the exclusive right to provide
digital wireless personal communication services under the Sprint and Sprint PCS
brand names in a network territory comprised of significant portions of the
states of Washington and Oregon. WOW is responsible for building, owning and
managing the segment of the Sprint PCS wireless network located in its network
territory. Once operational, WOW will market wireless products and services in
its network territory under the Sprint and Sprint PCS brand names and intends to
offer national plans designed by Sprint PCS and specialized local plans tailored
to match local market demographics. WOW will market wireless products and
services through a number of distribution outlets located in its network
territory, including its own Sprint PCS stores, major national distributors and
third party local representatives.
WOW is a development stage enterprise, with very limited operations,
very limited revenues, substantial losses and future capital requirements and an
expectation of continued losses. As of June 30, 2000, the first 8 tower sites in
WOW's territory were operational, upon which WOW began earning roaming revenues
from Sprint PCS and other wireless service providers as wireless users roamed
into its segment of the Sprint PCS wireless network.
Since inception, WOW has incurred substantial costs to negotiate
contracts with Sprint PCS, to obtain debt financing, to raise equity funds, to
engineer its wireless system, to develop its business infrastructure and
distribution channels and to begin the build-out of its segment of the Sprint
PCS wireless network. As of June 30, 2000, WOW's accumulated deficit was $4.1
million. Through June 30, 2000, WOW had incurred $24.8 million of capital
expenditures and construction in progress related to the build-out of its
segment of the Sprint PCS wireless network. While management anticipates that
operating losses will continue, WOW expects revenue to increase as it begins
adding Sprint PCS subscribers in its network territory and as more tower sites
are completed to increase the amount of roaming activity through its network
territory.
WOW launched limited Sprint PCS service in its first market near
Spokane, Washington in May 2000. Additional markets are expected to become
operational in 2000 and 2001. Upon completion, the WOW wireless network systems
are expected to offer Sprint PCS wireless services to approximately 1.2 million
residents out of approximately 1.5 million total residents in the WOW network
territory. As of June 30, 2000, there were no Sprint PCS subscribers based in
WOW's network territory.
As operations commence, WOW will recognize 100% of the subscription
revenues from Sprint PCS subscribers based in its network territory, proceeds
from the sales of handsets and accessories and roaming fees from Sprint PCS and
other wireless service providers when their customers roam onto WOW's segment of
the Sprint PCS wireless network. Based on WOW's affiliation agreements with
Sprint PCS, Sprint PCS will retain 8% of all collected subscription revenue from
Sprint PCS subscribers based in WOW's network territory and 8% of all fees
collected from wireless service providers (other than Sprint PCS) when their
subscribers roam into WOW's segment of the Sprint PCS wireless network. WOW will
report the amounts retained by Sprint PCS as an operating expense.
Pursuant to WOW's affiliation agreements with Sprint PCS, WOW has
elected to have Sprint PCS
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provide back office services such as customer activation, handset logistics,
billing, customer service and network monitoring services to take advantage of
Sprint PCS's economies of scale, to accelerate WOW's build-out and market
launches and to lower its initial capital requirements. The cost for these
services will primarily be calculated on a per-subscriber and per-transaction
basis and will be recorded as an operating expense.
For more information concerning the affiliation agreements between
WOW and Sprint, see "Affiliation Agreements with Sprint PCS."
REGULATORY DEVELOPMENTS
See "Regulatory Environment-Regulation of the Wireless
Telecommunications Industry" for a discussion of regulatory developments that
could have a future impact on WOW.
SEASONALITY
WOW's business is subject to seasonality as the digital wireless
communication industry is heavily dependent on fourth quarter sales. Among other
things, the industry relies on significant increases in new subscribers and
handset sales in the fourth quarter compared to the other three fiscal quarters.
A number of factors contribute to these trends, including:
o the increasing use of retail distribution, which is dependent
upon the year-end holiday shopping season;
o the timing of new product and service announcements and
introductions;
o competitive pricing pressures; and
o aggressive marketing and promotions.
RESULTS OF OPERATIONS - FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 2000
COMPARED TO THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1999
Operating activity for the quarter and six months ended June 30, 2000
and the quarter and six months ended June 30, 1999 were mainly directed toward
the development and start-up of the business infrastructure.
Net loss for the quarter ended June 30, 2000 was $2,152,826 compared to
WOW's net loss of $222,166 for the quarter ended June 30, 1999. WOW's net loss
for the six months ended June 30, 2000 was $3,049,729 compared to its net loss
of $373,036 for the six months ended June 30, 1999. The increased loss is
attributable to substantial increases in expenses without corresponding
increases in revenues.
WOW's first tower sites became operational in May of 2000. Service
revenues for the quarter and six months ended June 30, 2000 amounted to $36,805
and were comprised entirely of roaming revenue. WOW receives roaming revenue at
a per-minute rate from Sprint PCS or other Sprint PCS affiliates when Sprint PCS
subscribers based outside of its territory use WOW's segment of the Sprint PCS
wireless network. WOW had no product sales or associated cost during this period
and no market operations in the quarter and six months ended June 30, 1999, and
therefore no service revenues, product sales or associated costs are reflected
in results of operations for this period.
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Total expenses were $2,223,128 during the quarter ended June 30, 2000,
compared to $222,166 for the quarter ended June 30, 1999. Total expenses for the
six months ended June 30, 2000 amounted to $3,159,766, compared to $373,036 for
the six months ended June 30, 1999. The increase in expenses relates to
substantial increases in operations expenses (such as lease of circuits for
backhaul and tower site expenses), sales and marketing expenses, and general and
administrative expenses (such as human resource, legal and other professional
services and office and retail space) incurred in the quarter ended June 30,
2000. WOW has been working toward bringing 75 more tower sites and six retail
stores operational in September, 2000. As such, higher operating expenses in
2000, especially the second quarter of 2000, reflect significantly increased
activity as WOW approached operational readiness.
OPERATIONS. Operations related expenses totaled $1,027,400 during the
quarter ended June 30, 2000 and $44,528 for the quarter ended June 30,1999. For
the six months ended June 30, 2000 and 1999 operations related expenses totaled
$1,189,398 and $153,027, respectively. Operations expenses for the quarter and
six months ended June 30, 2000 were related to tower site expenses (monthly
lease payments and utilities), leased circuit backhaul (leasing of T-l and other
communication transport lines at various locations throughout the WOW network)
and human resource related expenses related to the design and build-out of the
WOW network. Operations expenses for quarter and six months ended June 30, 1999
related to professional services incurred related to the design and development
of the WOW network.
SALES AND MARKETING. Sales and marketing expenses totaled $184,926 and
$198,235 for the quarter and six months ended June 30, 2000, respectively. WOW
had no sales and marketing expenses for the quarter and six months ended June
30, 1999. Sales and marketing expenses include payroll, payroll taxes, benefits
and advertising costs incurred as WOW prepared for operational readiness in
September 2000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization during the
quarter and six months ended June 30, 2000 totaled $57,310 and $61,810,
respectively. Amortization of deferred loan costs of $36,516 has been
capitalized as part of the cost of construction. WOW incurred no depreciation or
amortization for the quarter and six months ended June 30, 1999. Depreciation is
calculated using the straight-line method over the useful of the assets. For the
quarter and six months ended June 30, 2000 depreciation is being calculated on
office equipment (5-year life) and leasehold improvements and amortization is
being taken on deferred financing costs. WOW will begin to depreciate the assets
of a market only after it successfully launches that market.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses include legal and other professional services, payroll, payroll taxes,
benefits and other corporate costs and expenses not included in other
categories. These expenses totaled $953,492 for the quarter ended June 30, 2000
and $177,638 for the quarter ended June 30, 1999. For the six months ended June
30, 2000 and 1999 these expenses amounted to $1,710,323 and $220,009,
respectively. The substantial increase in these expenses relates to increased
efforts to build and start-up the infrastructure of WOW's business and were
expensed according to American Institute of Certified Public Accountants
Statement of Position 98-5.
NON-CASH COMPENSATION EXPENSE. Non-cash compensation expense totaled
$19,000 for the quarter ended June 30, 2000 and $31,000 for the six months ended
June 30, 2000. WOW had no non-cash compensation expense for the quarter and six
months ended June 30, 1999. Non-cash compensation expense relates to the
institution of an executive value appreciation rights plan for the executives of
WOW, which permits WOW to grant "Units" to an executive, the value of which is
tied to the value of Company. Upon the grant of Units, the executive receives
the right to be paid an amount, sometime in the future, equal to the
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value of the Units on the date the VAR is exercised. These expenses were
determined in accordance with the provisions of Statement of Financial
Accounting Standards No. 123 "Accounting for Stock Based Compensation," and were
based on the estimated intrinsic value of the value appreciation Units granted
at the appropriate measurement date.
RELATED PARTY EXPENSES. Related party expenses totaled $32,369 for the
quarter ended June 30, 2000 and $78,967 for the quarter ended June 30, 1999.
Related party expenses totaled $90,813 and $78,967 for the six month periods
ended June 30, 2000 and 1999, respectively. In addition $750,000 of capital
acquisition costs were paid to a member for assistance in obtaining equity
financing. These costs have been offset against members' contributions. These
expenses were primarily comprised of management and administrative services, and
other professional consulting expenses paid to members of WOW or organizations
affiliated with members of WOW for assistance in obtaining debt and equity
financing.
Interest and other income generated from the investment of cash from
equity and loan proceeds that is held in liquid accounts waiting to be deployed
totaled $33,497 and $73,232 during the quarter and six month ended June 30,
2000. WOW had no interest and other income for the quarter and six months ended
June 30, 1999.
Interest costs incurred totaled $200,197 during the quarter and six
months ended June 30, 2000, all of which have been capitalized as part of the
cost of construction. WOW had no interest expense for the quarter and six months
ended June 30, 1999. Interest expense in 2000 is primarily due to the interest
related to the senior discount notes payable completed on April 25, 2000.
RESULTS OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1999
Operating activities for the year ended December 31, 1999, continued to
be directed toward the development of WOW's business infrastructure, including
the design of its wireless network and executing its build-out plan. During
February 1999, WOW entered into affiliation agreements with Sprint PCS that
permit WOW to operate as the exclusive affiliate of Sprint PCS in a network
territory comprised of significant portions of the states of Washington and
Oregon. WOW had no markets in operation during 1999 and therefore no service
revenues, product sales or related costs associated with services or products
are reflected in the results of operations for the year ended December 31, 1999.
WOW's net loss for the period was $980,141, which was comprised mainly of
general and administrative expenses.
Expenses for the period ended December 31, 1999 in the amount of
$987,133 were comprised primarily of legal and other professional services of
$714,847 that related to management consulting and the development of the WOW
business systems. In addition, $131,203 of human resource costs were incurred
that related to the anticipated launch of WOW's wireless network operations in
2000. Virtually all general and administrative expenses during the year ended
December 31, 1999 related to start-up expenses and were expensed in accordance
with American Institute of Certified Public Accountants Statement of Position
98-5.
RESULTS OF OPERATIONS - FOR THE PERIOD JULY 8, 1998 (INCEPTION) THROUGH
DECEMBER 31, 1998
From July 8, 1998 (inception) through December 31, 1998, WOW's
operating activities were directed toward establishing and developing its
business infrastructure. Financial results for the 1998 period reflect no
service revenues, product sales or related costs associated with services or
products. WOW's net loss for the period was $ 45,476, which was principally
comprised of general and administrative expenses and limited
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other income of $14,750. Expenses for the period in the amount $60,226 were
comprised of legal and other professional services related to the start up of
WOW's business and development of alternative business strategies. These start
up costs have been expensed in accordance with American Institute of Certified
Public Accountants Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities." Other income in the amount of $14,750 were attributable to
interest earned on cash and investments and contributions made by organizations
who declined membership.
INCOME TAXES
As an Oregon limited liability company, WOW is not a taxpaying entity
for federal income tax purposes and thus no income tax expense or benefits has
been recorded in the quarter and six months ended June 30, 2000 and 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, WOW has financed its operations through capital
contributions from its members and through debt financing. WOW has a $45,000,000
senior revolving credit facility with CoBank of which $9,460,318 has been drawn
as of June 30, 2000.
The terms of the CoBank credit facility provide for a choice by WOW
between a base rate (the higher of the prime rate or the sum of the Federal
Funds Rate plus 0.50%) or LIBOR, plus an applicable margin. The current
applicable base rate margin is 2.25% and the applicable LIBOR margin is 3.25%.
Each LIBOR loan may be obtained for periods of one, two, three or six months.
Interest payments are due the last day of each calendar quarter for Base Rate
loans and the last day of each applicable interest period (but not longer than
three months from the commencement of such interest period) for LIBOR loans.
The terms of the CoBank credit facility call for minimum quarterly
reductions in the commitment of $45,000,000 commencing March 31, 2003 as
follows:
Dates of Reduction Quarterly Amount of Reduction
-------------------------------------- ------------------------------------
June 30, 2003 through March 3l, 2005 $1,687,500
June 30, 2005 through March 31, 2006 $2,250,000
June 30, 2006 through March 31, 2008 $2,812,500
The CoBank credit facility also contains provisions that require
mandatory repayments to be made if certain circumstances occur including the
retention of defined excess cash flow, the receipt of insurance proceeds, the
issuance of additional equity, additional debt incurrence, significant asset
dispositions and a change in control of WOW.
Net cash used in operating activities was $1,372,892 and $ 281,152 for
the six months ended June 30, 2000 and 1999. Net cash used in operating
activities amounted to $854,158 and $28,921 for the year ended December 31, 1999
and from July 8, 1998 (inception) to December 31, 1998, respectively. The cash
used for operating activities was primarily attributable to operating losses and
working capital needs.
Net cash used in investing activities was $18,904,599 and $ 150,226 for
the six months ended June 30, 2000 and 1999, respectively. The cash used for the
six months ended June 30, 2000 related primarily to purchasing office equipment,
constructing leasehold improvements, constructing the WOW segment of the
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Sprint PCS wireless network and loan financing costs of $1,615,444. The cash
used for the six months ended June 30, 1999 was related to constructing the WOW
segment of the Sprint PCS wireless network and purchasing office equipment. Net
cash used in investing activities for the year ended December 31, 1999 amounted
to $2,249,596 and was primarily related to the construction of the WOW segment
of the Sprint PCS wireless network and the purchase of office equipment. There
were no cash flows from investing activities for the period from July 8, 1998
(inception) to December 31, 1998.
Net cash provided by financing activities for the six months ended June
30, 2000 was $20,221,368, consisting of member contributions of $11,511,050,
capital acquisition costs of $750,000 and proceeds of $9,460,318 from the CoBank
credit facility. Net cash provided by financing activities for the six months
ended June 30, 1999 was $500,750 which was attributable to member contributions.
Net cash provided by financing activities for the year ended December 31, 1999
and the period from July 8, 1998 (inception) to December 31, 1998 totaled
$3,696,120 and $33,000, respectively, resulted solely from member contributions.
As of June 30, 2000, the primary sources of liquidity for WOW were
approximately $540,000 of cash, approximately $35.5 million of unused capacity
under the CoBank credit facility, and approximately $18.0 million of subscribed
(but unpaid) capital from WOW Holdings members.
The management of WOW currently believes that WOW has sufficient funds
available through cash, available borrowings and subscribed capital to complete
the current build-out plan and to fund working capital losses through 2001.
Actual amounts of funds required to build out the WOW segment of the Sprint PCS
wireless network and to fund operating losses and working capital needs may vary
materially from estimates, and additional funds may be necessary.
Under the terms of the WOW reorganization agreement, Alamosa Operations
has agreed to extend credit to WOW and the members of WOW Holdings in order for
the capital contribution requirements of the CoBank credit facility to be met
without requiring the contribution of such amounts by the members of WOW
Holdings. See "The WOW Merger-Loan and Services Agreements." WOW intends to rely
on the Alamosa credit extension and the CoBank credit facility to meet its
current operational and capital procurement requirements.
In connection with the entering into the WOW reorganization agreement,
Superholdings entered into a commitment letter with Citicorp, North America,
Inc. and Salomon Smith Barney providing for a senior credit facility of up to
$200.0 million to be made to Alamosa Holdings, LLC fund the cash portion of the
consideration in the Roberts and WOW mergers to fund and the working capital and
build-out needs of Roberts and WOW, including the refinancing of existing
indebtedness of Roberts and WOW.
INFLATION
The management of WOW currently believes that inflation has not had,
and is not likely to have, a material adverse effect on WOW's results of
operations.
EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The management of WOW does not believe that any recently issued
accounting pronouncements will have a material impact on WOW's financial
position, results of operations or cash flows, other than as noted in the above
analysis.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
WOW does not engage in commodity futures trading activities and does
not enter into derivative financial instrument transactions for trading or other
speculative purposes. WOW also does not engage in transactions in foreign
currencies that could expose it to market risk.
WOW is subject to some interest rate risk on its debt financing with
CoBank and any future floating rate financing it may obtain.
The following table presents the estimated future outstanding long-term
debt at the end of each year and future required annual principal balances for
each year then ended associated with the CoBank credit facility based on its
projected levels of long-term indebtedness.
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
--------------------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 THEREAFTER
-------------- -------------- -------------- -------------- -------------- -------------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C> <C> <C>
CoBank credit facility:
Indebtedness (1)........ $ 27.4 $ 45.0 $ 45.0 $ 39.9 $ 33.2 $ -
Average interest rate... 9.94% 9.94% 9.94% 9.94% 9.94% -
Principal payments...... - - - $ 5.1 $ 6.8 $ 33.2
</TABLE>
----------
(1) The amounts represent estimated year-end balances under the CoBank
credit facility based on a projection of the funds borrowed under that
facility pursuant to WOW's current plan of network build-out.
WOW's primary market risk exposure relates to:
o the interest rate risk on long-term borrowings; and
o the related impact on WOW's ability to meet interest expense
requirements and meet financial covenants.
The carrying value of the financial instruments approximates fair
value.
As a condition to the CoBank credit facility, WOW must maintain one or
more interest rate protection agreements in an amount equal to at least 50% of
the principal amounts of loans outstanding. WOW does not hold or issue financial
or derivative financial instruments for trading or speculative purposes. While
WOW cannot predict its ability to refinance existing debt or the impact that
interest rate movements will have on its existing debt, WOW continues to
evaluate its financial position on an ongoing basis.
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AFFILIATION AGREEMENTS WITH SPRINT PCS
As used herein, the term "Sprint network partners" refers to each of
Alamosa, Roberts and WOW.
The Sprint network partners have each entered into four major
affiliation agreements with Sprint and Sprint PCS:
o a management agreement;
o a services agreement; and
o two trademark and service mark license agreements with
different Sprint entities.
We refer to these agreements as the "Alamosa affiliation agreements,"
the "Roberts affiliation agreements," and the "WOW affiliation agreements,"
respectively, and together, the "affiliation agreements."
Alamosa entered into one set of these agreements with Sprint and Sprint
PCS for Alamosa's territory in the southwestern part of the United States and
another set of these agreements for Alamosa's territory in Wisconsin. Unless
otherwise indicated below, the description of the Alamosa affiliation agreements
applies to the affiliation agreements for both of Alamosa's territories.
The following is a description of the material terms and provisions of
the affiliation agreements and the Alamosa consent and agreement with Sprint PCS
and Nortel, that Nortel assigned to EDC, that modifies the Alamosa management
agreement for the benefit of EDC, as administrative agent, and the future
holders of the EDC credit facility. See "-Consent and Agreement for the Benefit
of the Holders of the EDC Credit Facility."
Under the affiliation agreements with Sprint PCS, the Sprint network
partners have the exclusive right to provide wireless personal communications
services under the Sprint and Sprint PCS brand names in their territory. Sprint
PCS holds the spectrum licenses and controls the network through its agreements
with the Sprint network partners. The affiliation agreements with Sprint PCS
require the Sprint network partners to interface with the Sprint PCS wireless
network by building their portion of the Sprint PCS network to operate on the
10, 20 or 30 MHZ of wireless personal communications services frequencies
licensed to Sprint PCS in the 1900 MHZ range.
THE MANAGEMENT AGREEMENTS
The Sprint network partners have each entered into a management
agreement with Sprint and Sprint PCS. We refer to these agreements as the
"Alamosa management agreement," the "Roberts management agreement," and the "WOW
management agreement," respectively, and together, the "management agreements."
Under its management agreement with Sprint PCS, each of the Sprint
network partners has agreed to:
o own, construct and manage a wireless personal communications
services network in its territory in compliance with FCC
license requirements and other technical requirements
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contained in its management agreement;
o distribute Sprint PCS products and services;
o use Sprint PCS's and its own distribution channels in its
territory;
o conduct advertising and promotion activities in its territory;
and
o manage that portion of Sprint PCS's customer base assigned to
its territory.
Sprint PCS will supervise the Sprint network partners' wireless
personal communications services network operations and has the right to
unconditional access to their portions of the Sprint PCS network, including the
right to test and monitor any of their facilities and equipment.
EXCLUSIVITY. Each of the Sprint network partners is designated as the
only person or entity that can manage or operate a wireless personal
communications services network for Sprint PCS in its territory. Sprint PCS is
prohibited from owning, operating, building or managing another wireless
communications network in any Sprint network partner's territory while the
management agreement with such Sprint network partner is in place and no event
has occurred that would permit such agreement to terminate. Sprint PCS is
permitted to make national sales to companies in the Sprint network partners'
territory and, as required by the FCC, to permit resale of the Sprint PCS
products and services in their territory. The management agreements prohibit the
Sprint network partners from interfering with others who resell Sprint PCS
products and services in their territory.
If Sprint PCS decides to expand the geographic size of any Sprint
network partners' build-out within their territory Sprint PCS must provide such
Sprint network partner with written notice of the proposed expansion.
Under each of Alamosa's and Roberts' management agreements, each of
Alamosa and Roberts has a 90 day right of first refusal to build out the
proposed area. If Alamosa or Roberts chooses not to build out the proposed area,
then Sprint PCS may build out the area itself or allow another Sprint PCS
network partner to do so.
Under the WOW management agreement, WOW agrees to build out the
proposed area. Sprint PCS has agreed not to require any new coverage during the
first two years of the WOW management agreement or to require coverage that
exceeds the capacity and footprint parameters that Sprint PCS has adopted for
all its comparable markets. The WOW management agreement also contains a
mechanism for WOW to appeal to Sprint PCS if the build-out is not economically
advantageous for WOW. If WOW fails to build out the proposed area, Sprint PCS
has the termination rights described below under "-Termination of Management
Agreements."
NETWORK BUILD-OUT. Each of the management agreements specifies the
terms of the Sprint PCS affiliation, including the required network build-out
plan. Each of the Sprint network partners has agreed to cover a specified
percentage of the population within each of the markets which make up its
territory by specified dates. Alamosa's and WOW's current build-out plan will
satisfy the network build-out requirements set forth in their respective
management agreements.
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Pursuant to the Roberts management agreement, Roberts has agreed to pay
certain penalties to Sprint PCS if Roberts fails to timely achieve "hard launch"
or full build-out coverage of the Springfield, Joplin, Cape Girardeau, Rolla,
Poplar Bluff, Carbondale, Quincy, Hannibal and Kirksville markets by specific
dates that range from October 27, 2000 to December 1, 2000. Pursuant to the
Roberts reorganization agreement, Superholdings has agreed that at the closing
of the Roberts merger, it will make payments to Sprint PCS in an aggregate
amount that ranges from one-fourth to 100% of any penalties owed by Roberts to
Sprint PCS depending upon the length of Roberts' delay in achieving hard-launch
or full build-out for any such markets. Such payments must be made either in
cash or in the form of shares of Superholdings common stock.
The calculation of penalties is based on the identity of the market,
the delay in achieving "hard launch" or full build-out coverage, the "entire
business value" of Roberts, and the price of Superholdings common stock. In
addition, if any of the Springfield, Joplin or Cape Girardeau markets do not
achieve "hard launch" or full build-out coverage by the dates set forth in the
addendum, penalties will accrue for each market until all three markets achieve
"hard launch" or full build-out coverage. All other markets have a separate
penalty amount, calculated in part on the priority level assigned by Sprint PCS
to that market and the total covered POPs of such market, in addition to the
factors mentioned above.
If Roberts does not achieve "hard launch" or full build-out coverage,
as applicable, in any of its markets within 90 days past the date set forth in
Roberts management agreement, Roberts will be considered to have breached a
material term of the Roberts management agreement, and Sprint PCS will have the
right to declare an event of default under the Roberts management agreement.
"Hard launch" means, for each market, that:
o Roberts has met all Sprint PCS standards and program
requirements for operational and network readiness;
o Roberts has handset inventory, training completed and
point-of-sale materials from Sprint PCS, Sprint PCS national
third party and local third party retail outlets in the
minimum launch footprint to meet reasonably expected
subscriber demand;
o Roberts markets and sells Sprint PCS products and services
through mass advertising; and
o Roberts has met all Sprint PCS "soft launch" criteria, which
means:
o systems are up and functioning, stores are operational
and open, and activations can occur;
o soft launch typically occurs one week after network
ready date, and one week before "hard launch";
o activations of friendly accounts may occur, but any
store traffic is strictly unsolicited; and
o launch-related hiring and training should be completed
prior to "soft launch."
If technically feasible and commercially reasonable, the Sprint network
partners have agreed to
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provide for a seamless handoff of a call initiated in their territory to a
neighboring Sprint PCS network. The management agreements require the Sprint
network partners to reimburse Sprint PCS one-half of the microwave clearing
costs for their territory.
PRODUCTS AND SERVICES. The management agreements identify the products
and services that the Sprint network partners can offer in their territory.
These services include, but are not limited to, Sprint PCS consumer and business
products and services available as of the date of such agreement, or as modified
by Sprint PCS. The Sprint network partners are allowed to sell wireless products
and services that are not Sprint PCS products and services if those additional
products and services do not cause distribution channel conflicts or, in Sprint
PCS's sole determination, consumer confusion with Sprint PCS's products and
services. The Sprint network partners also cannot sell non-Sprint PCS products
and services if it would hamper their build out of the network. Under the
Wisconsin management agreement, if Sprint PCS begins to offer nationally a
product or service that Alamosa already offers, then that product or service
will be considered to be a Sprint PCS product or service.
The Sprint network partners may also sell services such as specified
types of long distance service, Internet access, handsets, and prepaid phone
cards with Sprint, Sprint PCS and other Sprint network partners. If the Sprint
network partners decide to use third parties to provide these services, they
must give Sprint PCS an opportunity to provide the services on the same terms
and conditions. The Sprint network partners cannot offer wireless local loop
services specifically designed for the competitive local exchange market in
areas where Sprint owns the local exchange carrier unless they name the
Sprint-owned local exchange carrier as the exclusive distributor or Sprint PCS
approves the terms and conditions. Sprint does not own the local exchange
carrier in a majority of the markets in the Sprint network partners' territory.
NATIONAL SALES PROGRAMS. The Sprint network partners must participate
in the Sprint PCS sales programs for national sales to customers, and will pay
the expenses and receive the compensation from Sprint PCS sales to national
accounts located in their respective territories. The Sprint network partners
must use Sprint's long distance service, which they can buy at the best prices
offered to comparably situated Sprint customers.
SERVICE PRICING, ROAMING AND FEES. The Sprint network partners must
offer Sprint PCS subscriber pricing plans designated for regional or national
offerings, including Sprint PCS's "Free and Clear" plans. The Sprint network
partners are permitted to establish their own local price plans for Sprint PCS's
products and services offered only in their respective territories, subject to
Sprint PCS's approval. Each Sprint network partner is entitled to receive a
weekly fee from Sprint PCS equal to 92% of "collected revenues" for all
obligations under its management agreement, adjusted by the cost of customer
services provided to such Sprint network partner by Sprint PCS. "Collected
revenues" include revenue from Sprint PCS subscribers based in such Sprint
network partner's territory and inbound non-Sprint PCS roaming. Sprint PCS will
retain 8% of the collected revenues. Outbound non-Sprint PCS roaming revenue,
inbound and outbound Sprint PCS roaming fees, proceeds from the sales of
handsets and accessories, proceeds from sales not in the ordinary course of
business, amounts collected with respect to taxes and, for Alamosa's Wisconsin
territory only, proceeds from sales of Alamosa's products and services, are not
considered collected revenues. Except in the case of taxes, each Sprint network
partner will retain 100% of these revenues. Many Sprint PCS subscribers purchase
bundled pricing plans that allow Sprint PCS roaming anywhere on the Sprint PCS
network without incremental Sprint PCS roaming charges. However, each Sprint
network partner will earn Sprint PCS roaming revenue for every minute that a
Sprint PCS subscriber from outside its territory enters its territory and uses
its services. Each Sprint network partner will earn revenue from Sprint PCS
based on
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a per minute rate established by Sprint PCS when Sprint PCS's or its affiliates'
subscribers roam on the Sprint network partner's portion of the Sprint PCS
network. Similarly, each Sprint network partner will pay the same rate for every
minute Sprint PCS subscribers who are based in its territory use the Sprint PCS
network outside its territory. The analog roaming rate onto a non-Sprint PCS
provider's network is set under Sprint PCS's third party roaming agreements.
VENDOR PURCHASE AGREEMENTS. The Sprint network partners may participate
in discounted volume- based pricing on wireless-related products and warranties
Sprint PCS receives from its vendors. Sprint PCS will use commercially
reasonable efforts to obtain for the Sprint network partners the same prices as
Sprint PCS receives from its vendors.
ADVERTISING AND PROMOTIONS. Sprint PCS uses national as well as
regional television, radio, print, outdoor and other advertising campaigns to
promote its products. The Sprint network partners benefit from the national
advertising at no additional cost to them. In addition to Sprint PCS's national
advertising campaigns, the Sprint network partners advertise and promote Sprint
PCS products and services on a local level in their markets at their cost. The
Sprint network partners have the right to use any promotion or advertising
materials developed by Sprint PCS and only have to pay the incremental cost of
using those materials, such as the cost of local radio and television
advertisement placements and incremental printing costs. Sprint PCS also runs
numerous promotional campaigns which provide customers with benefits such as
additional features at the same rate or free minutes of use for limited time
periods. Each Sprint network partner offers these promotional campaigns to
potential customers in its territory.
PROGRAM REQUIREMENTS. The Sprint network partners must comply with
Sprint PCS's program requirements for technical standards, customer service
standards, roaming coverage and national and regional distribution and national
accounts programs. Sprint PCS can adjust the program requirements at any time.
Each Sprint network partner has the right to appeal to the management of Sprint
PCS if adjustments to program requirements will:
o cause such Sprint network partner to incur a cost exceeding 5%
of the sum of its stockholders' equity plus its outstanding
long term debt; or
o cause such Sprint network partner's operating expenses on a
per-unit basis using a ten year time frame to increase by more
than 10% on a net present value basis.
If Sprint PCS denies such Sprint network partner's appeal and such
Sprint network partner fails to comply with the program adjustment, Sprint PCS
has the termination rights described below under "-Termination of Management
Agreements."
Under the Alamosa management agreement, Sprint PCS has agreed that it
will use commercial reasonableness to adjust the program requirements for cities
located within Alamosa's territory that have a population of less than 100,000.
NON-COMPETITION. The Sprint network partners may not offer Sprint PCS
products and services outside their territory without the prior written approval
of Sprint PCS. Each Sprint network partner may offer, market or promote
telecommunications products and services within its territory only under the
Sprint PCS brands, its own brand, brands of related parties of the Sprint
network partners or other products and services approved under the management
agreements, except that no brand of a significant competitor of
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Sprint PCS or its related parties may be used for those products and services.
To the extent any Sprint network partner has or will obtain licenses to provide
wireless personal communications services outside its territory, such Sprint
network partner may not use the spectrum to offer Sprint PCS products and
services without prior written consent from Sprint PCS.
INABILITY TO USE NON-SPRINT PCS BRAND. The Sprint network partners may
not market, promote, advertise, distribute, lease or sell any of the Sprint PCS
products and services on a non-branded, "private
label" basis or under any brand, trademark or trade name other than the Sprint
PCS brand, except for sales to resellers or as otherwise permitted under the
trademark and service mark license agreements.
TRANSFER OF SPRINT PCS NETWORK. Sprint PCS can sell, transfer or assign
its wireless personal communications services network to a third party if the
third party agrees to be bound by the terms of the management agreements and the
services agreements.
CHANGE IN CONTROL. Sprint PCS must approve a change in control of any
of the Sprint network partners, but this consent cannot be unreasonably
withheld.
RIGHTS OF FIRST REFUSAL. Sprint PCS has rights of first refusal,
without further stockholder approval, to buy each Sprint network partner's
assets upon a proposed sale of all or substantially all of such Sprint network
partner's assets used in the operation of such Sprint network partner's portion
of the Sprint PCS network.
TERM. Each management agreement has an initial term of 20 years with
three 10-year renewal options, which would lengthen each management agreement to
a total term of 50 years. The three 10-year renewal terms automatically occur
unless the Sprint network partner or Sprint PCS provide the other with two years
prior written notice to terminate the agreement or unless the Sprint network
partner is in material default of its obligations under such agreement.
TERMINATION OF MANAGEMENT AGREEMENTS. Each management agreement can be
terminated as a result of the following events:
o termination of Sprint PCS's spectrum licenses;
o an uncured breach under such management agreement;
o bankruptcy of a party to such management agreement;
o such management agreement not complying with any applicable
law in any material respect; or
o the termination of either of the trademark and service mark
license agreements with the Sprint network partner which is a
party to such management agreement.
The termination or non-renewal of a management agreement triggers some
of the rights of the Sprint network partner that is a party to such agreement
and some of the rights of Sprint PCS. The right of either party to a management
agreement to require the other party to purchase or sell the operating assets of
the Sprint Affiliate that is a party to such agreement is discussed below.
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If any Sprint network partner has the right to terminate its management
agreement because of an event of termination caused by Sprint PCS, generally
such Sprint network partner may:
o require Sprint PCS to purchase all of its operating assets
used in connection with its portion of the Sprint PCS network
for an amount equal to at least 80% of its "entire business
value" as defined below;
o in all areas in its territory where Sprint PCS is the licensee
for 20 MHZ or more of the spectrum on the date it terminates
such management agreement, require Sprint PCS to assign to it,
subject to governmental approval, up to 10 MHZ of licensed
spectrum for an amount equal to the greater of either the
original cost to Sprint PCS of the license plus any microwave
clearing costs paid by Sprint PCS or 9% of its "entire
business value"; or
o choose not to terminate such management agreement and sue
Sprint PCS for damages or submit the matter to arbitration.
If Sprint PCS has the right to terminate any management agreement
because of an event of termination caused by the Sprint network partner which is
a party to such management agreement, generally Sprint PCS may:
o require such Sprint network partner, without further
stockholder approval, to sell its operating assets to Sprint
PCS for an amount equal to 72% of such Sprint network
partner's "entire business value";
o require such Sprint network partner to purchase, subject to
governmental approval, the licensed spectrum in its territory
for an amount equal to the greater of either the original cost
to Sprint PCS of the license plus any microwave relocation
costs paid by Sprint PCS or 10% of such Sprint network
partner's "entire business value";
o take any action as Sprint PCS deems necessary to cure its
breach of such management agreement, including assuming
responsibility for, and operating, such Sprint network
partner's portion of the Sprint PCS network; or
o not terminate such management agreement and sue such Sprint
network partner for damages or submit the matter to
arbitration.
Sprint PCS has entered into a consent and agreement with Nortel, that
Nortel assigned to EDC and which has been acknowledged by Alamosa, that modifies
Sprint PCS's rights and remedies under the Alamosa affiliation agreements for
the benefit of EDC, as administrative agent, and future holders of the EDC
credit facility and any refinancing thereof, which was a condition to the
funding of any amounts under the EDC credit facility. The consent and agreement
with EDC generally provides, among other things, that the Alamosa affiliation
agreements generally may not be terminated by Sprint PCS until the EDC credit
facility is satisfied in full pursuant to the terms of the consent and
agreement. Each of WOW's and Roberts' management agreements are subject to a
similar consent and agreement between Sprint PCS, on the one hand, and the
administrative agents under WOW's and Roberts' current credit facilities, on the
other hand. See "-Consent and Agreement for the Benefit of the Holders of the
EDC Credit Facility."
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Pursuant to the terms of the commitment letter with respect to the
Citicorp credit facility, it is a condition to the obligation of the lenders to
make the initial funding thereunder that Sprint PCS and Citicorp enter into a
consent and agreement that modifies Sprint PCS's rights and remedies under
Roberts' and WOW's affiliation agreements with Sprint PCS, for the benefit of
Citicorp and future holders of th Citicorp credit facility and a refinancing
thereof.
NON-RENEWAL. If Sprint PCS gives any Sprint network partner timely
notice that it does not intend to renew the management agreement with such
Sprint network partner, such Sprint network partner may:
o require Sprint PCS to purchase all of its operating assets
used in connection with its portion of the Sprint PCS network
for an amount equal to 80% of such Sprint network partner's
"entire business value"; or
o in all areas in such Sprint network partner's territory where
Sprint PCS is the licensee for 20 MHZ or more of the spectrum
on the date it terminates such management agreement, require
Sprint PCS to assign to it, subject to governmental approval,
up to 10 MHZ of licensed spectrum for an amount equal to the
greater of either the original cost to Sprint PCS of the
license plus any microwave relocation costs paid by Sprint PCS
or 10% of such Sprint network partner's "entire business
value."
If any Sprint network partner gives Sprint PCS timely notice of
non-renewal, or any Sprint network partner and Sprint PCS both give notice of
non-renewal, or any management agreement expires with neither party giving a
written notice of non-renewal, or if any management agreement can be terminated
for failure to comply with legal requirements or regulatory considerations,
Sprint PCS may:
o purchase all of such Sprint network partner's operating
assets, without further stockholder approval, for an amount
equal to 80% of such Sprint network partner's "entire business
value"; or
o require such Sprint network partner to purchase, subject to
governmental approval, the licensed spectrum in its territory
for an amount equal to the greater of either the original cost
to Sprint PCS of the license plus any microwave clearing costs
paid by Sprint PCS or 10% of such Sprint network partner's
"entire business value."
See "Risk Factors-Risks Related to the Relationships with Sprint PCS: Certain
Provisions of the Alamosa, Roberts and WOW affiliation agreements with Sprint
PCS may diminish the value of Superholdings and restrict the sale of
Superholdings' business" for a discussion of possible effects of this part of
the management agreements."
DETERMINATION OF ENTIRE BUSINESS VALUE. If the "entire business value"
of any Sprint network partner is to be determined, such Sprint network partner
and Sprint PCS will each select one independent appraiser and the two appraisers
will select a third appraiser. The three appraisers will determine the "entire
business value" of such Sprint network partner on a going concern basis using
the following principles:
o the "entire business value" is based on the price a willing
buyer would pay a willing seller for the entire on-going
business;
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o then-current customary means of valuing a wireless
telecommunications business will be used;
o the business is conducted under the Sprint and Sprint PCS
brands and such Sprint network partner's affiliation
agreements with Sprint PCS;
o that such Sprint network partner owns the spectrum and
frequencies presently owned by Sprint PCS and subject to such
affiliation agreements with Sprint PCS; and
o the valuation will not include any value for businesses not
directly related to the Sprint PCS products and services, and
those businesses will not be included in the sale.
INSURANCE. Each Sprint network partner is required to obtain and
maintain with financially reputable insurers who are licensed to do business in
all jurisdictions where any work is performed under such Sprint network
partner's 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. Each Sprint network partner has agreed to indemnify
Sprint PCS and its directors, employees and agents and related parties of Sprint
PCS and their directors, employees and agents against any and all claims against
any of the foregoing arising from such Sprint network partner's violation of any
law, a breach by such Sprint network partner of any representation, warranty or
covenant contained in its management agreement or any other agreement between
such Sprint network partner and Sprint PCS, such Sprint network partner's
ownership of the operating assets or the actions or the failure to act of anyone
employed or hired by such Sprint network partner in the performance of any work
under such agreement, except such Sprint network partner will not be obligated
to indemnify Sprint PCS for any claims arising solely from the negligence or
willful misconduct of Sprint PCS. Sprint PCS has agreed to indemnify each Sprint
network partner and its directors, employees and agents against all claims
against any of the foregoing arising from Sprint PCS's violation of any law and
from Sprint PCS's breach of any representation, warranty or covenant contained
in the management agreement with such Sprint network partner or any other
agreement between Sprint PCS and such Sprint network partner, except Sprint PCS
will not be obligated to indemnify such Sprint network partner for any claims
arising solely from its negligence or willful misconduct.
DISPUTE RESOLUTION. If the parties to any management agreement cannot
resolve any dispute between themselves and such management agreement does not
provide a remedy, then either party to such management agreement may require
that any dispute be resolved by a binding arbitration.
THE SERVICES AGREEMENTS
Each of the Sprint network partners has entered into a services
agreement with Sprint and Sprint PCS. We refer to these agreements as the
"Alamosa services agreement," the "Roberts services agreement," and the "WOW
services agreement," respectively, and together, the "services agreements."
Each of the services agreements outlines various back office services
provided by Sprint PCS and available to the Sprint network partners for an
adjustment to the Sprint network partners' 92% fee. Sprint PCS can change the
amount of adjustment for any or all of the services one time in any twelve month
period. The Sprint network partners have the option to cancel a service upon
notification of a fee increase, and if any
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Sprint network partner decides to cancel the service, then Sprint PCS, at such
Sprint network partner's option, must continue to provide that service for nine
months at the original price. Some of the available services include: billing,
customer care, activation, credit checks, handset logistics, home locator
record, voice mail, prepaid services, directory assistance, operator services,
roaming fees, roaming clearinghouse fees, interconnect fees and inter-territory
fees. Sprint PCS offers three packages of available services. Each package
identifies which services must be purchased from Sprint PCS and which may be
purchased from a vendor or provided in-house. Essentially, services such as
billing, activation and customer care must all be purchased from Sprint PCS or
none may be purchased from Sprint PCS. The Sprint network partners have chosen
to initially delegate the performance of these services to Sprint PCS but may
develop an independent capability with respect to these services over time.
Sprint PCS may contract with third parties to provide expertise and services
identical or similar to those to be made available or provided to the Sprint
network partners. The Sprint network partners have agreed not to use the
services performed by Sprint PCS in connection with any other business or
outside their territory. The Sprint network partners may discontinue use of any
service upon three months' prior written notice, while Sprint PCS must give nine
months notice if it will no longer offer any service.
Each Sprint network partner has agreed with Sprint PCS that each will
indemnify the other party as well as the other party's affiliates and their
officers, directors and employees for violations of law or its services
agreement except for any liabilities resulting from the negligence or willful
misconduct of the person seeking to be indemnified or its representatives. Each
services agreement also provides that no party to such 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, such services agreement
except as may otherwise be required by the indemnification provisions. Each
services agreement automatically terminates upon termination of the management
agreement with the Sprint network partner which is a party to such services
agreement, and neither party may terminate such services agreement for any
reason other than the termination of such management agreement.
THE TRADEMARK AND SERVICE MARK LICENSE AGREEMENTS
Each Sprint network partner has entered into a trademark and service
mark license agreement with Sprint and Sprint PCS. We refer to these agreements
as the "Alamosa trademark and service mark license agreements," the "Roberts
trademark and service mark license agreements," and the "WOW trademark and
service mark license agreements," respectively, and together, the "trademark and
service mark license agreements."
Each Sprint network partner has a non-transferable license to use, at
no additional cost to such Sprint network partner, the Sprint and Sprint PCS
brand names and "diamond" symbol, and several other U.S. trademarks and service
marks such as "The Clear Alternative to Cellular" and "Clear Across the Nation"
on Sprint PCS products and services. The Sprint network partners believe that
the Sprint and Sprint PCS brand names and symbols enjoy a high degree of
awareness, providing the Sprint network partners an immediate benefit in the
market place. Each Sprint network partner's use of the licensed marks is subject
to such Sprint network partner's 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. Each
Sprint network partner has agreed to promptly notify Sprint and Sprint PCS of
any infringement of any of the licensed marks within its territory of which such
Sprint network partner becomes aware and to provide assistance to Sprint and
Sprint PCS in connection with Sprint's and Sprint PCS's enforcement of their
respective rights. Each Sprint network partner has agreed with Sprint and Sprint
PCS that each will
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indemnify the other for losses incurred in connection with a material breach of
the trademark license agreements between Sprint, Sprint PCS and such Sprint
network partner. In addition, each Sprint network partner has agreed to
indemnify Sprint and Sprint PCS from any loss suffered by reason of such Sprint
network partner's 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 such Sprint network
partner's use of the licensed marks in compliance with certain guidelines.
Sprint and Sprint PCS can terminate the trademark and service mark
license agreements with any Sprint network partner if such Sprint network
partner files for bankruptcy or materially breaches its agreement or if its
management agreement is terminated. Each Sprint network partner can terminate
the trademark and service mark licenses agreement upon Sprint's or Sprint PCS's
abandonment of the licensed marks or if Sprint or Sprint PCS files for
bankruptcy or the management agreement with such Sprint network partner is
terminated. However, Sprint and Sprint PCS can assign their interests in the
licensed marks to a third party if that third party agrees to be bound by the
terms of the trademark and service mark license agreements.
CONSENT AND AGREEMENT FOR THE BENEFIT OF THE HOLDERS OF THE EDC CREDIT FACILITY
Sprint PCS entered into a consent and agreement with Nortel, which
Nortel assigned to EDC and Alamosa acknowledged, that modifies Sprint PCS's
rights and remedies under the Alamosa affiliation agreements with Sprint PCS,
for the benefit of EDC and future holders of the EDC credit facility and any
refinancing thereof, which was a condition to the funding of any amounts under
the EDC credit facility.
Each of CoBank and DLJ, as administrative agents under WOW's and
Roberts' credit facilities, respectively, has entered into a similar consent and
agreement with Sprint PCS that modifies each of WOW's and Roberts' management
agreements. Upon the refinancing of existing indebtedness of Roberts and WOW,
each of the WOW consent and agreement and the Roberts consent and agreement will
be terminated. As a condition precedent to the closing and funding the Citicorp
credit facility, Citicorp will enter into a consent and agreement with Sprint
PCS that modifies Sprint PCS's rights and remedies under Roberts' and WOW's
affiliation agreements with Sprint PCS, for the benefit of Citicorp and future
holders of the Citicorp credit facility and any refinancing thereof.
The Alamosa consent and agreement with EDC generally provides, among
other things, the following:
o Sprint PCS's consent to the pledge of substantially all of
Alamosa's assets, including Alamosa's rights in its
affiliation agreements with Sprint PCS;
o that the Alamosa affiliation agreements with Sprint PCS may
not be terminated by Sprint PCS until the EDC credit facility
is satisfied in full pursuant to the terms of the Alamosa
consent and agreement with EDC, unless Alamosa's operating
subsidiaries or assets are sold to a purchaser who does not
continue to operate the business as a Sprint PCS network
affiliate, which sale requires the approval of EDC;
o Sprint PCS may not exercise its right under the management
agreement to purchase Alamosa's assets until all obligations
pursuant to the EDC credit facility have been paid in full in
cash and all commitments to advance credit under such facility
have been terminated
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or have expired. However, Sprint PCS retains the option to
purchase Alamosa's assets if it first pays all obligations
under the EDC facility and such facility is terminated in
connection with such payment;
o for Sprint PCS to maintain 10 MHz of wireless personal
communications services spectrum in all of Alamosa's markets
until the EDC credit facility is satisfied, Alamosa's
operating assets are sold after Alamosa's default under the
EDC credit facility or the management agreement is terminated;
o for redirection of payments due to Alamosa under the Alamosa
management agreement from Sprint PCS to EDC during the
continuation of any default by Alamosa under the EDC credit
facility;
o for Sprint PCS and EDC to provide to each other notices of
default by Alamosa under the Alamosa management agreement and
the EDC credit facility, respectively;
o the ability to appoint interim replacements, including Sprint
PCS or a designee of the administrative agent, to operate
Alamosa's portion of the Sprint PCS network under the Alamosa
affiliation agreements after an event of default under the EDC
credit facility or an event of termination under the Alamosa
affiliation agreements;
o subject to certain requirements and limitations, the ability
of EDC or Sprint PCS to assign the Alamosa affiliation
agreements with Sprint PCS and sell Alamosa's assets or the
partnership interests of its operating subsidiaries to a
qualified purchaser that is not a major competitor of Sprint
PCS or Sprint, free of the restrictions on assignment and
change of control in the Alamosa management agreement, if the
EDC credit facility has been accelerated after Alamosa's
default; and
o subject to certain requirements and limitations, that if
Sprint PCS enters into consent and agreement documents with
similarly-situated lenders that have provisions that are more
favorable to the lender, Sprint PCS will give EDC written
notice of the amendments and will amend the Alamosa consent
and agreement with EDC in the same manner at EDC's request;
consequently, from time to time, EDC and Sprint PCS may modify
the Alamosa consent and agreement so that it will contain
terms and conditions more favorable to EDC.
SPRINT PCS'S RIGHT TO PURCHASE ON ACCELERATION OF AMOUNTS OUTSTANDING
UNDER THE EDC CREDIT FACILITY. Subject to the requirements of applicable law, so
long as the EDC credit facility remains outstanding, Sprint PCS has the right to
purchase Alamosa's operating assets or the partnership interests of its
operating subsidiaries, upon its receipt of notice of an acceleration of the EDC
credit facility, under the following terms:
o Sprint PCS elects to make such a purchase within a specified
period;
o the purchase price is the greater of an amount equal to 72% of
Alamosa's "entire business value" or the amount Alamosa owes
under the EDC credit facility;
o if Sprint PCS has given notice of its intention to exercise
the purchase right, then the
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administrative agent is prohibited for a specified period
after the acceleration, or until Sprint PCS rescinds its
intention to purchase, from enforcing its security interest;
and
o if Alamosa receives a written offer that is acceptable to it
to purchase its operating assets or the partnership interests
of Alamosa's operating subsidiaries after the acceleration,
then Sprint PCS has the right to purchase Alamosa's operating
assets or the partnership interests of Alamosa's operating
subsidiaries, as the case may be, on terms at least as
favorable to Alamosa as the offer Alamosa receives. Sprint PCS
must agree to purchase the operating assets or the partnership
interests of Alamosa's operating subsidiaries within 14
business days of its receipt of the offer, on acceptable
conditions, and in an amount of time acceptable to Alamosa and
EDC.
Upon acceleration of the EDC credit facility, Sprint also has the right
to purchase the obligations under the EDC credit facility by repaying such
obligations in full in cash.
SALE OF OPERATING ASSETS OR THE PARTNERSHIP INTERESTS OF ALAMOSA'S
OPERATING SUBSIDIARIES TO THIRD PARTIES. If Sprint PCS does not purchase
Alamosa's operating assets or the partnership interests of its operating
subsidiaries after an acceleration of the obligations under the EDC credit
facility, then EDC may sell the operating assets or the partnership interests of
its operating subsidiaries. Subject to the requirements of applicable law,
including the law relating to foreclosures of security interests, EDC has two
options:
o to sell the operating assets or the partnership interests of
its operating subsidiaries to an entity that meets the
requirements to be Alamosa's successor under its affiliation
agreements with Sprint PCS; or
o to sell the operating assets or the partnership interests of
its operating subsidiaries to any third party, subject to
specified conditions.
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REGULATORY ENVIRONMENT
REGULATION OF THE WIRELESS TELECOMMUNICATIONS INDUSTRY
The FCC can have a substantial impact upon entities that manage
wireless personal communications service systems and/or provide wireless
personal communications services because the FCC regulates the licensing,
construction, operation, acquisition and interconnection arrangements of
wireless telecommunica tions systems in the United States.
The FCC has promulgated, and is in the process of promulgating, a
series of rules, regulations and policies to, among other things:
o grant or deny licenses for wireless personal communications
service frequencies;
o grant or deny wireless personal communications service license
renewals;
o rule on assignments and/or transfers of control of wireless
personal communications service licenses;
o govern the interconnection of wireless personal communications
service networks with other wireless and wireline service
providers;
o establish access and universal service funding provisions;
o impose fines and forfeitures for violations of any of the
FCC's rules; and
o regulate the technical standards of wireless personal
communications services networks.
The FCC currently prohibits a single entity from having a combined
attributable interest (20% or greater) in broadband wireless personal
communications service, cellular and specialized mobile radio (SMR) and licenses
totaling more than 45 MHZ in any geographic area. The 45 MHZ cap is raised to 55
MHZ for cellular spectrum in rural areas. The 20% cap is raised to 40% where the
relevant single entity is a small business or a rural telephone company. The
geographic area at issue is the PCS licensed service area, where there can be
significant overlap involving 10% or more of the population in the geographic
area.
TRANSFERS AND ASSIGNMENTS OF WIRELESS PERSONAL COMMUNICATIONS SERVICES LICENSES
The FCC must give prior approval to the assignment of, or transfers
involving, substantial changes in ownership or control of a wireless personal
communications service license. This means that Superholdings and its
stockholders will receive advance notice of any and all transactions involved in
transferring control of Sprint PCS or the assignment of some or all of the
wireless personal communications service licenses held by Sprint PCS. The FCC
proceedings afford Superholdings and its stockholders an opportunity to evaluate
proposed transactions well in advance of closing, and to take actions necessary
to protect their interests. Non-controlling interests in an entity that holds a
wireless personal communications service license or operates wireless personal
communications service networks generally may be bought or sold without prior
FCC approval. In addition, a recent FCC order requires only post-consummation
notification of pro forma assignments or transfers of control of certain
commercial mobile radio service licenses.
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CONDITIONS OF WIRELESS PERSONAL COMMUNICATIONS SERVICES LICENSES
All wireless personal communications service licenses are granted for
ten year terms conditioned upon timely compliance with the FCC's build-out
requirements. Pursuant to the FCC's build-out requirements, all 30 MHZ broadband
wireless personal communications service licensees must construct facilities
that offer coverage to one-third of the population in their licensed areas
within five years and to two-thirds of the population in such areas within ten
years, and all 10 MHZ broadband wireless personal communications services
licensees must construct facilities that offer coverage to at least one-quarter
of the population in their licensed areas within five years or make a showing of
"substantial service" within that five year period.
If the build-out requirements are not met, wireless personal
communications service licenses could be forfeited. The FCC also requires
licensees to maintain control over their licenses. The affiliation agreements
between Sprint PCS and each of Alamosa, Roberts and WOW reflect a management
agreement that the parties believe meets the FCC requirements for licensee
control of licensed spectrum.
If the FCC were to determine that the affiliation agreements between
Sprint PCS and each of Alamosa, Roberts and WOW need to be modified to increase
the level of licensee control, they have agreed with Sprint PCS to use their
best efforts to modify the agreements necessary to cause the agreements to
comply with applicable law and to preserve to the extent possible the economic
arrangements set forth in the agreements. If the agreements cannot be modified,
the agreements may be terminated pursuant to their terms. The FCC could also
impose monetary penalties on Sprint PCS, and possibly revoke one or more of the
Sprint PCS licenses.
WIRELESS PERSONAL COMMUNICATIONS SERVICES LICENSE RENEWAL
Wireless personal communications service licensees can renew their
licenses for additional ten year terms. Wireless personal communications service
renewal applications are not subject to auctions. However, under the FCC's
rules, third parties may oppose renewal applications and/or file competing
applications. If one or more competing applications are filed, a renewal
application will be subject to a comparative renewal hearing. The FCC's rules
afford wireless personal communications services renewal applicants involved in
comparative renewal hearings with a "renewal expectancy." The renewal expectancy
is the most important comparative factor in a comparative renewal hearing and is
applicable if the wireless personal communica tions service renewal applicant
has:
o provided "substantial service" during its license term; and
o substantially complied with all applicable laws and Federal
Communications Commission rules and policies.
The FCC's rules define "substantial service" in this context as service
that is sound, favorable and substantially above the level of mediocre service
that might minimally warrant renewal. The FCC's renewal expectancy and
procedures make it very likely that Sprint PCS will retain the wireless personal
communications service licenses managed by each of Alamosa, Roberts and WOW for
the foreseeable future.
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INTERCONNECTION
The FCC has the authority to order interconnection between commercial
mobile radio services, commonly referred to as CMRS, providers and incumbent
local exchange carriers. The FCC has ordered local exchange carriers to provide
reciprocal compensation to commercial mobile radio service providers for the
termination of traffic. Using these rules, each of Alamosa, Roberts and WOW will
assist Sprint PCS in the negotiation of interconnection agreements for the
Sprint PCS network in their market area with all of the Bell operating
companies, including Verizon and several smaller independent local exchange
carriers. Interconnection agreements are negotiated on a state-wide basis.
If an agreement cannot be reached, parties to interconnection
negotiations can submit outstanding disputes to state authorities for
arbitration. Negotiated interconnection agreements are subject to state
approval. The FCC rules and rulings, as well as the state arbitration
proceedings, will directly impact the nature and cost of the facilities
necessary for interconnection of the Sprint PCS systems with local, national and
international telecommunications networks. They will also determine the nature
and amount of revenues each of Alamosa, Roberts, WOW and Sprint PCS can receive
for terminating calls originating on the networks of local exchange and other
telecommunications carriers.
OTHER FCC REQUIREMENTS
In June 1996, the FCC adopted rules that prohibit broadband wireless
personal communications services providers from unreasonably restricting or
disallowing resale of their services or unreasonably discriminating against
resellers. Resale obligations will automatically expire on November 24, 2002.
These existing resale requirements and their expiration may somewhat affect the
number of resellers competing with Sprint PCS and its managers and affiliates in
various markets. However, to date, wireless resellers have not significantly
impacted wireless service providers. Any losses in retail customers have been
offset, in major part, by increases in wireless customers, traffic and wholesale
revenues.
The FCC also adopted rules in June 1996 that require local exchange and
most commercial mobile radio services providers, to program their networks to
allow customers to change service providers without changing telephone numbers,
which is referred to as service provider number portability. The FCC requires
most commercial mobile radio service providers to implement wireless service
provider number portability where requested in the 100 largest metropolitan
areas in the United States by November 24, 2002. Most commercial mobile radio
service providers are required to implement nationwide roaming by November 24,
2002 as well. The FCC currently requires most commercial mobile radio service
providers to be able to deliver calls from their networks to ported numbers
anywhere in the country, and to contribute to the Local Number Portability Fund.
Implementation of wireless service provider number portability will require
wireless personal communications service providers like Alamosa, Roberts, WOW
and Sprint PCS to purchase more expensive switches and switch upgrades. However,
it will also enable existing cellular customers to change to wireless personal
communications services without losing their existing wireless telephone
numbers, which should make it easier for wireless personal communications
service providers to market their services to existing cellular users.
The FCC has adopted rules permitting broadband wireless personal
communications service and other commercial mobile radio service providers to
provide wireless local loop and other fixed services that would directly compete
with the wireline services of local exchange carriers. This creates new markets
and revenue opportunities for Sprint PCS and its managers and affiliates and
other wireless providers, and may
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do so increasingly in future years. In June 1996, the FCC adopted rules
requiring broadband wireless personal communications services and other
commercial mobile radio services providers to implement enhanced emergency 911
capabilities within 18 months after the effective date of the FCC's rules. The
full compliance with these rules must occur by October 1, 2001. Further waivers
of the enhanced emergency 911 capability requirements may be obtained by
individual service providers by filing a waiver request. The FCC's waivers and
extensions are enabling Alamosa, Roberts, WOW, Sprint PCS and other commercial
mobile radio services industry members to delay emergency 911 implementation
until the required equipment becomes more functional and less expensive.
However, at a more reasonable future cost, emergency 911 services may afford
wireless carriers substantial and attractive new service and marketing
opportunities.
On June 10, 1999, the FCC initiated a regulatory proceeding seeking
comment from the public on a number of issues related to competitive access to
multiple-tenant buildings, including the following:
o the FCC's tentative conclusion that the Communications Act of
1934, as amended, requires utilities to permit
telecommunications service providers access to rooftop and
other rights- of-way in multiple tenant buildings under just,
reasonable and nondiscriminatory rates, terms and conditions;
and
o whether building owners that make access available to a
telecommunications service providers should be required to
make access available to all other telecommunications service
providers on a nondiscriminatory basis, and whether the FCC
has the authority to impose such a requirement.
This proceeding could affect the availability and pricing of sites for
each of Alamosa's, Roberts' and WOW's antennae and those of their competitors.
COMMUNICATIONS ASSISTANCE FOR LAW ENFORCEMENT ACT
The Communications Assistance for Law Enforcement Act, or CALEA,
enacted in 1994 requires wireless personal communications services and other
telecommunications service providers to meet capability and capacity
requirements needed by federal, state and local law enforcement to preserve
their electronic surveillance capabilities. Wireless personal communications
service providers must comply with the current industry CALEA capability
standard, known as J-STD-025, by June 30, 2000, and with recently adopted
additions by September 30, 2001. Wireless personal communications services
providers must comply with the CALEA capacity requirements by March 12, 2001. At
present, many wireless personal communication service providers, including
Sprint PCS, have petitioned the Federal Communications Commission for extensions
of the June 30, 2000 deadline, and it appears that the FCC will grant most
providers extensions until at least March 31, 2001. In addition, most wireless
personal communications service providers are ineligible for federal
reimbursement for the software and hardware upgrades necessary to comply with
the CALEA capability and capacity requirements, but several bills pending in
Congress may expand reimbursement rights if they are enacted. Finally, the
Federal Bureau of Investigation has been discussing with the industry options
for further deferring CALEA compliance requirements in geographic areas with
minimal or nonexistent electronic surveillance needs.
In addition, the FCC is considering petitions from numerous parties to
establish and implement technical compliance standards pursuant to CALEA
requirements. In sum, CALEA capability and capacity requirements are likely to
impose some additional switching and network costs upon Sprint PCS and its
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managers and affiliates and other wireless entities. However, it is possible
that some of these costs will be reduced or delayed if current law enforcement
or legislative initiatives are adopted and implemented during 2000 or
thereafter.
OTHER FEDERAL REGULATIONS
Sprint PCS and its managers and affiliates must bear the expense of
compliance with FCC and Federal Aviation Administration regulations regarding
the siting, lighting and construction of transmitter towers and antennas. In
addition, FCC environmental regulations may cause some of Alamosa's, Roberts' or
WOW's, as the case may be, base station locations to become subject to the
additional expense of regulation under the National Environmental Policy Act.
The FCC is required to implement this Act by requiring service providers to meet
land use and radio emissions standards.
REVIEW OF UNIVERSAL SERVICE REQUIREMENTS
The FCC and the states are required to establish "universal service"
programs to ensure that affordable, quality telecommunications services are
available to all Americans. Sprint PCS is required to contribute to the federal
universal service program as well as existing state programs. The FCC has
determined that Sprint PCS's "contribution" to the federal universal service
program is a variable percentage of "end-user telecommunications revenues."
Although many states are likely to adopt a similar assessment methodology, the
states are free to calculate telecommunications service provider contributions
in any manner they choose as long as the process is not inconsistent with the
FCC's rules. At the present time it is not possible to predict the extent of the
Sprint PCS total federal and state universal service assessments or its ability
to recover from the universal service fund. However, some wireless entities are
seeking state commission designation as "eligible telecommunications carriers,"
enabling them to receive federal and state universal service support, and are
preparing to compete aggressively with wireline telephone companies for
universal service revenue. Because each of Alamosa, Roberts and WOW manage
substantial rural areas for Sprint PCS, they are likely to receive revenues in
the future from federal and state universal service support funds that are much
greater than the reductions in their revenues due to universal service
contributions paid by Sprint PCS.
PARTITIONING; DISAGGREGATION
The FCC has modified its rules to allow broadband wireless personal
communications services licensees to partition their market areas and/or to
disaggregate their assigned spectrum and to transfer partial market areas or
spectrum assignments to eligible third parties. These rules may enable each of
Alamosa, Roberts and WOW to purchase wireless personal communications service
spectrum from Sprint PCS and other wireless personal communications services
licensees as a supplement or alternative to the existing management
arrangements.
WIRELESS FACILITIES SITING
States and localities are not permitted to regulate the placement of
wireless facilities so as to "prohibit" the provision of wireless services or to
"discriminate" among providers of those services. In addition, so long as a
wireless system complies with the FCC's rules, states and localities are
prohibited from using radio frequency health effects as a basis to regulate the
placement, construction or operation of wireless facilities. These rules are
designed to make it possible for Sprint PCS and its managers and affiliates and
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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
service providers for toll services. This enables each of Alamosa, Roberts, WOW
and Sprint PCS to generate additional revenues by reselling the toll services of
Sprint PCS and other interexchange carriers from whom each of Alamosa, Roberts
and WOW can obtain favorable volume discounts. However, the FCC is authorized to
require unblocked access to toll service providers subject to certain
conditions.
STATE REGULATION OF WIRELESS SERVICE
Section 332 of the Communications Act preempts states from regulating
the rates and entry of commercial mobile radio service providers. Section 332
does not prohibit a state from regulating the other terms and conditions of
commercial mobile services, including consumer billing information and
practices, billing disputes and other consumer protection matters. However,
states may petition the FCC to regulate those providers and the FCC may grant
that petition if the state demonstrates that:
o market conditions fail to protect subscribers from unjust and
unreasonable rates or rates that are unjustly or unreasonably
discriminatory; or
o such market conditions exist and commercial mobile radio
service is a replacement for a substantial portion of the
landline telephone service within the state.
To date, the FCC has granted no such petition. To the extent Sprint PCS and its
managers and affiliates provide fixed wireless service, each of Alamosa, Roberts
and WOW may be subject to additional state regulation. These standards and
rulings have prevented states from delaying the entry of wireless personal
communications services and other wireless carriers into their jurisdictions via
certification and similar requirements, and from delaying or inhibiting
aggressive or flexible wireless price competition after entry.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF ALAMOSA,
WOW HOLDINGS, ROBERTS HOLDINGS AND SUPERHOLDINGS
ALAMOSA
The following table presents information regarding the beneficial
ownership of Alamosa common stock as of October 11, 2000, with respect to:
o each person who, to our knowledge, is the beneficial owner of
5% or more of the outstanding common stock;
o each of the directors;
o each of the executive officers; and
o all executive officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF
NAME AND ADDRESS(1) OWNED(2) OWNERSHIP
------------------------------------------------------------------------- ----------------------
<S> <C> <C>
5% STOCKHOLDERS
Caroline Hunt Trust Estate .................... 8,209,480(3) 13.4%
100 Crescent Court, Suite 1700
Dallas, TX 75201
South Plains Telephone Cooperative, Inc........ 8,769,732(4) 14.3%
2425 Marshall Street
Lubbock, TX 79415
Michael R. Budagher............................ 7,312,776(5) 11.9%
3702 Holland Avenue
Dallas, TX 75219
Taylor Telephone Cooperative, Inc.............. 5,175,700(6) 8.4%
9796 N. Interstate 20
Merkel, TX 79536
ENMR Telephone Cooperative, Inc................ 3,194,215(7) 5.2%
7111 North Prince
Clovis, NM 88102
DIRECTORS AND EXECUTIVE OFFICERS:
David E. Sharbutt.............................. 1,369,724(8) 2.2%
Jerry W. Brantley.............................. 621,250(9) 1.0%
Michael R. Budagher............................ 7,312,776(5) 11.9%
Ray M. Clapp................................... 107,175(10) *
Kendall W. Cowan............................... 291,000(11) *
Scotty Hart.................................... 29,300(12) *
Thomas Hyde.................................... 28,000(13) *
Schuyler B. Marshall........................... 138,000(14) *
Tom M. Phelps.................................. 31,325(15) *
Loyd I. Rinehart............................... - *
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NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF
NAME AND ADDRESS(1) OWNED(2) OWNERSHIP
------------------------------------------------------------------------- ----------------------
Anthony Sabatino............................... - *
Reagan W. Silber............................... 3,045,647(16) 4.96%
Jimmy R. White................................. 29,014(17) *
All Directors and Executive Officers
as a Group (13 persons)...................... 11,685,961 19.0%
</TABLE>
------------
* Less than one percent.
(1) Except as otherwise indicated below, the address for each executive
officer and director is 5225 S. Loop 289, Lubbock, Texas 79424.
(2) Beneficial ownership is determined in accordance with Rule 13d-3 of the
Exchange Act. A person is deemed to be the beneficial owner of any
shares of common stock if that person has or shares voting power or
investment power with respect to that common stock, or has the right to
acquire beneficial ownership at any time within 60 days of the date of
the table. As used herein, "voting power" is the power to vote or
direct the voting of shares and "investment power" is the power to
dispose or direct the disposition of shares.
(3) The share information reflected is based upon a statement on Amendment
No. 1 to a Schedule 13D filed on April 3, 2000 with the SEC. Includes
shares held by Caroline Hunt Trust Estate or a wholly-owned subsidiary
of Caroline Hunt Trust Estate.
(4) The share information reflected is based upon a statement on a Schedule
13D filed jointly by South Plains Telephone Cooperative, Inc. and South
Plains Advanced Communications & Electronics, Inc. on February 7, 2000
with the SEC. South Plains Advanced Communications is a wholly-owned
subsidiary of South Plains Telephone Cooperative, which may be deemed
to be the beneficial owner of the shares held by South Plains Advanced
Communications. South Plains Telephone Cooperative and South Plains
Advance Communications share voting and investment power for these
shares, as a result of their parent-subsidiary relationship. The
address for South Plains Advance Communications is the same as the
address for South Plains Telephone Cooperative.
(5) The share information reflected is based upon a statement on a Schedule
13D filed jointly by Mr. Budagher, Budagher Family, LLC and West Texas
PCS, LLC on February 7, 2000 with the SEC. Budagher Family, LLC owns
100% of the membership interests in West Texas PCS, Inc. and Mr.
Budagher and his spouse and children own 100% of the membership
interests in Budagher Family, LLC, each of which may also be deemed to
be the beneficial owner of the shares held by West Texas PCS. Includes
28,000 shares issuable to Mr. Budagher pursuant to options currently
exercisable and 7,284,776 shares for which Budagher Family, LLC, West
Texas PCS and Mr. Budagher share voting and investment power, as a
result of their parent-subsidiary and control person relationships. Mr.
Budagher is the sole Manager and President of Budagher Family, LLC and
the sole Manager of West Texas PCS. The address for Budagher Family,
LLC and West Texas PCS is the same as the address for Mr. Budagher.
(6) The share information reflected is based upon a statement on a Schedule
13D filed jointly by Taylor Telephone Cooperative, Inc. and Taylor
Telecommunications, Inc. on February 7, 2000 with the SEC. Taylor
Telecommunications is a wholly-owned subsidiary of Taylor Telephone
Cooperative, which may be deemed to be the beneficial owner of the
shares held by Taylor Telecommunications. Taylor Telephone Cooperative
and Taylor Telecommunications share voting and investment power for
these shares, as a result of their parent- subsidiary relationship. The
address for Taylor Telecommunications is the same as the address for
Taylor Telephone Cooperative.
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(7) The share information reflected is based upon a statement on a Schedule
13D filed jointly by ENMR Telephone Cooperative, Inc., Plateau
Telecommunications, Incorporated and Telecommunications Holdings East,
Inc. Plateau is a wholly owned subsidiary of Telecommunications
Holdings East, which in turn is a wholly-owned subsidiary of ENMR, each
of which may also be deemed to be the beneficial owner of the shares
held by Plateau. ENMR, Plateau and Telecommunications Holdings East
share voting and investment power over these shares as a result of
their parent-subsidiary relationships. The address for Plateau and
Telecommunications Holdings East is the same as the address for ENMR.
(8) Includes 242,500 shares held individually by Mr. Sharbutt, 48,824
shares held in Mr. Sharbutt's 401(k) plan, 593,200 shares beneficially
owned by Five S, Ltd., 200 shares beneficially owned by Mr. Sharbutt's
children and 485,000 shares issuable pursuant to options exercisable
within 60 days. Mr. Sharbutt is a limited partner of Five S, Ltd. and
President of Sharbutt Inc., the general partner of Five S Ltd., and may
be considered a beneficial owner of the shares owned by Five S, Ltd.
Mr. Sharbutt disclaims beneficial ownership of these shares, except to
the extent of his pecuniary interest therein. Additionally, Mr.
Sharbutt is a director, shareholder and the President of US
Consultants, Inc., the general partner of Harness, Ltd., which holds
292,938 shares of Alamosa common stock. Mr. Sharbutt disclaims
beneficial ownership of the shares owned by Harness, Ltd. The address
for Five S Ltd. is 4606 91st Street, Lubbock, Texas 79424 and the
address for Harness, Ltd. is P.O. Box 65700, 4747 S. Loop 289, Lubbock,
Texas 79464.
(9) Includes 242,500 shares held individually by Mr. Brantley, 15,000
shares held by Mr. Brantley's wife and 363,750 shares issuable pursuant
to options exercisable within 60 days.
(10) Includes 64,175 shares held individually by Mr. Clapp and 43,000 shares
issuable pursuant to options currently exercisable.
(11) These shares are issuable pursuant to options exercisable within 60
days.
(12) Includes 1,000 shares held individually by Mr. Hart, 28,000 shares
issuable pursuant to options currently exercisable and 300 shares held
by Lubbock HLH, Ltd. Mr. Hart controls Lubbock HLH, Ltd. and is a
beneficial owner of the shares held by Lubbock HLH, Ltd. Excludes
8,769,732 shares held by South Plains Advanced Communications &
Electronics, Inc., as to which Mr. Hart disclaims beneficial ownership.
Mr. Hart is the General Manager of South Plains Telephone Cooperative
and South Plains Advanced Communications & Electronics, a wholly-owned
subsidiary of South Plains Telephone Cooperative. Mr. Hart's address is
the same as the address for South Plains Telephone Cooperative.
(13) Includes 28,000 shares issuable pursuant to options currently
exercisable. Excludes 5,175,700 shares held by Taylor
Telecommunications, Inc., as to which Mr. Hyde disclaims beneficial
ownership. Mr. Hyde is the Manager of Taylor Telephone Cooperative,
Inc. and Taylor Telecommunications, a wholly-owned subsidiary of Taylor
Telephone Cooperative. Mr. Hyde's address is the same as the address
for Taylor Telephone Cooperative.
(14) Includes 110,000 shares held individually by Mr. Marshall and 28,000
shares issuable pursuant to options currently exercisable. Excludes
8,209,480 shares held by Caroline Hunt Trust Estate, as to which Mr.
Marshall disclaims beneficial ownership. Additionally, Mr. Marshall is
the President of Rosewood Financial, Inc. and the Rosewood Corporation,
both of which are wholly-owned subsidiaries of the Caroline Hunt Trust
Estate. Mr. Marshall disclaims beneficial ownership of any shares held
by Rosewood Financial Inc. and the Rosewood Corporation. Mr. Marshall
is a Director of various Caroline Hunt Trust Estate subsidiaries. The
address for Mr. Marshall is the same as the address for Caroline Hunt
Trust Estate.
(15) Includes 3,325 shares held individually by Mr. Phelps and 28,000 shares
issuable pursuant to options currently exercisable. Excludes 3,194,215
shares held by Plateau Telecommunications, Inc., as to which Mr. Phelps
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disclaims beneficial ownership. Mr. Phelps is the Executive Vice
President and General Manager of ENMR Telephone Cooperative, Inc. and
of its wholly-owned subsidiary Telecommunications Holdings East, Inc.
and the Executive Vice President of Plateau Telecommunications, Inc., a
wholly-owned subsidiary of Telecommunications Holdings East. The
address for Mr. Phelps is the same as the address for ENMR Telephone
Cooperative.
(16) Includes 28,000 shares issuable pursuant to options currently
exercisable as well as 3,017,647 shares held by Tregan International
Corp. Mr. Silber is a director, the President and 50% stockholder of
Tregan International and is a beneficial owner of the shares owned by
Tregan International. Mr. Silber's address is 2711 North Haskell
Avenue, 5th Floor 2832, Dallas, TX 75204.
(17) Includes 1,014 shares held individually by Mr. White and 28,000 shares
issuable pursuant to options currently exercisable. Mr. White's address
is Highway 87 North, Dalhart, TX 79022.
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ROBERTS HOLDINGS
The table below sets forth certain information regarding
beneficial ownership of Roberts Holdings' units of membership as of October 11,
2000, by the two holders of Roberts Holdings' outstanding units of membership
interests.
UNIT OF MEMBERSHIP
INTEREST BENEFICIALLY PERCENTAGE OF
NAME AND ADDRESS OWNED (1) OWNERSHIP
------------------------------------ ----------------------- ---------------
Michael V. Roberts 10,000 50%
1408 North Kingshighway, Suite 300
St. Louis, Missouri 63113
Steven C. Roberts 10,000 50%
1408 North Kingshighway, Suite 300
St. Louis, Missouri 63113
(1) At October 11, 2000, a total of 20,000 units of membership interests
were outstanding.
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WOW HOLDINGS
The following table presents information regarding the beneficial
ownership of WOW Holdings membership interests as of October 11, 2000, with
respect to:
o each person who, to our knowledge, is the beneficial owner of
5% or more of the outstanding units of membership interests;
o each of the directors; and
o each of the executive officers.
<TABLE>
<CAPTION>
UNIT OF MEMBERSHIP
INTEREST BENEFICIALLY PERCENTAGE OF
NAME AND ADDRESS OWNED (1) OWNERSHIP
----------------------------------------- ---------------------------------------- ---------------------
<S> <C> <C>
Seth A. Buechley 193,897.00 (2) 0.6144%
25977 SW Canyon Creek Road
Suite E
Wilsonville, OR 97070
Clear Creek Mutual Telephone Co. 1,110,200.00 (3) 3.5179%
18238 S. Fischers Mill Road
Oregon City, OR 97045
Cal-Ore Wireless, Inc. 2,915,256.50 (4) 9.2378%
719 West 3rd Street
P.O. Box 847
Dorris, CA 96023
Henderson Bay, LLC 3,875,587.00 12.2808%
1145 West Broadway Plaza
Suite 1500
Tacoma Financial Center
Tacoma, WA 98402
WOW Investment Partners, L.P. 14,000,000.00 (5) 44.3627%
2711 North Haskell Avenue
Fifth Floor, LB 32
Dallas, TX 75204
</TABLE>
(1) At October 11, 2000, a total of 31,558,046.35 units of membership
interests were outstanding, no options to acquire units of membership
interests of WOW were exercisable within 60 days and no warrants to
acquire units of membership interests were exercisable within 60 days.
(2) Mr. Buechley is a member of the Board of Managers of WOW.
(3) Clear Creek Mutual Telephone Co. is a cooperative telephone company.
Mitchell A. Moore, Chief Executive Officer and Chairman of Board of
Managers of WOW, is the President of Clear Creek Mutual Telephone Co.
(4) Cal-Ore Wireless, Inc. is a privately held corporation. Edward B.
Ormsbee, a member of the Board of Managers of WOW, is the General
Manager of Cal-Ore Wireless, Inc.
(5) WOW Investment Partner L.L.C. holds the sole general partner interest
of WOW Investment Partners, L.P. The sole membership interest of WOW
Investment Partner L.L.C. is held by Silpearl Associates, LLC. Reagan
W. Silber indirectly owns 50% of the membership interests, and is the
President, of Silpearl Associates, LLC.
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SUPERHOLDINGS
The following table presents information regarding the beneficial
ownership of Superholdings common stock after giving effect to the
reorganization, with respect to:
o each person anticipated to be the beneficial owner of
5% or more of the outstanding common stock;
o each person expected to be a Superholdings director;
o each person expected to be a Superholdings executive officer;
and
o all persons expected to be Superholdings executive officers
and directors as a group.
The information in the table below assumes the completion of the
reorganization in accordance with the existing terms of the reorganization
agreements, including the issuance of 6,750,000 shares of Superholdings common
stock to each of Michael Roberts and Steven Roberts and the exchange of each
unit of membership interest in WOW for 0.1917 shares of Superholdings common
stock. Upon the effectiveness of the reorganization, Superholdings will assume
the long-term incentive plan and all awards granted thereunder.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF
NAME AND ADDRESS(1) OWNED(2) OWNERSHIP
-------------------------------------------------- ------------------------- ---------------
<S> <C> <C>
5% STOCKHOLDERS
Caroline Hunt Trust Estate ....................... 8,209,480(3) 10.1%
100 Crescent Court, Suite 1700
Dallas, TX 75201
South Plains Telephone Cooperative, Inc........... 8,769,732(4) 10.8%
2425 Marshall Street
Lubbock, TX 79415
Michael R. Budagher............................... 7,312,776(5) 9.0%
3702 Holland Avenue
Dallas, TX 75219
Taylor Telephone Cooperative, Inc................. 5,175,700(6) 6.4%
9796 N. Interstate 20
Merkel, TX 79536
DIRECTORS AND EXECUTIVE OFFICERS:
David E. Sharbutt................................. 1,369,724(7) 1.7%
Jerry W. Brantley................................. 621,250(8) *
Michael R. Budagher............................... 7,312,776(5) 9.0%
Ray M. Clapp...................................... 107,175(9) *
Kendall W. Cowan.................................. 291,000(10) *
Scotty Hart....................................... 29,300(11) *
Thomas Hyde....................................... 28,000(12) *
Schuyler B. Marshall.............................. 138,000(13) *
Tom M. Phelps..................................... 31,325(14) *
Michael V. Roberts................................ 6,750,000(15) 8.3%
Steven C. Roberts................................. 6,750,000(16) 8.3%
Loyd I. Rinehart.................................. - *
Anthony Sabatino.................................. - *
Reagan W. Silber.................................. 3,045,647(17) 3.8%
Jimmy R. White.................................... 29,014(18) 0
All Directors and Executive Officers
as a Group (15 persons)......................... 25,185,961 31.1%
</TABLE>
------------
* Less than one percent.
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<PAGE>
(1) Except as otherwise indicated below, the address for each executive
officer and director is 5225 S. Loop 289, Lubbock, Texas 79424.
(2) Beneficial ownership is determined in accordance with Rule 13d-3 of the
Exchange Act. A person is deemed to be the beneficial owner of any
shares of common stock if that person has or shares voting power or
investment power with respect to that common stock, or has the right to
acquire beneficial ownership at any time within 60 days of the date of
the table. As used herein, "voting power" is the power to vote or
direct the voting of shares and "investment power" is the power to
dispose or direct the disposition of shares.
(3) The share information reflected is based upon a statement on Amendment
No. 1 to a Schedule 13D filed on April 3, 2000 with the SEC. Includes
shares held by Caroline Hunt Trust Estate or a wholly-owned subsidiary
of Caroline Hunt Trust Estate.
(4) The share information reflected is based upon a statement on a Schedule
13D filed jointly by South Plains Telephone Cooperative, Inc. and South
Plains Advanced Communications & Electronics, Inc. on February 7, 2000
with the SEC. South Plains Advanced Communications is a wholly-owned
subsidiary of South Plains Telephone Cooperative, which may be deemed
to be the beneficial owner of the shares held by South Plains Advanced
Communications. South Plains Telephone Cooperative and South Plains
Advance Communications share voting and investment power for these
shares, as a result of their parent-subsidiary relationship. The
address for South Plains Advance Communications is the same as the
address for South Plains Telephone Cooperative.
(5) The share information reflected is based upon a statement on a Schedule
13D filed jointly by Mr. Budagher, Budagher Family, LLC and West Texas
PCS, LLC on February 7, 2000 with the SEC. Budagher Family, LLC owns
100% of the membership interests in West Texas PCS, Inc. and Mr.
Budagher and his spouse and children own 100% of the membership
interests in Budagher Family, LLC, each of which may also be deemed to
be the beneficial owner of the shares held by West Texas PCS. Includes
28,000 shares issuable to Mr. Budagher pursuant to options currently
exercisable and 7,284,776 shares for which Budagher Family, LLC, West
Texas PCS and Mr. Budagher share voting and investment power, as a
result of their parent-subsidiary and control person relationships. Mr.
Budagher is the sole Manager and President of Budagher Family, LLC and
the sole Manager of West Texas PCS. The address for Budagher Family,
LLC and West Texas PCS is the same as the address for Mr. Budagher.
(6) The share information reflected is based upon a statement on a Schedule
13D filed jointly by Taylor Telephone Cooperative, Inc. and Taylor
Telecommunications, Inc. on February 7, 2000 with the SEC. Taylor
Telecommunications is a wholly-owned subsidiary of Taylor Telephone
Cooperative, which may be deemed to be the beneficial owner of the
shares held by Taylor Telecommunications. Taylor Telephone Cooperative
and Taylor Telecommunications share voting and investment power for
these shares, as a result of their parent- subsidiary relationship. The
address for Taylor Telecommunications is the same as the address for
Taylor Telephone Cooperative.
(7) Includes 242,500 shares held individually by Mr. Sharbutt, 48,824
shares held in Mr. Sharbutt's 401(k) plan, 593,200 shares beneficially
owned by Five S, Ltd., 200 shares beneficially owned by Mr. Sharbutt's
children and 485,000 shares issuable pursuant to options exercisable
within 60 days. Mr. Sharbutt is a limited partner
200
<PAGE>
of Five S, Ltd. and President of Sharbutt Inc., the general partner of
Five S Ltd., and may be considered a beneficial owner of the shares
owned by Five S, Ltd. Mr. Sharbutt disclaims beneficial ownership of
these shares, except to the extent of his pecuniary interest therein.
Additionally, Mr. Sharbutt is a director, shareholder and the President
of US Consultants, Inc., the general partner of Harness, Ltd., which
holds 292,938 shares of Alamosa common stock. Mr. Sharbutt disclaims
beneficial ownership of the shares owned by Harness, Ltd. The address
for Five S Ltd. is 4606 91st Street, Lubbock, Texas 79424 and the
address for Harness, Ltd. is P.O. Box 65700, 4747 S. Loop 289, Lubbock,
Texas 79464.
(8) Includes 242,500 shares held individually by Mr. Brantley, 15,000
shares held by Mr. Brantley's wife and 363,750 shares issuable pursuant
to options exercisable within 60 days.
(9) Includes 64,175 shares held individually by Mr. Clapp and 43,000 shares
issuable pursuant to options currently exercisable.
(10) These shares are issuable pursuant to options exercisable within 60
days.
(11) Includes 1,000 shares held individually by Mr. Hart, 28,000 shares
issuable pursuant to options currently exercisable and 300 shares held
by Lubbock HLH, Ltd. Mr. Hart controls Lubbock HLH, Ltd. and is a
beneficial owner of the shares held by Lubbock HLH, Ltd. Excludes
8,769,732 shares held by South Plains Advanced Communications &
Electronics, Inc., as to which Mr. Hart disclaims beneficial ownership.
Mr. Hart is the General Manager of South Plains Telephone Cooperative
and South Plains Advanced Communications & Electronics, a wholly-owned
subsidiary of South Plains Telephone Cooperative. Mr. Hart's address is
the same as the address for South Plains Telephone Cooperative.
(12) Includes 28,000 shares issuable pursuant to options currently
exercisable. Excludes 5,175,700 shares held by Taylor
Telecommunications, Inc., as to which Mr. Hyde disclaims beneficial
ownership. Mr. Hyde is the Manager of Taylor Telephone Cooperative,
Inc. and Taylor Telecommunications, a wholly-owned subsidiary of Taylor
Telephone Cooperative. Mr. Hyde's address is the same as the address
for Taylor Telephone Cooperative.
(13) Includes 110,000 shares held individually by Mr. Marshall and 28,000
shares issuable pursuant to options currently exercisable. Excludes
8,209,480 shares held by Caroline Hunt Trust Estate, as to which Mr.
Marshall disclaims beneficial ownership. Additionally, Mr. Marshall is
the President of Rosewood Financial, Inc. and the Rosewood Corporation,
both of which are wholly-owned subsidiaries of the Caroline Hunt Trust
Estate. Mr. Marshall disclaims beneficial ownership of any shares held
by Rosewood Financial Inc. and the Rosewood Corporation. Mr. Marshall
is a Director of various Caroline Hunt Trust Estate subsidiaries. The
address for Mr. Marshall is the same as the address for Caroline Hunt
Trust Estate.
(14) Includes 3,325 shares held individually by Mr. Phelps and 28,000 shares
issuable pursuant to options currently exercisable. Excludes 3,194,215
shares held by Plateau Telecommunications, Inc., as to which Mr. Phelps
disclaims beneficial ownership. Mr. Phelps is the Executive Vice
President and General Manager of ENMR Telephone Cooperative, Inc. and
of its wholly-owned subsidiary Telecommunications Holdings East, Inc.
and the Executive Vice President of Plateau Telecommunications, Inc., a
wholly-owned subsidiary of Telecommunications Holdings East. The
address for Mr. Phelps is the same as the address for ENMR Telephone
Cooperative.
(15) Mr. Roberts address is 1408 North Kingshighway, Suite 300, St. Louis,
MO 63113.
(16) Mr. Roberts address is 1408 North Kingshighway, Suite 300, St. Louis,
MO 63113.
(17) Includes 28,000 shares issuable pursuant to options currently
exercisable as well as 3,017,647 shares held by
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<PAGE>
Tregan International Corp. Mr. Silber is a director, the President and
50% stockholder of Tregan International and is a beneficial owner of
the shares owned by Tregan International. Mr. Silber's address is 2711
North Haskell Avenue, 5th Floor 2832, Dallas, TX 75204.
(18) Includes 1,014 shares held individually by Mr. White and 28,000 shares
issuable pursuant to options currently exercisable. Mr. White's address
is Highway 87 North, Dalhart, TX 79022.
202
<PAGE>
DESCRIPTION OF SUPERHOLDINGS CAPITAL STOCK
The following description of the terms of the capital stock of
Superholdings at the time of completion of the reorganization is not meant to be
complete and is qualified by reference to the forms of the amended and restated
certificate of incorporation of Superholdings and the amended and restated
by-laws of Superholdings, which are included as exhibits to the registration
statement on Form S-4 of which this proxy statement-prospectus forms a part.
GENERAL
Both Alamosa and Superholdings are incorporated under the laws of the
State of Delaware. In accordance with the Alamosa reorganization agreement, upon
completion of the Alamosa merger, holders of Alamosa common stock will be
entitled to receive Superholdings common stock.
The provisions of the amended and restated certificate of incorporation
and the amended and restated by-laws of Superholdings to be adopted at the time
of completion of the reorganization will be substantially the same as those
currently contained in the amended and restated certificate of incorporation and
by-laws of Alamosa. Accordingly, the rights of the holders of Alamosa common
stock are substantially the same as the rights the holders of Superholdings
common stock will have upon completion of the reorganization. The only material
difference between the terms of Alamosa's amended and restated certificate of
incorporation and the amended and restated certificate of incorporation to be
adopted by Superholdings upon completion of the reorganization is that under the
amended and restated certificate of incorporation of Superholdings, stockholders
of Superholdings will not have the right to call a special meeting of
stockholders while under the amended and restated certificate of incorporation
of Alamosa, Alamosa stockholders holding a majority of the outstanding shares of
Alamosa common stock may call a special meeting of Alamosa stockholders.
AUTHORIZED CAPITAL STOCK
Under its current certificate of incorporation, Superholdings has the
authority to issue up to 95,000,000 shares of common stock and 5,000,000 shares
of preferred stock. Under the amended and restated certificate of incorporation
of Superholdings to be adopted by Superholdings upon completion of the
reorganization, Superholdings will have the authority to issue up to 290,000,000
shares of common stock and 10,000,000 shares of preferred stock.
SUPERHOLDINGS COMMON STOCK
Pursuant to the amended and restated certificate of incorporation of
Superholdings, the holders of Superholdings common stock will be entitled to one
vote for each share held of record on all matters submitted to a vote of
stockholders and will not have any cumulative voting rights.
Subject to the rights of the holders of any series of preferred stock,
holders of common stock will be entitled to receive ratably those dividends as
may be declared by the board of directors out of legally available funds. The
Citicorp credit facility likely will significantly limit the ability of Alamosa
Holdings, LLC and its subsidiaries (including Roberts and WOW) to pay dividends
or make distributions on their capital stock. The EDC credit facility and the
Alamosa senior discount notes indenture will continue to significantly limit the
ability of Alamosa and Alamosa PCS, Inc. to pay dividends and distributions on
their capital stock to Superholdings. Accordingly, Superholdings expects that it
will only be able to pay dividends to the extent
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<PAGE>
that Alamosa Holdings, LLC or Alamosa are permitted to do so under the terms of
the Alamosa senior discount notes indenture and the EDC credit facility, or
under the Citicorp credit facility.
If Superholdings liquidates, dissolves or winds up, the holders of
shares of Superholdings common stock will be 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.
Holders of shares of Superholdings common stock will have no
preemptive, conversion, redemption, subscription or similar rights. All shares
of Superholdings common stock, when validly issued and fully paid, will be
non-assessable.
After completion of the reorganization the transfer agent and registrar
for the Superholdings common stock will be ChaseMellon Shareholder Services in
Dallas, Texas.
PREFERRED STOCK
The Superholdings preferred stock may be issued in one or more series
by the board of directors, subject to limitations prescribed by Delaware law,
without further stockholder approval. Each series may have different rights,
preferences and designations and qualifications, limitations and restrictions
that may be established by Superholdings' board of directors without approval
from the stockholders. These rights, designations and preferences include
dividend rights, dividend rates, conversion rights, voting rights, liquidation
preferences, terms of redemption, the number of shares constituting any series
and the designation of such series.
The issuance of preferred stock 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 Superholdings' 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.
Prior to completion of the reorganization, the board of directors of
Superholdings will authorize and designate the Series A preferred stock
described under "Stockholder Rights Plan" below in connection with the adoption
by Superholdings of a stockholder rights plan having substantially the same
terms and provisions as those in the Alamosa stockholder rights plan.
WARRANTS
In connection with the closing of the Citicorp credit facility,
Superholdings will place into an escrow account warrants to purchase a number of
shares of common stock equal to 2% of the fully diluted common equity of
Superholdings as of the date of the closing for the Citicorp credit facility.
The Citicorp warrants will have an exercise price equal to 20% over the average
closing price per share of Alamosa common stock for the 20 days prior to but
excluding the closing date of the Citicorp credit facility as quoted on The
Nasdaq National Market, subject to adjustment pursuant to customary antidilution
provisions. Each Citicorp warrant will be exercisable for a period of ten years.
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Unless Superholdings makes a cash contribution to the common equity of
Alamosa Holdings, LLC of at least $75.0 million within one year of the closing
of the Citicorp credit facility, which amount may not include the APCS
Contribution or any conversion into equity of Alamosa Holdings, LLC of
outstanding loans theretofore made by Superholdings or an affiliate of Alamosa
Holdings, LLC, its subsidiaries, WOW or Roberts, after the date of the closing
for the Citicorp credit facility and prior to the dates specified below (each a
"Determination Date"), the Citicorp warrants will be immediately released to
each lender from the escrow account on such date in an amount equal to the
product of (i) the corresponding percentage specified below and (ii) such
lender's pro rata share of such Citicorp warrants.
Six months following the date of the closing for the
Citicorp credit facility 50.0%
Six months following the initial Determination Date 50.0%
Any Citicorp warrant to which none of the lenders is, or may become,
entitled shall be returned to Superholdings for cancellation.
DELAWARE LAW
Superholdings is subject to the provisions of Section 203 of the
Delaware General Corporation Law. This statute is intended to discourage certain
types of coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of Superholdings to first negotiate
with the board of directors of Superholdings. In general, the statute prohibits
Superholdings from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date that the person became
an interested stockholder, unless:
o prior to the date that the person became an interested
stockholder, the transaction or business combination that
resulted in the person becoming an interested stockholder is
approved by the Superholdings board of directors;
o upon completion of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of Superholdings' outstanding
voting stock; or
o on or after that date, the business combination is approved by
Superholdings' board of directors and by the affirmative vote
of at least 66 2/3% of Superholdings' outstanding voting stock
that is not owned by the interested stockholder.
Generally, a "business combination" includes a merger, asset or stock
sale, or other transaction resulting in a financial benefit to the stockholder.
Subject to certain exceptions, an "interested stockholder" is a person who,
together with that person's affiliates and associates, owns or within the
previous three years did own 15% or more of Superholdings' voting stock.
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<PAGE>
PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS THAT MAY HAVE
ANTI-TAKEOVER EFFECTS
The following is a summary of certain provisions of the amended and
restated certificate of incorporation and the amended and restated by-laws of
Superholdings at the time of completion of the reorganization which could have
the effect of delaying, deferring or preventing a change in control of
Superholdings and which would make removal of Superholdings' management more
difficult. Substantially the same provisions are found in Alamosa's existing
certificate of incorporation and by-laws.
BOARD CLASSIFICATION. Superholdings' certificate of incorporation will
provide for the division of the board of directors into three classes, as nearly
equal in number as possible, with each class beginning its three year term in a
different year. Superholdings' certificate of incorporation will also provide
that only the board of directors may fix the number of directors.
STOCKHOLDER NOMINATIONS. Superholdings' by-laws will provide that a
stockholder may nominate directors only if the stockholder delivers written
notice to Superholdings not less than 45 days or more than 75 days before the
first anniversary of the date on which Superholdings first mailed its 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 Superholdings 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 of public announcement of the
date of the annual meeting is made.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Superholdings' certificate
of incorporation will provide 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 may Superholdings'
stockholders fill any newly created directorships. Directors elected to fill a
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.
REMOVAL OF DIRECTORS. Directors of Superholdings 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.
ACTION BY WRITTEN CONSENT. Superholdings' certificate of incorporation
will provide that any action required or permitted to be taken by its
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 MEETING OF STOCKHOLDERS. Special meetings of stockholders of
Superholdings may be called only by the Chairman of the board of directors, if
there is one, the President or the board of directors pursuant to a resolution
adopted by a majority of authorized directors. Unlike the amended and restated
certificate of incorporation of Alamosa, the amended and restated certificate of
incorporation of Superholdings will not provide that a special meeting of
stockholders may also be called by the holders of not less than a majority of
the then outstanding shares of stock of Superholdings entitled to vote generally
in an election of directors or that otherwise are entitled to vote with such
stock on the specific matter in question.
The foregoing 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 to
acquire all
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<PAGE>
or a majority of the common stock. This is because the person or entity making
the offer, even if it acquired a majority of Superholdings' outstanding voting
securities, would be unable to increase the size of the board, remove directors
or 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 matters which such persons or entities endorse, including the
election of new directors or the approval of a merger, would have to wait for
the next duly called stockholders meeting.
VOTING REQUIREMENTS FOR CERTAIN BUSINESS COMBINATIONS. Superholdings'
certificate of incorporation will also contain fair price provisions designed to
provide safeguards for stockholders when a stockholder owning 20% or more of its
voting stock, referred to as an "interested stockholder," or that interested
stockholder's affiliates or associates, attempts to effect a business
combination with Superholdings.
In general, in addition to any affirmative vote required by law, a
"business combination" (as defined above) between Alamosa and an interested
stockholder must be approved by the affirmative vote of the holders of 80% of
the outstanding voting stock of Superholdings, excluding voting stock owned by
such interested stockholder. The additional voting requirements will not apply,
however, if:
o the business combination was approved by not less than a
majority of the disinterested directors; or
o a series of conditions are satisfied requiring (in summary):
o that the consideration to be paid to Superholdings'
shareholders in the business combination must be at
least equal to the higher of (1) the highest per-share
price paid by the interested stockholder in acquiring
any shares of Superholdings common stock during the two
years prior to the an nouncement date of the business
combination or in the transaction in which it became an
interested stockholder (the "determination date"),
whichever is higher or (2) the fair market value per
share of Superholdings common stock on the announcement
date or determination date, whichever is higher, in
either case appropriately adjusted for any subsequent
stock dividend, stock split, combination of shares or
similar event (any non-cash consider ation is treated
similarly); and
o certain "procedural" requirements are complied with,
such as the solicita tion of proxies pursuant to the
rules of the SEC and no decrease in regular dividends
(if any) after the interested stockholder became an
interested stockholder (except as approved by a
majority of the disinterested directors).
Pursuant to the Superholdings certificate of incorporation, the
following events will be deemed to be "business combinations":
o any merger or consolidation of Superholdings involving an
interested stockholder or any other company that is or after
the merger or consolidation will be an affiliate or associate
of an interested stockholder;
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o specified dispositions of assets, cash flow or earning power
of Superholdings to an interested stockholder, any issuance of
Superholdings' securities to an interested stockholder or
Superholdings entering into loans or other arrangements
involving an interested stockholder, in each case, meeting
specified threshold amounts;
o the adoption of any plan of liquidation or dissolution of
Superholdings; and
o any issuance or reclassification of Superholdings' securities
having the effect of increasing the proportionate share of
ownership of an interested stockholder.
Regarding the 20% threshold for the definition of interested
stockholder, persons who were stockholders in Alamosa before the date of its
initial public offering will be permitted under the amended and restated
certificate of incorporation of Superholdings to enter into voting agreements
with each other, without being deemed the beneficial owner of the securities
owned by the other parties to the voting agreements, only if the voting
agreements:
o were approved by the Superholdings board of directors prior to
the time they were entered into;
o do not govern the voting of Superholdings common stock in
matters other than the election of members of the board of
directors of Superholdings; and
o do not govern the voting of Superholdings common stock held by
persons other than persons who were stockholders in
Superholdings before the date of this sale of Superholdings
common stock.
CHARTER AND BY-LAW AMENDMENTS. Delaware Law provides that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless the corporation's certificate of incorporation or by-laws, as the case
may be, requires a greater percentage. Superholdings' certificate of
incorporation requires the affirmative vote of the holders of at least 80% of
the outstanding voting stock to amend or repeal certain provisions of the
certificate of incorporation or by-laws described above. Except as otherwise
provided by law, holders of Superholdings common stock are not entitled to vote
on any amendment to Superholdings certificate of incorporation that changes the
powers, preferences, rights or other terms of an outstanding series of
Superholdings preferred stock, if the holders of the affected series of
preferred stock are entitled to vote on the proposed amendment. The by-laws may
be amended or repealed by the board of directors, except if the bylaw provisions
affect provisions of the certificate of incorporation or by-laws described
above, then the affirmative vote of the holders of at least 80% of the
outstanding voting stock is required. The 80% stockholder vote would be in
addition to any separate vote that each class of preferred stock is entitled to
that might in the future be required in accordance with the terms of any
preferred stock that might be outstanding at the time any amendments are
submitted to stockholders.
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 Superholdings'
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 securities or the removal
of
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incumbent management, even if these events would be perceived as favorable to
the interests of Superholdings' stockholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. The certificate of
incorporation requires Superholdings to indemnify Superholdings' 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 Superholdings or its stockholders for monetary damages for breach of
certain fiduciary duties as a director. The effect of this provision is to
restrict Superholdings' rights and the rights of its 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:
o acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
o the payment of dividends or the redemption or purchase of
stock in violation of Delaware law;
o any breach of the duty of loyalty to Superholdings or its
stockholders; or
o any transaction from which the director derived an improper
personal benefit.
CERTAIN PROVISIONS OF THE SPRINT PCS AGREEMENTS
Sprint's affiliation agreements with Alamosa, Roberts and WOW contain
restrictions which may limit Superholdings' ability to sell its business and may
have a substantial anti-takeover effect.
Pursuant to Alamosa's, Roberts' and WOW's affiliation agreements with
Sprint PCS, under specific circumstances and without further stockholder
approval, Sprint PCS may purchase Alamosa's , Roberts' and WOW's operating
assets or capital stock for 72% or 80% of the "entire business value" of
Alamosa, Roberts or WOW, as the case may be, which includes the value of the
spectrum licenses, business operations and other assets more fully described in
"Affiliation Agreements with Sprint PCS -- The Management Agreement --
Determination of Entire Business Value." In addition, Sprint PCS must approve
any change of control of Alamosa's, Roberts' or WOW's ownership and must consent
to any assignment of Alamosa's, Roberts' or WOW's affiliation agreements with
Sprint PCS. Sprint PCS has a right of first refusal if Alamosa, Roberts or WOW
decide to sell their operating assets to a third party. Alamosa, Roberts and WOW
are also subject to a number of restrictions on the transfer of its business
including a prohibition on the sale of Alamosa, Roberts or WOW or their
operating assets to competitors of Sprint or Sprint PCS.
Sprint's rights under the Alamosa affiliation agreements are subject to
the provisions of the consent and agreement entered into by Sprint with EDC as
administrative agent under Alamosa's credit facility, and its right under the
WOW and Roberts affiliation agreements will be subject to the provisions of any
consent and agreement entered into by Sprint with Citicorp in connection with
the Citicorp credit facility. See "Affiliation Agreements with Sprint
PCS-Consent and Agreements for the Benefit of the Holders of the EDC credit
facility."
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STOCKHOLDER RIGHTS PLAN
RIGHTS AND RIGHTS CERTIFICATES. The Superholdings board of directors
currently expects to adopt a stockholder rights plan effective upon the
completion of the reorganization. This plan will be substantially similar to the
stockholder rights plan previously adopted by the board of directors of Alamosa.
A right will attach to each share of Superholdings common stock issued
at the completion of the reorganization and each share of Superholdings common
stock issued subsequent to the completion of the reorganization. Each right,
when exercisable, will entitle the holder to purchase from Superholdings one
one- thousandth of a share of Series A preferred stock at a purchase price of
$84 per one one-thousandth of a share, subject to adjustment. Each fractional
share of the Series A preferred stock will essentially be the economic
equivalent of one share of common stock.
A stockholder rights plan is designed to deter coercive takeover
tactics and to otherwise encourage third parties interested in acquiring
Superholdings to negotiate with the Superholdings board of directors. The
stockholder rights plan achieves these goals by significantly diluting the
ownership interest of a person who acquires a specified percentage of common
stock without first obtaining approval of the Superholdings board of directors.
Initially, the rights will be attached to all certificates representing
outstanding shares of Superholdings common stock and will be transferred with
and only with such certificates. The rights will separate from the Superholdings
common stock and become exercisable upon the earlier to occur of:
o the close of business on the tenth business day after the
public announcement that a person or group of persons has
acquired 20% or more of Superholdings' outstanding common
stock, except in connection with an offer approved by the
Superholdings board of directors; or
o the close of business on the tenth business day after the
commencement of, or announcement of an intention to commence a
tender offer or exchange offer that would result in a person
or group of persons acquiring 20% or more of Superholdings'
outstanding common stock.
A person or group of persons will be considered to have acquired
beneficial ownership of common stock if they have the power to vote or direct
the voting of the common stock. Certain stockholders named in the amended and
restated certificate of incorporation of Superholdings may enter into voting
agreements with each other only, at any time, without being deemed the
beneficial owner of securities owned by the other parties to the voting
agreements, if the voting agreements:
o were approved by the Superholdings board of directors prior to
the time they were entered into;
o do not govern the voting of Superholdings common stock
regarding matters other than the election of members of the
Superholdings board of directors; and
o do not govern the voting of Superholdings' common stock held
by persons other than persons who were stockholders in Alamosa
before the date of its initial public offering.
EXPIRATION OF RIGHTS. The rights will expire at the close of business
on the tenth anniversary of the
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date of issuance, unless Superholdings redeems or exchanges the rights before
that date or amends the stockholder rights plan to extend the term of the
rights.
FLIP-IN RIGHT. If any person or group of persons acquires 20% or more
of Superholdings' outstanding common stock, each holder of a right, other than
the acquiring person, will have the right to receive the number of shares of
common stock, or in certain circumstances, cash, property or other securities of
Superholdings, having a value equal to two times the purchase price of the
right. The acquiring person's rights will automatically become null and void in
that event. In other words, the stockholders other than the acquiring person
will be able to buy common stock at half price.
FLIP-OVER RIGHT. If at any time after a person or group of persons
acquires 20% or more of Superholdings' outstanding common stock and the
following occurs:
o Superholdings effects a merger or other business combination
in which Superholdings is not the surviving corporation;
o Superholdings is the surviving corporation in a consolidation,
merger or similar transaction in which its shares of common
stock are changed into or exchanged for other securities; or
o Superholdings sells or otherwise transfers more than 50% of
its assets, cash flow or earning power.
then each holder of a right, except a person who has acquired beneficial
ownership of 20% or more of the outstanding common stock, may purchase, upon the
exercise of each right at the then-current purchase price, that number of shares
of common stock of the acquiring company with a market value equal to two times
the purchase price of the right. In other words, the stockholders other than the
acquiring person will be able to buy common stock of the acquiring company at
half price.
ADJUSTMENTS. The purchase price and the number of shares of Series A
preferred stock or other securities issuable upon exercise of the rights may be
adjusted to prevent dilution upon:
o stock dividends, subdivisions, combinations or
reclassifications of the Series A preferred
stock;
o below market issuances of rights or warrants to subscribe for
or convert into Series A preferred stock; or
o distributions to holders of the Series A preferred stock of
evidence of indebtedness, cash, excluding regular quarterly
cash dividends, assets, excluding dividends payable in Series
A preferred stock, or subscription rights or warrants.
EXCHANGE OF RIGHTS. After a person or group of persons acquires 20% of
Superholdings' outstanding common stock but before that person or group
beneficially owns 50% or more of Superholdings' common stock, Superholdings may,
at its option, exchange the rights at an exchange ratio of one-half the number
of shares of common stock, Series A preferred stock, or other property for which
a right is exercisable immediately prior to Superholdings' decision to exchange
the rights, subject to adjustment. Rights held by an acquiring person are not
entitled to these exchange rights. In that event, the stockholders other than
the
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acquiring person would receive common stock in exchange for their rights.
REDEMPTION OF RIGHTS. At any time before a person or group of persons
acquires 20% or more of Superholdings' outstanding common stock, Superholdings
may redeem the rights at a price of $0.001 per right. Upon the effective date of
the redemption of the rights, the rights will terminate and the rights holders
will only be entitled to receive the $0.001 redemption price.
RIGHTS AS A STOCKHOLDER. Until a right is exercised, the rights will
not entitle the holder to the rights as a Superholdings stockholder, including,
without limitation, the right to vote or to receive dividends.
SERIES A PREFERRED STOCK. The terms of the Series A preferred stock
will be contained in a Certificate of Designations, Rights and Preferences to be
filed with the Delaware Secretary of State prior to completion of the
reorganization.
ANTI-TAKEOVER EFFECTS. The rights will have certain anti-takeover
effects. The rights will cause substantial dilution to any person or group that
attempts to acquire Superholdings without the approval of its board of
directors. As a result, the overall effect of the rights may be to make more
difficult a merger, tender offer, other business combination or proxy contest
involving Superholdings, even if such event would be favorable to the interest
of stockholders of Superholdings.
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AMENDMENT TO ALAMOSA'S 1999 LONG-TERM INCENTIVE PLAN
The following summary of the amended and restated long-term incentive
plan is not meant to be complete and is qualified in its entirety by reference
to a copy of the amended and restated long-term incentive plan, which is
incorporated by reference and attached as Appendix F to this proxy
statement-prospectus. You are urged to read the full text of the amended and
restated long-term incentive plan.
At the special meeting, Alamosa stockholders will be asked to approve
an amendment to the long-term incentive plan. The amendment will increase the
number of shares of common stock authorized for issuance under the long-term
incentive plan and provide for an automatic annual increase in shares available
under the long-term incentive plan.
Alamosa will implement the proposed amendment to the long-term
incentive plan if it receives stockholder approval for the proposed amendment,
even if the reorganization does not occur.
LONG-TERM INCENTIVE PLAN OVERVIEW
The adoption of the long-term incentive plan was approved by Alamosa
stockholders on February 1, 2000. Upon the effectiveness of the reorganization,
Superholdings will assume the long-term incentive plan. The purpose of the
long-term incentive plan is to attract and retain the services of key
management, employees, outside directors and consultants by providing those
persons with a proprietary interest in Alamosa. The long-term incentive plan
allows Alamosa to provide that proprietary interest through the grant of:
o incentive stock options;
o non-qualified stock options;
o tandem and independent stock appreciation rights; and
o restricted stock.
PROPOSED AMENDMENT
To ensure that Alamosa or, after the reorganization, Superholdings will
be able to grant sufficient future awards under the long-term incentive plan
to employees of Alamosa, and, after the reorganization, Roberts and WOW, the
Alamosa board of directors has authorized an amendment to the long-term
incentive plan, subject to stockholder approval, to:
o increase the number of shares of Alamosa common stock
authorized for issuance under the long-term incentive plan by
6,000,000 shares, from 7 million shares to 13,000,000 shares;
and
o increase on December 31 of each year, from and including
December 31, 2000, the number of shares of Alamosa common
stock authorized for issuance under the long-term incentive
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plan by a number of shares equal to 1% of the total number of
shares of Alamosa common stock outstanding on such date. As of
October 11, 2000 there were a total of 61,359,856 shares of
Alamosa common stock outstanding and after the completion of
the reorganization it is expected that 80,909,849 shares of
Superholdings common stock will be outstanding.
As of October 11, 2000, we had granted options under the long-term
incentive plan covering approximately 7,000,000 shares of common stock.
Accordingly, an increase in the number of shares available under the long-term
incentive plan is necessary in order for Alamosa to meet its future needs,
including those needs attributable to the increased number of employees who will
be eligible to receive awards if the reorganization is completed. Alamosa will
implement the proposed amendment to the long-term incentive plan if it receives
stockholder approval for the proposed amendment, even if the reorganization does
not occur.
Alamosa is seeking stockholder approval of the amendment to the
long-term incentive plan.
PLAN DESCRIPTION
The following is a description of the material terms of the long-term
incentive plan, and as such is qualified by the actual terms of the long-term
incentive plan. The long-term incentive plan is administered by the stock option
plan committee of Alamosa's board of directors, and the plan committee is
authorized, subject to the provisions of the long-term incentive plan, to grant
awards and establish rules and regulations as it deems necessary for the proper
administration of the long-term incentive plan and to make whatever
determinations and interpretations as it deems necessary or advisable. The
long-term incentive plan may be amended by the Alamosa board of directors with
stockholder approval where necessary to satisfy regulatory requirements. The
long-term incentive plan provides for an equitable adjustment to be made to
outstanding awards in the event of certain corporate transactions.
OPTIONS
Options granted under the long-term incentive plan will either be
incentive stock options, as defined under Section 422 of the Code, or
non-qualified stock options.
An incentive stock option may not have an exercise price less than the
fair market value of the underlying common stock on the date of grant or an
exercise period that exceeds ten years from the date of grant and is subject to
other limitations which allow the option holder to qualify for favorable tax
treatment. Non-qualified stock options may have an exercise price of less than,
equal to, or greater than the fair market value of the underlying common stock
on the date of grant but, like incentive stock options, are limited to an
exercise period of no longer than ten years.
The plan committee determines and designates those persons to whom
awards are granted and determines:
o the award period;
o the date of grant;
o the vesting period; and
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o other terms, provisions, limitations and performance
requirements approved by the plan committee, but not
inconsistent with the long-term incentive plan.
The plan committee also has the discretion to reprice stock option
awards.
An option will not be transferable except by will or by the laws of
descent or distribution, unless specified in the long-term incentive plan or
determined otherwise by Alamosa's board of directors.
STOCK APPRECIATION RIGHTS
A stock appreciation right, or "SAR," entitles the holder to receive,
at the plan committee's discretion, cash or common stock (or a combination of
each) with a value equal to the appreciation in the common stock subject to the
SAR, measured from the date the SAR was granted to the date the SAR is
exercised. A SAR may be granted with an exercise price of less than, equal to,
or greater than the fair market value of the underlying common stock on the date
of grant, but like an option, is limited to an exercise period of ten years. A
SAR may be granted in tandem with an option, meaning that the right of the
tandem award recipient to exercise one of the awards will be cancelled if, and
to the extent, the other award is exercised.
RESTRICTED STOCK
Each restricted stock award will specify the number of shares of
restricted stock to be awarded, the price, if any, to be paid by the award
recipient and the time during which the stock will be subject to forfeiture, or
the conditions upon the satisfaction of which, the restricted stock will vest.
The grant and/or the vesting of the restricted stock may be conditioned upon the
completion of a specified period of service, upon the attainment of specified
performance objectives or upon such other criteria as the plan committee may
determine. The plan committee may provide that the restricted stock recipient
will have the right to vote the restricted stock and receive dividends on the
restricted stock.
CHANGE IN CONTROL
Awards under the long-term incentive plan may contain provisions that,
if a change in control of Alamosa occurs, give the plan committee discretion to
offer to purchase awards from the long-term incentive plan participants and make
adjustments or modifications to outstanding awards to protect and maintain the
rights and interests of the long-term incentive plan participants or take any
other action the award agreements may authorize. The long-term incentive plan
provides for all awards granted under the long-term incentive plan to become
fully vested and, if applicable, exercisable upon a change in control. A change
in control of Alamosa will be deemed to occur for purposes of the long-term
incentive plan upon any of the following events:
o the approval by Alamosa's stockholders of the long-term
incentive plan to dissolve or liquidate;
o continuing directors, who are persons who were serving on the
Alamosa board of directors when the long-term incentive plan
was adopted or who afterwards were elected to the board of
directors by majority of the directors in office, cease to
constitute at least 50% of the board of directors;
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o a consolidation or merger in which Alamosa does not survive,
or in which the common stock of Alamosa is converted into
cash, securities or other property; or
o a sale of substantially all of Alamosa's assets unless the
sale is due to the default by Alamosa, or its affiliates under
any:
o credit or related agreement among Alamosa or its
affiliates or successors and EDC or any other lender;
or
o management or related agreement among or, after the
reorganization, among Superholdings, or their
respective affiliates or successors and Sprint
Spectrum, LP, SprintCom, Inc., WirelessCo, LP, Sprint
Communications Company, LP or their affiliates or
successors.
The events described in the third and fourth bullet points above will
not be deemed a change in control of Alamosa if after the event:
o continuing directors constitute at least 50% of the board of
directors of the continuing, surviving or acquiring entity, or
that entity's ultimate parent entity if the parent entity has
at least a majority of the voting power of the entity; and
o the continuing, surviving or acquiring entity, or that
entity's ultimate parent entity, assumes all of the
outstanding stock options under the long-term incentive plan.
FEDERAL INCOME TAX TREATMENT
The following discussion of certain relevant income tax effects
applicable to options, SARs and restricted stock granted under the long-term
incentive plan is a brief summary only, and reference is made to the Code and
the regulations and interpretations issued thereunder for a complete statement
of all relevant federal tax consequences. This summary is not intended to be
exhaustive and does not describe state, local or foreign tax consequences.
A participant generally will not be taxed upon the grant of a
non-qualified stock option. Rather, at the time of exercise of the option, the
optionee will recognize ordinary income for federal income tax purposes in an
amount equal to the excess of the fair market value of the shares purchased over
the option price. At the time of the option is exercised, Alamosa will generally
be entitled to a tax deduction equal in amount to the ordinary income recognized
by the optionee.
An optionee will not be in receipt of taxable income upon the grant or
timely exercise of an incentive stock option. Exercise of an incentive stock
option will be timely if made during its term and if the optionee remains an
employee of Alamosa or a subsidiary of Alamosa at all times during the period
beginning on the date of grant of the option and ending on the date three months
before the date of exercise (or one year before the date of exercise in the case
of a disabled optionee). The tax consequences of an untimely exercise of an
incentive stock option will be determined in accordance with the rules
applicable to non-statutory stock options. Alamosa is not entitled to any tax
deduction in connection with the grant or exercise of an incentive stock option.
However, if the optionee disposes of stock within the holding periods described
above, Alamosa may be entitled to a tax deduction for the amount of ordinary
income, if any, realized by the optionee.
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The recipient of a SAR will not be taxed upon the grant of the SAR.
Rather, at the time of exercise of the SAR, the SAR recipient will recognize
ordinary income for federal income tax purposes in an amount equal to the value
of the consideration received (i.e., the increase in the appreciation of the
underlying common stock). At the time the SAR is exercised, Alamosa will be
entitled to a tax deduction equal to the amount of ordinary income recognized by
the SAR recipient.
The recipient of an award of restricted stock generally will not be
taxed upon the grant of the award, but rather will recognize ordinary income in
an amount equal to the fair market value of the number of shares of common stock
subject to the award at the time the shares are no longer subject to a
substantial risk of forfeiture. Alamosa will be entitled to a deduction at the
time when, and in the amount that, the recipient recognizes ordinary income.
Amended Long-Term Incentive Plan Benefits
Since awards under the long-term incentive plan are made in the
discretion of the plan committee, future awards under the long-term incentive
plan are not reasonably determinable.
The number of shares of common stock subject to options granted to
certain persons under the long- term incentive plan since inception of the plan
are as follows: Messrs. Sharbutt, Brantley, Cowan, Rinehart and Sabatino were
granted options to purchase 1,697,500 shares, 1,697,500 shares, 1,455,000
shares, 100,000 shares, and 120,000 shares, respectively; all current directors
who are not executive officers as a group were granted options to purchase an
aggregate of 239,000 shares; and all employees as a group were granted options
to purchase an aggregate of 6,093,233 shares. Since the inception of the
long-term incentive plan, no option has been granted to (i) any associate of any
current director who is not an executive officer, (ii) any associate of any
executive officer or (iii) any associate of any nominee for election as a
director, and no person other than those individuals set forth above was granted
five percent or more of the total amount of options granted under the long-term
incentive plan since its inception.
On [ ], 2000, the last trading day prior to the printing and
mailing of this proxy statement-prospectus, the last reported sale price per
share of Alamosa common stock on The Nasdaq National Market was $[______].
VOTES REQUIRED FOR APPROVAL OF THE AMENDMENT TO THE LONG-TERM INCENTIVE PLAN
Approval of the proposed amendment to the long-term incentive plan
requires the affirmative votes of the holders of a majority of the shares of
Alamosa common stock present or represented by proxy at the meeting and entitled
to vote.
Abstentions will have the same effect as a vote against the proposal to
approve the amendment to the long-term incentive plans but "broker non-votes"
will have no effect on such proposal.
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THE ALAMOSA BOARD RECOMMENDS THAT ALAMOSA'S STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE AMENDMENT TO ALAMOSA'S 1999 LONG-TERM INCENTIVE PLAN.
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LEGAL MATTERS
The validity of the shares of Superholdings common stock to be issued
in the Alamosa merger will be passed upon for Superholdings and Alamosa by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. Certain legal
matters in connection with the reorganization, including certain federal income
tax consequences, have been passed upon for Alamosa by Haynes & Boone, LLP,
Dallas, Texas.
EXPERTS
The consolidated financial statements of Alamosa PCS Holdings, Inc. as
of December 31, 1998 and 1999, and for the period from inception, July 16, 1998
to December 31, 1998 and the year ended December 31, 1999 included in this proxy
statement-prospectus have been so included in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants given on the authority of
said firm as experts in accounting and auditing.
The consolidated financial statements of Roberts Wireless
Communications, LLC as of December 31, 1999 and for the year then ended included
in this proxy statement-prospectus have been so included in reliance upon the
report of Melman, Alton & Co., independent accountants given on the authority of
said firm as experts in accounting and auditing.
The financial statements of Washington Oregon Wireless, LLC as of
December 31, 1999 and 1998, and for the year ended December 31, 1999, and from
July 8, 1998 (date of inception) to December 31, 1999 and 1998 included in this
proxy statement-prospectus have been so included in reliance upon the report of
Aldrich, Kibride & Tatone, LLP, independent accountants given on the authority
of said firm as experts in accounting and auditing.
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PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma condensed combined financial
statements combine the historical consolidated balance sheets and statements of
operations of Alamosa, Roberts and WOW. These unaudited pro forma financial
statements give effect to the acquisitions of Roberts and WOW using the purchase
method of accounting. To aid you in your analysis of the financial aspects of
each of these transactions, both individually and combined, we have presented
this set of unaudited pro forma condensed combined financial statements to
demonstrate the financial aspects of the combined transaction.
We derived this information from the unaudited consolidated financial
statements of Alamosa, Roberts and WOW as of and for the six months ended June
30, 2000 and from the audited consolidated financial statements of Alamosa,
Roberts and WOW for the year ended December 31, 1999. This information is only a
summary and should be read in conjunction with the historical financial
statements and related notes contained elsewhere herein for the periods
presented.
The unaudited pro forma condensed combined statements of operations for
the six months ended June 30, 2000 and the year ended December 31, 1999 assume
the reorganization was effected on January 1, 1999. The unaudited pro forma
condensed combined balance sheet as of June 30, 2000 gives effect to the
reorganization as if it had occurred on June 30, 2000. The accounting policies
of Alamosa, Roberts and WOW are comparable. Certain reclassifications have been
made to Roberts' and WOW's historical presentation to conform to Alamosa's
presentation. These reclassifications do not materially impact Alamosa's,
Roberts', or WOW's operations or financial position for the periods presented.
The pro forma adjustments, which are based upon available information
and upon certain assumptions that we believe are reasonable, are described in
the accompanying notes. The actual allocation of these adjustments will be
different and the difference may be material.
We are providing the unaudited pro forma condensed combined financial
information for illustrative purposes only. The companies may have performed
differently had they always been combined. You should not rely on the unaudited
pro forma condensed combined financial information as being indicative of the
historical results that would have been achieved had the companies always been
combined or the future results that the combined company will experience.
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ALAMOSA HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2000
<TABLE>
<CAPTION>
Roberts Merger
Alamosa ----------------------------------------
Historical Pro Forma Historical Pro Forma
Alamosa Adjustments Roberts Adjustments
---------------- --------------- ------------------ ------------------
ASSETS (Note 1) (Note 2)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 241,038,281 $ -- $ 338,106 $ (8,443,000)
Short-term investments 21,840,763 -- -- --
Accounts receivable, net 6,605,823 -- 227,911 --
Inventory 2,151,772 -- 297,322 --
Prepaid expenses and other assets 551,071 10,825,000 60,000 --
--------------- --------------- --------------- ---------------
Total current assets 272,187,710 10,825,000 923,339 (8,443,000)
Property and equipment, net 142,219,575 -- 50,669,173 (4,420,226)
Debt issuance costs, net 13,853,077 -- 1,490,722 (1,490,722)
Intangible and other noncurrent assets 431,023 (10,825,000) 8,455,524 428,837,691(2a)
--------------- --------------- --------------- ---------------
Total assets $ 428,691,385 $ -- $ 61,538,758 $ 414,483,743
=============== =============== =============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 42,140,014 $ -- $ 9,770,510 $ --
Accounts payable to related parties 1,834,723 -- -- --
Current installments of capital leases 22,932 -- -- --
Microwave relocation obligation 527,715 -- -- --
--------------- --------------- --------------- ---------------
Total current liabilities 44,525,384 -- 9,770,510 --
Capital lease obligations, noncurrent 815,272 -- -- --
Long-term debt 201,098,342 -- 56,000,000 --
Deferred tax and other noncurrent liabilities -- -- -- 118,085,741(2b)
--------------- --------------- --------------- ---------------
Total liabilities 246,438,998 -- 65,770,510 118,085,741
--------------- --------------- --------------- ---------------
Commitments and contingencies
Shareholders' equity:
Shareholders' equity (deficit)/members'
equity (deficit) 184,315,506 -- (4,231,752) 296,988,002
Unearned compensation (2,063,119) -- -- (590,000)(2c)
--------------- --------------- --------------- ---------------
Total shareholders' equity 182,252,387 -- (4,231,752) 296,398,002
--------------- --------------- --------------- ---------------
Total liabilities and shareholders' equity $ 428,691,385 $ -- $ 61,538,758 $ 414,483,743
=============== =============== =============== ===============
</TABLE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
WOW Merger
---------------------------------------
Historical Pro Forma
WOW Adjustments Total
---------------- ------------------- ---------------
ASSETS (Note 3)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 540,322 $ (15,483,667) $ 217,990,042
Short-term investments -- -- 21,840,763
Accounts receivable, net -- -- 6,833,734
Inventory -- -- 2,449,094
Prepaid expenses and other assets 73,895 -- 11,509,966
--------------- --------------- ---------------
Total current assets 614,217 (15,483,667) 260,623,599
Property and equipment, net 24,742,284 -- 213,210,806
Debt issuance costs, net 1,578,928 (1,578,928) 13,853,077
Intangible and other noncurrent assets 97,323 191,390,964(3a) 618,387,525
--------------- --------------- ---------------
Total assets $ 27,032,752 $ 174,328,369 $ 1,106,075,007
=============== =============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 6,926,610 $ 303,333 $ 59,140,467
Accounts payable to related parties -- -- 1,834,723
Current installments of capital leases -- -- 22,932
Microwave relocation obligation -- -- 527,715
--------------- --------------- ---------------
Total current liabilities 6,926,610 303,333 61,525,837
Capital lease obligations, noncurrent -- -- 815,272
Long-term debt 9,460,318 -- 266,558,660
Deferred tax and other noncurrent liabilities 31,000 52,701,860(3b) 170,818,601
--------------- --------------- ---------------
Total liabilities 16,417,928 53,005,193 499,718,370
--------------- --------------- ---------------
Commitments and contingencies
Shareholders' equity:
Shareholders' equity (deficit)/members'
equity (deficit) 10,614,824 121,323,176 609,009,756
Unearned compensation -- -- (2,653,119)
--------------- --------------- ---------------
Total shareholders' equity 10,614,824 121,323,176 606,356,637
--------------- --------------- ---------------
Total liabilities and shareholders' equity $ 27,032,752 $ 174,328,369 $ 1,106,075,007
=============== =============== ===============
</TABLE>
221
<PAGE>
ALAMOSA HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
Roberts Merger
Alamosa -----------------------------
Historical Pro Forma Historical Pro Forma
Alamosa Adjustments Roberts Adjustments
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenues: (Note 1) (Note 2)
Service revenue $ 25,146,175 $ -- $ 4,733,415 $ --
Product sales 3,772,424 -- 426,226 --
------------ ------------ ------------ ------------
Total revenue 28,918,599 -- 5,159,641 --
------------ ------------ ------------ ------------
Costs and expenses:
Cost of service and operations 18,125,782 -- 3,322,934 --
Cost of service and operations - related parties 324,780 -- -- --
Cost of products sold 9,293,840 -- 780,728 --
Selling and marketing 11,720,879 -- 2,171,422 --
Selling and marketing - related parties 212,374 -- -- --
General and administrative expenses 3,078,147 -- 808,880 175,000(2c)
Equity participation compensation expense 4,893,746 -- -- 59,000(2c)
General and administrative - related parties 379,053 -- -- --
Depreciation and amortization 4,747,937 -- 3,176,256 11,692,332(2d)
------------ ------------ ------------ ------------
Total costs and expenses 52,776,538 -- 10,260,220 11,926,332
------------ ------------ ------------ ------------
Loss from operations (23,857,939) -- (5,100,579) (11,926,332)
Interest and other income 6,722,463 -- 56,333 --
Interest expense (11,352,199) -- (347,373) (543,518)(2e)
------------ ------------ ------------ ------------
Net loss before income tax benefit (28,487,675) -- (5,391,619) (12,469,850)
Income tax benefit -- 10,825,000 -- 5,588,000(2d)
------------ ------------ ------------ ------------
Net income/(loss) $(28,487,675) $ 10,825,000 $ (5,391,619) $ (6,881,850)
============ ============ ============ ============
Net loss per common share, basic and diluted $ (0.48)
Weighted average common shares outstanding,
basic and diluted 59,026,759
</TABLE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
WOW Merger
--------------------------
Historical Pro Forma
WOW Adjustment Total
------------- ----------- -------------
(Note 3)
<S> <C> <C> <C>
Revenues:
Service revenue $ 36,805 $ -- $ 29,916,395
Product sales -- -- 4,198,650
------------ ------------ ------------
Total revenue 36,805 -- 34,115,045
------------ ------------ ------------
Costs and expenses:
Cost of service and operations 1,189,398 -- 22,638,114
Cost of service and operations - related parties -- -- 324,780
Cost of products sold -- -- 10,074,568
Selling and marketing 198,235 -- 14,090,536
Selling and marketing - related parties -- -- 212,374
General and administrative expenses 1,669,809 -- 5,731,836
Equity participation compensation expense -- -- 4,952,746
General and administrative - related parties 40,514 -- 419,567
Depreciation and amortization 61,810 5,287,043(3d) 24,965,378
------------ ------------ ------------
Total costs and expenses 3,159,766 5,287,043 83,409,899
------------ ------------ ------------
Loss from operations (3,122,961) (5,287,043) (49,294,854)
Interest and other income 73,232 -- 6,852,028
Interest expense -- (996,761)(3e) (13,239,851)
------------ ------------ ------------
Net loss before income tax benefit (3,049,729) (6,283,804) (55,682,677)
Income tax benefit -- 2,993,519 (3d) 19,406,519
------------ ------------ ------------
Net income/(loss) $ (3,049,729) $ (3,290,285) $(36,276,158)
============ ============ ============
Net loss per common share, basic and diluted $ (0.46)
Weighted average common shares outstanding,
basic and diluted 78,576,759
</TABLE>
222
<PAGE>
ALAMOSA HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Roberts Merger
Alamosa -----------------------------
Historical Pro Forma Historical Pro Forma
Alamosa Adjustments Roberts Adjustments
------------ ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues: (Note 1) (Note 2)
Service revenue $ 6,533,623 $ -- $ 2,494,438 $ --
Product sales 2,450,090 -- 379,259 --
------------ ------------ ------------ ------------
Total revenue 8,983,713 -- 2,873,697 --
------------ ------------ ------------ ------------
Costs and expenses:
Cost of service and operations 6,616,266 -- 1,748,565 --
Cost of service and operations - related parties 824,210 -- -- --
Cost of products sold 7,426,736 -- 834,236 --
Selling and marketing 8,918,487 -- 2,025,429 --
Selling and marketing - related parties 404,561 -- -- --
General and administrative and marketing 3,711,548 -- 702,829 350,000(2c)
Non-cash compensation expense 8,199,511 -- -- 118,000(2c)
General and administrative - related parties 497,427 -- -- --
Depreciation and amortization 3,056,923 -- 1,799,281 23,384,664(2d)
------------ ------------ ------------ ------------
Total costs and expenses 39,655,669 -- 7,110,340 23,852,664
------------ ------------ ------------ ------------
Loss from operations (30,671,956) -- (4,236,643) (23,852,664)
Interest and other income 477,390 -- 65,739 --
Interest expense (2,641,293) -- (417,337) (1,087,036)(2e)
------------ ------------ ------------ ------------
Net loss before income tax benefit (32,835,859) -- (4,588,241) (24,939,700)
Income tax benefit -- 12,478,000 -- 8,821,000(2d)
------------ ------------ ------------ ------------
Net income/(loss) $(32,835,859) $ 12,478,000 $ (4,588,241) $(16,118,700)
============ ============ ============ ============
Net loss per common share, basic and diluted $ (0.68)
Weighted average common shares outstanding,
basic and diluted 48,500,008
</TABLE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
WOW Merger
-----------------------------
Historical Pro Forma
WOW Adjustments Total
------------ ------------- ------------
<S> <C> <C> <C>
Revenues: (Note 3)
Service revenue $ -- $ -- $ 9,028,061
Product sales -- -- 2,829,349
------------ ------------ ------------
Total revenue -- -- 11,857,410
------------ ------------ ------------
Costs and expenses:
Cost of service and operations 200,486 -- 8,565,317
Cost of service and operations - related parties -- -- 824,210
Cost of products sold -- -- 8,260,972
Selling and marketing -- -- 10,943,916
Selling and marketing - related parties -- -- 404,561
General and administrative and marketing 580,049 100,000(3c) 5,444,426
Non-cash compensation expense -- -- 8,317,511
General and administrative - related parties 205,675 -- 703,102
Depreciation and amortization 923 10,574,086(3d) 38,815,877
------------ ------------ ------------
Total costs and expenses 987,133 10,674,086 82,279,892
------------ ------------ ------------
Loss from operations (987,133) (10,674,086) (70,422,482)
Interest and other income 6,992 -- 550,121
Interest expense -- (1,993,522)(3e) (6,139,188)
------------ ------------ ------------
Net loss before income tax benefit (980,141) (12,667,608) (76,011,549)
Income tax benefit -- 4,079,697(3d) 25,378,697
------------ ------------ ------------
Net income/(loss) $ (980,141) $ (8,587,911) $(50,632,852)
============ ============ ============
Net loss per common share, basic and diluted $ (0.74)
Weighted average common shares outstanding,
basic and diluted 68,050,008
</TABLE>
223
<PAGE>
NOTES TO PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ALAMOSA PRO FORMA ADJUSTMENTS
The pro forma adjustments to Alamosa's historical financial statements
represent the reversal of the deferred tax asset valuation allowance and the
resulting recognition of its deductible net operating loss carry forwards. These
adjustments were based on an assessment of the combined past and expected future
taxable income of Superholdings and expected reversals of the temporary
differences from the Roberts and WOW mergers.
NOTE 2 - THE ROBERTS MERGER
Pursuant to the Roberts reorganization agreement, the members of
Roberts have formed Roberts Wireless Holdings, LLC, which holds all of the
outstanding membership interest of Roberts. At the effective time of the Roberts
merger, Roberts Holdings will merge with and into Superholdings. Each unit of
membership interest of Roberts Holdings will be converted into the right to
receive (i) 675 shares of Superholdings common stock, and (ii) up to $200.00 in
cash, without any interest thereon. The aggregate consideration to be paid in
the Roberts merger will be 13,500,000 shares of Superholdings common stock and
up to $4.0 million in cash.
To obtain the consent of Sprint PCS to the terms of the Roberts
reorganization agreement, Superholdings has agreed to make certain payments to
Sprint PCS if certain network build-out timetables are not met. These contingent
payments have not been included in the accompanying pro forma financial
statements.
The unaudited pro forma condensed combined balance sheet and unaudited
pro forma condensed combined statement of operations have been adjusted for the
Roberts merger which includes Superholdings' acquisition of Roberts in exchange
for cash and stock in Superholdings. The Roberts merger will be accounted for
using the purchase method of accounting.
The pro forma adjustments represent the purchase accounting adjustments
necessary to reflect the Roberts merger. The aggregate purchase price was
calculated as follows:
Outstanding membership interests of Roberts Holdings 20,000
Exchange ratio per membership interest 675
------------------
Equivalent Holding Company trading common shares 13,500,000
Average trading price $ 21.56 (i)
------------------
Subtotal $ 291,060,000
Cash consideration 4,000,000
Fair market value of stock options issued 1,106,250 (ii)
Merger-related costs 4,443,000 (iii)
Assumed deferred tax liability 118,085,741 (2b)
------------------
Total consideration $ 418,694,991
==================
224
<PAGE>
NOTES TO PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Goodwill was calculated as follows:
<S> <C>
Total consideration $ 418,694,991
Less:
Roberts members' equity at June 30, 2000 (4,231,752)
Write-off deferred debt issuance costs and other intangibles (9,946,246)
Excluded assets (4,420,226) (iv)
Estimated fair value of Sprint PCS affiliation and operating agree 319,207,474
ments
------------------
Goodwill $ 118,085,741
==================
</TABLE>
(i) The average trading price is based on the average of the
closing prices of Alamosa's common stock for the two days
before, the day of, and the two days after the date of the
announcement of the Roberts merger, July 31, 2000.
(ii) Pursuant to the Roberts reorganization agreement, at the
closing of the Roberts merger, Superholdings will issue stock
options to purchase a total of 75,000 shares of Superholdings
common stock to former employees and consultants of Roberts to
be identified by Michael and Steven Roberts prior to closing.
It is not anticipated that these employees and consultants
will be providing services to Superholdings in the future. The
options will have an exercise price of 90% of the market value
of Superholdings common stock on the date of grant. These
options will be subject to other terms to be provided by
Michael and Steven Roberts prior to closing. The fair value of
the stock options was based on a Black-Scholes valuation and
has been recorded as additional consideration.
(iii) Anticipated costs of the Roberts merger have been included as
additional purchase price and are:
Investment banking fees $ 2,443,000
Legal, accounting and other 2,000,000
------------------
Total merger-related costs $ 4,443,000
==================
(iv) Before the closing date of the Roberts merger, Roberts will
transfer to Michael and Steven Roberts, Roberts Tower Company
or other entities controlled by them, approximately $4.4
million of real estate, towers, base stations and retail store
sites that were funded directly or indirectly with capital
contributions to Roberts by Michael and Steven Roberts.
Superholdings intends to enter into an agreement to lease all
of these assets from Roberts Tower Company and/or its
affiliates. As these assets had largely not been placed in
service during the periods presented, the additional lease
expense and the related depreciation and other income and
expense elimination have been deemed to be insignificant.
Accordingly, no pro forma adjustment was recorded.
225
<PAGE>
NOTES TO PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
We have preliminarily allocated the excess of the estimated purchase price over
the estimated fair value of the net tangible identifiable assets acquired to the
Sprint PCS affiliation and operating agreements and goodwill. A deferred tax
liability has been assumed for the difference between the reported amounts
allocated to the Sprint PCS affiliation and operating agreements and the
underlying tax basis. The final allocation of the excess purchase price over net
identifiable assets, which may be determined by an independent appraiser
subsequent to the closing of the reorganization, will include, if applicable,
recognition of fair value adjustments to the tangible assets, liabilities and
identifiable intangible assets, including the Sprint PCS affiliation and
operating agreements, intellectual property, subscriber lists and residual
goodwill. For illustrative purposes, we have amortized all intangible assets
over a period of 18.7 years to reflect the remaining term of the underlying
Sprint PCS affiliation and operating agreements from the assumed date of the
closing of the reorganization.
(2a) The value assigned to the Sprint PCS affiliation and operating
agreements of $319,207,474 and goodwill of $118,085,741 is
recorded as a pro forma adjustment to the unaudited pro forma
combined condensed balance sheet, less the write off of
existing intangible assets of $8,455,524.
(2b) A deferred tax liability has been recorded for the differences
between the estimated fair value and tax bases of the Roberts
assets acquired and liabilities assumed. We have assumed the
estimated fair value of the assets acquired, other than the
Sprint PCS affiliation and operating agreements, and
liabilities assumed are equal to their tax bases. The
effective tax rate of 38% is an estimate of the composite
federal and state income tax rates. The deferred tax liability
has been calculated as follows:
<TABLE>
<CAPTION>
Estimated Tax Temporary
Fair Value Basis Difference
----------------- ---------------- -----------------
<S> <C> <C> <C>
Sprint PCS affiliation and operating
agreements $ 319,207,474 $ 8,455,524 $ 310,751,950
Estimated effective tax rate 38%
-----------------
Deferred tax liability $ 118,085,741
=================
</TABLE>
(2c) Represents the estimated cost associated with Michael
Roberts', Steven Roberts' and Kay Gabbert's five-year
consulting agreements. The aggregate annual cost of these
consulting agreements totals $350,000 and has been recorded as
compensation expense. As part of Ms. Gabbert's five-year
consulting agreement, she will receive options for 40,000
shares of Alamosa common stock vesting over five years, at an
exercise price of 90% of the market value of Alamosa common
stock on July 1, 2000. The fair value associated with these
stock options was based on a Black-Scholes valuation and has
been recorded as unearned compensation amortized over five
years.
226
<PAGE>
NOTES TO PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(2d) The pro forma adjustment to depreciation and amortization
expense reflects the amortization of the fair value assigned
to the Sprint PCS affiliation and operating agreements and
goodwill over 18.7 years recognized as if the Roberts merger
occurred on January 1, 1999. These amounts total $11,692,332
for the six months ended June 30, 2000 and $23,384,664 for the
year ended December 31, 1999. The corresponding remeasurement
of the deferred tax liability associated with the amount
allocated to the Sprint PCS affiliation and operating
agreements and Roberts' NOL benefit have been recorded as an
income tax benefit.
(2e) The pro forma adjustment reflects an increase in interest
expense related to the incremental debt to fund the cash
consideration of the Roberts merger, assuming an annual
interest rate of 12 7/8%. These amounts total $543,518 for the
six months ended June 30, 2000 and $1,087,036 for the year
ended December 31, 1999. A 1/8% variance in interest rates
would increase or decrease interest expense by $5,277 for the
six months ended June 30, 2000 and $10,554 for the year ended
December 31, 1999.
On July 31, 2000, Superholdings entered into a commitment
letter with Citicorp and Salomon Smith Barney providing for a
new senior credit facility of up to $200.0 million, to be made
to Alamosa Holdings, LLC. The proceeds of the Citicorp credit
facility will be used to fund the cash portion of the
consideration in the Roberts and WOW mergers and to fund the
working capital and build-out needs of Roberts and WOW,
including the refinancing of their existing debt. The
definitive agreements providing for the Citicorp credit
facility have not been completed. The Citicorp credit facility
will be comprised of a secured term loan for up to $175.0
million and a secured revolving credit facility for up to
$25.0 million, each with a term of seven years and at a rate
of interest to be determined under the credit facility.
Alamosa Holdings, LLC must draw down $100.0 million under the
term loan at the closing of the credit facility. It is
anticipated that the terms of the Citicorp credit facility
will be substantially equivalent to the terms of Alamosa's
existing debt. Accordingly, no pro forma adjustment was
recorded.
NOTE 3 - THE WOW MERGER
Pursuant to the WOW reorganization agreement, the members of WOW have
formed WOW Holdings, LLC, which holds all of the outstanding membership interest
of WOW. At the effective time of the WOW merger, WOW Holdings will merge with
and into Superholdings. Each unit of membership interest of WOW Holdings will be
converted into the right to receive (i) 0.19171 shares of Superholdings common
stock, and (ii) $0.396 in cash, without any interest thereon. The aggregate
consideration to be paid in the WOW merger will be 6,050,000 shares of
Superholdings common stock and $12.5 million in cash.
The unaudited pro forma condensed combined balance sheet and unaudited
pro forma condensed combined statement of operations have been adjusted for the
WOW merger which includes Superholdings' acquisition of WOW in exchange for cash
and stock in Superholdings. The WOW merger will be accounted for using the
purchase method of accounting.
227
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The pro forma adjustments represent the purchase accounting adjustments
necessary to reflect the WOW merger. The aggregate purchase price was calculated
as follows:
<TABLE>
<CAPTION>
<S> <C>
Outstanding membership interests of WOW Holdings 31,558,046
Exchange ratio per membership interest 0.19171
-----------------
Equivalent Holding Company trading common shares 6,050,000
Average trading price $ 21.56 (i)
-----------------
Subtotal $ 130,438,000
Cash consideration 12,500,000
Merger-related costs 2 (ii)
Assumption of value appreciation plan obligations 1,455,000 (iii)
Assumed deferred tax liability 52,701,860 (3b)
-----------------
Total consideration $ 198,926,860
=================
Goodwill was calculated as follows:
Total consideration $ 198,926,860
Less:
WOW members' equity at June 30, 2000 less investment banking fees 9,114,824 (ii)
Write-off deferred debt issuance costs (1,578,928)
Estimated fair value of Sprint PCS affiliation and operating agreement 138,689,104
-----------------
Goodwill $ 52,701,860
=================
(i) The average trading price is based on the average of the
closing prices of Alamosa's common stock for the two days
before, the day of, and the two days after the date of the
announcement of the WOW merger, July 31, 2000.
(ii) Anticipated costs of the WOW merger have been included as
additional purchase price and are:
Investment banking fees $ 1,182,000
Legal, accounting and other 650,000
-----------------
Total merger-related costs $ 1,832,000
=================
</TABLE>
Under the terms of the WOW merger, Superholdings has agreed
to also pay WOW's investment banking fees associated with
the merger of approximately $1.5 million. These fees have
not been included in the preceding table. No pro forma
adjustment was recorded in WOW's pro forma condensed
statement of operations given the one-time nature of the
charge. In calculating goodwill, the estimated fees were
deducted from WOW's members' equity at June 30, 2000.
228
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(iii) Pursuant to the WOW reorganization agreement, at the request
of Superholdings, WOW will terminate all or any portion of its
value appreciation plan before completion of the WOW merger
and all participants of the value appreciation plan will
become fully vested. Superholdings will then assume the
obligations owed under the value appreciation plan both to
Mitchell Moore and the WOW employees whom Superholdings elects
to employ. The assumed obligation owed under the value
appreciation plan, which was calculated assuming Superholdings
employs all of WOW's employees, was recorded as additional
purchase price. The agreement stipulates that Mitchell Moore
will receive a fixed value of $1,000,000 in satisfaction of
the obligation to him. All of the obligation to Mr. Moore and
one-third of the remaining obligation is payable on the date
of completion of the WOW merger. The remaining amount is
payable in equal installments six and twelve months after the
date of completion of the WOW merger, regardless of the
respective employees' employment status.
We have preliminarily allocated the excess of the estimated purchase price over
the estimated fair value of the net tangible identifiable assets acquired to the
Sprint PCS affiliation and operating agreements and goodwill. A deferred tax
liability has been assumed for the difference between the reported amounts
allocated to the Sprint PCS affiliation and operating agreements and the
underlying tax basis. The final allocation of the excess purchase price over net
identifiable assets, which may be determined by an independent appraiser
subsequent to the closing of the reorganization, will include, if applicable,
recognition of fair value adjustments to the tangible assets, liabilities and
identifiable intangible assets, including the Sprint PCS affiliation and
operating agreements, intellectual property and residual goodwill. For
illustrative purposes, we have amortized all intangible assets over a period of
18.1 years to reflect the remaining term of the underlying Sprint PCS
affiliation and operating agreements from the assumed date of the closing of the
reorganization.
(3a) The value assigned to the Sprint PCS affiliation and operating
agreements of $138,689,104 and goodwill of $52,701,860 has
been recorded as a pro forma adjustment to the unaudited pro
forma combined condensed balance sheet.
(3b) A deferred tax liability has been recorded for the differences
between the estimated fair value and tax bases of the WOW
assets acquired and liabilities assumed. We have assumed the
estimated fair value of the assets acquired, other than the
Sprint PCS affiliation and operating agreements, and
liabilities assumed are equal to their tax bases. The
effective tax rate of 38% is an estimate of the composite
federal and state income tax rates. The deferred tax liability
has been calculated as follows:
229
<PAGE>
NOTES TO PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Estimated Tax Temporary
Fair Value Basis Difference
---------------- -------------- -----------------
<S> <C> <C> <C>
Sprint PCS affiliation and operating
agreements $ 138,689,104 $ - $ 138,689,104
Estimated effective tax rate 38%
-----------------
Deferred tax liability $52,701,860
=================
</TABLE>
(3c) Represents the incremental cost arising from a one-year
consulting agreement with Mitchell Moore, the Chairman and
Chief Executive Officer of WOW. The annual expense of Mr.
Moore's consulting agreement of $100,000 has been recorded as
compensation expense.
(3d) The pro forma adjustment to depreciation and amortization
expense reflects the amortization of the intangible assets
over 18.1 years recognized as if the WOW merger occurred on
January 1, 1999. These amounts total $5,287,043 for the six
months ended June 30, 2000 and $10,574,086 for the year ended
December 31, 1999. The corresponding remeasurement of the
deferred tax liability associated with the amount allocated to
the Sprint PCS affiliation and operating agreements and WOW's
NOL net benefit have been recorded as an income tax benefit.
(3e) The pro forma adjustment reflects an increase in interest
expense related to the incremental debt to fund the cash
consideration of the WOW merger, assuming an annual interest
rate of 12 7/8%. These amounts total $996,761 for the six
months ended June 30, 2000 and $1,993,522 for the year ended
December 31, 1999. A 1/8% variance in interest rates would
increase or decrease interest expense by $9,677 for the six
months ended June 30, 2000 and $19,355 for the year ended
December 31, 1999.
On July 31, 2000, Superholdings entered into a commitment
letter with Citicorp and Salomon Smith Barney providing for a
new senior credit facility of up to $200.0 million to be made
to Alamosa Holdings, LLC. The proceeds of the Citicorp credit
facility will be used to fund the cash portion of the
consideration in the Roberts and WOW mergers and to fund the
working capital and build-out needs of Roberts and WOW,
including the refinancing of their existing debt. The
definitive agreements providing for the Citicorp credit
facility have not been completed. The Citicorp credit facility
will be comprised of a secured term loan for up to $175.0
million and a secured revolving credit facility for up to
$25.0 million, each with a term of seven years and at a rate
of interest to be determined under the credit facility.
Alamosa Holdings, LLC must draw down $100.0 million under the
term loan at the closing of the credit facility. It is
anticipated that the terms of the Citicorp credit facility
will be substantially equivalent to the terms of Alamosa's
existing debt. Accordingly, no pro forma adjustment was
recorded.
230
<PAGE>
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
This proxy statement-prospectus contains statements about future events
and expectations, which are "forward-looking statements." Any statement in this
proxy statement-prospectus that is not a statement of historical fact may be
deemed to be a forward-looking statement. These forward-looking statements
include:
o forecasts of growth in the number of consumers using wireless
personal communications services and in estimated populations;
o statements regarding Alamosa's, Roberts' or WOW's plans for,
schedule for and costs of the build-out of their respective
portions of the Sprint PCS network;
o statements regarding Alamosa's, Roberts' or WOW's anticipated
revenues, expense levels, liquidity and capital resources,
operating losses and future stock price performance;
o projections of when Alamosa, Roberts or WOW will launch
commercial wireless personal communications service in
particular markets;
o statements regarding expectations or projections about markets
in Alamosa's, Roberts' or WOW's territory;
o statements regarding the anticipated benefits of the
reorganization; and
o other statements, including statements containing words such
as "may," "might," "could," "would," "anticipate," "believe,"
"plan," "estimate," "project," "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 that may cause Alamosa's, Roberts' or WOW's
actual results, performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by these
forward- looking statements. Specific factors that might cause such a difference
include, but are not limited to:
o Alamosa's, Roberts' or WOW's dependence on their respective
affiliation with Sprint PCS;
o the need to successfully complete the build-out of Alamosa's,
Roberts' or WOW's portion of the Sprint PCS network on their
respective anticipated schedules;
o Alamosa's, Roberts' or WOW's limited operating histories and
anticipation of future losses;
o Alamosa's, Roberts' or WOW's dependence on Sprint PCS's back
office services;
o potential fluctuations in Alamosa's, Roberts' or WOW's
operating results;
o Alamosa's, Roberts' or WOW's potential need for additional
capital or the need for refinancing existing indebtedness;
o Alamosa's, Roberts' or WOW's potential inability to expand
their respective services and related products in the event of
231
<PAGE>
substantial increases in demand for these services and related
products;
o changes or advances in technology;
o changes in government regulation;
o competition in the industry and markets in which Alamosa,
Roberts or WOW operate;
o future acquisitions;
o Alamosa's, Roberts' or WOW's ability to attract and retain
skilled personnel; and
o general economic and business conditions.
For a discussion of some of these factors, see "Risk Factors" beginning
on page 24.
WHERE YOU CAN FIND MORE INFORMATION
You should rely only on the information contained in this proxy
statement-prospectus or information to which Alamosa has referred you. Alamosa
has not authorized anyone to provide you with any additional information.
The documents referred to in this proxy statement-prospectus are
available from Alamosa upon request. Alamosa will provide a copy of any and all
of the information that is referred to in this proxy statement-prospectus to any
person, without charge, upon written or oral request. If exhibits to the
documents referred to in this proxy statement-prospectus are not themselves
specifically referred to in this proxy statement-prospectus, then the exhibits
will not be provided. Any request for documents should be made by [__________],
2000 to ensure timely delivery of the documents.
Requests for documents should be directed to:
Alamosa PCS Holdings, Inc.
5225 S. Loop 289
Lubbock, TX 79424
Attention: Kendall W. Cowan, Chief Financial Officer and Secretary
Alamosa files reports and other information with the Securities and
Exchange Commission. Copies of those reports and other information may be
inspected and copied at the public reference facilities maintained by the
Securities and Exchange Commission at:
o Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549;
o Seven World Trade Center, 13th Floor, New York, New York
10048; or
o Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661
232
<PAGE>
Please call the Securities and Exchange Commission at 1-800-SEC-0330
for further information on the operation of the public reference rooms.
Copies of these materials can also be obtained by mail at prescribed
rates from the Public Reference Room of the Securities and Exchange Commission,
450 Fifth Street, N.W., Washington, D.C. 20549 or by calling the Securities and
Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission
maintains a website that contains reports, proxy statements and other
information regarding us. The address of the Securities and Exchange Commission
website is http://www.sec.gov.
Superholdings has filed a registration statement on Form S-4 under the
Securities Act of 1933 with the Securities and Exchange Commission with respect
to Superholdings' common stock to be issued in the reorganization. This proxy
statement-prospectus constitutes the prospectus of Superholdings filed as part
of the registration statement. This proxy statement-prospectus does not contain
all of the information set forth in the registration statement because certain
parts of the registration statement are omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. The registration
statement and its exhibits are available for inspection and copying as set forth
above.
This proxy statement-prospectus does not constitute an offer to sell,
or a solicitation of an offer to purchase, the securities offered by this proxy
statement-prospectus, or the solicitation of a proxy, in any jurisdiction to or
from any person to whom or from whom it is unlawful to make such offer,
solicitation of an offer or proxy solicitation in such jurisdiction. Neither the
delivery of this proxy statement-prospectus nor any distribution of securities
pursuant to this proxy statement-prospectus shall, under any circumstances,
create any implication that there has been no change in the information set
forth or incorporated into this proxy statement-prospectus by reference or in
Alamosa's affairs since the date of this proxy statement-prospectus. The
information contained in this proxy statement-prospectus with respect to Roberts
was provided by Roberts and the information contained in this proxy
statement-prospectus with respect to WOW was provided by WOW.
OTHER MATTERS
Alamosa does not presently intend to bring any matters other than those
described in this proxy statement-prospectus before its special meeting.
Further, Alamosa does not have any knowledge of any other matters that may be
introduced by other persons. If any other matters do properly come before
Alamosa's special meeting, the persons named in the enclosed form of proxy of
Alamosa will vote the proxies in their discretion on such matters.
233
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ALAMOSA PCS HOLDINGS, INC. AND SUBSIDIARIES AND PREDECESSORS
<S> <C>
Consolidated Balance Sheets at June 30, 2000 (unaudited) and December 31, 1999 ......................................F-3
Consolidated Statements of Operations (unaudited) for the three and six months ended June 30,
2000 and 1999 ......................................................................................................F-4
Consolidated Statement of Stockholders' Equity (unaudited) for the six months ended June 30,
2000 ................................................................................................................F-5
Consolidated Statements of Cash Flows (unaudited) for the six months ended June
30, 2000 and 1999 ...................................................................................................F-6
Notes to the Consolidated Financial Statements ......................................................................F-7
Report of Independent Accountants ..................................................................................F-19
Consolidated Balance Sheets at December 31, 1999 and 1998 ..........................................................F-20
Consolidated Statements of Operations for the year ended December 31, 1999 and
for the period July 16, 1998 (inception) through December 31, 1998 .................................................F-21
Consolidated Statements of Stockholders' Equity for the period July 16, 1998
(inception) through the year ended December 31, 1999 ...............................................................F-22
Consolidated Statements of Cash Flows for the year ended December 31, 1999 and
for the period July 16, 1998 (inception) through December 31, 1998 .................................................F-23
Notes to Consolidated Financial Statements ........................................................................F-25
Report of Independent Accountants on Financial Statement Schedule ..................................................F-44
Schedule II ........................................................................................................F-45
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
Condensed Consolidated Balance Sheets at June 30, 2000 (unaudited) and December 31, 1999 ...........................F-46
Condensed Consolidated Statements of Operations (unaudited) for the six months ended June 30,
2000 and 1999 ......................................................................................................F-47
Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30,
2000 and 1999 ......................................................................................................F-48
Notes to Condensed Consolidated Financial Statements ...............................................................F-49
Independent Auditors' Report .......................................................................................F-50
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Consolidated Balance Sheet at December 31, 1999 ....................................................................F-51
Consolidated Statements of Operations for the year ended December 31, 1999 and
for the period May 6, 1998 (inception) through December 31, 1998 (unaudited) .......................................F-52
Consolidated Statement of Members' Equity (Deficit) for the year ended December 31, 1999 ...........................F-53
Consolidated Statements of Cash Flows for the year ended December 31, 1999 and
for the period May 6, 1998 (inception) through December 31, 1998 (unaudited) .......................................F-54
Notes to Consolidated Financial Statements .........................................................................F-55
WASHINGTON OREGON WIRELESS, LLC
Balance Sheets (unaudited) at June 30, 2000 and 1999 ...............................................................F-61
Statements of Operations (unaudited) for the three and six months ended June 30, 1999 and 2000 .....................F-62
Statement of Members' Equity (Deficit) (unaudited) for the three and six months ended June 30,
2000 and 1999 ......................................................................................................F-63
Statements of Cash Flows (unaudited) for the three and six months ended June 30, 1999 and 2000 .....................F-64
Notes to Financial Statements ......................................................................................F-65
Independent Auditors' Report .......................................................................................F-72
Balance Sheets at December 31, 1999 and 1998 .......................................................................F-73
Statements of Operations for the year ended December 31, 1999, for the period
July 8, 1998 (inception) through December 31, 1999 and for the period July 8,
1998 (inception) through December 31, 1998 .........................................................................F-74
Statements of Members' Equity (Deficit) for the period July 8, 1998 (inception)
through December 31, 1999 ..........................................................................................F-75
Statements of Cash Flows for the year ended December 31, 1999, for the period
July 8, 1998 (inception) through December 31, 1999 and for the period July 8,
1998 (inception) through December 31, 1998 .........................................................................F-76
Notes to Financial Statements ......................................................................................F-77
</TABLE>
F-2
<PAGE>
ALAMOSA PCS HOLDINGS, INC. AND SUBSIDIARIES AND PREDECESSORS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
-------------------- ----------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 241,038,281 $ 5,655,711
Short-term investments 21,840,763 -
Accounts receivable, net of allowance for doubtful accounts 6,605,823 1,675,636
Inventory 2,151,772 5,777,375
Prepaid expenses and other assets 551,071 882,516
-------------------- ----------------------
Total current assets 272,187,710 13,991,238
Property and equipment, net 142,219,575 84,713,724
Debt issuance costs, net 13,853,077 3,743,308
Restricted cash - 518,017
Other noncurrent assets 431,023 1,525,912
-------------------- ----------------------
Total assets $ 428,691,385 $ 104,492,199
==================== ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 42,140,014 $ 15,203,103
Accounts payable to related parties 1,834,723 1,182,225
Current installments of capital leases 22,932 21,818
Bank line of credit - 363,665
Microwave relocation obligations 527,715 3,578,155
-------------------- ----------------------
Total current liabilities 44,525,384 20,348,966
Long-term debt 201,098,342 71,876,379
Capital lease obligations, noncurrent 815,272 827,024
-------------------- ----------------------
Total liabilities 246,438,998 93,052,369
-------------------- ----------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized:
no shares issued - -
Common stock, $.01 par value; 290,000,000 shares authorized,
61,354,606 and 48,500,008 issued and outstanding at
June 30, 2000 and December 31, 1999, respectively 613,546 485,000
Additional paid-in capital 245,949,316 50,824,876
Accumulated deficit (62,247,356) (33,759,681)
Unearned compensation (2,063,119) (6,110,365)
-------------------- ----------------------
Total stockholders' equity 182,252,387 11,439,830
-------------------- ----------------------
Total liabilities and stockholders' equity $ 428,691,385 $ 104,492,199
==================== ======================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-3
<PAGE>
ALAMOSA PCS HOLDINGS, INC. AND SUBSIDIARIES AND PREDECESSORS
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------- ----------------------------------
2000 1999 2000 1999
----------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Service revenue $ 15,044,154 $ 1,504 $ 25,146,175 $ 1,504
Product sales 2,189,066 33,588 3,772,424 33,588
----------------- ----------------- ---------------- ---------------
Total revenue 17,233,220 35,092 28,918,599 35,092
----------------- ----------------- ---------------- ---------------
Costs and expenses:
Cost of service and operations 10,856,488 668,319 18,125,782 668,319
Cost of service and operations
related parties 192,217 - 324,780 -
Cost of products sold 4,821,896 75,181 9,293,840 75,181
Selling and marketing 6,478,635 823,343 11,720,879 823,343
Selling and marketing - related parties 143,131 89,812 212,374 89,812
General and administrative expenses
(excluding non-cash compensation
expense) 1,830,523 423,003 3,078,147 1,290,463
Equity participation compensation
expense 921,116 1,802,578 4,893,746 2,793,832
General and administrative -
related parties 241,913 27,515 379,053 135,340
Depreciation and amortization 2,490,990 118,432 4,747,937 127,056
----------------- ----------------- ---------------- ---------------
Total costs and expenses 27,976,909 4,028,183 52,776,538 6,003,346
Loss from operations (10,743,689) (3,993,091) (23,857,939) (5,968,254)
Interest and other income 4,407,978 103,803 6,722,463 341,071
Interest expense (6,572,090) (128,285) (11,352,199) (135,379)
Net loss $ (12,907,801) $ (4,017,573) $ (28,487,675) $ (5,762,562)
================= ================= ================ ===============
Weighted average common shares
outstanding, basic and diluted 61,354,606 48,500,008 59,026,759 48,500,008
----------------- ----------------- ---------------- ---------------
Net loss per common share, basic and
diluted $ (0.21) $ (0.08) $ (0.48) $ (0.12)
----------------- ----------------- ---------------- ---------------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-4
<PAGE>
ALAMOSA PCS HOLDINGS, INC. AND SUBSIDIARIES AND PREDECESSORS
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- ---------------------- PAID-IN ACCUMULATED UNEARNED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT COMPENSATION TOTAL
-------- --------- ---------- ---------- ------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 - $ - 48,500,008 $ 485,000 $ 50,824,876 $(33,759,681) $(6,110,365) $ 11,439,830
Initial public offering - - 12,321,100 123,211 193,664,076 - - 193,787,287
Exercise of stock options - - 533,498 5,335 613,864 - - 619,199
Amortization of unearned
compensation - - - - - - 4,893,746 4,893,746
Unearned compensation - - - - 846,500 - (846,500) -
Net loss - - - - - (28,487,675) - (28,487,675)
-------- --------- ---------- ---------- ------------- ------------- -------------- ---------------
Balance, June 30, 2000 - $ - 61,354,606 $ 613,546 $245,949,316 $(62,247,356) $(2,063,119) $182,252,387
======== ========= ========== ========== ============= ============= ============== ===============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-5
<PAGE>
ALAMOSA PCS HOLDINGS, INC. AND SUBSIDIARIES AND PREDECESSORS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
-------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (28,487,675) $ (5,762,562)
Adjustments to reconcile net loss to net cash used in
operating activities:
Non-cash compensation expense 4,893,746 2,793,832
Depreciation and amortization 4,747,937 127,056
Amortization of debt issuance costs 652,845 -
Deferred interest expense 10,346,126 10,859
Loss from disposition of interest rate cap premiums 266,178 -
Loss from asset disposition 54,130 -
(Increase) decrease in asset accounts:
Accounts receivable 356,284 (1,230)
Inventory 3,625,603 (1,245,915)
Prepaid expenses and other assets (115,582) (163,436)
Increase (decrease) in liability accounts:
Accounts payable and accrued expenses 890,742 1,135,275
-------------------- --------------------
Net cash used in operating activities (2,769,666) (3,106,121)
-------------------- --------------------
Cash flows from investing activities:
Additions to property and equipment (44,048,794) (5,314,605)
Payment (issuance) of notes receivable from officer 100,000 (100,000)
Purchase of short-term investments (21,840,763) -
Change in restricted cash 518,017 (500,000)
-------------------- --------------------
Net cash used in investing activities (65,271,540) (5,914,605)
-------------------- --------------------
Cash flows from financing activities:
Equity offering proceeds 208,589,367 -
Equity offering costs (13,598,942) -
Issuance of Senior Discount Notes 187,096,000 -
Debt issuance costs (10,762,613) (234,371)
Stock options exercised 619,199 -
Capital contributions - 3,818,751
Proceeds from issuance of long-term debt 7,758,175 -
Repayments of long-term debt (76,239,373) -
Payments on capital leases (10,637) (15,636)
Interest rate cap premiums (27,400) -
-------------------- --------------------
Net cash provided by financing activities 303,423,776 3,568,744
-------------------- --------------------
Net increase (decrease) in cash and cash equivalents 235,382,570 (5,451,982)
Cash and cash equivalents at beginning of period 5,655,711 13,529,077
-------------------- --------------------
Cash and cash equivalents at end of period $ 241,038,281 $ 8,077,095
==================== ====================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-6
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION OF UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited consolidated balance sheet as of June 30, 2000, the
unaudited consolidated statements of operations for the three months
and six months ended June 30, 2000 and 1999, the unaudited consolidated
statement of stockholders' equity for the six months ended June 30,
2000, and the unaudited consolidated statements of cash flows for the
six months ended June 30, 2000 and 1999, and related footnotes, have
been prepared in accordance with generally accepted accounting
principles for interim financial information and Article 10 of
Regulation S-X. Accordingly, they do not include all the information
and footnotes required by generally accepted accounting principles. In
the opinion of management, the interim data includes all adjustments
(consisting of only normally recurring adjustments) necessary for a
fair statement of the results for the interim periods. Operating
results for the three months and six months ended June 30, 2000 are not
necessarily indicative of results that may be expected for the year
ending December 31, 2000.
Certain reclassifications of prior period amounts have been made to
conform to current period presentation.
2. ORGANIZATION AND BUSINESS OPERATIONS
Alamosa PCS Holdings, Inc. ("Holdings") was formed in October 1999 in
anticipation of an initial public offering which occurred in February
2000. Immediately prior to the offering, shares of Holdings, the
registrant, were exchanged for Alamosa PCS LLC's ("Alamosa") membership
interests, and Alamosa became wholly owned by Holdings. These financial
statements are presented as if the reorganization had occurred as of
the beginning of the periods presented. There were no activities within
Holdings prior to the reorganization. Holdings and its subsidiaries,
including Alamosa, are collectively referred to as the "Company." Other
subsidiaries formed include Texas Telecommunications LP ("Texas"),
Alamosa Wisconsin Limited Partnership ("Wisconsin"), Alamosa Wisconsin
GP, LLC, Alamosa Finance, LLC, Alamosa Limited, LLC, Alamosa Delaware
GP, LLC, and Alamosa PCS, Inc.
Alamosa and its successor Alamosa PCS, Inc., referred to in these
financial statements as "Alamosa," was formed in July 1998 as a Texas
limited liability company. In July 1998, Alamosa entered into
affiliation agreements with Sprint PCS, the PCS Group of Sprint
Corporation. These affiliation agreements provided Alamosa with the
exclusive right to build, own and manage a wireless voice and data
services network in markets with over 5.2 million residents located in
Texas, New Mexico, Arizona and Colorado under the Sprint PCS brand.
Alamosa amended its affiliation agreements with Sprint PCS in December
1999 to expand its services network so that it will include 8.4 million
residents. Alamosa is required to build out the wireless network
according to Sprint PCS specifications. The affiliation agreements are
in effect for a term of 20 years with three 10-year renewal options
unless terminated by either party under provisions outlined in the
affiliation agreements. The affiliation agreements include
indemnification clauses between Alamosa and Sprint PCS to indemnify
each other against claims arising from violations of laws or the
affiliation agreements, other than liabilities resulting from
negligence or willful misconduct of the party seeking to be
indemnified.
F-7
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Holdings and Alamosa were in the development stage from July 1998
through December 31, 1999. This stage was characterized by significant
expenditures for the design and construction of the wireless network
and no significant operating revenue.
3. NET LOSS PER COMMON SHARE
Net loss per share is calculated by dividing net loss by the weighted
average number of shares of common stock. Weighted average shares
outstanding is computed after giving effect to the reorganization of
the Company described in Note 2. The calculation was made in accordance
with SFAS No. 128, "Earnings Per Share." Weighted average shares
outstanding at June 30, 2000 exclude incremental potential common
shares from stock options because inclusion would have been
antidilutive.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
JUNE 30, 2000 DECEMBER 31, 1999
--------------- -----------------
(unaudited)
Land and buildings ................ $ 3,028,239 $ 2,817,426
Network equipment ................. 107,512,125 76,867,836
Vehicles .......................... 788,781 477,353
Furniture and office equipment .... 4,350,670 2,266,966
--------------- -----------------
115,679,815 82,429,581
Accumulated depreciation .......... (7,618,048) (2,974,674)
--------------- -----------------
Subtotal ........ 108,061,767 79,454,907
--------------- -----------------
Microwave relocation costs ........ 3,742,014 3,578,155
Accumulated amortization .......... (175,051) (84,312)
--------------- -----------------
Subtotal ........ 3,566,963 3,493,843
--------------- -----------------
Construction in progress:
Network equipment ........ 28,346,310 374,680
Leasehold improvements ... 2,244,535 1,390,294
--------------- -----------------
Subtotal ........ 30,590,845 1,764,974
--------------- -----------------
Total ........... $ 142,219,575 $ 84,713,724
=============== =================
F-8
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------------- ------------------
(unaudited)
<S> <C> <C>
Debt outstanding under credit facilities:
Senior Discount Notes ................... $ 196,574,501 $ -
EDC Credit Facility ..................... 4,523,841 71,876,379
Bank line of credit ..................... - 363,665
------------------- -------------------
Total debt ....................................... 201,098,342 72,240,044
Less current maturities .......................... - 363,665
------------------- -------------------
Long-term debt, excluding current maturities ..... $ 201,098,342 $ 71,876,379
=================== ===================
</TABLE>
SENIOR DISCOUNT NOTES - On December 23, 1999, Holdings filed a
registration statement with the SEC for the issuance of $350 million
face amount of Senior Discount Notes (the "Notes Offering"). The Notes
Offering was completed on February 4, 2000 and generated net proceeds
of approximately $181 million after underwriters' commissions and
expenses of approximately $6.5 million. The Senior Discount Notes (the
"Notes") mature in ten years (February 15, 2010), carry a coupon rate
of 12 7/8%, and provide for interest deferral for the first five years.
The Notes will accrete to their $350 million face amount by February 8,
2005, after which, interest will be paid in cash semiannually. The
proceeds of the Notes Offering were used to prepay $75 million of the
EDC Credit Facility, and the balance will be used to pay costs to build
out the system, to fund operating working capital needs and for other
general corporate purposes. Significant terms of the Notes include:
o RANKING - The Notes are senior unsecured obligations of
Holdings, equal in right of payment to all future senior debt
of Holdings and senior in right of payment to all future
subordinated debt of Holdings;
o GUARANTEES - The Notes are unsecured obligations and rank
equally with all existing and future senior debt and senior to
all existing and future subordinate debt. The Notes are fully
and unconditionally, jointly and severally guaranteed on a
subordinated, unsecured basis, by all the existing and any
future restricted subsidiaries of Holdings. In addition,
Holdings has no assets or operations other than its
investments in Alamosa PCS Inc., and there are no significant
non-guarantor subsidiaries. Therefore, financial statements of
guarantor subsidiaries have been omitted.
o OPTIONAL REDEMPTION - During the first thirty six (36) months
after the Notes Offering, Alamosa may use net proceeds of an
equity offering to redeem up to 35% of the accreted value of
the notes at a redemption price of 112 7/8%;
F-9
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
o CHANGE OF CONTROL - Upon a change of control as defined by the
Notes Offering, Alamosa will be required to make an offer to
purchase the Notes at a price equal to 101% of the accreted
value (original principal amount plus accrued interest) before
February 15, 2005, or 101% of the principal amount at maturity
thereafter; and
o RESTRICTIVE COVENANTS - The indenture governing the Notes
contain covenants that, among other things and subject to
important exceptions, limit Alamosa's ability and the ability
of Alamosa's subsidiaries to incur additional debt, issue
preferred stock, pay dividends, redeem capital stock or make
other restricted payments or investments as defined by the
Notes Offering, create liens on assets, merge, consolidate or
dispose of assets, or enter into transactions with affiliates
and change lines of business.
EDC CREDIT FACILITY - On February 8, 2000 Alamosa entered into an
Amended and Restated Credit Agreement with Nortel Networks Inc.
("Nortel"), and on June 23, 2000, Nortel assigned the entirety of its
loans and commitments under the Amended and Restated Credit Agreement
to Export Development Corporation ("EDC"). Then Alamosa entered into a
Second Amended and Restated Credit Agreement with EDC (the "EDC Credit
Facility"). The proceeds of the EDC Credit Facility are used to
purchase equipment, to fund the construction of the Company's portion
of the Sprint PCS network, and to pay associated financing costs. The
financing terms permit Alamosa to borrow $175 million under three
commitment tranches through February 18, 2002, and requires minimum
equipment purchases. The Tranche A Commitment and Tranche A Note
provide for borrowings up to $116.9 million, the Tranche B Commitment
and Tranche B Note provide for borrowings up to $40.6 million and the
Tranche C Commitment and Tranche C Note provide for borrowings up to
$17.5 million.
Terms and conditions of the EDC Credit Facility after the assignment on
June 23, 2000 are essentially the same as before the assignment and
amendments. However, the Company is no longer required to maintain a $1
million cash balance as collateral against the EDC Credit Facility.
The EDC Credit Facility is collateralized by all of Alamosa's current
and future assets and capital stock. Alamosa is required to maintain
certain financial ratios and other financial conditions including
minimum levels of revenue and wireless subscribers. At December 31,
1999, Alamosa was not in compliance with this agreement; however, a
waiver of this requirement was obtained from Nortel.
Alamosa may borrow money under the EDC Credit Facility as either a base
rate loan with an interest rate of prime plus 2.75%, or a Eurodollar
loan with an interest rate of the London interbank offered rate,
commonly referred to as LIBOR, plus 3.75%. The LIBOR interest rate was
6.778% at June 30, 2000. In addition, an annual unused facility fee of
0.75% will be charged beginning August 8, 2000 on the portion of the
available credit that has not been borrowed. Interest accrued through
the two-year anniversary from the closing date can be added to the
principal amount of the loan. Thereafter, interest is payable monthly
in the case of base rate loans and at the end of the applicable
interest period, not to exceed three months, in the case of Eurodollar
loans. Interest expense for the period ended June 30, 2000 totaled
$948,345. Principal is payable in 20 quarterly installments beginning
F-10
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 (except that installments of principal must be paid
beginning March 31, 2001 if Alamosa has not borrowed an additional
$45.5 million, approximately, by February 8, 2001). Alamosa may
voluntarily prepay any of the loans at any time, but any amount repaid
may not be reborrowed since there are no revolving credit features.
Alamosa must make mandatory prepayments under certain circumstances,
including 50% of the excess cash flow, as computed under the EDC Credit
Facility, after March 31, 2003 and any amount in excess of $250,000
received for asset sales outside the ordinary course of business or
insurance proceeds, to the extent not reinvested in property or assets
within a stated period of time. Mandatory prepayments of excess cash
flow will be required sooner if Alamosa has not borrowed an additional
$45.5 million, approximately, by February 8, 2001, or if Alamosa fully
borrows all amounts that it is entitled to borrow under the Tranche A
commitment before March 31, 2002. All prepayments are applied to the
outstanding loan balances pro rata in the inverse order of maturity,
except where there is a borrowing base shortage, in which case
prepayments are first applied there, and then pro rata among all three
commitment tranches.
The original commitment terms provided for warrants representing 2% of
the outstanding common stock of Holdings. These warrants were
eliminated, by prior agreement, when Alamosa used $75 million of the
equity contribution from Holdings to prepay, in February 2000, amounts
previously borrowed under the EDC Credit Facility.
In addition to the $75 million prepayment, in conjunction with the
closing of the new facility, Alamosa also paid accrued interest of
approximately $852,500 and origination fees and expenses of $3,995,000.
As a condition of the financing, Sprint PCS has entered into a consent
and agreement with Nortel, that Nortel assigned to EDC, which has been
acknowledged by Alamosa, that modifies Sprint PCS's rights and remedies
under its affiliation agreements with Alamosa. Among other things,
Sprint PCS consented to the pledge of substantially all of Alamosa's
assets to EDC, including the affiliation agreements. In addition,
Sprint PCS may not terminate the affiliation agreements with Alamosa
and must maintain 10 MHz of PCS spectrum in Alamosa's markets until the
EDC Credit Facility is satisfied or Alamosa's assets are sold pursuant
to the terms of the consent and agreement with EDC.
During the six months ended June 30, 2000, Alamosa incurred
approximately $4,182,000 associated with obtaining the EDC credit
facility, in addition to the cost incurred as of December 31, 1999 of
approximately $4,074,000. Those costs consisted of loan origination
fees, legal fees and other debt issuance costs that have been
capitalized and are being amortized to interest expense using the
straight-line method over the term of the EDC Credit Facility.
6. STOCK-BASED COMPENSATION
Holdings adopted an Incentive Stock Option Plan (the "Plan") effective
November 12, 1999, which provides for the granting of either incentive
stock options or nonqualified stock options to purchase shares of
Holdings' common stock and for other stock-based awards to officers,
directors and key employees for the direction and management of the
Company and to non-employee consultants and independent contractors. At
December 31, 1999, 7,000,000 shares of common stock were reserved
F-11
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for issuance under the Plan. The compensation committee of the board of
directors administers the Plan and determines grant prices and vesting
periods.
The Company applies APB No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its employee
and non-employee director stock options and applies SFAS No. 123,
"Accounting for Stock Based Compensation" and related interpretations
in accounting for other non-employee options. Total non-cash
compensation expense of $2,793,832 was recorded as of June 30, 1999. As
of June 30, 2000, the Company has recorded compensation of $15,156,376.
This amount is being recognized over the vesting period in accordance
with FASB Interpretation No. 28 when applicable. As of June 30, 2000,
non-cash compensation of $4,893,746 and $921,116 has been recognized
for the year and quarter, respectively.
The following summarizes activity under the Company's stock option
plans:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
-----------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------- --------------------
(unaudited)
<S> <C> <C>
Options outstanding at beginning of period 5,282,000 873,000
Granted .................................... 209,900 5,282,000
Exercised .................................. - -
Cancelled .................................. (25,000) (873,000)
-------------------- --------------------
Options outstanding at the end of the period 5,466,900 5,282,000
==================== ====================
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
On December 21, 1998, Alamosa entered into a three-year agreement with
Nortel to purchase network equipment and infrastructure. Pursuant to
that agreement, Nortel also agreed to provide installation and
optimization services, such as network engineering and radio frequency
engineering, for the equipment and to grant Alamosa a nonexclusive
license to use the software associated with the Nortel equipment. Under
the original agreement, Alamosa committed to purchase $82.0 million
worth of equipment and services from Nortel, and Nortel agreed to
finance these purchases pursuant to the EDC Credit Facility. Under the
agreement, Alamosa received a discount on the network equipment and
services because of the Company's affiliation with Sprint PCS, but paid
a premium on any equipment and services financed by Nortel. If
Alamosa's affiliation with Sprint PCS ends, Nortel has the right to
either terminate the agreement or, with Alamosa's consent, modify the
agreement to establish new prices, terms and conditions. On February 8,
2000, the Company amended its equipment purchase contract with Nortel
and increased its purchase commitment to $167 million. In addition, the
requirement to pay a premium for purchases financed by Nortel was
eliminated. As of June 30, 2000, Alamosa had remaining commitments of
$64.5 million under the Nortel equipment agreement. These purchases
from Nortel may be financed pursuant to the EDC credit facility.
F-12
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTRACT FOR TOWERS - On February 22, 2000, the Company entered into a
Master Design Build Agreement with a tower contractor to provide towers
in the expansion areas including Wisconsin.
8. STOCKHOLDERS' EQUITY
On October 29, 1999, Holdings filed a registration statement with the
Securities and Exchange Commission for the sale of 10,714,000 shares of
its common stock (the "Stock Offering"). The Stock Offering became
effective and the shares were issued on February 3, 2000 at the initial
price of $17.00 per share. Subsequently, the underwriters exercised
their over-allotment option of 1,607,100 shares. Holdings received net
proceeds of $193.8 million after commissions of $13.3 million and
expenses of approximately $1.5 million. The proceeds of the Stock
Offering are to be used for the build out of the system, to fund
operating working capital needs and for other general corporate
purposes.
9. INCOME TAXES
Prior to February 1, 2000, the Company's predecessor operated as a
limited liability company ("LLC") under which losses for income tax
purposes were utilized by the LLC members on their income tax returns.
Subsequent to January 31, 2000, the Company became a C-Corp for federal
income tax purposes and therefore subsequent losses became net
operating loss ("NOL") carry forwards of the Company.
No benefit for federal income tax has been recorded for the six months
ended June 30, 2000 as the net deferred tax asset is fully reserved
because of the uncertainties regarding the Company's ability to utilize
the asset in future years.
10. SUPPLEMENTAL DISCLOSURE TO STATEMENTS OF CASH FLOWS
Accounts payable at December 31, 1999 and June 30, 2000 include
$9,096,776 and $27,355,920, respectively, of property and equipment
additions. Additions to Property and Equipment of $44,048,794 in the
consolidated statements of cash flows for the six months ended June 30,
2000 include payments of accounts payable outstanding at December 31,
1999.
Capital lease obligations of $146,379 were incurred during the six
months ended June 30, 1999.
11. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 44, ("FIN 44"), "Accounting for Certain Transactions
Involving Stock Compensation - an Interpretation of APB 25". This
Interpretation clarifies (a) the definition of employee for purposes of
applying Opinion 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequence of
various modifications to the terms of a previously fixed stock option
or award, and (d) the accounting for an exchange of stock compensation
awards in a business combination. FIN 44 is effective July 1, 2000;
however, certain conclusions in this Interpretation cover specific
events that occur after either December 15, 1998, or January 12, 2000.
To the extent
F-13
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
that this Interpretation covers events occurring during the period
after December 15, 1998, or January 12, 2000, but before the effective
date of July 1, 2000, the effects of applying this Interpretation will
be recognized on a prospective basis from July 1, 2000. The Company
does not expect FIN 44 to have a material effect on its financial
position, results of operations or cash flows.
On December 3, 1999, the SEC released Staff Accounting Bulletin 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). This
bulletin established more clearly defined revenue recognition criteria
than previously existing accounting pronouncements, and specifically
addresses revenue recognition requirements for nonrefundable fees, such
as activation fees, collected by a company upon entering into an
arrangement with a customer, such as an arrangement to provide
telecommunications services. On June 26, 2000, the SEC released SAB
101B, which delays the required implementation of SAB 101 until no
later than the fourth quarter of fiscal years ending December 31, 2000.
The Company believes that the effects of this bulletin will not be
material to its financial position, results of operations or cash
flows.
The Company does not believe that any other recently issued accounting
pronouncements will have a material impact on its financial position,
results of operations or cash flows.
12. SUBSEQUENT EVENTS
On July 31, 2000, Holdings signed definitive agreements to combine its
operations with Roberts Wireless Communications, LLC ("Roberts") and
Washington Oregon Wireless, LLC ("WOW") in a reorganization transaction
in which each of Holdings, Roberts and WOW will become a wholly-owned
subsidiary of Alamosa Holdings, Inc. ("Superholdings"), a newly formed
Delaware corporation. The mergers will be recorded using the purchase
method of accounting.
At the effective time of the Holdings reorganization, each share of
Holdings common stock issued and outstanding immediately prior to the
reorganization will be converted into the right to receive one share of
Superholdings common stock.
ROBERTS MERGER. Based in St. Louis, Missouri, Roberts has a management
agreement with Sprint PCS to serve approximately 2.5 million people
primarily in the state of Missouri. Roberts provides personal
communications services in the areas surrounding Kansas City, the home
of Sprint PCS, and St. Louis, including the Interstate 70 corridor
connecting the two cities.
Pursuant to the Roberts reorganization agreement, the members of
Roberts formed Roberts Wireless Holdings LLC ("Roberts Holdings"),
which holds all of the outstanding membership interests of Roberts. At
the effective time of the Roberts merger, Roberts Holdings will merge
with and into Superholdings. As a result, Roberts Holdings will cease
to exist as a separate legal entity and Superholdings will continue as
the surviving corporation under the laws of the State of Delaware and
will retain its name.
Upon completion of the Roberts merger, each unit of membership interest
of Roberts Holdings will be converted into the right to receive (a) 675
shares of Superholdings common stock, and (b) $200 in cash, without any
interest thereon. The aggregate consideration to be paid in the Roberts
merger
F-14
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
will be 13,500,000 shares of Superholdings common stock and $4 million
in cash. No holder of membership interests of Roberts Holdings will
have any rights as a member of Roberts Holdings or Roberts following
the Roberts merger.
Superholdings will have the right to withhold from the aggregate amount
of the cash payment made pursuant to the Roberts merger the amounts,
including interest, then owing from the members of Roberts to Alamosa
pursuant to any outstanding borrowings, as well as the amount of any
transfer taxes owed as a result of the formation of Roberts Holdings or
Roberts' or Roberts Holdings' participation in the Roberts merger.
The officers and directors of Superholdings immediately prior to the
Roberts merger will be the surviving officers and directors of the
surviving corporation until their respective successors are duly
elected or appointed.
In addition, on July 31, 2000, Roberts and Alamosa Operations, Inc.,
a subsidiary of Alamosa, ("Operations") entered into a services
agreement whereby, effective July 31, 2000, Alamosa Operations began
to manage the operations of Roberts, pending completion of the
Roberts merger. Operations will provide various services in
connection with the operation of Roberts' business, including (a) all
network management services for the operation of Roberts' wireless
telecommunications network with the Roberts Basic Trading Areas, (b)
management of all sales and marketing services, (c) through the
Roberts management agreement with Sprint PCS, customer care, billing,
and other services, and (d) certain general and administrative,
executive, financial and accounting, human resources, legal and other
professional and forecasting services. Under the terms of the
agreement, Roberts will pay Operations a management fee of $100,000
per month for the services provided by Operations and will reimburse
Operations for certain reimbursable costs and expenses incurred or
paid by Operations in providing these services.
The term of the Roberts services agreement began on July 31, 2000 and
will end upon the completion of the Roberts merger, subject to earlier
termination in certain circumstances.
Also on July 31, 2000, Roberts and Operations entered into a loan
agreement whereby Operations will lend up to $20 million to Roberts, to
be used only for the purpose of funding Roberts' working capital needs
from July 31, 2000 through the completion of the Roberts merger. In
connection with the Roberts loan agreement, Roberts assumed certain
obligations of certain members of Roberts under the loan agreement
between the members of Roberts Holdings (as borrowers) and Operations
(as lender), to the extent the proceeds of that loan were used to make
capital contributions to Roberts.
The loan bears interest at the prime rate and is due six months after
the termination of the Roberts reorganization agreement, upon
acceleration, or upon demand. Operations is not obligated to make any
advances under the Roberts loan agreement until it has received certain
consents.
In connection with the loan agreement, certain members of Roberts
Holdings entered into an agreement providing that, if the Roberts
merger is not completed, all sums due under the Roberts loan agreement
and related documents are not paid in full to Operations, and certain
liens and
F-15
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
security interests are not released, certain members of Roberts will
jointly and severally convey to Operations all or a portion of their
respective membership interests in Roberts so that Operations owns on a
fully diluted basis, 15% of the total membership interests in Roberts,
free and clear of all liens and encumbrances
When the Roberts merger is completed, all amounts due to Operations by
Roberts under the Roberts loan agreement may at Operations option,
either (a) be deemed paid in full (in such ease, this loan will be
characterized as capital contributions by Operations to Roberts), or
(b) remain a debt obligation of Roberts, subject to a subordination
agreement in favor of the senior lender to Superholdings.
WOW MERGER. WOW, based in Lake Oswego, Oregon, has the exclusive right
to provide wireless personal communication services under the Sprint
PCS brand name to approximately 1.5 million people primarily in
Washington and Oregon. Upon completion, the WOW network will include
the cities of Ellensburg, Yakima and Kennewick, Washington and key
travel corridors within Washington and Oregon.
Pursuant to the WOW reorganization agreement, the members of WOW formed
WOW Holdings LLC ("WOW Holdings"), which holds all of the outstanding
membership interests of WOW. At the effective time of the WOW merger,
WOW Holdings will merge with and into Superholdings. As a result, WOW
Holdings will cease to exist as a separate legal entity and
Superholdings will continue as the surviving corporation under the laws
of the State of Delaware and will retain its name.
Upon completion of the WOW merger, each unit of membership interest of
WOW Holdings will be converted into the right to receive (a) 0.19171
shares of Superholdings common stock and (b) $12.5 million in cash,
without any interest thereon. The aggregate consideration to be paid in
connection with the WOW merger will be equal to 6,050,000 shares of
Superholdings common stock and $12.5 million in cash. No holder of
membership interests of WOW Holdings will have any rights as a member
of WOW Holdings or WOW following the WOW merger.
Superholdings will have the right to withhold from the aggregate amount
of the cash payment made pursuant to the WOW merger the amount of any
transfer taxes owed as a result of the formation of WOW Holdings or
WOW's or WOW Holdings' participation in the WOW merger.
The officers and directors of Superholdings immediately prior to the
WOW merger will be the officers and directors or the surviving
corporation until their respective successors are duly elected or
appointed.
In addition, on July 31, 2000, WOW and Operations entered into a
services agreement whereby, effective September 1, 2000, Operations
began to manage the operations of WOW, pending completion of the WOW
merger. Operations will provide various services in connection with the
operation of WOW's business, including (a) all network management
services for the operation of WOW's wireless telecommunications network
with the WOW Basic Trading Areas, (b) management of all sales and
marketing services, (c) through the WOW management agreement with
Sprint PCS,
F-16
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
customer care, billing, and other services, and (d) certain general and
administrative, executive, financial and accounting, human resources,
legal and other professional and forecasting services. Under the terms
of the agreement, WOW will pay Operations a management fee of $100,000
per month for the services provided by Operations and will reimburse
Operations for certain reimbursable costs and expenses incurred or paid
by Operations in providing these services.
The term of the WOW services agreement began on September 1, 2000 and
will end upon the completion of the WOW merger, subject to earlier
termination in certain circumstances.
Also, on July 31, 2000, WOW and Operations entered into a loan
agreement whereby Operations will lend up to $11 million to WOW to be
used only for the purposes of (a) satisfying certain capital
contribution requirements under WOW's operating agreement, and (b)
funding WOW's working capital needs from July 31, 2000 through the
completion of the WOW merger.
The loan bears interest at the prime rate and is due 30 days after the
termination of the WOW reorganization agreement or upon demand.
Operations is not obligated to make any advances under the WOW loan
agreement until is has received certain consents and until the waiting
period under the Hart-Scott-Rodino Act has expired or is terminated.
This loan is guaranteed by certain members of WOW.
When the WOW merger is completed, all amounts due to Operations by WOW
under the WOW loan agreement may, at Operations option either, (a) be
deemed paid in full (in such case, this loan will be characterized as
capital contribution by Operations to WOW), or (b) remain a debt
obligation of WOW, subject to a subordination agreement in favor of the
senior lender to Superholdings.
Each of these agreements is subject to the customary conditions to
closing, and there is no guarantee that they will close on schedule or
at all. These conditions include among other things, that Alamosa
obtain consents from its lending institutions. Alamosa may have to make
concessions in order to obtain the consents which may have a material
adverse effect on it.
On July 31, 2000, Superholdings entered into a commitment letter with
Citicorp, North America, Inc. and Salomon Smith Barney providing for a
new senior credit facility of up to $200 million to be made to Alamosa
Holdings, LLC, a wholly-owned subsidiary of Superholdings (the
"Citicorp Credit Facility"). The proceeds of the Citicorp Credit
Facility will be used to fund the cash portion of the consideration to
be paid in the Roberts and WOW mergers and to fund the working
capital and build-out needs of Roberts and WOW, including the
refinancing of any debt assumed. The definitive agreements providing
for the Citicorp Credit Facility have not been completed. The Citicorp
Credit Facility will be comprised of a secured term loan for up to $175
million and a secured revolving credit facility for up to $25 million,
each with a term of seven years and at a rate of interest to be
determined under the credit facility. Alamosa Holdings, LLC must draw
down $100 million under the term loan at the closing of the credit
facility. The Citicorp Credit Facility will require a commitment fee
and arrangement fees. The Citicorp Credit Facility also provides for
the issuance of warrants to the lenders thereunder, representing 2% of
Superholdings fully diluted common stock, which will have an exercise
price of 20% over Superholdings' stock price as of the date of the
closing of the Citicorp Credit Facility. Superholdings' obligation to
issue the warrants can be eliminated by the infusion of an additional
$75 million of equity into Alamosa Holdings, LLC by
F-17
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
certain specified dates. The Citicorp Credit Facility will require
Alamosa Holdings, LLC and its subsidiaries to maintain certain
financial and operating covenants.
F-18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Alamosa PCS Holdings, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Alamosa PCS
Holdings, Inc. and its subsidiaries at December 31, 1999 and December 31, 1998,
and the results of their operations and their cash flows for the year ended
December 31, 1999 and the period from July 16, 1998 (inception) through December
31, 1998, in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Dallas, Texas
February 28, 2000
F-19
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------- ---------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,655,711 $ 13,529,077
Accounts receivable, net of allowance for doubtful accounts
of $161,704 at December 31, 1999 1,675,636 -
Inventory 5,777,375 -
Prepaid expenses and other assets 882,516 52,046
------------------------- ---------------------------
Total current assets 13,991,238 13,581,123
Property and equipment, net 84,713,724 2,092,762
Note receivable from officer 100,000 -
Debt issuance costs, net 3,743,308 -
Restricted cash 518,017 -
Other noncurrent assets 1,425,912 -
------------------------- ---------------------------
Total assets $ 104,492,199 $ 15,673,885
========================= ===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 15,153,068 $ 395,355
Accounts payable to related parties 1,182,225 450,496
Current installments of capital leases 21,818 20,145
Bank line of credit 363,665 23,637
Microwave relocation obligation 3,578,155 -
------------------------- ---------------------------
Total current liabilities 20,298,931 889,633
Capital lease obligations, noncurrent 827,024 708,074
Long-term debt 71,926,414 -
------------------------- ---------------------------
Total liabilities 93,052,369 1,597,707
------------------------- ---------------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares
authorized; no shares issued - -
Common stock, $.01 par value; 290,000,000 shares
authorized, 48,500,008 issued and outstanding 485,000 485,000
Additional paid-in capital 50,824,876 14,515,000
Accumulated deficit (33,759,681) (923,822)
Unearned compensation (6,110,365) -
------------------------- ---------------------------
Total stockholders' equity 11,439,830 14,076,178
Total liabilities and stockholders' equity $ 104,492,199 $ 15,673,885
======================== ==========================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-20
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 16, 1998
(INCEPTION)
YEAR ENDED THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998
-------------------------- ----------------------------
<S> <C> <C>
Revenues:
Service revenue $ 6,533,623 $ -
Product sales 2,450,090 -
-------------------------- ----------------------------
Total revenue 8,983,713 -
-------------------------- ----------------------------
Costs and expenses:
Cost of service and operations 6,616,266 -
Cost of service and operations - related parties 824,210 -
Cost of products sold 7,426,736 -
Selling and marketing 8,918,487 -
Selling and marketing - related parties 404,561 -
General and administrative expenses (excluding non-cash
compensation expense) 3,711,548 949,445
Non-cash compensation expense 8,199,511 -
General and administrative - related parties 497,427 6,886
Depreciation and amortization 3,056,923 2,063
-------------------------- ----------------------------
Total costs and expenses 39,655,669 958,394
Loss from operations (30,671,956) (958,394)
Interest and other income 477,390 34,589
Interest expense (2,641,293) (17)
-------------------------- ----------------------------
Net loss $ (32,835,859) $ (923,822)
========================== ============================
Pro forma information:
Net loss $ (32,835,859) $ (923,822)
Pro forma income tax adjustment:
Income tax benefit 10,854,083 317,592
Deferred tax valuation allowance (10,854,083) (317,592)
-------------------------- ----------------------------
Pro forma net loss $ (32,835,859) $ (923,822)
========================== ============================
Pro forma weighted average common shares outstanding,
basic and diluted 48,500,008 48,500,008
-------------------------- ----------------------------
Pro forma net loss per common share, basic and diluted $ (0.68) $ (0.02)
-------------------------- ----------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-21
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 16, 1998 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
----------------- ------------------------ PAID-IN ACCUMULATED UNEARNED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT COMPENSATION TOTAL
-------- -------- ---------- ----------- --------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, July 16, 1998
(inception) - $ - - $ - $ - $ - $ - $ -
Members' contribution - - 48,500,008 485,000 14,515,000 - - 15,000,000
Net loss - - - - - (923,822) - (923,822)
-------- -------- ---------- ----------- --------------- -------------- -------------- -----------
Balance, December 31, 1998 - - 48,500,008 485,000 14,515,000 (923,822) - 14,076,178
Members' contribution - - - - 22,000,000 - - 22,000,000
Stock options - - - - 14,309,876 - (14,309,876) -
Amortization of unearned
compensation - - - - 8,199,511 8,199,511
Net loss - - - - - (32,835,859) - (32,835,859)
-------- -------- ---------- ----------- --------------- -------------- -------------- -----------
Balance, December 31, 1999 - $ - 48,500,008 $ 485,000 $ 50,824,876 $(33,759,681) $ (6,110,365) $11,439,830
======== ======== ========== =========== =============== ============== ============== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-22
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 16, 1998
(INCEPTION)
YEAR ENDED THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998
-------------------- -----------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (32,835,859) $ (923,822)
Adjustments to reconcile net loss to net cash used in
operating activities:
Non-cash compensation expense 8,199,511 -
Depreciation and amortization 3,056,923 2,063
Amortization of debt issuance costs 331,063 -
Deferred interest expense 2,068,601 -
(Increase) decrease in:
Accounts receivable (1,675,636) -
Inventory (5,777,375) -
Prepaid expenses and other assets (594,027) (52,046)
Increase (decrease) in:
Accounts payable and accrued expenses 10,137,095 845,851
-------------------- -----------------------
Net cash used in operating activities (17,089,704) (127,954)
-------------------- -----------------------
Cash flows from investing activities:
Additions to property and equipment (76,601,004) (1,366,606)
Issuance of note receivable from officer (100,000) -
Change in restricted cash (518,017) -
-------------------- -----------------------
Net cash used in investing activities (77,219,021) (1,366,606)
-------------------- -----------------------
Cash flows from financing activities:
Capital contributions 22,000,000 15,000,000
Increase in notes payable 66,357,841 23,637
Debt and equity offering costs (1,360,405) -
Debt issuance costs (234,371) -
Payments on capital leases (25,756) -
Interest rate cap premiums (301,950) -
-------------------- -----------------------
Net cash provided by financing activities 86,435,359 15,023,637
-------------------- -----------------------
Net increase (decrease) in cash and cash equivalents (7,873,366) 13,529,077
Cash and cash equivalents at beginning of period 13,529,077 -
-------------------- -----------------------
Cash and cash equivalents at end of period $ 5,655,711 $ 13,529,077
==================== =======================
Supplemental disclosure - cash paid for interest $ 218,142 $ -
==================== =======================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-23
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 16, 1998
(INCEPTION)
YEAR ENDED THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------------- ---------------------
<S> <C> <C>
Supplemental disclosure of noncash activities:
Capitalized lease obligations incurred $ 146,379 $ 728,219
Liabilities assumed in connection with purchase of -
property and equipment 5,352,347
Liabilities assumed in connection with debt
issuance costs 3,840,000 -
Liabilities assumed in connection with microwave
relocation 3,578,155 -
----------------------- ----------------------
$ 12,916,881 $ 728,219
======================= ======================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-24
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS OPERATIONS
Alamosa PCS Holdings, Inc. ("Holdings") was formed in October 1999 in
anticipation of an initial public offering as described in Note 14.
Immediately prior to the offering in February 2000, shares of Holdings,
the registrant, were exchanged for Alamosa PCS LLC's ("Alamosa")
membership interests, and Alamosa became wholly owned by Holdings.
These financial statements are presented as if the reorganization had
occurred as of the beginning of the periods presented. There were no
activities within Holdings prior to the reorganization. Holdings and
its subsidiaries, including Alamosa, are collectively referred to in
these financial statements as the "Company." Other subsidiaries formed
include Texas Telecommunications LP ("Texas") and Alamosa Wisconsin
Limited Partnership ("Wisconsin").
Alamosa and its successor Alamosa PCS, Inc., referred to in these
financial statements as Alamosa, was formed in July 1998 as a Texas
limited liability company. In July 1998, Alamosa entered into
affiliation agreements with Sprint PCS, the PCS Group of Sprint
Corporation. These affiliation agreements provided Alamosa with the
exclusive right to build, own and manage a wireless voice and data
services network in markets with over 5.2 million residents located in
Texas, New Mexico, Arizona and Colorado under the Sprint PCS brand.
Alamosa amended its affiliation agreements with Sprint PCS in December
1999 to expand its services network so that it will include 8.4 million
residents. Alamosa is required to build out the wireless network
according to Sprint PCS specifications. The affiliation agreements are
in effect for a term of 20 years with three 10-year renewal options
unless terminated by either party under provisions outlined in the
affiliation agreements. The affiliation agreements include
indemnification clauses between Alamosa and Sprint PCS to indemnify
each other against claims arising from violations of laws or the
affiliation agreements, other than liabilities resulting from
negligence or willful misconduct of the party seeking to be
indemnified.
Holdings and Alamosa were in the development stage from July 1998
through December 31, 1999. This stage was characterized by significant
expenditures for the design and construction of the wireless network
and no significant operating revenue.
Management estimates total network build-out expenditures related to
the markets included in the affiliation agreements with Sprint PCS of
approximately $272 million, including site acquisition, design,
construction and equipment through 2002. These expenditures will be
funded through member contributions of $37 million, a financing
agreement with Nortel Networks, Inc. ("Nortel") of $250 million and
proceeds of the initial public offering and Senior Discount Notes
proceeds described in Note 14. From inception through December 31,
1999, the Company has commenced operations in eleven markets. Since
inception, the Company has incurred revenues and expenses of $8,983,713
and $42,743,394 resulting in an accumulated deficit of $33,759,681 at
December 31, 1999. Alamosa has signed an agreement with a related party
for the provision of engineering services related to the network
build-out. Once the initial build-out is completed within a market, the
Company's focus is the development of the Sprint PCS subscriber base
within that market.
F-25
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Prior to the reorganization discussed above, the Regulations of
Alamosa, as amended, provided for the governance and administration of
its business, allocation of profits and losses, tax allocations,
transactions with partners, disposition of ownership interest and other
matters. The Regulations established two classes of membership
interests. Class I members had full voting rights and were entitled to
full benefits of ownership of their share of Alamosa. Class II members
consisted of additional non-voting share interests of Alamosa, which
the Board of Managers may authorize to be distributed to employees of
Alamosa under an incentive bonus plan. The Regulations generally
provided for the allocation of profits and losses pro-rata based on the
proportion that a percentage interest of a member bears to the
aggregate percentage interests of all members, as defined in the
Regulations.
The members of the Company had the following Class I
ownerships interests as of December 31, 1998 and December 31, 1999:
Alamo IV, LLC 56.2930%
Rosewood Telecommunications, LLC 20.0515%
West Texas PCS, LLC 14.5833%
Tregan International Corp. 6.1856%
Longmont PCS, LLC 2.0619%
Yellow Rock PCS, L.P. 0.8247%
Alamo IV, LLC was dissolved in November 1999. Upon the dissolution, its
members received their pro rata portions of ownership interest of
Alamosa PCS LLC. In conjunction with the reorganization described
above, the ownership interests of Alamosa PCS LLC were exchanged for an
equivalent interest in Holdings' common stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies:
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash,
money market funds, and commercial paper with minimal interest rate
risk and original maturities of three months or less at the date of
acquisition. The carrying amount approximates fair value.
INVENTORY - Inventory consists of handsets and related accessories.
Inventories purchased for resale are carried at the lower of cost,
determined using weighted average, or market. Market will be determined
using replacement cost in accordance with industry standards.
PROPERTY AND EQUIPMENT - Property and equipment are reported at cost
less accumulated depreciation. Cost incurred to design and construct
the wireless network in a market are classified as construction in
progress. When the wireless network for a particular market is
completed and placed into service, the related costs are transferred
from construction in progress to property and equipment. Repair and
maintenance costs are charged to expense as incurred; significant
renewals
F-26
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and betterments are capitalized. When depreciable assets are retired or
otherwise disposed of, the related costs and accumulated depreciation
are removed from the respective accounts, and any gains or losses on
disposition are recognized in income. If facts or circumstances support
the possibility of impairment, the Company will prepare a projection of
future operating cash flows, undiscounted and without interest. If
based on this projection, the Company does not expect to recover its
carrying cost, an impairment loss equal to the difference between the
fair value of the asset and its carrying value will be recognized in
operating income. No such losses have been recognized to date.
Property and equipment are depreciated using the straight-line method
based on estimated useful lives of the assets.
Asset lives are as follows:
Buildings 20 years
Network equipment 5-10 years
Vehicles 5 years
Furniture and office equipment 5-7 years
Leasehold improvements are depreciated over the shorter of the
remaining term of the lease or the estimated useful life of the
improvement.
Interest will be capitalized in connection with the construction of the
wireless network. The capitalized interest will be recorded as part of
the asset to which it relates and will be amortized over the asset's
estimated useful life. Total interest capitalized is $656,985 as of
December 31, 1999. No interest was capitalized in 1998.
Microwave relocation includes costs and the related obligation incurred
to relocate incumbent microwave frequencies in Alamosa's service area.
Microwave relocation costs are amortized on a straight-line basis over
20 years beginning upon commencement of services in respective markets.
The amortization of microwave relocation costs was $84,312 for the year
ended December 31, 1999.
SOFTWARE COSTS - Initial operating systems software is capitalized and
amortized using the straight-line method, generally over a period of
five years. Capitalized software of approximately $411,000 and $11,500
at December 31, 1999 and 1998, respectively, are recorded in property
and equipment. The Company amortized computer software costs of
approximately $40,000 and $1,000 during 1999 and 1998, respectively.
START-UP COSTS - In April 1998, the American Institute of Certified
Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-5,
"Reporting on the Costs of Start-Up Activities." This statement became
effective January 1, 1999 and required that costs of start up
activities and organization costs be expensed as incurred.
ADVERTISING COSTS - Advertising costs are expensed as incurred.
Advertising expenses totaled approximately $2,277,495 and $2,000 during
1999 and 1998, respectively.
F-27
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES - At December 31, 1999 and 1998, Alamosa was organized as
a Texas limited liability company. Therefore, the taxable loss of the
Company was included in the income tax returns of its members. While no
benefit for income taxes was recorded in the financial statements of
Alamosa, the statements of operations includes pro forma information as
if Alamosa was a taxable entity as described in Note 3.
REVENUE RECOGNITION - The Company recognizes revenue as services are
performed. Sprint PCS handles Alamosa's billings and collections and
retains 8% of collected service revenues from Sprint PCS subscribers
based in Alamosa's territory and from non-Sprint PCS subscribers who
roam onto Alamosa's network. The amount retained by Sprint PCS is
recorded in Cost of Service and Operations. Revenues generated from the
sale of handsets and accessories and from roaming services provided to
Sprint PCS customers who are not based in Alamosa's territory are not
subject to the 8% retainage.
Sprint PCS pays Alamosa a Sprint PCS roaming fee for each minute that a
Sprint PCS subscriber based outside of Alamosa's territory roams on
Alamosa's portion of the Sprint PCS network. Revenue from these
services will be recognized as the services are performed. Similarly,
Alamosa will pay Sprint PCS roaming fees to Sprint PCS, when a Sprint
PCS subscriber based in Alamosa's territory roams on the Sprint PCS
network outside of Alamosa's territory. These costs will be included as
cost of service when incurred.
Product revenues consisting of proceeds from sales of handsets and
accessories are recorded net of an allowance for sales returns. The
allowance is estimated based on Sprint PCS's handset return policy that
allows customers to return handsets for a full refund within 30 days of
purchase. When handsets are returned to the Company, the Company may be
able to reissue the handsets to customers at little additional cost.
However, when handsets are returned to Sprint PCS for refurbishing, the
Company will receive a credit from Sprint PCS, which will be less than
the amount the Company originally paid for the handset. For the year
ended December 31, 1999 product revenue was $2,450,090. The cost of
these products was $7,426,736 of which $5,023,430 represents the excess
of the cost of handsets over the retail sales price of handsets. There
were no product revenues or related costs for the period from inception
to December 31, 1998.
STOCK BASED COMPENSATION - The Company has elected to follow Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued
to Employees" and related interpretations in accounting for its
employee stock options. The non-cash compensation expense relates to
three employees whose cash compensation is recorded in cost of service
and operations and general and administrative expenses. The Company has
implemented the disclosure-only provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock Based
Compensation."
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities on the
F-28
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
date of the financial statements and the reported amounts of expenses
during the reporting period. Actual results could differ from those
estimates.
RISKS AND UNCERTAINTIES - Emergence from the development stage 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.
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 significant credit risk associated
with deposits in excess of federally insured amounts.
RECLASSIFICATION - Certain reclassifications have been made to prior
year balances to conform to current year presentations.
EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS - In June 1998 and June
1999, the Financial Accounting Standards Board ("FASB"), issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
and SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133."
These statements require companies to record derivatives on the balance
sheet as assets or liabilities, measured at fair value. Gains or losses
resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it
qualifies for hedging accounting. SFAS No. 133 will be effective for
Alamosa's fiscal year ending December 31, 2001. Management believes
that the adoption of these statements will not have a significant
impact on the Company's financial results.
In June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement requires that all items required to be
recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the
same prominence as other financial statements. SFAS No. 130 is
effective for financial statement periods beginning after December 31,
1997. No items represent comprehensive income as defined in SFAS No.
130 during 1999 and 1998.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB101"), "Revenue Recognition in
Financial Statements." SAB101 summarizes certain of the staff's
interpretations in applying generally accepted accounting principles to
revenue recognition. The provisions of SAB101 are effective for
Alamosa's quarter ending March 31, 2000. Management is currently
assessing the impact of the adoption of SAB101.
F-29
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. UNAUDITED PRO FORMA INFORMATION
The unaudited pro forma information reflects certain assumptions
regarding transactions and their effects that occurred as a result of
the reorganization described in Note 1.
UNAUDITED PRO FORMA INCOME INFORMATION - The unaudited pro forma
information as shown on the statements of operations is presented to
show the effects of income taxes related to the Company's subsequent
termination of its limited liability company status. The unaudited pro
forma income tax adjustment is presented as if the Company had been a C
Corporation subject to federal and state income taxes at an effective
tax rate of 34% for the period from inception through December 31, 1998
and the year ended December 31, 1999. Application of the provisions of
SFAS No. 109, "Accounting for Income Taxes" would have resulted in a
deferred tax asset primarily from temporary differences related to the
treatment of start-up costs and from net operating loss carry forwards.
The deferred tax asset would have been offset by a full valuation
allowance, as there is not currently sufficient positive evidence as
required by SFAS No. 109 to substantiate recognition of the asset.
The pro forma information is presented for informational purposes only
and is not necessarily indicative of operating results that would have
occurred had the Company elected to terminate its limited liability
company status as of the beginning of each of the periods presented,
nor are they necessarily indicative of future operating results.
UNAUDITED PRO FORMA NET LOSS PER SHARE - Pro forma net loss per share
is calculated by dividing pro forma net loss by the weighted average
number of shares of common stock which would have been outstanding
before the initial public offering after giving effect to the
reorganization of the Company described in Note 1.
UNAUDITED PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING - Unaudited pro
forma weighted average shares outstanding is computed after giving
effect to the reorganization of the Company described in Note 1. The
calculation was made in accordance with SFAS No. 128, "Earnings Per
Share." Diluted weighted average shares outstanding at December 31,
1999 exclude 141,042 incremental potential common shares from stock
options because inclusion would have been antidilutive.
F-30
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------- -------------------
Land and building ................. $ 2,817,426 $ -
Network equipment ................. 76,867,836 -
Vehicles .......................... 477,353 23,637
Furniture and office equipment .... 2,266,966 92,418
--------------------- -------------------
82,429,581 116,055
Accumulated depreciation .......... (2,974,674) (2,063)
--------------------- -------------------
Subtotal 79,454,907 113,992
--------------------- -------------------
Microwave relocation costs ........ 3,578,155 -
Accumulated amortization .......... (84,312) -
--------------------- -------------------
Subtotal .......................... 3,493,843 -
--------------------- -------------------
Construction in progress:
Network equipment ................. 374,680 1,628,271
Leasehold improvements ............ 1,390,294 350,499
--------------------- -------------------
Subtotal .......................... 1,764,974 1,978,770
--------------------- -------------------
Total ............................. $ 84,713,724 $ 2,092,762
===================== ===================
5. LEASES
OPERATING LEASES - The Company has various operating leases, primarily
related to rentals of tower sites and offices. Rental expense was
$1,924,848 and $15,208 for 1999 and 1998, respectively. At December 31,
1999, the aggregate minimum rental commitments under noncancelable
operating leases for the periods shown are as follows:
YEARS:
2000 $ 3,433,809
2001 3,456,342
2002 3,470,805
2003 3,495,462
2004 3,532,010
Thereafter 15,997,042
--------------------
Total $ 33,385,470
====================
Included in total minimum rental commitments is $1,508,000 which will
be paid to related parties.
F-31
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITAL LEASES - Capital leases consist of leases for rental of retail
space and switch usage. The net present value of the leases was
$848,842 and $728,219 at December 31, 1999 and 1998, respectively, and
was included in property and equipment. Amortization recorded under
these leases was $30,894 for the year ended December 31, 1999 and was
minimal during 1998.
At December 31, 1999, the future payments under capital lease
obligations, less imputed interest, are as follows:
YEARS:
2000 $ 105,720
2001 105,720
2002 105,720
2003 105,720
2004 113,970
Thereafter 1,085,480
----------------
Total minimum lease payments 1,622,330
Less: imputed interest 773,488
----------------
Present value of minimum lease payments 848,842
Less: current installments 21,818
----------------
Long-term capital lease obligations at
December 31, 1999 $ 827,024
================
6. BANK LINE OF CREDIT
Alamosa has a $500,000 revolving line of credit with a bank that
expires June 9, 2000. The line of credit has a variable interest rate
of 9.25% at December 31, 1999. Proceeds from this line of credit are
used to purchase vehicles for service representatives. As of December
31, 1999, $363,665 was outstanding on the line of credit. The vehicles
purchased under this line of credit and all of Alamosa's cash and cash
equivalents held at the bank are pledged as collateral under the terms
of the agreement. No interest amounts were paid during the period ended
December 31, 1998. A total of $22,035 was paid during the year ended
December 31, 1999.
7. LONG-TERM DEBT
Long-term debt at December 31, 1999 included $71,876,379 owed to Nortel
and $50,035 owed to another party relating to the build-out of retail
facilities.
On February 3, 1999, Alamosa issued a $7,500,000 letter of credit in
favor of Nortel.
F-32
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The letter of credit expired in June 1999. On June 10, 1999, Alamosa
entered into a credit agreement with Nortel. The proceeds of that
credit facility are used to purchase equipment, to fund the
construction of the Company's portion of the Sprint PCS network, and to
pay associated financing costs. The financing terms permit Alamosa to
borrow $123 million under three commitment tranches through February
18, 2002, and will require minimum equipment purchases.
The Nortel credit facility is collateralized by all of Alamosa's
current and future assets and capital stock. Alamosa is required to
maintain certain financial ratios and other financial conditions
including minimum levels of revenue and wireless subscribers. In
addition, Alamosa is required to maintain a $1,000,000 cash balance as
collateral against the facility. At December 31, 1999, Alamosa was not
in compliance with this agreement; however, a waiver of this
requirement was obtained from Nortel.
In connection with the credit agreement with Nortel, each of the former
members of Alamosa pledged its ownership interest in Alamosa to Nortel
to collateralize Alamosa's obligations under the credit agreement. The
members secured their unfunded contributions with either a letter of
credit or a marketable securities pledge agreement. Each letter of
credit or marketable securities pledge agreement will be terminated
prior to the closing of the initial public offering described in Note
14. In addition, Nortel required the members to execute capital
contribution agreements to confirm their collective obligations to make
capital contributions of at least $48.5 million.
Alamosa may borrow money under the Nortel credit facility as either a
base rate loan with an interest rate of prime plus 2.5%, or a
Eurodollar loan with an interest rate of the London interbank offered
rate, commonly referred to as LIBOR, plus 3.75%. The LIBOR was 9.5% at
December 31, 1999. In addition, an annual unused facility fee of 0.75%
will be charged beginning six months after the closing date on the
portion of the available credit that has not been borrowed. Interest
accrued through the two-year anniversary from the closing date is added
to the principal amount of the loan. Thereafter, interest is payable
monthly in the case of base rate loans and at the end of the applicable
interest period, not to exceed three months, in the case of Eurodollar
loans. Interest expense for the year ended December 31, 1999 totaled
$2,068,601. Principal is payable in 20 quarterly installments beginning
February 18, 2002. Alamosa may voluntarily prepay any of the loans at
any time, but any amount repaid may not be reborrowed since there are
no revolving credit features. Alamosa must make mandatory prepayments
under certain circumstances, including 50% of the excess cash flow, as
computed under the credit agreement, after March 31, 2002 and any
amount in excess of $250,000 received for asset sales outside the
ordinary course of business or insurance proceeds, to the extent not
reinvested in property or assets within a stated period of time. All
prepayments are applied to the outstanding loan balances pro rata in
the inverse order of maturity, except where there is a borrowing base
shortage, in which case prepayments are first applied there, and then
pro rata among all three commitment tranches.
As a condition of the financing, Sprint PCS has entered into a consent
and agreement with Nortel that modifies Sprint PCS's rights and
remedies under its affiliation agreements with Alamosa. Among other
things, Sprint PCS consented to the pledge of substantially all of
Alamosa's assets to Nortel, including the affiliation agreements. In
addition, Sprint PCS may not terminate the affiliation
F-33
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
agreements with Alamosa and must maintain 10 MHz of PCS spectrum in
Alamosa's markets until the Nortel financing is satisfied or Alamosa's
assets are sold pursuant to the terms of the consent and agreement with
Nortel.
Alamosa incurred approximately $4,074,000 of costs associated with
obtaining the Nortel financing. Those costs consisted of a loan
origination fee, legal fees and other debt issue costs that have been
capitalized and are being amortized to interest expense using the
straight-line method over the term of the credit facility.
See Note 14 for a discussion of the amendment of the credit facility
subsequent to year end.
8. RELATED PARTY TRANSACTIONS
NOTE RECEIVABLE - On April 23, 1999, the Company entered into a
$100,000 loan agreement with an officer of the Company. The loan
matures on April 2014 and accrues interest at an annual rate of 7.75%.
AGREEMENTS WITH CHR SOLUTIONS, INC. - Alamosa has entered into a number
of agreements with CHR Solutions, Inc. ("CHR") as described in more
detail below. CHR resulted from a merger between Hicks & Ragland
Engineering Co., Inc., and Cathey, Hutton & Associates, Inc. effective
as of November 1, 1999. David Sharbutt, Alamosa's Chairman and Chief
Executive Officer, was at the time the agreements were executed the
President and Chief Executive Officer of Hicks & Ragland. Mr. Sharbutt
is currently employed as a senior consultant by CHR Solutions.
On July 27, 1998, Alamosa entered into an engineering services contract
with CHR for design and construction inspection services in connection
with the network deployment. The term of the contract covers three
periods through August 2001, though either party may terminate the
agreement for cause before August 2001. A guaranteed maximum fee amount
has been set for each period of the contract, and those fees aggregate
to approximately $7.0 million, excluding taxes. If the total billing
for the project is less than the guaranteed maximum fee, Alamosa will
pay an incentive bonus equal to 50% of the difference. Alamosa paid
$2,951,476 and $902,243 for these services during 1999 and 1998,
respectively. Engineering fees under this agreement are recorded in
construction in progress and property and equipment and comprise
approximately 4% and 72% of fixed asset purchases during 1999 and 1998,
respectively. At December 31, 1999 and 1998, amounts payable under
these agreements amounted to $709,987 and $443,610, respectively.
Effective September 20, 1998, Alamosa entered into a special services
contract with CHR to provide marketing and operations consulting
services for a maximum amount of $100,000. Subsequent contracts for
marketing, consulting, business planning and radio frequency "drive
testing" were approved in October 1999, in an aggregate amount of
approximately $500,000. Alamosa paid $424,994 for these services for
the year ended December 31, 1999. The amounts payable under these
agreements was $139,822 at December 31, 1999.
F-34
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On April 9, 1999, Alamosa entered into a data communications services
contract with CHR to perform design and implementation services in
connection with corporate enterprise wide area network and local area
networks for a maximum fee of $262,040. Alamosa paid $88,486 for these
services for the year ended December 31, 1999. The amount payable under
this agreement amounted to $20,132 at December 31, 1999.
As of April 6, 1999, Alamosa entered into a telecommunications service
agreement with Tech Telephone Company Limited Partnership, an affiliate
of CHR, to install and provide DS1 telecommunications lines between
Sprint PCS and Alamosa's Lubbock-based operations and between Alamosa's
Lubbock-based operations and other markets. The original term of the
agreement is three years, but the agreement automatically renews upon
expiration for additional successive 30-day terms by either party.
Transport expenses under the agreement amounted to $346,740 for 1999
and are included in Cost of Service and Operations.
As of August 13, 1999, Alamosa entered into a distribution agreement
with TechTel Communications Corporation, an affiliate of CHR,
authorizing it to become a third party distributor of Sprint PCS
products and services for Alamosa in Lubbock.
As of October 8, 1999, Alamosa entered into a special service contract
with CHR to perform marketing and operations consulting services in
selected areas in Wisconsin for a maximum fee of $100,000, excluding
taxes. This agreement lasts until the project is completed, unless
either party terminates it earlier.
As of October 8, 1999, Alamosa entered into a special service contract
with CHR to perform business planning and consulting services and a
feasibility study in selected areas of Wisconsin for a fixed fee of
$81,000. This agreement lasts until the project is completed, unless
either party terminates it earlier.
As of October 8, 1999, Alamosa entered into a special service contract
with CHR to perform business planning and consulting services and a
feasibility study in selected areas of its territory for an estimated
probable cost of $200,000, excluding taxes. This agreement lasts until
the project is completed, unless either party terminates it earlier.
As of October 8, 1999, Alamosa entered into a special service contract
with CHR to provide us with radio frequency "driver testing" to predict
the propagation characteristics of given areas in its territory for an
estimated probable cost of $62,085, excluding taxes. This agreement
lasts until the project is completed, unless either party terminates it
earlier.
AGREEMENT WITH AMERICAN TOWER CORPORATION - In August 1998, Alamosa
entered into a master site development and lease agreement with
Specialty Capital Services, Inc. ("Specialty"), a subsidiary of
Specialty Teleconstructors, Inc. ("Teleconstructors"), that has since
merged with American Tower Corporation ("American"). Pursuant to the
agreement, Specialty arranges for collocation of equipment or
constructs new facilities in areas identified for build-out. Specialty
provides site
F-35
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
acquisitions, leasing and construction services, and secures zoning,
permitting and surveying approvals and licenses for each base station.
This initial term master agreement expires in August 2003, with
automatic renewal for three additional terms of five years each.
The agreement provides for monthly payments subject to an annual
adjustment based on the Consumer Price Index. Prior to October 1, 1999,
Specialty was related to Alamosa through one of Alamosa's directors who
owned interests in both Alamosa and Teleconstructors and was an
employee and officer of Specialty and Teleconstructors. In addition,
another individual who was one of Alamosa's directors at the time the
agreement was entered into is a manager of Longmont PCS, LLC, one of
Alamosa's former members. This individual was also a stockholder of
Teleconstructors and acted as a vice president of American, which
acquired Teleconstructors. The two individuals completed the
disposition of their ownership interests in American by September 30,
1999 and are no longer associated with American. No amounts were paid
or outstanding under this agreement during 1998. Through September 30,
1999, $165,300 was paid under this agreement.
OTHER RELATED PARTY TRANSACTIONS - In November 1998, the Company
entered into an agreement to lease space for telephone switching
equipment in Albuquerque with SASR Limited Partnership, 50% owned by
one of Alamosa's directors and a manager of West Texas PCS, LLC, and
Budagher Family LLC, two of Alamosa's interest holders. The lease has a
term of five years with two optional five-year terms. The lease
provides for monthly payments aggregating to $18,720 a year with 10%
increase at the beginning of the two option periods, as well as a pro
rata portion of real estate taxes on the property.
In connection with Alamosa's distribution and sales of Sprint PCS
wireless communications equipment, on December 28, 1998, Alamosa
entered into a long-term agreement to lease space for a retail store in
Lubbock, Texas with Lubbock HLH, Ltd., principally owned by one of
Holding's directors and the general manager of South Plains Advance
Communications & Electronics, Inc. ("SPACE"). SPACE is a stockholder of
Alamosa. This lease has a term of 15 years and provides for monthly
payments aggregating to approximately $110,000 a year, subject to
adjustment based on the Consumer Price Index on the first day of the
sixth lease year and on the first day of the eleventh lease year. No
amounts were paid or outstanding under this lease at December 31, 1998.
During 1999, $73,233 was paid under this lease. No amount was payable
at December 31, 1999.
During 1998, certain members paid costs on behalf of the Company, which
were subsequently reimbursed. Such payments amounted to approximately
$101,000 during 1998 and were minimal during 1999. No amounts payable
to members were outstanding at December 31, 1999 and 1998.
Mr. Silber, one of the members of the the Company's board of directors,
is a member of the board of managers of WOW. Mr Silber is also a
principal of WOW Investment Partners, L.L.C., an affiliate of WOW
Investment Partners, L.P. WOW Investment Partners, L.P. owns
approximately 44.4% of the outstanding membership interests of WOW
Holdings.
F-36
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mr. Silber beneficially owns 3,045,647 shares of the Company's common
stock, which includes 28,000 shares issuable pursuant to options
currently exercisable as well as 3,017,647 shares held by Tregan
International Corp. Mr. Silber is a director, the President and 50%
stockholder of Tregan International.
9. EMPLOYEE BENEFITS
Effective November 13, 1998, Alamosa elected to participate in the NTCA
Savings Plan, a defined contribution employee savings plan sponsored by
the National Telephone Cooperative Association under Section 401(k) of
the Internal Revenue Code. No employer contributions were made to this
plan for the period ended December 31, 1999 and 1998.
Effective October 1, 1999, Alamosa entered into a three-year employment
agreement with its Chief Executive Officer ("CEO"), Alamosa's chairman.
In addition, in December 1999, Alamosa granted options to the CEO to
acquire 242,500 common shares at an exercise price of $1.15 per share
which vested immediately prior to the completion of the initial public
offering and 1,455,000 shares at an exercise price equal to the initial
public offering price which vest 33% per year beginning September 30,
2000. The options expire January 5, 2009. The Company will recognize
compensation expense of $3,116,125 related to the 242,500 options
issued with an exercise price below the initial public offering price
over the options vesting period. Compensation expense recorded for the
year ended December 31, 1999 was $351,328.
On October 2, 1998, Alamosa entered into an employee agreement with its
Chief Operating Officer ("COO"). The agreement provides for the
granting of stock options in three series. The initial exercise price
was determined based on the following formula: $48,500,000, committed
capital at September 30, 1998, multiplied by the percentage interest
represented by the option exercised. The exercise price for each series
increased by an annual rate of 8%, 15% or 25% compounded monthly
beginning at the date of grant as specified by the agreement. Options
may be exercised any time from January 1, 2004 to January 5, 2008. The
options vest over a three-year period. During 1998, one option from
each series was granted under this agreement. The options to acquire
membership interests described above were to be exchanged for options
in Holdings to acquire an equivalent number of common shares: 242,500
at $1.08 per share, 242,500 at $1.15 per share and 242,500 at $1.25 per
share. Effective December 1999, the Company amended his options such
that each of his three series of original options were exchanged for
two options to acquire a total of 1,697,500 shares of common stock. The
first option to acquire 242,500 shares of common stock has a fixed
exercise price of $1.15 per share and vested immediately prior to
completion of the initial public offering. The second option to acquire
1,455,000 shares of common stock has an exercise price equal to the
initial public offering price and vests 25% per year beginning
September 30, 2000. The expiration date of all of the COO's options was
extended from January 5, 2008 to January 5, 2009. These amendments
resulted in a new measurement date. The Company will record
compensation expense totaling $9,341,100 in connection with these
options. Compensation expense recorded for the year ended December 31,
1999 was $6,588,755.
F-37
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective December 1, 1999, the Company entered into a five-year
employment agreement with its Chief Financial Officer ("CFO"). In
addition, Alamosa granted the CFO options to purchase 1,455,000 shares
at the initial public offering price and that will expire January 5,
2009. There is no compensation cost related to these options.
On October 14, 1998, the Board of Members of Alamosa approved an
Incentive Ownership Plan. The plan consisted of 3,500 units comprised
of 1,200 Series 8, 1,150 Series 15 and 1,150 Series 25 units. The
exercise price for each series was based on a pre-defined strike price
which increased by an annual rate of 8%, 15% or 25% compounded monthly
beginning July 1, 2000. The initial exercise prices were $564.79,
$623.84 and $711.88 for Series 8, Series 15 and Series 25 options,
respectively. Each unit provided the holder an option to purchase an
interest in the Company. Vested units could have been exercised any
time from July 1, 2000 to December 31, 2006. On October 29, 1998, under
an employment agreement with the Company's Chief Technology Officer,
300 units were granted under this plan. The options to acquire
membership interests described above were to be exchanged for options
to acquire an equivalent number of common shares: 48,500 at $1.13 per
share, 48,500 at $1.25 per share and 48,500 at $1.42 per share.
Effective as of the IPO, these options were converted into options of
Holdings and were amended such that his original options with exercise
prices that increased by an annual rate of 8%, 15%, or 25% (compounded
monthly beginning July 1, 2000) were exchanged for options to purchase
an equivalent number of common shares at fixed exercise prices equal to
$1.13, $1.25 and $1.42 per share, which will not increase over the term
of the options. These amendments will resulted in a new measurement
date. The Company will record compensation expense totaling $1,852,651
in connection with these options. Compensation expense recorded for the
year ended December 31, 1999 was $1,259,427.
10. STOCK-BASED COMPENSATION
Holdings adopted an Incentive Stock Option Plan (the "Plan") effective
November 12, 1999, which provides for the granting of either incentive
stock options or nonqualified stock options to purchase shares of
Holdings' common stock and for other stock-based awards to officers,
directors and key employees for the direction and management of the
Company and to non-employee consultants and independent contractors. At
December 31, 1999, 7,000,000 shares of common stock were reserved for
issuance under the Plan. The compensation committee of the board of
directors administers the Plan and determines grant prices and vesting
periods.
The Company applies APB No. 25, "Accounting for Stock Issued to
Employees" and related interpretation, in accounting for its employee
stock options. In accordance with APB No. 25, no compensation expense
or unearned compensation was recorded as of December 31, 1998. As of
December 31, 1999, the Company has recorded compensation of
$14,309,876. This amount is being recognized over the vesting period in
accordance with FASB Interpretation No. 28 when applicable. For the
year ended December 31, 1999, non-cash compensation of $8,199,511 has
been recognized.
As discussed in Note 2, the Company has adopted the disclosure-only
provisions of SFAS No. 123. Had compensation cost for the Company's
stock option plans been determined based on the fair value provisions
of SFAS No. 123, the Company's net income and net income per share
would have been decreased to the pro forma amounts indicated below:
F-38
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JULY 16, 1998
(INCEPTION)
YEAR ENDED THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------- -----------------------------
<S> <C> <C>
Net loss - as reported ............. $ (32,835,859) $ (923,822)
Net loss - pro forma ............... $ (32,835,859) $ (997,531)
Net loss per share - as reported ...
Basic and Diluted ........... $ (.68) $ (.02)
Net loss per share - pro forma .....
Basic and Diluted ........... $ (.68) $ (.02)
</TABLE>
The pro forma disclosures provided are not likely to be representative
of the effects on reported net income or loss for future years due to
future grants and the vesting requirements of the Company's stock
option plans.
The weighted-average fair value for options with exercise prices
greater than the market price issued of the stock at the grant date was
$0.46 for 1998. There were no options issued with exercise prices
greater than market price at the grant date during 1999. The
weighted-average fair value for options with exercise prices equal to
the market price of the stock at the grant date was $9.22 in 1999.
There were no options issued with exercise prices equal to market price
of the stock at grant date during 1998. The weighted-average fair value
for options with exercise prices below the market price of stock at
grant date was $13.04 in 1999. There were no options issued with
exercise prices below the market price at the grant date during 1998.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
FOR THE PERIOD FROM
JULY 16, 1998
(INCEPTION)
YEAR END THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------- ---------------------
Dividend yield ............. 0% 0%
Expected volatility ........ 70% 70%
Risk-free rate of return ... 5.5% 5.5%
Expected life .............. 5.53 years 0.3 years
F-39
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following summarizes activity under the Company's stock option
plans:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE EXERCISE PRICE
NUMBER OF OPTIONS PER SHARE
---------------------------------------- ----------------------------------------
FOR THE PERIOD FROM FOR THE PERIOD FROM
YEAR END JULY 16, 1998 YEAR END JULY 16, 1998
DECEMBER 31, (INCEPTION) THROUGH DECEMBER 31, (INCEPTION) THROUGH
1999 DECEMBER 31, 1998 1999 DECEMBER 31, 1998
----------------- ---------------------- ----------------------------------------
<S> <C> <C> <C>
Options outstanding at beginning
of the period .................. 873,000 -- $ 1.18 $ --
Granted ........................ 5,282,000 873,000 12.47 1.18
Exercised ...................... -- -- --
Canceled ....................... (873,000) -- (1.18) --
----------------- ---------------------- ----------------------------------------
Options outstanding at the end
of the period .................. 5,282,000 873,000 $ 12.47 $ 1.18
================= ====================== ========================================
Options exercisable at end of
the period ..................... 48,498 -- $ 1.27 $ --
</TABLE>
The following table summarizes information for stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE WEIGHTED-AVERAGE REMAINING
EXERCISE PRICES NUMBER OF OPTIONS EXERCISE PRICE CONTRACTUAL LIFE
-------------------- ------------------------- --------------------------- -------------------------------
<S> <C> <C> <C>
$1.13 - $1.42 630,500 $ 1.18 8.55
$14.00 4,651,500 14.00 9.07
------------------------- --------------------------- -------------------------------
5,282,000 $ 12.47 9.01
========================= =========================== ===============================
</TABLE>
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts payable, and accrued expenses
approximate fair value because of the short maturity of these items.
The carrying amount of the debt issued pursuant to the Company's credit
agreement with Nortel is expected to approximate fair value because the
interest rate changes with market interest rates.
Alamosa utilizes interest rate cap agreements to limit the impact of
increases in interest rates on its floating rate debt. The interest
rate cap agreements require premium payments to counterparties based
upon a notional principal amount. Interest rate cap agreements entitle
the Company to receive from the counterparties the amounts, if any, by
which the selected market interest rates exceed the strike rates stated
in the agreements. The fair value of the interest rate cap agreements
is estimated by obtaining quotes from brokers and represents the cash
requirement if the existing contracts had been settled at the balance
sheet dates.
F-40
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Selected information related to the Company's interest rate cap
agreements is as follows:
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- --------------------
Notional amount ................ $ 35,607,000 $ --
Fair value ..................... 125,815 --
Carrying amount ................ 282,958 --
----------------- --------------------
Net unrecognized gain (loss) ... $ (157,143) $ --
================= ====================
These fair value estimates are subjective in nature and involve
uncertainties and matters of considerable judgment and therefore,
cannot be determined with precision. Changes in assumptions could
significantly affect these estimates.
12. COMMITMENTS AND CONTINGENCIES
On December 21, 1998, Alamosa entered into a three-year agreement with
Nortel to purchase network equipment and infrastructure. Pursuant to
that agreement, Nortel also agreed to provide installation and
optimization services, such as network engineering and radio frequency
engineering, for the equipment and to grant Alamosa a nonexclusive
license to use the software associated with the Nortel equipment.
Alamosa has committed to purchase $82.0 million worth of equipment and
services from Nortel, which Nortel has agreed to finance pursuant to
the Nortel credit facility. Under the agreement, Alamosa will receive a
discount on the network equipment and services because of the Company's
affiliation with Sprint PCS, but must pay a premium on any equipment
and services financed by Nortel. If Alamosa's affiliation with Sprint
PCS ends, Nortel has the right to either terminate the agreement or,
with Alamosa's consent, modify the agreement to establish new prices,
terms and conditions. Alamosa entered into a modification of the
agreement with Nortel after December 31, 1999 as described in Note 14.
13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The quarterly results of operations (unaudited) for 1998 and 1999 per
quarter are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------------- ------------- ------------------ ------------------
(In thousands, except per share amount)
<S> <C> <C> <C> <C>
1998:
Net sales .............................. $ -- $ -- $ -- $ --
Operating loss ......................... -- -- (401) (558)
Net loss ............................... -- -- (400) (523)
Basic and diluted earnings per share ... $ -- $ -- $ (0.01) $ (0.01)
1999:
Net sales .............................. $ -- $ 35 $ 1,965 $ 6,984
</TABLE>
F-41
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------------- ------------- ------------------ ------------------
(In thousands, except per share amount)
<S> <C> <C> <C> <C>
Operating loss ......................... (1,963) (4,005) (11,279) (13,425)
Net loss ............................... (1,745) (4,018) (11,926) (15,147)
Basic and diluted earnings per share ... $ (0.02) $ (0.08) $ (0.25) $ (0.31)
</TABLE>
The sum of the quarterly per share amounts may not equal the annual per
share amounts due to relative changes in the weighted average number of
shares used in the per share computations.
14. SUBSEQUENT EVENTS
Initial Public Offering of Common Stock - On October 29, 1999, Holdings
filed a registration statement with the Securities and Exchange
Commission for the sale of 10,714,000 shares of its common stock (the
"Stock Offering"). The Stock Offering became effective and the shares
were issued on February 3, 2000 at the initial price of $17.00 per
share. Subsequently, the underwriters exercised their over-allotment
option of 1,607,100 shares. Holdings received net proceeds of $194.3
million after commissions of $13.3 million and expenses of
approximately $1.0 million. The proceeds of the Stock Offering are to
be used for the build out of the system, to fund operating working
capital needs and for other general corporate purposes.
Initial Public Offering of Senior Discount Notes - On December 23,
1999, Holdings filed a registration statement with the Securities and
Exchange Commission for the issuance of $350 million face amount of
Senior Discount Notes (the "Notes Offering"). The Notes Offering was
completed on February 8, 2000 and generated net proceeds of
approximately $181 million after underwriters' commissions and expenses
of approximate $6.1 million. The Senior Discount Notes ("Notes") mature
in ten years (February 15, 2010) and carry a coupon rate of 12 7/8%,
and to provide for interest deferral for the first five years. The
Notes will accrete to their $350 million face amount by February 8,
2005, after which, interest will be paid in cash semiannually. The
proceeds of the Notes Offering are to be used to prepay $75 million of
the Nortel credit facility (see Note 7), to pay costs to build out the
system, to fund operating working capital needs and for other general
corporate purposes. Significant terms of the Notes include:
o RANKING - The Notes are senior unsecured obligations of
Holdings, equal in right of payment to all future senior debt
of Holdings and senior in right of payment to all future
subordinated debt of Holdings;
o GUARANTEES - The Notes are unsecured obligations and will rank
equally with all existing and future senior debt and senior to
all existing and future subordinate debt. The Notes will be
fully and unconditionally, jointly and severally guaranteed on
a senior subordinated, unsecured basis, by all the existing
and any future restricted subsidiaries of Holdings. In
addition, Holdings will have no assets or operations other
than its investments in Alamosa PCS Inc., and there are no
non-guarantor subsidiaries. Therefore, financial statements of
guarantor subsidiaries have been omitted;
F-42
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
o OPTIONAL REDEMPTION - During the first thirty six (36) months
after the Notes Offering, Alamosa may use net proceeds of an
equity offering to redeem up to 35% of the accreted value of
the notes at a redemption price of 112 7/8%;
o CHANGE OF CONTROL - Upon a change of control as defined by the
Notes Offering, Alamosa will be required to make an offer to
purchase the notes at a price equal to 101% of the accreted
value (original principal amount plus accrued interest) before
February 15, 2005, or 101% of the principal amount at maturity
thereafter;
o RESTRICTIVE COVENANTS - The indenture governing the Notes
contain covenants that, among other things and subject to
important exceptions, limit Alamosa's ability and the ability
of its subsidiaries to incur additional debt, issue preferred
stock, pay dividends, redeem capital stock or make other
restricted payments or investments as defined by the Notes
Offering, create liens on assets, merge, consolidate or
dispose of assets, or enter into transactions with affiliates
and change lines of business.
REVISION TO CREDIT FACILITY WITH NORTEL NETWORKS, INC. - On February 8,
2000, Alamosa entered into an Amended and Restated Credit Facility (the
"New Facility"), which replaced the $123 million facility entered into
on June 10, 1999. The new agreement increased the facility to $250
million to provide for the financing of additional equipment needs to
complete the build-out of the existing territory and the additional
territory received from Sprint PCS (see following subsequent event).
The terms of the New Facility are mostly the same as the original $123
million facility discussed in Note 7, but there are certain exceptions,
key ones of which are detailed here. Under the New Facility, there are
no equity commitments by former members of Alamosa. The interest rate
on base rate loans was increased to prime plus 2.75% and on Eurodollar
loans to LIBOR plus 3.75%. In addition, each of the tranches A, B and C
were increased to $167.0 million, $58.0 million and $25.0 million,
respectively. The New Facility also provided for warrants representing
2% of the outstanding common stock of Holdings. These warrants were
eliminated, by prior agreement, when Alamosa used $75 million of the
equity contribution from Holdings to prepay the Nortel debt in February
2000. Under the circumstances provided in the New Credit Facility,
those prepaid amounts may be re-borrowed.
In addition to the $75 million prepayment, in conjunction with the
closing of the New Facility, Alamosa also paid origination and other
fees along with interest accrued of approximately $4.7 million.
REVISION TO PURCHASE CONTRACT WITH NORTEL NETWORKS, INC. - On February
8, 2000, the Company amended its equipment purchase contract with
Nortel and increased its purchase commitment to $167 million. In
addition, the requirement to pay a premium for purchases financed by
Nortel (see Note 11) was eliminated once the Company's purchases under
the contract exceed $82 million.
CONTRACT FOR TOWERS - On February 22, 2000, the Company entered into
the Master Design Build Agreement with a tower contractor to provide
towers in the expansion areas including Wisconsin.
F-43
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Alamosa PCS Holdings, Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 28, 2000 appearing in the 1999 annual report on Form 10-K of
Alamosa Holdings Inc. also included an audit of the financial statement schedule
listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial
statement schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
PricewaterhouseCoopers LLP
Dallas, Texas
February 28, 2000
F-44
<PAGE>
SCHEDULE II
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR THE PERIOD JULY 16, 1998 (INCEPTION) THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED BALANCE AT
CLASSIFICATION BEGINNING OF TO COSTS AND END OF
CLASSIFICATION PERIOD EXPENSES DEDUCTIONS PERIOD
---------------------------------- -------------- ----------------- ------------- -------------
(In thousands)
<S> <C> <C> <C> <C>
December 31, 1998
Allowance for doubtful accounts .... $ -- $ -- $ -- $ --
December 31, 1999
Allowance for doubtful accounts .... $ -- $ 162 $ -- $ 162
</TABLE>
This schedule should be read in conjunction with the Company's audited
consolidated financial statements and related notes thereto that appear
elsewhere herein.
F-45
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
--------------------------- --------------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 338,106 $ 3,144,756
Accounts receivable 227,911 389,951
Inventory 297,322 226,968
Prepaid rent 60,000 120,000
--------------------------- --------------------------
Total current assets 923,339 3,881,675
Fixed assets:
Land and buildings 1,505,864 216,335
Communication equipment 52,591,787 14,208,718
Furniture & fixtures 506,173 191,207
Vehicles 349,059 170,000
--------------------------- --------------------------
Total fixed assets 54,952,883 14,786,260
Less: accumulated depreciation (4,283,710) (1,454,939)
--------------------------- --------------------------
Net fixed assets 50,669,173 13,331,321
Intangible assets (net of amortization) 9,946,246 10,129,487
--------------------------- --------------------------
Total assets $ 61,538,758 $ 27,342,483
=========================== ==========================
LIABILITIES AND MEMBERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 9,770,510 $ 2,371,177
Long term liabilities:
Note payable 56,000,000 25,011,439
--------------------------- --------------------------
Total liabilities 65,770,510 27,382,616
Members' deficit (4,231,752) (40,133)
--------------------------- --------------------------
Total liabilities and members' deficit $ 61,538,758 $ 27,342,483
=========================== ==========================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-46
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE SIX MONTHS ENDED JUNE
30, 2000 30, 1999
------------------------ -----------------------
<S> <C> <C>
Revenues:
Service revenue $ 4,733,415 $ 102,090
Product sales 426,226 174,926
Rental tower income 18,613 -
------------------------ -----------------------
Total revenue 5,178,254 277,016
------------------------ -----------------------
Cost of services 3,322,934 553,996
Cost of product sold 780,728 351,526
------------------------ -----------------------
Gross profit (loss) 1,074,592 (628,506)
Operating expenses:
Selling and marketing 2,171,422 220,597
General and administrative 808,880 117,138
Depreciation and amortization 3,176,256 48,643
------------------------ -----------------------
Loss from operations (5,081,966) (1,014,884)
Interest and other income 37,720 1,048
Interest expense (347,373) -
------------------------ -----------------------
Net loss $ (5,391,619) $ (1,013,836)
======================== =======================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-47
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
---------------------- -----------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (5,391,619) $ (1,013,836)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 2,828,771 48,643
Amortization 347,485 -
Change in assets and liabilities:
Decrease in accounts receivable 162,040 -
Increase in inventory (70,354) (43,000)
Decrease in prepaid rent 60,000 -
Increase in intangible assets (164,244) (24,685)
Increase in accounts payable and accrued expenses 7,399,333 382,549
---------------------- -----------------------
Net cash provided by (used in) operating activities 5,171,412 (650,329)
---------------------- -----------------------
Cash flow from investing activities:
Additions to fixed assets (40,166,623) (709,187)
---------------------- -----------------------
Net cash used in investing activities (40,166,623) (709,187)
---------------------- -----------------------
Cash flow from financing activities:
Proceeds from contributed capital 1,200,000 1,279,860
Proceeds from long-term debt 30,988,561 -
---------------------- -----------------------
Net cash provided by financing activities 32,188,561 1,279,860
---------------------- -----------------------
Net decrease in cash (2,806,650) (79,656)
Cash at beginning of period 3,144,756 79,656
---------------------- -----------------------
Cash at end of period $ 338,106 $ -
====================== =======================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-48
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of the managing members' of Roberts Wireless
Communications, LLC (the "Company"), the accompanying financial statements which
are unaudited, except for the balance sheet dated December 31, 1999, contain all
adjustments (consisting of only normal accruals) necessary to present fairly the
financial position as of June 30, 2000 and December 31, 1999 and the results of
operations and cash flows for the six months ended June 30, 2000 and 1999. The
results of operations for the six months ended June 30, 2000 and 1999 are not
necessarily indicative of the results to be expected for the full year.
During the six months ended June 30, 2000, the Company borrowed
approximately $31,000,000 which was used to purchase communication equipment.
The June 30, 2000 accounts payable and accrued expenses is approximately
$7,300,000 greater than accounts payable and accrued expenses as of December 31,
1999. This increase is due to additional equipment purchases, working capital
liabilities and a decrease in the cash balance.
At June 30, 2000, the Company was not in compliance with all of the
debt covenants including number of covered points of presence and minimum net
revenue. The lenders have agreed to waive the non-compliance issues at June 30,
2000 as well as any that may exist at September 30, 2000.
Subsequent to June 30, 2000, the Company has entered into a definitive
agreement ("Roberts Reorganization Agreement") to merge with Sprint PCS
affiliate Alamosa PCS Holdings, Inc. The terms of the merger call for members of
the Company to receive 13,500,000 shares of common stock and up to $4.0 million
in cash in exchange for 100% of the ownership of the Company. The merger is
contingent upon the completion of the conditions to consummate the transaction
as contained in the Roberts Reorganization Agreement.
On July 31, 2000, the Company signed a definitive agreement to combine
its operations with Alamosa PCS Holdings, Inc. and Washington Oregon Wireless,
LLC ("WOW") in a reorganization transaction in which the Company, Alamosa PCS
Holdings, Inc. and WOW will each become a wholly-owned subsidiary of Alamosa
Holdings, Inc.
On July 31, 2000, the Company and Alamosa Operations, Inc. ("Alamosa
Operations"), a wholly-owned subsidiary of Alamosa, entered into a services
agreement whereby, effective July 31, 2000, Alamosa Operations began to manage
the operations of the Company, pending completion of the Company's merger. Under
the Company's service agreement, Alamosa Operations provides various services in
connection with the operation of the Company's business. The Company pays
Alamosa Operations a management fee of $100,000 per month for the services
provided by Alamosa Operations and has to reimburse Alamosa Operations for
certain reimbursable costs and expenses incurred or paid by Alamosa Operations
in providing these services.
On July 31, 2000, the Company and Alamosa Operations entered into a
loan agreement whereby Alamosa Operations agreed to lend up to $20 million to
the Company, to be used only for the purpose of funding the Company's working
capital needs from July 31, 2000, through the completion of the Company's
merger. Upon consummation of the merger, the loan shall be deemed paid in full,
and all funds advanced by Alamosa operations, plus accrued interest shall be
treated as capital contributions. If the merger does not consummate, the loan
plus interest is required to be paid back in full. If the loan plus accrued
interest is not paid back in full, then the lender will receive a membership
interest in the Company in lieu of repayment.
F-49
<PAGE>
INDEPENDENT AUDITORS' REPORT
Members
Roberts Wireless Communications, LLC
We have audited the accompanying consolidated balance sheet of Roberts
Wireless Communications, LLC (the Company) as of December 31, 1999, and the
related consolidated statement of income and members' equity for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Roberts Wireless
Communications, LLC as of December 31, 1999, and the results of their operations
and their cash flows for the year then ended, in accordance with generally
accepted accounting principles.
MELMAN, ALTON & CO.
March 29, 2000, except as to Note 7,
which is dated July 31, 2000.
F-50
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current assets:
Cash $ 3,144,756
Accounts receivable 389,951
Inventory 226,968
Prepaid rent 120,000
-----------------
Total current assets 3,881,675
-----------------
Fixed assets:
Land and buildings 216,335
Communication equipment 14,208,718
Furniture and fixtures 191,207
Vehicles 170,000
-----------------
Total cost 14,786,260
Less: accumulated depreciation (1,454,939)
-----------------
Net fixed assets 13,331,321
Intangible assets (net of amortization) 10,129,487
-----------------
Total assets $ 27,342,483
=================
LIABILITIES AND MEMBERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 1,734,992
Accrued interest payable 636,185
-----------------
Total current liabilities 2,371,177
Long term liabilities:
Note payable (Note 3) 25,011,439
-----------------
Total liabilities 27,382,616
Commitments and contingencies
Members' deficit (40,133)
-----------------
Total liabilities and deficit $ 27,342,483
=================
The accompanying notes are an integral part of the
consolidated financial statements.
F-51
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD MAY 6, 1998
YEAR ENDED (INCEPTION) THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998
---------------------------- -------------------------------
(unaudited)
<S> <C> <C>
Revenues:
Service revenue $ 2,494,438 $ -
Product sales 379,259 -
---------------------------- -------------------------------
Total revenue 2,873,697 -
Cost of services 1,748,565 -
Cost of products sold 834,236 -
---------------------------- -------------------------------
Gross profit 290,896 -
Operating expenses:
Selling and Marketing 2,025,429 -
General and administrative expenses 702,829 433,591
Depreciation and amortization 1,799,281 1,821
---------------------------- -------------------------------
Loss from operations (4,236,643) (435,412)
Interest and other income 65,739 3,499
Interest expense (417,337) -
---------------------------- -------------------------------
Net loss $ (4,588,241) $ (431,913)
============================ ===============================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-52
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY (DEFICIT)
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
CONTRIBUTED
CAPITAL MEMBERS'
CONTRIBUTED RELATED ACCUMULATED EQUITY
CAPITAL MEMBERS ENTITIES DEFICIT (DEFICIT)
-------------------- ---------------- ------------------- ----------------
<S> <C> <C> <C> <C>
Members equity - May 6, 1998 (inception)
(unaudited) $ - $ 3,242,687 $ (3,200,468) $ 42,219
Contributed capital - members (unaudited) 1,176,200 - - 1,176,200
Contributed capital - related entities
(unaudited) - 466,442 - 466,442
Net loss (unaudited) - - (431,913) (431,913)
-------------------- ---------------- ------------------- ----------------
Members' equity (deficit)-December 31,1998
(unaudited) 1,176,200 3,709,129 (3,632,381) 1,252,948
Contributed capital - members 2,903,000 2,903,000
Contributed capital - related entities 392,160 392,160
Net loss (4,588,241) (4,588,241)
-------------------- ---------------- ------------------- ----------------
Members' equity (deficit)-December 31,1999 $ 4,079,200 $ 4,101,289 $ (8,220,622) $ (40,133)
==================== ================ =================== ================
</TABLE>
(Note 4)
The accompanying notes are an integral part of the
consolidated financial statements.
F-53
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 6, 1998
(INCEPTION)
YEAR ENDED THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------ ---------------------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net Loss $ (4,588,241) $ (431,913)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,799,281 1,821
Change in assets and liabilities:
Increase in accounts receivable (1,073,722) -
Increase in inventory (226,968) -
Increase in accounts payable and accrued expenses 2,371,177 -
(Increase) decrease in deposits 1,000,000 (1,000,000)
Increase in prepaid rent (120,000) -
Increase in intangible assets - (76,200)
------------------------ ---------------------------
Net cash used in operating activities (838,473) (1,506,292)
------------------------ ---------------------------
Cash flows from investing activities:
Additions to fixed assets and operating rights (22,489,025) (56,694)
------------------------ ---------------------------
Net cash used in investing activities (22,489,025) (56,694)
------------------------ ---------------------------
Cash flows from financing activities:
Increase in loan costs (1,521,841) -
Proceeds from contributed capital 2,903,000 1,176,200
Proceeds from long-term debt 25,011,439 -
Contributed capital-related entities - 466,442
------------------------ ---------------------------
Net cash provided by financing activities 26,392,598 1,642,642
------------------------ ---------------------------
Net increase in cash 3,065,100 79,656
Cash and cash equivalents at beginning of year 79,656 -
------------------------ ---------------------------
Cash and cash equivalents at end of year $ 3,144,756 $ $79,656
======================== ===========================
</TABLE>
F-54
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS POLICIES
NATURE OF OPERATIONS
Roberts Wireless Communications, LLC (the "Company") was
formed May, 1998 as a limited liability company, to engage in the
business of wireless communications and is currently operating as a
Sprint PCS affiliate.
INTERIM NETWORK OPERATING AGREEMENT/ASSET PURCHASE
On January 21, 1999, Sprint PCS assigned the Columbia, MO BTA
and the Jefferson City, MO BTA service areas to the Company through a
purchase agreement. This assignment included an agreement whereby the
Company receives 92% of billed revenue generated by subscribers in
these markets. At the time of this assignment, the Company was in the
process of building its master switching center ("MSC"), thus not
capable of operating the network. The Company and Sprint entered into
an Interim Network Operating Agreement whereby the twenty-three cell
sites located in the Columbia and Jefferson City, MO service areas
would remain on the Sprint PCS St. Louis Switch, and, Sprint PCS would
continue to maintain such properties until: (a) all leases for cell
sites in both service areas had been transferred from Sprint PCS to the
Company; (b) the Company paid Sprint PCS in full for the "Asset
Purchase". On September 8, 1999, the Asset Purchase was consummated
although three of the total twenty-three leases had not been
transferred: From January 21, 1999 through April 4, 2000, the Company
incurred interim Network Operating fees of varying amounts based upon
the number of cell site leases not transferred. On May 19, 2000, all
cell sites in the Columbia and Jefferson City service areas were
transferred off the Sprint PCS switch and connected to the Company's
switch.
The purchase price for the operating rights and related equipment
totaled $12.9 million. The fair value of the equipment was $4 million.
The remaining $8.9 million was recorded as an intangible asset and is
being amortized over the remaining life of the Sprint Agreement of 18
years.
WHOLLY-OWNED SUBSIDIARY
The Company owns 100% of Roberts Wireless Properties, LLC.
This subsidiary is inactive.
F-55
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions affect the
reported amounts of assets and liabilities, the disclosure of any
contingent assets and liabilities, and the reported revenues and
expenses.
INVENTORY
Inventory consists of handsets and related accessories.
Inventories purchased for resale will be carried at the lower of cost,
determined using weighted average, or market. Market will be determined
using replacement cost in accordance with industry standards.
PROPERTY AND EQUIPMENT
Property and equipment are reported at cost less accumulated
depreciation. Repair and maintenance costs are charged to expense as
incurred; significant renewals and betterments are capitalized.
When depreciable assets are retired or otherwise disposed of,
the related costs and accumulated depreciation are removed from the
respective accounts, and any gains or losses on disposition are
recognized in income.
Property and equipment are depreciated using the straight-line
method based on estimated useful lives of the assets. Asset lives are
as follows:
Buildings 39 years
Furniture and Fixtures 5-7 years
Communication Equipment 5-15 years
Vehicles 5 years
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company does not believe that any recently issued
accounting pronouncements will have a material impact on its financial
position, results of operations or cash flows.
REVENUE RECOGNITION
The Company 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 territory 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 roaming services
F-56
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
provided to Sprint PCS customers who are not based in the Company's
territory are not subject to the 8% retainage.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising
expenses totaled approximately $110,774 during 1999.
ACCRUAL BASIS OF ACCOUNTING
Assets and liabilities and income and expenses are recognized
on the accrual basis of accounting.
CONCENTRATION OF CREDIT RISK
The Company maintains deposits in excess of federally insured
limits. Statement of Financial Accounting Standards No. 105 identifies
these items as a concentration of credit risk requiring disclosure,
regardless of the degree of risk. The risk is managed by maintaining
all deposits in high quality financial institutions.
ACCOUNTS RECEIVABLE
The Company uses the allowance method for recognizing bad
debts. There is no provision for bad debts. In the opinion of
management, all amounts due will be collected.
AMORTIZATION
Loan costs are capitalized and amortized over the term of the
loan on a straight-line basis over eight years.
INCOME TAXES
No income tax provision has been included in the financial
statements, since income or loss of the limited liability company is
reported by the members on their individual tax returns.
F-57
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
3. LONG TERM DEBT
Note payable - Lucent Technologies, Inc.
Origination Date: September 8, 1999
Collateral: All assets owned by the Company
Maturity Date: September 8, 2007 $ 25,011,439
================
The Company entered into a credit agreement with Lucent
Technologies, Inc. The financing terms permit the Company to borrow $56
million through three commitment tranches to finance the costs of
equipment and services purchased from Lucent Technologies, Inc. In
exchange for Lucent base stations purchased by the company in
connection with the swap-out of 23 Nortel base stations, Lucent agrees
to give the company credits amounting to $2,061,428 to be used for
future purchases of Lucent products.
The loan shall bear interest at the alternative base rate
(ABR), plus the applicable margin set forth as follows:
The applicable margin for ABR Borrowings is a percentage per
annum based on the ratio of Total Debt to Annualized EBITDA of the
Borrower as of the prior fiscal quarter (calculated on a rolling
12-month basis) as follows:
Applicable Margin for ABR
Leverage Borrowings
--------------------------- -----------------------------
(greater than) 10 x 3.50%
= or (less than) 10 x
but (greater than) 6 x 3.25%
= or (less than) 6 x
but (greater than) 4 x 3.00%
= or (less than) 4 x 2.75%
The interest rate at December 31, 1999 approximated 10.625%.
Maturities of long-term debt for the years succeeding December
31, 1999, and thereafter are as follows:
F-58
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
Year Amount
------------------- ---------------------------------
2000 $ 0
2001 0
2002 0
2003 5,002,288
2004 5,002,288
Thereafter 15,006,863
---------------------------------
$ 25,011,439
=================================
No interest was paid during 1999. The Company is required to
maintain certain financial ratio conditions including minimum revenue
levels.
4. RELATED PARTY TRANSACTIONS
Capital has been contributed by related entities of the
Company. Capital was contributed in the form of expenditures paid by
related entities.
5. ADDITIONAL EQUITY RESERVED BY MEMBERS
The members have agreed to reserve as additional equity for
the Company, $11,891,000 of ready and immediate available cash from
their margin account and line of credit, which cannot exceed fifty
percent of their stock ownership in a publicly held company, plus the
value of various other investments.
6. COMMITMENTS AND CONTINGENCIES
The Company leases office space from Roberts Brothers
Properties, LLC whose members are members of this company. The lease
requires monthly payments of $11,667 and expires December 31, 2004.
Rent charged to operations was $140,000 during 1999. Accrued rent as of
December 31, 1999 equaled $105,000.
Minimum required future rental payments under this operating
Lease as of December 31, 1999 are:
Year Amount
-------------- ----------------------
2000 $ 140,000
2001 140,000
2002 140,000
2003 140,000
2004 140,000
----------------------
$ 700,000
======================
F-59
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
The Company is a defendant in a lawsuit. The plaintiff is
seeking $300,000. The Company has filed a motion to dismiss the suit on
the basis that it fails to state any legal claim on which relief can be
granted by the court as a matter of loss. If the motion to dismiss is
denied, the Company intends to vigorously defend the suit. The ultimate
resolution of this matter is not ascertainable at this time. No
provision has been made in the financial statements related to this
claim.
7. SUBSEQUENT EVENTS
On July 31, 2000, the Company signed a definitive agreement to
combine its operations with Alamosa PCS Holdings, Inc. and Washington
Oregon Wireless, LLC ("WOW") in a reorganization transaction in which
the Company, Alamosa PCS Holdings, Inc. and WOW will each become a
wholly-owned subsidiary of Alamosa Holdings, Inc.
On July 31, 2000, the Company and Alamosa Operations, Inc.
("Alamosa Operations"), a wholly-owned subsidiary of Alamosa, entered
into a services agreement whereby, effective July 31, 2000, Alamosa
Operations began to manage the operations of the Company, pending
completion of the Company's merger. Under the Company's service
agreement, Alamosa Operations provides various services in connection
with the operation of the Company's business. The Company pays Alamosa
Operations a management fee of $100,000 per month for the services
provided by Alamosa Operations and has to reimburse Alamosa Operations
for certain reimbursable costs and expenses incurred or paid by Alamosa
Operations in providing these services.
On July 31, 2000, the Company and Alamosa Operations entered
into a loan agreement whereby Alamosa Operations agreed to lend up to
$20 million to the Company, to be used only for the purpose of funding
the Company's working capital needs from July 31, 2000, through the
completion of the Company's merger. Upon consummation of the merger,
the loan shall be deemed paid in full, and all funds advanced by
Alamosa operations, plus accrued interest shall be treated as capital
contributions. If the merger does not consummate, the loan plus
interest is required to be paid back in full. If the loan plus accrued
interest is not paid back in full, then the lender will receive a
membership interest in the Company in lieu of repayment.
F-60
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 2000 JUNE 30, 1999
------------------------- ---------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 540,322 $ 73,451
Other current assets 73,895 8,116
------------------------- ---------------------
Total current assets 614,217 81,567
Fixed assets (Note 1):
Construction in progress 23,692,655 1,226,200
Leasehold improvements 631,094 -
Office equipment 481,268 -
------------------------- ---------------------
24,805,017 1,226,200
Less accumulated depreciation 62,733 -
------------------------- ---------------------
Fixed assets, net 24,742,284 1,226,200
Deferred financing costs (Note 9) 1,578,928 -
Other assets 97,323 -
------------------------- ---------------------
Total assets $ 27,032,752 $ 1,307,767
========================= =====================
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable $ 5,889,348 $ 1,088,779
Accrued expenses 1,037,262 -
------------------------- ---------------------
Total current liabilities 6,926,610 1,088,779
Senior secured notes payable (Note 8) 9,460,318 -
Other noncurrent liabilities (Note 6) 31,000 -
------------------------- ---------------------
Total liabilities 16,417,928 1,088,779
------------------------- ---------------------
Commitments
Members' equity (Notes 1 and 3):
Capital contributed and subscribed 33,437,500 15,237,500
Deficit accumulated during the development stage (4,075,346) (418,512)
Capital acquisition cost (750,000) -
Capital subscriptions receivable (17,997,330) (14,600,000)
------------------------- ---------------------
Total members' equity 10,614,824 218,988
Total liabilities and members' equity $ 27,032,752 $ 1,307,767
========================= =====================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-61
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS SIX MONTHS
THREE MONTHS ENDED ENDED ENDED ENDED
JUNE 30, 1999 JUNE 30, 1999 JUNE 30, 2000 JUNE 30, 2000
------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Revenues: $ - $ - $ 36,805 $ 36,805
------------------- -------------------- ------------------- -------------------
Expenses:
Operations 44,528 153,027 1,027,400 1,189,398
Sales and marketing - - 184,926 198,235
General and administrative 177,638 220,009 953,492 1,710,323
Depreciation and amortization - - 57,310 61,810
------------------- -------------------- ------------------- -------------------
Total expenses 222,166 373,036 2,223,128 3,159,766
Loss from operations (222,166) (373,036) (2,186,323) (3,122,961)
Other income (expenses):
Interest income - - 33,497 73,232
Interest expense - - - -
------------------- -------------------- ------------------- -------------------
Total other income (expense) - - 33,497 73,232
------------------- -------------------- ------------------- -------------------
Net loss $ (222,166) $ (373,036) $ (2,152,826) $ (3,049,729)
=================== ==================== =================== ===================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-62
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
CAPITAL TOTAL
CONTRIBUTED ACCUMULATED ACQUISITION MEMBERS'
CAPITAL DEFICIT COST EQUITY (DEFICIT)
--------------- ---------------- -------------- -------------------
<S> <C> <C> <C> <C>
Members' deficit at December 31, 1998 $ 33,000 $ (45,476) $ - $ (12,476)
Activity during the three months ended March 31, 1999:
Capital contributions 504,500 - - 504,500
Net loss - (150,870) - (150,870)
--------------- ---------------- -------------- -------------------
Members' equity at March 31, 1999 537,500 (196,346) - 341,154
Activity during the three months ended June 30, 1999:
Capital contributions 100,000 - - 100,000
Net loss - (222,166) - (222,166)
--------------- ---------------- -------------- -------------------
Members' equity at June 30, 1999 $ 637,500 $ (418,512) $ $ 218,988
=============== ================ ============== ===================
Members' equity at December 31, 1999 $ 3,829,120 $ (1,025,617) $ - $ 2,803,503
Activity during the three months ended March 31, 2000:
Capital contributions 11,611,050 - - 11,611,050
Capital acquisition cost - - (750,000) (750,000)
Net loss - (896,903) - (896,903)
--------------- ---------------- -------------- -------------------
Members' equity at March 31, 2000 15,440,170 (1,922,520) (750,000) 12,767,650
Activity during the three months ended June 30, 2000:
Net loss - (2,152,826) - (2,152,826)
--------------- ---------------- -------------- -------------------
Members' equity at June 30, 2000 $ 15,440,170 $ (4,075,346) $ (750,000) $ 10,614,824
=============== ================ ============== ===================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-63
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS THREE MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1999 JUNE 30, 1999 JUNE 30, 2000 JUNE 30, 2000
----------------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (222,166) $ (373,036) $ (2,152,826) $ (3,049,729)
Contributed services 100,000 100,000 - 200,000
Noncurrent employee compensation - - 19,000 31,000
Depreciation and amortization - - 93,826 98,326
Adjustments to reconcile net loss to net
cash used in operating activities:
Changes in assets and liabilities:
Other current assets (8,116) (8,116) (30,408) (73,895)
Accounts payable - - 525,759 496,804
Accrued expenses (4,058) -- 939,176 924,602
----------------- ---------------- ------------------ ----------------
Net cash used in operating activities (134,340) (281,152) (605,473) (1,372,892)
----------------- ---------------- ------------------ ----------------
Cash flows from investing activities:
Capital expenditures (172,741) (150,226) (8,894,465) (17,191,832)
Loan financing costs - - (1,511,407) (1,615,444)
Purchase of other assets - - (19,737) (97,323)
----------------- ---------------- ------------------ ----------------
Net cash used in investing activities (172,741) (150,226) (10,425,609) (18,904,599)
----------------- ---------------- ------------------ ----------------
Cash flows from financing activities:
Member contributions - 500,750 - 11,511,050
Proceeds from senior secured note - - 9,460,318 9,460,318
payable
Capital acquisition costs - - - (750,000)
----------------- ---------------- ------------------ ----------------
Net cash provided by financing
activities - 500,750 9,460,318 20,221,368
----------------- ---------------- ------------------ ----------------
Net increase (decrease) in cash and
cash equivalents (307,081) 69,372 (1,570,764) (56,123)
Cash and cash equivalents, beginning of
period $ 380,532 $ 4,079 $ 2,111,086 $ 596,445
----------------- ---------------- ------------------ ----------------
Cash and cash equivalent, end of period $ 73,451 $ 73,451 $ 540,322 $ 540,322
================= ================ ================== ================
Non-cash investing activities:
Additions to construction in progress $ 1,226,200 $ 1,226,200 $ 6,743,338 $ 13,293,325
Equipment additions - -- 304,318 466,520
Leasehold improvements - -- 626,246 631,094
Equipment purchases included in
accounts payable:
Beginning of period - -- 6,584,152 8,164,482
End of period (1,053,459) (1,075,974) (5,363,589) (5,363,589)
----------------- ---------------- ------------------ ----------------
Net cash additions to fixed assets $ 172,741 $ 150,226 $ 8,894,465 $ 17,191,832
================= ================ ================== ================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-64
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
BUSINESS ACTIVITY
The Washington Oregon Wireless, LLC (the "Company") operates as an
Oregon Limited Liability Company comprised of 27 members as of June 30,
2000. As an LLC, the members of the Company have limited personal
liability for the obligations and debts of the entity. The Company was
formed in 1998 for the purpose of building out and operating personal
communications services (PCS) networks in Washington and Oregon to
provide other wireless telephone services and construct other
infrastructure, towers, and networks as the members may approve.
AFFILIATION AGREEMENT
In February 1999, the Company entered into an "Affiliation Agreement"
with Sprint PCS (Sprint). As a Sprint PCS affiliate, the Company has
the exclusive right to provide digital PCS services under the Sprint
and Sprint PCS brand name in its service areas in rural portions of
Oregon and Washington for a period of up to 50 years. Under the
Agreement, the Company is responsible for designing, building, owning,
and managing a communications network in its service area to the
standards established by Sprint which will operate as a
single-integrated system with other Sprint PCS service areas. As part
of the Sprint PCS Agreement, the Company has the option of contracting
with Sprint PCS to provide back office services such as customer
activation, handset logistics, billing, customer service, and network
monitoring.
MEMBERSHIP
All members are required to own a membership interest in the Company.
Each member of the Company has subscribed to a minimum of $100,000 cash
(or contributed services, see Note 4) to be admitted in the LLC. Only
one class of members exists and the entity's life shall exist
indefinitely until dissolved as provided by the operating agreement.
New members may be admitted with the approval of members comprising 67%
of the ownership rights.
Members are granted membership units based on the capital contributed
plus the present value of capital subscribed. At June 30, 2000,
31,558,046 membership units have been granted.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. The Company
maintains its cash in bank deposit accounts that, at times, may exceed
federally insured limits. The Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit
risk on cash.
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
F-65
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
FIXED ASSETS
Fixed assets include office equipment, leasehold improvements, and
construction in progress. Office equipment and leasehold improvements
are recorded at cost and depreciated on a straight-line basis over the
estimated life of the assets (5 years for office equipment), or the
term of the lease as appropriate. Construction in progress consists of
the costs of acquiring wireless communication sites for the placement
of base stations, purchases of the related equipment, and construction
of a mobile switching center in Beaver Creek, Oregon.
INCOME TAXES
The Company is not a taxpaying entity for federal income tax purposes,
and thus no income tax expense has been recorded in the statements.
Income (loss) of the Company is included in the members' tax returns.
ACCOUNTING FOR START-UP COSTS
The Company accounts for start-up related costs in accordance with
AICPA Statement of Position 98-5 Reporting on the Costs of Start-Up
Activities. The Company expenses start-up costs as incurred unless the
costs qualify for capitalization under other generally accepted
accounting principles.
ACCOUNTING FOR APPRECIATION RIGHTS
The Company accounts for its Value Appreciation Rights Plan (see Note
6) in accordance with Statement of Financial Accounting Standards No.
123, Accounting for Stock Based Compensation. Statement No. 123
established fair value as the measurement basis for accounting for
employee stock option plans and similar equity instruments.
INTEREST CAPITALIZATION
The Company follows the policy of capitalizing interest as a component
of the cost of property, plant, and equipment constructed for its own
use. For the six months ended June 30, 2000, total interest incurred
was $236,713 (including $36,516 of amortization of deferred financing
costs) all of which has been capitalized. The Company incurred no
interest for the six months ended June 30, 1999.
2. DEVELOPMENT STAGE OPERATIONS
Since its formation in July 1998, the operations of the Company have
been devoted to raising capital, design and development related to
construction of facilities, acquisition of wireless communication
sites, construction of base stations, and administrative functions.
Certain tower sites became
F-66
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
operational in the second quarter of 2000, and the Company began
earning revenue on roaming traffic through their network.
3. CAPITAL SUBSCRIPTIONS RECEIVABLE
Each member of the Company entered into the Amended and Restated
Operating Agreement of Washington Oregon Wireless, LLC that covers the
amount and timing of its contributions to the LLC. Actual capital calls
may differ from the Funding Schedule contained within the Agreement and
are made at the discretion of the Board of Managers based on the needs
of the Company.
The original subscription agreements have been superseded by the
Amended and Restated Operating Agreement.
Based upon the Amended and Restated Operating Agreement, the capital is
callable as follows:
2000 $ 14,648,330
2001 1,964,000
2002 810,000
2003 575,000
-------------
$ 17,997,330
=============
Member capital calls were suspended after the first quarter 2000 due to
the proposed merger (see Note 10).
4. RELATED PARTY TRANSACTION
A member of the Company, Western Independent Network ("WIN"), provides
certain management and administrative services to the Company. Payments
to WIN for these services totaled $4,365 and $84,773 for the six months
ended June 30, 2000 and 1999, respectively. WIN also received $100,000
in contributed capital in 2000 and 1999 for management services. WIN
will receive an additional $100,000 in contributed capital in 2001 for
management services, for a total membership contribution of $300,000.
F-67
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
Another member of the Company, Duncan, Tiger and Tabor, provided legal
services to the Company. Payments for these services totaled $36,149
and $38,687 for the six months ended June 30, 2000 and 1999,
respectively.
In addition, organizations affiliated with JMW Wireless Acquisition
Company, LLC, a member of the Company, have provided various
professional services including assistance in obtaining debt and equity
financing for the Company. Payments for these services were
approximately $836,000 and $7,000 for the six months ended June 30,
2000 and 1999, respectively.
5. COMMITMENTS
The Company designed and engineered the wireless network it will build
and has developed an estimate of the cost to construct. The Company has
entered into various agreements related to building out the network.
These agreements cover the purchase of switching and other equipment,
construction of base stations, and the construction of a mobile
switching center. Based on the system design, the estimated costs that
the Company will incur to build the network, including the commitments
already made, are as follows:
2000 $ 9,405,000
2001 12,290,000
2002 2,110,000
2003 1,230,000
2004 1,950,000
2005 1,230,000
--------------------
$ 28,215,000
====================
In addition, the Company has entered into lease agreements for the use
of towers. The lease agreements differ in amount based on whether the
tower is a build-to-suit or a co-locate. The leases commence when a
tower is ready for use and begin in 2000. The Company currently has
signed lease agreements on 79 sites (67 of which had commenced at June
30, 2000) with annual lease payments totaling $1,565,000. An additional
26 and 47 sites are expected to commence in 2000 and 2001,
respectively, for a total of 152 sites. The minimum lease payments for
the remainder of 2000 and over the next five years on all sites are
expected to be as follows:
2000 $ 1,033,200
2001 2,960,000
2002 3,370,000
2003 3,490,000
2004 3,610,000
2005 3,740,000
--------------------
$ 18,203,200
====================
The Company has leases for building, office and retail space, vehicles,
and office equipment under operating leases expiring through 2005.
Future minimum payments under these leases are:
F-68
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
2000 $ 184,400
2001 368,900
2002 368,900
2003 255,800
2004 202,300
2005 71,200
--------------------
$ 1,451,500
====================
6. VALUE APPRECIATION RIGHTS PLAN
The Company has established a "Value Appreciation Rights" plan for the
benefit of selected management executives effective September 1, 1999.
The plan shall remain in effect until it is otherwise terminated by the
Board. A "Value Appreciation Right" (VAR) is the grant by the Company,
to an executive, of "Units" whose value is tied to the value of the
Company; together with the right to be paid an amount at some time in
the future equal to the value of the Units plus or minus the difference
between the value of the Units on the Grant Date and the value on the
date the VAR is exercised. VARs are granted to executives at the
discretion of the Board. The actual benefit available at the time
benefits become payable will depend on the future financial performance
of the Company. The plan requires a third party valuation firm to
annually determine the market value of the Company based on its
financial statements. As of June 30, 2000, a third party valuation of
the Company has not been performed, and the fair market value of the
Company was estimated by the Board of Managers.
A grant vests at 20% per year and is fully vested at the completion of
5 years. The plan states that VARs may not be exercised unless the
executive is continuously employed by the Company from the Grant Date
through at least the first anniversary of the Grant Date, unless early
vesting takes place due to the occurrence of one of the various
circumstances as described in the plan (see Note 10). Compensation
costs related to the Plan are recognized over the vesting period.
At June 30, 2000, the Board has granted 337,012 units in accordance
with this plan. The units granted have an estimated current value of
$1.472 per unit. The Company has recognized $30,964 of compensation
cost for the six months ended June 30, 2000.
7. RETIREMENT SAVINGS PLAN
Effective May 1, 2000, the Company began sponsoring a defined
contribution employee retirement savings plan. Employees age 21 and
over who have been employed at least one month are eligible to
participate in the plan on the first day of the next calendar quarter.
Employees may contribute from 1% to 15% of their eligible compensation
on a pre-tax basis up to a maximum of $10,500 per calendar year.
Employer contributions are at the discretion of the Company and are
currently 50% of employees' contributions up to the first 6% of the
employees' eligible compensation deferred under the Plan. Employees
must provide 1,000 hours of service in the plan year to be eligible for
employer matching contributions. Contributions to the plan in 2000
amounted to $4,560. The plan also allows for potential profit sharing
contributions up to the discretion of the Company.
F-69
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
8. SENIOR SECURED CREDIT FACILITY
In April 2000, the Company obtained long-term financing from CoBank in
the amount of $45,000,000. Interest rates are determined at the time of
each advance based on the Company's election between either a base rate
(the higher of the prime rate or the sum of the Federal Funds Rate plus
0.50%) or LIBOR, plus an applicable margin based on the leverage ratio
as defined in the agreement. The current applicable Base Rate margin
and LIBOR margin are 2.25% and 3.25% respectively. Each LIBOR loan may
be obtained for periods of one, two, three or six months. Interest
payments are due the last day of each calendar quarter for Base Rate
loans and the last day of each applicable interest period, (but not
longer than three months from the commencement of such interest
period), for LIBOR loans.
The agreement calls for minimum quarterly reductions in the commitment
commencing March 31, 2003 as follows:
Quarterly Amount of
Dates of Reduction Reduction
--------------------------------------- -------------------------
June 30, 2003 through March 31, 2005 $ 1,687,500
June 30, 2005 through March 31, 2006 2,250,000
June 30, 2006 through March 31, 2008 2,812,500
The agreement also contains provisions that call for mandatory
repayments to be made if certain circumstances occur including, excess
cash flow, insurance proceeds, equity issuance, debt incurrence, asset
dispositions and change in control of the Company.
As of June 30, 2000 the Company has borrowed $9,460,318 on this credit
facility, with interest rates ranging from 9.58% to 10.05%. Subsequent
to June 30, 2000 the Company has borrowed an additional $9,500,000.
The loan is secured by a first superior continuing security interest in
all assets of the Company.
9. DEFERRED FINANCING COSTS
Deferred financing costs consist of loan fees paid to CoBank and legal
fees and other expenses incurred to obtain debt financing. The costs
are being amortized over the life of the loan. Amortization for the six
months ended June 30, 2000 amounted to $36,516 (none in 1999).
10. SUBSEQUENT EVENT
Subsequent to June 30, 2000, the Company has entered into a definitive
agreement (the "WOW Reorganization Agreement") to merge with Sprint PCS
affiliate Alamosa PCS Holdings, Inc. ("Alamosa"). The terms of the
merger call for members of the Company to receive 6,050,000 shares of
Alamosa stock and $12.5 million in cash in exchange for 100% of the
ownership of the Company.
F-70
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
The merger is contingent upon the completion of the conditions to
consummate the transaction as contained in the WOW Reorganization
Agreement.
Upon required conditions being met and the merger closing, all units
granted under the VAR Plan (see Note 6) shall become fully vested and
amounts owed under the plan shall be paid at the closing of the merger,
except as described below.
As described in the WOW Reorganization Agreement, on the closing date,
Alamosa, or an affiliate of Alamosa, shall assume the obligations owed
under the VAR Plan to the Company's employees whom Alamosa or its
affiliates elects to employ and either, assume the VAR Plan as it
relates to the CEO of the Company, or satisfy and pay the obligations
owed to the CEO of the Company under the VAR Plan. On the closing date,
Alamosa shall pay to each Company employee that Alamosa or its
affiliates elects to employ, one-third of the VAR obligations owed to
each individual employee and to the CEO of the Company, the amount of
VAR obligations attributable to the CEO. On each of the dates six and
twelve months after the closing date, Alamosa or its affiliates shall
pay the remaining one-third of the obligations owed to such Company
employees.
All units vesting upon closing of the merger will be valued as of such
closing and the valuation will be based on the Company's total equity
value as reflected in the merger (including stock and cash received by
the members of the Company) without deduction of the cost of such
merger and without reducing the value of stock the members of the
Company receive by any discount for any "lock-up" period applicable to
such stock.
F-71
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Managers
Washington Oregon Wireless, LLC
(A Development Stage Company)
Stayton, Oregon
We have audited the accompanying balance sheets of Washington Oregon Wireless,
LLC (a limited liability company) as of December 31, 1999 and 1998, and the
related statements of income, members' equity, and cash flows for the year ended
December 31, 1999, and from July 8, 1998 (date of inception) to December 31,
1999 and 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Washington Oregon Wireless, LLC
as of December 31, 1999 and 1998, and the results of its operations and cash
flows for the year ended December 31, 1999 and from inception to December 31,
1999 and 1998, in conformity with generally accepted accounting principles.
Aldrich, Kibride & Tatone, LLP
March 7, 2000
Salem, Oregon
F-72
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
ASSETS
Current assets - cash $ 596,445 $ 4,079
Fixed assets:
Office equipment 14,748 -
Construction in progress 10,399,330 -
----------- ----------
10,414,078 -
Less accumulated depreciation 923 -
----------- ----------
Fixed assets, net 10,413,155 -
----------- ----------
Total assets $11,009,600 $ 4,079
=========== ==========
LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 8,193,437 $ 12,805
Accrued expenses 12,660 3,750
----------- ----------
Total current liabilities 8,206,097 16,555
----------- ----------
Commitments (Note 5)
Members' equity (deficit):
Capital contributed and subscribed 18,066,853 15,248,750
Deficit accumulated during the development stage (1,025,617) (45,476)
Capital subscription receivable (14,237,733) (15,215,750)
----------- ----------
Total members' equity (deficit) 2,803,503 (12,476)
----------- ----------
$11,009,600 $ 4,079
=========== ==========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
F-73
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
JULY 8, 1998 JULY 8, 1998
YEAR ENDED (INCEPTION) THROUGH (INCEPTION) THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------- ------------------------ --------------------------
<S> <C> <C> <C>
Revenues: $ - $ - $ -
Expenses:
Design and development 192,986 192,986 -
Management fees - WIN 205,675 213,060 7,385
Consulting 204,965 252,228 47,263
Legal and accounting 111,221 112,826 1,605
Compensation, benefits and taxes 131,203 131,203 -
General and administrative 141,083 145,056 3,973
--------- ----------- --------
Total expenses 987,133 1,047,359 60,226
Other income 6,992 21,742 14,750
--------- ----------- --------
Net loss $(980,141) $(1,025,617) $(45,476)
========= =========== ========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
F-74
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
JULY 8, 1998 (INCEPTION) THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
CONTRIBUTED ACCUMULATED TOTAL MEMBERS'
CAPITAL DEFICIT EQUITY (DEFICIT)
----------- ----------- ----------------
<S> <C> <C> <C>
Members' equity at July 8, 1998 (inception) $ - $ - $ -
Activity from inception to December 31, 1998:
Capital contributions 33,000 - 33,000
Net loss - (45,476) (45,476)
---------- ----------- ----------
Members' deficit at December 31, 1998 33,000 (45,476) (12,476)
Activity for the year ended December 31, 1999:
Capital contributions 3,796,120 - 3,796,120
Net loss - (980,141) (980,141)
---------- ----------- ----------
Members' equity at December 31, 1999 $3,829,120 $(1,025,617) $2,803,503
========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
F-75
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD PERIOD
JULY 8, 1998 JULY 8, 1998
(INCEPTION) (INCEPTION)
YEAR ENDED THROUGH THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (980,141) $(1,025,617) $(45,476)
Contributed services 100,000 100,000 -
Depreciation 923 923 -
Adjustments to reconcile net loss to net cash used
in operating activities:
Changes in liabilities:
Accounts payable 16,150 28,955 12,805
Accrued expenses 8,910 12,660 3,750
----------- ----------- --------
Net used in operating activities (854,158) (883,079) (28,921)
Cash flows from investing activities - capital expenditures (2,249,596) (2,249,596) -
Cash flows from financing activities - member contributions 3,696,120 3,729,120 33,000
----------- ----------- --------
Net increase in cash 592,366 596,445 4,079
Cash, beginning of period 4,079 - -
----------- ----------- --------
Cash, end of period $ 596,445 $ 596,445 $ 4,079
=========== =========== ========
Non-cash investing activities:
Additions to construction in progress $10,399,330 $10,399,330 $ -
Equipment additions 14,748 14,748 -
Equipment purchases included in accounts payable (8,164,482) (8,164,482) -
----------- ----------- --------
Net cash additions to fixed assets $ 2,249,596 $ 2,249,596 $ -
=========== =========== ========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
F-76
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
BUSINESS ACTIVITY
The Washington Oregon Wireless, LLC (the "Company") operates as an
Oregon Limited Liability Company comprised of 25 members as of December
31, 1999. As an LLC, the members of the Company have limited personal
liability for the obligations or debts of the entity. The Company was
formed in 1998 for the purpose of building out and operating personal
communications services (PCS) networks in Washington and Oregon and to
provide other wireless telephone services and construct other
infrastructure, towers and networks as the members may approve.
AFFILIATION AGREEMENT
In February 1999, the Company entered into an "Affiliation Agreement"
with Sprint PCS (Sprint). As a Sprint PCS affiliate, the Company has
the exclusive right to provide digital PCS services under the Sprint
and Sprint PCS brand name in its service areas in rural portions of
Oregon and Washington for a period of up to 50 years. Under the
Agreement, the Company is responsible for designing, building, owning
and managing a communications network in its service area to the
standards established by Sprint, which will operate as a
single-integrated system with other Sprint PCS service areas. As part
of the Sprint PCS Agreement, the Company has the option of contracting
with Sprint PCS to provide back office services such as customer
activation, handset logistics, billing, customer service and network
monitoring.
MEMBERSHIP
All members are required to own a membership interest in the Company.
Each member of the Company has subscribed to a minimum of $100,000 cash
(or contributed services, see Note 4) to be admitted in the LLC. Only
one class of members exists and the entity's life shall exist
indefinitely until dissolved as provided by the operating agreement.
New members may be admitted with the approval of members with 67% of
the ownership rights. The Company consisted of 18 members at its
inception and an additional seven members were added in 1999.
Two additional members (WOW Investments Partners, LP and JMWireless,
LLC) were added in 2000.
CASH
The Company maintains its cash in bank deposit accounts that, at times,
may exceed federally insured limits. The Company has not experienced
any losses in such accounts and believes it is not exposed to any
significant credit risk on cash.
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
F-77
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
FIXED ASSETS
Fixed assets include office equipment and construction in progress.
Office equipment is recorded at cost. Depreciation is calculated on a
straight-line basis over the estimated life of the assets. At December
31, 1999, depreciation is being calculated on office equipment over a
life of five years. Construction in progress consists of the costs of
acquiring wireless communication sites for the placement of base
stations, purchases of the related equipment and construction of a
mobile switching center in Beaver Creek, Oregon.
INCOME TAXES
The Company is not a taxpaying entity for federal income tax purposes,
and thus no income tax expense has been recorded in the statements.
Income (loss) of the Company is taxed to the members in their
individual returns.
ACCOUNTING FOR START-UP COSTS
The Company accounts for start-up related costs in accordance with
AICPA Statement of Position 98-5 Reporting on the Costs of Start-Up
Activities. The Company expenses start-up costs as incurred unless the
costs qualify for capitalization under other generally accepted
accounting principles.
ACCOUNTING FOR APPRECIATION RIGHTS
The Company accounts for its Value Appreciation Rights Plan (see Note
6) in accordance with Statement of Financial Accounting Standards No.
123, Accounting for Stock Based Compensation. Statement No. 123
established fair value as the measurement basis for accounting for
employee stock option plans and similar equity instruments.
2. DEVELOPMENT STAGE OPERATIONS
Since its formation in July 1998, the operations through December 1999
have been devoted to raising capital, design and development related to
construction of facilities, acquisition of wireless communication
sites, construction of base stations and administrative functions.
Operations are scheduled to commence in the third quarter of 2000.
3. SUBSCRIPTION RECEIVABLE
Each member of the Company entered into the Amended and Restated
Operating Agreement of Washington Oregon Wireless, LLC that covers the
amount and timing of contributions upon
F-78
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
membership in the LLC. Actual capital calls may differ from the Funding
Schedule contained within the Amended and Restated Operating Agreement
and are made at the discretion of the Board of Managers based on the
needs of the Company.
The original subscription agreements have been superseded by the
Amended and Restated Operating Agreement.
Based upon the Amended and Restated Operating Agreement, the capital is
callable as follows:
Members at New
December 31, 1999 Members Total
------------------- --------------- -----------------
2000 $ 10,909,381 $ 15,350,000 $ 26,259,381
2001 1,964,000 - 1,964,000
2002 810,000 - 810,000
2003 575,000 - 575,000
------------------- --------------- -----------------
$ 14,258,381 $ 15,350,000 $ 29,608,381
=================== =============== =================
Subsequent to December 31, 1999 but prior to the date of the report,
the Company has received $11,471,048 in capital contributions committed
for 2000.
4. RELATED PARTY TRANSACTION
A member of the Company, Western Independent Network ("WIN"), provides
certain management and administrative services to the Company. Payments
to WIN for these services totaled $205,675 in 1999. WIN also received
$100,000 in contributed capital in 1999 related to these management
services. In addition, WIN will receive an additional $100,000 in
contributed capital in 2000 and 2001 for a total membership
contribution of $300,000.
5. COMMITMENTS
The Company has designed and engineered the wireless network it will
build, and has developed an estimate of the cost to construct. The
Company has entered into various agreements related to building out the
network. These agreements cover the purchase of switching and other
equipment, construction of base stations, and the construction of a
mobile switching center. Commitments signed to date are approximately
$14,000,000, of which $7,631,081 was included in construction in
progress at December 31, 1999. Based on the system design, the
estimated costs that the Company will incur to build the network,
including the commitments already made over the next five years, is as
follows:
2000 $ 29,550,000
2001 6,840,000
2002 2,110,000
2003 1,230,000
2004 2,195,000
---------------
F-79
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
$ 41,925,000
===============
In addition, the Company has entered into lease agreements for the use
of towers. The lease agreements differ in amount based on whether the
tower is a build-to-suit or a co-locate. The leases commence when a
tower is ready for use and begin in 2000. The Company currently has
signed lease agreements on 24 sites with annual lease payments of
$373,000. An additional 112 and 21 sites are expected to commence in
2000 and 2001, respectively, for a total of 157 sites. The minimum
lease payments for the next five years on all sites are expected to be
as follows:
2000 $ 1,729,350
2001 3,334,356
2002 3,491,167
2003 3,615,059
2004 3,742,434
----------------
$ 15,912,366
================
The Company has leases for building, office and retail space under
leases expiring through 2004. Future minimum payments under these
leases are:
2000 $ 270,107
2001 300,614
2002 313,299
2003 225,865
2004 217,143
---------------
$ 1,327,028
===============
6. VALUE APPRECIATION RIGHTS PLAN
The Company has established a "Value Appreciation Rights" plan for the
benefit of selected management executives. The plan shall remain in
effect until it is otherwise terminated by the Board. A "Value
Appreciation Right" (VAR) is the grant by the Company, to an executive,
of "Units" whose value is tied to the value of the company; together
with the right to be paid an amount at some time in the future equal to
the value of the Units plus or minus the difference between the value
of the Units on the Grant Date and the value on the date the VAR is
exercised. VARs are granted to executives at the discretion of the
Board. The actual benefit available at the time benefits become payable
will depend on the future financial performance of the Company. The
plan requires a third party valuation firm to annually determine the
market value of the Company based on its financial statements.
At December 31, 1999 the Board has granted 157,790 units in accordance
with this plan with a value of $185,848. A grant vests at 20% per year
and is fully vested at the completion of five years. The plan states
that VARs may not be exercised unless the executive is continuously
employed by the Company from the Grant Date through at least the first
anniversary of the Grant Date. Since the units granted are unvested as
of December 31, 1999, no costs have been reflected in these financial
statements.
F-80
<PAGE>
7. SUBSEQUENT EVENT
The Company received a commitment for long-term financing from Co-Bank
in the amount of $45,000,000. The terms of the commitment call for the
loan to be repaid over an eight-year period with interest at either a
base rate (prime plus .5% based on 75% of the U. S. 30 largest
commercial banks), or LIBOR, plus an adjustment based on the leverage
ratio of the Company as defined in the agreement. No funds have been
received under this agreement.
The Company entered into an agreement with a consultant that requires
them to pay fees on any new debt or equity financing obtained. The fees
are set at 1% of debt proceeds and 5% of equity contributions. As a
result of new equity contributions received, the Company has paid fees
of $767,500 subsequent to December 31, 1999.
F-81
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
ALAMOSA PCS HOLDINGS, INC.
ALAMOSA SUB I, INC.
AND
ALAMOSA HOLDINGS, INC.
July 31, 2000
An Index of Defined Terms begins on Page iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 Mergers.......................................................................................A-3
1.1 The Mergers...................................................................................A-3
(a) The Mergers............................................................................A-3
(b) Consummation...........................................................................A-3
(c) Effective Time of the Merger...........................................................A-3
(d) Effect of the Merger...................................................................A-4
(e) The Surviving Corporation's Certificate of Incorporation;
Bylaws; Directors and Officers.........................................................A-4
1.2 Terms of the Merger...........................................................................A-4
(a) Conversion of Public Stock.............................................................A-4
(b) Conversion of Merger Sub Stock.........................................................A-4
(c) Rights as Holders of Public Stock and Merger Sub Stock.................................A-4
(d) Treasury Stock.........................................................................A-4
1.3 Stock Options.................................................................................A-5
(a) Options................................................................................A-5
(b) Option Plans...........................................................................A-5
(c) Stock Reserve; Form S-8; Listing Application...........................................A-5
1.4 Exchange Agent................................................................................A-5
1.5 Exchange Procedure............................................................................A-6
1.6 Distributions with Respect to Unexchanged Shares. ............................................A-6
1.7 Cancellation and Retirement of Shares.........................................................A-7
1.8 Termination of Exchange Fund..................................................................A-7
1.9 No Liability..................................................................................A-7
1.10 Tax Withholding...............................................................................A-7
ARTICLE 2 Closing the Transaction.......................................................................A-8
2.1 Closing.......................................................................................A-8
ARTICLE 3 Conditions To Consummating the Transaction....................................................A-8
3.1 Obligations of Public, Superholdings and Merger Sub...........................................A-8
(a) Stockholder Approval...................................................................A-8
(b) HSR Act................................................................................A-8
(c) No Litigation..........................................................................A-8
(d) Other Conditions to Closing............................................................A-9
ARTICLE 4 Termination...................................................................................A-9
4.1 Reasons for Termination.......................................................................A-9
4.2 Effect of Termination.........................................................................A-9
ARTICLE 5 Covenants of the Parties......................................................................A-9
5.1 Satisfaction of Conditions to Closing.........................................................A-9
(a) Defending the Agreement................................................................A-9
-i-
<PAGE>
(b) Lifting Injunctions....................................................................A-9
(c) Other Actions..........................................................................A-9
5.2 Section 16(b) Resolution - Superholdings.....................................................A-10
5.3 Section 16(b) Resolution - Public............................................................A-10
5.4 Public Stockholders Meeting..................................................................A-10
ARTICLE 6 Miscellaneous................................................................................A-10
6.1 Successors and Assigns.......................................................................A-10
6.2 Entire Agreement.............................................................................A-11
6.3 Amendment....................................................................................A-11
6.4 Governing Law................................................................................A-11
6.5 Extension; Waiver............................................................................A-11
6.6 Notices, Etc.................................................................................A-11
6.7 Third Party Beneficiary, Etc.................................................................A-12
6.8 Reformation; Severability....................................................................A-12
6.9 Counterparts.................................................................................A-12
6.10 Titles and Subtitles.........................................................................A-12
</TABLE>
-ii-
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Page
<S> <C>
Agreement.........................................................................................................A-1
Articles.........................................................................................................A-12
Certificates of Merger............................................................................................A-3
Closing...........................................................................................................A-8
Closing Date......................................................................................................A-8
Code..............................................................................................................A-2
DGCL..............................................................................................................A-3
Effective Time....................................................................................................A-3
Exchange Agent....................................................................................................A-5
Exchange Fund.....................................................................................................A-6
HSR Act...........................................................................................................A-8
Merger Consideration..............................................................................................A-4
Merger Sub........................................................................................................A-1
Merger Sub Stock..................................................................................................A-1
Option Plan.......................................................................................................A-5
Options...........................................................................................................A-5
Parent Mergers....................................................................................................A-1
Public............................................................................................................A-1
Public Stock......................................................................................................A-4
Public Stockholders Meeting......................................................................................A-10
Reorganization....................................................................................................A-2
Roberts Agreement.................................................................................................A-1
Roberts LLC.......................................................................................................A-1
Roberts LLC Holdings..............................................................................................A-1
Roberts Merger....................................................................................................A-1
Sections.........................................................................................................A-12
Sister Agreements.................................................................................................A-3
Subsidiary Merger.................................................................................................A-2
Subsidiary Merger Surviving Corporation...........................................................................A-3
Substitute Option.................................................................................................A-5
Superholdings.....................................................................................................A-1
Superholdings Stock...............................................................................................A-1
Tax...............................................................................................................A-6
Taxes.............................................................................................................A-6
WOW Agreement.....................................................................................................A-1
WOW LLC...........................................................................................................A-1
WOW LLC Holdings..................................................................................................A-1
WOW Merger........................................................................................................A-1
</TABLE>
-iii-
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is entered
into as of July 31, 2000, by and among Alamosa PCS Holdings, Inc., a Delaware
corporation ("Public"), Alamosa Holdings, Inc., a Delaware corporation
("Superholdings"), and Alamosa Sub I, Inc., a Delaware corporation and
wholly-owned direct subsidiary of Superholdings ("Merger Sub").
R E C I T A L S
- - - - - - - -
A. The Board of Managers of Roberts Wireless Communications, L.L.C.
("Roberts LLC") has deemed it advisable and in the best interests of
its members that Roberts LLC and its members form a limited liability
company to hold all of such members' interests of Roberts LLC ("Roberts
LLC Holdings"), and that Roberts LLC Holdings merge with and into
Superholdings (the "Roberts Merger") pursuant to that certain Amended
and Restated Agreement and Plan of Reorganization by and among Public,
Superholdings, Merger Sub, Roberts LLC and the members of Roberts LLC,
dated as of July 31, 2000 (the "Roberts Agreement").
B. The Board of Managers of Washington Oregon Wireless, LLC ("WOW LLC")
has deemed it advisable and in the best interests of its members that
WOW LLC and its members form WOW Holdings, LLC, an Oregon limited
liability company ("WOW LLC Holdings") to hold all of such members'
interests of WOW LLC, and that WOW LLC Holdings merge with and into
Superholdings (the "WOW Merger" and together with the Roberts Merger,
the "Parent Mergers") pursuant to that certain Amended and Restated
Agreement and Plan of Reorganization by and among Public,
Superholdings, Merger Sub, WOW LLC, WOW Holdings LLC and certain
members of WOW LLC, dated as of July 31, 2000 (the "WOW Agreement").
C. As of the date hereof, there are no shares of common stock of
Superholdings, par value $0.01 per share ("Superholdings Stock"),
issued and outstanding and as of the date hereof, Superholdings holds
of record all of the issued and outstanding shares of common stock of
Merger Sub, par value $0.01 per share ("Merger Sub Stock").
D. The Board of Directors of Public has determined that in order to
complete the Parent Mergers in a tax-efficient manner, such
acquisitions should be structured as transactions described in Section
351(a) of the Internal Revenue Code of
A-1
<PAGE>
1986, as amended (the "Code"), which will require Public to form a new
holding company. The parties desire that the Parent Mergers, except as
provided in Sections 1.2(a)(ii) (Cash) and 1.8(b) (Cash Payments) of
the Roberts Agreement and the WOW Agreement, qualify as transactions
described in Section 351(a) of the Code.
E. The Board of Directors of Public deems it advisable and in the best
interests of its stockholders to consummate the merger of Merger Sub
and Public (the "Subsidiary Merger") simultaneously with the
consummation of the Parent Mergers. In furtherance thereof, the Board
of Directors of Public has approved the Subsidiary Merger, upon the
terms and subject to the conditions set forth herein, and has
recommended that the stockholders of Public approve the Subsidiary
Merger, upon the terms and subject to the conditions set forth herein.
F. The parties desire that the Subsidiary Merger qualify as a transaction
described in Sections 351(a) and 368(a)(1)(A) of the Code by virtue of
Section 368(a)(2)(E) of the Code. It is contemplated that the
Subsidiary Merger will be completed substantially simultaneously with
the merger or consolidation of Superholdings or one or more of its
subsidiaries with or into one or more business entities (including,
without limitation, the Parent Mergers) in a transaction of the type
described in Section 351(a) of the Code.
G. Similarly, the Board of Directors of Superholdings deems it advisable
to consummate the Subsidiary Merger simultaneously with the
consummation of the Parent Mergers. In furtherance thereof, the Board
of Directors of Superholdings has approved the Subsidiary Merger, upon
the terms and subject to the conditions set forth herein.
H. Further, the Board of Directors of Merger Sub deems it advisable and in
the best interests of its stockholders to consummate the Subsidiary
Merger simultaneously with the consummation of the Parent Mergers. In
furtherance thereof, the Board of Directors of Merger Sub has approved
the Subsidiary Merger, upon the terms and subject to the conditions set
forth herein, and has recommended that the sole stockholder of Merger
Sub approve the Subsidiary Merger, upon the terms and subject to the
conditions set forth herein. The Parent Mergers, the Subsidiary Merger
and the other transactions contemplated herein are collectively
referred to as the "Reorganization."
I. Public, Superholdings and Merger Sub acknowledge that they have
received adequate consideration for entering into, and have relied upon
the promises, covenants, representations and warranties contained in,
this Agreement, and that they will be benefitted by the transactions
contemplated herein.
J. Public, Superholdings and Merger Sub may enter into other agreements
(any such other agreements, the Roberts Agreement and the WOW Agreement
being
A-2
<PAGE>
collectively referred to herein as the "Sister Agreements")
pursuant to which other business entities join in the Reorganization.
A G R E E M E N T
-----------------
Based on the recitals set forth above and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE 1
Mergers
-------
1.1 The Mergers.
(a) The Mergers. Upon the terms and subject to the
conditions set forth in this Agreement:
(i) Subsidiary Merger. Simultaneously with the
Parent Mergers, Merger Sub will merge with and into Public, in accordance with
the terms set forth herein. From and after the Effective Time, the separate
corporate existence of Merger Sub shall cease. Public shall continue as the
surviving corporation in the Subsidiary Merger (the "Subsidiary Merger Surviving
Corporation") and shall continue to be governed by the laws of the State of
Delaware. At the sole discretion of the Board of Directors of Public, as an
alternative structure to the Subsidiary Merger, Public may merge directly with
and into Superholdings, and Superholdings shall continue as the surviving
corporation and shall continue to be governed by the laws of the State of
Delaware.
(b) Consummation. Certificates of Merger (herein so called)
shall be filed with the secretary of state of the State of Delaware in the
following order: (i) a Certificate of Merger with respect to the Roberts Merger,
(ii) a Certificate of Merger with respect to the WOW Merger, (iii) a Certificate
of Merger with respect to the Subsidiary Merger and (iv) Certificates of Merger,
if any, with respect to any other Sister Agreements, together with all other
documents, notices and filings required by the Delaware General Corporation Law
("DGCL").
(c) Effective Time of the Merger. The Certificate of Merger
shall provide that the Subsidiary Merger shall be effective as of the date and
time set forth in the Certificate of Merger filed with the Secretary of State of
the State of Delaware (the "Effective Time").
A-3
<PAGE>
(d) Effect of the Merger. At the Effective Time, the effect of
the Subsidiary Merger shall be as provided in Section 259 and Section 261 of the
DGCL.
(e) The Surviving Corporation's Certificate of Incorporation;
Bylaws; Directors and Officers. The certificate of incorporation and bylaws of
Public, as in effect at the Effective Time, shall be the certificate of
incorporation and bylaws of the Subsidiary Merger Surviving Corporation. At the
Effective Time, the Board of Directors and officers of the Subsidiary Merger
Surviving Corporation shall be composed of the entire Board of Directors of
Public and officers of Public serving immediately before the Effective Time who
shall hold office until their respective successors are duly elected or
appointed and qualified.
1.2 Terms of the Merger. The consideration payable to the Stockholders
as set forth below in this Section 1.2 in connection with the Subsidiary Merger
is sometimes referred to herein as the "Merger Consideration."
(a) Conversion of Public Stock. Each share of common stock of
Public, par value $0.01 (the "Public Stock"), issued and outstanding immediately
prior to the Effective Time together with the related rights distributed to
holders of Public Stock pursuant to the Rights Agreement, dated as of January
31, 2000, between Public and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent (other than shares of Public Stock held in Public's treasury) shall, at
the Effective Time, by virtue of the Subsidiary Merger and without any action on
the part of the holder thereof, be converted into, as specified and pursuant to
the terms of this Section 1.2(a), the right to receive one duly authorized,
validly issued, fully paid and nonassessable share of Superholdings Stock, along
with any dividends or distributions thereon after the Effective Time.
(b) Conversion of Merger Sub Stock. Each share of Merger Sub
Stock issued and outstanding immediately prior to the Effective Time (other than
shares of Merger Sub Stock held in Merger Sub's treasury) shall, at the
Effective Time, by virtue of the Subsidiary Merger and without any action on the
part of the holder thereof, be converted into one duly authorized, validly
issued, fully paid nonassessable share of stock of the Subsidiary Merger
Surviving Corporation.
(c) Rights as Holders of Public Stock and Merger Sub Stock. On
and after the Effective Time, holders of certificates which immediately prior to
the Effective Time represented issued and outstanding shares of Public Stock or
Merger Sub Stock shall cease to have any rights as stockholders of Public or
Merger Sub, respectively, except the right to receive the consideration set
forth herein in Section 1.2(a) (Conversion of Public Stock) or Section 1.2(b)
(Conversion of Merger Sub Stock) with respect to each share held by them.
(d) Treasury Stock. At the Effective Time all shares of Public
Stock and Merger Sub Stock that are owned by Public or Merger Sub, respectively,
as
A-4
<PAGE>
treasury stock shall be cancelled and shall cease to exist and no stock of
Superholdings or other consideration shall be delivered in exchange therefor.
1.3 Stock Options.
(a) Options. At the Effective Time, each then-outstanding
option to purchase Public Stock under Public's 1999 Long Term Incentive Plan
(collectively, the "Options" under the "Option Plan"), whether or not then
exercisable or fully vested, shall be assumed by Superholdings for all purposes
and shall be converted into an option (a "Substitute Option") to acquire, on
substantially the same terms and subject to substantially the same conditions as
were applicable under such Option (including without limitation term, exercise
price per share, vesting, exercisability, status as an "incentive stock option"
(if applicable) under Section 422 of the Code or as an employee stock purchase
plan option (if applicable) under Section 423 of the Code, and termination
provisions), a number of shares of Superholdings Stock determined by
multiplying the number of shares of Public Stock subject to such Option
immediately prior to the Effective Time by 1.0.
(b) Option Plans. Public shall use its reasonable best efforts
to obtain all necessary waivers, consents or releases from holders of Options
under the Option Plan, if any, and take any such other action as may be
reasonably necessary to give effect to the transactions contemplated by this
Section 1.3.
(c) Stock Reserve; Form S-8; Listing Application.
Superholdings shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Superholdings Stock for delivery upon exercise
of Substitute Options pursuant to the terms set forth in Section 1.3(a)
(Options). Within a reasonable time after the Effective Time, the shares of
Superholdings Stock subject to Substitute Options will be covered by an
effective registration statement on Form S-8 (or any successor form) or another
appropriate form, and Superholdings shall use its reasonable best efforts to
maintain the effectiveness of such registration statement for so long as the
Substitute Options remain exercisable and outstanding. In addition,
Superholdings shall use its reasonable best efforts to cause the shares of
Superholdings Stock subject to Substitute Options to be listed on The Nasdaq
Stock Market and such other exchanges, if any, as Superholdings shall determine.
1.4 Exchange Agent. Prior to or concurrently with the Effective Time,
Superholdings shall enter into an agreement with such bank or trust company as
may be designated by Superholdings (the "Exchange Agent"), which shall provide
that Superholdings shall deposit with the Exchange Agent as of the Effective
Time, for the benefit of the holders of Public Stock and for exchange in
accordance with this Agreement, through the Exchange Agent, (a) certificates
representing the shares of Superholdings Stock, (b) any dividends or
distributions with respect thereto with a
A-5
<PAGE>
record date after the Effective Time, and (c) any cash payable in lieu of any
fractional shares of Superholdings Stock. All things deposited with and held by
the Exchange Agent pursuant to this Section 1.4 are collectively referred to as
the "Exchange Fund."
1.5 Exchange Procedure. After the Effective Time, each holder of Public
Stock that is entitled to receive Merger Consideration pursuant to Section 1.2
(Terms of the Merger) shall surrender the certificates representing same to the
Exchange Agent, together with a Release and an Indemnification Agreement.
Subject to Section 1.10 (Tax Withholding), at the time of such surrender or
delivery, the Merger Consideration applicable to such Public Stock held by such
Public stockholder shall be delivered to such holder of Public Stock. The Merger
Consideration shall be deemed, when paid or issued hereunder, to have been paid
or issued, as the case may be, in full satisfaction of all rights and
obligations pertaining to the surrendered Public Stock. No interest shall be
paid or accrued on any cash payable upon the surrender of any shares of Public
Stock.
After the Effective Time, there shall be no transfers on the
stock transfer books of Public of the shares of Public Stock which were issued
and outstanding immediately prior to the Effective Time. If a cash payment is to
be made, or shares of Superholdings Stock are to be issued, to a person other
than the person who surrendered the Public Stock, it shall be a condition of
payment that the Public Stock so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other Taxes required by reason of the payment
to a person other than the registered holder of the surrendered Public Stock, or
established to the satisfaction of Superholdings that such Taxes have been paid
or are not applicable.
As used herein, the term "Taxes" means all federal, state,
local, foreign and other governmental net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, unemployment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments or charges of any kind whatever, together with any
interest and any penalties, additions to tax or additional amounts with respect
thereto, and the term "Tax" means any one of the foregoing Taxes.
1.6 Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Superholdings Stock shall be paid to the
holder of any unsurrendered Public Stock with respect to the shares of
Superholdings Stock issuable upon the surrender of such Public Stock pursuant to
Section 1.5 (Exchange Procedure), and all such dividends and other distributions
shall be paid by Superholdings to the Exchange Agent and shall be included in
the Exchange Fund, in each case until the surrender of such Public Stock
pursuant to Section 1.5 (Exchange Procedure). Subject to the effect of
applicable escheat or similar laws and subject to Section 1.10 (Tax
Withholding), after the surrender of a stock certificate in accordance
A-6
<PAGE>
with this Section 1.6, the record holder thereof shall be entitled to receive
any such dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of Superholdings Stock
represented by such stock certificate. No holder of an unsurrendered stock
certificate shall be entitled, until the surrender of such certificate, to vote
the shares of Superholdings Stock into which the shares of Public Stock
represented thereby shall have been converted.
1.7 Cancellation and Retirement of Shares. As of the Effective Time,
all shares of Public Stock and Merger Sub Stock issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding and shall
automatically be canceled and retired and shall cease to exist.
1.8 Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Public Stock for 180 days after
the Effective Time shall be delivered to Superholdings, upon demand, and any
holders of Public Stock that have not theretofore complied with this Article 1
shall thereafter look only to Superholdings, and only as general creditors
thereof, for payment of their claim for any Merger Consideration and any
dividends or distributions with respect to Superholdings Stock, as provided
herein.
1.9 No Liability. None of Public, Superholdings, Merger Sub, Subsidiary
Merger Surviving Corporation or the Exchange Agent shall be liable to any person
in respect of any payments or distributions payable from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Public Stock shall not have been surrendered
prior to five years after the Effective Time (or immediately prior to such
earlier date on which any Merger Consideration in respect of such Public Stock
would otherwise escheat to or become the property of any governmental entity),
any amounts payable in respect of such Public Stock shall, to the extent
permitted by applicable law, become the property of Superholdings, free and
clear of all claims or interest of any person previously entitled thereto.
1.10 Tax Withholding. Superholdings shall be entitled to deduct and
withhold, or cause to be deducted or withheld, from the consideration otherwise
payable pursuant to this Agreement to any holder of Public Stock, options or
warrants to acquire Public Stock such amounts as are required to be deducted and
withheld with respect to the making of such payment under the Code, or any
provision of applicable state, local or foreign tax law. To the extent that
amounts are so deducted and withheld, such deducted and withheld amounts shall
be treated for all purposes of this Agreement as having been paid to such
holders in respect of which such deduction and withholding was made.
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<PAGE>
ARTICLE 2
Closing the Transaction
-----------------------
2.1 Closing. On the third business day after the satisfaction or
written waiver of the latest to occur of the conditions set forth in Article 3
(Conditions to Consummating the Transaction) hereof (other than execution,
filing or delivery of agreements, certificates, legal opinions or other
instruments to be delivered at Closing), or as otherwise agreed by the parties
hereto, the consummation of the transactions provided for herein (the "Closing")
shall take place at the offices of Haynes and Boone, LLP, counsel to
Superholdings, Public and Merger Sub, located at 1600 N. Collins Blvd., Suite
2000, Richardson, Texas 75080, at 10:00 a.m., local time, or at such other place
or by such other means as the parties hereto may agree; provided, however, that
at the option of Superholdings and Public, the Closing of this Agreement may be
delayed in order to achieve satisfaction or waiver of the conditions contained
in one or more Sister Agreements, but not later than March 31, 2001; provided,
further, that the Closing shall not occur if either this Agreement has been
validly terminated pursuant to the provisions of Article 4 (Termination) hereof
or all Sister Agreements have been validly terminated in accordance with their
terms. The time and date of the Closing are referred to herein as the "Closing
Date."
ARTICLE 3
Conditions To Consummating the Transaction
------------------------------------------
3.1 Obligations of Public, Superholdings and Merger Sub. The
obligations of Public, Superholdings and Merger Sub to consummate the
transactions provided for in this Agreement are subject to the satisfaction, at
or prior to the Closing, of the following conditions:
(a) Stockholder Approval. This Agreement shall have been
adopted by the affirmative vote of the holders of the requisite number of shares
of capital stock of Public in the manner required pursuant to Public's
certificate of incorporation and bylaws, the DGCL and other applicable law.
(b) HSR Act. The waiting period prescribed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act") shall have expired or early
termination of the waiting period under the HSR Act shall have been granted.
(c) No Litigation. No action, suit or proceeding (other than
such an action, suit or proceeding directly or indirectly instituted by a party
hereto) shall be threatened or pending, and no preliminary or permanent
injunction, order, decree or ruling shall be in effect, seeking to restrain or
prohibit, or to obtain damages or other relief in connection with, the execution
and delivery of this Agreement or the consummation of the transactions
contemplated by the foregoing.
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<PAGE>
(d) Other Conditions to Closing. All conditions precedent to
the consummation of at least one of the Sister Agreements shall have been
satisfied or duly waived in accordance with the terms of such applicable
agreement; provided, however, that the condition precedent of such applicable
agreement which states that all conditions to the consummation of the Subsidiary
Merger shall have been satisfied, need not be satisfied.
ARTICLE 4
Termination
-----------
4.1 Reasons for Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time, notwithstanding adoption thereof by the stockholders of Public,
Superholdings or Merger Sub, only by following the termination procedures set
forth in this Article 4, for the following reason:
Termination of the Roberts and WOW Agreements. If all of the
Sister Agreements are terminated prior to the consummation of the Parent
Mergers.
4.2 Effect of Termination. Upon termination hereof pursuant to this
Article 4, no party shall have any liability or continuing obligation to another
party arising out of this Agreement, or out of actions taken in connection
herewith, except that Article 6 (Miscellaneous) shall survive termination
hereof.
ARTICLE 5
Covenants of the Parties
------------------------
5.1 Satisfaction of Conditions to Closing. Each party shall use its
reasonable best efforts to satisfy the conditions to the obligations of the
parties hereunder, and to consummate and make effective as promptly as
practicable the transactions provided for herein including:
(a) Defending the Agreement. Defending lawsuits or
other legal proceedings challenging this Agreement or the consummation of the
transactions provided for in this Agreement;
(b) Lifting Injunctions. Using reasonable best efforts
to lift or rescind any injunction, restraining order or other order adversely
affecting the ability of the parties to consummate the transactions provided
for in this Agreement; and
(c) Other Actions. Taking such other reasonable actions that
are necessary, appropriate or advisable, including, without limitation, using
reasonable best
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<PAGE>
efforts to obtain all approvals, and all consents of third parties to contracts
as are necessary for the consummation of the Reorganization. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, each party and its officers and directors
shall use their reasonable best efforts to take all such action.
5.2 Section 16(b) Resolution - Superholdings. Prior to the Closing
Date, the Board of Directors of Superholdings shall pass a resolution approving,
for purposes of Rule 16b-3 of the Exchange Act, the issuance of Superholdings
Stock and other equity securities (derivative on nonderivative) pursuant to the
Subsidiary Merger, to the directors, officers and other persons subject to
potential liability under Section 16(b) of the Exchange Act, which resolution
shall specifically refer to such directors, officers and other persons and the
number of shares of Superholdings Stock and other equity securities (derivative
on nonderivative) issued to such persons pursuant to the Subsidiary Merger.
5.3 Section 16(b) Resolution - Public. Prior to the Closing Date, the
Board of Directors of Public shall pass a resolution approving, for purposes of
Rule 16b-3 of the Exchange Act, the disposition of Public Stock and other equity
securities (derivative on nonderivative) pursuant to the Subsidiary Merger, by
the directors, officers and other persons subject to potential liability under
Section 16(b) of the Exchange Act, which resolution shall specifically refer to
such directors, officers and other persons and the number of shares of Public
Stock and other equity securities (derivative on nonderivative) disposed of by
such persons pursuant to the Subsidiary Merger.
5.4 Public Stockholders Meeting. Public shall take all action
necessary, in accordance with the DGCL, the Exchange Act and other applicable
law and its certificate of incorporation and bylaws, to convene and hold a
special meeting of the stockholders of Public (the "Public Stockholders
Meeting") as promptly as practicable after the date hereof for the purpose of
considering and voting upon this Agreement.
ARTICLE 6
Miscellaneous
-------------
6.1 Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the permitted assigns, successors, heirs,
executors and administrators of the parties hereto. This Agreement may not be
assigned without the written consent of Public, Superholdings and Merger Sub and
any attempted assignment without such consent shall be null and void; provided,
however, Public, Superholdings and Merger Sub may assign any of its rights
and obligations hereunder to one of its affiliates (as such term is defined in
Rule 405 promulgated under the
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<PAGE>
Securities Act of 1933, as amended); provided, further, that any assignment
hereunder shall not relieve any party of any obligations or liabilities
hereunder and will not adversely impact the intended tax treatment of the
Reorganization as described in Recital F hereof.
6.2 Entire Agreement. This Agreement and the other documents delivered
pursuant hereto and referenced herein constitute the full and entire
understanding and agreement between the parties and supersede any other
agreement, written or oral, with regard to the subject matter hereof.
6.3 Amendment. Subject to any applicable provisions of the DGCL, at any
time prior to the Effective Time, the parties hereto may modify or amend this
Agreement by written agreement executed and delivered by duly authorized
officers of the respective parties; provided, however, that after adoption of
this Agreement at the Public Stockholders Meeting, no amendment shall be made
which would reduce the amount or change the type of consideration into which
shares of Public Stock shall be converted upon consummation of the
Reorganization.
6.4 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware.
6.5 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement, or (c) subject to
Section 6.3 (Amendment), waive compliance with any of the agreements or
conditions of the other parties contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in a written instrument executed and delivered by a duly authorized
officer on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
6.6 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by certified or
registered mail, postage prepaid with return receipt requested, telecopy (with
hard copy delivered by overnight courier service), or delivered by hand,
messenger or overnight courier service, and shall be deemed given when received
at the addresses or telecopy numbers of the parties set forth below, or at such
other address or telecopy number furnished in writing to the other parties
hereto:
If to Public, Superholdings Alamosa PCS Holdings, Inc.
or Merger Sub: 5225 S. Loop 289
Suite 120
Lubbock, Texas 79424
A-11
<PAGE>
Attention: David E. Sharbutt,
Chief Executive Officer
(806) 722-1127 (fax)
with copies to: Haynes and Boone, LLP
1600 North Collins Boulevard, Suite 2000
Richardson, Texas 75080
Attention: William S. Kleinman
(972) 692-9065 (fax)
6.7 Third Party Beneficiary, Etc. There shall be no third party
beneficiary hereof. Neither the availability of, nor any limit on, any remedy
hereunder limits the remedies of any party hereto against third parties.
6.8 Reformation; Severability. In case any provision hereof shall be
invalid, illegal or unenforceable, such provision shall be reformed to best
effectuate the intent of the parties and permit enforcement hereof, and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. If such provision is not capable of
reformation, it shall be severed from this Agreement and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
6.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. Any counterpart may be delivered
by facsimile and shall be treated as an original, provided that attachment
thereof shall constitute the representation and warranty of the person
delivering such signature that such person has full power and authority to
attach such signature and to deliver this Agreement.
6.10 Titles and Subtitles. The titles of the paragraphs and
subparagraphs hereof are for convenience of reference only and are not to be
considered in construing this Agreement. References to "Articles" and "Sections"
herein are references to articles and sections of this Agreement, respectively.
The words "herein," "hereof," "hereto" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision.
* * * * *
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<PAGE>
This Agreement has been executed and delivered as of the date first
written above.
ALAMOSA PCS HOLDINGS, INC.:
By: /s/ David E. Sharbutt
---------------------------------
Name: David E. Sharbutt
Title: Chief Executive Officer
ALAMOSA SUB I, INC.:
By: /s/ David E. Sharbutt
---------------------------------
Name: David E. Sharbutt
Title: President
ALAMOSA HOLDINGS, INC.:
By: /s/ David E. Sharbutt
---------------------------------
Name: David E. Sharbutt
Title: President
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<PAGE>
APPENDIX B
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
by and among
ALAMOSA PCS HOLDINGS, INC.
ALAMOSA HOLDINGS, INC. and
ALAMOSA SUB I, INC.
and
ROBERTS WIRELESS COMMUNICATIONS, L.L.C. and
MEMBERS OF ROBERTS WIRELESS COMMUNICATIONS, L.L.C.
July 31, 2000
An Index of Defined Terms begins on Page vii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 Mergers.................................................................................................B-3
1.1 The Mergers..........................................................................................B-3
(a) The Mergers......................................................................................B-3
(b) Consummation of the Mergers......................................................................B-4
(c) Effective Time of the Mergers....................................................................B-4
(d) Effect of the Mergers............................................................................B-4
(e) The Surviving Corporations' Certificates of Incorporation; Bylaws; Directors and Officers........B-4
1.2 Terms of the Merger..................................................................................B-5
(a) Consideration for the Parent Merger..............................................................B-5
(b) Right to Withhold................................................................................B-5
(c) Consideration Subject to Agreements..............................................................B-6
(d) Antidilution.....................................................................................B-6
(e) Sister Agreements................................................................................B-6
(f) Conversion of Public Stock.......................................................................B-6
(g) Conversion of Merger Sub Stock...................................................................B-6
(h) Treasury Stock...................................................................................B-6
(i) Rights as Holders................................................................................B-7
1.3 Stock Options........................................................................................B-7
(a) [Intentionally deleted]..........................................................................B-7
(b) [Intentionally deleted]..........................................................................B-7
(c) [Intentionally deleted]..........................................................................B-7
1.4 Exchange Agent.......................................................................................B-7
1.5 Exchange Procedure...................................................................................B-7
1.6 Distributions with Respect to Unexchanged Shares.....................................................B-8
1.7 Cancellation and Retirement of Units.................................................................B-8
1.8 No Fractional Shares.................................................................................B-8
(a) No Certificates..................................................................................B-8
(b) Cash Payments....................................................................................B-8
1.9 Investment of Exchange Fund..........................................................................B-9
1.10 Termination of Exchange Fund.........................................................................B-9
1.11 No Liability.........................................................................................B-9
1.12 Tax Withholding......................................................................................B-9
ARTICLE 2 Closing the Transaction................................................................................B-10
2.1 Closing.............................................................................................B-10
2.2 LLC Parties' Deliveries at Closing to Superholdings.................................................B-10
(a) Closing Certificate.............................................................................B-10
(b) Consents and Approvals..........................................................................B-10
(c) Proceedings and Documents.......................................................................B-10
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C>
(d) Good Standing Certificates.................................................B-11
(e) Opinions of LLC Parties' Counsel...........................................B-11
(f) Tower Closing Certificate..................................................B-11
(g) Other Instruments..........................................................B-11
2.3 Superholdings' and Public's Deliveries at Closing to LLC.......................B-11
(a) Closing Certificate........................................................B-11
(b) Proceedings and Documents..................................................B-11
(c) Consents and Approvals.....................................................B-11
(d) Opinion of Public's, Superholdings' and Merger Sub's Counsel...............B-12
(e) Other Instruments..........................................................B-12
2.4 Related Agreements.............................................................B-12
(a) Prior to Closing...........................................................B-12
(b) At Closing.................................................................B-12
(c) At Closing if Completed....................................................B-13
ARTICLE 3 Conditions To Consummating The Transaction........................................B-13
3.1 Joint Conditions...............................................................B-13
(a) Public Stockholder Approval................................................B-14
(b) LLC Members Approval.......................................................B-14
(c) HSR Act....................................................................B-14
(d) Nasdaq Listing.............................................................B-14
(e) Merger.....................................................................B-14
(f) Subsidiary Merger..........................................................B-14
3.2 Public's, Superholdings' and Merger Sub's Conditions...........................B-14
(a) LLC Parties' Representations True..........................................B-14
(b) LLC Parties' Compliance with Agreement.....................................B-15
(c) LLC Parties Consents.......................................................B-15
(d) Public Consents............................................................B-16
(e) Permits....................................................................B-16
(f) LLC Members Approval.......................................................B-16
(g) Form S-4...................................................................B-16
(h) No Litigation..............................................................B-16
(i) Approvals..................................................................B-16
(j) Members Obligations........................................................B-17
(k) Related Agreements.........................................................B-17
(l) Landlord Consents..........................................................B-17
3.3 LLC Parties' Conditions to Closing.............................................B-17
(a) Public's, Superholdings' and Merger Sub's Representations True.............B-17
(b) Public's Superholdings' and Merger Sub's Compliance with Agreement.........B-17
(c) No Litigation..............................................................B-17
(d) Public Consents............................................................B-18
(e) Approvals..................................................................B-18
ARTICLE 4 Covenants Regarding Consummation of the Transaction...............................B-18
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<PAGE>
4.1 Satisfaction of Conditions to Closing............................B-18
(a) Joint Responsibilities.......................................B-18
(b) LLC Parties' Responsibilities................................B-18
(c) Public's, Superholdings' and Merger Sub's Responsibilities...B-19
4.2 Preparation of the Proxy Statement, Form S-4 and Form S-1........B-20
(a) Preparation..................................................B-20
(b) Proxy Statement and Form S-4.................................B-20
(c) Form S-1.....................................................B-21
(d) Public's and Superholdings' Actions..........................B-21
4.3 Accountants' Letters.............................................B-22
(a) From LLC Holdings............................................B-22
(b) From Public and Superholdings................................B-22
4.4 Public Stockholders Meeting......................................B-22
4.5 Votes and Recommendations........................................B-22
4.6 LLC Members Meeting; LLC Holdings................................B-23
4.7 Public Announcements.............................................B-23
4.8 No Solicitation; Acquisition Proposals...........................B-23
(a) No Solicitation..............................................B-23
(b) Approval.....................................................B-23
(c) Voting Agreement.............................................B-23
(d) Acquisition Proposal.........................................B-24
4.9 Leases...........................................................B-24
4.10 Affiliates and Certain Members...................................B-24
4.11 Pooling of Interests.............................................B-25
4.12 Employment Agreements............................................B-25
4.13 Consulting Agreements............................................B-25
4.14 Reissuance of LLC Audited Financial Statements...................B-25
4.15 Master Lease Agreement...........................................B-25
4.16 Asset Transfers..................................................B-26
4.17 Joint Venture Development Agreement..............................B-26
4.18 Resale Agreement.................................................B-27
4.19 Stock Options....................................................B-27
4.20 Other Assets.....................................................B-27
4.21 Fee for Consent of Senior Lender.................................B-27
4.22 Sprint Payments by Members.......................................B-27
4.23 Superholdings Sprint Payments....................................B-28
4.24 Legends..........................................................B-28
4.25 Directors........................................................B-29
ARTICLE 5 Termination.........................................................B-29
5.1 Reasons for Termination..........................................B-29
(a) By Mutual Consent............................................B-29
(b) By Public or Superholdings...................................B-29
(c) By LLC.......................................................B-29
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<PAGE>
(d) Drop Dead Date............................................B-30
(e) Prohibition of the Reorganization.........................B-30
5.2 Notice of Problems............................................B-30
5.3 Public and Superholdings Termination Procedure................B-30
5.4 LLC's Termination Procedure..................................B-31
5.5 Effect of Termination.........................................B-31
ARTICLE 6 Representations and Warranties of LLC and the Members............B-32
6.1 LLC; Entry Into Agreements....................................B-32
(a) Organization and Good Standing............................B-32
(b) Validity and Authorization; Power and Authority...........B-32
(c) Subsidiaries..............................................B-33
(d) No Conflict...............................................B-33
(e) LLC Parties Consents Required.............................B-34
(f) State Takeover Statutes...................................B-34
6.2 Financial Information.........................................B-34
(a) Financial Statements; Books and Records...................B-34
(b) Conduct of Business.......................................B-35
(c) No Material Adverse Effect................................B-36
(d) Projections...............................................B-36
6.3 Members' Interests............................................B-36
(a) Capitalization............................................B-36
(b) Capitalization of LLC Holdings............................B-36
(c) Ownership and Transfer by Members.........................B-37
6.4 Assets........................................................B-37
(a) Personal Property.........................................B-37
(b) Real Property.............................................B-38
(c) Intellectual Property.....................................B-40
(d) Contracts.................................................B-42
(e) Necessary Assets..........................................B-45
6.5 Liabilities...................................................B-45
(a) No Liabilities............................................B-45
(b) Tax Matters...............................................B-45
(c) Litigation................................................B-47
(d) Employee Liabilities......................................B-47
(e) Warranties................................................B-48
(f) Products Liability........................................B-48
6.6 Business......................................................B-48
(a) Customers and Suppliers...................................B-48
(b) Insurance.................................................B-48
(c) Employees.................................................B-48
(d) Worker's Compensation.....................................B-49
(e) ERISA.....................................................B-49
(f) Conflicts of Interest.....................................B-51
(g) LLC Legal Requirements....................................B-51
(h) Environmental Matters.....................................B-52
iv
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(i) Build-out Plan.......................................................B-53
6.7 Other....................................................................B-53
(a) Certain Information..................................................B-53
(b) Documents Delivered..................................................B-54
(c) No Brokers Fees; No Commissions......................................B-54
(d) Advice...............................................................B-54
(e) Disclosure...........................................................B-54
6.8 Investment Representations...............................................B-54
ARTICLE 7 Representations and Warranties of Public, Superholdings and Merger Sub......B-56
7.1 Entry Into Agreements....................................................B-56
(a) Organization and Good Standing.......................................B-56
(b) Corporate Power and Authority; Validity and Authorization............B-56
7.2 Conflicts and Consents...................................................B-56
(a) No Conflict..........................................................B-56
(b) Consents Obtained....................................................B-57
7.3 No Brokers Fees; No Commissions..........................................B-57
7.4 Superholdings Stock......................................................B-57
7.5 SEC Documents............................................................B-57
7.6 No Material Adverse Effect...............................................B-57
7.7 Capitalization...........................................................B-57
7.8 Capitalization of Superholdings..........................................B-58
7.9 No Liabilities...........................................................B-58
7.10 Compliance with Laws.....................................................B-58
7.11 Certain Information......................................................B-58
7.12 Litigation...............................................................B-59
7.13 Disclosure...............................................................B-59
7.14 Reorganization...........................................................B-59
ARTICLE 8 Covenants of the Parties ...................................................B-59
8.1 Services Agreement.......................................................B-59
8.2 Conduct of Business of LLC Pending Closing...............................B-59
8.3 Access to Information and Employees......................................B-60
8.4 Financial Statements.....................................................B-60
8.5 Payment of Indebtedness of Related Persons...............................B-60
8.6 Records of LLC...........................................................B-61
8.7 Employee Benefit Plans...................................................B-61
8.8 Tower Payables...........................................................B-61
ARTICLE 9 Post-Closing Agreements.....................................................B-61
9.1 Further Actions..........................................................B-61
9.2 Cooperation. ...........................................................B-61
9.3 Tax Returns..............................................................B-62
9.4 Access to Information; Confidentiality...................................B-62
9.5 [Intentionally deleted]..................................................B-62
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9.6 Name........................................................B-62
9.7 Tower Payables..............................................B-62
9.8 Reorganization..............................................B-62
9.9 Insurance...................................................B-62
ARTICLE 10 Indemnification...............................................B-62
10.1 Survival; Etc...............................................B-63
(a) Contents of this Agreement..............................B-63
(b) No Effect on Liability..................................B-63
(c) Survival................................................B-63
(d) Commencing Actions......................................B-63
(e) Materiality.............................................B-64
10.2 Indemnities.................................................B-64
(a) Indemnification of Superholdings........................B-64
(b) Indemnification of the Members..........................B-65
(c) Contribution............................................B-65
(d) Form of Payment; Interim Losses.........................B-66
(e) Termination Fee.........................................B-67
10.3 Limitations on Indemnities..................................B-67
(a) Basket..................................................B-67
(b) Cap.....................................................B-68
(c) Services Agreement......................................B-68
(d) Damages.................................................B-68
(e) Exclusivity.............................................B-68
(f) Indemnification of Escrow Agent.........................B-68
10.4 Notice and Opportunity to Defend............................B-69
(a) Notice, Etc.............................................B-69
(b) Defense Costs...........................................B-69
(c) Third Party Claims......................................B-70
10.5 Delays or Omissions, Etc....................................B-70
10.6 Governing Law; Attorneys' Fees..............................B-70
10.7 Dispute Resolution..........................................B-71
(a) Arbitration.............................................B-71
(b) Emergency Relief........................................B-72
(c) Definition of Parties...................................B-72
ARTICLE 11 Miscellaneous.................................................B-72
11.1 Successors and Assigns......................................B-72
11.2 Entire Agreement............................................B-73
11.3 Amendment...................................................B-73
11.4 Extension; Waiver...........................................B-73
11.5 Notices, Etc................................................B-73
11.6 Third Party Beneficiary, Etc................................B-74
11.7 Reformation; Severability...................................B-74
11.8 Counterparts................................................B-74
11.9 Titles and Subtitles........................................B-74
11.10 Confidentiality.............................................B-75
vi
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(a) Confidential Information................................B-75
(b) Disclosure..............................................B-75
11.11 Expenses....................................................B-76
11.12 Responsibility for Superholdings and Merger Sub.............B-77
11.13 Knowledge...................................................B-77
</TABLE>
vii
<PAGE>
INDEX OF DEFINED TERMS
Page
AAA........................................................................B-71
Accounts ..................................................................B-38
Accounts Receivable .......................................................B-38
Acquisition Proposal.......................................................B-24
Affiliate .................................................................B-51
Affiliate Letter ..........................................................B-24
Agreement ..................................................................B-1
Alliance Party ............................................................B-48
Analysis ..................................................................B-75
Approvals .................................................................B-16
Articles ..................................................................B-75
Asserted Liability ........................................................B-69
Associate .................................................................B-51
Breach ....................................................................B-63
Certificates of Merger......................................................B-4
Closing ...................................................................B-10
Closing Date ..............................................................B-10
Code .......................................................................B-2
Companies .................................................................B-32
Confidential Information...................................................B-75
Consulting Agreements......................................................B-25
Contracts .................................................................B-42
Copyrights ................................................................B-40
Credit Agreement ..........................................................B-44
Default ...................................................................B-44
Defense Costs .............................................................B-69
DGCL .......................................................................B-4
Disclosing Party ..........................................................B-75
Disclosure Schedules........................................................B-3
EDC .......................................................................B-16
Effective Time .............................................................B-4
Employee Benefit Plans.....................................................B-49
Employment Agreements......................................................B-25
Environmental Claim .......................................................B-53
Environmental Laws ........................................................B-52
Equipment Leases ..........................................................B-37
ERISA .....................................................................B-49
ERISA Affiliate ...........................................................B-50
Escrow Account .............................................................B-5
viii
<PAGE>
Escrow Adjustment ................................................B-66
Escrow Agent ......................................................B-5
Escrow Agreement ..................................................B-5
Escrow Deposit ...................................................B-66
Escrow Funds ......................................................B-5
Event of Default .................................................B-44
Exchange Act .....................................................B-20
Exchange Agent ....................................................B-7
Exchange Fund .....................................................B-7
Exhibits ..........................................................B-3
Form S-1 .........................................................B-21
Form S-4 .........................................................B-20
GAAP .............................................................B-34
Good Standing Certificate.........................................B-11
HSR Act ..........................................................B-14
Indemnified Party ................................................B-69
Indemnifying Party ...............................................B-69
Indemnity Agreement ..............................................B-13
Intellectual Property.............................................B-40
Interim Loss Value ...............................................B-66
Interim Losses ...................................................B-66
Joint Venture Development Agreement...............................B-27
K.G. .............................................................B-25
Landlord Consents ................................................B-17
Leases ...........................................................B-24
Leased Premises ..................................................B-39
Lenders ..........................................................B-44
Letters ..........................................................B-73
Licenses .........................................................B-52
Liens ............................................................B-37
LLC ...............................................................B-1
LLC Financial Statements..........................................B-34
LLC Holdings ......................................................B-1
LLC Legal Requirements............................................B-51
LLC Material Adverse Change.......................................B-15
LLC Parties .......................................................B-1
LLC Parties Closing Certificate...................................B-11
LLC Parties Consents..............................................B-34
LLC Parties' Delegated Conditions.................................B-18
LLC Records ......................................................B-54
Lock-Up Agreement ................................................B-12
Losses ...........................................................B-64
M.R. .............................................................B-13
Management Agreement..............................................B-13
ix
<PAGE>
Marks ...................................................................B-40
Master Lease Agreement...................................................B-25
Member Indemnified Claim.................................................B-64
Member Indemnitors ......................................................B-64
Members ..................................................................B-1
Members Meeting .........................................................B-23
Members' Releases .......................................................B-13
Members Required Vote....................................................B-32
Members' Interests .......................................................B-1
Members' Releases .......................................................B-13
Merger Sub ...............................................................B-1
Merger Sub Stock .........................................................B-2
Orders ..................................................................B-47
Outside Confidentiality Agreement........................................B-48
Parent Merger ............................................................B-1
Parent Surviving Corporation..............................................B-4
Patents .................................................................B-41
Paying Member Indemnitor.................................................B-65
Per Unit Cash Consideration...............................................B-5
Per Unit LLC Consideration................................................B-5
Permits .................................................................B-16
Permitted Liens .........................................................B-37
Personal Property .......................................................B-37
Policies ................................................................B-48
Prior Policies ..........................................................B-48
Proceedings .............................................................B-47
Projections .............................................................B-36
Proxy Statement .........................................................B-20
Public ...................................................................B-1
Public Consents .........................................................B-57
Public Legal Requirements................................................B-58
Public Loan Agreement....................................................B-12
Public Material Adverse Change...........................................B-15
Public Stock .............................................................B-6
Public Stockholders Meeting..............................................B-22
Public's, Superholdings' and Merger Sub's Delegated Conditions...........B-20
Real Estate Contracts....................................................B-39
Real Property ...........................................................B-38
Receiving Party .........................................................B-75
Related Agreements ......................................................B-12
Remaining Member Indemnitors.............................................B-65
Reorganization ...........................................................B-2
Representatives .........................................................B-60
Resale Agreement ........................................................B-27
S.R. ....................................................................B-13
x
<PAGE>
SEC ......................................................................B-16
SEC Documents ............................................................B-57
SEC Filing Date ..........................................................B-20
Sections .................................................................B-75
Securities Act ...........................................................B-20
Services Agreement .......................................................B-12
Significant Customer......................................................B-48
Significant Supplier......................................................B-48
Sister Agreements .........................................................B-3
Sister Lockup ............................................................B-12
Sprint ...................................................................B-43
Sprint Management Agreement...............................................B-43
Subsidiaries .............................................................B-33
Subsidiary Merger .........................................................B-1
Subsidiary Merger Agreement................................................B-1
Subsidiary Surviving Corporation...........................................B-4
Superholdings .............................................................B-1
Superholdings Closing Certificate.........................................B-11
Superholdings Indemnitees.................................................B-65
Superholdings Indemnitors.................................................B-65
Superholdings Stock .......................................................B-2
Tax ......................................................................B-47
Tax Returns ..............................................................B-47
Taxes ....................................................................B-47
Technology Contracts......................................................B-40
Termination Date .........................................................B-30
Termination Fee ..........................................................B-67
Tower Closing Certificate.................................................B-11
Tower Company ............................................................B-11
Tower Leases .............................................................B-39
Trade Secrets ............................................................B-41
Transferrable Licenses....................................................B-52
xi
<PAGE>
TABLE OF EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Escrow Agreement..................................................................Exhibit 1.2(b)
Subsidiary Merger Agreement ......................................................Exhibit 1.2(f)
LLC Parties Closing Certificate...................................................Exhibit 2.2(a)
Form of Opinion of LLC Parties' Counsel...........................................Exhibit 2.2(e)
Superholdings' Closing Certificate................................................Exhibit 2.3(a)
Form of Opinion of Public's, Superholdings' and Merger Sub's Counsel..............Exhibit 2.3(d)
Tower Closing Certificate.........................................................Exhibit 2.2(g)
Services Agreement................................................................Exhibit 2.4(a)(i)
Public Loan Agreement.............................................................Exhibit 2.4(a)(ii)
Lock-Up Agreement (contained in Member Agreement).................................Exhibit 2.4(b)(i)
Indemnity Agreement (contained in Member Agreement)...............................Exhibit 2.4(b)(ii)
Members' Releases (contained in Member Agreement).................................Exhibit 2.4(b)(iii)
</TABLE>
xii
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement") is entered into as of July 31, 2000, by and among Alamosa PCS
Holdings, Inc., a Delaware corporation ("Public"), Alamosa Holdings, Inc., a
Delaware corporation ("Superholdings"), Alamosa Sub I, Inc., a Delaware
corporation and wholly-owned direct subsidiary of Superholdings ("Merger Sub"),
and Roberts Wireless Communications, L.L.C., a Missouri limited liability
company ("LLC"), and members of LLC (the "Members").
R E C I T A L S
- - - - - - - -
A. The Members own, in the aggregate, all of the issued and outstanding
units of membership interests of LLC, consisting in the aggregate of
20,000 units (all of the authorized membership interests of LLC,
whether or not owned by a Member, and any interest received with
respect to or in exchange for any such interest (including, without
limitation, units of LLC Holdings), being referred to as "Members'
Interests"). LLC, LLC Holdings and the Members are sometimes
collectively referred to herein as the "LLC Parties."
B. The Board of Managers of LLC deems it advisable and in the best
interests of its members that LLC and its members form a limited
liability company to hold all of the Members' Interests of LLC ("LLC
Holdings"), and that LLC Holdings, merge with and into Superholdings
(the "Parent Merger") simultaneously with the merger of Merger Sub and
Public (the "Subsidiary Merger"). The Parent Merger may include the
merger of any other business entity with which Superholdings has
agreed to merge, which mergers would take place immediately after the
merger of LLC Holdings into Superholdings. In furtherance thereof, the
Board of Directors of Superholdings and the Board of Managers of LLC
Holdings have approved the Parent Merger, upon the terms and subject
to the conditions set forth herein. In addition, the Members have
agreed to vote in favor of the Parent Merger.
C. The Board of Directors of Public have deemed it advisable and in the
best interests of its stockholders to enter into the Agreement and Plan
of Reorganization dated as of July 31, 2000 (the "Subsidiary Merger
Agreement") by and among Merger Sub, Public and Superholdings and to
consummate the Subsidiary Merger simultaneously with the consummation
of the Parent Merger. In furtherance thereof, the Board of Directors of
Public has approved the Subsidiary Merger Agreement and the Subsidiary
Merger, upon the terms and subject to the conditions set forth herein.
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D. Similarly, the Board of Directors of Superholdings have deemed it
advisable to enter into the Subsidiary Merger Agreement and to
consummate the Subsidiary Merger simultaneously with the consummation
of the Parent Merger. In furtherance thereof, the Board of Directors of
Superholdings has approved the Subsidiary Merger Agreement and the
Subsidiary Merger, upon the terms and subject to the conditions set
forth herein.
E. Further, the Board of Directors of Merger Sub have deemed it advisable
and in the best interests of its stockholders to enter into the
Subsidiary Merger Agreement and to consummate the Subsidiary Merger
simultaneously with the consummation of the Parent Merger. In
furtherance thereof, the Board of Directors of Merger Sub has approved
the Subsidiary Merger Agreement and Subsidiary Merger, upon the terms
and subject to the conditions set forth herein. The Parent Merger, the
Subsidiary Merger and the other transactions contemplated herein,
collectively referred to as the "Reorganization," and Sister
Agreements consummated contemporaneously herewith are part of a single
reorganization.
F. As of the date hereof, there are no shares of common stock of
Superholdings, par value $0.01 per share ("Superholdings Stock"),
issued and outstanding and as of the date hereof, Superholdings holds
of record all of the issued and outstanding shares of common stock of
Merger Sub, par value $0.01 per share ("Merger Sub Stock").
G. The Board of Directors of Public has determined that in order to
complete the Parent Merger in a tax-efficient manner, such acquisition
should be structured as a transaction described in Section 351(a) of
the Internal Revenue Code of 1986, as amended (the "Code") (all
citations to the Code, or to the Treasury Regulations promulgated
thereunder, shall include any amendments or any substitute or
successor provisions thereto), which will require Public to form a new
holding company. The parties desire that the Parent Merger, except as
provided in Sections 1.2(a)(ii) (Cash) and 1.8(b) (Cash Payments)
herein, qualifies as a transaction described in Section 351(a) of the
Code.
H. The parties desire that the Subsidiary Merger qualify as a transaction
described in Sections 351(a) and 368(a)(1)(A) of the Code by virtue of
Section 368(a)(2)(E) of the Code. It is contemplated that the
Subsidiary Merger will be completed substantially simultaneously with
the merger or consolidation of Superholdings or one or more of its
subsidiaries with or into one or more business entities (including,
without limitation, the Parent Merger) in a transaction of the type
described in Section 351(a) of the Code.
I. For financial accounting purposes, Public and Superholdings may
determine that
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<PAGE>
Superholdings' merger with LLC will be accounted for as a pooling of
interests transaction.
J. Public, Superholdings, Merger Sub and the LLC Parties acknowledge that
they have received adequate consideration for entering into, and have
relied upon the promises, covenants, representations and warranties
contained in, this Agreement, and that they will be benefitted by the
transactions contemplated herein.
K. The LLC Parties have delivered to Superholdings certain disclosure
schedules of even date herewith referred to herein. Public,
Superholdings and Merger Sub have delivered to the LLC Parties certain
disclosure schedules of even date herewith referred to herein. Any
such disclosure schedules are referred to herein as "Disclosure
Schedules." The Disclosure Schedules and the Exhibits (herein so
called) referred to herein are a part of this Agreement.
L. Public, Superholdings and Merger Sub may enter into other agreements
(the "Sister Agreements") pursuant to which other business entities
join in the Parent Merger.
A G R E E M E N T
- - - - - - - - -
Based on the recitals set forth above and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE 1
Mergers
-------
1.1 The Mergers.
(a) The Mergers. Upon the terms and subject to the conditions
set forth in this Agreement:
(i) Parent Surviving Corporation. Not later than
August 7, 2000, LLC and its members shall form LLC Holdings, which at such time
shall hold all of the Members' Interests of LLC. At the Effective Time, LLC
Holdings will merge with and into Superholdings in accordance with the terms set
forth herein (one or more other parties, if any, that Public and Superholdings
agree to be constituents in the Parent Merger, pursuant to the terms of a Sister
Agreement may merge into Superholdings immediately following the merger of LLC
Holdings into Superholdings). From and after
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<PAGE>
the Effective Time, the separate existence of LLC Holdings and such other
constituents shall cease to exist. Superholdings shall continue as the surviving
corporation in the Parent Merger (the "Parent Surviving Corporation") and shall
continue to be governed by the laws of the State of Delaware. (LLC shall
continue as a subsidiary of Superholdings.)
(ii) Subsidiary Surviving Corporation. Simultaneously
with the Parent Merger, Merger Sub will merge with and into Public, in
accordance with the terms set forth herein and the terms of the Subsidiary
Merger Agreement. From and after the Effective Time, the separate corporate
existence of Merger Sub shall cease to exist. Public shall continue as the
surviving corporation in the Subsidiary Merger (the "Subsidiary Surviving
Corporation") and shall continue to be governed by the laws of the State of
Delaware. At the sole discretion of the Board of Directors of Public, as an
alternative structure to the Subsidiary Merger, Public may merge directly with
and into Superholdings, and Superholdings shall continue as the surviving
corporation and shall continue to be governed by the laws of the State of
Delaware.
(b) Consummation of the Mergers. The Parent Merger and the
Subsidiary Merger shall be consummated by filing Certificates of Merger (herein
so called) with the secretaries of state of the State of Delaware and State of
Missouri, together with all other documents, notices and filings required by the
Delaware General Corporation Law ("DGCL") and the Missouri Limited Liability
Company Act.
(c) Effective Time of the Mergers. The Certificates of Merger
shall provide that the Parent Merger and the Subsidiary Merger shall be
effective as of the date and time set forth in the Certificates of Merger filed
with the Secretary of State of the State of Delaware (the "Effective Time").
(d) Effect of the Mergers. At the Effective Time, the effect
of the Parent Merger shall be as provided in Section 264 of the DGCL and other
applicable provisions of the DGCL and Sections 347.700 through 347.735 of the
Missouri Limited Liability Company Act and other applicable provisions of such
act, and the effect of the Subsidiary Merger shall be as provided in Sections
259 and 261 of the DGCL.
(e) The Surviving Corporations' Certificates of Incorporation;
Bylaws; Directors and Officers. The certificates of incorporation and bylaws of
Superholdings and Public, in each case as in effect at the Effective Time, shall
be the certificates of incorporation and bylaws of Parent Surviving Corporation
and Subsidiary Surviving Corporation, respectively. At the Effective Time, the
Board of Directors and officers of each of Parent Surviving Corporation and
Subsidiary Surviving Corporation shall be composed of the directors and officers
of Superholdings and Public serving immediately before the Effective Time,
respectively, to hold office until their respective successors are duly elected
or appointed and qualified. The rights and obligations of the current members of
LLC, whether as members of LLC or LLC Holdings, (i) under their respective
operating agreements, limited liability company agreements, or similar
B-4
<PAGE>
agreements, including without limitation the obligations to make capital
contributions and (ii) with respect to Members' Interests shall terminate.
1.2 Terms of the Merger.
(a) Consideration for the Parent Merger. Each unit of the
Members' Interests that are units of LLC Holdings (which the members of LLC
shall have received in exchange for their units of LLC) issued and outstanding
immediately prior to the Effective Time shall, at the Effective Time, by virtue
of the Parent Merger and without any action on the part of the holder thereof,
be converted into, as specified by and pursuant to the terms of this Section
1.2(a), into the following:
(i) Superholdings Stock. The right to receive a
number of duly authorized, validly issued, fully paid and nonassessable shares
of Superholdings Stock, along with any dividends or distributions thereon after
the Effective Time, equal to the Per Unit LLC Consideration. "Per Unit LLC
Consideration" shall be equal to 675 shares of Superholdings Stock per unit of
the Members' Interests of LLC Holdings; provided, that, the aggregate number of
shares of Superholdings Stock that shall be issued in connection with the Parent
Merger pursuant to this Section 1.2(a) for all of such Members' Interests
outstanding shall be equal to 13,500,000 shares.
(ii) Cash. The right to receive cash equal up to
$200.00 per unit of Members' Interests of LLC Holdings, without any interest
thereon (the "Per Unit Cash Consideration"); provided, that, the aggregate
amount of Per Unit Cash Consideration shall be determined pursuant to Section
4.16 (Asset Transfers) and not exceed $4,000,000.
(iii) Adjustment of Cash. The amount of Per Unit Cash
Consideration shall be subject to adjustment as provided below and shall be
reduced by the amount of any transfer Taxes owed as a result of the formation of
LLC Holdings or LLC's or LLC Holdings' participation in the Parent Merger,
although no such taxes are anticipated.
(b) Right to Withhold.
(i) Escrow. At the Closing, Superholdings shall have
the right to withhold from the aggregate amount of the Per Unit LLC
Consideration the amounts of any Interim Losses, as described in further detail
in Section 10.2(d) (Form of Payment; Interim Losses). The aggregate amount of
all such amounts withheld at any time is defined herein as the "Escrow Funds."
An escrow agent (the "Escrow Agent") shall keep the Escrow Funds in a separate
escrow account, maintained on behalf of the Members (the "Escrow Account"),
subject to the terms of the Escrow Agreement (the "Escrow Agreement")
substantially in the form attached as the Exhibit to this Section 1.2(b).
(ii) Debt of Members. At the Closing, Public,
Superholdings and
B-5
<PAGE>
Merger Sub shall have the right to withhold from the aggregate amount of the Per
Unit Cash Consideration, the amounts, including interest, then owing from the
Members to Public pursuant to any outstanding borrowings.
(c) Consideration Subject to Agreements. The consideration to
be paid pursuant to the Parent Merger pursuant to Section 1.2(a) (Consideration
for the Parent Merger) shall be subject to the terms of the Escrow Agreement,
Lock-Up Agreement, and the Indemnity Agreement and, to the extent applicable,
Affiliate Letters. Superholdings shall retain possession of such consideration
until the later of (i) the expiration of the Lock-Up Agreement or (ii) the
resolutions of all claims for Losses that arise pursuant to Section 10.2(a)
(Indemnification of Superholdings), unless the person or entity and, if
applicable, its direct and indirect owners, entitled to receive such
consideration execute a Lock-Up Agreement, and an Indemnity Agreement, and to
the extent applicable, Affiliate Letters, whereupon Superholdings shall release
such consideration.
(d) Antidilution. In the event of any stock dividend, stock
split, reclassification, recapitalization, combination or exchange of shares
with respect to, or rights issued in respect of, Public Stock on or after the
date hereof and prior to the Effective Time, the Per Unit LLC Consideration
shall be adjusted accordingly.
(e) Sister Agreements. The Sister Agreements, if any, shall
set forth the consideration to be paid to the other parties to the Parent
Merger.
(f) Conversion of Public Stock. Each share of common stock of
Public, par value $0.01 (the "Public Stock"), issued and outstanding immediately
prior to the Effective Time together with the related rights distributed to
holders of Public Stock pursuant to the Rights Agreement, dated as of January
31, 2000, between Public and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent (other than shares of Public Stock held in Public's treasury) shall, at
the Effective Time, by virtue of the Subsidiary Merger and without any action on
the part of the holder thereof, be converted into, as specified and pursuant to
the terms of this Section 1.2(f), the right to receive one duly authorized,
validly issued, fully paid and nonassessable share of Superholdings Stock, along
with any dividends or distributions thereon after the Effective Time pursuant to
the terms of the Subsidiary Merger Agreement in the form attached as the Exhibit
to this Section 1.2(f), which agreement shall not be amended in a manner adverse
to the LLC Parties without the consent of the Members.
(g) Conversion of Merger Sub Stock. Each share of Merger Sub
Stock issued and outstanding immediately prior to the Effective Time (other than
shares of Merger Sub Stock held in Merger Sub's treasury) shall, at the
Effective Time, by virtue of the Subsidiary Merger and without any action on the
part of the holder thereof, be converted into one duly authorized, validly
issued, fully paid nonassessable share of stock of the Subsidiary Surviving
Corporation.
(h) Treasury Stock. All shares of Public Stock and Merger Sub
Stock that are owned by Public or Merger Sub, respectively, as treasury stock
shall, at the Effective Time, be canceled and retired and shall cease to exist,
and no shares of Superholdings Stock or other
B-6
<PAGE>
consideration shall be delivered or owing in exchange therefor.
(i) Rights as Holders. On or after the Effective Time, holders
of Members' Interests shall cease to have any rights as members of LLC and LLC
Holdings, except the right to receive the consideration set forth herein in
Section 1.2(a) (Consideration for the Parent Merger) with respect to Members'
Interests held by them, and such Members' Interests shall be extinguished. On
and after the Effective Time, holders of certificates which immediately prior to
the Effective Time represented issued and outstanding shares of Public Stock
shall cease to have any rights as stockholders of Public, except the right to
receive the consideration set forth herein in Section 1.2(f) (Conversion of
Public Stock) with respect to each share held by them. The merger consideration
paid upon the surrender for exchange of units of Members' Interests or shares of
Public Stock in accordance with the terms of this Agreement shall be deemed,
when paid or issued hereunder, to have been paid or issued, as the case may be,
in full satisfaction of all rights and obligations pertaining to the Members'
Interests or shares theretofore represented by such unit of Members' Interests
or shares of Public Stock.
1.3 Stock Options.
(a) [Intentionally deleted].
(b) [Intentionally deleted].
(c) [Intentionally deleted].
1.4 Exchange Agent. Prior to or concurrently with the Effective
Time, Superholdings shall enter into an agreement with such bank or trust
company as may be designated by Superholdings (the "Exchange Agent"), which
shall provide that Superholdings shall deposit with the Exchange Agent as of the
Effective Time, for the benefit of the holders of units of Members' Interests,
for exchange in accordance with this Agreement, through the Exchange Agent, (a)
certificates representing the shares of Superholdings Stock, (b) any dividends
or distributions with respect thereto with a record date after the Effective
Time, (c) any cash payable in lieu of any fractional shares of Superholdings
Stock and (d) the aggregate Per Unit Cash Consideration (collectively, the
"Exchange Fund") issuable pursuant to this Agreement in exchange for outstanding
units of Members' Interests.
1.5 Exchange Procedure. After the Effective Time, each holder of
Members' Interests shall surrender the certificates representing same or, if the
Members' Interests are not certificated, deliver a release of members' interest,
in a form, duly endorsed or executed as the Parent Surviving Corporation may
reasonably require, to the Exchange Agent, together with a Lock-Up Agreement,
Members' Release and an Indemnity Agreement. Subject to Sections 1.2(b) (Right
to Withhold), 1.2(c) (Consideration Subject to Agreements) and 1.12 (Tax
Withholding), at the time of such surrender or delivery, the merger
consideration applicable to such Members' Interests shall be delivered to such
holder. The merger consideration shall be deemed, when paid or issued hereunder,
to have been paid or issued, as the case may be, in full satisfaction of all
rights and obligations pertaining to the surrendered units. No interest shall be
B-7
<PAGE>
paid or accrued on any cash payable upon the surrender of any unit of Members'
Interests. If cash payment is to be made, or shares of Superholdings Stock
issued, to a person other than the person who surrendered the units of Members'
Interests, it shall be a condition of payment that the units of Members'
Interests so surrendered shall be properly endorsed or otherwise in proper form
for transfer and that the person requesting such payment shall pay any transfer
or other taxes required by reason of the payment to a person other than the
registered holder of the surrendered units of Members' Interests, or established
to the satisfaction of Superholdings that such taxes have been paid or are not
applicable.
1.6 Distributions with Respect to Unexchanged Shares. No dividends
or other distributions with respect to Superholdings Stock shall be paid to the
holder of any unsurrendered units of Members' Interests with respect to the
shares of Superholdings Stock issuable upon the surrender of such units of
Members' Interests pursuant to Section 1.5 (Exchange Procedure) and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 1.8 (No Fractional Shares) and all such dividends, other
distributions and cash in lieu of fractional shares of Superholdings Stock shall
be paid by Superholdings to the Exchange Agent and shall be included in the
Exchange Fund, in each case until the surrender of such units of Members'
Interests pursuant to Section 1.5 (Exchange Procedure). Subject to the effect of
applicable escheat or similar laws and subject to Sections 1.2(b) (Right to
Withhold), 1.2(c) (Consideration Subject to Agreements) and 1.12 (Tax
Withholding), following the surrender of any such units of Members' Interests
pursuant to Section 1.5 (Exchange Procedure) there shall be paid to the holder
of the units of Members' Interests, (i) any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable (with a record date or payment date prior to the surrender of units of
Members' Interests) with respect to shares of Superholdings Stock represented by
such units of Members' Interests and (ii) the amount of any cash payable in lieu
of a fractional share of Superholdings Stock to which such holder is entitled
pursuant to Sections 1.8(a) (No Certificates) and 1.8(b) (Cash Payments). No
holder of unsurrendered units of Members' Interests shall be entitled, until the
surrender of such units, to vote the shares of Superholdings Stock into which
the shares of Members' Interests represented thereby shall have been converted.
1.7 Cancellation and Retirement of Units. As of the Effective
Time, all units of Members' Interests of LLC Holdings issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding and shall
automatically be canceled and retired and shall cease to exist.
1.8 No Fractional Shares.
(a) No Certificates. No certificates representing fractional
shares of Superholdings Stock shall be issued upon the surrender for exchange of
units of Members' Interests which have been converted pursuant to this
Agreement, and such fractional share interests shall not entitle the owner
thereof to vote or to have any rights of a stockholder of Superholdings.
(b) Cash Payments. In lieu of any such fractional shares, each
holder of units
B-8
<PAGE>
who would otherwise have been entitled to a fraction of a share of Superholdings
Stock upon surrender of units for exchange pursuant to this Article 1 will be
paid an amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (i) the per share closing price on The Nasdaq Stock
Market of Superholdings Stock on the date on which the Effective Time occurs
(or, if Superholdings Stock does not trade on The Nasdaq Stock Market on such
date, the first date of trading of Superholdings Stock on The Nasdaq Stock
Market after the Effective Time) by (ii) the fractional interest to which such
holder otherwise would be entitled. Such amount in cash shall be deemed to be
substituted for any such fractional share and to constitute a portion of the
merger consideration with respect to the related units.
1.9 Investment of Exchange Fund. The Exchange Agent shall invest
any cash included in the Exchange Fund, as directed by Superholdings, in (a)
direct obligations of the United States of America, (b) obligations for which
the full faith and credit of the United States of America is pledged to provide
for the payment of principal and interest, (c) commercial paper rated the
highest quality by either Moody's Investors Services, Inc. or Standard & Poor's
Corporation, or (d) certificates of deposit, bank repurchase agreements or
bankers' acceptances of commercial banks with capital exceeding $500.0 million.
Any net earnings with respect to the Exchange Fund shall be the property of and
paid over to Superholdings as and when requested by Superholdings.
1.10 Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of units of Members' Interests for
180 days after the Effective Time shall be delivered to Superholdings, upon
demand, and any holders of units of Members' Interests that have not theretofore
complied with this Article 1 shall thereafter look only to Superholdings, and
only as general creditors thereof, for payment of their claim for any merger
consideration, any cash in lieu of fractional shares of Superholdings Stock and
any dividends or distributions with respect to Superholdings Stock, as provided
herein.
1.11 No Liability. None of Public, Superholdings, Merger Sub,
Parent Surviving Corporation, Subsidiary Surviving Corporation or the Exchange
Agent shall be liable to any person in respect of any payments or distributions
payable from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any units of Members'
Interests shall not have been surrendered prior to five years after the
Effective Time (or immediately prior to such earlier date on which any merger
consideration in respect of such units of Members' Interests would otherwise
escheat to or become the property of any governmental entity); any amounts
payable in respect of such units of Members' Interests shall, to the extent
permitted by applicable law, become the property of Superholdings, free and
clear of all claims or interest of any person previously entitled thereto.
1.12 Tax Withholding. Superholdings shall be entitled to deduct and
withhold, or cause to be deducted or withheld, from the consideration otherwise
payable pursuant to this Agreement to any holder of options or units of Members'
Interests such amounts, if any, as are required to be deducted and withheld with
respect to the making of such payment under the Code, or any provision of
applicable state, local or foreign tax law. To the extent that amounts are so
deducted and withheld, such deducted and withheld amounts shall be treated for
all
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purposes of this Agreement as having been paid to such holders in respect of
which such deduction and withholding was made.
ARTICLE 2
Closing the Transaction
-----------------------
2.1 Closing. On the third business day after the satisfaction or
written waiver of the conditions (other than execution, filing or delivery of
agreements, certificates, legal opinions or other instruments to be delivered at
Closing) contained (a) herein, (b) in the Subsidiary Merger Agreement and (c) at
the option of Superholdings and Public, any Sister Agreements that have not been
validly terminated in accordance with their terms, or as otherwise agreed by the
parties hereto, and unless this Agreement has been terminated pursuant to the
provisions of Article 5 (Termination), the consummation of the transactions
provided for herein and in such other agreements (the "Closing") shall take
place at the offices of Haynes and Boone, LLP, counsel to Superholdings, Public
and Merger Sub, located at 1600 N. Collins Blvd., Suite 2000, Richardson, Texas
75080, at 10:00 a.m., local time, or at such other place or by such other means
as the parties hereto may agree; provided, however, that if the conditions
(other than execution, filing or delivery of agreements, certificates, legal
opinions or other instruments to be delivered at Closing) contained herein and
in the Subsidiary Merger Agreement are satisfied or waived in writing, then
Superholdings and Public may not delay the Closing beyond March 31, 2001 (or
April 30, 2001 if the termination date of this Agreement or any Sister Agreement
has been extended in accordance with its terms to allow a party to cure any
matter under this Agreement or such Sister Agreement) in order to achieve
satisfaction or waiver of the conditions contained in a Sister Agreement;
provided, further, that if (i) the closing of a Sister Agreement occurs prior to
March 31, 2001 and (ii) the conditions contained herein are satisfied or waived
in writing, then the Closing of this Agreement shall also occur on the closing
date of such Sister Agreement. The time and date of the Closing are referred to
herein as the "Closing Date."
2.2 LLC Parties' Deliveries at Closing to Superholdings. At the
Closing, the LLC Parties shall deliver, or cause to be delivered, to
Superholdings the following items:
(a) Closing Certificate. The LLC Parties shall jointly deliver
to Superholdings a closing certificate executed by each of the LLC Parties (the
"LLC Parties Closing Certificate") in the form attached as the Exhibit to this
Section 2.2(a).
(b) Consents and Approvals. The LLC Parties jointly shall
deliver copies of all LLC Parties' Consents that have been obtained, and all
Approvals obtained by the LLC Parties.
(c) Proceedings and Documents. The LLC Parties shall deliver
copies, certified or otherwise identified to Superholdings' reasonable
satisfaction, of all company documents that Superholdings shall reasonably
request, including resolutions of the Board of
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Managers of LLC Holdings and resolutions of the members of LLC Holdings, dated
on or before the date hereof to authorize this Agreement, the Related Agreements
and the transactions and other acts contemplated either by this Agreement or the
Related Agreements.
(d) Good Standing Certificates. LLC Holdings shall deliver
certificates, issued within 10 days of the date of the Closing, (i) from the
Secretary of State of Missouri, evidencing that LLC, LLC Holdings and the
Subsidiaries are validly existing under the laws of their jurisdictions of
organization and (ii) from each state listed on the Disclosure Schedule to
Section 6.1(a) (Organization and Good Standing) evidencing that LLC, LLC
Holdings and the Subsidiaries are qualified to do business as foreign entities
(each, a "Good Standing Certificate") in each such state.
(e) Opinions of LLC Parties' Counsel. The LLC Parties shall
deliver an opinion of Armstrong Teasdale LLP, counsel to the LLC Parties, dated
as of the Closing Date, in form and substance reasonably satisfactory to
Superholdings regarding the matters set forth in the Exhibit to this Section
2.2(e).
(f) Tower Closing Certificate. The LLC Parties shall cause
Roberts Tower Company, a Missouri corporation owned and operated by the Members
("Tower Company"), to deliver to Superholdings a closing certificate executed by
Tower Company (the "Tower Closing Certificate"), in the form attached as the
Exhibit to this Section 2.2(f), regarding environmental liabilities.
(g) Other Instruments. Such other instruments, documents or
information that Superholdings reasonably requests in order to more effectively
consummate the transactions contemplated hereby.
2.3 Superholdings' and Public's Deliveries at Closing to LLC. At
the Closing, Superholdings and Public shall deliver the following items to the
Members:
(a) Closing Certificate. Superholdings shall deliver to the
Members a closing certificate executed by Superholdings (the "Superholdings
Closing Certificate") in the form attached as the Exhibit to this Section
2.3(a).
(b) Proceedings and Documents. Superholdings, Public and
Merger Sub shall deliver copies, certified or otherwise, identified to LLC
Holdings' reasonable satisfaction, of all company documents that LLC Holdings
shall reasonably request, including resolutions of their respective boards of
directors, dated on or before the date hereof to authorize this Agreement, the
Related Agreements and the transactions and other acts contemplated either by
this Agreement or the Related Agreements.
(c) Consents and Approvals. Public and Superholdings jointly
shall deliver copies of all of the Public Consents that have been obtained, and
all Approvals obtained by Public and Superholdings.
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(d) Opinion of Public's, Superholdings' and Merger Sub's
Counsel. Superholdings shall deliver an opinion of Haynes and Boone, LLP, dated
as of the Closing Date, in form and substance reasonably satisfactory to LLC
Holdings regarding the matters set forth in the Exhibit to this Section 2.3(d).
(e) Other Instruments. Such other instruments, documents or
information that LLC Holdings reasonably requests in order to more effectively
consummate the transactions contemplated hereby.
2.4 Related Agreements. The parties, as appropriate, shall execute
and deliver the following documents. All agreements, documents or instruments
executed among Public, Superholdings and Merger Sub on the one hand, and any of
the LLC Parties on the other, pursuant to this Agreement or the transactions
contemplated hereby are referred to as the "Related Agreements." Without
limitation, the Related Agreements include:
(a) Prior to Closing. The following documents, which shall be
executed prior to Closing:
(i) Services Agreement. On the date hereof, the
parties will execute a services agreement substantially in the form attached as
the Exhibit to this Section 2.4(a)(i) (the "Services Agreement"), which
Services Agreement shall become effective as provided therein on the date the
condition contained in Section 3.1(c) (HSR Act) has been satisfied, until the
earlier of the Closing Date or the Termination Date.
(ii) Public Loan Agreement. Public shall loan funds
to LLC, pursuant to a loan agreement (the "Public Loan Agreement") which shall
be executed simultaneously with this Agreement in the form attached as the
Exhibit to this Section 2.4(a)(ii).
(b) At Closing. The following documents, which shall be
executed at the Closing:
(i) Lock-Up Agreement. Each member of LLC Holdings
will enter into a Lock-Up Agreement (herein so called) in the form attached as
the Exhibit to this Section 2.4(b)(i) with Superholdings, which agreement shall
prohibit the sale or other disposition of their holdings of Superholdings Stock
until September 30, 2001, without the prior written consent of Superholdings.
Notwithstanding the foregoing, the members shall have the right to pledge up to
40% of their Superholdings Stock as collateral for margin loans. If
Superholdings enters into a lock-up agreement (a "Sister Lock-Up") having a
shorter term with any person who receives at least 25% of the Superholdings
Stock issued pursuant to a Sister Agreement, then any Member who executes a
Lock-Up Agreement may substitute such Lock-up Agreement in its entirety for a
lock-up agreement having the same terms as this Sister Lock-Up Agreement.
(ii) Indemnity Agreement. Each member of LLC
Holdings and its
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direct and indirect owners will enter into an indemnity agreement with
Superholdings, pursuant to which agreement each member shall agree to be bound
by the provisions of Article 10 (Indemnification) ("Indemnity Agreement"), in
the form attached hereto as the exhibit to this Section 2.4(b)(ii) and its
direct and indirect owners shall be so bound to the extent that they receive any
distribution of any merger consideration or proceeds thereof.
(iii) Members' Releases. The members of LLC Holdings
shall execute and deliver releases (the "Members' Releases") which release any
and all claims held or to be held by the Members against LLC, LLC Holdings and
their successors, assigns, officers, directors, employees and agents, but
excluding any claims the members may have to unpaid compensation and benefits,
in the form attached hereto as the Exhibit to this Section 2.4(b)(iii).
(iv) Affiliate Letters. If applicable, the members
of LLC Holdings shall deliver Affiliate Letters.
(v) Master Lease Agreement. The Master Lease
Agreement described in Section 4.15 (Master Lease Agreement).
(vi) Joint Venture Development Agreement. The Joint
Venture Development Agreement described in Section 4.17 (Joint Venture
Development Agreement).
(vii) Closing Certificates. The LLC Parties Closing
Certificate and the Superholdings Closing Certificate.
(viii) Escrow Agreement. Superholdings, the Members
and the Escrow Agent shall, if there are Interim Losses, execute the Escrow
Agreement in the form attached as the Exhibit to Section 1.2(b) (Right to
Withhold), with such changes as the Escrow Agent may reasonably request.
(c) At Closing if Completed. The following documents shall be
delivered at the Closing if they are completed by the Closing.
(i) Leases. The Leases described in Section 4.9
(Leases).
(ii) Consulting Agreements. The Consulting Agreements
with Michael V. Roberts ("M.R.") and Steven C. Roberts ("S.R.") described in
Section 4.13 (Consulting Agreements).
ARTICLE 3
Conditions To Consummating The Transaction
3.1 Joint Conditions. The obligations of Public, Superholdings, Merger
Sub and the LLC Parties to consummate the transactions provided for in this
Agreement and the Related Agreements are subject to the satisfaction, at or
prior to the Closing Date, of the following
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conditions:
(a) Public Stockholder Approval. The issuance of the shares of
Superholdings' common stock pursuant to the Parent Merger shall have been
approved by the affirmative vote of the holders of the requisite number of
shares of capital stock of Public in the manner required pursuant to the rules
of The Nasdaq Stock Market.
(b) LLC Members Approval. This Agreement shall have been
adopted by the affirmative vote of the holders of the requisite number of units
of Members' Interests of LLC and LLC Holdings in the manner required pursuant to
LLC's and LLC Holdings' organizational documents, LLC agreement, the Missouri
Limited Liability Company Act and other applicable law.
(c) HSR Act. The waiting period prescribed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act") shall have expired or early
termination of the waiting period under the HSR Act shall have been granted.
(d) Nasdaq Listing. The Superholdings Stock issuable to the
LLC Parties and to Public's stockholders shall have been approved for listing on
The Nasdaq Stock Market, subject to official notice of issuance.
(e) Merger. The secretaries of state of the State of Delaware
and the State of Missouri shall have accepted for filing the Certificates of
Merger for the Parent Merger and the Subsidiary Merger.
(f) Subsidiary Merger. All conditions to the consummation of
the Subsidiary Merger, set forth in Section 3.1 of the Subsidiary Merger
Agreement, shall have been satisfied, including the adoption of the Subsidiary
Merger Agreement by the requisite vote of the stockholders of Public pursuant to
Public's certificate of incorporation and bylaws and applicable law; provided,
however, that the condition precedent of the Subsidiary Merger Agreement which
states that all conditions precedent to the consummation of at least this
Agreement or a Sister Agreement shall have been satisfied or duly waived, need
not be satisfied or duly waived.
3.2 Public's, Superholdings' and Merger Sub's Conditions. The
obligations of Public, Superholdings and Merger Sub to consummate the
transactions contemplated by this Agreement and the Related Agreements are
subject to the satisfaction or waiver by Public, Superholdings and Merger Sub,
at or prior to the Closing Date, of the following conditions:
(a) LLC Parties' Representations True. The LLC Parties'
representations and warranties made in this Agreement or any Related Agreement
shall be true and correct in all respects at the Closing Date, except as
affected by the transactions contemplated hereby and except as will not
constitute an LLC Material Adverse Change, and the LLC Parties shall have
delivered the LLC Parties' Closing Certificate which shall so indicate.
Notwithstanding the foregoing, this condition shall be deemed to have been
satisfied even though an LLC Material
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Adverse Change has occurred, unless the LLC Material Adverse Change (i)
occurred on or prior to the date of this Agreement, (ii) was caused after the
date of this Agreement by the actions of the Members, the Board of Managers of
LLC or LLC Holdings, or any agent of LLC or LLC Holdings, which agent is not
under the supervision of Public pursuant to the Services Agreement or (iii) was
caused by the failure of any of the persons identified in clause (ii) to take
actions that (A) would be taken in the ordinary course of LLC's and LLC
Holdings' business in the exercise of reasonable judgment and (B) have not been
delegated to Public under the Services Agreement.
"LLC Material Adverse Change" means any change, effect, event
or occurrence that would reasonably be expected to (i) result in liabilities to
Superholdings (on a consolidated basis) at or after the Closing of at least $40
million, (ii) result in a reduction of cash flow or increased losses, of
Superholdings (on a consolidated basis) at or after the Closing, discounted at
10%, having a net present value of at least $40 million or (iii) materially
impair or delay the ability of Public, Superholdings, Merger Sub or the LLC
Parties to consummate the transactions contemplated hereby.
"Public Material Adverse Change" means any change, effect,
event or occurrence that would reasonably be expected to (i) result in
liabilities to Superholdings (on a consolidated basis) at or after the Closing
of at least $190 million, (ii) result in a reduction of cash flow, or increased
losses, of Superholdings (on a consolidated basis) at or after the Closing,
discounted at 10%, having a net present value of at least $190 million or (iii)
materially impair the ability of Public, Superholdings or Merger Sub to
consummate the transactions contemplated hereby including, without limitation,
failure to deliver the merger consideration described herein.
(b) LLC Parties' Compliance with Agreement. The LLC Parties,
in all respects, shall have performed each agreement, and shall have complied
with each covenant, to be performed or complied with by them, or any of them, on
or prior to the Closing Date under this Agreement or any Related Agreement
except as will not constitute an LLC Material Adverse Change, and the LLC
Parties shall have delivered the LLC Parties' Closing Certificate which shall
indicate that no LLC Material Adverse Change has occurred. Notwithstanding the
foregoing, this condition shall be deemed to have been satisfied even though an
LLC Material Adverse Change has occurred, unless the LLC Material Adverse Change
(i) occurred on or prior to the date of this Agreement, (ii) was caused after
the date of this Agreement by the actions of the Members, the Board of Managers
of LLC or LLC Holdings, or any agent of LLC or LLC Holdings, which agent is not
under the supervision of Public pursuant to the Services Agreement or (iii) was
caused by the failure of any of the persons identified in clause (ii) to take
actions that (A) would be taken in the ordinary course of LLC's and LLC
Holdings' business in the exercise of reasonable judgment and (B) have not been
delegated to Public under the Services Agreement. The LLC Parties shall have
delivered the LLC Parties Closing Certificate which shall so indicate.
(c) LLC Parties Consents. The LLC Parties shall have obtained
the LLC Parties Consents except for those LLC Parties Consents that, if not
obtained, would not constitute an LLC Material Adverse Change. Without
limitation, the failure to obtain the
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following LLC Parties Consents wouldconstitute an LLC Material Adverse Change:
(i) Sprint; (ii) Lucent Technologies Inc. and its assignees under the Credit
Agreement and (iii) Lucent Technologies, Inc. under the PCS Procurement and
Services Contract dated March 26, 1999.
(d) Public Consents. Public shall have obtained the Public
Consents except for those Public Consents that, if not obtained, would not
constitute a Public Material Adverse Change. Without limitation, the failure to
obtain the consent of Export Development Corporation ("EDC") would constitute a
Public Material Adverse Change.
(e) Permits. Superholdings shall have obtained all
governmental licenses and permits, or binding commitments, if any, from
governmental authorities to issue, transfer or consent to a change of control
with respect to, all governmental licenses and permits necessary to enable
Superholdings to conduct the business of LLC after the Closing as previously,
and as presently proposed to be, conducted (the "Permits"), except for those
Permits that, if not obtained, would not constitute an LLC Material Adverse
Change.
(f) LLC Members Approval. This Agreement shall have been
adopted by the affirmative vote of the holders of the requisite number of units
of Members' Interests of LLC and LLC Holdings in the manner required pursuant to
LLC's and LLC Holdings' organizational documents, LLC agreements, the Missouri
Limited Liability Company Act and other applicable law.
(g) Form S-4. The Form S-4 shall have become effective under
the Securities Act and no stop order suspending the effectiveness of the Form
S-4 shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the Securities and Exchange Commission (the "SEC").
(h) No Litigation. No action, suit or proceeding (other than
such an action, suit or proceeding directly or indirectly instituted by a party
hereto) shall be threatened or pending, and no preliminary or permanent
injunction, order, decree or ruling shall be in effect, seeking to restrain or
prohibit, or to obtain damages or other relief in connection with, the execution
and delivery of this Agreement, any Related Agreement or the consummation of the
transactions contemplated by any of the foregoing except as would not constitute
an LLC Material Adverse Change. The LLC Parties shall have delivered the LLC
Parties Closing Certificate, which shall so indicate with respect to the LLC
Parties.
(i) Approvals. All authorizations, consents and approvals, if
any, of and filings, if any, with any governmental authority that are required
to (i) validly execute, deliver and perform this Agreement or the Related
Agreements, (ii) to consummate the transactions provided for in this Agreement
or the Related Agreements or (iii) to enable Superholdings to operate the
business of LLC after the Closing in substantially the same manner as such
business was conducted before the Closing (collectively, "Approvals"), shall
have been obtained or made except for those Approvals that, if not obtained,
would not constitute an LLC Material Adverse Change. Without limitation, the
failure to obtain the Approval described in Section 3.1(c) (HSR Act) would
constitute an LLC Material Adverse Change.
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(j) Members Obligations. The Members shall have repaid to LLC
all amounts, if any, owed by the Members to LLC other than unpaid capital
contributions called and payable after the date hereof.
(k) Related Agreements. The LLC Parties shall have entered
into the Related Agreements.
(l) Landlord Consents. The Members shall have delivered to
Superholdings landlord subordination agreements, landlord consents (to include
consents to access to the property and right to remove equipment), landlord
waivers, landlord consents to subleases, landlord agreements to assign leases in
favor of any lender of LLC and to assign or sublease leases to Superholdings or
any Affiliate of Superholdings, and mortgage holder non-disturbance agreements
in forms reasonably acceptable to Superholdings ("Landlord Consents") for all
tower properties they or their affiliates own that are leased to LLC and shall
use their reasonable best efforts to obtain Landlord Consents for all tower
properties that LLC leases. The Landlord Consents shall relate to any financings
or refinancings of Superholdings or its affiliates.
3.3 LLC Parties' Conditions to Closing. The obligations of the LLC
Parties to consummate the transactions contemplated by this Agreement and the
Related Agreements are subject to the satisfaction or waiver in writing by the
LLC Parties, at or prior to the Closing Date, of the following conditions:
(a) Public's, Superholdings' and Merger Sub's Representations
True. The representations and warranties made by Public, Superholdings and
Merger Sub herein shall be true and correct in all respects at the Closing Date,
except as affected by the transactions contemplated hereby and except as will
not constitute a Public Material Adverse Change and Superholdings shall have
delivered the Superholdings Closing Certificate which shall so indicate.
(b) Public's Superholdings' and Merger Sub's Compliance with
Agreement. Each of Public, Superholdings and Merger Sub, in all respects, shall
have performed each agreement, and complied with each covenant to be performed
or complied with by it on or prior to the Closing Date under this Agreement or
any Related Agreement, except as will not constitute a Public Material Adverse
Change and Superholdings shall have delivered the Superholdings Closing
Certificate which shall indicate that no Public Material Adverse Change has
occurred.
(c) No Litigation. No action, suit or proceeding (other than
such an action, suit or proceeding directly or indirectly instituted by a party
hereto) shall be threatened or pending, and no preliminary or permanent
injunction, order, decree or ruling shall be in effect, seeking to restrain or
prohibit, or to obtain damages or other relief in connection with, the execution
and delivery of this Agreement, any Related Agreement or the consummation of the
transactions contemplated by any of the foregoing except as would not constitute
a Public Material Adverse Change. Superholdings shall have delivered the
Superholdings Closing Certificate, which shall so indicate with respect to
Superholdings, Public and Merger Sub.
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(d) Public Consents. Public shall have obtained the Public
Consents except for those Public Consents that, if not obtained, would not
constitute a Public Material Adverse Change or constitute a Public Material
Adverse Change. Without limitation, the failure to obtain the consent of EDC
would constitute a Public Material Adverse Change.
(e) Approvals. All Approvals to be obtained by Public shall
have been obtained or made except for those Approvals that, if not obtained,
would not constitute a Public Material Adverse Change. The Approval described in
Section 3.1(c) (HSR Act) shall have been obtained.
ARTICLE 4
Covenants Regarding Consummation of the Transaction
4.1 Satisfaction of Conditions to Closing.
(a) Joint Responsibilities. Each party shall use his, her or
its reasonable best efforts to satisfy the conditions to the obligations of the
parties hereunder, and to consummate and make effective as promptly as
practicable the transactions provided for herein including:
(i) Defending the Agreement. Defending lawsuits or
other legal proceedings challenging this Agreement or any Related Agreement or
the consummation of the transactions provided for in this Agreement or any
Related Agreement;
(ii) Lifting Injunctions. Using reasonable best
efforts to lift or rescind any injunction, restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
provided for in this Agreement or any Related Agreement;
(iii) Other Actions. Taking such other reasonable
actions that are necessary, appropriate or advisable, unless responsibility for
taking such actions has been delegated to certain parties pursuant to
Sections 4.1(b) (LLC Parties' Responsibilities) or 4.1(c) Public's,
Superholdings' and Merger Sub's Responsibilities), including without limitation
using reasonable best efforts to obtain all Approvals, and all consents of
third parties to contracts as are necessary for the consummation of the
Reorganization. In case at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement, each
party and its officers and directors shall use their reasonable best efforts
to take all such action.
(b) LLC Parties' Responsibilities.
(i) LLC Parties' Delegated Conditions. The LLC
Parties shall have the responsibility for satisfying the following conditions
("LLC Parties' Delegated Conditions"), for which the LLC Parties shall have the
obligations set forth in this Section 4.1(b)(i). Public, Superholdings and
Merger Sub shall reasonably cooperate and assist with the LLC Parties in
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connection with the following:
(A) Section 3.2(a) (LLC Parties'
Representations True), for which the LLC Parties' obligation shall be as
follows: (x) the LLC Parties shall take no action that will cause any of their
representations or warranties to be or remain untrue or incorrect in any
material respect and (y) the LLC Parties shall not omit any action that any of
them would take in the ordinary course of prudent business, which omission will
cause any of their representations or warranties to be or remain untrue or
incorrect in any material respect, provided that the LLC Parties shall not be
required to take any action for which Public has assumed responsibility under
the Services Agreement; and
(B) Section 3.2(b) (LLC Parties' Compliance
with Agreement), for which the LLC Parties shall have the obligations set forth
elsewhere herein.
(ii) HSR Act Filings. The LLC Parties shall make
their HSR Act filings, if required, in compliance with such act as soon as
possible after thedate of this Agreement and provide any additional information
that the Federal Trade Commission or the Justice Department requests as promptly
as practicable, and perform all other acts required of them under the HSR Act
in order to satisfy the condition contained in Section 3.1(c) (HSR Act), in all
cases in coordination with Public and Superholdings. The LLC Parties shall
provide to Public and Superholdings the information with respect to the LLC
Parties required by such filings or other filings to be made by Public or
Superholdings under the HSR Act as is reasonably requested by Public or
Superholdings as soon as possible, but no later than two business days after
the date of such request. The LLC Parties shall pay the HSR Act filing fee, if
any, relating to any filing requirement arising out of the LLC Parties'
participation in the Parent Merger.
(iii) LLC Parties' Consents. The LLC Parties shall
use their reasonable best efforts to obtain the LLC Parties Consents.
(c) Public's, Superholdings' and Merger Sub's
Responsibilities.
(i) Public's, Superholdings' and Merger Sub's
Delegated Conditions. Public, Superholdings and Merger Sub shall have the
responsibility for satisfying the following conditions ("Public's,
Superholdings' and Merger Sub's Delegated Conditions"), for which Public,
Superholdings and Merger Sub shall have the obligations set forth in this
Section 4.1(c)(i). The LLC Parties shall reasonably cooperate with and assist
Public, Superholdings and Merger Sub in connection with the following:
(A) Section 3.3(a) (Public's, Superholdings'
and Merger Sub's Representations True), for which Public's, Superholdings' and
Merger Sub's obligation shall be as follows: (x) Public, Superholdings and
Merger Sub shall take no action that will cause any of their representations and
warranties to be or remain untrue or incorrect in any material respect and
(y) Public, Superholdings and Merger Sub shall not omit any action that they
would take in
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the ordinary course of prudent business, which omission will cause any of their
representations and warranties to be or remain untrue or incorrect in any
material respect; and
(B) Section 3.3(b) (Public's, Superholdings'
and Merger Sub's Compliance with Agreement), for which Public, Superholdings
and Merger Sub shall have the obligations set forth elsewhere herein.
(ii) HSR Act Filings. Public, Superholdings and
Merger Sub shall make their HSR Act filings, if required, in compliance with
such act as soon as possible after the date of this Agreement and provide any
additional information that the Federal Trade Commission or the Justice
Department requests as promptly as practicable, and perform all other acts
required of them under the HSR Act in order to satisfy the condition contained
in Section 3.1(c) (HSR Act); provided, however, that in no event shall Public,
Superholdings or Merger Sub or any of their subsidiaries be required to divest,
hold separate, offer for sale, abandon, limit its operation of or take similar
action with respect to any assets or any business interest in connection with
any Approval (including, without limitation under the HSR Act). Public shall
pay the HSR Act filing fee relating to any filing requirement arising out of
its participation in the Subsidiary Merger.
(iii) Public's and Superholdings' Consents and
Permits. Public and Superholdings shall use their reasonable best efforts to
obtain the Public Consents and the Permits.
4.2 Preparation of the Proxy Statement, Form S-4 and Form S-1.
(a) Preparation. Public and Superholdings shall prepare and
file with the SEC as promptly as practicable, but no later than October 10, 2000
(the "SEC Filing Date") in accordance with the Securities Act of 1933, as
amended (the "Securities Act"), on behalf of Superholdings, the Form S-4. Public
and Superholdings shall use reasonable best efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing. Public and Superholdings shall keep the LLC Parties advised of the
status of the filing and effectiveness of the Form S-4.
(b) Proxy Statement and Form S-4. Public, Superholdings and,
if requested by Public, LLC Holdings shall jointly prepare for inclusion in the
registration statement on Form S-4 to be filed with the SEC by Public and
Superholdings, on behalf of Superholdings, in connection with the issuance by
Superholdings of shares of Superholdings Stock in the Reorganization (the "Form
S-4") a proxy statement (the "Proxy Statement"), in accordance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
and regulations under the Exchange Act, with respect to the Reorganization, it
being understood that Public and Superholdings may, in their sole discretion,
include in the S-4 any shares of Superholdings Stock to be issued pursuant to
any Sister Agreements and may include in the Proxy Statement any matters to be
voted upon pursuant to any Sister Agreement. Public, Superholdings and LLC
Holdings shall cooperate with each other in the preparation of the Proxy
Statement. Public, Superholdings and LLC Holdings shall use reasonable best
efforts to respond
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promptly to any comments made by the SEC with respect to theProxy Statement
and to cause the Form S-4 to be declared effective under the Securities Act as
promptly as practicable after the filing thereof with the SEC. Public and
Superholdings shall use reasonable best efforts to cause the Proxy Statement to
be mailed to the members of LLC Holdings (if applicable) and the Public
stockholders, as determined by Public, at the earliest practicable date after
the Form S-4 is declared effective by the SEC. The LLC Parties shall as promptly
as practicable provide any information reasonably requested by Public or
Superholdings or their respective counsel in connection with the preparation of
the Proxy Statement and the S-4 and any amendments or supplements thereto.
(c) Form S-1. If the shares of Superholdings Stock to be
received by the members in the Reorganization are not registered on the
Form S-4, then Public, Superholdings and LLC shall jointly prepare a
registration statement on Form S-1 (or other appropriate form) to be filed
with the SEC by Superholdings by July 31, 2001 in connection with the resale
by the members of the shares of Superholdings Stock the LLC Parties receive
pursuant to the terms of the Reorganization (the "Form S-1") in accordance with
the Securities Act, it being understood that Public and Superholdings may, in
their sole discretion, include in the Form S-1 any shares of Superholdings Stock
issued pursuant to any Sister Agreement and not registered on the Form S-4.
Public, Superholdings and LLC shall use reasonable best efforts to respond
promptly to any comments made by the SEC with respect to the Form S-1 and to
cause the Form S-1 to be declared effective under the Securities Act by
October 1, 2001, or as promptly thereafter as practicable. If a Form S-1 is
declared effective under the Securities Act, then Superholdings shall use
reasonable best efforts to prepare and file such amendments and supplements to
the Form S-1 and the prospectus used in connection therewith as may be necessary
to keep the Form S-1 effective for a period of not less than one year from the
later of the first day that the Form S-1 is declared effective or October 1,
2001; provided, however, that if the Superholdings Stock that the LLC Parties
receive pursuant to the Reorganization becomes freely tradeable pursuant to Rule
144(k) of the Securities Act prior to the termination of the effective period,
then Superholdings shall have no further obligation to keep the Form S-1
effective; provided, further, that, if in connection with a Sister Agreement,
Superholdings agrees to registration rights of Superholdings Stock that are more
beneficial than the registration rights contained herein, then the Members may
substitute in their entirety the more beneficial registration rights for the
registration rights in this Section 4.2(c). If the shares of Superholdings Stock
to be received by the members in the Reorganization are registered on the Form
S-4, then Public and Superholdings may satisfy their obligations under this
Section 4.2(c) by filing a post-effective amendment to the Form S-4 in lieu of
filing the Form S-1.
(d) Public's and Superholdings' Actions. Public and
Superholdings shall, as promptly as practicable, take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of Superholdings Stock in connection with the
Parent Merger, and LLC and LLC Holdings shall furnish all information concerning
LLC, LLC Holdings and the Members as may be reasonably requested in connection
with any such action. Public and Superholdings shall keep the LLC Parties
advised of the status of any actions taken under any applicable state securities
laws.
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4.3 Accountants' Letters.
(a) From LLC Holdings. LLC Holdings shall use its reasonable
best efforts to cause to be delivered to Public and Superholdings a letter of
Melman, Alton & Co., the LLC Parties' independent certified public accountants,
dated a date within two business days before the date on which the Form S-4 or
Form S-1 shall become effective, and a letter of Melman, Alton & Co. dated a
date within two business days before the Closing Date, each addressed to Public
and Superholdings, in form and substance reasonably satisfactory to Public and
Superholdings and customary in scope and substance for letters delivered by
independent accountants in connection with similar such registration statements
and permitting the use of the accountant's report in subsequent filings by
Public or Superholdings under the Securities Act or Exchange Act.
The LLC Parties shall use their reasonable efforts to cause to
be delivered to Public and Superholdings a letter of Melman, Alton & Co.
consenting to the inclusion of its report on LLC's audited financial statements
in the Form S-4 and the Form S-1 and any other filings required by the
Securities Act or Exchange Act.
(b) From Public and Superholdings. Public and Superholdings
shall each use its reasonable best efforts to cause to be delivered to LLC
Holdings a letter of PricewaterhouseCoopers, LLP, Public's and Superholdings'
independent certified public accountants, dated a date within two business days
before the date on which the Form S-4 or Form S-1 registering shares of
Superholdings Stock received by the Members of LLC Holdings, or anyamendment,
shall become effective, or any supplement is filed, and a letter of
PricewaterhouseCoopers, LLP, dated a date within two business days before the
Closing Date, each addressed to LLC Holdings and the Members and customary in
scope and substance for letters delivered by independent public accountants in
connection with similar such registration statements.
4.4 Public Stockholders Meeting. Public shall take all action
necessary, in accordance with the DGCL, the Exchange Act and other applicable
law and its certificate of incorporation and bylaws, to convene and hold a
special meeting of the stockholders of Public (the "Public Stockholders
Meeting") as promptly as practicable after the date hereof for the purpose of
considering and voting upon the Subsidiary Merger Agreement and the issuance of
shares of Superholdings Stock pursuant to the Parent Merger.
4.5 Votes and Recommendations. The Board of Directors of Public
shall (a) recommend that the stockholders of Public vote in favor of the
adoption of the Subsidiary Merger Agreement and the issuance of shares of
Superholdings Stock pursuant to this Agreement at the Public Stockholders
Meetings, (b) cause such recommendation to be included in the Proxy Statement,
(c) solicit proxies in favor of the adoption of the Subsidiary Merger Agreement
and the issuance of shares of Superholdings Stock pursuant to this Agreement and
(d) use reasonable best efforts to obtain the required votes of the stockholders
of Public.
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4.6 LLC Members Meeting; LLC Holdings. If requested by Public, LLC
and LLC Holdings shall take all action necessary, in accordance with the
Missouri Limited Liability Company Act, the Exchange Act, other applicable
law and its organizational documents, to convene and hold a special meeting of
the members of LLC and LLC Holdings (the "Members Meeting") as promptly as
practicable after the date hereof for the purpose of considering and voting upon
this Agreement and to solicit proxies pursuant to the Proxy Statement in
connection therewith. The Boards of Managers of LLC and LLC Holdings shall (a)
recommend that the holders of the Members' Interests vote in favor of the
adoption of this Agreement at the Members Meeting, (b) cause such recommendation
to be included in the Proxy Statement, (c) solicit proxies in favor of the
adoption of this Agreement and (d) use reasonable best efforts to obtain the
Members Required Vote.
4.7 Public Announcements. The LLC Parties shall not issue any
press release with respect to the transactions contemplated hereby. Public,
Superholdings and Merger Sub may issue press releases with respect to the
transactions contemplated hereby but, if practicable, shall allow LLC to review,
and shall consult with LLC before issuing, any press release.
4.8 No Solicitation; Acquisition Proposals.
(a) No Solicitation. During the period from and including the
date of this Agreement to and including the Effective Time, the LLC Parties
shall not, and shall not authorize or permit any Subsidiary, or any of its or
their Affiliates, officers, directors, employees, agents or representatives
(including without limitation any investment banker, financial advisor, attorney
or accountant retained by the LLC Parties or any Subsidiary), to, directly or
indirectly, initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries, any expression of interest or the making of any proposal that
constitutes, or may reasonably be expected to lead to, an Acquisition Proposal,
or enter into or maintain or continue discussions or negotiate with any person
in furtherance of such inquiries or to obtain an Acquisition Proposal or agree
to or endorse any Acquisition Proposal.
(b) Approval. During the period from and including the date of
this Agreement to and including the Effective Time, neither the Board of
Managers of LLC or LLC Holdings nor any committee thereof shall withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to
Public, Superholdings or Merger Sub, the approval or recommendation of this
Agreement or the transactions contemplated hereby.
(c) Voting Agreement. Not later than August 7, 2000, the
Members shall approve this Agreement. If requested by Public, the Members shall
from time to time (i) vote, or consent, their Members' Interests in favor of the
Parent Merger and against any Acquisition Proposal whether or not at a members
meeting, (ii) take all reasonable actions in support of or to consummate as
promptly as practicable the transactions contemplated hereby, (iii) take no
action that will impede or impair the consummation of the transactions
contemplated hereby, (iv) not grant to any other person or entity a proxy or
other right to vote any Members' Interests, (v) not
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transfer or dispose of or agree to transfer or dispose of any Members'
Interests and (vi) not exercise dissenters', appraisal or other rights to
receive cash or other consideration instead of Superholdings Stock.
In conjunction with the approval of this Agreement by LLC and its
members, the Members shall cause LLC Holdings to (i) be formed, (ii) issue one
unit of Members' Interests in LLC Holdings in exchange for one unit of Members'
Interests in LLC, (iii) approve this Agreement and (iv) obtain its members'
approval of this Agreement.
(d) Acquisition Proposal. For purposes of this Agreement,
"Acquisition Proposal" means an inquiry, offer, proposal or other indication of
interest regarding any of the following (other than the transactions provided
for in this Agreement) involving LLC or LLC Holdings: (i) any merger,
consolidation, share exchange, recapitalization, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of all or substantially all the assets of LLC or LLC
Holdings and its Subsidiaries, taken as a whole, or any substantial portion of
its assets or business, in a single transaction or series of related
transactions; (iii) any tender offer or exchange offer for any of the
outstanding Members' Interests or the filing of a registration statement under
the Securities Act in connection therewith; (iv) issuance of any Members'
Interests; or (v) any public announcement of a proposal, plan or intention to do
any of the foregoing or any agreement to engage in any of the foregoing.
4.9 Leases. Superholdings and the Members, through one or more
entities controlled by them, shall use their reasonable best good faith
efforts to, within two weeks after the date hereof, enter into leases (the
"Leases") by LLC of the assets described on the Disclosure Schedule to this
Section, which shall include, among other things, the St. Louis office and
certain of the assets transferred to the Members pursuant to Section 4.16
(Asset Transfers). The Leases shall provide that LLC will pay $1,400 per
month for the initial terms of the Leases for towers within the LLC footprint as
of June 30, 2000, with such tower rents commencing on the Sprint network ready
date, will provide a return based on dollars invested in the switch and retail
locations that is consistent with comparable lease rates within the respective
markets (which will be on a triple-net basis if leases in the market are
triple-net leases) and shall otherwise be on terms reasonably satisfactory to
Superholdings that are similar to other comparable leases to which either Public
or LLC are parties with nonaffiliates; provided, however, that the failure to
enter into the Leases, for any reason, shall not be a breach of this Agreement.
4.10 Affiliates and Certain Members. If requested by Public, prior
to the Closing Date, LLC shall deliver to Public and Superholdings a letter
identifying all persons who are, at the time the Parent Merger is submitted for
approval to the members of LLC or LLC Holdings, "affiliates" of LLC or LLC
Holdings for purposes of Rule 145 under the Securities Act. If requested by
Public, on or prior to the Closing Date, LLC shall cause each such person to
deliver to Public and Superholdings a written agreement (an "Affiliate Letter").
The certificates representing Superholdings Stock received by such affiliates in
the Parent Merger shall bear a customary legend regarding applicable Securities
Act restrictions.
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4.11 Pooling of Interests. If requested by Public or Superholdings,
the parties shall use their reasonable best efforts to cause the Reorganization
to be accounted for as a pooling of interests under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations, and to cause such
accounting treatment to be accepted by each of the parties' independent
certified public accountants and by the SEC. None of the parties shall knowingly
take any action that would cause such accounting treatment to be unattainable.
4.12 Employment Agreements. Each party shall use his or its
reasonable best efforts to cause Superholdings or any of its Subsidiaries
and each of Randy Talley and Suzanne Mears to execute and deliver at Closing an
employment agreement (collectively, the "Employment Agreements"), reasonably
acceptable to Superholdings; provided, however, that the failure to enter into
any Employment Agreement, for any reason, shall not be a breach of this
Agreement. The Employment Agreements will provide, among other things, that the
employees will be eligible for compensation, benefits, and stock options under
Superholdings' guidelines and policies, which shall be substantially identical
to Public's guidelines and policies existing on the date hereof for similarly
situated employees. Benefits will include Superholdings' matching of the
employees' contributions under Superholdings' 401(k) plan, if applicable, and
consistent with Superholdings' employment practices. Benefits for each employee
will also include credit for eligibility and vesting purposes for all past
services of such employee with LLC.
4.13 Consulting Agreements. Superholdings, or Public, as
applicable, and the Members shall use their reasonable best efforts to enter
into, and shall use their reasonable best efforts to cause the Members and
Kay Gabbert ("K.G."). to enter into, five-year consulting agreements
(collectively, the "Consulting Agreements") reasonably acceptable to
Superholdings, or Public, as applicable; provided, however, that the failure to
enter into any Consulting Agreement, for any reason, shall not be a breach
of this Agreement. The Members' Consulting Agreements will be with Public and
will provide, among other things, that the Members will each receive annual
compensation of $125,000, to be paid monthly, and will be reimbursed for
reasonable, approved expenses incurred by them while conducting business for
Superholdings. K.G.'s Consulting Agreement will be with Public and will provide,
among other things, that it will be effective as of July 1, 2000, that she will
receive monthly compensation of $1,000, and that she will receive options for
40,000 shares of Public common stock vesting over five years (beginning with
July 1, 2000) at an exercise price of 90% of the market value of Public common
stock on July 1, 2000. At the Closing, Superholdings shall offer K. G. a
five-year consulting agreement with annual compensation of $100,000 payable
monthly.
4.14 Reissuance of LLC Audited Financial Statements. The LLC
Parties shall cause LLC's and LLC Holdings' audited financial statements that
are required to be included in the Form S-1 and, if necessary, Form S-4, to
be reissued in accordance with GAAP and in a form reasonably acceptable to
Superholdings.
4.15 Master Lease Agreement. Superholdings and the Members through
one or more entities controlled by them shall use their reasonable best good
faith efforts to enter into a master lease agreement (the "Master Lease
Agreement") reasonably acceptable to Superholdings providing for the first
right to negotiate tower space leases on a "build-to-suit" basis within
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Superholdings' present and future territory with terms similar to Public's
current leases for towers. The Master Lease Agreement will provide, among other
things, that (i) the Master Lease Agreement will have a five-year term, will not
terminate during that term if Superholdings retains its Sprint PCS affiliation,
and will be subject to five-year extensions if agreed by all parties thereto,
(ii) the Master Lease Agreement will be subject to performance criteria, (iii)
Public is currently a party to contracts for certain tower space and that, to
prevent a violation of existing contracts, new contracts with the Members will
have to be negotiated after the Phase I build-out under the existing contracts
is complete and (iv) the Master Lease Agreement will extend to any acquisitions
by Superholdings. The Master Lease Agreement will also provide that from time to
time as Superholdings determines that it requires additional tower sites, it
will notify Tower Company and provide Tower Company with information concerning
the proposed locations of such sites, the technical requirements and any
available search rings. After Tower Company has been provided with such
information, Superholdings shall grant Tower Company the exclusive right for a
period of 30 days to negotiate with Superholdings for Tower Company to provide
such tower sites. Superholdings agrees that during such 30-day period it will
negotiate with Tower Company in good faith for Tower Company to provide such
tower sites. After such 30 day period, Superholdings may obtain such tower sites
from third parties; provided, that, if Superholdings has not entered into an
agreement to obtain such tower sites within 12 months after such notice to Tower
Company, Superholdings shall again comply with the foregoing notice and
negotiation procedure. Superholdings and the Members shall use their reasonable
best efforts to agree upon the final form of the Master Lease Agreement within
two weeks of the date of this Agreement.
4.16 Asset Transfers. Prior to the Closing Date, LLC shall transfer
to the Members or, at the election of the Members, Tower Company or other
entities controlled by them the assets listed on the Disclosure Schedule to
this Section 4.16, which shall consist, among other things, of certain real
estate, towers, Nortel base stations, and retail store sites that were funded
directly or indirectly with capital contributions by the Members. The total fair
market value of the assets transferred plus the cash received by the Members
pursuant to Section 1.2 (a)(ii) (Cash) hereof shall not exceed $12,000,000 or
such other amount equal to the Members' actual capital investment that the
parties shall agree upon, and the maximum amount of cash shall not exceed
$4,000,000. If any assets of LLC or LLC Holdings other than those listed on the
Disclosure Schedule to this Section 4.16 are transferred to the members or Tower
Company, then the aggregate cost of such assets shall be deducted from the
amount of cash to be received by the Members pursuant to Section 1.2(a)(ii)
(Cash) hereof.
Upon execution of this Agreement or as soon thereafter as practicable,
LLC shall submit to Public a proposed fair market value of the transferred
assets. If the parties cannot agree on the fair market value of the transferred
assets within 30 days of the date hereof, then the fair market value will be
determined by an independent third party appraiser selected by Public and
subject to LLC's approval (which approval shall not be unreasonably withheld).
Public shall bear the cost of such appraisal, unless the value determined by the
appraiser is more than 10% greater than the value originally proposed by LLC,
whereupon LLC shall bear such costs.
4.17 Joint Venture Development Agreement. Superholdings and the Members
or an
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entity controlled by them will use their reasonable best good faith efforts
to enter into a joint venture development agreement (the "Joint Venture
Development Agreement") reasonably acceptable to Superholdings providing for the
formation of international joint ventures on a non-exclusive basis. The Joint
Venture Development Agreement will provide, among other things, that (i) entry
by Superholdings into any specific joint venture will be conditioned upon and
subject to Superholdings' approval of a business plan for the joint venture,
(ii) Superholdings will finance all costs of any joint venture into which it
enters and (iii) each joint venture will be owned 50% by the Members and 50% by
Superholdings, provided that Superholdings will be the manager of the joint
venture.
4.18 Resale Agreement. Superholdings and its subsidiaries and the
Members or an entity controlled by them will use their reasonable best good
faith efforts to enter into a resale agreement (the "Resale Agreement")
reasonably acceptable to Superholdings and its subsidiaries permitting the
Members or their controlled entities to buy air time at a discount for resale on
a basis no less favorable than any other similar agreement Superholdings may
have; provided, however, that the failure to enter into any Resale Agreement,
for any reason, shall not be a breach of this Agreement.
4.19 Stock Options. At the Closing Superholdings will cause stock
options to purchase a total of 75,000 shares of Superholdings Common Stock to be
issued to the employees and consultants of LLC listed on a list to be provided
by the Members prior to Closing with an exercise price of 90% of the market
value of Superholdings common stock on the date of grant and other terms as
specified on such list.
4.20 Other Assets. Prior to the Closing LLC will assign to the
Members LLC's FCC F Block licenses, the contract rights LLC has to the
Cause of Action described on the Schedule to this Section 4.20 (the "Cause of
Action") and all Proceedings. The Members will be entitled to all damages
recovered with respect to the Cause of Action and the Proceedings and will
assume all liabilities and obligations with respect to the Cause of Action and
the Proceedings, including the costs and liabilities with respect to any
counterclaims filed with respect to the Cause of Action or the Proceedings.
After the Closing, Superholdings shall cooperate with the Members in the
prosecution of the Cause of Action by making employees available as witnesses
and providing documents, provided that the Members shall bear all expenses
related thereto.
4.21 Fee for Consent of Senior Lender. If the Closing fails to
occur due to a Breach by one or more of the LLC Parties, then Superholdings,
Public and Merger Sub shall be entitled to receive from the LLC Parties in
addition to any other remedies pursuant to this Agreement, at law or in equity,
an amount equal to the consent fee paid under the Credit Agreement to obtain
consent to the Parent Merger. If the Closing fails to occur due to a Breach by
Superholdings, Public or Merger Sub, then Section 10.2 (e) (Termination Fee)
shall apply. If the Closing fails to occur for any other reason, then each of
the LLC Parties, on one hand, and Superholdings, Public and Merger Sub, on the
other, shall be entitled to receive an amount equal to one half of the consent
fee paid under the Credit Agreement to obtain consent to the Parent Merger.
4.22 Sprint Payments by Members. The Members shall pay when due all
penalties
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owed to Sprint pursuant to Addendum VII to the Sprint Management Agreement
except as provided in Section 4.23 (Superholdings Sprint Payments).
4.23 Superholdings Sprint Payments. At the Closing, Superholdings
shall make the following payments to Sprint:
(a) if the date of a Hard Launch or the actual Full Buildout
Date in any A Market or B Market (as such terms are defined in the Sprint
Management Agreement) is on or after the 6th day and on or before the 60th day
after the Contractual Launch Date or the Full Buildout Date as set forth in
Exhibit 2.1 to Addendum VII (as such terms are defined in the Sprint Management
Agreement), respectively, Superholdings shall deliver to Sprint either (1) the
number of shares of Superholdings Stock equal to the product of (i) the number
of shares of Superholdings Stock LLC owes Sprint pursuant to Addendum VII
multiplied by (ii) 0.25; or (2) an amount of cash equal to the product of (i)
the cash amount LLC owes Spring pursuant to Addendum VII multiplied by (ii)
0.25;
(b) if the date of a Hard Launch or the actual Full Buildout
Date in any A Market or B Market is on or after the 61st day and on or before
the 120th day after the Contractual Launch Date or the Full Buildout Date as set
forth in Exhibit 2.1 to Addendum VII, respectively, Superholdings shall deliver
to Sprint either (1) the number of shares of Superholdings Stock equal to the
product of (i) the number of shares of Superholdings Stock LLC owes Sprint
pursuant to Addendum VII multiplied by (ii) 0.5; or (2) an amount of cash equal
to the product of (i) the cash amount LLC owes Sprint pursuant to Addendum VII
multiplied by (ii) 0.5; and
(c) if the date of a Hard Launch or the actual Full Buildout
Date in any A Market or B Market is after the 120th day after the Contractual
Launch Date or the Full Buildout Date as set forth in Exhibit 2.1 to Addendum
VII, respectively, Superholdings shall deliver to Sprint either (1) the number
of shares of Superholdings Stock LLC owes Sprint pursuant to Addendum VII; or
(2) the cash amount LLC owes Sprint pursuant to Addendum VII.
4.24 Legends. The Members consent to the placement of a legend on
the shares of Superholdings Stock to be issued to each of the LLC Parties in the
Reorganization, which legend shall be substantially as follows:
"THESE SECURITIES ARE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE DISTRIBUTED FOR VALUE, NOR MAY THESE SECURITIES BE
TRANSFERRED ON THE BOOKS OF SUPERHOLDINGS, IN THE ABSENCE OF SUCH
REGISTRATION UNLESS SUPERHOLDINGS HAS RECEIVED AN OPINION OF COUNSEL OR
OTHER EVIDENCE, SATISFACTORY TO SUPERHOLDINGS AND ITS COUNSEL, THAT
SUCH REGISTRATION IS
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NOT REQUIRED."
4.25 Directors. At the Effective Time, M.R. and S.R. shall be
appointed to the Superholdings Board of Directors at the Closing Date as
class III and class II directors, respectively, with M.R. nominated to serve as
vice-chairman of the Board. Class II directors of Superholdings will stand for
election at the annual meeting of Superholdings stockholders to be held in 2002.
Class III directors of Superholdings will stand for election at the annual
meeting of Superholdings stockholders to be held in 2003.
ARTICLE 5
Termination
5.1 Reasons for Termination. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned at any time prior
to the Effective Time, notwithstanding approval thereof by the stockholders of
Public, Superholdings or Merger Sub or by the members of the LLC or LLC
Holdings, only by following the termination procedures set forth in this
Article, for the following reasons:
(a) By Mutual Consent. By the mutual written consent of
Public, Superholdings, LLC and LLC Holdings, duly authorized by the Boards of
Directors of Public, Superholdings and by LLC's and LLC Holdings' Board of
Managers.
(b) By Public or Superholdings. By Public or Superholdings
after compliance with the procedure set forth in this Article 5, if (i) any of
the LLC Parties' representations or warranties contained herein is or becomes
or, when executed any Related Agreement would be, untrue or incorrect in
any respect, except as will not constitute an LLC Material Adverse Change, (ii)
any of the LLC Parties fails to perform any of his, her or its covenants or
agreements contained herein, or would be in breach of his or its covenants upon
execution of any Related Agreement, in any respect, except as will not
constitute an LLC Material Adverse Change, or (iii) any of Public's,
Superholdings' or Merger Sub's conditions to the consummation of the
transactions provided for herein shall have become impossible to satisfy.
Notwithstanding the foregoing, Public or Superholdings may only terminate this
Agreement pursuant to clauses (i) or (ii) above even though an LLC Material
Adverse Change has occurred, if the LLC Material Adverse Change (A) occurred on
or prior to the date of this Agreement, (B) was caused after the date of this
Agreement by the actions of the Members, the Board of Managers of LLC or LLC
Holdings, or any agent of LLC or LLC Holdings, which agent is not under the
supervision of Public or any of its Affiliates pursuant to the Services
Agreement or (C) was caused by the failure of any of the persons identified in
clause (B) to take actions that (x) would be taken in the ordinary course of
LLC's and LLC Holdings' business in the exercise of reasonable judgment and (y)
have not been delegated to Public under the Services Agreement.
(c) By LLC. By LLC, after compliance with the procedure set
forth in this Article 5, if (i) any of Public's, Superholdings' or Merger Sub's
representations or warranties contained herein is or becomes or, when executed
any Related Agreement would be, untrue or
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incorrect in any material respect, except as will not constitute a Public
Material Adverse Change, (ii) Public, Superholdings or Merger Sub fails to
perform its covenants or agreements contained herein, or would be in breach of
its respective covenants upon execution of any Related Agreement, in any
respect, except as will not have a Public Material Adverse Change at or after
the Closing, or (iii) any of LLC's conditions to the consummation of the
transactions provided for herein shall become impossible to satisfy.
(d) Drop Dead Date. By any of Public, Superholdings or the LLC
if the Effective Time shall not have occurred on or before March 31, 2001 (the
"Termination Date"), otherwise than as a result of any material breach of any
provision of this Agreement by the party seeking to effect such termination;
provided, however, that the Termination Date shall be extended by the number of
days, if any, to cure any curable matter that is the subject of a notice under
Section 5.3 (Public and Superholdings Termination Procedure) or Section 5.4
(LLC's Termination Procedure).
(e) Prohibition of the Reorganization. By any of Public,
Superholdings or LLC if any federal or state court of competent jurisdiction or
other governmental entity shall have issued an order, decree or ruling, or taken
any other action permanently restraining, enjoining or otherwise prohibiting the
Reorganization and such order, decree, ruling or other action shall have become
final and non-appealable, provided that neither party may terminate this
Agreement pursuant to this Section 5.1(e) if it has not complied with its
obligations under Section 4.1(a) (Joint Responsibilities).
provided, however, except pursuant to Section 5.1(d) (Drop Dead Date), the right
to terminate this Agreement under this Section 5.1 shall not be available to any
party (i) that is in material breach of its obligations hereunder or (ii) whose
failure to fulfill its obligations or to comply withits covenants under this
Agreement has been the cause of, or resulted in, the failure to satisfy any
condition to the obligations of either party hereunder.
5.2 Notice of Problems. Each party will promptly give written
notice to the other parties when any of them becomes aware of the occurrence or
failure to occur, or the impending or threatened occurrence or failure to
occur, of any fact or event that would cause or constitute, or would be likely
to cause or constitute (i) any of its representations or warranties contained
herein being or becoming untrue or incorrect, (ii) its failure to perform any of
its covenants or agreements contained herein or (iii) any of its Delegated
Conditions, or any condition to the obligation of the parties contained in
Section 3.1 (Joint Conditions), being or becoming impossible to satisfy.
No such notice shall affect the representations, warranties, covenants,
agreements or conditions of the parties hereunder, or prevent any party from
relying on the representations and warranties contained herein.
5.3 Public and Superholdings Termination Procedure. If, pursuant
to the Services Agreement, the chief financial officer of Public becomes aware
of circumstances that lead him to conclude that the LLC Parties are in Breach of
this Agreement or any Related Agreement, then
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the chief financial officer shall deliver a notice to the LLC Parties of
such Breach, specifying the factual basis therefor in reasonable detail.
Furthermore, if Public or Superholdings discovers, by reason of a notice given
pursuant hereto or otherwise, circumstances that would give it the right to
terminate this Agreement pursuant to Section 5.1(b) (By Public or Superholdings)
(other than pursuant to clause (iv) thereof), then Public or Superholdings may
deliver a notice to the LLC Parties of such circumstances, specifying the
factual basis therefor in reasonable detail. The LLC Parties shall have the
right to cure any such matter within 20 business days following the date of
delivery of such notice. If such circumstances create a termination right
pursuant to clauses (i), (ii), or (iii) of Section 5.1(b) (By Public or
Superholdings), then after such notice and the LLC Parties' failure to cure,
either of Public or Superholdings may terminate this Agreement by giving a
notice of termination to the LLC Parties. If the circumstance described in
clause (iv) of Section 5.1(b) (By Public or Superholdings) occurs, Public or
Superholdings may terminate this Agreement by giving written notice of
termination to the LLC Parties.
5.4 LLC's Termination Procedure. If LLC discovers by reason of a
notice given pursuant hereto or otherwise, circumstances that would give it
the right to terminate this Agreement pursuant to Section 5.1(c) (By LLC), then
LLC shall deliver a notice to Public, Superholdings and Merger Sub of such
circumstances, specifying the factual basis therefor in reasonable detail.
Public, Superholdings and Merger Sub shall have the right to cure any such
matter within 20 business days following the date of delivery of such notice.
Upon such notice and upon Public's, Superholdings' or Merger Sub's failure to
cure, LLC may terminate this Agreement by giving a notice of termination to
Public, Superholdings and Merger Sub.
5.5 Effect of Termination. Upon termination hereof pursuant to
this Article 5, no party shall have any liability or continuing obligation to
another party arising out of this Agreement, or out of actions taken in
connection herewith, except that Article 10 (Indemnification) and Article 11
(Miscellaneous) shall survive termination hereof. Notwithstanding the foregoing,
termination hereof shall not relieve any party from its liability for (i) the
failure, prior to termination, of such party to perform or comply with its
covenants or agreements or (ii) the representations or warranties made by such
party being untrue or incorrect when made. In addition to the foregoing, (a) if
LLC terminates this Agreement because the issuance of the shares of
Superholdings Stock pursuant to the Parent Merger or the adoption of the
Subsidiary Merger Agreement shall not have been adopted by the holders of the
requisite number of shares of capital stock of Public (including, without
limitation, pursuant to Section 4.4 (Public Stockholders Meeting)) in the manner
required pursuant to Public's certificate of incorporation and bylaws, the DGCL,
or the rules of The Nasdaq Stock Market, as applicable, or other applicable law,
when all other conditions to Closing are satisfied or waived, then Public shall
pay a termination fee of $7.5 million to the LLC Parties, and (b) if Public
terminates this Agreement because it was not adopted by the requisite number of
members interests of LLC Holdings (including, without limitation, pursuant to
Section 4.6 (LLC Members Meeting; LLC Holdings)) in the manner required pursuant
to LLC Holdings' organizational documents, the Missouri Limited Liability
Company Act and other applicable law, if such approval is necessary, when all
other conditions to Closing are satisfied or waived, then the LLC Parties shall
pay a
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termination fee of $7.5 million to Public.
ARTICLE 6
Representations and Warranties of LLC and the Members
In this Article 6, LLC, LLC Holdings and the Subsidiaries are referred
to collectively as the "Companies." The Companies (solely prior to Closing and
with the understanding that the representations and warranties by or concerning
LLC Holdings shall become effective on the date LLC Holdings enters into this
Agreement) and the Members, jointly and severally, represent and warrant to
Public, Superholdings and Merger Sub that except as set specifically forth on
the Disclosure Schedules (which exceptions shall relate only to the Sections
specifically identified in such Disclosure Schedules):
6.1 LLC; Entry Into Agreements.
(a) Organization and Good Standing. Each of the Companies is a
limited liability company duly organized and validly existing under the laws of
the State of Missouri and is in good standing under such laws. Each of the
Companies has all requisite power and authority to own, lease and operate all
properties and assets owned or leased by it and to conduct its business as
previously and currently conducted by it. Each of the Companies is qualified to
do business and is in good standing in each jurisdiction in which it is required
to be so qualified, except where the lack of such qualification would not have a
material adverse effect on such Company. The Disclosure Schedule to this Section
6.1(a) lists all jurisdictions in which any Company is qualified to do business
as a foreign corporation and indicates which of the Companies is so qualified in
each such jurisdiction.
(b) Validity and Authorization; Power and Authority. Each of
the Companies has full power and authority to consummate the Parent Merger and
to execute, deliver and perform this Agreement, the Related Agreements and the
other instruments called for hereby or thereby to which it is a party.
The only vote of the holders (the "Members Required Vote") of the
Members' Interests that is necessary to approve this Agreement, the Related
Agreements, the Parent Merger, and the transactions contemplated hereby is the
affirmative vote of the holders of 100% of the Members' Interests. No other
action by the LLC Parties is necessary to approve this Agreement, the Related
Agreements, the Parent Merger, and the transactions contemplated hereby or
thereby.
This Agreement, the Related Agreements and the other instruments called
for hereby or thereby to which it is a party have been duly authorized, executed
and delivered by each of the Companies and upon obtaining the Members Required
Vote, will constitute (or, in the case of Related Agreements or instruments
called for hereby or thereby, to be executed by such Company at or before the
Closing, upon execution will constitute) the legal, valid and binding obligation
of such Company, enforceable against such Company in accordance with its terms.
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The Members have full requisite power and authority (or if natural
persons, capacity) to execute, deliver and perform this Agreement, the Related
Agreements and the other instruments called for hereby or thereby to which the
Members are a party. This Agreement has been duly executed and delivered by the
Members and constitutes (or, in the case of Related Agreements or instruments
called for hereby, to be executed by the Members at or before the Closing, will
constitute) the legal, valid and binding obligation of the Members, enforceable
against the Members in accordance with its terms. The Disclosure Schedule to
this Section 6.1(b) sets forth (i) the identity of all of the Members and (ii)
their respective ownership of units of Members' Interests, including fully-paid
units and subscribed, but unpaid, units.
The consent or vote of the Members in favor of the transactions
contemplated by this Agreement and the Related Agreements was or will be duly
obtained pursuant to the organizational documents of LLC and LLC Holdings and
all applicable state law.
(c) Subsidiaries. Except as set forth in the Disclosure
Schedule to this Section 6.1(c), no Company owns a majority of the capital stock
or other equity interests entitled to vote generally in the election of the
board of directors, board of managers, general partners or similar governing
body of, directly or indirectly, any other corporation, partnership, association
or other business entity and no Company is a party to any agreement relating to
the acquisition or disposition of such an interest (such scheduled entities, the
"Subsidiaries").
The Subsidiaries are duly organized and validly existing under the laws
of their states of organization and are in good standing under such laws. The
Subsidiaries have all requisite power and authority to own, lease and operate
all properties and assets owned or leased by them and to conduct their business
as previously and currently conducted by them. The Subsidiaries are qualified to
do business and are in good standing in each jurisdiction in which they are
required to be so qualified, except where the lack of such qualification would
not have a material adverse effect on the Subsidiaries. The Disclosure Schedule
to this Section 6.1(c) lists all jurisdictions in which the Subsidiaries are
respectively qualified to do business as a foreign entity.
LLC has good, valid and marketable title to all of the issued
and outstanding equity interests of each of the Subsidiaries, free and clear of
any Liens.
(d) No Conflict. Except as set forth in the Disclosure
Schedule to this Section 6.1(d), neither the execution, delivery or performance
of this Agreement or the Related Agreements, nor the consummation of the Parent
Merger or the transactions contemplated hereby or thereby will (i) result in any
violation of the terms of, (ii) contravene or conflict with, (iii) accelerate
the performance of the obligations required under, (iv) constitute a default
under, (v) give any right of termination or cancellation under, (vi) give any
right to make any change in any of the liabilities or obligations under, the
certificate of incorporation or similar organizational documents, bylaws,
regulations or operating agreement of any Company, as appropriate, any Order, or
any agreement, contract, note, bond, debenture, indenture, mortgage, deed of
trust, lease, license, judgment, decree, order, law, rule or regulation or other
restriction applicable to any Company or any Member or to which any Company or
any Member is a party or by which any Company or any Member or their respective
property or assets are bound or affected or (vii)
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result in a material adverse effect on any Company. Neither the execution,
delivery and performance of this Agreement or the Related Agreements, nor the
consummation of the transactions contemplated hereby or thereby will result in
the creation of any Lien upon any of the properties or assets of any Company or
the Members' Interests. No Member shall have the right to assert dissenters' or
appraisal rights under applicable state law or otherwise have the right to
demand cash or other payment for Members' Interests in the Parent Merger, other
than the consideration provided in Section 1.2 (Terms of the Merger).
(e) LLC Parties Consents Required. The Disclosure Schedule to
this Section 6.1(e) lists all material consents, approvals or authorizations of
third parties required in connection with each party's (other than Public's,
Superholdings' and Merger Sub's) valid execution, delivery or performance of
this Agreement and the Related Agreements or the consummation of the Parent
Merger or the Subsidiary Merger or any of the transactions contemplated hereby
or thereby on the part of any of them (collectively, the "LLC Parties
Consents"), including but not limited to the consents required under the
Contracts and consents required in connection with the Approvals to be obtained
by the LLC Parties and Licenses. The Members have taken, or on or prior to
Closing the Members shall have taken, all other limited liability company
actions necessary for the consummation by the Companies of the transactions
contemplated by this Agreement and the Related Agreements.
(f) State Takeover Statutes. No state takeover statute is
applicable to any Company in connection with this Agreement, the Parent Merger
or the other transactions contemplated hereby.
6.2 Financial Information.
(a) Financial Statements; Books and Records. Included in the
Disclosure Schedule to this Section 6.2(a) are true and correct copies of (i)
the audited consolidated balance sheets for LLC and the Subsidiaries at December
31, 1999 and the related statement of profit and loss and cash flows for the
periods then ended, (ii) the unaudited consolidated balance sheet for the
Subsidiaries at March 31, 2000 and the related statement of profit and loss for
the three-month period then ended prepared internally by LLC and (iii) when
delivered pursuant hereto, similar financial statements for each additional
month ending after the date hereof (collectively, the "LLC Financial
Statements").
The LLC Financial Statements fairly present the financial position of
LLC and the Subsidiaries as of the dates thereof and the results of LLC's and
the Subsidiaries' operations and cash flows for the periods then ended, in
accordance with GAAP, except for the variances from GAAP set forth in the notes
to the LLC Financial Statements, subject, in the case of the LLC Financial
Statements listed in items (ii) and (iii) of the immediately-preceding
paragraph, to normal recurring period-end adjustments and absence of notes and a
statement of cash flows. LLC maintains a standard system of accounting,
including without limitation internal controls, established and administered in
accordance with GAAP, except for the variances from GAAP set
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forth in the notes to the LLC Financial Statements.
LLC's books and records (including without limitation all financial
records, business records, minute books, ownership transfer records, customers
lists, referral source lists and records pertaining to services or products
delivered to customers) (i) are complete and correct in all material respects
and all transactions to which LLC is or has been a party are accurately
reflected therein, (ii) reflect all discounts, returns and allowances granted by
LLC with respect to the periods covered thereby, (iii) have been maintained in
accordance with customary and sound business practices in LLC's industry, (iv)
form the basis for the LLC Financial Statements and (v) accurately reflect the
assets, liabilities, financial position, results of operations and cash flows of
LLC. LLC's management information systems are adequate for the preservation of
relevant information and the preparation of accurate reports.
"GAAP" shall mean those generally accepted accounting principles and
practices which are used in the United States and recognized as such by the
American Institute of Certified Public Accountants acting through its Accounting
Principles Board or by the Financial Accounting Standards Board or through other
appropriate boards or committees thereof and which are consistently applied for
all periods, so as to properly reflect the financial position, results of
operations and operating cash flow on a consolidated basis of the party, except
that any accounting principle or practice required to be changed by the
Accounting Principles Board or Financial Accounting Standards Board (or other
appropriate board or committee) in order to continue as a generally accepted
accounting principle or practice may be so changed for periods for which such
change is applicable.
(b) Conduct of Business. Except as specifically contemplated
herein, since March 31, 2000, no Company has (i) changed its authorized or
issued members' interests; granted any option or right to purchase members'
interests; issued any security convertible into members' interests; granted any
registration rights; purchased, redeemed, retired or otherwise acquired any
members' interests; or declared or paid any distribution or payment in respect
of members' interests; (ii) amended its organizational documents or regulations
or operating agreement; (iii) sold or transferred (other than in the ordinary
course of business) any assets with a fair market value in excess of $50,000
individually, or $100,000 in the aggregate; (iv) mortgaged, pledged or subjected
to any Lien or other encumbrance any assets; (v) except as set forth in the LLC
Financial Statements, incurred or become subject to any debt, liability
(including indemnification, guaranty and repurchase obligations) or lease
obligation, other than current liabilities incurred in the ordinary course of
business that do not exceed $50,000 individually, or $100,000 in the aggregate;
(vi) incurred obligations or entered into contracts outside of the ordinary
course of business or providing aggregate payments in excess of $100,000; (vii)
suffered any damage, destruction or loss of any assets in the aggregate in
excess of $100,000; (viii) experienced any equipment malfunction that materially
interferes with the conduct of its business; (ix) waived or relinquished any
rights or canceled or compromised any debt or claim owing to it, in either case
without adequate consideration or not in the ordinary course of business, in
excess of $100,000 in the aggregate; (x) made any change in its accounting
methods or practices or increased any reserves for Taxes; (xi) made any material
change in its billing and collection practices and procedures; (xii) paid any
bonuses or made any increase in
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the compensation, commissions or benefits payable or to become payable to
any of its officers, directors, employees, consultants or agents over the
amounts paid or payable as of such date, or entered into or terminated any
employment, consulting, deferred compensation, severance or bonus agreement with
any of such parties, or made any loan, or commitment to loan, monies to any such
parties, other than customary cash travel advances which do not exceed $100,000
in the aggregate at any time; (xiii) declared or made any dividend, payment or
distribution to its or LLC's members other than ordinary employment
compensation; (xiv) entered into any transaction with any of its or LLC's
Affiliates (including without limitation by paying, distributing or transferring
any funds or assets to the members of LLC, whether in their capacity as members
of LLC or in any other capacity, other than the payment of employment
compensation to members of LLC who are employees); (xv) made any capital
expenditures except as set forth in the budget model attached as the Disclosure
Schedule to this Section 6.2(b); (xvi) acquired any business or business
operations or (xvii) agreed to do any of the foregoing.
(c) No Material Adverse Effect. Except as contemplated by this
Agreement, since the date of the most recent LLC Financial Statements delivered
prior to the date hereof, each Company has conducted its business only in the
ordinary course consistent with past practice and there has been no event or
occurrence that has caused a material adverse effect on such Company other than
(i) operating losses in the ordinary course of business, (ii) economic
conditions affecting the U.S. economy generally or the telecommunications
industry generally or (iii) delays in completing LLC's buildout for which LLC
may incur a penalty under Addendum VII to the Sprint Management Agreement.
(d) Projections. The forecasts and projections (the
"Projections") attached as the Disclosure Schedule to this Section 6.2(d) have
been prepared on the basis of the assumptions set forth therein and are
arithmetically correct. As of the date of this Agreement, all of the estimates
and assumptions upon which the Projections are based were and are believed by
each Company to be reasonable, and no Company has reason to believe that the
Projections or the assumptions underlying the Projections, taken as a whole,
would be required to be revised negatively in any material respect.
6.3 Members' Interests.
(a) Capitalization. The authorized and issued and outstanding
equity interests of each Company are as set forth in the Disclosure Schedule to
this Section 6.3(a). There are no other equity interests of any Company either
authorized or outstanding. All of the issued and outstanding units have been
duly authorized and validly issued, are fully paid and nonassessable and are
free and clear of any preemptive rights. No certificates have been issued to
represent the Members' Interests or the equity interests of any Company. There
are no outstanding preemptive, conversion or other rights, or other options,
warrants or agreements granted by, issued by, or binding upon, any Company for
the issuance, sale, purchase, repurchase, redemption, acquisition or other
transfer of its equity securities. The Disclosure Schedule to this Section
6.3(a) identifies the holders of all of the equity interests of each Company.
(b) Capitalization of LLC Holdings. Upon formation, the
Members' Interests
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of LLC Holdings shall consist of 20,000 units. There will be no other equity
interests of LLC Holdings either authorized or outstanding. All of the issued
and outstanding units will be duly authorized and validly issued, fully paid and
nonassessable and free and clear of any preemptive rights. No certificates
will be issued to represent the Members' Interests of LLC Holdings. There will
be no outstanding preemptive, conversion or other rights, or other options,
warrants or agreements granted by, issued by, or binding upon, LLC Holdings for
the issuance, sale, purchase, repurchase, redemption, acquisition or other
transfer of its equity securities. The Disclosure Schedule to this Section
6.3(b) identifies the holders of all of the Members' Interests of LLC Holdings.
The formation of LLC Holdings and its acquisition of LLC as contemplated hereby
will result in LLC Holdings becoming the sole owner of LLC, holding its interest
in LLC free and clear of Liens other than a pledge under the Credit Agreement.
(c) Ownership and Transfer by Members. Each Member represents
that it has good, valid and marketable title to the units of Members' Interests
owned by it, free and clear of any Liens other than the pledge under the Credit
Agreement. Each Member represents that it is not a party to any contract,
agreement or understanding (other than this Agreement) relating to the issuance,
sale, redemption, purchase, repurchase, acquisition or other transfer or voting
of any units of Members' Interests or any other equity security of any Company,
other than LLC's operating agreement. There is no plan or intention on the part
of any Member to sell, exchange, transfer or otherwise dispose of any Members'
Interests to be received by such Member. Consummation of the transactions
contemplated by this Agreement will result in Superholdings becoming the sole
owner of LLC Holdings and LLC, holding its interests in LLC Holdings and LLC
free and clear of Liens.
6.4 Assets.
(a) Personal Property.
(i) Title. Except asset transfers to the Members
contemplated hereby, LLC or a Subsidiary is the sole owner of the assets
reflected in the LLC Financial Statements and has good and marketable title to
all such assets that are personalty (the "Personal Property") (other than the
leased Personal Property described below), in each case free and clear of all
Liens, except for (A) liens for non-delinquent taxes and assessments, (B) liens
of lessors arising under statute (C) other claims and encumbrances, charges or
statutory liens that do not materially detract from the value of, or impair the
use or transfer of, such Personal Property, (D) inchoate statutory liens for
amounts not yet payable and (E) the liens securing indebtedness under the Credit
Agreement ("Permitted Liens"). For purposes hereof, "Liens" shall mean security
interests, liens (choate or inchoate), encumbrances, mortgages, pledges,
equities, charges, assessments, easements, covenants, restrictions,
reservations, defects in title, encroachments and other burdens, whether arising
by contract or under law. With respect to any Personal Property that is leased,
LLC or the applicable Subsidiary is in compliance in all material respects with
each such lease and is the sole holder of a valid and subsisting leasehold
interest, free and clear of any Liens, other than Permitted Liens. The
Disclosure Schedule to this Section 6.4(a)(i) lists all lease agreements,
service agreements or other agreements related to leased Personal Property (the
"Equipment Leases").
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(ii) Inventory. LLC maintains an inventory of
telephones and accessories as required under LLC's agreements with Sprint,
which inventory is reflected as required by GAAP in the LLC Financial Statements
and covered by the manufacturers' applicable warranties.
(iii) Facilities and Equipment. All buildings,
facilities, offices, improvements on real estate, fixtures, machinery,
equipment, computer hardware and software, vehicles and other properties, owned
or leased by the Company for the conduct of its business (A) have been
maintained in accordance with maintenance practices that are standard for such
Company's industry, are prudent, and are in compliance in all material respects
with all applicable laws and regulations and (B) are adequate and sufficient for
all business operations conducted by such Company and are in condition and
repair adequate and sufficient for all business operations conducted by such
Company and comply in all material respects with all contractual obligations of
such Company.
(iv) Notes and Accounts Receivable. Except as set
forth on the Disclosure Schedule to this Section 6.4(a)(iv), all notes payable
to, and accounts receivable of, each Company (the "Accounts Receivable")
were created in the ordinary course of business and have been collected or are
collectible in the amounts thereof reflected in the books and records of such
Company, net of reserves or contractual allowances reflected in the LLC
Financial Statements. For purposes of this Agreement and the Related Agreements,
Accounts Receivable shall be deemed to be uncollectible if payment is not
collected through the utilization of ordinary collection efforts on the
ninetieth day after the applicable payment date. Payments to each Company in
respect of Accounts Receivable are deposited, upon receipt, directly into such
Company's Accounts and such amounts can only be withdrawn therefrom by such
Company or its duly authorized agents. To each Company's knowledge, none of the
Accounts Receivable is or was subject to any counterclaim or set off. All of
such Accounts Receivable arose out of bona fide, arms-length transactions.
(v) Bank Accounts. The Disclosure Schedule to this
Section 6.4(a)(v) sets forth the names and locations of all banks, trust
companies, savings and loan associations and other financial institutions at
which any Company maintains accounts of any nature (collectively, the
"Accounts"), the numbers of such accounts and the names of all persons
authorized to draw thereon or to make withdrawals therefrom.
(b) Real Property.
(i) Fee Simple. The Disclosure Schedule to this
Section 6.4(b)(i) sets forth a summary description of each parcel of real
property and the use thereof owned by any Company and identifies which Company
owns such real property, including but not limited to those properties reflected
on the LLC Financial Statements, (the "Real Property"). Except as set forth in
the Disclosure Schedule to this Section 6.4(b)(i), such Company has good and
marketable title in fee simple absolute to all Real Property, and to the
buildings, structures and improvements thereon, in each case free and clear of
all Liens other than Permitted Liens.
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Except for such leases and tenancies as are particularly described in the
Disclosure Schedule to this Section 6.4(b)(i), such Company has not granted any
leases on, and there are no tenancies of, the Real Property or any part thereof.
(ii) Leases; Easements and Other Interests. The
Disclosure Schedule to this Section 6.4(b)(ii) sets forth a summary
description of the nature of each Company's use of the land, premises,
buildings, structures and improvements held by lease or license. The interests
described above are collectively referred to herein as the "Leased Premises" and
the leases and licenses described above and the leases and tenancies described
in the Disclosure Schedule to Section 6.4(b)(i) (Fee Simple) are collectively
referred to herein as the "Real Estate Contracts."
The Company identified as such in the Disclosure Schedule to this
Section 6.4(b)(ii) is the sole holder of valid and subsisting leasehold
interests in the Leased Premises free and clear of any Liens, other than
Permitted Liens except, in the case of Tower Leases, subject to the co- location
rights of other tenants. All lease or rental payments and other amounts due and
payable in connection with the Leased Premises are current, there are no
defaults by such Company with respect thereto or, to the Companies' knowledge,
by any other party thereto and no event has occurred that with the passing of
time or the giving of notice or both would constitute a default (x) by such
Company thereunder or (y), to the Companies' knowledge, by any other party
thereunder. All options in favor of such Company to purchase any of the Leased
Premises, if any, are in full force and effect and are described in the
Disclosure Schedule to this Section 6.4(b)(ii). Such Company is in possession of
the Leased Premises and has the right to quiet enjoyment of the Leased Premises
for the full term of the related Real Estate Contract and any renewal option
related thereto. No Real Estate Contract is terminable as a result of the
transactions contemplated herein, and no leasehold or other interest of such
Company in such real property is subject or subordinate to any Lien, other than
Permitted Liens.
(iii) Tower Leases. With respect to leases or
licenses of tower space to which LLC is a party (the "Tower Leases"), (A) to
LLC's knowledge, there are no applications, ordinances, petitions, resolutions
or other matters pending before any governmental agency having jurisdiction
to act on zoning changes that would prohibit or make nonconforming the use of
any of the Leased Premises by LLC in any material respect, (B) LLC has good and
valid easement rights providing reasonable access and utilities to and from the
Leased Premises under the Tower Leases, (C) LLC has not voluntarily granted any,
and is not a party to any agreement providing for, and LLC has no knowledge of,
any easements, conditions, restrictions, reservations, rights or options that
would materially adversely affect the use of any of the Leased Premises under
the Tower Leases for the same purposes and uses as such Leased Premises have
been used by LLC, except for Permitted Liens.
(iv) Eminent Domain. Neither the whole nor any
portion of any Real Property or Leased Premises has been condemned, taken
by right of eminent domain, requisitioned or otherwise taken by any public
authority and no Company has received written notice from any governmental body
with power of eminent domain of any pending or threatened taking by eminent
domain, requisition or condemnation.
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(v) Ingress and Egress. Each Company has all
easements and rights of ingress and egress necessary for utilities and
services and for all operations of its business in the manner and to the extent
previously conducted by it.
(vi) Improvements. None of the improvements included
in the Real Property or Leased Premises (A) are in violation in any material
respect of any building line or use or occupancy restriction, limitation,
condition or covenant of record or any zoning or building law, code or ordinance
or public utility or other easement or (B) encroaches on the property rights of
any other person or entity. Each facility located on the Real Property or Leased
Premises currently is served by gas, electricity, water, sewage and waste
disposal and rail and other utilities adequate to operate such facility, and
none of the utility companies serving any such facility has threatened any
Company with any reduction in service. Such utilities either enter the Real
Property and Leased Premises through adjoining public streets or, if they pass
through adjoining private land, do so in accordance with valid, permanent public
or private easements which, following the Closing, will inure to the benefit of
Superholdings, its successors and assigns. All of said utilities are installed
and operating and all installation and connection charges have been paid for in
full.
(vii) Leased Premises Taxes. To the extent any
Company is liable for payment therefor, there is no Tax assessment pending
or, to the Companies' knowledge, threatened, with respect to any portion of the
Leased Premises, except for ad valorem taxes for the calendar year 2000.
(c) Intellectual Property.
(i) Intellectual Property. The term "Intellectual
Property" shall include all fictitious business names, trade names, registered
and unregistered trademarks, service marks and applications owned, used or
licensed by any Company (collectively, "Marks"), all patents and patent
applications (if any) owned, used or licensed by any Company (collectively,
"Patents"), all registered and unregistered copyrights (if any) in both
published works and unpublished works owned, used or licensed by any Company
(collectively, "Copyrights"), and all know-how, inventions, trade secrets,
confidential information, software, technical information, process technology,
plans, drawings and blue prints owned, used or licensed by any Company as
licensee or licensor (collectively, "Trade Secrets"). The Intellectual Property
also includes all such rights and assets of any Company under all contracts to
which any Company is a party or by which any Company is bound relating to the
Intellectual Property including, without limitation, contracts by which any
Company licenses Intellectual Property to third parties and contracts by which
any third party licenses to, or otherwise permits the use of its intellectual
property by, any Company (collectively, "Technology Contracts"). Each Company
is, and to the Companies' knowledge, each other party to the Technology
Contracts is, in compliance with all Technology Contracts, is not currently in
default thereunder, and no event has occurred that with the passing of time or
the giving of notice or both would constitute a default thereunder.
(ii) Ownership. Except with respect to Intellectual
Property licensed
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by a Company from a third party pursuant to a Technology Contract, one or more
of the Companies is the owner of all right, title and interest in and to the
Intellectual Property free and clear of all Liens other than Permitted Liens.
The Intellectual Property includes all such property necessary for the operation
of the respective businesses of the Companies (A) as they currently are proposed
to be, and have been, conducted and (B) without violating or infringing upon the
rights of any third party. Without limiting the foregoing, each Company is
properly licensed to use all computer software (and copies thereof) used by it.
No current or former employee of any Company has any rights to any Intellectual
Property. No right, license or consent of, or payment to, any third party will
be required after consummation of the transactions contemplated hereby for the
continued use of the Intellectual Property by LLC and the Subsidiaries.
(iii) Technology Contracts. The Disclosure Schedule
to this Section 6.4(c)(iii) contains an accurate and complete list of all of
the Technology Contracts, including all of the parties to each Technology
Contract.
(iv) Trademarks. The Disclosure Schedule to this
Section 6.4(c)(iv) contains an accurate and complete list of all Marks for
which registration has been obtained or for which application to registration
has been filed, including application and registration dates and numbers, and
jurisdiction thereof, and all other Marks, as well as which Company owns each
Mark. No Mark is infringed or has been challenged or threatened in any way, and
the Companies are not aware of any potentially interfering mark or application
therefor of any third party. None of the Marks infringe or are, or have been,
alleged to infringe any business name, trade name, trademark, service mark or
other right of any third party.
(v) Patents. The Disclosure Schedule to this
Section 6.4(c)(v) contains an accurate and complete list of all Patents,
including application and issuance dates and numbers, jurisdictions thereof, and
which Company holds each Patent. All the Patents are currently in compliance
with formal legal requirements (including payment of filing, examination and
maintenance fees), are valid and enforceable, and are not subject to any
maintenance fees or Taxes or actions falling due within one year from the date
hereof. No Patent has been or is now involved in any interference, reissue,
reexamination or opposition proceeding. To the Companies' knowledge after due
inquiry, there is no potentially interfering patent or patent application of any
third party. No Patent is infringed or, to the best of the Companies' knowledge,
has been challenged or threatened in any way. None of any Company's goods or
services, nor any processes or know-how used by any Company, infringe or are
alleged to infringe any patent or other right of any third party.
(vi) Copyrights. The Disclosure Schedule to this
Section 6.4(c)(vi) contains an accurate and complete list of all registered
Copyrights, including application and registration dates and numbers,
jurisdictions thereof and which Company holds each Copyright. None of the
Copyrights infringe or are, or have been, alleged to infringe any copyright or
any other right of any third party.
(vii) Trade Secrets. The Disclosure Schedule to this
Section 6.4(c)(vii) contains an accurate and complete listing and summary
description of each Trade Secret and
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which Company owns each Trade Secret. With respect to each Trade Secret the
documentation relating to such Trade Secret is current, accurate and sufficient
in detail and content to identify and explain it, and to allow its full and
proper use without reliance on the special knowledge or memory of any
individual. The Companies have taken all reasonable precautions to protect the
secrecy, confidentiality and value of the Trade Secrets. The Trade Secrets are
not part of the public knowledge or literature, nor have they been used,
divulged, or appropriated for the benefit of any third party. No Trade Secret is
subject to any adverse claim nor has any Trade Secret been challenged or, to the
Companies' knowledge, threatened in any way. None of the Trade Secrets infringe
or are alleged to infringe any right of any third party.
(d) Contracts.
(i) Definition. The Disclosure Schedule to this
Section 6.4(d)(i) lists as of May 31, 2000 all agreements, contracts, notes,
bonds, debentures, indentures, mortgages, deeds of trust, leases, licenses,
obligations, promises, settlements, repurchase obligations (including, but not
limited to, repurchase obligations pertaining to whole loan sales,
securitizations, pooling and servicing agreements and other such agreements and
understandings (whether written or oral and whether express or implied)
(together with the Equipment Leases, the Real Estate Contracts and the
Technology Contracts, the "Contracts")) that are material to the business of any
Company, including without limitation all of the foregoing (A) that provide for
future payments, claims or obligations to or from any Company of $25,000 or more
per year or $100,000 or more over the term thereof or (B) that are (1)
collective bargaining agreements or other agreements with any labor union, (2)
joint venture agreements, partnership agreements or other agreements involving
a sharing of profits, losses, costs or liabilities, (3) agreements containing
covenants that in any way purport to restrict the business activity of any
Company or limit the freedom of any Company to engage in any line of business or
to compete with any other person, (4) standard forms of agreements providing for
payments to or for any person based on sales, originations, closings, purchases
or profits (other than direct payments for goods), (5) powers of attorney, (6)
agreements providing for the payment of special or consequential damages in
excess of $100,000 by any Company, (7) agreements relating to capital
expenditures in excess of $200,00 by any Company, (8) warranties regarding
products or services, guarantees or other similar undertakings by any Company in
excess of $100,000, exclusive of manufacturers' warranties on telephones and
accessories (9) agreements involving indemnification for obligations of third
parties, (10) employment, secrecy, proprietary information, noncompetition,
restrictive covenant, or confidentiality agreements with key employees, (11)
requirements or output contracts, (12) business alliance or joint marketing
agreements, (13) agreements with Sprint, Sprint Spectrum or Sprint PCS or any of
their affiliates, (14) documents related to debt for borrowed money or (15)
amendments, modifications or supplements to any of the foregoing. As used
herein, the term "Contracts" also shall be deemed to refer to all agreements
between any Company, on the one hand, and any Member, any affiliate of any
Member, or any director or executive officer of any Company, on the other hand.
(ii) Sprint Agreements. LLC has complied in all
material respects with
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the following agreements with Sprint Corporation ("Sprint") (which agreements
are included in the definition of "Contracts," set forth above):
(A) Sprint PCS Management Agreement, dated
as of June 8, 1998, by and between Sprint Spectrum, LP, SprintCom, Inc. and
LLC, as amended by addenda dated June 8, 1998, October 6, 1998, January 21,
1999, September 1, 1999, February 17, 2000 and May 5, 2000 and July 27, 2000
(collectively, the "Sprint Management Agreement").
(B) Sprint Spectrum Service Mark and
Trademark License Agreement dated June 8, 1998, by and between Sprint Spectrum
LP and LLC.
(C) Sprint Service Mark and Trademark
License Agreement, dated as of June 8, 1998, by and between Sprint
Communications Company, LP and LLC.
(D) Sprint PCS Services Agreement, dated as
of June 8, 1998 by and between Sprint Spectrum, LP and LLC.
(E) Interim Network Operating Agreement
between Sprint Spectrum, LP and LLC, dated January 21, 1999, as amended on
August 27, 1999, September 8, 1999 and February 17, 2000.
(F) Asset Purchase Agreement, dated
October 6, 1998, between Sprint Spectrum, LP and LLC, as amended on July 21,
1999 and September 6, 1999.
(G) Build-out. The LLC Parties' build-out
of the Service Area Network in the Service Area, as such terms are defined
pursuant to the Build-out Plan approved by Sprint, is currently on schedule. As
of the date hereof, no Company has failed to meet any contract date except as
has been waived or modified in writing.
(H) Sprint PCS Technical Program
Requirements. LLC has complied with all Sprint PCS Technical Program
Requirements, as defined in the Sprint Management Agreement, in all material
respects except as have been waived or modified in writing.
(I) Sprint PCS Program Requirements. LLC has
complied with all Sprint PCS Program Requirements, as defined in the Sprint
Management Agreement, in all material respects except as have been waived or
modified in writing.
(J) Sprint PCS Customer Service Standards.
LLC has complied with all Sprint PCS Customer Service Standards, as defined in
the Sprint Management Agreement, in all material respects except as have been
waived or modified in writing.
(K) Sprint PCS Insurance Requirements. LLC
has complied with the Sprint PCS Insurance Requirements, as defined in the
Sprint Management Agreement, in all material respects except as have been waived
or modified in writing.
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(L) Sprint Management Agreement. No Event of
Termination (as defined therein) has occurred under the Sprint Management
Agreement.
(iii) LLC Credit Agreement.
(A) As of the date hereof, the Credit
Agreement (the "Credit Agreement") by and among LLC, as borrower, and Lucent
Technologies, Inc., as administrative agent and a lender, and the other lenders
referred to in the Credit Agreement (collectively, the "Lenders") and all other
Loan Documents (as that term is defined in the Credit Agreement), are in full
force and effect, without any amendments, and no Default (as that term is
defined in the Credit Agreement) (a "Default") exists and no Event of Default
(as that term is defined in the Credit Agreement) (an "Event of Default") has
occurred or is continuing under the Credit Agreement, nor has any Company
received any notice from any Lender alleging that a Default or an Event of
Default has occurred or is continuing, except as listed and explained on the
Disclosure Schedule to this Section 6.4(d)(iii)(A).
(B) As of the date hereof, the LLC has
borrowed the full amount of the Commitment (as that term is defined in the
Credit Agreement) under the Credit Agreement. The amount borrowed by LLC and
outstanding under the Credit Agreement is $56,000,000.00 exclusive of accrued
interest.
(C) As of the date hereof, LLC has not been
required to make any mandatory repayments under the Credit Agreement, except as
listed on the Disclosure Schedule to this Section 6.4(d)(iii)(C).
(D) The transactions contemplated herein
will not cause an Event of Default, or otherwise cause LLC to violate any
covenant or warranty of LLC under the Credit Agreement. LLC has obtained all
consents required to be obtained (from any party whatsoever) under the Credit
Agreement, with respect to the transactions contemplated herein. LLC has
attached copies of all necessary consents as the Disclosure Schedule to this
Section 6.4(d)(iii)(D).
(E) All representations and warranties made
to the Lenders under the Credit Agreement are true and correct as of the date
hereof, except as listed and explained on the Disclosure Schedule to this
Section 6.4(d)(iii)(E).
(iv) Legally Binding. All of the Contracts are legal,
valid and binding on the parties thereto, are in full force and effect and
represent legitimate transactions; no Company is in violation of or default
under any of the Contracts in any material respect and, to the Companies'
knowledge, no other party to any Contract is in material violation or default
thereunder; no event, occurrence or condition exists which, with the lapse of
time, the giving of notice, or both, or the happening of any further event or
condition, would become a material violation or default by any Company or any
other party thereto, under any Contract; there are no outstanding, and to the
Companies' knowledge, no threatened, disputes or disagreements with
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respect to any of the Contracts; no Company has released any material rights
under any Contract; no Company is subject to any legal obligations to
renegotiate, nor is there any right to renegotiate, any Contract; and no Company
is subject to any liability, or claim therefor, for or with respect to price
adjustment under any Contract with the United States Government or any agency
thereof, including any liability for defective pricing.
(v) Material Contracts. The Contracts constitute all
of the material contracts, leases and agreements necessary for the conduct of
the businesses of the Companies in the manner and to the extent conducted
respectively by them. All rights of the Companies under the Contracts will be
enforceable by Superholdings, LLC or a Subsidiary after the Closing without the
consent or agreement of any other party.
(vi) Copies. The Companies have delivered or made
available to Public true and complete copies of each Contract, including all
amendments thereto and waivers thereunder. There are no unwritten amendments to,
or waivers under, any Contract.
(e) Necessary Assets. Each Company owns or has the right to
use all assets, rights, and properties necessary for the conduct of its business
in the manner and to the extent currently conducted including, without
limitation, all items of property located on the Real Property.
6.5 Liabilities.
(a) No Liabilities. Except for the obligations of the Members
or their affiliates to distribute assets contemplated hereby, no Company has any
debt, guaranty, liability or obligation of any nature to any Member or an
Associate or Affiliate of such Member; no Company has any interest-bearing debt,
liability or obligation or any guaranty of any nature in excess of $50,000
individually or $100,000 in the aggregate, in each case, whether accrued,
absolute, contingent or otherwise, whether due or to become due, and whether
known or unknown, and there is no basis for the assertion against it of any such
debt, guaranty, liability or obligation except to the extent set forth or
reserved against in full in the LLC Financial Statements. The current
liabilities of the Companies incurred in the ordinary course of business
(excluding current maturities of interest-bearing debt and accounts payable for
fixed-asset purchases) do not exceed $400,000.
(b) Tax Matters.
(i) Filings. Each Company has filed or will timely
file all Tax Returns that it was, is or will be required to file on its behalf
and on behalf of any other party. All such Tax Returns were, are and will be
correct and complete in all respects. All Taxes due and owing by any Company
(whether or not shown on any Tax Return, whether known or unknown, asserted or
unasserted) have been paid. No Company is a party to any tax sharing or other
agreement that will require any payment with respect to Taxes. No Company
currently is
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the beneficiary of any extension of time within which to file any Tax Return
except that LLC has extended the due date of its 1999 Federal income tax return.
No Company has waived any statute of limitations in respect of Taxes or has
agreed to any extension of time with respect to a Tax assessment or deficiency
or the collection of Taxes.
(ii) Additional Taxes. No Company expects any taxing
authority or other governmental unit to assess any additional Taxes. No taxing
authority or other governmental unit has proposed or threatened any assessment,
deficiency, adjustment, dispute or claim concerning any Tax Return or any Tax
liability of any Company. There is no unpaid assessment, deficiency or
adjustment concerning any Tax Return or Tax liability of any Company. To the
Companies' knowledge, none of the Tax Returns of any Company has been selected
for or is now under audit or examination by any taxing authority or other
governmental unit. There are no suits, actions, proceedings or investigations
pending or, to the Companies' knowledge, threatened against any Company with
respect to any Taxes.
(iii) Withholdings. Each Company has withheld and
timely deposited or paid all Taxes required to have been withheld and deposited
or paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, Members or other third party.
(iv) Specific Code Provisions. No Company has made
any payments, is obligated to make any payments, or is a party to any agreement
that under any circumstances could obligate it to make any payments that would
be characterized as "excess parachute payments" under Section 280G of the Code.
None of the assets of any Company (A) is property which is required to be
treated as being owned by any other person pursuant to the so-called "safe
harbor lease" provisions of former Section 168(f)(8) of the Code; (B) directly
or indirectly secures any debt the interest on which is tax exempt under Section
103(a) of the Code; or (C) is "tax-exempt use property" within the meaning of
Section 168(h) of the Code. No Company (x) is a party to any Tax allocation or
sharing agreement; (y) has been a member of an affiliated group filing a
consolidated federal income Tax Return; or (z) has liability for the Taxes of
any person under Treasury Regulations Section 1.1502-6 or any similar provision
of state, local, or foreign law, as a member of a consolidated group, transferee
or successor, by contract, or otherwise. No Company has agreed to make, nor is
any Company required to make, any adjustment under Section 481(e) by reason of a
change in accounting method or otherwise. Neither the Members nor any Company is
a person other than a United States person within the meaning of the Code and
the transaction contemplated herein is not subject to the withholding provisions
of Section 3406 of the Code or subchapter A of Chapter 3 of the Code.
(v) Unpaid Taxes. The unpaid Taxes of the Companies,
including all Taxes not yet due for any and all periods through the Closing
Date, whether known or unknown, asserted or unasserted (A) do not exceed the
reserve for Tax liability (other than any reserve for deferred Taxes established
to reflect timing differences between book and Tax basis in assets and
liabilities) included in LLC Financial Statements and (B) do not exceed those
reserves as adjusted for the passage of time through the Closing Date.
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As used herein, the term "Taxes" means all federal, state, local,
foreign and other governmental net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, lease, service, service
use, withholding, payroll, employment, unemployment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other taxes,
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts with respect thereto,
and the term "Tax" means any one of the foregoing Taxes, and the term "Tax
Returns" means all returns, declarations, reports, statements and other
documents required to be filed in respect of Taxes.
(c) Litigation.
(i) Proceedings. There is no pending or, to the
Companies' knowledge, threatened, action, arbitration, audit, charge,
complaint, demand, hearing, investigation, litigation or suit (whether civil,
criminal, administrative (including, without limitation, Equal Employment
Opportunity Commission, Department of Labor or Office of Federal Contract
Compliance, National Labor Relations Board, and similar state or federal
agencies), investigative or informal) (A) that has been received or commenced by
or against any Company or that otherwise relates to or may affect the Parent
Merger, the Subsidiary Merger, the LLC Parties, the Members' Interests, this
Agreement, any Related Agreement or the transactions contemplated herein or
therein or (B) that has been received or commenced by or against any Member and
that relates to the LLC Parties or that otherwise relates to or may affect the
Parent Merger, the Subsidiary Merger, the LLC Parties, the Members' Interests,
this Agreement, any Related Agreement or the transactions contemplated herein
or therein (collectively, the "Proceedings") nor is there any basis therefor.
(ii) Orders. There is no award, decision, injunction,
judgment, order, ruling, subpoena, writ or verdict of any court, arbitrator or
government agency or instrumentality (A) to which the Parent Merger, the
Subsidiary Merger, the LLC Parties, the Members' Interests, this Agreement, any
Related Agreement or the transactions contemplated herein or therein is subject
or by which any of the foregoing may be affected or (B) to which any Member is
subject and that relates to or affects the Parent Merger, the Subsidiary Merger,
the LLC Parties, the Members' Interests, this Agreement, any Related Agreement
or the transactions contemplated herein and therein (collectively, the
"Orders").
(iii) Disclosure Schedule. The Disclosure Schedule to
this Section 6.5(c)(iii) sets forth a brief description of each Proceeding
pending or, to the Companies' knowledge, threatened, at the date hereof.
(d) Employee Liabilities. The Disclosure Schedule to this
Section 6.5(d) accurately lists as of the date set forth therein, (i) the hire
date of and year-to-date compensation paid to each current employee of each
Company (specifying as to each such employee the respective amounts of base
salary, bonus and commissions paid to such employee) (ii) all written employee
policies of each Company and (iii) all accrued and unpaid commissions, bonus
payments and vacation pay due to employees of each Company as of May 31, 2000.
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(e) Warranties. There are no warranties with respect to the
quality or absence of defects of its products or services that any Company has
sold or performed which are in force as of the date hereof except as are
described in the Disclosure Schedule to this Section 6.5(e).
(f) Products Liability. The Company has no liability for
products or services sold or distributed by it except such as for which the
manufacturers are exclusively liable.
6.6 Business.
(a) Customers and Suppliers. No Company has been informed in
writing of any intention or indication of intention by a Significant Customer, a
Significant Supplier or an Alliance Party to terminate its business relationship
with any Company or to limit its business relationship with any Company in any
respect. As used herein, (i) "Significant Customer" means any customer or
referral source (including without limitation consultants), responsible for in
excess of $100,000 of sales of any Company, measured in terms of dollar sales
volume for the twelve months ended May 31, 2000; (ii) "Significant Supplier"
means any supplier responsible for over $250,00 in sales to any Company
(measured by dollar value of goods purchased) for the twelve month period ended
May 31, 2000 and (iii) "Alliance Party" means any party with which any Company
had a joint venture, joint marketing or joint sales relationship during the
twelve month period ended May 31, 2000.
(b) Insurance. Each Company maintains insurance policies on
its assets, and upon its business and operations, against loss or damage, risks,
hazards and liabilities of the kinds customarily insured against by entities
similarly situated and engaged in the same or similar businesses in adequate
amounts under valid and enforceable policies (the "Policies"), with insurers the
Companies reasonably believe to be financially sound and reputable. The premiums
due and owing with respect to the Policies have been paid, premiums not yet due
have been adequately accrued for, and no Company has received any notice of
cancellation or of intention not to renew any such Policy. The Disclosure
Schedule to this Section 6.6(b) contains a list of the Policies, copies of which
have been provided to Public and the holder of each of the Policies. The
Disclosure Schedule to this Section 6.6(b) sets forth a list of each other
insurance policy or insurance contract relating to any Company or the business
of any Company pursuant to which any Company is or may hereafter be entitled to
assert claims for insurance coverage (the "Prior Policies"). The covered Company
or Companies have timely pursued all rights to recover (if any) under the
Policies and the Prior Policies.
(c) Employees. No officer, employee or independent contractor
of any Company is in violation of any term of any contract, proprietary
information agreement, noncompetition agreement, or any other agreement or any
restrictive covenant or any other common law obligation to a former employer
relating to the right of any such person to be engaged by such Company or to the
use of trade secrets or proprietary information of others (an "Outside
Confidentiality Agreement"), and the engagement of such persons by such Company
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before or after the Closing does not and will not subject any Company,
Superholdings or Public to any liability with respect thereto. There are neither
pending, nor to the Companies' knowledge, threatened, any Proceedings with
respect to any Outside Confidentiality Agreement. The Disclosure Schedule to
this Section 6.6(c) lists every Outside Confidentiality Agreement to which any
Company's officers or technical staff are a party, and all others about which
the Companies have knowledge.
There is no labor strike, dispute, slowdown, picketing or stoppage
pending or, to the Companies' knowledge, threatened against or directly
affecting any Company, nor has any Company experienced any of the foregoing
since its formation. No Company is subject to any collective bargaining
agreement. No union representation question exists and, to the Companies'
knowledge, there has been no union organization effort respecting the employees
of any Company. No Company is delinquent in payments to any of its employees for
any wages, salaries, commissions, bonuses or other direct compensation for any
services performed by them or amounts required to be reimbursed to such
employees. The Disclosure Schedule to this Section 6.6(c) lists every retired
employee entitled to receive compensation from any Company or to participate in
any benefit plan of any Company. The books and records of each Company
accurately reflect all changes in compensation since such Company's formation.
There are no employment agreements with any past or former employees of
any Company which provide or create a right to continued employment or
compensation. All employees of each Company are, and have been, employed for an
indefinite period and are, and have been, terminable at will, with or without
cause, and without cost to any Company for severance obligations, or any other
liability, except for payment of accrued salaries or wages and vacation
pay. No employee or former employee has any right to be rehired by any Company
prior to the hiring of a person not previously employed by such Company. To the
Companies' knowledge, no officer, director or key employee intends to terminate
employment with any Company.
(d) Worker's Compensation. Each Company subscribes to, or is
otherwise insured under, the worker's compensation or similar statute in every
state in which it owns or leases real estate or has employees. The Disclosure
Schedule to this Section 6.6(d) lists all material claims filed by employees of
any Company in respect of employment-related injury or illness since its
formation. No Company has received any report or notice from the Occupational
Safety and Health Administration.
(e) ERISA. The Disclosure Schedule to this Section 6.6(e)
lists each employee benefit plan, program, arrangement and contract (including
each "employee benefit plan" as defined in Section 3(3) of Title I of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and any
bonus, deferred compensation, stock bonus, stock, purchase, restricted stock,
stock option, employment, termination, stay agreement or bonus, value
appreciation, change in control and severance plan, program, arrangement or
contract that any Company maintains or ever has maintained, or to which any
Company contributes, ever has contributed or ever has been required to
contribute (collectively, the "Employee Benefit Plans"). Each Employee Benefit
Plan (and each related trust, insurance contract or fund) complies in form
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and in operation in all material respects with the applicable requirements of
all laws, rules and regulations governing or applying to such Employee Benefit
Plan, including without limitation ERISA and the Code, and each such Plan has
been operated in accordance with its terms in all material respects, except as
will not have an adverse effect on any Company, Superholdings or Public. No
liability has been incurred and there exists no condition or circumstance which
could result in any liability to any Company under ERISA, the Code or any other
applicable law, other than liability for benefits due under the appropriate
Employee Benefit Plan. All contributions (including all employer and employee
salary reduction contributions) which are due have been paid in a timely manner
to each such Employee Benefit Plan. No Company has engaged in or permitted to
occur and, to the Companies' knowledge, no other party has engaged in or
permitted to occur, any transaction prohibited by ERISA Title I ss. 406 or any
"prohibited transaction" under Code ss. 4975(c) or any breach of fiduciary duty
under ERISA with respect to any Employee Benefit Plan, except for any
transactions which are exempt under ERISA Title I ss. 408 or Code ss. 4975. All
filings required by ERISA and the Code as to each Employee Benefit Plan have
been timely filed, and all notices and disclosures to participants required by
either ERISA or the Code, including all notices required under ERISA Title I ss.
601 et seq. and Code ss. 4980B, have been timely provided. Each Company has
complied with all of the provisions of Parts 6 and 7 of Title I of ERISA and
Code ss. 4980B. The Companies have delivered or made available to Public correct
and complete copies of the plan documents or contracts and summary plan
descriptions, where applicable, the most recent Form 5500 Annual Report, where
applicable, all related trust agreements, insurance contracts and other funding
agreements which implement each Employee Benefit Plan, and such other documents
requested by Public with respect to each Employee Benefit Plan. No Company has
ever sponsored or has any liability under any employee pension benefit plan as
defined in ERISA Section 3(3).
No action, suit, proceeding, hearing or investigation with respect to
the administration or the investment of the assets of any Employee Benefit Plan
is pending or, to the Companies' knowledge, threatened, except for routine
claims for benefits under such plans.
The Disclosure Schedule to this Section 6.6(e) lists all contracts with
third-party administrators, insurers, actuaries, investment managers,
consultants and other independent contractors that relate to any Employee
Benefit Plan.
No Company has or has ever had any ERISA Affiliates other than the
Companies. "ERISA Affiliate" shall mean any person that, together with any
Company, is or at any time within the six-year period preceding the date of this
Agreement would be treated as a single employer under Code ss. 414. No Employee
Pension Benefit Plan is or has ever been subject to Title IV of ERISA or Code
ss. 412.
No employee of any Company will be entitled to any additional benefits
or any acceleration of the time of payment or vesting of any benefits under any
Employee Benefit Plan as a result of the transactions contemplated by this
Agreement. No Person is entitled to receive any additional payment from any
Company or any other party in the event that the excise tax of Code ss. 4999 is
imposed on that Person.
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(f) Conflicts of Interest.
(i) Affiliated Transactions. Except as contemplated
by this Agreement, since its formation, there have not been, nor are there
presently pending, any transactions between any Company and any member holding
more than 1% of the equity interests in any Company, or an "Associate" or
"Affiliate" (as such terms are defined in Rule 405 promulgated pursuant to the
Securities Act) of any Company or any such member, or any transaction with any
Company in which any of the foregoing persons or entities has a direct or
indirect financial interest other than public companies in which such person has
less than a 1% interest.
(ii) Ownership in Competitive Entities. Except as set
forth on the Disclosure Schedule to this Section 6.6(f)(ii), the Members (and
their respective spouses and relatives) do not, and to the best knowledge of the
Members, none of the Companies' officers, directors, employees, contractors or
consultants (or any of their respective spouses or relatives), directly or
indirectly, own any interest in any entity that is a competitor, customer or
supplier of, or has any existing contractual relationship with, any Company
other than public companies in which such person has less than a 1% interest.
(g) LLC Legal Requirements.
(i) Compliance with Laws. No Company has violated any
term of any judgment, writ, decree, order, law, statute, rule or regulation to
which it is subject or a party, or by which its business or assets are bound or
affected (collectively, "LLC Legal Requirements"), except as would not have a
material adverse effect on any Company, Superholdings or Public. No Company has
received notice of any actual, alleged or potential violation of an LLC Legal
Requirement. No Company is a public utility holding company, as defined in the
Public Utility Holding Company Act of 1935, as amended. No Company is an
investment company, as defined in the Investment Company Act of 1940, as
amended.
(ii) Certain Acts. Neither any of the LLC Parties nor
any of their former or current officers, directors, employees, agents or
representatives has made or agreed to make, directly or indirectly, with respect
to the businesses or assets of any Company, any (A) bribes or kickbacks, illegal
political contributions, payments from corporate funds not recorded on the books
and records of such Company, or funds to governmental officials (or any such
official's family members or affiliates) for the purpose of affecting their
action or the action of the government they represent, to obtain favorable
treatment in securing business or licenses or to obtain special concessions, or
illegal payments from corporate funds to obtain or retain business or (B)
payments from corporate funds to governmental officials for the purpose of
affecting their action or the action of the government they represent, to obtain
favorable treatment in securing business or licenses or to obtain special
concessions. Without limiting the generality of the foregoing, none of the
foregoing persons or entities has made or agreed to make, directly or
indirectly, (whether or not said payment is lawful) any payment to obtain, or
with respect to, sales other than usual and regular compensation to its
employees and sales representatives with respect to such sales.
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(iii) Licenses. Each Company has all governmental
licenses, permits, approvals, authorizations, exemptions, classifications,
registrations and certificates, and all consents or agreements with governmental
authorities (collectively, "Licenses") necessary to conduct its business in the
manner and to the extent that it has been conducted. All of the Licences and the
parties thereto are listed on the Disclosure Schedule to this Section
6.6(g)(iii). The Disclosure Schedule to this Section 6.6(g)(iii) also lists
every license that is in effect or has been applied for or is pending and
identifies all Licenses and applications for Licenses (collectively,
"Transferrable Licenses") that will be unimpaired as a result of the Parent
Merger and describes any action to be taken such that the Transferrable Licenses
will be enforceable by LLC, Superholdings or a Subsidiary after the Closing. The
Companies have delivered to Public true and complete copies of all of the
Licenses.
All Licenses are in full force and effect. No event
has occurred that may constitute or result in a violation of a License, or
result in the revocation, suspension, modification or nonrenewal of any License.
No LLC Party has received any notice of any actual, alleged or potential
violation, revocation, suspension, modification or nonrenewal of any License.
(h) Environmental Matters.
(i) Compliance. Each Company is in compliance in all
material respects with all applicable Environmental Laws and no Company has
received any written communication from any person that alleges that any Company
is not in compliance with any Environmental Law. As used herein, "Environmental
Laws" mean all laws or orders relating to the regulation or protection of human
health, safety or the environment (including, without limitation, ambient air,
soil, surface water, ground water, wetlands, land or subsurface strata),
including, without limitation, laws and regulations relating to releases or
threatened releases of hazardous materials or pollutants, archaeological or
historical sites or surveys, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
recycling, handling, discharge, removal or remediation of hazardous materials or
pollutants, the National Historic Preservation Act, and the National
Environmental Policy Act of 1969.
(ii) Environmental Claims. There is no Environmental
Claim pending or, to the Companies' knowledge, threatened (A) against any
Company, (B) against any person or entity whose liability for any Environmental
Claim any Company has or may have retained or assumed either contractually or by
operation of law or (C) with respect to any real or personal property or
operations which are now or have been previously owned, leased, operated or
managed, in whole or in part, by any Company, or any real property to which any
Company has transported any hazardous materials or pollutants.
(iii) Permits. No Company is required under any
Environmental Law to apply for or maintain any permit or authorization with
respect to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, recycling, handling or discharge of any hazardous materials
or pollutants.
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(iv) Pollutants. None of the Real Property or Leased
Property (including without limitation the soils, surface water or groundwater
thereof) are or have been impacted by the presence of hazardous materials or
pollutants.
As used herein, "Environmental Claim" means any and
all administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, claims, Liens, investigations, proceedings or notices of
non-compliance or violation (written or oral) by any person or entity (including
any governmental authority), alleging potential liability (including, without
limitation, potential liability for enforcement, investigatory costs, cleanup
costs, governmental response costs, removal costs, remedial costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (A) the presence, or release or threatened
release into the environment of any hazardous material or pollutant at any
location; or (B) any violation, or alleged violation, of any Environmental Law,
and including, without limitation, any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief in connection with the presence or release of any hazardous
materials or pollutants.
(v) Underground and Above Ground Storage Tanks.
Except as set forth on the Disclosure Schedule to this Section 6.6(h)(v), there
are no underground storage tanks or above ground storage tanks located on any of
the Real Property or Leased Premises or on any property located adjacent to any
Real Property or Leased Premises and no underground storage tanks or above
ground storage tanks have ever been located on the Real Property or Leased
Premises or on any property located adjacent to any Real Property or Leased
Premises.
(vi) Environmental Assessments. Except as set forth
on the Disclosure Schedule to this Section 6.6(h)(vi), environmental
assessments have been performed on all real properties which are now or have
been previously owned, leased, operated or managed by any Company, and such
assessments have been provided to Superholdings.
(i) Build-out Plan. The technical aspects of the build-out
plan attached as the Disclosure Schedule to this Section 6.6(i) have been
approved by Sprint. The Disclosure Schedule to this Section 6.6(i) sets forth
the extent of LLC's progress in the completion of the build-out and network
launch at the date hereof.
6.7 Other.
(a) Certain Information. None of the information supplied or
to be supplied by the LLC Parties in written form specifically for inclusion or
incorporation by reference in, or which may be deemed to be incorporated by
reference in, the Form S-4 or the Form S-1 will, at the time the Form S-4 or
Form S-1, as applicable, is filed with the SEC, at any time that such form is
amended or supplemented and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by the LLC Parties in written form specifically for
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inclusion or incorporation by reference in, or which may be deemed to be
incorporated by reference in, the Proxy Statement will, at the time it is filed
with the SEC, at any time that it is amended or supplemented, at the time it is
mailed to the holders of Public Stock and at the time of the Public Stockholders
Meeting and, if it is mailed to the Members, at the time it is mailed to the
Members and at the time of the Members Meeting, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(b) Documents Delivered. The written responses, documents,
copies and information delivered by the LLC Parties pursuant to requests by
Public or pursuant to the terms of this Agreement are true, complete and correct
in all respects. The ownership transfer records of each Company (the "LLC
Records") that have been made available to Public, Superholdings, Merger Sub or
their agents are complete in all material respects. At the Closing, all of the
LLC Records will be in the possession of LLC.
(c) No Brokers Fees; No Commissions. All negotiations relative
hereto and the transactions contemplated hereby have been carried on by the
Companies directly with Public and Merger Sub without any act by any Company
that would give rise to any claim against any Company, Public, Superholdings,
Merger Sub or their respective Affiliates for a brokerage commission, finder's
fee or other similar payment.
(d) Advice. Each Company has received and the Members have had
the opportunity to receive advice from their own accounting, financial, tax,
legal and other advisors regarding the Reorganization. The LLC Parties have
received no advice, agreement or representation from, and are not relying in any
way upon, Public, Superholdings, Merger Sub,Parent Surviving Corporation,
Subsidiary Surviving Corporation or any of their agents or advisors with regard
to advice on the Reorganization.
(e) Disclosure. None of the representations or warranties of
the LLC Parties contained in this Agreement, the Related Agreements the
Disclosure Schedules, or any other document delivered pursuant hereto or
thereto, none of the information contained in this Agreement, the Related
Agreements or the Disclosures Schedules, and none of the other information or
documents furnished or to be furnished to Superholdings, Public or their agents
by the LLC Parties or provided pursuant to the terms of this Agreement, the
Related Agreements or the Disclosure Schedules, contained, contains or will
contain on the date such agreement, document or information was delivered, or on
the Closing Date, any untrue statement of a material fact or omits or will omit
to state a material fact herein or therein necessary in order to make the
statements contained herein or therein not misleading.
6.8 Investment Representations.
(a) The Members understand and acknowledge that the
Superholdings Stock is being offered and sold under the exemptions from
registration provided for in Section 4(2) of the Securities Act, including
Regulation D promulgated thereunder, and that Superholdings' reliance upon such
exemption is based in part upon the Members' representations, warranties and
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agreements contained in this Agreement.
(b) The Members have carefully read this Agreement and, to the
extent believed necessary, have discussed the representations, warranties and
agreements which the Members make by signing it and the applicable limitations
upon the Members' resale of the shares of Superholdings Stock with the Members'
counsel.
(c) The Superholdings Stock to be issued to such Members in
the Reorganization is being acquired by the Members solely for the Members' own
account, for investment purposes only, and is not being acquired for resale,
resyndication, distribution, subdivision of fractionalization thereof, except
pursuant to an effective registration under the Securities Act or in a
transaction exempt from registration under the Securities Act. The Members have
no contract or arrangement with any person to sell, transfer or pledge to any
person the shares of Superholdings Stock or any part thereof, any interest
herein or any rights thereto, and the Members have no present plans to enter
into any such contract or arrangement.
(d) Each of the Members understands that it may not sell or
otherwise transfer its shares of Superholdings Stock unless such sale or other
transfer is registered under the Securities Act and the applicable state
securities laws or unless the sale or other transfer is exempt from the
registration requirements under the Securities Act and such other securities
laws, and that, as a result, the Members must bear the economic risk of the
investment for an indefinite period of time. The Members understand that
Superholdings may require the Members to furnish an opinion of counsel
satisfactory to Superholdings that such sale or transfer is so exempt.
(e) Each of the Members is able (i) to bear the economic risk
of an investment in Superholdings Stock, (ii) to hold the shares of
Superholdings Stock indefinitely, and (iii) to afford a complete loss of this
investment. Each of the Members has adequate means of providing for current
needs and has no present need for liquidity in this investment.
(f) Each of the Members is an "accredited investor" as that
term is defined under Rule 501(a) of Regulation D, as amended, under the
Securities Act and possesses such knowledge and experience in financial and
business matters so that each of the Members is capable of evaluating the merits
and risks of an investment in Superholdings Stock, and of making an informed
investment decision.
(g) Each of the Members confirms that, in making the decision
to acquire the shares of Superholdings Stock in the Reorganization, the Members
have relied solely upon independent investigations made by each of the Members
and/or by its representatives, including each of the Members' own professional
tax and other advisors and that the Members and such representatives and
advisors have been given the opportunity to ask questions of, and to receive
answers from, Superholdings concerning this Agreement and the terms and
conditions of the Reorganization, and to obtain any information requested by
Members concerning Superholdings from such person, to the extent such persons
possessed such information or could acquire it without unreasonable effort or
expense, necessary for each of the Members to make an informed
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investment in Superholdings Stock.
ARTICLE 7
Representations and Warranties of Public, Superholdings and Merger Sub
Public, Superholdings and Merger Sub, jointly and severally, represent
and warrant to the LLC Parties that except as set specifically forth on the
Disclosure Schedules (which exception shall relate only to the Sections
specifically identified in such Disclosure Schedules):
7.1 Entry Into Agreements.
(a) Organization and Good Standing. Public, Superholdings and
Merger Sub are corporations duly organized and validly existing under the laws
of the State of Delaware and are in good standing under such laws. Superholdings
owns, beneficially and of record, all of the issued and outstanding shares of
capital stock of Merger Sub.
(b) Corporate Power and Authority; Validity and Authorization.
Each of Public, Superholdings and Merger Sub has full corporate power and
authority to execute, deliver and perform this Agreement and the Related
Agreements to which it is a party. This Agreement has been duly authorized,
executed and delivered by Public, Superholdings and Merger Sub, and is
enforceable against Superholdings and Merger Sub, and upon approval by the
Public stockholders will be enforceable against Public, in accordance with its
terms.
When the Related Agreements to which each of Public,
Superholdings and Merger Sub is a party are delivered at the Closing, such
agreements will have been duly authorized, executed and delivered by Public,
Superholdings and Merger Sub, and will constitute the legal, valid and binding
obligations of Public, Superholdings and Merger Sub, enforceable against Public,
Superholdings and Merger Sub in accordance with their terms.
7.2 Conflicts and Consents.
(a) No Conflict. The execution, delivery and performance of
this Agreement and the Related Agreements, and the consummation of the
transactions contemplated hereby and thereby will not result in any violation of
the terms of and will not contravene, conflict with, accelerate the performance
of the obligations required under, or constitute a default under, the
certificate of incorporation or bylaws of Public, Superholdings or Merger Sub,
or any material agreement, judgment, decree, order, law, rule or regulation or
other restriction applicable to any of them, or to which any of them is a party
or by which Public, Superholdings or Merger Sub or their property or assets is
bound, or result in the creation of any mortgage, pledge, lien, encumbrance or
charge upon any of the properties or assets of Public, Superholdings or Merger
Sub.
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(b) Consents Obtained. Other than the approvals referred to in
Section 3.1(a) (Stockholder Approval) and Section 3.1(c) (HSR Act), the Permits
and the consents listed on the Disclosure Schedule to this Section 7.2(b) (the
"Public Consents"), no material consents, approvals or authorizations of third
parties are required in connection with Public's, Superholdings' and Merger
Sub's valid execution, delivery, or performance of this Agreement and the
Related Agreements or the consummation of any of the transactions contemplated
hereby or thereby on the part of such party.
7.3 No Brokers Fees; No Commissions. All negotiations relative
hereto and the transactions contemplated hereby have been carried on by Public
and Merger Sub directly with the LLC Parties without any act by Public or Merger
Sub that would give rise to any claim against the LLC Parties or their
Affiliates for a brokerage commission, finder's fee or other similar payment.
7.4 Superholdings Stock. The shares of Superholdings Stock, when
issued, sold and delivered in accordance with the terms hereof will be duly and
validly issued, fully paid and nonassessable and issued free and clear of any
Liens.
7.5 SEC Documents. Public has heretofore delivered or made
available to the LLC Parties Public's Prospectus dated February 3, 2000 and all
reports required to be filed by Public under Sections 13(a), 14(a), 14(c) and
15(d) with the SEC on or after February 3, 2000 (the "SEC Documents"). As of
their respective dates, each of the SEC Documents complied in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act and the rules and regulations of the SEC applicable to such reports and did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited consolidated financial
statements of Public included in the SEC Documents fairly present the financial
position of Public as of the dates of such financial statements and the results
of Public's operations and cash flows for the periods then ended, in accordance
with GAAP, except for the variances from GAAP set forth in the notes thereto.
7.6 No Material Adverse Effect. Since the date of the most recent
filing by Public under the Exchange Act prior to the date hereof, there has been
no event or occurrence that has caused or is reasonably expected to cause a
material adverse effect on Public other than (i) operating losses in the
ordinary course of business or (ii) economic conditions affecting the U.S.
economy generally or the telecommunications industry generally.
7.7 Capitalization. The authorized capital stock of Public
consists (i) of 95,000,000 shares of Public Stock, of which 61,354,606 shares
were issued and outstanding as of April 20, 2000 and (ii) 5,000,000 shares of
preferred stock, par value $.01 per share, of which no shares were issued and
outstanding as of April 20, 2000. All of the issued and outstanding shares of
Public Stock have been duly authorized and validly issued, are fully paid and
nonassessable and are free and clear of any preemptive rights. As of March 31,
2000, there were no outstanding preemptive, conversion or other rights, or other
options, warrants or agreements granted by,
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issued by, or binding upon, Public for the issuance, sale, purchase,
repurchase, redemption, acquisition or other transfer of its equity securities,
other than stock that may be issued pursuant to stock option plans or agreements
described in the SEC Documents and obligations under the Sister Agreements.
7.8 Capitalization of Superholdings. The authorized capital stock
of Superholdings immediately prior to the Closing will consist (i) of at least
290,000,000 shares of Superholdings Stock, and (ii) at least 10,000,000 shares
of preferred stock. All of the issued and outstanding shares of Superholdings
Stock will be duly authorized and validly issued, fully paid and nonassessable
and will be free and clear of any preemptive rights. On the date of this
Agreement, there are no outstanding preemptive, conversion or other rights, or
other options, warrants or agreements granted by, issued by, or binding upon,
Superholdings for the issuance, sale, purchase, repurchase, redemption,
acquisition or other transfer of its equity securities, other than stock that
may be issued pursuant to the stock option plans and agreements of Public
described above (after consummation of the Subsidiary Merger) or pursuant to the
Sister Agreements.
7.9 No Liabilities. At the date of this Agreement, Public has no
debt, guaranty, liability or obligation of any nature in excess of $5,000,000,
whether accrued, absolute, contingent or otherwise, whether due or to become
due, and whether known or unknown, and there is no basis for the assertion
against it of any such debt, guaranty, liability or obligation except (i) to the
extent set forth or reserved against in full in Public's audited consolidated
financial statements and unaudited consolidated financial statements included in
the SEC Documents and (ii) liabilities incurred in the ordinary course of
business since March 31, 2000.
7.10 Compliance with Laws. Public has not violated any term of any
judgment, writ, decree, order, law, statute, rule or regulation to which it is
subject or a party, or by which the business or assets of Public are bound or
affected (collectively, "Public Legal Requirements"), except as would not have a
material adverse effect on Public. Public has not received notice of any actual,
alleged or potential violation of a Public Legal Requirement.
7.11 Certain Information. None of the information supplied or to be
supplied by Public, Superholdings or Merger Sub in written form specifically for
inclusion or incorporation by reference in, or which may be deemed to be
incorporated by reference in, the Form S-4 or the Form S-1 will, at the time the
Form S-4 or Form S-1, as applicable, is filed with the SEC, at any time that
such form is amended or supplemented and at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by Public, Superholdings or Merger Sub in written form specifically
for inclusion or incorporation by reference in, or which may be deemed to be
incorporated by reference in, the Proxy Statement will, at the time it is filed
with the SEC, at any time that it is amended or supplemented, at the time it is
mailed to the holders of Public Stock and at the time of the Public
Stockholders Meeting and, if it is mailed to the Members, at the time it is
mailed to the Members and at the time of the Members Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or
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necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by Public, Superholdings or Merger Sub with
respect to statements made or incorporated by reference therein based on
information supplied by the LLC Parties or other parties to Sister Agreements
specifically for inclusion therein.
7.12 Litigation. There are no suits, actions or proceedings pending
against Public or any of its subsidiaries or, to the knowledge of Public,
threatened against Public or any of its subsidiaries, at law or in equity, or
before any federal or state commission, board, agency or instrumentality, that
are likely to have, individually or in the aggregate, a material adverse effect
on Public. There are no outstanding judgments, decrees, injunctions, awards or
orders against Public or any of its subsidiaries that are likely to have,
individually or in the aggregate, a material adverse effect on Public.
7.13 Disclosure. None of the representations or warranties of
Public, Superholdings or Merger Sub contained in this Agreement, the Related
Agreements or the Disclosure Schedules contains any untrue statement of a
material fact or omits to state a material fact herein or therein necessary in
order to make the statements contained herein or therein not misleading in any
material respect.
7.14 Reorganization. Neither Public, Superholdings nor Merger Sub
has knowingly taken, or knowingly failed to take, any action that would
reasonably result in the Parent Merger not qualifying as a transaction described
in Section 351(a) of the Code.
ARTICLE 8
Covenants of the Parties
During the periods from the date of this Agreement and continuing until
the Effective Time, the parties agree that:
8.1 Services Agreement. On the date hereof, the parties will
execute the Services Agreement. The Services Agreement sets forth the terms
pursuant to which Public will manage the LLC's business after HSR Act approval
has been obtained and until the earlier of the Closing Date or the Termination
Date.
8.2 Conduct of Business of LLC Pending Closing. Unless otherwise
expressly contemplated hereby including, without limitation, pursuant to the
terms of the Services Agreement or approved in writing by Public and
Superholdings, each of LLC, LLC Holdings and the Subsidiaries shall conduct
their respective businesses and operations only in, and each of LLC, LLC
Holdings and the Subsidiaries shall not take any action except in, the ordinary
course of their respective businesses and consistent with their respective past
practices. In the conduct
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of their respective businesses, each of LLC, LLC Holdings and the Subsidiaries
shall comply with the covenants set forth in Section 4.1(b) (LLC Parties'
Responsibilities).
The LLC Parties shall use reasonable best efforts to:
(a) maintain LLC's, LLC Holdings' and the Subsidiaries'
respective rights and franchises and preserve their respective relationships
with customers, suppliers and others having business dealings with them with the
objective of minimization of the impairment of their respective ongoing
businesses;
(b) preserve, protect and maintain for Public and
Superholdings the good will of LLC's, LLC Holdings' and the Subsidiaries'
respective employees; and
(c) to keep available to Public and Superholdings the present
officers and employees of LLC, LLC Holdings, and the Subsidiaries.
The LLC Parties shall consult with Public and Superholdings on
strategies for maintaining and preserving LLC's, LLC Holdings' and the
Subsidiaries' respective businesses and effecting an orderly transition to
Public and Superholdings' ownership of such businesses.
8.3 Access to Information and Employees. The LLC Parties shall
permit, upon reasonable notice during normal business hours, Public and their
Representatives to visit and inspect any of the properties of LLC, LLC Holdings
and the Subsidiaries, including books and records, and to discuss the affairs,
finances and accounts of LLC, LLC Holdings and the Subsidiaries, and Public's
and Superholdings' prospects, plans and intentions with LLC's, LLC Holdings' and
the Subsidiaries' respective officers, employees, brokers and independent public
accountants, as often as any such person may deem necessary or desirable and
reasonably request. The LLC Parties shall furnish to Public copies of any Phase
1 or other environmental reports relating to the Real Property or the Leased
Premises that are created after the date of this Agreement. The LLC Parties
shall permit Public to conduct, subject to the rights of the lessors thereof, at
Public's sole discretion, environmental investigations and analyses of the Real
Property.
In this Agreement, "Representatives" means, collectively, a party's
directors, officers, employees, stockholders or members (as the case may be),
partners, financial parties in interest, agents, advisors, attorneys,
accountants, consultants, Affiliates, Associates, financing sources and
representatives of any such source, representatives, and any person or entity
being considered for any such role.
8.4 Financial Statements. The LLC Parties shall deliver to Public
and Superholdings not later than the 15th business day of each succeeding month,
financial statements of the kind described in Section 6.2 (Financial
Information) for the month ended July 31, 2000 and each subsequent month before
the Closing.
8.5 Payment of Indebtedness of Related Persons. The Members will
cause all
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indebtedness that any of the Members or any of LLC's, LLC Holdings' or the
Subsidiaries' Affiliates owes to LLC, LLC Holdings or any Subsidiary to be paid
in full prior to Closing (other than travel advances in the ordinary course of
business not to exceed $10,000 in the aggregate).
8.6 Records of LLC. On or prior to the Closing Date, the LLC
Parties shall transfer or cause to be transferred to LLC any files, books,
records or other documents relating to the business of LLC, LLC Holdings or any
Subsidiary that are the property of LLC, LLC Holdings or any Subsidiary and that
are possessed by any LLC Party or any Affiliate of any LLC Party and that are
not otherwise possessed by LLC. The LLC Parties may make and retain copies (at
their expense) of any such files, books, records and documents transferred to
LLC.
8.7 Employee Benefit Plans. LLC shall maintain in accordance with
all legal requirements the Employee Benefit Plans and prior to Closing shall
not take any action to terminate or discontinue any such plan without Public's
and Superholdings' prior written consent.
8.8 Tower Payables. The LLC Parties shall cause Tower Company to
assume all existing and future tower payables of LLC and LLC Holdings and shall
cause LLC, LLC Holdings, and Tower Company to inform all vendors to invoice
Tower Company for all such tower payables incurred after June 30, 2000.
ARTICLE 9
Post-Closing Agreements
The Members and Superholdings covenant and agree that after the
Closing:
9.1 Further Actions. Superholdings shall have the right to act in
the name and on the behalf of LLC and LLC Holdings, including, without
limitation, with respect to the execution and performance of such further
instruments of transfer and conveyance, documents and certificates as may be
reasonably requested by Superholdings in order to more effectively convey and
transfer to Superholdings all of the Members' Interests and businesses of LLC,
LLC Holdings and the Subsidiaries, to aid and assist in reducing to possession
or exercising rights with respect to same, or to consummate any of the
transactions contemplated hereby.
The Members shall as promptly as practical after receipt deliver to
Superholdings any cash, checks, mail, packages, notices and other similar
communications of or to LLC, LLC Holdings or the Subsidiaries that any of them
receives. The Members shall endorse in favor of Superholdings any checks or
other instruments of payment that by their terms are payable to the Members but
that are property of LLC, LLC Holdings or the Subsidiaries.
9.2 Cooperation. The Members shall use reasonable best efforts to
aid Superholdings in establishing itself as the new owner and operator of the
businesses of LLC, LLC Holdings and the Subsidiaries and, in connection
therewith, shall use reasonable best efforts to maintain LLC's, LLC Holdings'
and the Subsidiaries' goodwill and reputation with all suppliers,
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customers, distributors, creditors and others having business relations with
LLC, LLC Holdings or the Subsidiaries and in the business community generally.
The Members shall cooperate, at Superholdings' expense, and shall cause their
Representatives to cooperate, with Superholdings in connection with
Superholdings' preparation and filing under the Securities Act or Exchange Act
of any registration statement for which the assistance of the LLC Parties or
their respective Representatives is reasonably required.
9.3 Tax Returns. The Members shall file on behalf of LLC (and, if
necessary, on behalf of any other LLC Party), all tax returns for the fiscal
year ended December 31, 2000, by not later than the unextended due date, and all
tax returns for the short period by not later than the unextended due date and
shall provide copies of such returns to Superholdings immediately after the
filing of such returns.
9.4 Access to Information; Confidentiality. The Members and
Superholdings shall afford to the other and their respective Representatives
reasonable access to their respective books and records in order to prepare tax
returns within 30 days after the end of the reporting period therefor and other
governmental filings within reasonable time to permit the timely filing thereof.
9.5 [Intentionally deleted].
9.6 Name. After the Closing, M.R. and S.R. shall have the right
to conduct business under the name "Roberts Wireless Communications" and all
derivatives thereof.
9.7 Tower Payables. The Members shall cause Tower Company to
assume all existing and future tower payables of LLC and LLC Holdings not
otherwise assumed pursuant to Section 8.8 (Tower Payables) and shall cause Tower
Company to inform all vendors to invoice Tower Company for all such tower
payables incurred after June 30, 2000.
9.8 Reorganization. Following the Closing, Superholdings will not
knowingly take or knowingly permit any of its subsidiaries or Affiliates to take
any action or knowingly fail to take any action that would reasonably cause the
Parent Merger not to qualify as a transaction described in Section 351(a) of the
Code.
9.9 Insurance. Public and Superholdings acknowledge that LLC's
insurance coverage and health insurance are provided under blanket policies
covering other affiliates of LLC not included in this transaction and that such
coverages will be terminated with respect to LLC and LLC Holdings at Closing.
Accordingly, Superholdings will be responsible for providing replacement
coverage effective at the Closing, provided that LLC's coverages shall apply
with respect to insured events occurring prior to the Closing.
ARTICLE 10
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Indemnification
10.1 Survival; Etc.
(a) Contents of this Agreement. The representations,
warranties, covenants and agreements made in Superholdings Closing Certificate,
LLC Parties Closing Certificate, and any Disclosure Schedule shall be deemed
representations, warranties, covenants and agreements made herein.
(b) No Effect on Liability. None of (i) the consummation of
the transactions contemplated by this Agreement or the Related Agreements, (ii)
the delay or omission of any party to exercise any of its rights under this
Agreement or any Related Agreement or (iii) any investigation or disclosure that
any party makes, any notice or certificate that any party gives, or any
knowledge that any party obtains as a result thereof, or otherwise, shall (A)
affect the liability of the parties to one another for Breaches of this
Agreement or any Related Agreement or (B) prevent any party from relying on the
representations or warranties contained in this Agreement or any Related
Agreement.
As used herein, a party's "Breach" shall mean any
representation or warranty being untrue when made by such party, any breach of
any of such party's covenants or agreements or any other claim that may be
asserted against such party arising from the document in question or the
transactions contemplated thereby.
(c) Survival. The representations and warranties of Public,
Superholdings, Merger Sub and the Members made in this Agreement or any Related
Agreement shall survive the Closing, subject to the limitations set forth in
Section 10.1(d) (Commencing Actions). The representations and warranties of LLC,
LLC Holdings and Subsidiaries made herein shall be extinguished at the Closing
and LLC, LLC Holdings and Subsidiaries shall each have no liability thereafter
for Breach hereof. Effective at the Closing, the Members waive and release any
claim for Breach of this Agreement or any Related Agreement by LLC, LLC Holdings
or the Subsidiaries, including without limitation any claim for indemnification
or contribution.
(d) Commencing Actions. If the Closing occurs, then any action
against any party hereto for Breaches of this Agreement (other than breaches of
covenants or agreements) occurring on or prior to the time of the Closing that
is not commenced prior to the Closing pursuant to Section 10.7 (Dispute
Resolution) or withheld against pursuant to Section 10.2(d) (Form of Payment;
Interim Losses) shall be deemed waived, and no person shall have any remedy
against any party for any such Breaches; provided, however, (i) if any
Indemnified Party is subject to Losses for Breaches in Sections 6.1(b) (Validity
and Authorization; Power and Authority), 6.3 (Members' Interests), 7.1(b)
(Corporate Power and Authority; Validity and Authorization) or 7.4
(Superholdings Stock) such Indemnified Party may commence an action against the
Indemnifying Party to recover such Losses at any time that such Indemnified
Party is subject to Losses with respect thereto and shall not be barred by the
first clause of this Section and (ii) if any Superholdings Indemnitee is subject
to Losses for Breaches in Section 6.5(b) (Tax Matters), such Superholdings
Indemnitee may commence an action against the Members to
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recover such Losses for one year after the Closing Date and shall not be barred
by the first clause of this Section; provided, further, that any such
Indemnified Party shall use reasonable best efforts to obtain for itself and for
the Indemnifying Party the benefit of any statute of limitations applicable as
against any third party.
(e) Materiality. In determining whether (i) a party's
representations and warranties are true and correct in any respect, (ii) a party
has performed any of his, her or its covenants or agreements contained herein or
(iii) a Breach of this Agreement or any Related Agreement has occurred, such
representations, warranties, covenants, agreements and Breaches shall be deemed
to not include any qualification or limitation with respect to materiality
(whether by reference to a "Material Adverse Change," "material adverse effect"
or otherwise). The terms "material," "material adverse effect" and similar terms
(other than Public Material Adverse Change and LLC Material Adverse Change)
shall be construed in the customary manner, but in any event shall mean changes,
effects, events, occurrences, and other matters substantially less in magnitude
than a Public Material Adverse Change in the case of Public, Superholdings or
Merger Sub or an LLC Material Adverse Change in the case of the LLC Parties.
10.2 Indemnities.
(a) Indemnification of Superholdings. Subject to the other
provisions of this Article, before the Closing the LLC Parties jointly and
severally, and after the Closing, the members of LLC Holdings jointly and
severally (collectively, as applicable, the "Member Indemnitors"), shall defend,
indemnify and hold Superholdings and its Affiliates, and their respective
directors, officers, employees, stockholders or members (as the case may be),
agents, advisors, attorneys, accountants, consultants and affiliates
(collectively, the "Superholdings Indemnitees"), harmless from and against, and
promptly reimburse Superholdings Indemnitees for, any loss, expense, damage,
deficiency, liability, claim or obligation, including investigative costs, costs
of defense, settlement costs (subject to approval as provided below) and
attorneys' and accountants' fees (collectively, "Losses") that any Superholdings
Indemnitee suffers or incurs or to which any Superholdings Indemnitee becomes
subject, which Losses arise out of or in connection with (i) any Breach by any
of the LLC Parties of this Agreement, (ii) any claim asserted by any third party
that, assuming the truth thereof, would constitute a Breach by any of the LLC
Parties of this Agreement, (iii) the Cause of Action and all Proceedings or (iv)
all matters listed in the LLC Parties Closing Certificate.
The amount of the Losses payable by such Member Indemnitors shall bear
interest from the date the Losses are incurred at a rate of interest per annum
that shall, from day to day, equal the lesser of (x) the variable rate of
interest published in the "Money Rates" section of the Wall Street Journal (or
the comparable section of such newspaper) as the prime rate of interest on
corporate loans at large United States money center commercial banks and (y) the
maximum rate allowed under applicable law.
Each Member Indemnitor agrees that any liability for indemnification (a
"Member Indemnified Claim") under this Section 10.2(a) shall be borne by the
Member Indemnitors jointly and severally regardless of which Member Indemnitor
is required to make any payments
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to a Superholdings Indemnitee for a Member Indemnified Claim pursuant to this
Section 10.2(a). If any Member Indemnitor ("Paying Member Indemnitor") is
required to pay or is held liable for any amount with respect to a Member
Indemnified Claim, each of the other Member Indemnitors (the "Remaining Member
Indemnitors") shall be liable to the Paying Member Indemnitor for, and shall
contribute to and hold the Paying Member Indemnitor harmless from and against,
an amount equal to such Remaining Member Indemnitor's pro rata share of such
liability (based upon the aggregate dollar value of the Per Unit LLC
Consideration and the Per Unit Cash Consideration received by such Remaining
Member Indemnitor pursuant to the Parent Merger), as adjusted to account for a
default by any Member Indemnitor in meeting its obligations hereunder. Such
amount shall be paid within five days of the date any Paying Member Indemnitor
is held liable for, or is required to pay, a Member Indemnified Claim.
(b) Indemnification of the Members. Subject to the other
provisions of this Article before the Closing, Public, and after the Closing,
Superholdings, (the "Superholdings Indemnitors") shall defend, indemnify and
hold the Members harmless from and against, and promptly reimburse them for, any
Losses that the Members incur or to which the Members become subject, which
Losses arise out of or in connection with (i) any Breach by Public,
Superholdings or Merger Sub of this Agreement or (ii) any claim asserted by any
third party that, assuming the truth thereof, would constitute a Breach by
Public, Superholdings or Merger Sub of this Agreement.
The amount of the Losses payable by the Superholdings Indemnitors shall
bear interest from the date the Losses are incurred at a rate of interest per
annum that shall, from day to day, equal the lesser of (x) the variable rate of
interest published in the "Money Rates" section of the Wall Street Journal (or
the comparable section of such newspaper) as the prime rate of interest on
corporate loans at large United States money center commercial banks and (y) the
maximum rate allowed under applicable law.
(c) Contribution. If the indemnification provided for in this
Section 10.2 is unavailable to an indemnified party under Sections 10.2(a)
(Indemnification of Superholdings) or 10.2(b) (Indemnification of the Members)
(other than by reason of exceptions provided in this Article 10) in respect of
any Losses, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the LLC Parties (for Losses arising
prior to the Closing) or the Members (for Losses arising after Closing), on the
one hand, and of Public (for Losses arising prior to the Closing) or
Superholdings (for Losses arising after the Closing), on the other hand, in
connection with the Breaches which resulted in such Losses, as well as any other
relevant equitable considerations.
The LLC Parties, Public and Superholdings agree that it would not be
just and equitable if contribution pursuant to this Section 10.2(c) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
10.2(c), no person guilty of fraudulent misrepresentation shall be entitled to
contribution from
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any person who was not guilty of such fraudulent misrepresentation.
(d) Form of Payment; Interim Losses.
(i) Escrow Deposit. Subject to the provisions of this
Section 10.2(d), at the Closing, Superholdings may, after notice to the Members
specifying the factual basis therefor in reasonable detail, collectively
withhold from the aggregate amount of the Per Unit LLC Consideration a number of
shares of Superholdings Stock representing up to $40 million in value (using the
average of the last reported sales prices as reported by The Nasdaq Stock Market
for Public Stock for the 10 days preceding the Closing Date) (the "Escrow
Deposit") to satisfy Losses for which claims of indemnity may have arisen at or
prior to the Closing Date for which Superholdings claims indemnity pursuant to
this Agreement ("Interim Losses").
(ii) Interim Loss Value. In order to quantify the
actual value of the Interim Losses, after the Closing a national accounting
firm, independent of the parties hereto and selected by Superholdings, shall
attempt to estimate the amount of Interim Losses (the "Interim Loss Value"). If
such accounting firm is able to reasonably estimate the amount of each claim
comprising the Interim Loss Value, as a fixed amount or as a range of amounts,
then the amount withheld shall equal the estimated fixed amount(s) and/or the
maximum amount of such estimated range(s) of amounts for each claim comprising
the Interim Loss Value. If such accounting firm is unable, for any reason
whatsoever, to reasonably estimate the amount of any claim comprising the
Interim Loss Value, as a fixed amount or as a range of amounts, then
Superholdings shall have no right to withhold any amount with respect to such
claim.
(iii) Escrow Adjustment. On the third business day
following the date on which the amount of the Interim Loss Value has been
determined pursuant to Section 10.2(d)(ii)(Interim Loss Value), the difference,
if any, between the Interim Loss Value and the Escrow Deposit (the "Escrow
Adjustment") shall be paid in shares of Superholdings Stock (using the average
of the last reported sales prices as reported by The Nasdaq Stock Market for
Public Stock for the 10 days preceding the Closing Date) as follows:
(A) If the amount of the Interim Loss Value
is less than the Escrow Deposit, then the Escrow Agent shall pay and cause to
be paid to the Members the Escrow Adjustment, as provided in the Escrow
Agreement.
(B) If the amount of the Interim Loss Value
is greater than the Escrow Deposit, then the Members shall pay and cause to be
paid to the Escrow Agent the Escrow Adjustment, as provided in the Escrow
Agreement.
(iv) Resolution of Claims. The Escrow Agent shall
hold the Escrow Funds in the Escrow Account until final resolution of the
matters giving rise to the Losses or potential Losses as well as other Losses
that Superholdings subsequently asserts, and then deliver the Escrow Funds in
accordance with such resolution, as provided in the Escrow Agreement.
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After such final resolution, the Escrow Agent shall deliver to Superholdings
the Superholdings Stock, together with any dividends or other distributions with
respect thereto, in satisfaction of any liability in accordance with Section
10.2(d)(v) (Satisfaction of Liability). After the distribution to Superholdings,
the Escrow Agent will release the remaining balance of the Escrow Funds not
subject to further claims to the Members, as provided in the Escrow Agreement.
(v) Satisfaction of Liability. After Closing, any
party may satisfy its liability under this Article 10 by (A) delivering shares
of Superholdings Stock valued at the average of the last reported sale prices as
reported by The Nasdaq Stock Market for the 10 days preceding the date of
delivery, together with any dividends or other distributions with respect
thereto or (B) cash payments, at the sole option of such party. If a Member
satisfies its liability by cash payment instead of Superholdings Stock, then the
Escrow Agent shall release to such Member the shares of Superholdings Stock as
determined pursuant to Section 1.2(a)(i) (Superholdings Stock), valued at the
average of the last reported sale prices as reported by The Nasdaq Stock Market
for the 10 days preceding the date of delivery, together with any dividends or
other distributions with respect thereto; provided, however, that Superholdings
and the Members must provide the Escrow Agent with the proper instruments, as
detailed in the Escrow Agreement, as a condition to the Escrow Agent making any
distribution of the Escrow Funds.
(e) Termination Fee. If the Closing fails to occur due to a
Breach by Superholdings, Public or Merger Sub, then the LLC Parties shall be
entitled to receive an aggregate of (i) the total amount of management fees paid
to Public under the Services Agreement plus (ii) any consent fee paid to obtain
consent to the Parent Merger under the Credit Agreement in immediately available
funds (the "Termination Fee") from either Superholdings or Public.
Notwithstanding any other provisions of this Agreement, the receipt of the
Termination Fee shall be the sole and exclusive remedy available to the LLC
Parties for any failure of the Closing due to Breach by Superholdings, Public,
or Merger Sub, and the LLC Parties hereby waive their rights to any other
remedies, whether at law or in equity, for such failure caused by such Breach.
10.3 Limitations on Indemnities.
(a) Basket.
(i) Member Indemnitors. Notwithstanding anything to
the contrary in this Article, after the Closing, the Member Indemnitors shall
not have any obligation to indemnify the Superholdings Indemnitees for Losses
arising from a Breach of this Agreement at or prior to the Closing until the
indemnifiable Losses incurred by the Superholdings Indemnitees or to which the
Superholdings Indemnitees become subject, arising from a Breach of this
Agreement at or prior to the Closing, exceed $1.0 million, at which time the
Member Indemnitors shall indemnify the Superholdings Indemnitees pursuant to
this Article 10 for the full amount of the Losses; provided, however, that the
Member Indemnitors shall indemnify the Superholdings Indemnitees for the full
amount of all Losses incurred by the Superholdings Indemnitees related to a
Breach of (i) Section 6.4(a)(iv) hereof (Notes and Accounts Receivable), (ii)
Section 6.5(b) (Tax Matters) related to sales tax on asset purchase transactions
with Sprint or
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its Affiliates, (iii) this Agreement relating to or resulting from the failure
by any Company to perform archaeological studies or surveys with respect to
cellular tower sites without regard to whether such Losses exceed such dollar
amount, or (iv) Section 4.22 (Sprint Payments).
(ii) Superholdings Indemnitors. Notwithstanding
anything to the contrary in this Article, the Superholdings Indemnitors shall
not have any obligation to indemnify the Members for Losses arising from a
Breach of this Agreement at or prior to the Closing until the indemnifiable
Losses incurred by the Members or to which the Members become subject, arising
from a Breach of this Agreement at or prior to the Closing, exceed $1.0 million,
at which time the Superholdings Indemnitors shall indemnify the Members pursuant
to this Article 10 for the full amount of the Losses.
(b) Cap. After the Closing, no Indemnifying Party shall incur
any liability for Losses pursuant to this Article in excess of the aggregate
dollar value (with appropriate reductions for amounts received by such
Indemnifying Party pursuant to Section 10.2(c) (Contribution)) of the Per Unit
LLC Consideration (with each share of Superholdings Stock valued at the average
of the last reported sale prices of a share of Public Stock as reported by The
Nasdaq Stock Market for the ten (10) days preceding the Closing Date) and the
Per Unit Cash Consideration paid or received, as the case may be, by such
Indemnifying Party pursuant to the Parent Merger; provided however, that no
Member Indemnitor shall have any liability for Losses after he has satisfied
Losses by delivering to Indemnified Parties (i) the number of shares of
Superholdings Stock he received as his aggregate Per Unit LLC Consideration and
(ii) cash in an amount equal to his aggregate Per Unit Cash Consideration.
(c) Services Agreement. Notwithstanding anything to the
contrary in this Article 10, the Member Indemnitors shall not have any
obligation to indemnify the Superholdings Indemnitees for Losses to the extent
such Losses have been caused primarily by the actions of Public or any of its
Affiliates under the Services Agreement or by the failure of Public to or any of
its Affiliates take actions under the Services Agreement that would reasonably
be taken in the ordinary course of LLC's business.
(d) Damages. Losses recoverable for breach of this Agreement
shall be limited to actual damages, and no party shall recover consequential,
punitive, lost opportunity or special damages of any nature, regardless of the
nature of such party's claim or such party's theory of liability.
(e) Exclusivity. In the absence of fraud, the indemnification
provisions of this Article 10 shall be the exclusive remedy for any loss,
expense, damage, deficiency, liability, claim or obligation, including
investigative costs, costs of defense, settlement costs (subject to consent as
provided in Section 10.4(b) (Defense Costs)) and attorneys' and accountants'
fees in connection with this Agreement or any Breach hereof.
(f) Indemnification of Escrow Agent. Regarding Section 7
(Indemnification of Escrow Agent) of the Escrow Agreement, (i) the Superholdings
Indemnitors' liability pursuant to Section 7 of the Escrow Agreement shall not
exceed 50% of the aggregate loss, liability or
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expenses incurred by the Escrow Agent and (ii) the Member Indemnitors'
aggregate liability pursuant to Section 7 of the Escrow Agreement shall not
exceed 50% of the aggregate loss, liability or expenses incurred by the Escrow
Agent; provided, that, each Member Indemnitors' liability pursuant to Section 7
of the Escrow Agreement shall not exceed, and shall be in proportion to, the
aggregate dollar value of the Per Unit LLC Consideration (with each share of
Superholdings Stock valued at the average of the last reported sale prices of a
share of Public Stock as reported by The Nasdaq Stock Market for the ten (10)
days preceding the Closing Date) and the Per Unit Cash Consideration received by
such Member Indemnitor pursuant to the Parent Merger.
10.4 Notice and Opportunity to Defend.
(a) Notice, Etc. If any party (the "Indemnified Party")
receives notice of any third-party claim or commencement of any third-party
action or proceeding (an "Asserted Liability") with respect to which any other
party (an "Indemnifying Party") is obligated to provide indemnification pursuant
to Section 10.2(a) (Indemnification of Superholdings ) or Section 10.2(b)
(Indemnification of the Members), the Indemnified Party shall promptly give all
Indemnifying Parties notice thereof. The Indemnified Party's failure so to
notify an Indemnifying Party shall not cause the Indemnified Party to lose its
right to indemnification under this Article 10, except to the extent that such
failure materially prejudices the Indemnifying Party's ability to defend against
an Asserted Liability that such Indemnifying Party has the right to defend
against hereunder (and except as otherwise set forth in this Article 10). Such
notice shall describe the Asserted Liability in reasonable detail, and if
practicable shall indicate the amount (which may be estimated) of the Losses
that have been or may be asserted by the Indemnified Party. Each of the
Indemnifying Parties may defend against an Asserted Liability on behalf of the
Indemnified Party utilizing counsel reasonably acceptable to the Indemnified
Party, unless (i) the Indemnified Party reasonably objects to the assumption of
such defense on the grounds that counsel for such Indemnifying Party cannot
represent both the Indemnified Party and such Indemnifying Party because such
representation would be reasonably likely to result in a conflict of interest or
because there may be defenses available to the Indemnified Party that are not
available to such Indemnifying Party, (ii) such Indemnifying Party is not
capable (by reason of insufficient financial capacity, bankruptcy, receivership,
liquidation, managerial deadlock, managerial neglect or similar events) of
maintaining a reasonable defense of such action or proceeding, or (iii) the
action or proceeding seeks injunctive or other equitable relief against the
Indemnified Party.
(b) Defense Costs. If any Indemnifying Party defends an
Asserted Liability, it shall do so at its own expense and shall not be
responsible for the costs of defense, investigative costs, attorney's fees or
other expenses incurred to defend the Asserted Liability (collectively, "Defense
Costs") of the Indemnified Party (which may continue to defend, at its own
expense). Notwithstanding the foregoing, if the person or entity asserting the
Asserted Liability against the Indemnified Party claims or seeks amounts in
excess of the amount set forth in Section 10.3(b) (Cap), then the Indemnifying
Party shall remain liable for the Defense Costs incurred by the Indemnified
Party. If the Indemnified Party assumes the defense of an Asserted Liability by
reason of clauses (i), (ii) or (iii) of subsection (a) above, or because the
Indemnifying Party has
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not elected to assume the defense, then such Indemnifying Party shall indemnify
the Indemnified Party for its Defense Costs; provided, however, the Indemnifying
Parties shall not be liable for the costs of more than one counsel for all
Indemnified Parties in any one jurisdiction. An Indemnifying Party may settle
any Asserted Liability only with the consent of the Indemnified Party, which
consent shall not be unreasonably withheld.
(c) Third Party Claims. The parties shall cooperate with each
other with respect to the defense of any claims or litigation made or commenced
by third parties subsequent to the Closing Date arising out of or in connection
with the transactions contemplated by this Agreement or any Related Agreement
and with respect to which indemnification is not available (for any reason)
under this Article 10, provided that the party requesting cooperation shall
reimburse the other party for the other party's reasonable out-of-pocket costs
and expenses of furnishing such cooperation.
10.5 Delays or Omissions, Etc. Except as provided in Section 10.1
(Survival; Etc.) and Section 10.4(a) (Notice, Etc.), no delay or omission to
exercise any right, power or remedy inuring to any party upon any breach or
default of any party under this Agreement or any Related Agreement shall impair
any such right, power or remedy of such party nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Neither the exercise of nor the failure to
exercise any remedy under this Agreement or any Related Agreement will
constitute an election of remedies or limit in any manner enforcement of any
remedies. All remedies either under this Agreement or any Related Agreement or
by law or otherwise afforded to the parties shall be cumulative and not
alternative.
10.6 Governing Law; Attorneys' Fees. This Agreement and the Related
Agreements shall be governed by, construed, interpreted and applied in
accordance with the laws of the State of Texas, without giving effect to any
conflict of laws rules that would refer the matter to the laws of another
jurisdiction.
Subject to Section 10.7 (Dispute Resolution), each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court for the District of Kansas, Kansas City Division and, if such court does
not have jurisdiction, of the courts of the State of Kansas in Wyandotte County,
for the purposes of any action arising out of this Agreement or any of the
Related Agreements, or the subject matter hereof or thereof, brought by any
other party hereto or thereto.
Subject to Section 10.7 (Dispute Resolution), to the extent permitted
by applicable law, each party hereby waives and agrees not to assert, by way of
motion, as a defense or otherwise in any such action, any claim (i) that it is
not subject to the jurisdiction of the above-named courts, (ii) that the action
is brought in an inconvenient forum, (iii) that it is immune from any legal
process with respect to itself or its property, (iv) that the venue of the suit,
action or proceeding is
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improper or (v) that this Agreement or any Related Agreement, or the subject
matter hereof or thereof, may not be enforced in or by such courts.
The prevailing party in any action or proceeding relating to this
Agreement or any Related Agreement shall be entitled to recover reasonable
attorneys' fees and other costs from the non-prevailing parties, in addition to
any other relief to which such prevailing party may be entitled.
10.7 Dispute Resolution.
(a) Arbitration. All disputes and controversies of every kind
and nature between the parties hereto arising out of or in connection with this
Agreement (including without limitation this Article 10) or the Related
Agreements as to the construction, validity, interpretation or meaning,
performance, non-performance, enforcement, operation, or breach, shall be
submitted to arbitration pursuant to the following procedures:
(i) Notice. After a dispute or controversy arises,
either party may, in a written notice delivered to the other party, demand such
arbitration. Such notice shall designate the name of the arbitrator (who shall
be an impartial person) appointed by the party demanding arbitration, together
with a statement of the matter in controversy.
(ii) AAA. Within 30 days after receipt of such
demand, the other party shall, in a written notice delivered to the party
demanding arbitration, name such party's arbitrator (who shall be an impartial
person). If such party fails to name an arbitrator, then the second arbitrator
shall be named by the American Arbitration Association (the "AAA"). The two
arbitrators so selected shall name a third arbitrator (who shall be an impartial
person) within 30 days, or in lieu of such agreement on a third arbitrator by
the two arbitrators so appointed, the third arbitrator shall be appointed by the
AAA. If any arbitrator appointed hereunder shall die, resign, refuse, or become
unable to act before an arbitration decision is rendered, then the vacancy shall
be filled by the methods set forth in this Section 10.7(a)(ii) for the original
appointment of such arbitrator.
(iii) Costs. Each party shall bear its own
arbitration costs and expenses. The arbitration hearing shall be held in Kansas
City, Kansas at a location designated by a majority of the arbitrators. The
Commercial Arbitration Rules of the American Arbitration Association shall
govern at such hearing and the substantive laws of the State of Texas (excluding
conflict of laws provisions) shall apply.
(iv) Hearing. The arbitration hearing shall be
concluded within ten days unless otherwise ordered by the arbitrators and the
written award thereon shall be made within 15 days after the close of submission
of evidence. An award rendered by a majority of the arbitrators appointed
pursuant hereto shall be final and binding on all parties to the proceeding,
shall resolve the question of costs of the arbitrators and all related matters,
and judgment on such award may be entered and enforced by either party in any
court of competent jurisdiction.
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(v) Complete Defense. Except as set forth in
Section 10.7(b) (Emergency Relief), the parties stipulate that the provisions
of this Section 10.7 shall be a complete defense to any suit, action or
proceeding instituted in any federal, state or local court or before any
administrative tribunal with respect to any controversy or dispute arising out
of this Agreement or any of the Related Agreements. The arbitration provisions
hereof shall, with respect to such controversy or dispute, survive the
termination or expiration of this Agreement or the Related Agreements.
Except in response to a subpoena or other legal process or disclosure
to professional advisors, lenders and investors, neither any party hereto nor
the arbitrators may disclose the existence or results of any arbitration
hereunder without the prior written consent of the other party; nor will any
party hereto disclose to any third party any confidential information disclosed
by any other party hereto in the course of an arbitration hereunder without the
prior written consent of such other party. Notwithstanding the foregoing, the
parties acknowledge that Public or Superholdings may disclose the existence or
results of an arbitration hereunder, as well as information otherwise required
to be disclosed by deposition, subpoena or other court or governmental action in
connection with Public's or Superholdings' obligations under the Exchange Act
and the rules and regulations promulgated thereunder and in connection with
Public's or Superholdings' registration of offerings of securities under the
Securities Act and the rules and regulations promulgated thereunder, other laws,
regulations or stock exchange requirements.
(b) Emergency Relief. Notwithstanding anything in this Section
10.7 to the contrary and subject to the provisions of Section 10.6 (Governing
Law; Attorneys' Fees), either party may seek from a court any provisional remedy
that may be necessary to protect any rights or property of such party pending
the establishment of the arbitral tribunal or its determination of the merits of
the controversy.
(c) Definition of Parties. For purposes of this Section 10.7
only, prior to the Closing, the LLC Parties shall be considered one "party" and
Public, Superholdings and Merger Sub shall be considered one "party" and, after
the Closing, the Members shall be considered one "party" and Public,
Superholdings and LLC shall be considered one "party".
ARTICLE 11
Miscellaneous
11.1 Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the permitted assigns, successors, heirs,
executors and administrators of the parties hereto. This Agreement may not be
assigned without the written consent of Public, Superholdings and the LLC
Parties and any attempted assignment without such consent shall be null and
void; provided, however, each of Public, Superholdings and Merger Sub may assign
any of its rights and obligations hereunder to one of its Affiliates; provided
further, that the LLC Parties may assign their rights to the lenders as
collateral under the Credit Agreement; provided further, that any assignment
hereunder shall not relieve any party of any obligations or liabilities
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hereunder.
11.2 Entire Agreement. This Agreement (including the Disclosure
Schedules and Exhibits hereto), the other documents delivered pursuant hereto
and referenced herein constitute the full and entire understanding and agreement
between the parties hereto and supersede any other agreement, written or oral,
with regard to the subject matter hereof. This Agreement supersedes those
certain letters dated May 11, 2000, as amended, among certain of the parties
hereto (the "Letters") and hereby supercedes and replaces in its entirety that
certain previous Agreement and Plan of Reorganization by and among Public,
Superholdings, Merger Sub, LLC and Members dated as of July 31, 2000.
11.3 Amendment. Subject to any applicable provisions of the DGCL,
at any time prior to the Effective Time, the parties hereto may modify or amend
this Agreement by written agreement executed and delivered by duly authorized
officers of the respective parties; provided, however, that after adoption of
this Agreement at the Public Stockholders Meeting, and, if necessary, the
Members Meeting, no amendment shall be made which would reduce the amount or
change the type of consideration into which shares of Public Stock or Members'
Interests shall be converted upon consummation of the Reorganization. This
Agreement may not be modified or amended except by written agreement executed
and delivered by each of the respective parties hereto. Notwithstanding the
foregoing, the merger consideration that the LLC Holdings' members shall receive
can be adjusted if all of the members of LLC Holdings approve of any such
changes.
11.4 Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement, or (c)
subject to Section 11.3 (Amendment), waive compliance with any of the agreements
or conditions of the other parties contained in this Agreement. Any agreement
on the part of a party to any such extension or waiver shall be valid only if
set forth in a written instrument executed and delivered by a duly authorized
officer on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
11.5 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by certified or
registered mail, postage prepaid with return receipt requested, telecopy (with
hard copy delivered by overnight courier service), or delivered by hand,
messenger or overnight courier service, and shall be deemed given when received
at the addresses or telecopy numbers of the parties set forth below, or at such
other address or telecopy number furnished in writing to the other parties
hereto:
If to LLC, LLC Holdings Roberts Wireless Communications, L.L.C.
1408 North Kingshighway, Suite 300
Saint Louis, Missouri 63113
Attention: Michael V. Roberts
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(314) 367-0174 (fax)
with copies to: Joseph S. von Kaenel, Esq.
Armstrong Teasdale LLP
One Metropolitan Square, Suite 2600
Saint Louis, Missouri 63102
(314) 621-5065 (fax)
If to Public or Merger Sub: Alamosa PCS Holdings, Inc.
5225 S. Loop 289
Suite 120
Lubbock, Texas 79424
Attention: David E. Sharbutt,
Chief Executive Officer
(806) 722-1127 (fax)
with copies to: Haynes and Boone, LLP
1600 North Collins Boulevard, Suite 2000
Richardson, Texas 75080
Attention: William S. Kleinman
(972) 692-9065 (fax)
11.6 Third Party Beneficiary, Etc. Except as otherwise specifically
hereinabove provided, there shall be no third party beneficiary hereof. Neither
the availability of, nor any limit on, any remedy hereunder limits the remedies
of any party hereto against third parties.
11.7 Reformation; Severability. In case any provision hereof shall
be invalid, illegal or unenforceable, such provision shall be reformed to best
effectuate the intent of the parties and permit enforcement hereof, and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. If such provision is not capable of
reformation, it shall be severed from this Agreement and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
11.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. Any counterpart may be delivered
by facsimile and shall be treated as an original, provided that attachment
thereof shall constitute the representation and warranty of the person
delivering such signature that such person has full power and authority to
attach such signature and to deliver this Agreement.
11.9 Titles and Subtitles. The titles of the paragraphs and
subparagraphs hereof are for
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convenience of reference only and are not to be considered in construing this
Agreement. References to "Articles" and "Sections" herein are references to
articles and sections of this Agreement, respectively. The words "herein,"
"hereof," "hereto" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision.
11.10 Confidentiality.
(a) Confidential Information. As used herein, "Confidential
Information" means confidential business information regarding any party hereto
or its Affiliates, including, without limitation, marketing lists used by LLC or
any information identifying the source of, and the process used by LLC to
obtain, such marketing lists; customer lists and files; prices and costs;
business and financial records; information relating to personnel contracts;
stock ownership; liabilities; litigation and the terms of this Agreement or any
Related Agreement and any written analysis or other document reflecting such
information that a party hereto prepared (an "Analysis"). For purposes of this
Section 11.10, the party or parties disclosing Confidential Information are
referred to collectively as the "Disclosing Party" and the party or parties
receiving Confidential Information are referred to collectively as the
"Receiving Party." However, "Confidential Information" shall not include:
(i) any information properly obtained and already in
the possession of the Receiving Party, prior to the execution of the letter
agreement, dated May 11, 2000, as amended, or information available to the
Receiving Party from public records or from other sources in accordance with
law,
(ii) any information that is in the public domain or
subsequently enters the public domain otherwise than through disclosure by the
Receiving Party or any of the Receiving Party's Representatives,
(iii) any information that is independently developed
by or on behalf of the Receiving Party without reference to the Confidential
Information,
(iv) any information that is acquired from a person
(other than Public, Superholdings, Merger Sub or the LLC Parties) not known by
the Receiving Party to be providing such information in breach of a
confidentiality obligation, or
(v) information the release of which has been
approved in writing by the Disclosing Party;
provided, that, further information received by Public, Superholdings or Merger
Sub shall cease to be Confidential Information after the Closing.
(b) Disclosure. The LLC Parties, on the one hand, and Public,
Superholdings, and Merger Sub, collectively on the other, will treat the
Confidential Information disclosed by the other as confidential, will use the
Confidential Information only in connection with their
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evaluation of the transactions hereunder, and will not disclose it to others,
except that each party shall have the right to communicate the information to
any of such party's Representatives; provided, that, such Representative is
informed that the Confidential Information is confidential and such
Representative agrees to be bound by the terms of this Section 11.10. The
parties shall be liable for any breach of this Section 11.10 by any of their
Representatives.
The parties acknowledge that Public and Superholdings may disclose
Confidential Information in connection with Public's and Superholdings'
obligations under the Exchange Act and the rules and regulations promulgated
thereunder, and in connection with Public's and Superholdings' registration of
offerings of securities under the Securities Act, and the rules and regulations
promulgated thereunder; provided, however, that prior to any such disclosure of
Confidential Information, Public or Superholdings shall provide LLC with the
opportunity to review and comment, if practicable, upon the disclosure. Any such
disclosures of Confidential Information by Public or Superholdings shall not be
a breach or violation of this Section 11.10.
Each of the LLC Parties acknowledge that (a) it is aware that the
United States securities laws prohibit any person who has material, nonpublic
information about a company from purchasing or selling securities of that
company, or from communicating that information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell those securities and (b) it is familiar with the Exchange
Act and the rules and regulations promulgated thereunder, and agrees that it
will neither use, nor cause any third party to use, any Confidential Information
in contravention of the Exchange Act or any such rules and regulations,
including Rules 10b-5 and 14e-3.
If any Receiving Party becomes legally compelled by deposition,
subpoena or other court or governmental action to disclose any of the
Confidential Information, then such Receiving Party will give the Disclosing
Party prompt notice to that effect, and will cooperate with the Disclosing Party
if the Disclosing Party seeks to obtain a protective order concerning the
Confidential Information. The Receiving Party will disclose only such
Confidential Information as its counsel shall advise is legally required.
The parties acknowledge that remedies at law may be inadequate to
protect against breach of this Section 11.10. Each party hereby agrees in
advance to the granting of injunctive relief in the non-breaching party's or
parties' favor without proof of actual damages as a remedy for breach of this
Section 11.10.
Upon termination of this Agreement pursuant to the provisions of
Article 5 (Termination), the Receiving Party will, at the Disclosing Party's
request, return to the Disclosing Party or destroy all originals, copies,
extracts or other reproductions of the Confidential Information that the
Disclosing Party provides, and destroy any Analysis.
11.11 Expenses. Except as otherwise expressly provided herein, each
party hereto will bear its respective expenses (third-party or otherwise)
incurred in connection with the preparation, execution and performance of this
Agreement, the Related Agreements and the transactions contemplated herein or
therein, including without limitation all fees and expenses of
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agents, representatives, counsel and accountants. The LLC Parties shall not
utilize assets of LLC to pay such expenses. Notwithstanding the foregoing, LLC
may pay up to $400,000 for the expenses it incurs in connection with this
Agreement for its accountants, attorneys, and fairness opinions plus any filing
fees of the LLC Parties required under the HSR Act.
11.12 Responsibility for Superholdings and Merger Sub. Public shall
be directly responsible for assuring that Superholdings and Merger Sub perform
all of their obligations hereunder.
11.13 Knowledge. Statements herein based on the knowledge of LLC or
LLC Holdings or words of similar import shall mean only the actual knowledge
after due inquiry of S.R., M.R. or K.G.
* * * * *
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This Agreement has been executed and delivered as of the date first
written above.
Roberts Wireless Communications, L.L.C.:
---------------------------------------
By: /s/ Michael V. Roberts
--------------------------
Its: Member
The Members:
-----------
/s/ Steven C. Roberts
---------------------
Steven C. Roberts
/s/ Michael V. Roberts
----------------------
Michael V. Roberts
Alamosa PCS Holdings, Inc.:
--------------------------
By: /s/ David E. Sharbutt
-------------------------
Name: David E. Sharbutt
Title: Chief Executive Officer
Alamosa Holdings, Inc.:
----------------------
By: /s/ David E. Sharbutt
-------------------------
Name: David E. Sharbutt
Title: President
Alamosa Sub I, Inc.:
-------------------
By: /s/ David E. Sharbutt
-------------------------
Name: David E. Sharbutt
Title: President
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EXHIBIT 1.2(b)
ESCROW AGREEMENT
This Escrow Agreement (the "Escrow Agreement") is dated
_____________________, 2000 by and among Alamosa Holdings, Inc., a Delaware
corporation ("Superholdings"), Steven C. Roberts and Michael V. Roberts
(collectively, the "Members") and _______________ the ("Escrow Agent").
RECITALS
A. The parties are entering into this Escrow Agreement pursuant to
Section 1.2(b) of that certain Agreement and Plan of Reorganization (the
"Agreement") dated as of July 31, 2000.
B. All capitalized terms used herein and not otherwise defined in this
Escrow Agreement will have the meanings assigned to them in the Agreement.
AGREEMENT
In consideration of the mutual covenants and agreements herein
contained and in the Agreement, the parties hereby agree as follows:
1. Creation of Escrow Account; Delivery of Funds. An escrow account
designated by Superholdings (the "Escrow Account") has been established by the
Escrow Agent. Superholdings has delivered to the Escrow Agent ________ shares of
Superholdings Stock (the "Escrow Deposit"), and corresponding stock powers, to
be held in the Escrow Account, and the Escrow Agent acknowledges receipt of the
Escrow Deposit pursuant to the terms and conditions of this Escrow Agreement.
2. Escrow Adjustment. The Members may deposit additional shares of
Superholdings Stock with the Escrow Agent pursuant to the terms of the Agreement
(the "Escrow Adjustment") after the date hereof. The aggregate of the Escrow
Deposit and the Escrow Adjustment shall be defined as the "Escrow Funds."
3. Holding Period. The Escrow Agent shall hold the Escrow Funds until
instructed pursuant to (a) instruments delivered to the Escrow Agent, signed by
the Members and Superholdings (each of whom covenant to deliver such instruments
to effectuate the terms of the Agreement) authorizing the Escrow Agent to
distribute all or part of the Escrow Funds in the manner described in the
instruments or (b) a final arbitration decision, pursuant to the terms of
Section 10.7 of the Agreement. The distribution of Escrow Funds shall be made no
later than two business days after receipt by the Escrow Agent of such
instruments or a copy of such arbitration decision.
4. Termination of Escrow. This Escrow Agreement shall terminate upon
the distribution of all Escrow Funds pursuant to the terms hereof.
5. Duties and Responsibilities of Escrow Agent.
5.1 Escrow Funds. By signing this Escrow Agreement, the Escrow
Agent agrees to hold and dispose of any and all Escrow Funds delivered to it in
accordance with the terms of the Escrow Agreement.
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5.2 Attachment; Orders. If any property subject hereto is at
any time attached, garnished or levied upon under any arbitration or court
order, or in case the payment, assignment, transfer, conveyance or delivery of
any such property shall be stayed or enjoined by any arbitration or court order,
or in case any order, judgment or decree shall be made or entered by any
arbitrator or court affecting such property or any part thereof, then and in any
of such events, the Escrow Agent is authorized to rely upon and comply with any
such order, writ, judgment or decree which is deemed by any legal counsel of the
Escrow Agent's own choosing to be binding upon it; and if the Escrow Agent
complies with any such order, writ, judgment or decree, it shall not be liable
to any of the parties hereto or to any other person, firm or corporation by
reason of such compliance, even though such order, writ, judgment or decree may
be subsequently reversed, modified, annulled, set aside or vacated.
5.3 No Liabilities. The Escrow Agent shall not be personally
liable for any act taken or omitted hereunder if taken or omitted by it in good
faith and without gross negligence or wilful misconduct. The Escrow Agent also
shall be fully protected in relying upon any written notice, demand, certificate
or document that it believes in good faith to be genuine and effective.
5.4 Documents. The Escrow Agent shall not be responsible for
the sufficiency or accuracy of the form, execution, validity or genuineness of
documents now or hereafter deposited hereunder, or of any endorsement thereon,
or for any lack of endorsement thereon, nor shall it be responsible or liable in
any respect on account of the identity, authority or rights of the persons
executing or delivering or purporting to execute or deliver any such document or
endorsement, or this Escrow Agreement.
5.5 Instruments. The Escrow Agent shall follow all reasonable
instructions contained within instruments executed by the Members and
Superholdings.
6. Fees and Expenses of Escrow Agent. The Escrow Agent's fees for
performance of its duties hereunder are described in Exhibit A. The Escrow
Agent's fees, and any reimbursements owed to the Escrow Agent for out-of-pocket
expenses incurred by it in connection with the performance of such duties, shall
be paid by Superholdings.
7. Indemnification of Escrow Agent. Superholdings and the Members
covenant and agree to jointly and severally indemnify the Escrow Agent and hold
it harmless against any loss, liability or expenses arising out of or in
connection with the performance of its duties hereunder, including but not
limited to, reasonable legal and other fees and expenses, and including
specifically, but without limitation, any legal or other expenses with respect
to any action for interpleader by the Escrow Agent, except that the Escrow Agent
shall not be indemnified against any such loss, liability or expense arising out
of its gross negligence or wilful misconduct. The Escrow Agent shall be under no
obligation to institute or defend any action, suit or legal proceeding in
connection herewith, unless first indemnified and held harmless to its
satisfaction in accordance with the foregoing.
8. Miscellaneous.
8.1. Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by certified or
registered mail, postage prepaid with return receipt requested, telecopy (with
hard copy delivered by overnight courier service), or delivered by hand,
messenger or overnight courier service, and shall be deemed given when received
at the addresses or telecopy numbers of the parties set forth below, or at such
other address or telecopy number furnished in writing to the other parties
hereto:
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If to Superholdings: Alamosa Holdings, Inc.
4403 Brownfield Highway
Lubbock, Texas 79407
Attention: David E. Sharbutt, Chief Executive Officer
(806) 722-1127 (fax)
with copies to: Haynes and Boone, LLP
1600 North Collins Boulevard,
Suite 2000
Richardson, Texas 75080
Attention: William S. Kleinman
(972) 692-9065 (fax)
If to the Members: Roberts Wireless Communications
1408 North Kingshighway, Suite 300
Saint Louis, Missouri 63113
Attention: Michael V. Roberts
(314) 367-0174 (fax)
with copies to: Joseph S. von Kaenel, Esq.
Armstrong Teasdale LLP
One Metropolitan Square,
Suite 2600
Saint Louis, Missouri
(314) 621-5065 (fax)
If to Escrow Agent:
Attention:
(fax)
with copies to:
Attention:
(fax)
8.2 Assignment. Neither this Escrow Agreement nor any of the
parties' rights hereunder shall be assignable without the prior written consent
of the other parties.
8.3 Governing Law. This Escrow Agreement shall be construed in
accordance with the laws of the State of Texas, regardless of the choice of law
provisions of that state or any other jurisdiction.
8.4 Entire Escrow Agreement; Amendments. This Escrow Agreement
constitutes the complete agreement of the parties with respect to the subject
matter hereof. The waiver, amendment
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or modification of any provision of this Escrow Agreement or any right, power or
remedy hereunder, shall be effective if (but only if) in writing and signed by
each of the parties hereto.
8.5 Power and Authority. Each of the parties represents and
warrants that such party has full power and authority to execute, deliver and
perform this Escrow Agreement and to take any and all actions necessary with
respect to the Escrow Funds.
8.6 Counterparts. This Escrow Agreement may be executed in one
or more counterparts with all such counterparts constituting one and the same
instrument.
* * * * *
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The parties hereto have executed and delivered this Escrow Agreement as
of the day and year first set forth above.
ALAMOSA HOLDINGS, INC.:
By:
Name:
Title:
MEMBERS:
Steven C. Roberts
Michael V. Roberts
ESCROW AGENT:
By:
Name:
Title:
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EXHIBIT 2.2(a)
LLC PARTIES CLOSING CERTIFICATE
This LLC Parties Closing Certificate (the "Certificate") is delivered
pursuant to Section 2.2(a) (Closing Certificate) of that certain Agreement and
Plan of Reorganization (the "Agreement") entered into as of July 31, 2000, by
and among Alamosa PCS Holdings, Inc., a Delaware corporation ("Public"), Alamosa
Holdings, Inc., a Delaware corporation ("Superholdings"), Alamosa Sub I, Inc., a
Delaware corporation and wholly-owned direct subsidiary of Superholdings
("Merger Sub"), and Roberts Wireless Communications, L.L.C., a Missouri limited
liability company ("LLC"), and members of LLC (the "Members"). LLC (prior to
Closing), LLC Holdings (when formed but prior to Closing) and the Members are
sometimes collectively referred to herein as the "LLC Parties". All capitalized
terms used herein and not otherwise defined in this Certificate will have the
meanings assigned to them in the Agreement.
The undersigned hereby certify, and represent and warrant to Public,
Superholdings and Merger Sub as follows:
1. Representations and Warranties. Except as set forth on the Schedule
to this Certificate, the LLC Parties' representations and warranties made in the
Agreement or any Related Agreement were true and correct in all respects at the
Closing Date, except as affected by the transactions contemplated by the
Agreement and except as did not and will not constitute an LLC Material Adverse
Change.
2. Covenants. Except as set forth on the Schedule to this Certificate,
the LLC Parties, in all respects, have performed each agreement, and have
complied with each covenant, to be performed or complied with by them, or any of
them, on or prior to the Closing Date under the Agreement or any Related
Agreement except as has not constituted and will not constitute an LLC Material
Adverse Change.
3. No Litigation. Except as set forth on the Schedule to this
Certificate, no action, suit or proceeding (other than such an action, suit or
proceeding directly or indirectly instituted by a party to the Agreement) is
threatened or pending, and no preliminary or permanent injunction, order, decree
or ruling is in effect, seeking to restrain or prohibit, or to obtain damages or
other relief in connection with, the execution and delivery of the Agreement,
any Related Agreement or the consummation of the transactions contemplated by
any of the foregoing, except as has not constituted and will not constitute an
LLC Material Adverse Change.
4. No LLC Material Adverse Change. No LLC Material Adverse Change has
occurred.
* * * * *
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SCHEDULE:
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<PAGE>
Executed as of _______________ ____, 2000.
Roberts Wireless Communications, L.L.C.
By:
Name:
Title:
The Members:
Name: Steven C. Roberts
Name: Michael V. Roberts
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EXHIBIT 2.2(e)
Form of Opinion of LLC Parties' Counsel
1. Each of the Companies is a limited liability company duly organized and
validly existing under the laws of the State of Missouri. Each of the Companies
has all requisite power and authority to own, lease and operate all properties
and assets owned or leased by it and to conduct its business as previously and
currently conducted by it. Each of the Companies is qualified to do business in
each jurisdiction in which it is required to be so qualified, except where the
lack of such qualification would not have a material adverse effect on such
Company.
2. Each of the Companies has full power and authority to consummate the Parent
Merger and to execute, deliver and perform the Agreement, the Related Agreements
and the other instruments called for therein to which it is a party.
3. The Agreement and the Related Agreements have been duly authorized, executed
and delivered by each of the Companies and, upon obtaining the Members Required
Vote, will constitute (or, in the case of Related Agreements or instruments
called for by the Agreement or the Related Agreements, to be executed by such
Company at or before the Closing, upon execution will constitute) the legal,
valid and binding obligation of such Company, enforceable against such Company
in accordance with their terms.
4. Each of the Members has full requisite power and authority (or if a natural
person, capacity) to execute, deliver and perform the Agreement, the Related
Agreements and the other instruments called for therein to which such Member is
a party. The Agreement, the Related Agreements and the other instruments called
for therein to which such Member is a party have been duly executed and
delivered by each of the Members and constitute (or, in the case of Related
Agreements or instruments called for in the Agreement, to be executed by the
Member at or before the Closing, will constitute) the legal, valid and binding
obligation of the Member, enforceable against the Member in accordance with
their terms.
5. Each of the Companies is the holder of record of all of the issued and
outstanding shares of capital stock or interests, as appropriate, of its
Subsidiaries free and clear of any Liens.
6. The Members' Interests of LLC consist of 20,000 units and no preferred units.
There are no other equity interests of LLC either authorized or outstanding. All
of the issued and outstanding units have been duly authorized and validly
issued, are fully paid and nonassessable and are free and clear of any
preemptive rights. No certificates have been issued to represent the Members'
Interests in LLC. There are no outstanding preemptive, conversion or other
rights, or other options, warrants or agreements granted by, issued by, or
binding upon, LLC for the issuance, sale, purchase, repurchase, redemption,
acquisition or other transfer of its equity securities.
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7. Each Member is the holder of record of the units set forth in the Agreement.
To our knowledge, no Member is a party to any contract, agreement or
understanding (other than the Agreement) relating to the issuance, sale,
redemption, purchase, repurchase, acquisition or other transfer or voting of any
units of Members' Interests or any other equity security of any Company, other
than LLC's operating agreement.
8. The Members' Interests of LLC Holdings consists of 20,000 units and no
preferred units. There are no other equity interests of LLC Holdings either
authorized or outstanding pursuant to LLC's certificate of formation or
organizational agreements. All of the issued and outstanding units are duly
authorized and validly issued, fully paid and nonassessable and free and clear
of any preemptive rights. No certificates were issued to represent the Members'
Interests in LLC Holdings. There are no outstanding preemptive, conversion or
other rights, or other options, warrants or agreements granted by, issued by, or
binding upon, LLC Holdings for the issuance, sale, purchase, repurchase,
redemption, acquisition or other transfer of its equity securities pursuant to
LLC's certificate of formation or organizational agreements.
9. The formation of LLC Holdings transferred all of the Members' Interests of
LLC to LLC Holdings free and clear of Liens. Consummation of the transactions
contemplated by the Agreement will transfer to Superholdings all of the Members'
Interests of LLC Holdings free and clear of Liens.
10. The transactions contemplated by the Agreement do not conflict with any
provisions of the Contracts (as such term is defined in Section 6.4(d)(i)
(Definition) of the Agreement), except as listed on the exhibit hereto. Except
as specified on the Disclosure Schedule to Section 6.1(e) (LLC Parties Consents
Required), the transactions contemplated by the Agreement do not require any
consents. Notwithstanding the foregoing, the consents of Sprint, DLJ and Lucent
are sufficient such that the Sprint, DLJ and Lucent contracts do not otherwise
conflict with the transactions contemplated by the Agreement.
11. To our knowledge, there are no Proceedings or Orders.
12. No state takeover statute is applicable to any Company in connection with
the Agreement, the Parent Merger or the other transactions contemplated thereby.
B-88
<PAGE>
EXHIBIT 2.2(f)
TOWER CLOSING CERTIFICATE
This Tower Closing Certificate (the "Certificate") is delivered
pursuant to Section 2.2(f) (Tower Closing Certificate) of that certain Agreement
and Plan of Reorganization (the "Agreement") entered into as of July 31, 2000,
by and among Alamosa PCS Holdings, Inc., a Delaware corporation ("Public"),
Alamosa Holdings, Inc., a Delaware corporation ("Superholdings"), Alamosa Sub I,
Inc., a Delaware corporation and wholly-owned direct subsidiary of Superholdings
("Merger Sub"), and Roberts Wireless Communications, L.L.C., a Missouri limited
liability company ("LLC"), and members of LLC (the "Members"). LLC (prior to
Closing), LLC Holdings (when formed but prior to Closing) and the Members are
sometimes collectively referred to herein as the "LLC Parties." All capitalized
terms used herein and not otherwise defined in this Certificate will have the
meanings assigned to them in the Agreement.
The undersigned hereby certifies, represents and warrants to Public,
Superholdings and Merger Sub as follows:
1. Representations and Warranties. The undersigned hereby makes the LLC
Parties' representations and warranties made in Section 6.6(h) (Environmental
Matters) of the Agreement as if the undersigned were one of the LLC Parties on
the date of the Agreement and had entered into the Agreement on such date.
2. Liabilities. The undersigned hereby acknowledges and expressly
assumes all liabilities of the LLC Parties with respect to the foregoing
representations and warranties including, but not limited to, the
indemnification and other obligations of any or all of the LLC Parties contained
in Article 10 (Indemnification) of the Agreement, with the further express
acknowledgment that if any Indemnified Party is subject to Losses for Breaches
in this Certificate, such Indemnified Party may commence an action against the
undersigned to recover such Losses at any time that such Indemnified Party is
subject to Losses with respect thereto and shall not be barred by the first
clause of Section 10.1(d) (Commencing Actions) of the Agreement.
* * * * *
B-89
<PAGE>
Executed as of _________________________, 2000.
ROBERTS TOWER COMPANY:
By:
Name:
Title:
B-90
<PAGE>
EXHIBIT 2.3(a)
SUPERHOLDINGS CLOSING CERTIFICATE
This Superholdings Closing Certificate (the "Certificate") is delivered
pursuant to Section 2.3(a) (Closing Certificate) of that certain Agreement and
Plan of Reorganization (the "Agreement") entered into as of July 31, 2000, by
and among Alamosa PCS Holdings, Inc., a Delaware corporation ("Public"), Alamosa
Holdings, Inc., a Delaware corporation ("Superholdings"), Alamosa Sub I, Inc., a
Delaware corporation and wholly-owned direct subsidiary of Superholdings
("Merger Sub"), and Roberts Wireless Communications, L.L.C., a Missouri limited
liability company ("LLC"), and members of LLC (the "Members"). LLC (prior to
Closing), LLC Holdings (when formed but prior to Closing) and the Members are
sometimes collectively referred to herein as the "LLC Parties." All capitalized
terms used herein and not otherwise defined in this Certificate will have the
meanings assigned to them in the Agreement.
The undersigned hereby certify, and represent and warrant to the LLC
Parties as follows:
1. Representations and Warranties. Except as set forth on the Schedule
to this Certificate, the representations and warranties made in the Agreement by
Superholdings, Public and Merger Sub were true and correct in all respects at
the Closing Date, except as affected by the transactions contemplated by the
Agreement or except as did not have a Public Material Adverse Change at the
Closing and will not have a Public Material Adverse Change after the Closing.
2. Covenants. Except as set forth on the Schedule to this Certificate,
each of Superholdings, Public and Merger Sub, in all respects, have performed
each agreement, and have complied with each covenant to be performed or complied
with by it on or prior to the Closing Date under the Agreement or any Related
Agreement, except as has had a Public Material Adverse Change at the Closing and
will not have a Public Material Adverse Change after the Closing.
3. No Litigation. Except as set forth on the Schedule to this
Certificate, no action, suit or proceeding (other than such an action, suit or
proceeding directly or indirectly instituted by a party to the Agreement) is
threatened or pending, and no preliminary or permanent injunction, order, decree
or ruling is in effect, seeking to restrain or prohibit, or to obtain damages or
other relief in connection with, the execution and delivery of the Agreement,
any Related Agreement or the consummation of the transactions contemplated by
any of the foregoing, except as has not constituted and will not constitute an
LLC Material Adverse Change.
4. No Public Material Adverse Change. No Public Material Adverse Change has
occurred.
* * * * *
B-91
<PAGE>
Executed as of _______________ ____, 2000.
Alamosa Holdings, Inc:
By:
Name:
Title:
Alamosa PCS Holdings, Inc:
By:
Name:
Title:
Alamosa Sub I, Inc.:
By:
Name:
Title:
B-92
<PAGE>
EXHIBIT 2.3(d)
Form of Opinion of Public's, Superholdings' and Merger Sub's Counsel
1. Each of Public, Superholdings and Merger Sub is a corporation duly and
validly existing under the laws of the State of Delaware and is in good standing
under such laws. Superholdings owns, beneficially and of record, all of the
issued and outstanding shares of capital stock of Merger Sub.
2. Each of Public, Superholdings and Merger Sub has full corporate power and
authority to execute, deliver and perform the Agreement and the Related
Agreements. The Agreement has been duly authorized, executed and delivered by
each of Public, Superholdings and Merger Sub. Upon approval by their respective
stockholders, the Agreement will be enforceable against Public, Superholdings
and Merger Sub, in accordance with its terms.
3. When the Related Agreements to which each of Public, Superholdings and Merger
Sub is a party are delivered at the Closing, and upon approval of the Related
Agreements by the respective stockholders of Public, Superholdings and Merger
Sub, such agreements will have been duly authorized, executed and delivered by
Public, Superholdings and Merger Sub, and will constitute the legal, valid and
binding obligations of Public, Superholdings and Merger Sub, enforceable against
Public, Superholdings and Merger Sub in accordance with their terms.
4. The authorized capital stock of Public consists (i) of 95,000,000 shares of
Public Stock, of which 61,354,606 shares were issued and outstanding as of April
20, 2000 and (ii) 5,000,000 shares of preferred stock, par value $.01 per share,
of which no shares were issued and outstanding as of April 20, 2000. All of the
issued and outstanding shares of Public Stock have been duly authorized and
validly issued, are fully paid and nonassessable and are free and clear of any
preemptive rights.
5. The authorized capital stock of Superholdings immediately prior to the
Closing will consist (i) of at least 290,000,000 shares of Superholdings Stock
and (ii) at least 10,000,000 shares of preferred stock, par value $0.01 per
share. All of the issued and outstanding shares of Superholdings Stock will have
been duly authorized and validly issued, fully paid and nonassessable and free
and clear of any preemptive rights.
6. The shares of Superholdings Stock, when issued, sold and delivered in
accordance with the terms of the Agreement will be duly and validly issued,
fully paid and nonassessable and issued free and clear of any Liens.
B-93
<PAGE>
EXHIBIT 2.4(b)(i), (ii), (iii)
MEMBER AGREEMENT
This Member Agreement (the "Member Agreement") is delivered pursuant to
Sections 1.2(c) (Consideration Subject to Agreements), 2.4(b)(i) (Lock-Up
Agreement), 2.4(b)(ii) (Indemnity Agreement) 2.4(b)(iii) (Members' Releases) and
10.2 (Indemnities) of that certain Agreement and Plan of Reorganization (the
"Agreement") entered into as of July 31, 2000, by and among Alamosa PCS
Holdings, Inc., a Delaware corporation ("Public"), Alamosa Holdings, Inc., a
Delaware corporation ("Superholdings"), Alamosa Sub I, Inc., a Delaware
corporation and wholly-owned direct subsidiary of Superholdings ("Merger Sub"),
and Roberts Wireless Communications, L.L.C., a Missouri limited liability
company ("LLC"), and members of LLC (the "Members"). All capitalized terms used
herein and not otherwise defined in this Certificate will have the meanings
assigned to them in the Agreement. The parties hereto agree as follows:
1. Lock-Up. Each of the undersigned hereby covenants to Public and
Superholdings that before September 30, 2001, the undersigned will not, without
the prior written consent of Superholdings, offer, sell, contract to sell,
pledge or otherwise dispose of, (or enter into any transaction which is designed
to, or might reasonably be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise) of the undersigned's holdings of Superholdings Stock) or establish or
increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, with respect to any Superholdings Stock, or
any securities convertible into, or exercisable or exchangeable for,
Superholdings Stock, or publicly announce an intention to effect any such
transaction, other than (a) shares of Superholdings Stock disposed of as bona
fide gifts to persons who also enter into lock-up agreements in the form hereof
and (b) shares of Superholdings Stock acquired other than pursuant to the
Reorganization. This Section 1 of this Member Agreement is the "Lock-Up
Agreement" referred to in the Agreement.
2. Registration Provisions.
(a) Certain Information. The undersigned Member hereby covenants to
provide to Public and Superholdings the information required by the Form S-1, as
provided by Section 4.2(c) (Form S-1) of the Agreement, as is reasonably
requested by Public or Superholdings as soon as possible, but no later than five
business days after the date of such request. In addition, the undersigned
Member hereby covenants that none of the information supplied or to be supplied
by the undersigned Member specifically for inclusion in the Form S-1 will, at
the time the Form S-1 is filed with the SEC, at any time that such form is
amended or supplemented and at the time it becomes effective or remains in
effect under the Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. Notwithstanding the foregoing, if
the undersigned Member becomes aware, at any time, of any untrue statement of a
material fact or omission of any material fact required to be stated in the Form
S-1 (or other appropriate
B-94
<PAGE>
registration statement form), then the undersigned Member shall promptly notify
Public and Superholdings of such untrue statement, pursuant to Section 11.5
(Notices, Etc.) of the Agreement.
(b) Blackout. The undersigned member hereby agrees that if
Superholdings furnishes to the undersigned member a notice signed by the
President of Superholdings stating that Superholdings has determined in good
faith that it would be seriously detrimental to Superholdings and its
stockholders for the Form S-1 to be filed (or remain in effect) and it is
therefore essential to defer the filing of such Form S-1 (or temporarily suspend
the effectiveness of such registration statement or use of the related
prospectus) (a "Blackout Notice"), then Superholdings shall have the right (i)
immediately to defer such filing for a period of not more than sixty (60) days
beyond the date by which such Form S-1 was otherwise planned to be filed or (ii)
suspend such effectiveness for a period of not more than sixty (60) days (any
such deferral or suspension period of up to sixty (60) days, a "Blackout
Period"). The undersigned member agrees to cease any disposition during such
Blackout Period of the Superholdings Stock received by the undersigned member in
connection with the Reorganization. Superholdings may not utilize any of its
rights under this Section 2 of this Member Agreement to defer the filing of the
Form S-1 (or suspend the effectiveness of the Form S-1) more than twice in any
twelve (12) month period.
3. Indemnity. Each of the undersigned hereby agrees to be bound by all
of the provisions of Article 10 of the Agreement (Indemnification), and the
direct and indirect owners of the undersigned's Members' Interests (who are
signatories below) shall also be so bound to the extent that they receive any
merger consideration or proceeds thereof. This Section 2 of this Member
Agreement is the "Indemnity Agreement" referred to in the Agreement.
4. Intent to Sell. The undersigned hereby agrees that it has no plan or
intention to sell, exchange, transfer or otherwise dispose of any of the
Superholdings Stock received by such undersigned member in connection with the
Reorganization.
5. Releases. Superholdings hereby releases on its own behalf any and
all claims held or to be held by Superholdings against LLC, LLC Holdings, and
their successors, assigns, officers, directors, employees and agents, after the
Closing. Each of the undersigned hereby releases any and all claims held or to
be held by the undersigned member against LLC, LLC Holdings, and their
successors, assigns, officers, directors, employees and agents, but excluding
any claims each of the undersigned may have to unpaid compensation and benefits.
Each of the undersigned hereby agrees to be released from any obligation under
the operating agreements of LLC or LLC Holdings. This Section 5 of this Member
Agreement is the "Members Releases" referred to in the Agreement.
6. Consideration. Each of the undersigned hereby acknowledges that the
consideration received by him pursuant to the Agreement represents the amount of
consideration he is entitled to receive under the operating agreements of LLC
and LLC Holdings and satisfies
B-95
<PAGE>
in full any and all claims held or to be held by him with respect to his
membership interests in LLC and LLC Holdings.
7. Deliveries. Each of the undersigned shall deliver their respective
holdings of Superholdings Stock, and corresponding stock powers, to the Escrow
Agent, if applicable, in accordance with the Escrow Agreement and Section 10.2
(Indemnities) of the Agreement.
Executed as of _______________ ____, 2000.
* * * * *
B-96
<PAGE>
ALAMOSA HOLDINGS, INC.
By:
Name:
Title:
THE MEMBERS:
Name: Steven C. Roberts
Name: Michael V. Roberts
B-97
<PAGE>
APPENDIX C
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
by and among
Alamosa PCS Holdings, Inc.,
Alamosa Holdings, Inc. and
Alamosa Sub I, Inc.
and
Washington Oregon Wireless, LLC,
Members of Washington Oregon Wireless, LLC and
WOW Holdings, LLC
July 31, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 Mergers.......................................................................................C-3
1.1 The Mergers...................................................................................C-3
(a) The Mergers............................................................................C-3
(b) Consummation of the Mergers............................................................C-4
(c) Effective Time of the Mergers..........................................................C-4
(d) Effect of the Mergers..................................................................C-4
(e) The Surviving Corporations' Certificates of Incorporation;
Bylaws; Directors and Officers.........................................................C-4
1.2 Terms of the Merger...........................................................................C-4
(a) Consideration for the Parent Merger....................................................C-4
(b) Right to Withhold......................................................................C-5
(c) Consideration Subject to Agreements....................................................C-5
(d) Antidilution...........................................................................C-5
(e) Sister Agreements......................................................................C-6
(f) Conversion of Public Stock. ..........................................................C-6
(g) Conversion of Merger Sub Stock.........................................................C-6
(h) Treasury Stock.........................................................................C-6
(i) Rights as Holders......................................................................C-6
1.3 VAR Plan......................................................................................C-7
(a) [Intentionally deleted]................................................................C-7
(b) [Intentionally deleted]................................................................C-7
(c) [Intentionally deleted]................................................................C-7
(d) VAR Plan...............................................................................C-7
1.4 Exchange Agent................................................................................C-7
1.5 Exchange Procedure............................................................................C-7
1.6 Distributions with Respect to Unexchanged Shares..............................................C-8
1.7 Cancellation and Retirement of Units..........................................................C-8
1.8 No Fractional Shares..........................................................................C-8
(a) No Certificates........................................................................C-8
(b) Cash Payments..........................................................................C-9
1.9 Investment of Exchange Fund...................................................................C-9
1.10 Termination of Exchange Fund..................................................................C-9
1.11 No Liability..................................................................................C-9
1.12 Tax Withholding..............................................................................C-10
ARTICLE 2 Closing the Transaction......................................................................C-10
2.1 Closing......................................................................................C-10
2.2 LLC Parties' Deliveries at Closing to Superholdings..........................................C-10
(a) Closing Certificate...................................................................C-10
i
<PAGE>
(b) Consents and Approvals................................................................C-10
(c) Proceedings and Documents.............................................................C-11
(d) Certificates of Existence.............................................................C-11
(e) Opinions of LLC Parties' Counsel......................................................C-11
(f) Other Instruments.....................................................................C-11
2.3 Superholdings' and Public's Deliveries at Closing to LLC.....................................C-11
(a) Closing Certificate...................................................................C-11
(b) Proceedings and Documents.............................................................C-11
(c) Consents and Approvals................................................................C-11
(d) Opinion of Public's, Superholdings' and Merger Sub's Counsel..........................C-11
(e) Section 16(b) Resolution..............................................................C-12
(f) Other Instruments.....................................................................C-12
2.4 Related Agreements...........................................................................C-12
(a) Prior to Closing......................................................................C-12
(b) At Closing............................................................................C-13
ARTICLE 3 Conditions To Consummating The Transaction...................................................C-14
3.1 Joint Conditions.............................................................................C-14
(a) Public Stockholder Approval...........................................................C-14
(b) HSR Act...............................................................................C-14
(c) Nasdaq Listing........................................................................C-14
(d) Merger................................................................................C-14
(e) Subsidiary Merger.....................................................................C-14
3.2 Public's, Superholdings' and Merger Sub's Conditions.........................................C-14
(a) LLC Parties' Representations True.....................................................C-15
(b) LLC Parties' Compliance with Agreement................................................C-15
(c) LLC Parties Consents..................................................................C-16
(d) Public Consents.......................................................................C-16
(e) Permits...............................................................................C-16
(f) LLC Members Approval..................................................................C-16
(g) Form S-4..............................................................................C-16
(h) No Litigation.........................................................................C-16
(i) Approvals.............................................................................C-17
(j) Members Obligations...................................................................C-17
(k) Related Agreements....................................................................C-17
3.3 LLC Parties' Conditions to Closing...........................................................C-17
(a) Public's, Superholdings' and Merger Sub's Representations True........................C-17
(b) Public's, Superholdings' and Merger Sub's Compliance with
Agreement.............................................................................C-17
(c) Public Consents.......................................................................C-18
(d) No Litigation.........................................................................C-18
(e) Approvals.............................................................................C-18
ARTICLE 4 Covenants Regarding Consummation of the Transaction..........................................C-18
ii
<PAGE>
4.1 Satisfaction of Conditions to Closing........................................................C-18
(a) Joint Responsibilities................................................................C-18
(b) LLC Parties' Responsibilities.........................................................C-19
(c) Public's, Superholdings' and Merger Sub's Responsibilities............................C-20
4.2 Preparation of the Proxy Statement, Form S-4 and Form S-1....................................C-20
(a) Preparation...........................................................................C-21
(b) Proxy Statement and Form S-4..........................................................C-21
(c) Form S-1..............................................................................C-21
(d) Public's and Superholdings' Actions...................................................C-22
4.3 Accountants' Letters.........................................................................C-22
(a) From LLC Holdings.....................................................................C-22
(b) From Public and Superholdings.........................................................C-23
4.4 Public Stockholders Meeting..................................................................C-23
4.5 Votes and Recommendations....................................................................C-23
4.6 LLC Members Meeting; LLC Holdings............................................................C-23
4.7 Public Announcements.........................................................................C-24
4.8 No Solicitation; Acquisition Proposals.......................................................C-24
(a) No Solicitation.......................................................................C-24
(b) Approval..............................................................................C-24
(c) Voting Agreement......................................................................C-24
(d) Acquisition Proposal..................................................................C-24
4.9 Affiliates and Certain Members...............................................................C-25
4.10 Pooling of Interests.........................................................................C-25
4.11 Loan Agreement...............................................................................C-25
4.12 Employment Agreements........................................................................C-25
4.13 Consulting Agreement.........................................................................C-25
4.14 Reissuance of LLC Audited Financial Statements...............................................C-26
4.15 Legends......................................................................................C-26
ARTICLE 5 Termination..................................................................................C-26
5.1 Reasons for Termination......................................................................C-26
(a) By Mutual Consent.....................................................................C-26
(b) By Public or Superholdings............................................................C-26
(c) By LLC................................................................................C-27
(d) Drop Dead Date........................................................................C-27
(e) Prohibition of the Reorganization.....................................................C-27
5.2 Notice of Problems...........................................................................C-28
5.3 Public's and Superholdings' Termination Procedure............................................C-28
5.4 LLC's Termination Procedure.................................................................C-28
5.5 Effect of Termination........................................................................C-29
ARTICLE 6 Representations and Warranties of LLC and the Members........................................C-29
6.1 LLC; Entry Into Agreements...................................................................C-29
iii
<PAGE>
(a) Organization and Existence............................................................C-29
(b) Validity and Authorization; Power and Authority.......................................C-30
(c) Subsidiaries..........................................................................C-30
(d) No Conflict...........................................................................C-31
(e) LLC Parties Consents Required.........................................................C-31
(f) State Takeover Statutes...............................................................C-32
6.2 Financial Information........................................................................C-32
(a) Financial Statements; Books and Records...............................................C-32
(b) Conduct of Business...................................................................C-33
(c) No Material Adverse Effect............................................................C-33
(d) Projections...........................................................................C-34
6.3 Members' Interests...........................................................................C-34
(a) Capitalization........................................................................C-34
(b) Capitalization of LLC Holdings........................................................C-34
(c) Ownership and Transfer by Members.....................................................C-34
(d) VAR Plan..............................................................................C-35
6.4 Assets.......................................................................................C-35
(a) Personal Property.....................................................................C-35
(b) Real Property.........................................................................C-36
(c) Intellectual Property.................................................................C-37
(d) Contracts.............................................................................C-39
(e) Necessary Assets......................................................................C-43
6.5 Liabilities..................................................................................C-43
(a) No Liabilities........................................................................C-43
(b) Tax Matters...........................................................................C-43
(c) Litigation............................................................................C-45
(d) Employee Liabilities..................................................................C-45
(e) Warranties............................................................................C-46
6.6 Business.....................................................................................C-46
(a) Suppliers.............................................................................C-46
(b) Insurance.............................................................................C-46
(c) Employees.............................................................................C-46
(d) Worker's Compensation.................................................................C-47
(e) ERISA.................................................................................C-47
(f) Conflicts of Interest.................................................................C-49
(g) LLC Legal Requirements................................................................C-49
(h) Environmental Matters.................................................................C-50
(i) Build-out Plan........................................................................C-51
6.7 Other........................................................................................C-51
(a) Certain Information...................................................................C-51
(b) Documents Delivered...................................................................C-52
(c) No Brokers Fees; No Commissions.......................................................C-52
(d) Tax Advice............................................................................C-52
iv
<PAGE>
(e) Disclosure............................................................................C-52
6.8 Investment Representations...................................................................C-52
ARTICLE 7 Representations and Warranties of Public, Superholdings and Merger Sub.......................C-54
7.1 Entry Into Agreements........................................................................C-54
(a) Organization and Good Standing........................................................C-54
(b) Corporate Power and Authority; Validity and Authorization.............................C-54
7.2 Conflicts and Consents.......................................................................C-54
(a) No Conflict...........................................................................C-54
(b) Consents Obtained.....................................................................C-54
7.3 No Brokers Fees; No Commissions..............................................................C-55
7.4 Superholdings Stock..........................................................................C-55
7.5 SEC Documents................................................................................C-55
7.6 No Material Adverse Effect...................................................................C-55
7.7 Capitalization...............................................................................C-55
7.8 Capitalization of Superholdings..............................................................C-56
7.9 No Liabilities...............................................................................C-56
7.10 Compliance with Laws.........................................................................C-56
7.11 Certain Information..........................................................................C-56
7.12 Disclosure...................................................................................C-57
ARTICLE 8 Covenants of the Parties.....................................................................C-57
8.1 Services Agreement...........................................................................C-57
8.2 Conduct of Business of LLC Pending Closing...................................................C-57
8.3 Access to Information and Employees..........................................................C-58
8.4 Financial Statements. .......................................................................C-58
8.5 Payment of Indebtedness of Related Persons...................................................C-58
8.6 Records of LLC...............................................................................C-58
8.7 Employee Benefit Plans.......................................................................C-58
8.8 Section 16(b) Resolution.....................................................................C-58
ARTICLE 9 Post-Closing Agreements......................................................................C-59
9.1 Further Actions..............................................................................C-59
9.2 Cooperation..................................................................................C-59
9.3 LLC Nominee Election.........................................................................C-59
9.4 Tax Returns..................................................................................C-60
9.5 Access to Information; Confidentiality.......................................................C-60
ARTICLE 10 Indemnification..............................................................................C-60
10.1 Survival; Etc................................................................................C-60
(a) Contents of this Agreement............................................................C-60
(b) No Effect on Liability................................................................C-60
(c) Survival..............................................................................C-60
(d) Commencing Actions....................................................................C-60
(e) Materiality...........................................................................C-61
v
<PAGE>
10.2 Indemnities..................................................................................C-61
(a) Indemnification of Superholdings......................................................C-61
(b) Indemnification of the Members........................................................C-62
(c) Contribution..........................................................................C-62
(d) Form of Payment; Interim Losses.......................................................C-63
10.3 Limitations on Indemnities...................................................................C-64
(a) Basket................................................................................C-64
(b) Cap...................................................................................C-65
(c) Services Agreement....................................................................C-65
(d) Damages...............................................................................C-65
(e) Exclusivity...........................................................................C-65
(f) Indemnification of Escrow Agent.......................................................C-65
10.4 Notice and Opportunity to Defend.............................................................C-66
(a) Notice, Etc...........................................................................C-66
(b) Defense Costs.........................................................................C-66
(c) Third Party Claims....................................................................C-66
10.5 Delays or Omissions, Etc.....................................................................C-67
10.6 Governing Law; Attorneys' Fees...............................................................C-67
10.7 Dispute Resolution...........................................................................C-67
(a) Arbitration...........................................................................C-67
(b) Emergency Relief......................................................................C-69
ARTICLE 11 Miscellaneous................................................................................C-69
11.1 Successors and Assigns.......................................................................C-69
11.2 Entire Agreement.............................................................................C-69
11.3 Amendment....................................................................................C-69
11.4 Extension; Waiver............................................................................C-70
11.5 Notices, Etc.................................................................................C-70
11.6 Third Party Beneficiary, Etc.................................................................C-72
11.7 Reformation; Severability....................................................................C-72
11.8 Counterparts.................................................................................C-72
11.9 Titles and Subtitles.........................................................................C-73
11.10 Confidentiality..............................................................................C-73
(a) Confidential Information..............................................................C-73
(b) Disclosure............................................................................C-74
11.11 Expenses.....................................................................................C-75
11.12 Responsibility for Merger Sub................................................................C-75
11.13 Lack of Services Agreement...................................................................C-75
</TABLE>
vi
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Page
<S> <C>
AAA..............................................................................................................C-68
Accounts.........................................................................................................C-35
Acquisition Proposal.............................................................................................C-24
Affiliate........................................................................................................C-49
Affiliates Letter................................................................................................C-25
Agreement.........................................................................................................C-1
Analysis.........................................................................................................C-73
Approvals........................................................................................................C-17
Articles.........................................................................................................C-73
Asserted Liability...............................................................................................C-66
Associate........................................................................................................C-49
Breach...........................................................................................................C-60
Cash Consideration................................................................................................C-5
Certificate of Existence.........................................................................................C-11
Certificates of Merger............................................................................................C-4
Closing..........................................................................................................C-10
Closing Date.....................................................................................................C-10
CoBank...........................................................................................................C-12
Code..............................................................................................................C-2
Companies........................................................................................................C-29
Confidential Information.........................................................................................C-73
Consulting Agreement.............................................................................................C-26
Contracts........................................................................................................C-39
Copyrights.......................................................................................................C-38
Credit Agreement.................................................................................................C-41
Deductible.......................................................................................................C-64
Default..........................................................................................................C-41
Defense Costs....................................................................................................C-66
DGCL..............................................................................................................C-4
Disclosing Party.................................................................................................C-72
Disclosure Schedules..............................................................................................C-3
EDC..............................................................................................................C-16
Effective Time....................................................................................................C-4
Employee Benefit Plans...........................................................................................C-47
Employee Pension Benefit Plan....................................................................................C-48
Employment Agreements............................................................................................C-25
Environmental Claim..............................................................................................C-51
Environmental Laws...............................................................................................C-50
Equipment Leases.................................................................................................C-35
vii
<PAGE>
ERISA............................................................................................................C-47
ERISA Affiliate..................................................................................................C-48
Escrow Account....................................................................................................C-5
Escrow Adjustment................................................................................................C-63
Escrow Agent......................................................................................................C-5
Escrow Agreement..................................................................................................C-5
Escrow Deposit...................................................................................................C-63
Escrow Stock......................................................................................................C-5
Event of Default.................................................................................................C-41
Exchange Act.....................................................................................................C-21
Exchange Agent....................................................................................................C-7
Exchange Fund.....................................................................................................C-7
Exhibits..........................................................................................................C-3
Expiration Date..................................................................................................C-42
Form S-1.........................................................................................................C-21
Form S-4.........................................................................................................C-21
GAAP.............................................................................................................C-32
HSR Act..........................................................................................................C-14
Indemnified Party................................................................................................C-66
Indemnifying Party...............................................................................................C-65
Indemnity Agreement..............................................................................................C-13
Intellectual Property............................................................................................C-38
Interim Loss Value...............................................................................................C-63
Interim Losses...................................................................................................C-63
Leased Premises..................................................................................................C-36
Lenders..........................................................................................................C-41
Letters..........................................................................................................C-69
Licenses.........................................................................................................C-50
Liens............................................................................................................C-35
LLC...............................................................................................................C-1
LLC Financial Statements.........................................................................................C-32
LLC Holdings......................................................................................................C-1
LLC Legal Requirements...........................................................................................C-49
LLC Material Adverse Change......................................................................................C-15
LLC Nominee......................................................................................................C-59
LLC Parties.......................................................................................................C-1
LLC Parties Closing Certificate..................................................................................C-10
LLC Parties Consents.............................................................................................C-32
LLC Parties' Delegated Conditions................................................................................C-19
LLC Records......................................................................................................C-52
Loan Documents...................................................................................................C-13
Lock-Up Agreement................................................................................................C-13
Losses...........................................................................................................C-61
viii
<PAGE>
Lucent...........................................................................................................C-12
Marks............................................................................................................C-38
Member Agreement.................................................................................................C-13
Member Guaranty..................................................................................................C-12
Member Indemnitors...............................................................................................C-61
Members...........................................................................................................C-1
Members Meeting..................................................................................................C-23
Members' Releases................................................................................................C-13
Members Required Vote............................................................................................C-30
Members' Agent....................................................................................................C-5
Members' Interests................................................................................................C-1
Merger Sub........................................................................................................C-1
Merger Sub Stock..................................................................................................C-2
OLLCA.............................................................................................................C-4
Orders...........................................................................................................C-45
Outside Confidentiality Agreement................................................................................C-46
Parent Merger.....................................................................................................C-1
Parent Surviving Corporation......................................................................................C-3
Patents..........................................................................................................C-38
Per Unit LLC Consideration........................................................................................C-5
Permits..........................................................................................................C-16
Permitted Liens..................................................................................................C-35
Personal Property................................................................................................C-35
Policies.........................................................................................................C-46
Prior Policies...................................................................................................C-46
Proceedings......................................................................................................C-45
Projections......................................................................................................C-34
Promissory Note..................................................................................................C-12
Proxy Statement..................................................................................................C-21
Public............................................................................................................C-1
Public Consents..................................................................................................C-55
Public Legal Requirements........................................................................................C-56
Public Loan Agreement............................................................................................C-12
Public Material Adverse Change...................................................................................C-15
Public Stock......................................................................................................C-6
Public Stockholders Meeting......................................................................................C-23
Public's, Superholdings' and Merger Sub's Delegated Conditions...................................................C-20
Real Estate Contracts............................................................................................C-36
Real Property....................................................................................................C-36
Receiving Party..................................................................................................C-73
Related Agreements...............................................................................................C-12
Reorganization....................................................................................................C-2
Representatives..................................................................................................C-58
ix
<PAGE>
SEC..............................................................................................................C-16
SEC Documents....................................................................................................C-55
SEC Filing Date..................................................................................................C-21
Sections.........................................................................................................C-73
Securities Act...................................................................................................C-21
Services Agreement...............................................................................................C-12
Significant Supplier.............................................................................................C-46
Sister Agreements.................................................................................................C-3
Sister Lock-Up...................................................................................................C-13
Sprint...........................................................................................................C-12
Sprint Management Agreement......................................................................................C-40
Subsidiaries.....................................................................................................C-31
Subsidiary Merger.................................................................................................C-1
Subsidiary Merger Agreement.......................................................................................C-1
Subsidiary Surviving Corporation..................................................................................C-3
Superholdings.....................................................................................................C-1
Superholdings Closing Certificate................................................................................C-11
Superholdings Indemnitees........................................................................................C-61
Superholdings Indemnitors........................................................................................C-62
Superholdings Stock ..............................................................................................C-2
Tax..............................................................................................................C-45
Tax Returns......................................................................................................C-45
Taxes............................................................................................................C-45
Technology Contracts.............................................................................................C-38
Termination Date.................................................................................................C-27
Tower Leases.....................................................................................................C-37
Trade Secrets....................................................................................................C-38
VAR Obligations...................................................................................................C-7
VAR Plan..........................................................................................................C-7
</TABLE>
x
<PAGE>
TABLE OF EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Escrow Agreement.....................................................................................Exhibit 1.2(b)
Subsidiary Merger Agreement..........................................................................Exhibit 1.2(f)
LLC Parties Closing Certificate......................................................................Exhibit 2.2(a)
Form of Opinion of LLC Parties' Counsel..............................................................Exhibit 2.2(e)
Superholdings' Closing Certificate...................................................................Exhibit 2.3(a)
Form of Opinion of Public's, Superholdings' and Merger Sub's Counsel.................................Exhibit 2.3(d)
Services Agreement...................................................................................Exhibit 2.4(a)(i)
Public Loan Agreement................................................................................Exhibit 2.4(a)(ii)
Member Guaranty......................................................................................Exhibit 2.4(a)(iii)
Lock-Up Agreement (contained in Member Agreement)....................................................Exhibit 2.4(b)(i)
Indemnity Agreement (contained in Member Agreement)..................................................Exhibit 2.4(b)(i)
Members' Releases (contained in Member Agreement)....................................................Exhibit 2.4(b)(i)
</TABLE>
xi
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement") is entered into as of July 31, 2000, by and among Alamosa PCS
Holdings, Inc., a Delaware corporation ("Public"), Alamosa Holdings, Inc., a
Delaware corporation ("Superholdings"), Alamosa Sub I, Inc., a Delaware
corporation and wholly-owned direct subsidiary of Superholdings ("Merger Sub"),
and Washington Oregon Wireless, LLC, an Oregon limited liability company
("LLC"), certain members of LLC (collectively, the "Members") and WOW Holdings,
LLC, an Oregon limited liability company ("LLC Holdings").
R E C I T A L S
- - - - - - - -
A. The Members own, in the aggregate, at least 67% of the Final Percentage
Interest (as defined in LLC's operating agreement) of LLC, consisting
in the aggregate of 31,558,046 units (all of the outstanding membership
interests of LLC, whether or not owned by a Member, and any interest
received with respect to or in exchange for any such interest
(including, without limitation, units of LLC Holdings), being referred
to as "Members' Interests"). LLC, LLC Holdings and the Members are
sometimes collectively referred to herein as the "LLC Parties."
B. The Board of Managers of LLC deems it advisable and in the best
interests of its members that LLC and its members form LLC Holdings to
hold all of the Members' Interests of LLC, and that LLC Holdings, along
with any other business entity with which Superholdings has agreed to
merge, merge with and into Superholdings (the "Parent Merger")
simultaneously with the merger of Merger Sub and Public (the
"Subsidiary Merger"). In furtherance thereof, the Board of Directors of
Superholdings and the Board of Managers of LLC have approved the Parent
Merger, upon the terms and subject to the conditions set forth herein.
In addition, the Members have agreed to vote in favor of the Parent
Merger.
C. The Board of Directors of Public have deemed it advisable and in the
best interests of its stockholders to enter into the Agreement and Plan
of Reorganization dated as of July 31, 2000 (the "Subsidiary Merger
Agreement") by and among Merger Sub, Public and Superholdings and to
consummate the Subsidiary Merger simultaneously with the consummation
of the Parent Merger. In furtherance thereof, the Board of Directors of
Public has approved the Subsidiary Merger Agreement and the Subsidiary
Merger, upon the terms and subject to the conditions set forth herein.
D. Similarly, the Board of Directors of Superholdings have deemed it
advisable to enter into the Subsidiary Merger Agreement and to
consummate the Subsidiary Merger
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simultaneously with the consummation of the Parent Merger. In
furtherance thereof, the Board of Directors of Superholdings has
approved the Subsidiary Merger Agreement and the Subsidiary Merger,
upon the terms and subject to the conditions set forth herein.
E. Further, the Board of Directors of Merger Sub have deemed it advisable
and in the best interests of its stockholders to enter into the
Subsidiary Merger Agreement and to consummate the Subsidiary Merger
simultaneously with the consummation of the Parent Merger. In
furtherance thereof, the Board of Directors of Merger Sub has approved
the Subsidiary Merger Agreement and Subsidiary Merger, upon the terms
and subject to the conditions set forth herein. The Parent Merger, the
Subsidiary Merger and the other transactions contemplated herein,
collectively referred to as the "Reorganization," and
Sister Agreements consummated contemporaneously herewith are part of a
single reorganization.
F. As of the date hereof, there are no shares of common stock of
Superholdings, par value $0.01 per share ("Superholdings Stock"),
issued and outstanding and as of the date hereof, Superholdings holds
of record all of the issued and outstanding shares of common stock of
Merger Sub, par value $0.01 per share ("Merger Sub Stock").
G. The Board of Directors of Public has determined that in order to
complete the Parent Merger in a tax-efficient manner, such acquisition
should be structured as a transaction described in Section 351(a) of
the Internal Revenue Code of 1986, as amended (the "Code") (all
citations to the Code, or to the Treasury Regulations promulgated
thereunder, shall include any amendments or any substitute or successor
provisions thereto), which will require Public to form a new holding
company. The parties desire that the Parent Merger, except as provided
in Sections 1.2(a)(ii) (Cash) and 1.8(b) (Cash Payments) herein,
qualifies as a transaction described in Section 351(a) of the Code.
H. The parties desire that the Subsidiary Merger qualify as a transaction
described in Sections 351(a) and 368(a)(1)(A) of the Code by virtue of
Section 368(a)(2)(E) of the Code. It is contemplated that the
Subsidiary Merger will be completed substantially simultaneously with
the merger or consolidation of Superholdings or one or more of its
subsidiaries with or into one or more business entities (including,
without limitation, the Parent Merger) in a transaction of the type
described in Section 351(a) of the Code.
I. For financial accounting purposes, Public and Superholdings may
determine that Superholdings' merger with LLC will be accounted for as
a pooling of interests transaction.
J. Public, Superholdings, Merger Sub and the LLC Parties acknowledge that
they have received adequate consideration for entering into, and have
relied upon the promises, covenants, representations and warranties
contained in, this Agreement, and that they will be benefitted by the
transactions contemplated herein.
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<PAGE>
K. The LLC Parties have delivered to Superholdings certain disclosure
schedules of even date herewith referred to herein. Public,
Superholdings and Merger Sub have delivered to the LLC Parties certain
disclosure schedules of even date herewith referred to herein. Any such
disclosure schedules are referred to herein as "Disclosure Schedules."
The Disclosure Schedules and the Exhibits (herein so called) referred
to herein are a part of this Agreement.
L. Public, Superholdings and Merger Sub may enter into other agreements
(the "Sister Agreements") pursuant to which other business entities
join in the Parent Merger.
A G R E E M E N T
-----------------
Based on the recitals set forth above and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE 1
Mergers
-------
1.1 The Mergers.
-----------
(a) The Mergers. Upon the terms and subject to the
conditions set forth in this Agreement:
(i) Parent Surviving Corporation. Prior to the
date hereof, LLC and its members shall form LLC Holdings. As soon as practicable
after the date hereof, but not later than thirty calendar days from the date
hereof, LLC Holdings shall hold all of the Members' Interests of LLC. At the
Effective Time, LLC Holdings will merge with and into Superholdings (along with
one or more other parties, if any, that Public and Superholdings agree to be
constituents in the Parent Merger, pursuant to the terms of a Sister Agreement)
in accordance with the terms set forth herein. From and after the Effective
Time, the separate existence of LLC Holdings and such other constituents shall
cease to exist. Superholdings shall continue as the surviving corporation in the
Parent Merger (the "Parent Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware. (LLC shall continue as a
subsidiary of Superholdings.)
(ii) Subsidiary Surviving Corporation.
Simultaneously with the Parent Merger, Merger Sub will merge with and into
Public, in accordance with the terms set forth herein and the terms of the
Subsidiary Merger Agreement. From and after the Effective Time, the separate
corporate existence of Merger Sub shall cease to exist. Public shall continue as
the surviving corporation in the Subsidiary Merger (the "Subsidiary Surviving
Corporation") and
C-3
<PAGE>
shall continue to be governed by the laws of the State of Delaware. At the sole
discretion of the Board of Directors of Public, as an alternative structure to
the Subsidiary Merger, Public may merge directly with and into Superholdings,
and Superholdings shall continue as the surviving corporation and shall continue
to be governed by the laws of the State of Delaware.
(b) Consummation of the Mergers. The Parent Merger and the
Subsidiary Merger shall be consummated by filing Certificates of Merger (herein
so called) with the secretaries of state of the State of Delaware and State of
Oregon, together with all other documents, notices and filings required by the
Delaware General Corporation Law ("DGCL") and the Oregon Limited Liability
Company Act ("OLLCA").
(c) Effective Time of the Mergers. The Certificates of Merger
shall provide that the Parent Merger and the Subsidiary Merger shall be
effective as of the date and time set forth in the Certificates of Merger filed
with the Secretary of State of the State of Delaware (the "Effective Time").
(d) Effect of the Mergers. At the Effective Time, the effect
of the Parent Merger shall be as provided in Section 264 of the DGCL and other
applicable provisions of the DGCL and Section 63.481 of the OLLCA and other
applicable provisions of such act, and the effect of the Subsidiary Merger shall
be as provided in Sections 259 and 261 of the DGCL.
(e) The Surviving Corporations' Certificates of Incorporation;
Bylaws; Directors and Officers. The certificates of incorporation and bylaws of
Superholdings and Public, in each case as in effect at the Effective Time, shall
be the certificates of incorporation and bylaws of Parent Surviving Corporation
and Subsidiary Surviving Corporation, respectively. At the Effective Time, the
Board of Directors and officers of each of Parent Surviving Corporation and
Subsidiary Surviving Corporation shall be composed of the directors and officers
of Superholdings and Public serving immediately before the Effective Time,
respectively, to hold office until their respective successors are duly elected
or appointed and qualified. The rights and obligations of the then current
members of LLC, whether as members of LLC or LLC Holdings, (i) under their
respective operating agreements, limited liability company agreements, or
similar agreements, including, without limitation, the obligations to make
capital contributions and (ii) with respect to Members' Interests shall
terminate.
1.2 Terms of the Merger.
-------------------
(a) Consideration for the Parent Merger. Each unit of the
Members' Interests that are units of LLC Holdings (which the members of LLC
shall have received in exchange for their units of LLC) outstanding immediately
prior to the Effective Time shall, at the Effective Time, by virtue of the
Parent Merger and without any action on the part of the holder thereof, be
converted, as specified by and pursuant to the terms of this Section 1.2(a),
into the following:
(i) Superholdings Stock. The right to receive
a number of duly
C-4
<PAGE>
authorized, validly issued, fully paid and nonassessable shares of Superholdings
Stock, along with any dividends or distributions thereon after the Effective
Time, equal to the Per Unit LLC Consideration. "Per Unit LLC Consideration"
shall be equal to 0.19171 shares of Superholdings Stock per unit of the Members'
Interests of LLC Holdings; provided, that, the aggregate number of shares of
Superholdings Stock that shall be issued in connection with the Parent Merger
pursuant to this Section 1.2(a) for all of such Members' Interests outstanding
shall be equal to 6,050,000 shares.
(ii) Cash. The right to receive cash as set
forth in the Disclosure Schedule to this Section 1.2(a)(ii), without any
interest thereon (the "Cash Consideration"); provided, that, the aggregate
amount of all Cash Consideration shall equal $12.5 million.
(iii) Adjustment of Cash. The amount of Cash
Consideration shall be subject to adjustment as provided below and shall be
reduced by the amount of any transfer Taxes owed as a result of the formation
of LLC Holdings or LLC's or LLC Holdings' participation in the Parent Merger.
(b) Right to Withhold. At the Closing, Superholdings shall
have the right to withhold from the aggregate amount of the Per Unit LLC
Consideration the amounts of any Interim Losses, as described in further detail
in Section 10.2(d) (Form of Payment; Interim Losses). The aggregate amount of
all such amounts withheld at any time is defined herein as the "Escrow Stock."
An escrow agent (the "Escrow Agent") shall keep the Escrow Stock in a separate
escrow account, maintained on behalf of Superholdings and the members of LLC
Holdings (the "Escrow Account"), subject to the terms of the Escrow Agreement
(the "Escrow Agreement") substantially in the form attached as the Exhibit to
this Section 1.2(b). LLC Holdings shall appoint an agent (the "Members' Agent")
to act on behalf of the Members in all matters regarding the Escrow Stock. The
Members' Agent shall have the authority to take any and all actions, including,
without limitation, negotiate and compromise claims on behalf of the Members
with respect to the Escrow Stock.
(c) Consideration Subject to Agreements. The consideration to
be paid pursuant to the Parent Merger pursuant to Section 1.2(a) (Consideration
for the Parent Merger) shall be subject to the terms of the Escrow Agreement,
Lock-Up Agreement, the Indemnity Agreement, the other provisions of the Member
Agreement and, to the extent applicable, Affiliate Letters. Superholdings shall
retain possession of such consideration until the later of (i) the expiration of
the Lock-Up Agreement and (ii) the resolutions of all claims for Losses that
arise pursuant to Section 10.2(a) (Indemnification of Superholdings), unless the
person or entity and, if applicable, its direct and indirect owners, entitled to
receive such consideration execute a Lock-Up Agreement and an Indemnity
Agreement, and to the extent applicable, Affiliate Letters, whereupon
Superholdings shall release such consideration.
(d) Antidilution. In the event of any stock dividend, stock
split, reclassification, recapitalization, combination or exchange of shares
with respect to, or rights
C-5
<PAGE>
issued in respect of, Public Stock on or after the date hereof and prior to the
Effective Time, the Per Unit LLC Consideration shall be adjusted accordingly.
(e) Sister Agreements. The Sister Agreements, if any, shall
set forth the consideration to be paid to the other parties to the Parent
Merger.
(f) Conversion of Public Stock. Each share of common stock of
Public, par value $0.01 (the "Public Stock"), issued and outstanding immediately
prior to the Effective Time together with the related rights distributed to
holders of Public Stock pursuant to the Rights Agreement, dated as of January
31, 2000, between Public and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent (other than shares of Public Stock held in Public's treasury) shall, at
the Effective Time, by virtue of the Subsidiary Merger and without any action on
the part of the holder thereof, be converted into, as specified and pursuant to
the terms of this Section 1.2(f), the right to receive one duly authorized,
validly issued, fully paid and nonassessable share of Superholdings Stock, along
with any dividends or distributions thereon after the Effective Time pursuant to
the terms of the Subsidiary Merger Agreement in the form attached as the Exhibit
to this Section 1.2(f), which agreement shall not be amended in a manner adverse
to the LLC Parties without the consent of the Members.
(g) Conversion of Merger Sub Stock. Each share of Merger Sub
Stock issued and outstanding immediately prior to the Effective Time (other than
shares of Merger Sub Stock held in Merger Sub's treasury) shall, at the
Effective Time, by virtue of the Subsidiary Merger and without any action on the
part of the holder thereof, be converted into one duly authorized, validly
issued, fully paid nonassessable share of stock of the Subsidiary Surviving
Corporation.
(h) Treasury Stock. All shares of Public Stock and Merger Sub
Stock that are owned by Public or Merger Sub, respectively, as treasury stock
shall, at the Effective Time, be canceled and retired and shall cease to exist,
and no shares of Superholdings Stock or other consideration shall be delivered
or owing in exchange therefor.
(i) Rights as Holders. On or after the Effective Time, holders
of Members' Interests shall cease to have any rights as members of LLC and LLC
Holdings, except the right to receive the consideration set forth herein in
Section 1.2(a) (Consideration for the Parent Merger) with respect to members'
interest held by them, and such Members' Interests shall be extinguished. On and
after the Effective Time, holders of certificates which immediately prior to the
Effective Time represented issued and outstanding shares of Public Stock shall
cease to have any rights as stockholders of Public, except the right to receive
the consideration set forth herein in Section 1.2(f) (Conversion of Public
Stock) with respect to each share held by them. The merger consideration paid
upon the surrender for exchange of units of Members' Interests or shares of
Public Stock in accordance with the terms of this Agreement shall be deemed,
when paid or issued hereunder, to have been paid or issued, as the case may be,
in full satisfaction of all rights and obligations pertaining to the members'
interests or shares theretofore represented by such unit of Members' Interests
or shares of Public Stock
C-6
<PAGE>
1.3 VAR Plan.
--------
(a) [Intentionally deleted].
(b) [Intentionally deleted].
(c) [Intentionally deleted].
(d) VAR Plan. At the request of Superholdings, LLC shall
terminate all or any portion of its Value Appreciation Plan (the "VAR Plan")
prior to the Closing Date. On the Closing Date, Superholdings shall (i) assume
the obligations owed under the VAR Plan to the LLC employees whom Superholdings
elects to employ and (ii) either (A) assume the VAR Plan as it relates to
Mitchell Moore or (B) satisfy and pay the obligations owed to Mitchell Moore
under the VAR Plan (collectively, the "VAR Obligations"). On the Closing Date,
the aggregate amount of the Cash Consideration shall be decreased by the amount
of the VAR Obligations attributable to Mitchell Moore in excess of $1,000,000.
On the Closing Date, Superholdings shall pay (i) to each LLC employee whom
Superholdings elects to employ, one-third of the VAR Obligations owed to each
such LLC employee and (ii) to Mitchell Moore, the amount of VAR Obligations
attributable to Mitchell Moore. On each of the dates six and twelve months after
the Closing Date, Superholdings shall pay to each of the LLC employees other
than Mitchell Moore whom Superholdings elects to employ one-third of the VAR
Obligations owed to each such LLC employee.
1.4 Exchange Agent. Prior to or concurrently with the Effective Time,
Superholdings shall enter into an agreement with such bank or trust company as
may be designated by Superholdings (the "Exchange Agent"), which shall provide
that Superholdings shall deposit with the Exchange Agent as of the Effective
Time, for the benefit of the holders of units of Members' Interests, for
exchange in accordance with this Agreement, through the Exchange Agent, (a)
certificates representing the shares of Superholdings Stock, (b) any dividends
or distributions with respect thereto with a record date after the Effective
Time, (c) any cash payable in lieu of any fractional shares of Superholdings
Stock and (d) the $12.5 million aggregate for the Cash Consideration
(collectively, the "Exchange Fund") issuable pursuant to this Agreement in
exchange for outstanding units of Members' Interests.
1.5 Exchange Procedure. After the Effective Time, each holder of
Members' Interests shall surrender the certificates representing same or, if the
Members' Interests are not certificated, deliver a release of members' interest,
in a form, duly endorsed or executed as the Parent Surviving Corporation may
reasonably require, to the Exchange Agent, together with a Lock-Up Agreement,
Members' Release and an Indemnity Agreement. Subject to Sections 1.2(b) (Right
to Withhold), 1.2(c) (Consideration Subject to Agreements) and 1.12 (Tax
Withholding), at the time of such surrender or delivery, the merger
consideration applicable to such Members' Interests, as the case may be, shall
be delivered to such holder. The merger
C-7
<PAGE>
consideration shall be deemed, when paid or issued hereunder, to have been paid
or issued, as the case may be, in full satisfaction of all rights and
obligations pertaining to the surrendered units. No interest shall be paid or
accrued on any cash payable upon the surrender of any unit of Members'
Interests. If cash payment is to be made, or shares of Superholdings Stock
issued, to a person other than the person who surrendered the units of Members'
Interests, it shall be a condition of payment that the units of Members'
Interests so surrendered shall be properly endorsed or otherwise in proper form
for transfer and that the person requesting such payment shall pay any transfer
or other taxes required by reason of the payment to a person other than the
registered holder of the surrendered units of Members' Interests, or established
to the satisfaction of Superholdings that such taxes have been paid or are not
applicable.
1.6 Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Superholdings Stock shall be paid to the
holder of any unsurrendered units of Members' Interests with respect to the
shares of Superholdings Stock issuable upon the surrender of such units of
Members' Interests pursuant to Section 1.5, (Exchange Procedure) and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 1.8, (No Fractional Shares) and all such dividends, other
distributions and cash in lieu of fractional shares of Superholdings Stock shall
be paid by Superholdings to the Exchange Agent and shall be included in the
Exchange Fund, in each case until the surrender of such units of Members'
Interests pursuant to Section 1.5 (Exchange Procedure). Subject to the effect of
applicable escheat or similar laws and subject to Sections 1.2(b) (Right to
Withhold), 1.2(c) (Consideration Subject to Agreements) and 1.12 (Tax
Withholding), following the surrender of any such units of Members' Interests
pursuant to Section 1.5 (Exchange Procedure) there shall be paid to the holder
of the units of Members' Interests, (i) any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable (with a record date or payment date prior to the surrender of units of
Members' Interests) with respect to shares of Superholdings Stock represented by
such units of Members' Interests and (ii) the amount of any cash payable in lieu
of a fractional share of Superholdings Stock to which such holder is entitled
pursuant to Sections 1.8(a) (No Certificates) and 1.8(b) (Cash Payments). No
holder of unsurrendered units of Members' Interests shall be entitled, until the
surrender of such units, to vote the shares of Superholdings Stock into which
the shares of Members' Interests represented thereby shall have been converted.
1.7 Cancellation and Retirement of Units. As of the Effective Time, all
units of Members' Interests of LLC Holdings issued and outstanding immediately
prior to the Effective Time shall cease to be outstanding and shall
automatically be canceled and retired and shall cease to exist.
1.8 No Fractional Shares.
--------------------
(a) No Certificates. No certificates representing fractional
shares of Superholdings Stock shall be issued upon the surrender for exchange of
units of Members' Interests which have been converted pursuant to this
Agreement, and such fractional share
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interests shall not entitle the owner thereof to vote or to have any rights of a
stockholder of Superholdings.
(b) Cash Payments. In lieu of any such fractional shares, each
holder of units who would otherwise have been entitled to a fraction of a share
of Superholdings Stock upon surrender of units for exchange pursuant to this
Article 1 will be paid an amount in cash (without interest), rounded to the
nearest cent, determined by multiplying (i) the per share closing price on The
Nasdaq Stock Market of Superholdings Stock on the date on which the Effective
Time occurs (or, if Superholdings Stock does not trade on The Nasdaq Stock
Market on such date, the first date of trading of Superholdings Stock on The
Nasdaq Stock Market after the Effective Time) by (ii) the fractional interest to
which such holder otherwise would be entitled. Such amount in cash shall be
deemed to be substituted for any such fractional share and to constitute a
portion of the merger consideration with respect to the related units.
1.9 Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Superholdings, in (a) direct
obligations of the United States of America, (b) obligations for which the full
faith and credit of the United States of America is pledged to provide for the
payment of principal and interest, (c) commercial paper rated the highest
quality by either Moody's Investors Services, Inc. or Standard & Poor's
Corporation or (d) certificates of deposit, bank repurchase agreements or
bankers' acceptances of commercial banks with capital exceeding $500.0 million.
Any net earnings with respect to the Exchange Fund shall be the property of and
paid over to Superholdings as and when requested by Superholdings.
1.10 Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of units of Members' Interests for
180 days after the Effective Time shall be delivered to Superholdings, upon
demand, and any holders of units of Members' Interests that have not theretofore
complied with this Article 1 shall thereafter look only to Superholdings, and
only as general creditors thereof, for payment of their claim for any merger
consideration, any cash in lieu of fractional shares of Superholdings Stock and
any dividends or distributions with respect to Superholdings Stock, as provided
herein.
1.11 No Liability. None of Public, Superholdings, Merger Sub, Parent
Surviving Corporation, Subsidiary Surviving Corporation or the Exchange Agent
shall be liable to any person in respect of any payments or distributions
payable from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any units of Members'
Interests shall not have been surrendered prior to five years after the
Effective Time (or immediately prior to such earlier date on which any merger
consideration in respect of such units of Members' Interests would otherwise
escheat to or become the property of any governmental entity), any amounts
payable in respect of such units of Members' Interests shall, to the extent
permitted by applicable law, become the property of Superholdings, free and
clear of all claims or interest of any person previously entitled thereto.
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1.12 Tax Withholding. Superholdings shall be entitled to deduct and
withhold, or cause to be deducted or withheld, from the consideration otherwise
payable pursuant to this Agreement to any holder of options or units of Members'
Interests such amounts as are required to be deducted and withheld with respect
to the making of such payment under the Code, or any provision of applicable
state, local or foreign tax law. To the extent that amounts are so deducted and
withheld, such deducted and withheld amounts shall be treated for all purposes
of this Agreement as having been paid to such holders in respect of which such
deduction and withholding was made.
ARTICLE 2
Closing the Transaction
-----------------------
2.1 Closing. On the third business day after the satisfaction or
written waiver of the conditions (other than execution, filing or delivery of
agreements, certificates, legal opinions or other instruments to be delivered at
Closing) contained (a) herein, (b) in the Subsidiary Merger Agreement and (c) at
the option of Superholdings and Public, any Sister Agreements that have not been
validly terminated in accordance with their terms, or as otherwise agreed by the
parties hereto, and unless this Agreement has been terminated pursuant to the
provisions of Article 5 (Termination), the consummation of the transactions
provided for herein and in such other agreements (the "Closing") shall take
place at the offices of Haynes and Boone, LLP, counsel to Superholdings, Public
and Merger Sub, located at 1600 N. Collins Blvd., Suite 2000, Richardson, Texas
75080, at 10:00 a.m., local time, or at such other place or by such other means
as the parties hereto may agree; provided, however, that if the conditions
(other than execution, filing or delivery of agreements, certificates, legal
opinions or other instruments to be delivered at Closing) contained herein and
in the Subsidiary Merger Agreement are satisfied or waived in writing, then
Superholdings and Public may not delay the Closing beyond March 31, 2001 in
order to achieve satisfaction or waiver of the conditions contained in a Sister
Agreement; provided, further, that if (i) the closing of a Sister Agreement
occurs prior to March 31, 2001 and (ii) the conditions (other than execution,
filing or delivery of agreements, certificates, legal opinions or other
instruments to be delivered at Closing) contained herein are satisfied or waived
in writing, then the Closing of this Agreement shall also occur on the closing
date of such Sister Agreement. The time and date of the Closing are referred to
herein as the "Closing Date."
2.2 LLC Parties' Deliveries at Closing to Superholdings. At the
Closing, the LLC Parties shall deliver, or cause to be delivered, to
Superholdings the following items:
(a) Closing Certificate. The LLC Parties shall jointly deliver
to Superholdings a closing certificate executed by each of the LLC Parties (the
"LLC Parties Closing Certificate") in the form attached as the Exhibit to this
Section 2.2(a).
(b) Consents and Approvals. The LLC Parties jointly shall
deliver copies of all LLC Parties' Consents that have been obtained, and all
Approvals obtained by the LLC
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Parties.
(c) Proceedings and Documents. The LLC Parties shall deliver
copies, certified or otherwise identified to Superholdings' reasonable
satisfaction, of all company documents that Superholdings shall reasonably
request, including resolutions of the Board of Managers of LLC Holdings and
resolutions of the members of LLC Holdings, dated on or before the date hereof
to authorize this Agreement, the Related Agreements and the transactions and
other acts contemplated either by this Agreement or the Related Agreements.
(d) Certificates of Existence. LLC Holdings shall deliver
certificates, issued within 10 days of the date of the Closing, (i) from the
Secretary of State of Oregon, evidencing that LLC and LLC Holdings are validly
existing under the laws of their jurisdictions of organization and (ii) from
each state listed on the Disclosure Schedule to Section 6.1(a) (Organization and
Existence) evidencing that LLC and LLC Holdings are qualified to do business as
foreign entities (each, a "Certificate of Existence") in each such state.
(e) Opinions of LLC Parties' Counsel. The LLC Parties shall
deliver an opinion of Duncan, Tiger & Tabor, counsel to the LLC Parties, dated
as of the Closing Date, in customary form and substance regarding the matters
set forth in the Exhibit to this Section 2.2(e).
(f) Other Instruments. Such other instruments, documents or
information that Superholdings reasonably requests in order to more effectively
consummate the transactions contemplated hereby.
2.3 Superholdings' and Public's Deliveries at Closing to LLC. At the
Closing, Superholdings and Public shall deliver the following items to the
Members:
(a) Closing Certificate. Superholdings shall deliver to the
Members a closing certificate executed by Superholdings (the "Superholdings
Closing Certificate") in the form attached as the Exhibit to this Section
2.3(a).
(b) Proceedings and Documents. Superholdings, Public and
Merger Sub shall deliver copies, certified or otherwise identified to LLC
Holdings' reasonable satisfaction, of all company documents that LLC Holdings
shall reasonably request, including resolutions of their respective boards of
directors, dated on or before the date hereof to authorize this Agreement, the
Related Agreements and the transactions and other acts contemplated either by
this Agreement or the Related Agreements.
(c) Consents and Approvals. Public and Superholdings jointly
shall deliver copies of all of Public's and Superholdings' Consents that have
been obtained, and all Approvals obtained by Public and Superholdings.
(d) Opinion of Public's, Superholdings' and Merger Sub's
Counsel.
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Superholdings shall deliver an opinion of Haynes and Boone, LLP, dated as of the
Closing Date, in customary form and substance regarding the matters set forth in
the Exhibit to this Section 2.3(d).
(e) Section 16(b) Resolution. A copy of the resolution
referred to in Section 8.8 (Section 16(b) Resolution), certified as of the
Closing Date by the Secretary or Assistant Secretary of Superholdings.
(f) Other Instruments. Such other instruments, documents or
information that LLC Holdings reasonably requests in order to more effectively
consummate the transactions contemplated hereby.
2.4 Related Agreements. The parties, as appropriate, shall execute and
deliver the following documents. All agreements, documents or instruments
executed among Public, Superholdings and Merger Sub on the one hand, and any of
the LLC Parties on the other, pursuant to this Agreement or the transactions
contemplated hereby are referred to as the "Related Agreements." Without
limitation, the Related Agreements include:
(a) Prior to Closing. The following documents, which shall be
executed prior to Closing:
(i) Services Agreement. On the date hereof,
the parties will execute a services agreement substantially in the form attached
as the Exhibit to this Section 2.4(a)(i), which Services Agreement shall become
effective as provided therein on the date the condition contained in Section
3.1(b) (HSR Act) has been satisfied and the last consent to the transactions
contemplated hereby has been obtained from Sprint Spectrum, L.P., WirelessCo,
L.P., Sprint Communications, L.P., Sprint Spectrum Equipment Company, L.P., and
Sprint Spectrum Realty Company, L.P. (collectively, "Sprint"), Lucent
Technologies, Inc. ("Lucent") and CoBank, ACB ("CoBank") until the earlier of
the Closing Date or the Termination Date (the "Services Agreement").
(ii) Public Loan Agreement. Public shall loan
funds to LLC, pursuant to a loan agreement (the "Public Loan Agreement") in the
form attached as the Exhibit to this Section 2.4(a)(ii).
(iii) Member Guaranty. The loans under the
Public Loan Agreement shall be guaranteed by the Members, and such other members
of LLC that may join such guaranty, pursuant to a guaranty (the "Member
Guaranty") in the form attached as the Exhibit to this Section 2.4(a)(iii).
(iv) Promissory Note. LLC will execute a
promissory note (the "Promissory Note") in favor of Public in connection with
the Public Loan Agreement, in the form attached as the Exhibit to this Section
2.4(a)(iv)
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(v) Loan Documents. All "Loan Documents," as
defined in the Public Loan Agreement.
(b) At Closing. The following documents, which shall be
executed at the Closing:
(i) Member Agreement. Superholdings, each
Member of LLC Holdings and such Member's direct and indirect owners will enter
into a member agreement (the "Member Agreement"), which shall include, among
other provisions, the following:
(A) Lock-Up Agreement. Each member of
LLC Holdings will enter into a lock-up agreement with Superholdings, which
agreement shall prohibit the sale or other disposition of their holdings of
Superholdings Stock until September 30, 2001, without the prior written consent
of Superholdings ("Lock-Up Agreement"), in the form hereto attached as the
Exhibit to this Section 2.4(b)(i)(A). If Superholdings enters into a lock-up
agreement with any person who receives at least 25% of the Superholdings Stock
issued pursuant to a Sister Agreement (a "Sister Lock-Up") with terms more
beneficial to such person than any Lock-Up Agreement, then each Member may
substitute such Lock-up Agreement in its entirety for a lockup agreement having
the same terms as such Sister Lock-Up Agreement. Notwithstanding the foregoing,
if Superholdings does not enter into a Sister Lock-up with any person who
receives at least 25% of the Superholdings Stock issued pursuant to a Sister
Agreement, then each Member shall be immediately and forever released from any
and all obligation and duty under its respective Lock-Up Agreement.
(B) Indemnity Agreement. Each member
of LLC Holdings and its direct and indirect owners will enter into an indemnity
agreement with Superholdings, pursuant to which agreement each member shall
agree to be bound by the provisions of Article 10 (Indemnification) ("Indemnity
Agreement"), in the form attached hereto as the Exhibit to this Section
2.4(b)(ii)(B) and its direct and indirect owners shall be so bound to the extent
that they receive any distribution of any merger consideration or proceeds
thereof.
(C) Members' Releases. Superholdings and the
members of LLC Holdings shall execute and deliver releases (the "Members'
Releases"), in the form attached hereto as the Exhibit to this Section
2.4(b)(iii)(C), which (x) releases any and all claims held or to be held by the
members against LLC, LLC Holdings, and their successors, assigns, officers,
directors, employees and agents, but excluding any claims the members may have
to unpaid compensation and benefits and (y) releases any obligation of such
members under the operating agreements of LLC or LLC Holdings.
(ii) Closing Certificates. The LLC Parties
Closing Certificate and the Superholdings Closing Certificate.
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(iii) Escrow Agreement. Superholdings, LLC
Holdings, the Members' Agent and the Escrow Agent shall execute the Escrow
Agreement in the form attached as the Exhibit to Section 1.2(b) (Right to
Withhold), with such changes as the Escrow Agent may reasonably request.
ARTICLE 3
Conditions To Consummating The Transaction
------------------------------------------
3.1 Joint Conditions. The obligations of Public, Superholdings, Merger
Sub and the LLC Parties to consummate the transactions provided for in this
Agreement and the Related Agreements are subject to the satisfaction, at or
prior to the Closing Date, of the following conditions:
(a) Public Stockholder Approval. The issuance of the shares of
Superholdings' common stock pursuant to the Parent Merger shall have been
approved by the affirmative vote of the holders of the requisite number of
shares of capital stock of Public in the manner required pursuant to the rules
of The Nasdaq Stock Market.
(b) HSR Act. The waiting period prescribed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act") shall have expired or early
termination of the waiting period under the HSR Act shall have been granted.
(c) Nasdaq Listing. The Superholdings Stock issuable to the
LLC Parties and to Public's stockholders shall have been approved for listing on
The Nasdaq Stock Market, subject to official notice of issuance.
(d) Merger. The secretaries of state of the State of Delaware
and the State of Oregon shall have accepted for filing the Certificates of
Merger for the Parent Merger and the Subsidiary Merger.
(e) Subsidiary Merger. All conditions to the consummation of
the Subsidiary Merger, set forth in Section 2.1 of the Subsidiary Merger
Agreement, shall have been satisfied, including the adoption of the Subsidiary
Merger Agreement by the requisite vote of the stockholders of Public pursuant to
Public's certificate of incorporation and bylaws and applicable law; provided,
however, that the condition precedent of the Subsidiary Merger Agreement which
states that all conditions precedent to the consummation of at least this
Agreement or a Sister Agreement shall have been satisfied or duly waived, need
not be satisfied or duly waived.
3.2 Public's, Superholdings' and Merger Sub's Conditions. The
obligations of Public, Superholdings and Merger Sub to consummate the
transactions contemplated by this Agreement and the Related Agreements are
subject to the satisfaction or waiver by Public,
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Superholdings and Merger Sub, at or prior to the Closing Date, of the following
conditions:
(a) LLC Parties' Representations True. (i) The LLC Parties'
representations and warranties made in this Agreement or any Related Agreement
shall be true and correct in all respects at the effective date of the Services
Agreement; (ii) actions by the Members, the Board of Managers of LLC or LLC
Holdings, or any employee or agent of LLC or LLC Holdings (which employee or
agent is not under the supervision of Public pursuant to the Services
Agreement), shall not have caused the LLC Parties' representations and
warranties made in this Agreement or any Related Agreement to be untrue or
incorrect in any respect at the Closing Date and (iii) the failure of any of the
persons identified in clause (ii) to take actions that (A) would be taken in the
ordinary course of LLC's and LLC Holdings' business in the exercise of
reasonable judgment and (B) have not been delegated to Public under the Services
Agreement, shall not have caused the LLC Parties' representations and warranties
made in this Agreement or any Related Agreement to be untrue or incorrect in any
respect at the Closing Date; except, in each case, as affected by the
transactions contemplated hereby and except as will not constitute a LLC
Material Adverse Change. The LLC Parties shall have delivered the LLC Parties
Closing Certificate which shall so indicate. Notwithstanding the foregoing, the
following LLC Parties' representations and warranties made in this Agreement
shall be true and correct in all respects at the Closing Date: Sections 6.1(b)
(Validity and Authorization; Power and Authority), 6.1(f) (State Takeover
Statutes), 6.3(a) (Capitalization), 6.3(b) (Ownership and Transfer by Members),
6.3(c) (Ownership and Transfer by Members), 6.3(d) (VAR Plan), 6.7(a) (Certain
Information), 6.7(b) (Documents Delivered), 6.7(c) (No Brokers Fees; No
Commissions) and 6.7(d) (Tax Advice), and the LLC Parties Closing Certificate
shall so indicate.
"LLC Material Adverse Change" means any change, effect, event or
occurrence that would reasonably be expected to (i) result in liabilities to
Superholdings (on a consolidated basis) at or after the Closing of at least
$20.0 million, (ii) result in a reduction of cash flow or increased losses, of
Superholdings (on a consolidated basis) at or after the Closing, discounted at
10%, having a net present value of at least $20.0 million or (iii) materially
impair or delay the ability of Public, Superholdings, Merger Sub or the LLC
Parties to consummate the transactions contemplated hereby.
"Public Material Adverse Change" means any change, effect, event or
occurrence that would reasonably be expected to (i) result in liabilities to
Superholdings (on a consolidated basis) at or after the Closing of at least
$130.0 million, (ii) result in a reduction of cash flow, or increased losses, of
Superholdings (on a consolidated basis) at or after the Closing, discounted at
10%, having a net present value of at least $130.0 million or (iii) materially
impair the ability of Public, Superholdings or Merger Sub to consummate the
transactions contemplated hereby including, without limitation, failure to
deliver the merger consideration described herein.
(b) LLC Parties' Compliance with Agreement. The LLC Parties, in all
respects, shall have performed each agreement, and shall have complied with each
covenant, to be performed or complied with by them, or any of them, on or prior
to the Closing Date under
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this Agreement or any Related Agreement, except as will not constitute an LLC
Material Adverse Change, and the LLC Parties shall have delivered the LLC
Parties Closing Certificate which shall so indicate. Notwithstanding the
foregoing, this condition shall be deemed to have been satisfied even though an
LLC Material Adverse Change has occurred, if the LLC Material Adverse Change (i)
is proximately caused by actions of Public pursuant to the Services Agreement,
by any employee or agent of LLC or LLC Holdings under the supervision of Public
pursuant to the Services Agreement or (ii) by Public's breach (including,
without limitation, by the persons listed in clause (i)) of Public's obligations
under the Services Agreement. The LLC Parties shall have delivered the LLC
Parties Closing Certificate which shall so indicate.
(c) LLC Parties Consents. The LLC Parties shall have obtained the LLC
Parties Consents except for those LLC Parties Consents that, if not obtained,
would not constitute an LLC Material Adverse Change. Without limitation, the
failure to obtain the following LLC Parties Consents would constitute an LLC
Material Adverse Change: (i) Sprint, (ii) CoBank and (iii) Lucent.
(d) Public Consents. Public shall have obtained the Public Consents
except for those Public Consents that, if not obtained, would not constitute a
Public Material Adverse Change. Without limitation, the failure to obtain the
consent of Export Development Corporation ("EDC") would constitute a Public
Material Adverse Change.
(e) Permits. Superholdings shall have obtained all governmental
licenses and permits, or binding commitments, if any, from governmental
authorities to issue, transfer or consent to a change of control with respect
to, all governmental licenses and permits necessary to enable Superholdings to
conduct the business of LLC after the Closing in substantially the same manner
as such business was conducted before the Closing (the "Permits"), except for
those Permits that, if not obtained, would not constitute an LLC Material
Adverse Change.
(f) LLC Members Approval. This Agreement shall have been adopted by the
affirmative vote of the holders of the requisite number of units of Members'
Interests of LLC and LLC Holdings in the manner required pursuant to LLC's and
LLC Holdings' organizational documents, LLC Agreement, the OLLCA and other
applicable law.
(g) Form S-4. The Form S-4 shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the Form S-4
shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the Securities and Exchange Commission (the "SEC").
(h) No Litigation. No action, suit or proceeding (other than such an
action, suit or proceeding directly or indirectly instituted by a party hereto)
shall be threatened or pending, and no preliminary or permanent injunction,
order, decree or ruling shall be in effect, seeking to restrain or prohibit, or
to obtain damages or other relief in connection with, the execution and delivery
of this Agreement, any Related Agreement or the consummation of the
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transactions contemplated by any of the foregoing except as would not constitute
an LLC Material Adverse Change. The LLC Parties shall have delivered the LLC
Parties Closing Certificate, which shall so indicate with respect to the LLC
Parties.
(i) Approvals. All authorizations, consents and approvals if any, of
and filings if any, with any governmental authority that are required to (i)
validly execute, deliver and perform this Agreement or the Related Agreements,
(ii) to consummate the transactions provided for in this Agreement or the
Related Agreements or (iii) to enable Superholdings to operate the business of
LLC after the Closing in substantially the same manner as such business was
conducted before the Closing (collectively, "Approvals"), shall have been
obtained or made except for those Approvals that, if not obtained, would not
constitute an LLC Material Adverse Change. Without limitation, the failure to
obtain the Approval of Section 3.1(b) (HSR Act) would constitute an LLC Material
Adverse Change.
(j) Members Obligations. The Members shall have repaid to LLC all
amounts, if any, owed by the Members to LLC other than unpaid capital
contributions called and payable after the date hereof.
(k) Related Agreements. The LLC Parties shall have entered into the
Related Agreements.
3.3 LLC Parties' Conditions to Closing. The obligations of the LLC Parties
to consummate the transactions contemplated by this Agreement and the Related
Agreements are subject to the satisfaction or waiver in writing by the LLC
Parties, at or prior to the Closing Date, of the following conditions:
(a) Public's, Superholdings' and Merger Sub's Representations
True. The representations and warranties made by Public, Superholdings and
Merger Sub herein shall be true and correct in all respects at the effective
date of the Services Agreement, except as affected by the transactions
contemplated hereby and except as will not constitute a Public Material Adverse
Change. Superholdings shall have delivered the Superholdings Closing Certificate
which shall so indicate. Notwithstanding the foregoing, the following
representations and warranties made by Public, Superholdings and Merger Sub in
this Agreement shall be true and correct in all respects at the Closing Date,
except that representations and warranties that speak as of a specific date
shall be true and correct at that date: Sections 7.1(b) (Corporate Power and
Authority; Validity and Authorization), 7.3 (No Brokers Fees; No Commissions),
7.7 (Capitalization), 7.8 (Capitalization of Superholdings) and 7.11 (Certain
Information), and Superholdings Closing Certificate shall so indicate.
(b) Public's, Superholdings' and Merger Sub's Compliance with
Agreement. Each of Public, Superholdings and Merger Sub, in all respects, shall
have performed each agreement, and complied with each covenant to be performed
or complied with by it on or prior to the Closing Date under this Agreement or
any Related Agreement, except as will not
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constitute a Public Material Adverse Change. Superholdings shall have delivered
the Superholdings Closing Certificate which shall so indicate.
(c) Public Consents. Public shall have obtained the Public Consents
except for those Public Consents that, if not obtained, would not constitute a
Public Material Adverse Change or have a Public Material Adverse Change. Without
limitation, the failure to obtain the consent of EDC would constitute a Public
Material Adverse Change.
(d) No Litigation. No action, suit or proceeding (other than such an
action, suit or proceeding directly or indirectly instituted by a party hereto)
shall be threatened or pending, and no preliminary or permanent injunction,
order, decree or ruling shall be in effect, seeking to restrain or prohibit, or
to obtain damages or other relief in connection with, the execution and delivery
of this Agreement, any Related Agreement or the consummation of the transactions
contemplated by any of the foregoing except as would not constitute a Public
Material Adverse Change. Superholdings shall have delivered the Superholdings
Closing Certificate, which shall so indicate with respect to Superholdings,
Public and Merger Sub.
(e) Approvals. All Approvals to be obtained by Public shall have been
obtained or made except for those Approvals that, if not obtained, would not
constitute a Public Material Adverse Change. The Approval described in Section
3.1(c) (HSR Act) shall have been obtained.
ARTICLE 4
Covenants Regarding Consummation of the Transaction
4.1 Satisfaction of Conditions to Closing.
(a) Joint Responsibilities. Each party shall use his, her or its
reasonable best efforts to satisfy the conditions to the obligations of the
parties hereunder, and to consummate and make effective as promptly as
practicable the transactions provided for herein including:
(i) Defending the Agreement. Defending lawsuits or other legal
proceedings challenging this Agreement or any Related Agreement or the
consummation of the transactions provided for in this Agreement or any Related
Agreement;
(ii) Lifting Injunctions. Using reasonable best efforts to lift
or rescind any injunction, restraining order or other order adversely affecting
the ability of the parties to consummate the transactions provided for in this
Agreement or any Related Agreement;
(iii) Other Actions. Taking such other reasonable actions that
are necessary, appropriate or advisable, unless responsibility for taking such
actions has been delegated to certain parties pursuant to Sections 4.1(b) (LLC
Parties' Responsibilities) or 4.1(c)
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Public's, Superholdings' and Merger Sub's Responsibilities), including, without
limitation, using reasonable best efforts to obtain all Approvals, and all
consents of third parties to contracts as are necessary for the consummation of
the Reorganization. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
each party and its officers and directors shall use their reasonable best
efforts to take all such action.
(b) LLC Parties' Responsibilities.
(i) LLC Parties' Delegated Conditions. The LLC Parties shall
have the responsibility for satisfying the following conditions ("LLC Parties'
Delegated Conditions"), for which the LLC Parties shall have the obligations set
forth in this Section 4.1(b)(i). Public, Superholdings and Merger Sub shall
reasonably cooperate and assist with the LLC Parties in connection with the
following:
(A) Section 3.2(a) (LLC Parties' Representations True),
for which the LLC Parties' obligation shall be as follows: (x) the LLC Parties
shall take no action that will cause any of their representations or warranties
to be or remain untrue or incorrect in any material respect and (y) the LLC
Parties shall not omit any action that any of them would take in the ordinary
course of prudent business, which omission will cause their representations or
warranties to be or remain untrue or incorrect in any material respect, provided
that the LLC Parties shall not be required to take any action for which Public
has assumed responsibility under the Services Agreement; and
(B) Section 3.2(b) (LLC Parties' Compliance with
Agreement), for which the LLC Parties shall have the obligations set forth
elsewhere herein.
(ii) HSR Act Filings. The LLC Parties shall make their HSR Act
filings in compliance with such act as promptly as possible after the date
hereof, and provide any additional information that the Federal Trade Commission
or the Justice Department requests as promptly as practicable, and perform all
other acts required of them under the HSR Act in order to satisfy the condition
contained in Section 3.1(b) (HSR Act), in all cases in coordination with Public
and Superholdings. The LLC Parties shall provide to Public and Superholdings the
information required by such filings as is reasonably requested by Public and
Superholdings as soon as possible, but no later than two business days after the
date of such request. Time is of the essence with respect to the HSR Act
filings. The LLC Parties shall pay the HSR Act filing fee, if any, relating to
any filing requirement arising out of the LLC Parties' participation in the
Parent Merger.
(iii) LLC Parties' Consents. The LLC Parties shall use their
reasonable best efforts to obtain the LLC Parties Consents.
(iv) Tower Leases. The LLC Parties shall use their reasonable
best
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efforts to assist Superholdings in obtaining, in connection with the Tower
Leases, all landlord waivers, consents, subordinations, assignability to lender
and nondisturbance from any underlying mortgage holder; provided, that,
Superholdings shall reimburse the LLC Parties for any and all expenses and costs
associated with such assistance.
(c) Public's, Superholdings' and Merger Sub's Responsibilities.
(i) Public's, Superholdings' and Merger Sub's Delegated
Conditions. Public, Superholdings and Merger Sub shall have the responsibility
for satisfying the following conditions ("Public's, Superholdings' and Merger
Sub's Delegated Conditions"), for which Public, Superholdings and Merger Sub
shall have the obligations set forth in this Section 4.1(c)(i). The LLC Parties
shall reasonably cooperate with and assist Public, Superholdings and Merger Sub
in connection with the following:
(A) Section 3.3(a) (Public's, Superholdings' and Merger
Sub's Representations True), for which Public's, Superholdings' and Merger Sub's
obligation shall be as follows: (x) Public, Superholdings and Merger Sub shall
take no action that will cause any of their representations and warranties to be
or remain untrue or incorrect in any material respect and (y) Public,
Superholdings and Merger Sub shall not omit any action that they would take in
the ordinary course of prudent business, which omission will cause any of their
representations and warranties to be or remain untrue or incorrect in any
material respect; and
(B) Section 3.3(b) (Public's, Superholdings' and Merger
Sub's Compliance with Agreement), for which Public, Superholdings and Merger Sub
shall have the obligations set forth elsewhere herein.
(ii) HSR Act Filings. Public, Superholdings and Merger Sub
shall make their HSR Act filings in compliance with such act as promptly as
possible, and provide any additional information that the Federal Trade
Commission or the Justice Department requests as promptly as practicable, and
perform all other acts required of them under the HSR Act in order to satisfy
the condition contained in Section 3.1(b) (HSR Act); provided, however, that in
no event shall Public, Superholdings or Merger Sub or any of their subsidiaries
be required to divest, hold separate, offer for sale, abandon, limit its
operation of or take similar action with respect to any assets or any business
interest in connection with any Approval (including, without limitation under
the HSR Act). Public shall pay the HSR Act filing fee relating to any filing
requirement arising out of its participation in the Subsidiary Merger.
(iii) Public's and Superholdings' Consents and Permits. Public
and Superholdings shall use their reasonable best efforts to obtain the Public
Consents and the Permits.
4.2 Preparation of the Proxy Statement, Form S-4 and Form S-1.
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(a) Preparation. Public and Superholdings shall prepare and file with
the SEC as promptly as practicable, but no later than October 10, 2000 (the "SEC
Filing Date") in accordance with the Securities Act of 1933, as amended (the
"Securities Act"), on behalf of Superholdings, the Form S-4. Public and
Superholdings shall use reasonable best efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such filing.
Public and Superholdings shall keep the LLC Parties advised of the status of the
filing and effectiveness of the Form S-4.
(b) Proxy Statement and Form S-4. Public, Superholdings and, if
requested by Public, LLC Holdings shall jointly prepare for inclusion in the
registration statement on Form S-4 to be filed with the SEC by Public and
Superholdings, on behalf of Superholdings, in connection with the issuance by
Superholdings of shares of Superholdings Stock in the Reorganization (the "Form
S-4") a proxy statement (the "Proxy Statement"), in accordance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
and regulations under the Exchange Act, with respect to the Reorganization, it
being understood that Public and Superholdings may, in their sole discretion,
include in the S-4 any shares of Superholdings Stock to be issued pursuant to
any Sister Agreements and may include in the Proxy Statement any matters to be
voted upon pursuant to any Sister Agreement. Public, Superholdings and LLC
Holdings shall cooperate with each other in the preparation of the Proxy
Statement. Public, Superholdings and LLC Holdings shall use reasonable best
efforts to respond promptly to any comments made by the SEC with respect to the
Proxy Statement and to cause the Form S-4 to be declared effective under the
Securities Act as promptly as practicable after the filing thereof with the SEC.
Public and Superholdings shall use reasonable best efforts to cause the Proxy
Statement to be mailed to the members of LLC Holdings (if applicable) and the
Public stockholders, as determined by Public, at the earliest practicable date
after the Form S-4 is declared effective by the SEC. The LLC Parties shall as
promptly as practicable provide any information reasonably requested by Public
or Superholdings or their respective counsel in connection with the preparation
of the Proxy Statement and the S-4 and any amendments or supplements thereto.
(c) Form S-1. If the shares of Superholdings Stock to be received by
the members in the Reorganization are not registered on the Form S-4, then
Public, Superholdings and LLC shall jointly prepare a registration statement on
Form S-1 (or other appropriate form) to be filed with the SEC by Superholdings
by July 31, 2001 in connection with the resale by the members of the shares of
Superholdings Stock the LLC Parties receive pursuant to the terms of the
Reorganization (the "Form S-1") in accordance with the Securities Act, it being
understood that Public and Superholdings may, in their sole discretion, include
in the Form S-1 any shares of Superholdings Stock issued pursuant to any Sister
Agreement and not registered on the Form S- 4. Public, Superholdings and LLC
shall use reasonable best efforts to respond promptly to any comments made by
the SEC with respect to the Form S-1 and to cause the Form S-1 to be declared
effective under the Securities Act by October 1, 2001, or as promptly thereafter
as practicable. If a Form S-1 is declared effective under the Securities Act,
then Superholdings shall use reasonable best efforts to prepare and file such
amendments and supplements to the
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Form S-1 and the prospectus used in connection therewith as may be necessary to
keep the Form S-1 effective for a period of not less than one year from the
later of the first day that the Form S-1 is declared effective or October 1,
2001; provided, however, that if the Superholdings Stock that the LLC Parties
receive pursuant to the Reorganization becomes freely tradeable pursuant to Rule
144(k) of the Securities Act prior to the termination of the effective period,
then Superholdings shall have no further obligation to keep the Form S-1
effective; provided, further, that, if in connection with a Sister Agreement,
Superholdings agrees to registration rights of Superholdings Stock that are more
beneficial than the registration rights contained herein, then the Members may
substitute in their entirety the more beneficial registration rights for the
registration rights in this Section 4.2(c). If the shares of Superholdings Stock
to be received by the members in the Reorganization are registered on the Form
S-4, then Public and Superholdings may satisfy their obligations under this
Section 4.2(c) by filing a post-effective amendment to the Form S-4 in lieu of
filing the Form S-1.
(d) Public's and Superholdings' Actions. Public and Superholdings
shall, as promptly as practicable, take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified) required to be
taken under any applicable state securities laws in connection with the issuance
of Superholdings Stock in connection with the Parent Merger, and LLC and LLC
Holdings shall furnish all information concerning LLC, LLC Holdings and the
Members as may be reasonably requested in connection with any such action.
Public and Superholdings shall keep the LLC Parties advised of the status of any
actions taken under any applicable state securities laws.
4.3 Accountants' Letters.
(a) From LLC Holdings. LLC Holdings shall use its reasonable best
efforts to cause to be delivered to Public and Superholdings a letter of
Aldrich, Kilbride & Tatone, LLP, the LLC Parties' independent certified public
accountants, dated a date within two business days before the date on which the
Form S-4 and Form S-1 shall become effective, and a letter of Aldrich, Kilbride
& Tatone, LLP dated a date within two business days before the Closing Date,
each addressed to Public and Superholdings, customary in scope and substance for
letters delivered by independent accountants in connection with similar such
registration statements and permitting the use of the accountant's report in
subsequent filings by Public or Superholdings under the Securities Act or
Exchange Act.
If the Reorganization can be accounted for as a pooling of interests, and
if requested by Public or Superholdings, then LLC Holdings shall use its
reasonable best efforts to cause to be delivered to Public and Superholdings a
letter of Aldrich, Kilbride & Tatone, LLP, addressed to Public and
Superholdings, dated as of the Closing Date, setting forth the concurrence of
Aldrich, Kilbride & Tatone, LLP with the conclusion of Public's and
Superholdings' management that the Parent Merger, insofar as it relates to LLC
Holdings, will qualify as a pooling of interests transaction under Opinion 16 of
the Accounting Principles Board and applicable SEC rules and regulations.
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The LLC Parties shall use their reasonable best efforts to cause to be
delivered to Public and Superholdings a letter of Aldrich, Kilbride & Tatone,
LLP consenting to the inclusion of its report on LLC's audited financial
statements in the Form S-4 and the Form S-1 and any other filings required by
the Securities Act or Exchange Act.
(b) From Public and Superholdings. Public and Superholdings shall each
use its reasonable best efforts to cause to be delivered to LLC Holdings a
letter of PricewaterhouseCoopers, LLP, Public's and Superholdings' independent
certified public accountants, dated a date within two business days before the
date on which the Form S-4 or Form S-1 registering shares of Superholdings Stock
received by the members of LLC Holdings , or any amendment, shall become
effective, or any supplement is filed, and a letter of PricewaterhouseCoopers,
LLP, dated a date within two business days before the Closing Date, each
addressed to LLC Holdings and the Members and customary in scope and substance
for letters delivered by independent public accountants in connection with
similar such registration statements.
4.4 Public Stockholders Meeting. Public shall take all action necessary,
in accordance with the DGCL, the Exchange Act and other applicable law and its
certificate of incorporation and bylaws, to convene and hold a special meeting
of the stockholders of Public (the "Public Stockholders Meeting") as promptly as
practicable after the date hereof for the purpose of considering and voting upon
the Subsidiary Merger Agreement and the issuance of shares of Superholdings
Stock pursuant to the Parent Merger.
4.5 Votes and Recommendations. The Board of Directors of Public shall (a)
recommend that the stockholders of Public vote in favor of the adoption of the
Subsidiary Merger Agreement and the issuance of shares of Superholdings Stock
pursuant to this Agreement at the Public Stockholders Meetings, (b) cause such
recommendation to be included in the Proxy Statement, (c) solicit proxies in
favor of the adoption of the Subsidiary Merger Agreement and the issuance of
shares of Superholdings Stock pursuant to this Agreement and (d) use reasonable
best efforts to obtain the required votes of the stockholders of Public.
4.6 LLC Members Meeting; LLC Holdings. If requested by Public, LLC and LLC
Holdings shall take all action necessary, in accordance with the OLLCA, the
Exchange Act, other applicable law and its organizational documents, to convene
and hold a special meeting of the members of LLC and LLC Holdings (the "Members
Meeting") as promptly as practicable after the date hereof for the purpose of
considering and voting upon this Agreement and to solicit proxies pursuant to
the Proxy Statement in connection therewith. The Board of Managers of LLC and
LLC Holdings shall (a) recommend that the holders of the Members' Interests vote
in favor of the adoption of this Agreement at the Members Meeting, (b) cause
such recommendation to be included in the Proxy Statement, (c) solicit proxies
in favor of the adoption of this Agreement and (d) use reasonable best efforts
to obtain the Members Required Vote.
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4.7 Public Announcements. The LLC Parties shall not issue any press
release with respect to the transactions contemplated hereby. Public,
Superholdings and Merger Sub may issue press releases with respect to the
transactions contemplated hereby but, if practicable, shall allow LLC to review,
and shall consult with LLC before issuing, any press release.
4.8 No Solicitation; Acquisition Proposals.
(a) No Solicitation. During the period from and including the date of
this Agreement to and including the Effective Time, the LLC Parties shall not,
and shall not authorize or permit any Subsidiary, or any of its or their
affiliates, officers, directors, employees, agents or representatives
(including, without limitation, any investment banker, financial advisor,
attorney or accountant retained by the LLC Parties or Subsidiary), to, directly
or indirectly, initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries, any expression of interest or the making of any proposal that
constitutes, or may reasonably be expected to lead to, an Acquisition Proposal,
or enter into or maintain or continue discussions or negotiate with any person
in furtherance of such inquiries or to obtain an Acquisition Proposal or agree
to or endorse any Acquisition Proposal.
(b) Approval. During the period from and including the date of this
Agreement to and including the Effective Time, neither the Board of Managers of
LLC or LLC Holdings nor any committee thereof shall withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to Public,
Superholdings or Merger Sub, the approval or recommendation of this Agreement or
the transactions contemplated hereby.
(c) Voting Agreement. As of the date hereof, the Members have approved
and adopted this Agreement pursuant to Sections 63.130 and 63.487 of the OLLCA.
If requested by Public, the Members shall from time to time (i) vote, or
consent, their Members' Interests in favor of the Parent Merger and against any
Acquisition Proposal whether or not at a Members Meeting, (ii) take all
reasonable actions in support of or to consummate as promptly as practicable the
transactions contemplated hereby, (iii) take no action that will impede or
impair the consummation of the transactions contemplated hereby, (iv) not grant
to any other person or entity a proxy or other right to vote any Members'
Interests, (v) not transfer or dispose of or agree to transfer or dispose of any
Members' Interests and (vi) not exercise dissenters', appraisal or other rights
to receive cash or other consideration instead of Superholdings Stock.
In conjunction with the approval of this Agreement by LLC and its members,
the Members shall cause LLC Holdings to (i) be formed, (ii) issue one unit of
Members' Interests in exchange for one unit of Members' Interests in LLC, (iii)
approve this Agreement and (iv) obtain its members' approval of this Agreement.
(d) Acquisition Proposal. For purposes of this Agreement, "Acquisition
Proposal" means an inquiry, offer, proposal or other indication of interest
regarding any of the
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following (other than the transactions provided for in this Agreement) involving
LLC or LLC Holdings: (i) any merger, consolidation, share exchange,
recapitalization, business combination or other similar transaction; (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of all or
substantially all the assets of LLC or LLC Holdings and its Subsidiaries, taken
as a whole, or any substantial portion of its assets or business, in a single
transaction or series of related transactions; (iii) any tender offer or
exchange offer for any of the outstanding Members' Interests or the filing of a
registration statement under the Securities Act in connection therewith; (iv)
issuance of any Members' Interests; or (v) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
4.9 Affiliates and Certain Members. If requested by Public, prior to the
Closing Date, LLC shall deliver to Public and Superholdings a letter identifying
all persons who are, at the time the Parent Merger is submitted for approval to
the members of LLC or LLC Holdings, "affiliates" of LLC or LLC Holdings for
purposes of Rule 145 under the Securities Act. If requested by Public, on or
prior to the Closing Date, LLC shall cause each such person to deliver to Public
and Superholdings such letter, in customary form (an "Affiliates Letter"). The
certificates representing Superholdings Stock received by such affiliates in the
Parent Merger shall bear a customary legend regarding applicable Securities Act
restrictions.
4.10 Pooling of Interests. If the Reorganization can be accounted for
as a pooling of interests, and if requested by Public or Superholdings, then the
parties shall use their reasonable best efforts to cause the Reorganization to
be accounted for as a pooling of interests under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations, and such accounting
treatment to be accepted by each of the parties' independent certified public
accountants, and by the SEC. None of the parties shall voluntarily take any
action that would cause such accounting treatment to be unattainable.
4.11 Loan Agreement. Pending the Closing, Public shall loan funds to
LLC pursuant to the Public Loan Agreement. Such Public loans shall be guaranteed
by the Members, which guaranties shall (a) become due and payable within 30 days
of the termination of this Agreement and (b) expire and be of no further force
and effect upon the Closing.
4.12 Employment Agreements. Superholdings or one of its subsidiaries shall
offer to enter into at Closing an employment agreement with each of Robert
Staats, Harvey Luke, Johnny Calderon, Joe Schweitzer, Cathy LaTourette, David
Graham and Howard Amland (collectively, the "Employment Agreements"), reasonably
acceptable to Superholdings; provided, however, that the failure to enter into
any Employment Agreement, for any reason, shall not be a breach of this
Agreement.
4.13 Consulting Agreement. At Closing, Superholdings or one its
subsidiaries shall offer to enter into a one-year consulting agreement with
Mitchell Moore reasonably acceptable to Superholdings (the "Consulting
Agreement"), which Consulting Agreement shall provide that
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Mitchell Moore receive aggregate compensation of $100,000; provided, however,
that the failure to enter into the Consulting Agreement, for any reason, shall
not be a breach of this Agreement.
4.14 Reissuance of LLC Audited Financial Statements. The LLC Parties shall
cause LLC Holdings' audited financial statements that are required to be
included in the Form S-4 to be reissued in accordance with GAAP and in a form
reasonably acceptable to Superholdings.
4.15 Legends. The Members consent to the placement of a legend on the
shares of Superholdings Stock to be issued to each of the LLC Parties in the
Reorganization, which legend shall be substantially as follows:
"THESE SECURITIES ARE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE DISTRIBUTED FOR VALUE, NOR MAY THESE SECURITIES BE TRANSFERRED
ON THE BOOKS OF SUPERHOLDINGS, IN THE ABSENCE OF SUCH REGISTRATION UNLESS
SUPERHOLDINGS HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE,
SATISFACTORY TO SUPERHOLDINGS AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED."
ARTICLE 5
Termination
5.1 Reasons for Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time, notwithstanding approval thereof by the stockholders of Public,
Superholdings or Merger Sub or by the members of the LLC or LLC Holdings, only
by following the termination procedures set forth in this Article 5, for the
following reasons:
(a) By Mutual Consent. By the mutual written consent of Public,
Superholdings, LLC and LLC Holdings, duly authorized by the Boards of Directors
of Public, Superholdings and by LLC's and LLC Holdings' Board of Managers.
(b) By Public or Superholdings. By Public or Superholdings after
compliance with the procedure set forth in this Article 5, if
(i) (x) any of the LLC Parties' representations or warranties
contained herein is or becomes or, when executed any Related Agreement would be,
untrue or incorrect in any respect prior to the last date such representation or
warranty is to be made pursuant to Section 3.2(a) (LLC Parties' Representation
True) (y) actions by the Members, the Board of Managers of LLC or LLC Holdings,
or any employee or agent of LLC or LLC Holdings, (which
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employee or agent is not under the supervision of Public pursuant to the
Services Agreement), shall have caused the LLC Parties' representations and
warranties made in this Agreement or any Related Agreement to be untrue or
incorrect in any respect or (z) the failure of any of the persons identified in
clause (y) to take actions that (A) would be taken in the ordinary course of
LLC's and LLC Holdings' business in the exercise of reasonable judgment and (B)
have not been delegated to Public under the Services Agreement, shall have
caused the LLC Parties' representations and warranties made in this Agreement or
any Related Agreement to be untrue or incorrect in any respect; except, in each
case, as affected by the transactions contemplated hereby and except as will not
constitute a LLC Material Adverse Change;
(ii) any of the LLC Parties fails to perform any of his, her or
its covenants or agreements contained herein, or would be in breach of his or
its covenants upon execution of any Related Agreement, in any respect, except as
will not constitute an LLC Material Adverse Change, unless the LLC Material
Adverse Change (x) is proximately caused by actions of Public pursuant to the
Services Agreement, by any employee or agent of LLC or LLC Holdings under the
supervision of Public pursuant to the Services Agreement or (y) by Public's
breach (including, without limitation, by the persons listed in clause (x)) of
Public's obligations under the Services Agreement; or
(iii) any of Public's, Superholdings' or Merger Sub's
conditions to the consummation of the transactions provided for herein shall
have become impossible to satisfy.
(c) By LLC. By LLC, after compliance with the procedure set forth in
this Article 5, if (i) any of Public's, Superholdings' or Merger Sub's
representations or warranties contained herein is or becomes or, when executed
any Related Agreement would be, untrue or incorrect in any respect, except as
will not have a Public Material Adverse Change, (ii) Public, Superholdings or
Merger Sub fails to perform its covenants or agreements contained herein, or
would be in breach of its respective covenants upon execution of any Related
Agreement, in any respect, except as will not have a Public Material Adverse
Change or (iii) any of LLC's conditions to the consummation of the transactions
provided for herein shall become impossible to satisfy.
(d) Drop Dead Date. By any of Public, Superholdings or the LLC if the
Effective Time shall not have occurred on or before March 31, 2001 (the
"Termination Date"), otherwise than as a result of any material breach of any
provision of this Agreement by the party seeking to effect such termination,
provided, however, that the Termination Date shall be extended by the number of
days, if any, to cure any curable matter that is the subject of a notice under
Section 5.3 (Public's and Superholdings' Termination Procedure) or Section 5.4
(LLC's Termination Procedure).
(e) Prohibition of the Reorganization. By any of Public, Superholdings
or LLC if any federal or state court of competent jurisdiction or other
governmental entity shall have issued an order, decree or ruling, or taken any
other action permanently restraining,
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enjoining or otherwise prohibiting the Reorganization and such order, decree,
ruling or other action shall have become final and non-appealable, provided that
neither party may terminate this Agreement pursuant to this Section 5.1(e) if it
has not complied with its obligations under Section 4.1(a) (Joint
Responsibilities);
provided, however, the right to terminate this Agreement under this
Section 5.1 shall not be available to any party (i) that is in material breach
of its obligations hereunder or (ii) whose failure to fulfill its obligations or
to comply with its covenants under this Agreement has been the cause of, or
resulted in, the failure to satisfy any condition to the obligations of either
party hereunder.
5.2 Notice of Problems. Each party will promptly give written notice to
the other parties when any of them becomes aware of the occurrence or failure to
occur, or the impending or threatened occurrence or failure to occur, of any
fact or event that would cause or constitute, or would be likely to cause or
constitute (i) any of its representations or warranties contained herein being
or becoming untrue or incorrect, (ii) its failure to perform any of its
covenants or agreements contained herein or (iii) any of its Delegated
Conditions, or any condition to the obligation of the parties contained in
Section 3.1 (Joint Conditions), being or becoming impossible to satisfy.
No such notice shall affect the representations, warranties, covenants,
agreements or conditions of the parties hereunder, or prevent any party from
relying on the representations and warranties contained herein.
5.3 Public's and Superholdings' Termination Procedure. If Public or
Superholdings discovers, by reason of a notice given pursuant hereto or
otherwise, circumstances that would give it the right to terminate this
Agreement pursuant to Section 5.1(b) (By Public or Superholdings), then Public
or Superholdings shall deliver a notice to the LLC Parties of such
circumstances, specifying the factual basis therefor in reasonable detail. The
LLC Parties shall have the right to cure any such matter within 20 business days
following the date of delivery of such notice. If such circumstances create a
termination right pursuant to Section 5.1(b) (By Public or Superholdings), then
after such notice and the LLC Parties' failure to cure, either of Public or
Superholdings may terminate this Agreement by giving a notice of termination to
the LLC Parties.
5.4 LLC's Termination Procedure. If LLC discovers by reason of a notice
given pursuant hereto or otherwise, circumstances that would give it the right
to terminate this Agreement pursuant to Section 5.1(c) (By LLC), then LLC shall
deliver a notice to Public, Superholdings and Merger Sub of such circumstances,
specifying the factual basis therefor in reasonable detail. Public,
Superholdings and Merger Sub shall have the right to cure any such matter within
20 business days following the date of delivery of such notice. Upon such notice
and upon Public's, Superholdings' or Merger Sub's failure to cure, LLC may
terminate this Agreement by giving a notice of termination to Public,
Superholdings and Merger Sub.
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5.5 Effect of Termination. Upon termination hereof pursuant to this
Article 5, no party shall have any liability or continuing obligation to another
party arising out of this Agreement, or out of actions taken in connection
herewith, except that Article 10 (Indemnification) and Article 11
(Miscellaneous) shall survive termination hereof. Notwithstanding the foregoing,
termination hereof shall not relieve any party from its liability for (i) the
failure, prior to termination, of such party to perform or comply with its
covenants or agreements or (ii) the representations or warranties made by such
party being untrue or incorrect in any material respect when made. In addition
to the foregoing, (a) if LLC terminates this Agreement because the issuance of
the shares of Superholdings Stock pursuant to the Parent Merger or the adoption
of the Subsidiary Merger Agreement shall not have been adopted by the holders of
the requisite number of shares of capital stock of Public (including without
limitation pursuant to Section 4.4 (Public Stockholders Meeting)) in the manner
required pursuant to Public's certificate of incorporation and bylaws, the DGCL,
or the rules of The Nasdaq Stock Market, as applicable, or other applicable law,
when all other conditions to Closing are satisfied or waived, then Public shall
pay a termination fee of $5.0 million to the LLC Parties and (b) if Public
terminates this Agreement because it was not adopted by the requisite number of
members interests of LLC Holdings (including, without limitation, pursuant to
Section 4.6 (LLC Members Meeting; LLC Holdings)) in the manner required pursuant
to LLC Holdings' organizational documents, the OLLCA and other applicable law,
whenever such approval is necessary, when all other conditions to Closing are
satisfied or waived, then the LLC Parties shall pay a termination fee of $5.0
million to Public.
ARTICLE 6
Representations and Warranties of LLC and the Members
In this Article 6, LLC, LLC Holdings and the Subsidiaries are referred to
collectively as the "Companies." The Companies (solely prior to Closing and with
the understanding that the representations and warranties by or concerning LLC
Holdings shall become effective on the date LLC Holdings enters into this
Agreement) and the Members, jointly and severally, represent and warrant to
Public, Superholdings and Merger Sub that except as set specifically forth on
the Disclosure Schedules (which exceptions shall relate only to the Sections
specifically identified in such Disclosure Schedules):
6.1 LLC; Entry Into Agreements.
(a) Organization and Existence. Each of the Companies is a limited
liability company duly organized and validly existing under the laws of the
State of Oregon. Each of the Companies has all requisite power and authority to
own, lease and operate all properties and assets owned or leased by it and to
conduct its business as previously and currently conducted by it. Each of the
Companies is qualified to do business in each jurisdiction in which it is
required to be so qualified, except where the lack of such qualification would
not have a material adverse effect on such Company. The Disclosure Schedule to
this Section 6.1(a) lists all jurisdictions in
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which any Company is qualified to do business as a foreign corporation and
indicates which of the Companies is so qualified in each such jurisdiction.
(b) Validity and Authorization; Power and Authority. Each of the
Companies has full power and authority to consummate the Parent Merger and to
execute, deliver and perform this Agreement, the Related Agreements and the
other instruments called for hereby or thereby to which it is a party.
The only vote of the holders (the "Members Required Vote") of the Members'
Interests that was necessary to approve this Agreement, the Related Agreements,
the Parent Merger, and the transactions contemplated hereby was the affirmative
vote of the holders of 67% of the Final Percentage Interest (as defined in the
operating agreements of LLC and LLC Holdings) of each of LLC Holdings and LLC.
No other action by the LLC Parties was necessary to approve this Agreement, the
Related Agreements, the Parent Merger, and the transactions contemplated hereby
or thereby.
This Agreement and the Related Agreements have been duly authorized,
executed and delivered by each of the Companies and will constitute (or, in the
case of Related Agreements or instruments called for hereby or thereby, to be
executed by such Company at or before the Closing, upon execution will
constitute) the legal, valid and binding obligation of such Company, enforceable
against such Company in accordance with their terms.
The Members have full requisite power and authority (or if natural
persons, capacity) to execute, deliver and perform this Agreement, the Related
Agreements and the other instruments called for hereby or thereby to which the
Members are a party. This Agreement has been duly executed and delivered by the
Members and constitutes (or, in the case of Related Agreements or instruments
called for hereby, to be executed by the Members at or before the Closing, will
constitute) the legal, valid and binding obligation of the Members, enforceable
against the Members in accordance with its terms. The Disclosure Schedule to
this Section 6.1(b) sets forth (i) the identity of all of the members of LLC and
(ii) their respective ownership of units of Members' Interests.
The consent or vote of the Members in favor of the transactions
contemplated by this Agreement and the Related Agreements was duly obtained
pursuant to the organizational documents of LLC and LLC Holdings and all
applicable state law (including Sections 63.130 and 63.487 of the OLLCA), and no
right of first refusal or similar restriction on transfer applies to the
conversion of the Members' Interests in the Parent Merger or the formation of
LLC Holdings and LLC Holdings' acquisition of LLC.
(c) Subsidiaries. Except as set forth in the Disclosure Schedule to
this Section 6.1(c), no Company owns a majority of the capital stock or other
equity interests entitled to vote generally in the election of the board of
directors, board of managers, general partners or similar governing body of,
directly or indirectly, any other corporation, partnership, association or other
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business entity and no Company is a party to any agreement relating to the
acquisition or disposition of such an interest (such scheduled entities, the
"Subsidiaries").
The Subsidiaries are duly organized and validly existing under
the laws of their states of organization and are in good standing under such
laws. The Subsidiaries have all requisite power and authority to own, lease and
operate all properties and assets owned or leased by them and to conduct their
business as previously and currently conducted by them. The Subsidiaries are
qualified to do business and are in good standing in each jurisdiction in which
they are required to be so qualified, except where the lack of such
qualification would not have a material adverse effect on the Subsidiaries. The
Disclosure Schedule to this Section 6.1(c) lists all jurisdictions in which the
Subsidiaries are respectively qualified to do business as a foreign entity.
LLC has good, valid and marketable title to all of the issued and
outstanding shares of capital stock or interests, as appropriate, free and clear
of any Liens.
(d) No Conflict. Except as set forth in the Disclosure Schedule to this
Section 6.1(d), neither the execution, delivery or performance of this Agreement
or the Related Agreements, nor the consummation of the Parent Merger or the
transactions contemplated hereby or thereby will (i) result in any violation of
the terms of, (ii) contravene or conflict with, (iii) accelerate the performance
of the obligations required under, (iv) constitute a default under, (v) give any
right of termination or cancellation under or (vi) give any right to make any
change in any of the liabilities or obligations under, the certificate of
incorporation or similar organizational documents, bylaws, regulations or
operating agreement of any Company, as appropriate, any Order, or any agreement,
contract, note, bond, debenture, indenture, mortgage, deed of trust, lease,
License, judgment, decree, order, law, rule or regulation or other restriction
applicable to any Company or any Member or to which any Company or any Member is
a party or by any Company or any Member or their respective property or assets
are bound or affected that, in any such case, will result in a material adverse
effect on any Company. Neither the execution, delivery and performance of this
Agreement or the Related Agreements, nor the consummation of the transactions
contemplated hereby or thereby will result in the creation of any Lien upon any
of the properties or assets of any Company or the Members' Interests. No Member
shall have the right to assert dissenters' or appraisal rights under applicable
state law or otherwise have the right to demand cash or other payment for
Members' Interests in the Parent Merger, other than the consideration provided
in Section 1.2 (Terms of the Merger).
(e) LLC Parties Consents Required. The Disclosure Schedule to this
Section 6.1(e) lists (i) all Approvals for which filing or other action is
required by the LLC Parties, and (ii) all other material consents, approvals or
authorizations of third parties required in connection with each party's (other
than Public's, Superholdings' and Merger Sub's) valid execution, delivery or
performance of this Agreement and the Related Agreements or the consummation of
the Parent Merger or the Subsidiary Merger or any of the transactions
contemplated hereby or thereby on the part of any of them, including but not
limited to the consents required under the
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Contracts and Licenses (collectively, the "LLC Parties Consents"). The Members
have taken all other limited liability company actions necessary for the
consummation by the Companies of the transactions contemplated by this Agreement
and the Related Agreements.
(f) State Takeover Statutes. No state takeover statute is applicable to
any Company in connection with this Agreement, the Parent Merger or the other
transactions contemplated hereby.
6.2 Financial Information.
(a) Financial Statements; Books and Records. Included in the Disclosure
Schedule to this Section 6.2(a) are true and correct copies of (i) the audited
consolidated balance sheets for LLC and the Subsidiaries at December 31, 1999
and the related statement of profit and loss and cash flows for the one-year
period then ended, (ii) the unaudited consolidated balance sheet for LLC and the
Subsidiaries at March 31, 2000 and the related statement of profit and loss for
the three-month period then ended and (iii) when delivered pursuant hereto,
financial statements of the kind and character prepared in conjunction with the
Credit Agreement, copies of all financial statements delivered to LLC Parties'
Board of Managers, and electronic copies of all general ledger records commonly
referred to as "QuickBooks" (collectively, the "LLC Financial Statements").
The LLC Financial Statements fairly present the financial position of LLC
and the Subsidiaries as of the dates thereof and the results of LLC's and the
Subsidiaries' operations and cash flows for the periods then ended, in
accordance with GAAP, except for the variances from GAAP set forth in the notes
to the LLC Financial Statements, subject, in the case of the LLC Financial
Statements listed in items (ii) and (iii) of the immediately-preceding
paragraph, to normal recurring period-end adjustments and absence of notes and a
statement of cash flows in each case that, if presented, would not differ
materially from those included in the financial statements for the fiscal year
ended December 31, 1999 and the financial data set forth in the LLC Financial
Statements listed in items (ii) and (iii).
Each of the Company's books and records (including without limitation, all
financial records, business records, minute books, ownership transfer records,
customers lists, referral source lists and records pertaining to services or
products delivered to customers) (i) are complete and correct in all material
respects and all transactions to which such Company is or has been a party are
accurately reflected therein and (ii) form an adequate basis for the such
Company Financial Statements.
"GAAP" shall mean those generally accepted accounting principles and
practices which are used in the United States and recognized as such by the
American Institute of Certified Public Accountants acting through its Accounting
Principles Board or by the Financial Accounting Standards Board or through other
appropriate boards or committees thereof and which are consistently applied for
all periods, so as to properly reflect the financial position, results of
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operations and operating cash flow on a consolidated basis of the party, except
that any accounting principle or practice required to be changed by the
Accounting Principles Board or Financial Accounting Standards Board (or other
appropriate board or committee) in order to continue as a generally accepted
accounting principle or practice may be so changed for periods for which such
change is applicable.
(b) Conduct of Business. Except as specifically contemplated herein,
since December 31, 1999, no Company has (i) changed its outstanding members'
interests; granted any option or right to purchase members' interests; issued
any security convertible into such members' interests; granted any registration
rights; purchased, redeemed, retired or otherwise acquired any members'
interests; or declared or paid any distribution or payment in respect of
members' interests; (ii) amended its organizational documents or, regulations or
operating agreement; (iii) sold or transferred (other than in the ordinary
course of business) any assets with a fair market value in excess of $50,000
individually, or $100,000 in the aggregate; (iv) mortgaged, pledged or subjected
to any Lien or other encumbrance any assets; (v) incurred or become subject to
any debt, liability (including indemnification, guaranty and repurchase
obligations) or lease obligation, other than trade liabilities incurred in the
ordinary course of business that do not exceed $50,000 individually, or $100,000
in the aggregate; (vi) incurred obligations or entered into contracts outside of
the ordinary course of business or providing aggregate payments in excess of
$100,000; (vii) suffered any damage, destruction or loss of any assets in the
aggregate in excess of $500,000; (viii) experienced any equipment malfunction
that interferes with the conduct of its business; (ix) waived or relinquished
any rights or canceled or compromised any debt or claim owing to it, in either
case, without adequate consideration or not in the ordinary course of business
in excess of $50,000 in the aggregate; (x) made any change in its accounting
methods or practices, including the method of calculating reserves for Taxes;
(xi) made any material change in its billing and collection practices and
procedures; (xii) paid any bonuses or made any increase in the compensation,
commissions or benefits payable or to become payable to any of its officers,
directors, employees, consultants or agents over the amounts paid or payable as
of such date, or entered into or terminated any employment, consulting, deferred
compensation, severance or bonus agreement with any of such parties, or made any
loan, or commitment to loan, monies to any such parties, other than customary
cash travel advances which do not exceed $25,000 in the aggregate at any time;
(xiii) declared or made any dividend, payment or distribution to the members of
LLC other than ordinary employment compensation; (xiv) entered into any
transaction with any of its or LLC's Affiliates (including without limitation by
paying, distributing or transferring any funds or assets to the members of LLC,
whether in their capacity as members of LLC or in any other capacity, other than
the payment of employment compensation to members of LLC who are employees);
(xv) made any capital expenditures except as set forth in Budget Model 9.5
attached as the Disclosure Schedule to this Section 6.2(b); (xvi) acquired any
business or business operations or (xvii) agreed to do any of the foregoing.
(c) No Material Adverse Effect. Except as contemplated by this
Agreement, since the date of the most recent LLC Financial Statements delivered
prior to the date hereof,
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each Company has conducted its business only in the ordinary course consistent
with past practice and there has been no event or occurrence that has caused a
material adverse effect on such Company other than (i) operating losses in the
ordinary course of business or (ii) economic conditions affecting the U.S.
economy generally or the telecommunications industry generally.
(d) Projections. The forecasts and projections (the "Projections")
attached as the Disclosure Schedule to this Section 6.2(d) have been prepared on
the basis of the assumptions set forth therein and are arithmetically correct.
As of the date of this Agreement, all of the estimates and assumptions upon
which the Projections are based are believed in good faith by each Company, as
of the date of this Agreement, to be reasonable.
6.3 Members' Interests.
(a) Capitalization. The Members' Interests of LLC consist of
31,558,046 units and no preferred units. There are no other equity interests of
LLC either authorized or outstanding. All of the issued and outstanding units
have been duly authorized and validly issued, are fully paid and nonassessable
and are free and clear of any preemptive rights. No certificates have been
issued to represent the Members' Interests. There are no outstanding preemptive,
conversion or other rights, or other options, warrants or agreements granted by,
issued by, or binding upon, any Company for the issuance, sale, purchase,
repurchase, redemption, acquisition or other transfer of its equity securities.
The Disclosure Schedule to this Section 6.3(a) identifies the holders of all of
the Members' Interests.
(b) Capitalization of LLC Holdings. Upon formation, the Members'
Interests of LLC Holdings shall consist of one unit and no preferred units.
There will be no other equity interests of LLC Holdings either authorized or
outstanding. All of the issued and outstanding units will be duly authorized and
validly issued, fully paid and nonassessable and free and clear of any
preemptive rights. No certificates will be issued to represent the Members'
Interests. There will be no outstanding preemptive, conversion or other rights,
or other options, warrants or agreements granted by, issued by, or binding upon,
LLC Holdings for the issuance, sale, purchase, repurchase, redemption,
acquisition or other transfer of its equity securities. The Disclosure Schedule
to this Section 6.3(b) identifies the holders of all of the Members' Interests.
The formation of LLC Holdings and its acquisition of LLC as contemplated hereby
will result in LLC Holdings' becoming the sole owner of LLC, holding its
interest in LLC free and clear of Liens created by the members of LLC in the
Members' Interests.
(c) Ownership and Transfer by Members. Each Member represents that it
has good, valid and marketable title to the units of Members' Interests owned by
it, free and clear of any Liens. Each Member represents that it is not a party
to any contract, agreement or understanding (other than this Agreement) relating
to the issuance, sale, redemption, purchase, repurchase, acquisition or other
transfer or voting of any units of Members' Interests or any other equity
security of any Company, other than LLC's operating agreement. There is no plan
or intention on the part of any Member to sell, exchange, transfer or otherwise
dispose of any
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Superholdings Stock to be received by such Member. The Disclosure Schedule to
this Section 6.3(c) lists all members of LLC (and upon formation, LLC Holdings)
and the number of Units of Members' Interests held by each member. Consummation
of the transactions contemplated by this Agreement will result in Superholdings'
becoming the sole owner of LLC Holdings and LLC, holding its interests in LLC
Holdings and LLC free and clear of Liens created by the members of LLC Holdings
in the Members' Interests.
(d) VAR Plan. The Disclosure Schedule to this Section 6.3(d) lists the
name, position, number of units, date of grant and strike price for each
participant in the VAR Plan.
6.4 Assets.
(a) Personal Property.
(i) Title. LLC or a Subsidiary is the sole owner of the assets
reflected in the LLC Financial Statements and has good and marketable title to
all such assets that are personalty (the "Personal Property") (other than the
leased Personal Property described below), in each case free and clear of all
Liens, except for (A) liens for non-delinquent taxes and assessments, (B) liens
of lessors arising under statute (C) other claims and encumbrances, charges or
statutory liens that do not materially detract from the value of, or impair the
use or transfer of, such Personal Property and (D) inchoate statutory liens for
amounts not yet payable ("Permitted Liens"). For purposes hereof, "Liens" shall
mean security interests, liens (choate or inchoate), encumbrances, mortgages,
pledges, equities, charges, assessments, easements, covenants, restrictions,
reservations, defects in title, encroachments and other burdens, whether arising
by contract or under law. With respect to any Personal Property that is leased,
LLC or the applicable Subsidiary is in compliance with each such lease and is
the sole holder of a valid and subsisting leasehold interest, free and clear of
any Liens, other than Permitted Liens. The Disclosure Schedule to this Section
6.4(a)(i) lists all lease agreements, service agreements or other agreements
related to leased Personal Property (the "Equipment Leases").
(ii) Facilities and Equipment. All buildings, facilities,
offices, improvements on real estate, fixtures, machinery, equipment, computer
hardware and software, vehicles or other properties, owned or leased by the
Company for the conduct of its business (A) have been maintained in accordance
with maintenance practices that are standard for such Company's industry, are
prudent, and are in compliance with all applicable laws and regulations, and (B)
are in good condition and repair.
(iii) Bank Accounts. The Disclosure Schedule to this Section
6.4(a)(iii) sets forth the names and locations of all banks, trust companies,
savings and loan associations and other financial institutions at which any
Company maintains accounts of any nature (collectively, the "Accounts"), the
numbers of such accounts and the names of all persons authorized to draw thereon
or to make withdrawals therefrom.
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(b) Real Property.
(i) Fee Simple. The Disclosure Schedule to this Section 6.4(b)(i)
sets forth a legal description of each parcel of real property owned by any
Company and identifies which Company owns such real property, including but not
limited to those properties reflected on the LLC Financial Statements, (the
"Real Property"), together with a summary description of the buildings,
structures and improvements thereon. Except as set forth in the Disclosure
Schedule to this Section 6.4(b)(i), such Company has good and marketable title
in fee simple absolute to all Real Property, and to the buildings, structures
and improvements thereon, in each case free and clear of all Liens other than
Permitted Liens. Except for such leases and tenancies as are particularly
described in the Disclosure Schedule to this Section 6.4(b)(i), such Company has
not granted any leases on, and there are no tenancies of, the Real Property or
any part thereof.
(ii) Leases; Easements and Other Interests. The Disclosure Schedule
to this Section 6.4(b)(ii) sets forth (A) a description of the nature of each
Company's use of the land, premises, buildings, structures and improvements held
by lease or license and a description of the basic terms of the lease or license
involved and (B) a list of all other material easements, concessions, contracts
and instruments, whether or not in writing, relating to or affecting real
property or any interest therein to which any Company is a party or by which the
assets of any Company or any Company's business is bound or affected. The
interests described in items (A) and (B) above are collectively referred to
herein as the "Leased Premises" and the leases, licenses, easements,
concessions, contracts and instruments described in items (A) and (B) above (as
well as any leases and tenancies described in the Disclosure Schedule pursuant
to item (b)(i)), are collectively referred to herein as the "Real Estate
Contracts."
The Company identified as such in the Disclosure Schedule to this Section
6.4(b)(ii) is the sole holder of valid and subsisting leasehold interests or
licenses in the Leased Premises free and clear of any Liens, other than
Permitted Liens except, in the case of Tower Leases, for the co-location rights
of other tenants. All lease or rental payments and other amounts due and payable
in connection with the Real Estate Contracts are current, there are no defaults
by such Company with respect thereto or, to the Companies' knowledge, by any
other party thereto and no event has occurred that with the passing of time or
the giving of notice or both would constitute a default (x) by such Company
thereunder or (y), to the Companies' knowledge, by any other party thereunder.
All options in favor of such Company to purchase any of the Leased Premises, if
any, are in full force and effect and are described in the Disclosure Schedule
to this Section 6.4(b)(ii). To the extent applicable to the Leased Premises,
such Company is in possession of the Leased Premises and, subject to the terms
of the related Real Estate Contract, has the right to quiet enjoyment of the
Leased Premises for the full term of the related Real Estate Contract and any
renewal option related thereto. No Real Estate Contract is terminable as a
result of the transaction contemplated herein, and no leasehold or other
interest of such Company in such real property is subject or subordinate to any
Lien, other than Permitted Liens.
(iii) Eminent Domain. Neither the whole nor any portion of any Real
Property or Leased Premises has been condemned, taken by right of eminent
domain,
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requisitioned or otherwise taken by any public authority and no Company has
received written notice from any governmental body with power of eminent domain
of any pending or threatened taking by eminent domain, requisition or
condemnation.
(iv) Ingress and Egress. Other than with respect to Tower Leases,
each Company has all easements and rights of ingress and egress necessary for
utilities and services and for all operations of its business in the manner and
to the extent previously conducted by it.
(v) Improvements. Other than with respect to Tower Leases, (i) none
of the improvements included in the Real Property or Leased Premises (A) are in
violation of any building line or use or occupancy restriction, limitation,
condition or covenant of record or any zoning or building law, code or ordinance
or public utility or other easement or (B) encroaches on the property rights of
any other person or entity, (ii) each facility located on the Real Property or
Leased Premises currently is served by gas, electricity, water, sewage and waste
disposal and rail and other utilities adequate to operate such facility, and
none of the utility companies serving any such facility has threatened LLC with
any reduction in service, (iii) such utilities either enter the Real Property
and Leased Premises through adjoining public streets or, if they pass through
adjoining private land, do so in accordance with valid, permanent public or
private easements which, following the Closing, will inure to the benefit of
Superholdings, its successors and assigns and (iv) all of said utilities are
installed and operating and all installation and connection charges have been
paid for in full. The continued maintenance and operation of the Real Property
and Leased Premises as currently maintained and operated is not dependent on
facilities, equipment, or other assets located at property other than the Real
Property or the Leased Premises, which facilities, equipment or assets may
become unavailable.
(vi) Tower Leases. With respect to leases or licenses of tower
space to which LLC is a party ("Tower Leases"), (A) to LLC's knowledge, there
are no applications, ordinances, petitions, resolutions or other matters pending
before any governmental agency having jurisdiction to act on zoning changes that
would prohibit or make nonconforming the use of any of the Leased Premises by
LLC, (B) LLC has good and valid easement rights providing reasonable access and
utilities to and from the Leased Premises under the Tower Leases, (C) LLC has
not voluntarily granted any, and is not a party to any agreement providing for,
and LLC has no knowledge of, any easements, conditions, restrictions,
reservations, rights or options that would adversely affect the use of any of
the Leased Premises under the Tower Leases for the same purposes and uses as
such Leased Premises have been used by LLC, except for Permitted Liens.
(vii) Leased Premises Taxes. To the extent any Company is liable
for payment therefor, there is no Tax assessment pending or, to the Companies'
knowledge, threatened, with respect to any portion of the Leased Premises,
except for ad valorem taxes for the calendar year 2000.
(c) Intellectual Property.
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(i) Intellectual Property . The term "Intellectual Property" shall
include all fictitious business names, trade names, registered and unregistered
trademarks, service marks and applications owned, used or licensed by any
Company (collectively, "Marks"), all patents and patent applications (if any)
owned, used or licensed by any Company (collectively, "Patents"), all registered
and unregistered copyrights (if any) in both published works and unpublished
works owned, used or licensed by any Company (collectively, "Copyrights"), and
all know-how, inventions, trade secrets, confidential information, software,
technical information, process technology, plans, drawings and blue prints
owned, used or licensed by any Company as licensee or licensor (collectively,
"Trade Secrets"). The Intellectual Property also includes all such rights and
assets of any Company under all contracts to which any Company is a party or by
which any Company is bound relating to the Intellectual Property including,
without limitation, contracts by which any Company licenses Intellectual
Property to third parties and contracts by which third parties license to, or
otherwise permit the use of its intellectual property by, any Company
(collectively, "Technology Contracts"). Each Company is, and to the Companies'
knowledge, each other party to the Technology Contracts is, in compliance with
all Technology Contracts, is not currently in default thereunder, and no event
has occurred that with the passing of time or the giving of notice or both would
constitute a default thereunder. The Disclosure Schedule to this Section 6.4(b)
lists all Intellectual Property owned by LLC.
(ii) Ownership. Except with respect to Intellectual Property
licensed by a Company from a third party pursuant to a Technology Contract, one
or more of the Companies is the owner of all right, title and interest in and to
the Intellectual Property free and clear of all Liens. The Intellectual Property
includes all such property necessary for the operation of the respective
businesses of the Companies (A) as they currently are proposed to be, and have
been, conducted and (B) without violating or infringing upon the rights of any
third party. Without limiting the foregoing, each Company is properly licensed
to use all computer software (and copies thereof) used by it. No current or
former employee of any Company has any rights to any Intellectual Property. No
right, license or consent of, or payment to, any third party will be required
after consummation of the transactions contemplated hereby for the continued use
of the Intellectual Property by LLC and the Subsidiaries.
(iii) Technology Contracts. The Disclosure Schedule to this Section
6.4(c)(iii) contains an accurate and complete list of all of the Technology
Contracts, including all of the parties to each Technology Contract.
(iv) Trademarks. The Disclosure Schedule to this Section 6.4(c)(iv)
contains an accurate and complete list of all Marks for which registration has
been obtained or for which application to registration has been filed, including
application and registration dates and numbers, and jurisdiction thereof, and
all other Marks, as well as which Company owns each Mark. No Mark is infringed
or has been challenged or threatened in any way, and the Companies are not aware
of any potentially interfering mark or application therefor of any third party.
None
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of the Marks infringe or are, or have been, alleged to infringe any business
name, trade name, trademark, service mark or other right of any third party.
(v) Patents. The Disclosure Schedule to this Section 6.4(c)(v)
contains an accurate and complete list of all Patents, including application and
issuance dates and numbers, jurisdictions thereof, and which Company holds each
Patent. All the Patents are currently in compliance with formal legal
requirements (including payment of filing, examination and maintenance fees),
are valid and enforceable, and are not subject to any maintenance fees or taxes
or actions falling due within one year from the date hereof. No Patent has been
or is now involved in any interference, reissue, reexamination or opposition
proceeding. To the Companies' knowledge after due inquiry, there is no
potentially interfering patent or patent application of any third party. No
Patent is infringed or, to the best of the Companies' knowledge, has been
challenged or threatened in any way. None of the processes or know-how used by
any Company, infringe or are alleged to infringe any patent or other right of
any third party. Notwithstanding the foregoing, no representation or warranty is
made regarding patents, processes or know-how owned or licensed by Sprint.
(vi) Copyrights. The Disclosure Schedule to this Section 6.4(c)(vi)
contains an accurate and complete list of all registered Copyrights, including
application and registration dates and numbers, jurisdictions thereof and which
Company holds each Copyright and which Company owns each Trade Secret. None of
the Copyrights infringe or are, or have been, alleged to infringe any copyright
or any other right of any third party.
(d) Contracts.
(i) Definition. The Disclosure Schedule to this Section 6.4(d)(i)
lists all agreements, contracts, notes, bonds, debentures, indentures,
mortgages, deeds of trust, leases, licenses, obligations, promises, settlements,
repurchase obligations (including, but not limited to, repurchase obligations
pertaining to whole loan sales, securitizations, pooling and servicing
agreements, servicing agreements and other such agreements and understandings
(whether written or oral and whether express or implied) (together with the
Equipment Leases, the Real Estate Contracts and the Technology Contracts, the
"Contracts")) that are material to the business of any Company, including
without limitation all the foregoing (A) that provide for future payments,
claims or obligations to or from any Company of $25,000 or more per year or
$100,000 or more over the term thereof or (B) that are (1) collective bargaining
agreements or other agreements with any labor union, (2) joint venture
agreements, partnership agreements or other agreements involving a sharing of
profits, losses, costs or liabilities, (3) agreements containing covenants that
in any way purport to restrict the business activity of any Company or limit the
freedom of any Company to engage in any line of business or to compete with any
other person, (4) standard forms of agreements providing for payments to or for
any person based on sales, originations, closings, purchases or profits (other
than direct payments for goods), (5) powers of attorney, (6) agreements
providing for the payment of special or consequential damages in excess of
$100,000 by any Company, (7) agreements relating to capital expenditures
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in excess of $200,000 by any Company, (8) warranties regarding products or
services, guarantees or other similar undertakings by any Company in excess of
$100,000, (9) agreements involving indemnification for obligations of third
parties, (10) employment, secrecy, proprietary information, noncompetition,
restrictive covenant, or confidentiality agreements with key employees, (11)
requirements or output contracts, (12) business alliance or joint marketing
agreements, (13) agreements with Sprint or any of its affiliates, (14) documents
related to debt for borrowed money or (15) amendments, modifications or
supplements to any of the foregoing. As used herein, the term "Contracts" also
shall be deemed to refer to all agreements between any Company, on the one hand,
and any Member, any affiliate of any Member, or any director or executive
officer of any Company, on the other hand.
(ii) Sprint Agreements. LLC has complied in all material respects
with the following agreements with Sprint Corporation (which agreements are
included in the definition of "Contracts," set forth above):
(A) Sprint PCS Management Agreement, dated as of January 25,
1999, by and between Sprint Spectrum, LP and WirelessCo, LP, as amended by
addenda dated January 25, 1999 and April 12, 2000 (collectively, the "Sprint
Management Agreement").
(B) Sprint Spectrum Trademark and Service Mark License
Agreement, dated as of January 25, 1999, by and between Sprint Spectrum, LP and
LLC.
(C) Sprint Trademark and Service Mark License Agreement, dated
as of January 25, 1999, by and between Sprint Communications Company, LP and
LLC.
(D) Sprint PCS Services Agreement, dated as of February 9,
2000, by and between Sprint Spectrum, LP and LLC.
(E) Asset Purchase Agreement, dated as of April 12, 2000, by
and between Sprint Spectrum L.P., Sprint Spectrum Equipment Company, L.P. and
Sprint Spectrum Realty Company, L.P. and LLC.
(F) Custom Service Agreement, dated as of February 9, 2000, by
and between Sprint Communications Company L.P. and LLC.
(G) Consent and Agreement, dated as of April 12, 2000, by and
between Sprint Spectrum L.P., Sprint Communications Company, L.P., and
WirelessCo, L.P. and CoBank.
(H) Build-out. The LLC Parties' build-out of the Service Area
Network in the Service Area as such terms are defined, pursuant to the Build-out
Plan approved by Sprint, is on schedule. As of the date hereof, no Company has
violated or failed to meet any contract date.
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(I) Sprint PCS Technical Program Requirements. LLC has
complied with all Sprint PCS Technical Program Requirements, as defined in the
Sprint Management Agreement, in all material respects.
(J) Sprint PCS Program Requirements. LLC has complied with all
Sprint PCS Program Requirements, as defined in the Sprint Management Agreement,
in all material respects.
(K) Sprint PCS Customer Service Standards. LLC has complied
with all Sprint PCS Customer Service Standards, as defined in the Sprint
Management Agreement, in all material respects.
(L) Sprint PCS Insurance Requirements. LLC has complied with
the Sprint PCS Insurance Requirements, as defined in the Sprint Management
Agreement, in all material respects.
(M) Sprint Management Agreement. No Event of Termination (as
defined therein) has occurred under the Sprint Management Agreement.
(iii) LLC Credit Agreement.
(A) As of the date hereof, the Credit Agreement (the "Credit
Agreement") by and among LLC, as borrower, and CoBank, as administrative agent
and a lender, and the other lenders referred to in the Credit Agreement
(collectively, the "Lenders") and all other Loan Documents (as that term is
defined in the Credit Agreement), are in full force and effect, without any
amendments, and no Default (as that term is defined in the Credit Agreement) (a
"Default") (including, without limitation, by reason of any of LLC's
representations or warranties therein failing to be true and correct) exists and
no Event of Default (as that term is defined in the Credit Agreement) (an "Event
of Default") (including, without limitation, by reason of any of LLC's
representations or warranties therein failing to be true and correct) has
occurred or is continuing under the Credit Agreement, nor has any Company
received any notice from any Lender alleging that a Default or an Event of
Default has occurred or is continuing, except as listed and explained on the
Disclosure Schedule to this Section 6.4(d)(iii)(A).
(B) As of the date hereof, the current interest rate under the
Credit Agreement is LIBOR plus 3.25%.
(C) As of the date hereof, the amount of the Commitment (as
that term is defined in the Credit Agreement) under the Credit Agreement is
$45,000,000. The amount borrowed by LLC and outstanding under the Credit
Agreement (including interest any other fees and charges due or accrued) as of
June 1, 2000 is $8,062,863. The "Expiration Date" (as that term is defined in
the Credit Agreement) is March 31, 2008.
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(D) As of the date hereof, LLC has not been required to make
any mandatory repayments under Sections 1.6(D) and 1.7 of the Credit Agreement,
except as listed on the Disclosure Schedule to this Section 6.4(d)(iii)(D).
(E) The transactions contemplated herein will not cause an
Event of Default, or otherwise cause LLC to violate any covenant or warranty of
LLC under the Credit Agreement. LLC has obtained all consents required to be
obtained (from any party whatsoever) under the Credit Agreement, with respect to
the transactions contemplated herein. LLC has attached copies of all necessary
consents as the Disclosure Schedule to this Section 6.4(d)(iii)(E).
(F) LLC has attached, as the Disclosure Schedule to this
Section 6.4(d)(iii)(F), a copy of the most recent Compliance Certificate
provided to the administrative agent in accordance with the Credit Agreement.
The information contained in the Compliance Certificate is true and correct as
of May 26, 2000.
(G) All members of LLC have made contributions to LLC, as and
when required by the Undertaking Agreement (as that term is defined in the
Credit Agreement) and any other Loan Document (as that term is defined in the
Credit Agreement).
(H) The Vendor Guaranty (as that term is defined in the Credit
Agreement) executed by Lucent is in full force and effect, without any
amendment, and will not be adversely effected by the transactions contemplated
herein.
(I) The earliest date that Superholdings will be required to
make capital contributions, if any, pursuant to the equity contribution
requirements of the Credit Agreement will be on December 31, 2000, based on
current estimates of the cash requirements of LLC, which LLC believes are
reasonable.
(iv) Legally Binding. All of the Contracts are legal, valid and
binding on the parties thereto, are in full force and effect and represent
legitimate transactions; no Company is in violation of or default under any of
the Contracts and, to the Companies' knowledge, no other party to any Contract
is in material violation or default thereunder; no event, occurrence or
condition exists which, with the lapse of time, the giving of notice, or both,
or the happening of any further event or condition, would become a material
violation or default by any Company or any other party thereto, under any
Contract; there are no outstanding, and to the Companies' knowledge, no
threatened, disputes or disagreements with respect to any of the Contracts; no
Company has released any material rights under any Contract; no Company is
subject to any legal obligations to renegotiate, nor is there any right to
renegotiate, any Contract; and no Company is subject to any liability, or claim
therefor, for or with respect to price adjustment under any Contract with the
United States Government or any agency thereof, including any liability for
defective pricing.
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(v) Material Contracts. The Contracts constitute all of the
material contracts, leases and agreements necessary for the conduct of the
businesses of the Companies in the manner and to the extent conducted
respectively by them. All rights of the Companies under the Contracts will be
enforceable by Superholdings, LLC or a Subsidiary after the Closing without the
consent or agreement of any other party.
(vi) Copies. The Companies have delivered or made available to
Public true and complete copies of each Contract, including all amendments
thereto. There are no unwritten amendments to, or waivers under, any Contract.
(e) Necessary Assets. Each Company owns all assets, rights, and
properties necessary for the conduct of its business in the manner and to the
extent currently conducted including, without limitation, all items of property
reflected in the LLC Financial Statements other than (i) assets disposed of in
the ordinary course of business since March 31, 2000 and (ii) equipment subject
to financing leases.
6.5 Liabilities.
(a) No Liabilities. No Company has any debt, guaranty, liability or
obligation of the type required to be disclosed pursuant to GAAP to any Member
or an Associate or Affiliate of such Member. No Company has any debt, guaranty,
liability or obligation of the type required to be disclosed pursuant to GAAP in
excess of $50,000 individually or $100,000 in the aggregate, in each case, of
any nature, whether accrued, absolute, contingent or otherwise, whether due or
to become due, and whether known or unknown, whether or not presently
quantifiable, and there is no basis for the assertion against it of any such
debt, guaranty, liability or obligation except to the extent set forth or
reserved against in full in the LLC Financial Statements. The consolidated
current liabilities of the Companies incurred in the ordinary course of business
do not exceed $1.1 million in the aggregate (excluding current maturities of
interest bearing debt and accounts payable for fixed asset purchases).
(b) Tax Matters.
(i) Filings. Each Company has filed or will timely file all Tax
Returns that it was or is required to file on its behalf and on behalf of any
other party. All such Tax Returns were correct and complete in all material
respects. All Taxes due and owing by any Company (whether or not shown on any
Tax Return, whether known or unknown, asserted or unasserted) have been paid. No
Company is a party to any tax sharing or other agreement that will require any
payment with respect to Taxes. No Company currently is the beneficiary of any
extension of time within which to file any Tax Return. No Company has waived any
statute of limitations in respect of Taxes or has agreed to any extension of
time with respect to a Tax assessment or deficiency or the collection of Taxes.
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(ii) Additional Taxes. No Company expects any taxing authority or
other governmental unit to assess any additional Taxes in excess of reserves or
prior payment with respect to any periods ending on or before the date hereof.
No taxing authority or other governmental unit has proposed or threatened any
assessment, deficiency, adjustment, dispute or claim concerning any Tax Return
or any Tax liability of any Company. There is no unpaid assessment, deficiency
or adjustment concerning any Tax Return or Tax liability of any Company. To the
Companies' knowledge, none of the Tax Returns of any Company has been selected
for or is now under audit or examination by any taxing authority or other
governmental unit. There are no suits, actions, proceedings or investigations
pending or, to the Companies' knowledge, threatened against any Company with
respect to any Taxes.
(iii) Withholdings. Each Company has withheld and timely deposited
or paid all Taxes required to have been withheld and deposited or paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, Members or other third party.
(iv) Specific Code Provisions. No Company has made any payments, is
obligated to make any payments, or is a party to any agreement that under any
circumstances could obligate it to make any payments that would be characterized
as "excess parachute payments" under Section 280G of the Code. None of the
assets of any Company (A) is property which is required to be treated as being
owned by any other person pursuant to the so-called "safe harbor lease"
provisions of former Section 168(f)(8) of the Code; (B) directly or indirectly
secures any debt the interest on which is tax exempt under Section 103(a) of the
Code; or (C) is "tax-exempt use property" within the meaning of Section 168(h)
of the Code. Each Company has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Section 6662. No Company (x) is a party
to any Tax allocation or sharing agreement; (y) has been a member of an
affiliated group filing a consolidated federal income Tax Return; or (z) has
liability for the Taxes of any person under Treasury Regulations Section
1.1502-6 or any similar provision of state, local, or foreign law, as a member
of a consolidated group, transferee or successor, by contract, or otherwise. No
Company has agreed to make, nor is any Company required to make, any adjustment
under Section 481(e) by reason of a change in accounting method or otherwise.
Neither the Members nor any Company is a person other than a United States
person within the meaning of the Code and the transaction contemplated herein is
not subject to the withholding provisions of Section 3406 of the Code or
subchapter A of Chapter 3 of the Code.
(v) Unpaid Taxes. The unpaid Taxes of the Companies, including all
Taxes not yet due for present and prior periods, whether known or unknown,
asserted or unasserted do not exceed the reserve for Tax liability (other than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax basis in assets and liabilities) included in LLC Financial
Statements, as adjusted for the passage of time through the Closing Date.
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As used herein, the term "Taxes" means all federal, state, local, foreign
and other governmental net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, unemployment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other taxes,
fees, assessments or charges of any kind whatever, together with any interest
and any penalties, additions to tax or additional amounts with respect thereto,
and the term "Tax" means any one of the foregoing Taxes; and the term "Tax
Returns" means all returns, declarations, reports, statements and other
documents required to be filed in respect of Taxes.
(c) Litigation.
(i) Proceedings. There is no pending action, arbitration, audit,
charge, complaint, demand, hearing, investigation, litigation or suit (whether
civil, criminal, administrative (including, without limitation, Equal Employment
Opportunity Commission, Department of Labor or Office of Federal Contract
Compliance, National Labor Relations Board, and similar state or federal
agencies), investigative or informal) (collectively, "Proceedings") that has
been received or commenced by or against LLC that otherwise relates to or may
affect the Parent Merger, the LLC Parties, the Members' Interests, this
Agreement, any Related Agreement or the transactions contemplated herein or
therein, and, to the LLC Parties' knowledge, no such Proceedings have been
threatened. Each Member represents that there is no Proceeding that has been
received or commenced by or against such Member and that relates to the LLC
Parties that otherwise relates to or may affect the Parent Merger, the LLC
Parties, the Members' Interests, this Agreement, any Related Agreement or the
transactions contemplated herein or therein nor is there any basis therefor,
and, to such Member's knowledge, no such Proceedings have been threatened.
(ii) Orders. There is no award, decision, injunction, judgment,
order, ruling, subpoena, writ or verdict of any court, arbitrator or government
agency or instrumentality to which LLC is subject that relate to or affects the
Parent Merger, the LLC Parties, the Members' Interests, this Agreement, any
Related Agreement or the transactions contemplated herein or therein is subject
or by which any of the foregoing may be affected. Each Member represents that
there is no award, decision, injunction, judgment, order, ruling, subpoena, writ
or verdict of any court, arbitrator or government agency or instrumentality to
which such Member is subject and that relates to or affects the Parent Merger,
the LLC Parties, the Members' Interests, this Agreement, any Related Agreement
or the transactions contemplated herein and therein (collectively, the
"Orders").
(iii) Disclosure Schedule. The Disclosure Schedule to this Section
6.5(c)(iii) sets forth a brief description of each Proceeding pending or, to the
Companies' knowledge, threatened, at the date hereof.
(d) Employee Liabilities. The Disclosure Schedule to this Section
6.5(d) accurately lists as of the date set forth therein, (i) the hire date of
and year-to-date compensation
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paid to each employee of each Company (specifying as to each such employee the
respective amounts of base salary, bonus and commissions paid to such employee),
(ii) the monthly salary of each employee for each of the last 12 months, (iii)
all written employee policies of each Company and (iv) all accrued and unpaid
commissions, bonus payments or vacation pay due to employees of each Company as
of May 31, 2000 and (v) all obligations owned to any persons under the VAR Plan.
(e) Warranties. There are no express warranties with respect
to the quality or absence of defects of its systems, products or services that
any Company has sold or performed which are in force as of the date hereof
except as are described in the Disclosure Schedule to this Section 6.5(e).
6.6 Business.
(a) Suppliers. No Company has knowledge of any intention or indication
of intention by a Significant Supplier or an Alliance Party to terminate its
business relationship with any Company or to limit its business relationship
with any Company in any respect. As used herein, "Significant Supplier" means
any of the 10 largest suppliers (measured by dollar value of goods purchased) of
LLC for the two-year period ended May 31, 2000.
(b) Insurance. Each Company maintains insurance policies on its assets,
and upon its business and operations, against loss or damage, risks, hazards and
liabilities (the "Policies"), with insurers the Companies reasonably believe to
be financially sound and reputable. The premiums due and owing with respect to
the Policies have been paid, premiums not yet due have been adequately accrued
for, and no Company has received any notice of cancellation or of intention not
to renew any such Policy. The Disclosure Schedule to this Section 6.6(b)
contains a list of the Policies, copies of which have been provided to Public.
The Disclosure Schedule to this Section 6.6(b) sets forth a list of each other
insurance policy or insurance contract relating to any Company or the business
of any Company pursuant to which any Company is or may hereafter be entitled to
assert claims for insurance coverage (the "Prior Policies"). The covered Company
or Companies have timely pursued all rights to recover (if any) under the
Policies and the Prior Policies.
(c) Employees. No officer, employee or independent contractor of any
Company is in violation of any term of any contract, proprietary information
agreement, noncompetition agreement, or any other agreement or any restrictive
covenant or any other common law obligation to a former employer relating to the
right of any such person to be engaged by such Company or to the use of trade
secrets or proprietary information of others (an "Outside Confidentiality
Agreement"), and the engagement of such persons by such Company before or after
the Closing does not and will not subject any Company, Superholdings or Public
to any liability with respect thereto. There are neither pending, nor to the
Companies' knowledge, threatened, any Proceedings with respect to any Outside
Confidentiality Agreement. The Disclosure Schedule to this Section 6.6(c) lists
every Outside Confidentiality Agreement to
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which any Company's officers or technical staff are a party, about which the
Companies have knowledge.
There is no labor strike, dispute, slowdown, picketing or stoppage pending
or, to the Companies' knowledge, threatened against or directly affecting any
Company, nor has any Company experienced any of the foregoing since its
formation. No Company is subject to any collective bargaining agreement. No
union representation question exists and, to the Companies' knowledge, there has
been no union organization effort respecting the employees of any Company. No
Company is delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them or amounts required to be reimbursed to such employees. The
Disclosure Schedule to this Section 6.6(c) lists every retired employee entitled
to receive compensation from any Company or to participate in any benefit plan
of any Company. The books and records of each Company accurately reflect all
changes in compensation since such Company's formation.
There are no employment agreements with any past or former employee of any
Company which provide or create a right to continued employment or compensation.
All employees of each Company are, and have been, employed for an indefinite
period and are, and have been, terminable at will, with or without cause, and
without cost to any Company for severance obligations, or any other liability,
except for payment of accrued salaries or wages and vacation pay. No employee or
former employee has any right to be rehired by any Company prior to the hiring
of a person not previously employed by such Company. To the Companies'
knowledge, no officer, director or key employee intends to terminate employment
with any Company.
(d) Worker's Compensation. Each Company subscribes to, or is otherwise
insured under, the worker's compensation or similar statute in every state in
which it owns or leases real estate or has employees. The Disclosure Schedule to
this Section 6.6(d) lists all material claims filed by employees of any Company
in respect of employment-related injury or illness since its formation. No
Company has received any report or notice from the Occupational Safety and
Health Administration.
(e) ERISA. The Disclosure Schedule to this Section 6.6(e) lists each
employee benefit plan, program, arrangement and contract (including each
"employee benefit plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and any bonus, deferred
compensation, stock bonus, stock, purchase, restricted stock, stock option,
employment, termination, stay agreement or bonus, value appreciation, change in
control and severance plan, program, arrangement or contract that any Company
maintains or ever has maintained, or to which any Company contributes, ever has
contributed or ever has been required to contribute (collectively, the "Employee
Benefit Plans"). Each Employee Benefit Plan (and each related trust, insurance
contract or fund) complies in form and in operation in all respects with the
applicable requirements of all laws, rules and regulations governing or applying
to such Employee Benefit Plan, including without limitation ERISA and the Code,
and each such Plan has been operated in accordance with its terms, except as
will not
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have a material adverse effect on any Company, Superholdings or Public. No
liability has been incurred and there exists no condition or circumstance which
could result in any liability to any Company under ERISA, the Code or any other
applicable law, other than liability for benefits due under the appropriate
Employee Benefit Plan. All contributions (including all employer and employee
salary reduction contributions) which are due have been paid in a timely manner
to each such Employee Benefit Plan which is an "employee pension benefit plan"
(as defined in ERISA ss. 3(2) (hereinafter, an "Employee Pension Benefit Plan"))
or otherwise is an "employee benefit plan" (as defined in ERISA ss. 3(3)). No
Company has engaged in or permitted to occur and, to the Companies' knowledge,
no other party has engaged in or permitted to occur, any transaction prohibited
by ERISA ss. 406 or "prohibited transaction" under Code ss. 4975(c) or any
breach of fiduciary duty under ERISA with respect to any Employee Benefit Plan,
except for any transactions which are exempt under ERISA ss. 408 or Code ss.
4975. All filings required by ERISA and the Code as to each Employee Benefit
Plan have been timely filed, and all notices and disclosures to participants
required by either ERISA or the Code, including all notices required under ERISA
ss. 601 et seq. and Code ss. 4980B, have been timely provided. Each Company has
complied with all of the provisions of Parts 6 and 7 of Title I of ERISA and
Code ss. 4980B. The Companies have delivered or made available to Public correct
and complete copies of the plan documents or contracts and summary plan
descriptions, the most recent determination letter received from the Internal
Revenue Service, where applicable, the most recent Form 5500 Annual Report,
where applicable, all related trust agreements, insurance contracts and other
funding agreements which implement each Employee Benefit Plan, and such other
documents requested by Public with respect to each Employee Benefit Plan.
No action, suit, proceeding, hearing or investigation with respect to the
administration or the investment of the assets of any Employee Benefit Plan is
pending or, to the Companies' knowledge, threatened, except for routine claims
for benefits under such plans.
The Disclosure Schedule to this Section 6.6(e) lists all contracts with
third-party administrators, insurers, actuaries, investment managers,
consultants and other independent contractors that relate to any Employee
Benefit Plan.
No Company has or has ever had any ERISA Affiliates other than the
Companies. "ERISA Affiliate" shall mean any person that, together with any
Company, is or at any time within the six-year period preceding the date of this
Agreement would be treated as a single employer under Code ss. 414. No Employee
Pension Benefit Plan is or has ever been subject to Title IV of ERISA or Code
ss. 412.
No employee of any Company will be entitled to any additional benefits or
any acceleration of the time of payment or vesting of any benefits under any
Employee Benefit Plan as a result of the transactions contemplated by this
Agreement. No Person is entitled to receive any additional payment from any
Company or any other party in the event that the excise tax of Code ss. 4999 is
imposed on that Person.
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(f) Conflicts of Interest.
(i) Affiliated Transactions. Since its formation, there have not
been, nor are there presently pending, any transactions between any Company and
any member holding more than 1% of the equity interests in any Company, or an
"Associate" or "Affiliate" (as such terms are defined in Rule 405 promulgated
pursuant to the Securities Act) of any Company or any such member, or any such
transaction with any Company in which any of the foregoing persons or entities
has a direct or indirect financial interest.
(ii) Ownership in Competitive Entities. Except as set forth on the
Disclosure Schedule to this Section 6.6(f)(ii), the Members (and their
respective spouses and relatives) do not, and to the best knowledge of the
Members, none of the Companies' officers, directors, employees, contractors or
consultants (or any of their respective spouses or relatives), directly or
indirectly, own any interest in any entity that is a competitor, customer or
supplier of, or has any existing contractual relationship with, any Company.
(g) LLC Legal Requirements.
(i) Compliance with Laws. No Company has violated any term of any
judgment, writ, decree, order, law, statute, rule or regulation to which it is
subject or a party, or by which its business or assets are bound or affected
(collectively, "LLC Legal Requirements"), except as would not have a material
adverse effect on any Company, Superholdings or Public. No Company has received
notice of any actual, alleged or potential violation of an LLC Legal
Requirement. No Company is a public utility holding company, as defined in the
Public Utility Holding Company Act of 1935, as amended. No Company is an
investment company, as defined in the Investment Company Act of 1940, as
amended.
(ii) Certain Acts. Neither any of the LLC Parties nor any of their
former or current officers, directors, employees, agents or representatives has
made or agreed to make, directly or indirectly, with respect to the businesses
or assets of any Company, any (A) bribes or kickbacks, illegal political
contributions, payments from corporate funds not recorded on the books and
records of such Company, or funds to governmental officials (or any such
official's family members or affiliates) for the purpose of affecting their
action or the action of the government they represent, to obtain favorable
treatment in securing business or licenses or to obtain special concessions, or
illegal payments from corporate funds to obtain or retain business or (B)
payments from corporate funds to governmental officials for the purpose of
affecting their action or the action of the government they represent, to obtain
favorable treatment in securing business or licenses or to obtain special
concessions. Without limiting the generality of the foregoing, none of the
foregoing persons or entities has made or agreed to make, directly or
indirectly, any unlawful payment to obtain, or with respect to, sales.
(iii) Licenses. Each Company has all governmental licenses,
permits, approvals, authorizations, exemptions, classifications, registrations
and certificates, and all
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consents or agreements with governmental authorities (collectively, "Licenses")
necessary to conduct its business in the manner and to the extent that it has
been conducted. All of the Licences and the parties thereto are listed on the
Disclosure Schedule to this Section 6.6(g)(iii). The Disclosure Schedule to this
Section 6.6(g)(iii) also lists every license that is in effect or has been
applied for or is pending and identifies all Licenses and applications for
Licenses that will be impaired as a result of the Parent Merger. The Companies
have delivered to Public true and complete copies of all of the Licenses.
All Licenses are in full force and effect. No event has occurred
that may constitute or result in a violation of a License, or result in the
revocation, suspension, modification or nonrenewal of any License. No LLC Party
has received any notice of any actual, alleged or potential violation,
revocation, suspension, modification or nonrenewal of any License.
(h) Environmental Matters.
(i) Compliance. Each Company is in compliance with all applicable
Environmental Laws and no Company has received any written communication from
any person that alleges that any Company is not in compliance with any
Environmental Law. As used herein, "Environmental Laws" mean all laws or orders
relating to the regulation or protection of human health, safety or the
environment (including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata), including, without
limitation, laws and regulations relating to releases or threatened releases of
hazardous materials or pollutants, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
recycling, handling, discharge, removal or remediation of hazardous materials or
pollutants.
(ii) Environmental Claims. There is no Environmental Claim pending
or, to the Companies' knowledge, threatened (A) against any Company, (B) against
any person or entity whose liability for any Environmental Claim any Company has
or may have retained or assumed either contractually or by operation of law or
(C) with respect to any real or personal property or operations which are now or
have been previously owned, leased, operated or managed, in whole or in part, by
any Company, or any real property to which any Company has transported any
hazardous materials or pollutants.
(iii) Permits. No Company is required under any Environmental Law
to apply for or maintain any permit or authorization with respect to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, recycling, handling or discharge of any hazardous materials or
pollutants.
(iv) Pollutants. None of the Real Property or Leased Property
(including without limitation the soils, surface water or groundwater thereof)
are or have been impacted by the presence of hazardous materials or pollutants
for which LLC may have liability.
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As used herein, "Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, claims, Liens, investigations, proceedings or notices of
non-compliance or violation (written or oral) by any person or entity (including
any governmental authority), alleging potential liability (including, without
limitation, potential liability for enforcement, investigatory costs, cleanup
costs, governmental response costs, removal costs, remedial costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (A) the presence, or release or threatened
release into the environment of any hazardous material or pollutant at any
location; or (B) any violation, or alleged violation, of any Environmental Law,
and including, without limitation, any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief in connection with the presence or release of any hazardous
materials or pollutants.
(v) Underground and Above Ground Storage Tanks. Except as set forth
on the Disclosure Schedule to this Section 6.6(h)(v), there are no underground
storage tanks or above ground storage tanks located on any of the Real Property
or Leased Premises or on any property located adjacent to any Real Property or
Leased Premises and no underground storage tanks or above ground storage tanks
have ever been located on the Real Property or Leased Premises or on any
property located adjacent to any Real Property or Leased Premises.
(vi) Environmental Assessments. Except as set forth on the
Disclosure Schedule to this Section 6.6(h)(vi), there are no environmental
reports, audits, investigations or assessments of any Company or any real or
personal property or operations which are now or have been previously owned,
leased, operated or managed, in whole or in part, by any Company.
(i) Build-out Plan. At the date of this Agreement, LLC reasonably
believes, in good faith, that its build-out plan attached as the Disclosure
Schedule to this Section 6.6(i) is achievable using such efforts as have
historically been used by LLC (taking into account the additional effort that
has been required to achieve the deadlines imposed under the Sprint Management
Agreement) including Exhibit 2.1 of the addendum to the Sprint Management
Agreement dated April 12, 2000. The technical aspects of the build-out plan have
been approved by Sprint. The Disclosure Schedule to this Section 6.6(i) sets
forth the extent of LLC's progress in the completion of the build-out and
network launch at the date hereof.
6.7 Other.
(a) Certain Information. None of the information supplied or to be
supplied by the LLC Parties specifically for inclusion in (i) the Form S-4 or
the Form S-1 will, at the time the Form S-4 or Form S-1, as applicable, is filed
with the SEC, at any time that such form is amended or supplemented and at the
time it becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or (ii) the
Proxy Statement
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will, at the time it is filed with the SEC, at any time that it is amended or
supplemented, at the time it is mailed to the holders of Public Stock and at the
time of the Public Stockholders Meeting and, if it is mailed to the Members, at
the time it is mailed to the Members and at the time of the Members Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(b) Documents Delivered. The minute books and ownership transfer
records of each Company (the "LLC Records") that have been made available to
Public, Superholdings, Merger Sub or their agents are complete in all material
respects. The LLC Records contain accurate records of all meetings held of, and
corporate action taken by the respective boards of directors or managers and
members of each Company, and any committee or representative thereof. No meeting
has been held and no action has been taken, by any such board of directors or
equity security holders for which accurate records have not been prepared and
included in the LLC Records. At the Closing, all of the LLC Records will be in
the possession of LLC.
(c) No Brokers Fees; No Commissions. All negotiations relative hereto
and the transactions contemplated hereby have been carried on by the Companies
directly with Public and Merger Sub without any act by any Company that would
give rise to any claim against any Company, Public, Superholdings, Merger Sub or
their respective Affiliates for a brokerage commission, finder's fee or other
similar payment.
(d) Tax Advice. Each Company has received and the Members have had the
opportunity to receive tax advice from their own tax advisors regarding the
Reorganization. The LLC Parties have received no advice, agreement or
representation from, and are not relying in any way upon, Public, Superholdings,
Merger Sub, Parent Surviving Corporation, Subsidiary Surviving Corporation or
any of their agents or advisors with regard to tax advice or the tax impact of
the Reorganization.
(e) Disclosure. None of the representations or warranties of the LLC
Parties contained in this Agreement, the Related Agreements or the Disclosure
Schedules, contains any untrue statement of a material fact or omits to state a
material fact herein or therein necessary in order to make the statements
contained herein or therein not misleading.
6.8 Investment Representations.
(a) The Members understand and acknowledge that the Superholdings Stock
is being offered and sold under the exemptions from registration provided for in
Section 4(2) of the Securities Act, including Regulation D promulgated
thereunder, and that Superholdings' reliance upon such exemption is based in
part upon the Members' representations, warranties and agreements contained in
this Agreement.
(b) The Members have carefully read this Agreement and, to the extent
believed necessary, have discussed the representations, warranties and
agreements which the
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Members make by signing it and the applicable limitations upon the Members'
resale of the shares of Superholdings Stock with the Members' counsel.
(c) The Superholdings Stock to be issued to such Members in the
Reorganization is being acquired by the Members solely for the Members' own
account, for investment purposes only, and is not being acquired for resale,
resyndication, distribution, subdivision of fractionalization thereof, except
pursuant to an effective registration under the Securities Act or in a
transaction exempt from registration under the Securities Act. The Members have
no contract or arrangement with any person to sell, transfer or pledge to any
person the shares of Superholdings Stock or any part thereof, any interest
herein or any rights thereto, and the Members have no present plans to enter
into any such contract or arrangement.
(d) Each of the Members understands that it may not sell or otherwise
transfer its shares of Superholdings Stock unless such sale or other transfer is
registered under the Securities Act and the applicable state securities laws or
unless the sale or other transfer is exempt from the registration requirements
under the Securities Act and such other securities laws, and that, as a result,
the Members must bear the economic risk of the investment for an indefinite
period of time. The Members understand that Superholdings may require the
Members to furnish an opinion of counsel satisfactory to Superholdings that such
sale or transfer is so exempt.
(e) Each of the Members is able (i) to bear the economic risk of an
investment in Superholdings Stock, (ii) to hold the shares of Superholdings
Stock indefinitely, and (iii) to afford a complete loss of this investment. Each
of the Members has adequate means of providing for current needs and has no
present need for liquidity in this investment.
(f) Each of the Members is an "accredited investor" as that term is
defined under Rule 501(a) of Regulation D, as amended, under the Securities Act
and possesses such knowledge and experience in financial and business matters so
that each of the Members is capable of evaluating the merits and risks of an
investment in Superholdings Stock, and of making an informed investment
decision.
(g) Each of the Members confirms that, in making the decision to
acquire the shares of Superholdings Stock in the Reorganization, the Members
have relied solely upon independent investigations made by each of the Members
and/or by its representatives, including the each of the Members' own
professional tax and other advisors and that the Members and such
representatives and advisors have been given the opportunity to ask questions
of, and to receive answers from, Superholdings concerning this Agreement and the
terms and conditions of the Reorganization, and to obtain any information
requested by the Members concerning Superholdings from such person, to the
extent such persons possessed such information or could acquire it without
unreasonable effort or expense, necessary for each of the Members to make an
informed investment in Superholdings Stock.
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ARTICLE 7
Representations and Warranties of Public, Superholdings and Merger Sub
Public, Superholdings and Merger Sub, jointly and severally, represent and
warrant to the LLC Parties that except as set specifically forth on the
Disclosure Schedules (which exception shall relate only to the Sections
specifically identified in such Disclosure Schedules):
7.1 Entry Into Agreements.
(a) Organization and Good Standing. Public, Superholdings and Merger
Sub are corporations duly organized and validly existing under the laws of the
State of Delaware and are in good standing under such laws. Superholdings owns,
beneficially and of record, all of the issued and outstanding shares of capital
stock of Merger Sub.
(b) Corporate Power and Authority; Validity and Authorization. Public,
Superholdings and Merger Sub have full corporate power and authority to execute,
deliver and perform this Agreement and the Related Agreements. This Agreement
has been duly authorized, executed and delivered by Public, Superholdings and
Merger Sub, and is enforceable against Public, Superholdings and Merger Sub in
accordance with its terms.
When the Related Agreements to which each of Public, Superholdings and
Merger Sub is a party are delivered, such agreements will have been duly
authorized, executed and delivered by Public, Superholdings and Merger Sub, and
will constitute the legal, valid and binding obligations of Public,
Superholdings and Merger Sub, enforceable against Public, Superholdings and
Merger Sub in accordance with their terms.
7.2 Conflicts and Consents.
(a) No Conflict. Except as set forth on the Disclosure
Schedule to this Section 7.2(a), the execution, delivery and performance of this
Agreement and the Related Agreements, and the consummation of the transactions
contemplated hereby and thereby will not result in any violation of the terms of
and will not contravene, conflict with, accelerate the performance of the
obligations required under, or constitute a default under, the certificate of
incorporation or bylaws of Public, Superholdings or Merger Sub, or any material
agreement, judgment, decree, order, law, rule or regulation or other restriction
applicable to any of them, or to which any of them is a party or by which
Public, Superholdings or Merger Sub or their property or assets is bound, or
result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of Public, Superholdings or Merger Sub.
(b) Consents Obtained. Other than the approvals referred to in Section
3.1(a) Stockholder Approval) and Section 3.1(b) (HSR Act) (the "Public
Consents") and except as set forth on the Disclosure Schedule to this Section
7.2(b), no material consents, approvals or
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authorizations of third parties are required in connection with Public's,
Superholdings' and Merger Sub's valid execution, delivery, or performance of
this Agreement and the Related Agreements or the consummation of any of the
transactions contemplated hereby or thereby on the part of such party.
7.3 No Brokers Fees; No Commissions. All negotiations relative hereto
and the transactions contemplated hereby have been carried on by Public and
Merger Sub directly with the LLC Parties without any act by Public or Merger Sub
that would give rise to any claim against the LLC Parties or their Affiliates
for a brokerage commission, finder's fee or other similar payment.
7.4 Superholdings Stock. The shares of Superholdings Stock, when issued,
sold and delivered in accordance with the terms hereof will be duly and validly
issued, fully paid and nonassessable and issued free and clear of any Liens.
7.5 SEC Documents. Public has heretofore delivered or made available to
the LLC Parties all reports publicly filed by Public with the SEC on or after
February 3, 2000 (the "SEC Documents"). As of their respective dates, each of
the SEC Documents complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act. The audited
consolidated financial statements and unaudited consolidated financial
statements of Public included in the SEC Documents fairly present the financial
position of Public as of the dates of such financial statements and the results
of Public's operations and cash flows for the periods then ended, in accordance
with GAAP, except for the variances from GAAP set forth in the notes thereto.
7.6 No Material Adverse Effect. Since the date of the most recent filing
by Public under the Exchange Act prior to the date hereof, there has been no
event or occurrence that has caused or is reasonably expected to cause a
material adverse effect on Public other than (i) operating losses in the
ordinary course of business or (ii) economic conditions affecting the U.S.
economy generally or the telecommunications industry generally.
7.7 Capitalization. The authorized capital stock of Public consists (i) of
95,000,000 shares of Public Stock, of which 61,354,606 shares were issued and
outstanding as of April 20, 2000 and (ii) 5,000,000 shares of preferred stock,
par value $0.01 per share, of which no shares were issued and outstanding as of
April 20, 2000. All of the issued and outstanding shares of Public Stock have
been duly authorized and validly issued, are fully paid and nonassessable and
are free and clear of any preemptive rights. As of March 31, 2000, there were no
outstanding preemptive, conversion or other rights, or other options, warrants
or agreements granted by, issued by, or binding upon, Public for the issuance,
sale, purchase, repurchase, redemption, acquisition or other transfer of its
equity securities, other than stock that may be issued pursuant to stock option
plans or agreements described in the SEC Documents and obligations under the
Sister Agreements.
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7.8 Capitalization of Superholdings. The authorized capital stock of
Superholdings immediately prior to the Closing will consist (i) of at least
290,000,000 shares of Superholdings Stock and (ii) at least 10,000,000 shares of
preferred stock, par value $0.01 per share. All of the issued and outstanding
shares of Superholdings Stock will have been duly authorized and validly issued,
fully paid and nonassessable and free and clear of any preemptive rights. On the
date of this Agreement, there are no outstanding preemptive, conversion or other
rights, or other options, warrants or agreements granted by, issued by, or
binding upon, Superholdings for the issuance, sale, purchase, repurchase,
redemption, acquisition or other transfer of its equity securities, other than
stock that may be issued pursuant to the stock option plans and agreements of
Public described above (after consummation of the Subsidiary Merger) or pursuant
to the Sister Agreements.
7.9 No Liabilities. At the date of this Agreement, Public has no debt,
guaranty, liability or obligation, or guaranty, of the type required to be
disclosed pursuant to GAAP in excess of $5.0 million, whether accrued, absolute,
contingent or otherwise, whether due or to become due, and whether known or
unknown, whether or not presently quantifiable, and there is no basis for the
assertion against it of any such debt, guaranty, liability or obligation except
(i) to the extent set forth or reserved against in full in Public's audited
consolidated financial statements and unaudited consolidated financial
statements included in the SEC Documents and (ii) such liabilities incurred in
the ordinary course of business since March 31, 2000.
7.10 Compliance with Laws. Public has not violated any term of any
judgment, writ, decree, order, law, statute, rule or regulation to which it is
subject or a party, or by which the business or assets of Public are bound or
affected (collectively, "Public Legal Requirements"), except as would not have a
material adverse effect on Public. Public has not received notice of any actual,
alleged or potential violation of a Public Legal Requirement.
7.11 Certain Information. None of the information supplied or to be
supplied by Public, Superholdings or Merger Sub specifically for inclusion or
incorporation by reference in, or which may be deemed to be in incorporated by
reference in, (i) the Form S-4 or the Form S-1 will, at the time the Form S-4 or
Form S-1, as applicable, is filed with the SEC, at any time that such form is
amended or supplemented and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) the Proxy Statement will, at the time
it is filed with the SEC, at any time that it is amended or supplemented, at the
time it is mailed to the holders of Public Stock and at the time of the Public
Stockholders Meeting and, if it is mailed to the Members, at the time it is
mailed to the Members and at the time of the Members Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by Public, Superholdings or Merger Sub with
respect to statements made or incorporated
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by reference therein based on information supplied by the LLC Parties or other
parties to Sister Agreements specifically for inclusion therein.
7.12 Disclosure. None of the representations or warranties of Public,
Superholdings or Merger Sub contained in this Agreement, the Related Agreements
or the Disclosure Schedules contains any untrue statement of a material fact or
omits to state a material fact herein or therein necessary in order to make the
statements contained herein or therein not misleading.
ARTICLE 8
Covenants of the Parties
During the periods from the date of this Agreement and continuing until
the Effective Time, the parties agree that:
8.1 Services Agreement. On the date hereof, the parties will execute the
Services Agreement. The Services Agreement sets forth the terms pursuant to
which Public will manage LLC's business after HSR Act approval has been
obtained, and after consents have been obtained from Sprint, Lucent and CoBank
until the earlier of the Closing Date or the Termination Date.
8.2 Conduct of Business of LLC Pending Closing. Unless otherwise expressly
contemplated hereby including, without limitation pursuant to the terms of the
Services Agreement, or approved in writing by Public and Superholdings, LLC
shall conduct its business and operations only in, and LLC shall not take any
action except in, the ordinary course of business and consistent with past
practices. In the conduct of its business, LLC shall comply with the covenants
set forth in Section 4.1(b) (LLC Parties' Responsibilities).
The LLC Parties shall use reasonable best efforts to:
(a) maintain LLC's, LLC Holdings' and the Subsidiaries' respective
rights and franchises and preserve their respective relationships with
customers, suppliers and others having business dealings with them with the
objective of minimization of the impairment of their respective ongoing
businesses;
(b) preserve, protect and maintain for Public and Superholdings the
good will of LLC's, LLC Holdings' and the Subsidiaries' respective employees;
and
(c) to keep available to Public and Superholdings the present officers
and employees of LLC, LLC Holdings and the Subsidiaries.
The LLC Parties shall consult with Public and Superholdings on strategies
for maintaining and preserving LLC's, LLC Holdings' and the Subsidiaries'
respective businesses and effecting an orderly transition to Public and
Superholdings' ownership of such business.
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8.3 Access to Information and Employees. The LLC Parties shall permit,
upon reasonable notice during normal business hours, Public and their
Representatives to visit and inspect any of the properties of LLC, LLC Holdings
and the Subsidiaries, including books and records, and to discuss the affairs,
finances and accounts of LLC, LLC Holdings and the Subsidiaries and Public's and
Superholdings' prospects, plans and intentions with LLC's, LLC Holdings' and the
Subsidiaries' respective officers, employees, brokers and independent public
accountants, as often as any such person may deem necessary or desirable and
reasonably request. The LLC Parties shall furnish to Public copies of any
existing Phase 1 or other existing environmental reports relating to the Real
Property or the Leased Premises. The LLC Parties shall permit Public to conduct,
subject to the rights of the lessors thereof, at Public's sole discretion and
expense, environmental investigations and analyses of the Real Property.
In this Agreement, "Representatives" means, collectively, a party's
directors, officers, employees, stockholders or members (as the case may be),
partners, financial parties in interest, agents, advisors, attorneys,
accountants, consultants, Affiliates, Associates, financing sources and
representatives of any such source, representatives, and any person or entity
being considered for any such role.
8.4 Financial Statements. The LLC Parties shall deliver to Public and
Superholdings (a) copies of financial statements of the kind and character
prepared in conjunction with the Credit Agreement, (b) copies of all financial
statements delivered to LLC Parties' Board of Managers and (c) electronic copies
of all general ledger records commonly referred to as "QuickBooks" within 15
business days of each succeeding month.
8.5 Payment of Indebtedness of Related Persons. The Members will cause all
indebtedness that any of the Members or any of LLC's, LLC Holdings' or the
Subsidiaries' Affiliates owes to LLC, LLC Holdings, or any Subsidiary to be paid
in full prior to Closing (other than travel advances in the ordinary course of
business not to exceed $10,000 in the aggregate).
8.6 Records of LLC. On or prior to the Closing Date, the LLC Parties shall
transfer or cause to be transferred to LLC any files, books, records or other
documents relating to the business of LLC, LLC Holdings, or any Subsidiary that
are the property of LLC, LLC Holdings, or any Subsidiary and that are possessed
by any LLC Party or any of LLC's, LLC Holdings', or the Subsidiaries' Affiliates
and that are not otherwise possessed by LLC. The LLC Parties may make and retain
copies (at their expense) of any such files, books, records and documents
transferred to LLC.
8.7 Employee Benefit Plans. LLC shall maintain in accordance with all
legal requirements the Employee Benefit Plans and shall not take any action to
terminate or discontinue any such plan without Public's and Superholdings' prior
written consent.
8.8 Section 16(b) Resolution. Prior to the Closing Date, the Board of
Directors of uperholdings shall pass a resolution approving, for purposes of
Rule 16b-3 of the Exchange
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Act, the issuance of Superholdings Stock pursuant to the Parent Merger and the
Subsidiary Merger, to the directors, officers and other persons subject to
potential liability under Section 16(b) of the Exchange Act, which resolution
shall specifically refer to such directors, officers and other persons and the
number of shares of Superholdings Stock issued to such persons pursuant to the
Parent Merger and the Subsidiary Merger.
ARTICLE 9
Post-Closing Agreements
The Members and Superholdings covenant and agree that after the Closing:
9.1 Further Actions. Superholdings shall have the right to act in the name
and on the behalf of LLC and LLC Holdings, including, without limitation, such
further instruments of transfer and conveyance, documents and certificates as
may be reasonably requested by Superholdings in order to more effectively convey
and transfer to Superholdings all of the Members' Interests and business of LLC,
LLC Holdings and the Subsidiaries, to aid and assist in reducing to possession
or exercising rights with respect to same, or to consummate any of the
transactions contemplated hereby.
The Members shall as promptly as practical after receipt deliver to
Superholdings any cash, checks, mail, packages, notices and other similar
communications of LLC, LLC Holdings or the Subsidiaries that any of them
receives. The Members shall endorse in favor of Superholdings any checks or
other instruments of payment that by their terms are payable to the Members but
that are property of LLC, LLC Holdings or the Subsidiaries.
9.2 Cooperation. The Members shall use reasonable best efforts to aid
Superholdings in establishing itself as the new owner and operator of the
business of LLC, LLC Holdings, and the Subsidiaries and, in connection
therewith, shall use reasonable best efforts to maintain LLC's, LLC Holdings',
and the Subsidiaries' goodwill and reputation with all suppliers, customers,
distributors, creditors and others having business relations with LLC, LLC
Holdings or the Subsidiaries and in the business community generally. The
Members shall cooperate, at Superholdings' expense, and shall cause their
Representatives to cooperate, with Superholdings in connection with
Superholdings' preparation and filing under the Securities Act or Exchange Act
of any registration statement for which the assistance of the LLC Parties or
their respective Representatives is reasonably required.
9.3 LLC Nominee Election. If Superholdings determines that LLC shall have
board representation on the Superholdings Board of Directors, then LLC shall
deliver to Superholdings the name of the person, subject to Superholdings'
reasonable approval, to be a director of Superholdings (the "LLC Nominee").
Superholdings will include the LLC Nominee in management's slate of nominees for
Superholdings' Board of Directors and will solicit proxies in favor of the
election of the LLC Nominee for any annual or special meeting of Superholdings'
stockholders (commencing with the election of the LLC Nominee at Superholdings'
special meeting of stockholders in connection with the Reorganization).
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9.4 Tax Returns. The Members shall file on behalf of LLC (and, if
necessary, on behalf of any Member), all tax returns for LLC's fiscal year ended
December 31, 2000, by not later than the unextended due date, and all tax
returns for the short period by not later than the unextended due date and shall
provide copies of such returns to Superholdings immediately after the filing of
such returns.
9.5 Access to Information; Confidentiality. The Members and Superholdings
shall afford to the other and their respective Representatives reasonable access
to their respective books and records in order to prepare tax returns and other
governmental filings.
ARTICLE 10
Indemnification
10.1 Survival; Etc.
(a) Contents of this Agreement. The representations, warranties,
covenants and agreements made in Superholdings Closing Certificate, LLC Parties
Closing Certificate and any Disclosure Schedule shall be deemed representations,
warranties, covenants and agreements made herein.
(b) No Effect on Liability. None of (i) the consummation of the
transactions contemplated by this Agreement or the Related Agreements, (ii) the
delay or omission of any party to exercise any of its rights under this
Agreement or any Related Agreement or (iii) any investigation or disclosure that
any party makes, any notice or certificate that any party gives, or any
knowledge that any party obtains as a result thereof, or otherwise, shall (A)
affect the liability of the parties to one another for Breaches of this
Agreement or any Related Agreement or (B) prevent any party from relying on the
representations or warranties contained in this Agreement or any Related
Agreement.
As used herein, a party's "Breach" shall mean any representation or
warranty being untrue when made by such party, any breach of any of such party's
covenants or agreements.
(c) Survival. The representations and warranties of Public,
Superholdings, Merger Sub and the Members made in this Agreement or any Related
Agreement shall survive the Closing. The representations and warranties of LLC,
LLC Holdings and the Subsidiaries made herein shall be extinguished at the
Closing and LLC, LLC Holdings and the Subsidiaries shall each have no liability
thereafter for Breach hereof. Effective at the Closing, the Members waive and
release any claim for Breach of this Agreement or any Related Agreement by LLC,
LLC Holdings or the Subsidiaries, including without limitation any claim for
indemnification or contribution.
(d) Commencing Actions. If the Closing occurs, then any action against
any
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party hereto for Breaches of this Agreement occurring on or prior to the time of
the Closing that is not commenced pursuant to Section 10.7 (Dispute Resolution)
within one year of the effective date of the Services Agreement, or withheld
against pursuant to Section 10.2(d) (Form of Payment; Interim Losses) shall be
deemed waived, and no person shall have any remedy against any party for any
such Breaches; provided, however, if (i) any Superholdings Indemnitee is subject
to Losses for Breaches of Sections 6.5(b) (Tax Matters), 6.5(c) (Litigation), or
6.6(h) (Environmental Matters), such Superholdings Indemnitee may commence an
action against the Members to recover such Losses within two years of the
effective date of the Services Agreement and (ii) such Superholdings Indemnitee
is subject to Losses for Breaches of Sections 6.3(b) (Capitalization of LLC
Holdings) or 6.3(c) (Ownership and Transfer by Members), such Superholdings
Indemnitee may commence an action against the Members to recover such Losses at
any time that such Superholdings Indemnitee is subject to Losses with respect
thereto; provided, that, in each circumstance described in (i) and (ii) above,
such Superholdings Indemnitee shall use reasonable best efforts to obtain for
itself and for the Members (or if the Member Indemnitors have assumed the
defense of the Asserted Liability, to cooperate with them in obtaining, at their
expense) the benefit of any statute of limitations applicable as against any
third party.
(e) Materiality. In determining whether (i) a party's representations
and warranties are true and correct in any respect, (ii) a party has performed
any of his, her or its covenants or agreements contained herein or (iii) a
Breach of this Agreement or Related Agreements has occurred, such
representations, warranties, covenants, agreements and Breaches shall be deemed
to not include any qualification or limitation with respect to materiality
(whether by reference to a "Material Adverse Change," "material adverse effect"
or otherwise). The terms "material," "material adverse effect" and similar terms
(other than Public Material Adverse Change and LLC Material Adverse Change)
shall be construed in the customary manner, but in any event shall mean changes,
effects, events, occurrences, and other matters substantially less in magnitude
than a Public Material Adverse Change in the case of Public, Superholdings or
Merger Sub or an LLC Material Adverse Change in the case of the LLC Parties.
10.2 Indemnities.
(a) Indemnification of Superholdings. Subject to the other provisions
of this Article 10, before the Closing, the LLC Parties, and after the Closing,
the members (collectively, the "Member Indemnitors") (in proportion to the
aggregate dollar value of the Per Unit LLC Consideration and the Cash
Consideration received by each member pursuant to the Parent Merger), shall
defend, indemnify and hold Superholdings and its Affiliates, and their
respective directors, officers, employees, stockholders or members (as the case
may be), agents, advisors, attorneys, accountants, consultants and affiliates
(collectively, the "Superholdings Indemnitees"), harmless from and against, and
promptly reimburse Superholdings Indemnitees for, any loss, expense, damage,
deficiency, liability, claim or obligation, including investigative costs, costs
of defense, settlement costs (subject to approval as provided below) and
attorneys' and accountants' fees (collectively, "Losses") that any Superholdings
Indemnitee suffers or incurs or to which any Superholdings Indemnitee becomes
subject, which Losses arise out of or in connection with (i) any Breach by any
of the LLC Parties of this Agreement, (ii) any claim asserted by any third
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party that, assuming the truth thereof, would constitute a Breach by any of the
LLC Parties of this Agreement, or (iii) all matters listed on the LLC Parties
Closing Certificate.
The amount of the Loss payable by such Member Indemnitors shall bear
interest from the date the Loss is incurred at a rate of interest per annum that
shall, from day to day, equal the lesser of (x) the variable rate of interest
published in the "Money Rates" section of the Wall Street Journal (or the
comparable section of such newspaper) as the prime rate of interest on corporate
loans at large United States money center commercial banks and (y) the maximum
rate allowed under applicable law.
(b) Indemnification of the Members. Subject to the other provisions of
this Article 10, before the Closing, Public, and after the Closing,
Superholdings, (the "Superholdings Indemnitors") shall defend, indemnify and
hold the members harmless from and against, and promptly reimburse them for, any
Losses that the members incur or to which the members become subject, which
Losses arise out of or in connection with (i) any Breach by Public,
Superholdings or Merger Sub of this Agreement or (ii) any claim asserted by any
third party that, assuming the truth thereof, would constitute a Breach by
Public, Superholdings or Merger Sub of this Agreement.
The amount of the Loss payable by the Superholdings Indemnitors shall bear
interest from the date the Loss is incurred at a rate of interest per annum that
shall, from day to day, equal the lesser of (x) the variable rate of interest
published in the "Money Rates" section of the Wall Street Journal (or the
comparable section of such newspaper) as the prime rate of interest on corporate
loans at large United States money center commercial banks and (y) the maximum
rate allowed under applicable law.
(c) Contribution. If the indemnification provided for in this Section
10.2 is unavailable to an indemnified party under Sections 10.2(a)
(Indemnification of Superholdings) or 10.2(b) (Indemnification of the Members)
in respect of any Losses with respect to such information to be provided for
inclusion in the Form S-1 or Form S-4 by reason of limitations on
enforceability, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the LLC Parties (for Losses arising
prior to the Closing) or the members (for Losses arising after Closing), on the
one hand, and of Public (for Losses arising prior to the Closing) or Public and
Superholdings (for Losses arising after the Closing), on the other hand, in
connection with the Breaches which resulted in such Losses, as well as any other
relevant equitable considerations. The relative fault of the LLC Parties (for
Losses arising prior to the Closing) or the members (for Losses arising after
the Closing), on the one hand, and of Public (for Losses arising prior to the
Closing) or Superholdings (for Losses arising after the Closing), on the other
hand, shall be determined by reference to, among other things, whether the
Breach relates to information supplied by the LLC Parties or the members or by
Public or Superholdings and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such Breach.
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The LLC Parties and Superholdings agree that it would not be just and
equitable if contribution pursuant to this Section 10.2(c) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 10.2(c), no person
guilty of fraudulent misrepresentation shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(d) Form of Payment; Interim Losses.
(i) Escrow Deposit. Subject to the provisions of this Section
10.2(d), at the Closing, Superholdings may, after notice to the Members' Agent
and the members specifying the factual basis therefor in reasonable detail,
collectively withhold from the aggregate amount of the Per Unit LLC
Consideration a number of shares of Superholdings Stock representing up to $20.0
million in value (using the average of the last reported sales prices as
reported by The Nasdaq Stock Market for Public Stock for the 10 days preceding
the Closing Date) (the "Escrow Deposit") to satisfy Losses for which claims of
indemnity may have arisen at or prior to the Closing Date for which
Superholdings, as set forth in such notice, claims indemnity pursuant to this
Agreement ("Interim Losses").
(ii) Interim Loss Value. In order to quantify the amount to be held
in escrow, after the Closing a national accounting firm, independent of the
parties hereto and selected by Superholdings, shall attempt to estimate the
amount of Interim Losses (the "Interim Loss Value"). If such accounting firm is
able to reasonably estimate the amount of each claim comprising the Interim Loss
Value, as a fixed amount or as a range of amounts, then the amount withheld
shall equal the estimated fixed amount(s) and/or the maximum amount of such
estimated range(s) of amounts for each claim comprising the Interim Loss Value.
If such accounting firm is unable, for any reason whatsoever, to reasonably
estimate the amount of any claim comprising the Interim Loss Value, as a fixed
amount or as a range of amounts, then Superholdings shall have no right to
withhold any amount with respect to such claim. Superholdings shall select such
accounting firm within two weeks after the Closing Date, and the determination
by the accounting firm shall be completed as soon as practicable and in any
event within eight weeks after the Closing Date.
(iii) Escrow Adjustment. On the third business day following the
date on which the parties have agreed upon the amount of the Interim Loss Value,
or such amount has been determined pursuant to Section 10.2(d)(ii), the
difference, if any, between the Interim Loss Value and the Escrow Deposit (the
"Escrow Adjustment") shall be paid in shares of Superholdings Stock (using the
average of the last reported sales prices as reported by The Nasdaq Stock Market
for Public Stock for the 10 days preceding the Closing Date) as follows:
(A) If the amount of the Interim Loss Value is less than the
Escrow Deposit, then the Escrow Agent shall pay and cause to be paid to the
members the Escrow Adjustment, coordinated through the Members' Agent and as
provided in the Escrow Agreement.
(B) If the amount of the Interim Loss Value is greater than
the
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Escrow Deposit, then the members shall pay and cause to be paid to the Escrow
Agent, as coordinated through the Members' Agent, the Escrow Adjustment, as
provided in the Escrow Agreement; provided, that, the value of all of the
Superholdings Stock (using the average of the last reported sales prices as
reported by The Nasdaq Stock Market for Public Stock for the 10 days preceding
the Closing Date) in the Escrow Deposit shall not exceed $20.0 million,
regardless of the amount of the Interim Loss Value.
(iv) Resolution of Claims. The Escrow Agent shall hold the Escrow
Stock in the Escrow Account until final resolution (pursuant to Section 10.7
(Dispute Resolution)) of the matters giving rise to the Losses or potential
Losses as well as other Losses that Superholdings subsequently asserts. After
such final resolution, the Escrow Agent shall deliver to Superholdings the
Superholdings Stock, together with any dividends or other distributions with
respect thereto, in satisfaction of any liability in accordance with Section
10.2(d)(v) (Satisfaction of Liability). After the distribution to Superholdings,
the Escrow Agent will release the remaining balance of the Escrow Stock not
subject to further claims, together with any dividends or other distributions
with respect thereto, to the members, as provided in the Escrow Agreement.
(v) Satisfaction of Liability. After Closing, any party may satisfy
its liability under this Article 10 by (A) delivering shares of Superholdings
Stock, valued at the average of the last reported sale prices as reported by The
Nasdaq Stock Market for the 10 days preceding the date of delivery, together
with any dividends or other distributions with respect thereto or (B) cash
payments, at the sole option of such party. If a member satisfies its liability
by cash payment instead of Superholdings Stock, then the Escrow Agent shall
release to such member the shares of Superholdings Stock as determined pursuant
to Section 1.2(a)(i) (Superholdings Stock), together with any dividends or other
distributions with respect thereto; provided, however, that Superholdings and
the Members' Agent must provide the Escrow Agent with the proper instruments, as
detailed in the Escrow Agreement, before making any distribution of the Escrow
Stock.
10.3 Limitations on Indemnities.
(a) Basket.
(i) Member Indemnitors. Notwithstanding anything to the contrary in
this Article 10, after the Closing, the Member Indemnitors shall not have any
obligation to indemnify the Superholdings Indemnitees for Losses arising from a
Breach of this Agreement at or prior to Closing until the indemnifiable Losses
incurred by the Superholdings Indemnitees or to which the Superholdings
Indemnitees become subject, arising from a Breach of this Agreement at or prior
to Closing, exceed $2.0 million (the "Deductible"), at which time the Member
Indemnitors shall indemnify the Superholdings Indemnitees pursuant to this
Article 10 for the amount of such Losses in excess of $1.0 million.
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(ii) Superholdings Indemnitors. Notwithstanding anything to the
contrary in this Article 10, the Superholdings Indemnitors shall not have any
obligation to indemnify the members for Losses arising from a Breach of this
Agreement at or prior to Closing until the indemnifiable Losses incurred by the
members or to which members become subject, arising from a Breach of this
Agreement at or prior to Closing, exceed the Deductible, at which time the
Superholdings Indemnitors shall indemnify the members pursuant to this Article
10 for the amount of such Losses in excess of $1.0 million.
(b) Cap. After the Closing, no Indemnifying Party shall incur any
liability for Losses pursuant to this Article 10 in excess of the aggregate
dollar value of the Per Unit LLC Consideration (with each share of Superholdings
Stock valued at the average of the last reported sale prices of a share of
Public Stock as reported by The Nasdaq Stock Market for the ten (10) days
preceding the Closing Date) and the Cash Consideration paid or received by such
Indemnifying Party pursuant to the Parent Merger.
(c) Services Agreement. Notwithstanding anything to the contrary in
this Article 10, the Member Indemnitors shall not have any obligation to
indemnify the Superholdings Indemnitees for Losses to extent such Losses (i) are
proximately caused by actions of Public pursuant to the Services Agreement, by
any employee or agent of LLC or LLC Holdings under the supervision of Public
pursuant to the Services Agreement or (ii) by Public's breach (including,
without limitation, by the persons listed in clause (i)) of Public's obligations
under the Services Agreement.
(d) Damages. Losses recoverable for breach of this Agreement shall be
limited to actual damages, and no party shall recover consequential, punitive,
lost opportunity or special damages of any nature, regardless of the nature of
such party's claim or such party's theory of liability.
(e) Exclusivity. In the absence of fraud, the indemnification
provisions of this Article 10 shall be the exclusive remedy for any loss,
expense, damage, deficiency, liability, claim or obligation, including
investigative costs, costs of defense, settlement costs (subject to consent as
provided in Section 10.4(b) (Defense Costs) below) and attorneys' and
accountants' fees in connection with this Agreement (including Superholdings
Closing Certificate or LLC Parties Closing Certificate) or any Breach hereof.
(f) Indemnification of Escrow Agent. Regarding Section 7
(Indemnification of Escrow Agent) of the Escrow Agreement, (i) the Superholdings
Indemnitors' liability pursuant to Section 7 of the Escrow Agreement shall not
exceed 50% of the aggregate loss, liability or expenses incurred by the Escrow
Agent and (ii) the Member Indemnitors' aggregate liability pursuant to Section 7
of the Escrow Agreement shall not exceed 50% of the aggregate loss, liability or
expenses incurred by the Escrow Agent; provided, that, each Member Indemnitors'
liability pursuant to Section 7 of the Escrow Agreement shall not exceed, and
shall be in proportion to, the aggregate dollar value of the merger
consideration received by such Member Indemnitor pursuant to the Parent Merger.
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10.4 Notice and Opportunity to Defend.
(a) Notice, Etc. If any party (the "Indemnified Party") receives notice
of any third-party claim or commencement of any third-party action or proceeding
(an "Asserted Liability") with respect to which any other party (an
"Indemnifying Party") is obligated to provide indemnification pursuant to
Section 10.2(a) (Indemnification of Superholdings ) or Section 10.2(b)
(Indemnification of the Members), the Indemnified Party shall promptly give all
Indemnifying Parties notice thereof. The Indemnified Party's failure so to
notify an Indemnifying Party shall not cause the Indemnified Party to lose its
right to indemnification under this Article 10, except to the extent that such
failure materially prejudices the Indemnifying Party's ability to defend against
an Asserted Liability that such Indemnifying Party has the right to defend
against hereunder (and except as otherwise set forth in this Article 10). Such
notice shall describe the Asserted Liability in reasonable detail, and if
practicable shall indicate the amount (which may be estimated) of the Losses
that have been or may be asserted by the Indemnified Party. Each of the
Indemnifying Parties may defend against an Asserted Liability on behalf of the
Indemnified Party utilizing counsel reasonably acceptable to the Indemnified
Party, unless (i) the Indemnified Party reasonably objects to the assumption of
such defense on the grounds that counsel for such Indemnifying Party cannot
represent both the Indemnified Party and such Indemnifying Party because such
representation would be reasonably likely to result in a conflict of interest or
because there may be defenses available to the Indemnified Party that are not
available to such Indemnifying Party, (ii) such Indemnifying Party is not
capable (by reason of insufficient financial capacity, bankruptcy, receivership,
liquidation, managerial deadlock, managerial neglect or similar events) of
maintaining a reasonable defense of such action or proceeding, or (iii) the
action or proceeding seeks injunctive or other equitable relief against the
Indemnified Party.
(b) Defense Costs. If any Indemnifying Party defends an Asserted
Liability, it shall do so at its own expense and shall not be responsible for
the costs of defense, investigative costs, attorney's fees or other expenses
incurred to defend the Asserted Liability (collectively, "Defense Costs") of the
Indemnified Party (which may continue to defend, at its own expense).
Notwithstanding the foregoing, if the person or entity asserting the Asserted
Liability against the Indemnified Party claims or seeks amounts in excess of the
amount set forth in Section 10.3(b) (Cap), then the Indemnifying Party shall
remain liable for the Defense Costs incurred by the Indemnified Party. If the
Indemnified Party assumes the defense of an Asserted Liability by reason of
clauses (i), (ii) or (iii) of subsection (a) above, or because the Indemnifying
Party has not elected to assume the defense, then such Indemnifying Party shall
indemnify the Indemnified Party for its Defense Costs; provided, however, the
Indemnifying Parties shall not be liable for the costs of more than one counsel
for all Indemnified Parties in any one jurisdiction. An Indemnifying Party may
settle any Asserted Liability only with the consent of the Indemnified Party,
which consent shall not be unreasonably withheld.
(c) Third Party Claims. The parties shall cooperate with each other
with respect to the defense of any claims or litigation made or commenced by
third parties subsequent to the Closing Date with respect to which
indemnification is not available (for any reason) under this Article 10;
provided, that, the party requesting cooperation shall reimburse the other party
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for the other party's reasonable out-of-pocket costs and expenses of furnishing
such cooperation.
10.5 Delays or Omissions, Etc. Except as provided in Section 10.1
(Survival; Etc.) and Section 10.4(a) (Notice and Opportunity to Defend), no
delay or omission to exercise any right, power or remedy inuring to any party
upon any breach or default of any party under this Agreement or any Related
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Neither the exercise of
nor the failure to exercise any remedy under this Agreement or any Related
Agreement will constitute an election of remedies or limit in any manner
enforcement of any remedies. All remedies either under this Agreement or any
Related Agreement or by law or otherwise afforded to the parties shall be
cumulative and not alternative.
10.6 Governing Law; Attorneys' Fees. This Agreement and the Related
Agreements shall be governed by, construed, interpreted and applied in
accordance with the laws of the State of Texas, without giving effect to any
conflict of laws rules that would refer the matter to the laws of another
jurisdiction.
Subject to Section 10.7 (Dispute Resolution), each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court for the Northern District of Texas, Dallas Division and, if such court
does not have jurisdiction, of the courts of the State of Texas in Dallas
County, for the purposes of any action arising out of this Agreement or any of
the Related Agreements, or the subject matter hereof or thereof, brought by any
other party.
Subject to Section 10.7 (Dispute Resolution), to the extent permitted by
applicable law, each party hereby waives and agrees not to assert, by way of
motion, as a defense or otherwise in any such action, any claim (i) that it is
not subject to the jurisdiction of the above-named courts, (ii) that the action
is brought in an inconvenient forum, (iii) that it is immune from any legal
process with respect to itself or its property, (iv) that the venue of the suit,
action or proceeding is improper or (v) that this Agreement or any Related
Agreement, or the subject matter hereof or thereof, may not be enforced in or by
such courts.
The prevailing party in any action or proceeding relating to this
Agreement or any Related Agreement shall be entitled to recover reasonable
attorneys' fees and other costs from the non-prevailing parties, in addition to
any other relief to which such prevailing party may be entitled.
10.7 Dispute Resolution.
(a) Arbitration. All disputes and controversies of every kind and
nature between the parties hereto arising out of or in connection with this
Agreement (including without limitation this Article 10) or the Related
Agreements as to the construction, validity, interpretation or meaning,
performance, non-performance, enforcement, operation, or breach, shall be
submitted to arbitration pursuant to the following procedures:
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(i) Notice. After a dispute or controversy arises, either party
may, in a written notice delivered to the other party, demand such arbitration.
Such notice shall designate the name of the arbitrator (who shall be an
impartial person) appointed by such party demanding arbitration, together with a
statement of the matter in controversy.
(ii) AAA. Within 30 days after receipt of such demand, the other
party shall, in a written notice delivered to the other party, name such party's
arbitrator (who shall be an impartial person). If such party fails to name an
arbitrator, then the second arbitrator shall be named by the American
Arbitration Association (the "AAA"). The two arbitrators so selected shall name
a third arbitrator (who shall be an impartial person) within 30 days, or in lieu
of such agreement on a third arbitrator by the two arbitrators so appointed, the
third arbitrator shall be appointed by the AAA. If any arbitrator appointed
hereunder shall die, resign, refuse, or become unable to act before an
arbitration decision is rendered, then the vacancy shall be filled by the
methods set forth in this Section 10.7(a)(ii) for the original appointment of
such arbitrator.
(iii) Costs. Each party shall bear its own arbitration costs and
expenses. The arbitration hearing shall be held in Dallas, Texas at a location
designated by a majority of the arbitrators. The Commercial Arbitration Rules of
the American Arbitration Association shall govern at such hearing and the
substantive laws of the State of Texas (excluding conflict of laws provisions)
shall apply.
(iv) Hearing. The arbitration hearing shall be concluded within ten
days unless otherwise ordered by the arbitrators and the written award thereon
shall be made within 15 days after the close of submission of evidence. An award
rendered by a majority of the arbitrators appointed pursuant hereto shall be
final and binding on all parties to the proceeding, shall resolve the question
of costs of the arbitrators and all related matters, and judgment on such award
may be entered and enforced by either party in any court of competent
jurisdiction.
(v) Complete Defense. Except as set forth in Section 10.7(b)
(Emergency Relief) the parties stipulate that the provisions of this Section
10.7 shall be a complete defense to any suit, action or proceeding instituted in
any federal, state or local court or before any administrative tribunal with
respect to any controversy or dispute arising out of this Agreement or any of
the Related Agreements. The arbitration provisions hereof shall, with respect to
such controversy or dispute, survive the termination or expiration of this
Agreement or the Related Agreements.
Except in response to a subpoena or other legal process or disclosure to
professional advisors, lenders and investors, neither any party hereto nor the
arbitrators may disclose the existence or results of any arbitration hereunder
without the prior written consent of the other party; nor will any party hereto
disclose to any third party any confidential information disclosed by any other
party hereto in the course of an arbitration hereunder without the prior written
consent of such other party. Notwithstanding the foregoing, the parties
acknowledge that Public
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or Superholdings may disclose the existence or results of an arbitration
hereunder, as well as information otherwise required to be disclosed by
deposition, subpoena or other court or governmental action in connection with
Public's or Superholdings' obligations under the Exchange Act and the rules and
regulations promulgated thereunder and in connection with Public's or
Superholdings' registration of offerings of securities under the Securities Act
and the rules and regulations promulgated thereunder, other laws, regulations or
stock exchange requirements.
(b) Emergency Relief. Notwithstanding anything in this Section 10.7 to
the contrary and subject to the provisions of Section 10.6 (Governing Law;
Attorneys' Fees), either party may seek from a court any provisional remedy that
may be necessary to protect any rights or property of such party pending the
establishment of the arbitral tribunal or its determination of the merits of the
controversy.
ARTICLE 11
Miscellaneous
11.1 Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the permitted assigns, successors, heirs,
executors and administrators of the parties hereto. This Agreement may not be
assigned without the written consent of Public, Superholdings and the LLC
Parties and any attempted assignment without such consent shall be null and
void; provided, however, Public, Superholdings and Merger Sub may assign any of
its rights and obligations hereunder to one of its Affiliates; provided,
further, that any assignment hereunder shall not relieve any party of any
obligations or liabilities hereunder.
11.2 Entire Agreement. This Agreement (including the Disclosure Schedules
and Exhibits hereto), the other documents delivered pursuant hereto and
referenced herein constitute the full and entire understanding and agreement
between the parties and supersede any other agreement, written or oral, with
regard to the subject matter hereof. This Agreement supersedes those certain
letters dated May 7, 2000, as amended, among certain of the parties hereto (the
"Letters") and hereby supercedes and replaces in its entirety that certain
previous Agreement and Plan of Reorganization by and among Public,
Superholdings, Merger Sub, LLC, the Members and LLC Holdings dated as of July
31, 2000.
11.3 Amendment. Subject to any applicable provisions of the DGCL, at any
time prior to the Effective Time, the parties hereto may modify or amend this
Agreement by written agreement executed and delivered by duly authorized
officers of the respective parties; provided, however, that after adoption of
this Agreement at the Public Stockholders Meeting, and, if necessary, the
Members Meeting, no amendment shall be made which would reduce the amount or
change the type of consideration into which shares of Public Stock or Members'
Interests shall be converted upon consummation of the Reorganization. This
Agreement may not be modified or amended except by written agreement executed
and delivered by each of the respective parties. Notwithstanding the foregoing,
the merger consideration that LLC Holdings' members
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shall receive can be adjusted if all of the members of LLC Holdings approve of
any such changes.
11.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to
Section 11.3 (Amendment), waive compliance with any of the agreements or
conditions of the other parties contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in a written instrument executed and delivered by a duly authorized
officer on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
11.5 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by certified or
registered mail, postage prepaid with return receipt requested, telecopy (with
hard copy delivered by overnight courier service), or delivered by hand,
messenger or overnight courier service, and shall be deemed given when received
at the addresses or telecopy numbers of the parties set forth below, or at such
other address or telecopy number furnished in writing to the other parties
hereto:
If to LLC: Washington Oregon Wireless, LLC
5665 SW Meadows Road, Suite 100
Lake Oswego, Oregon 97035
Attention: Mitchell Moore, Chairman and CEO
503.443.4647 (fax)
with copies to: F. Howard Mandel
30615 Shaker Blvd.
Pepper Pike, Ohio 44124
216.360.9998 (fax)
and with copies to: Duncan, Tiger & Tabor
582 E. Washington Street
P.O. Box 248
Stayton, Oregon 97383
Attention: Jennifer Niegel
503.769.2461 (fax)
and with copies to: Thompson Hine & Flory LLP
3900 Key Center
127 Public Square
Cleveland, Ohio 44114-1216
Attention: James R. Carlson
216.566.5800 (fax)
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If to LLC Holdings: Washington Oregon Wireless, LLC
5665 SW Meadows Road, Suite 100
Lake Oswego, Oregon 97035
Attention: Mitchell Moore, Chairman and CEO
503.443.4647 (fax)
with copies to : F. Howard Mandel
30615 Shaker Blvd.
Pepper Pike, Ohio 44124
216.360.9998 (fax)
and with copies to: Duncan, Tiger & Tabor
582 E. Washington Street
P.O. Box 248
Stayton, Oregon 97383
Attention: Jennifer Niegel
503.769.2461 (fax)
and with copies to: Thompson Hine & Flory LLP
3900 Key Center
127 Public Square
Cleveland, Ohio 44114-1216
Attention: James R. Carlson
216.566.5800 (fax)
If to the Members: Cal-Ore Wireless, Inc.
719 West 3rd Street
P.O. Box 847
Dorris, California 96023
Attention: Ed Ormsbee, General Manager
530.397.2345 (fax)
Clear Creek Mutual Telephone Co.
18238 S. Fischers Mill Road
Oregon City, Oregon 97045-9696
Attention: Mitchell Moore, President
503.631.2385 (fax)
Henderson Bay, LLC
1145 West Broadway Plaza, Suite 1500
Tacoma Financial Center
Tacoma, Washington 98402
Attention: Nick Spika
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360.458.3909 (fax)
WOW Investment Partners, LP
2711 Haskell Ave., 5th Floor
Dallas, Texas 75204
Attention: F. Howard Mandel
216.360.9998 (fax)
with copies to: Thompson Hine & Flory LLP
3900 Key Center
127 Public Square
Cleveland, Ohio 44114-1216
Attention: James R. Carlson
216.566.5800 (fax)
If to Public, Superholdings
or Merger Sub: Alamosa PCS Holdings, Inc.
5225 S. Loop 289
Suite 120
Lubbock, Texas 79424
Attention: David E. Sharbutt,
Chief Executive Officer
806.722.1127 (fax)
with copies to: Haynes and Boone, LLP
1600 N. Collins Blvd., Suite 2000
Richardson, Texas 75080
Attention: William S. Kleinman
972.692.9065 (fax)
11.6 Third Party Beneficiary, Etc. There shall be no third party
beneficiary hereof. Neither the availability of, nor any limit on, any remedy
hereunder limits the remedies of any party hereto against third parties.
11.7 Reformation; Severability. In case any provision hereof shall be
invalid, illegal or unenforceable, such provision shall be reformed to best
effectuate the intent of the parties and permit enforcement hereof, and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. If such provision is not capable of
reformation, it shall be severed from this Agreement and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
11.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same
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instrument. Any counterpart may be delivered by facsimile and shall be treated
as an original, provided that attachment thereof shall constitute the
representation and warranty of the person delivering such signature that such
person has full power and authority to attach such signature and to deliver this
Agreement.
11.9 Titles and Subtitles. The titles of the paragraphs and subparagraphs
hereof are for convenience of reference only and are not to be considered in
construing this Agreement. References to "Articles" and "Sections" herein are
references to articles and sections of this Agreement, respectively. The words
"herein," "hereof," "hereto" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Article, Section or
other subdivision.
11.10 Confidentiality.
(a) Confidential Information. As used herein, "Confidential
Information" means confidential business information regarding any party hereto
or its affiliates, including, without limitation, marketing lists used by LLC or
any information identifying the source of, and the process used by LLC to
obtain, such marketing lists; customer lists and files; prices and costs;
business and financial records; information relating to personnel contracts;
stock ownership; liabilities; litigation and the terms of this Agreement or any
Related Agreement and any written analysis or other document reflecting such
information that a party hereto prepared (an "Analysis"). For purposes of this
Section 11.10, the party or parties disclosing Confidential Information are
referred to collectively as the "Disclosing Party" and the party or parties
receiving Confidential Information are referred to collectively as the
"Receiving Party." However, "Confidential Information" shall not include:
(i) any information properly obtained and already in the possession
of the Receiving Party, prior to the execution of the letter agreement, dated
May 7, 2000, as amended, or information available to the Receiving Party from
public records or from other sources in accordance with law,
(ii) any information that is in the public domain or subsequently
enters the public domain otherwise than through disclosure by the Receiving
Party or any of the Receiving Party's Representatives,
(iii) any information that is independently developed by or on
behalf of the Receiving Party without reference to the Confidential Information,
(iv) any information that is acquired from a person (other than
Public, Superholdings, Merger Sub or the LLC Parties) not known by the acquiring
party to be providing such information in breach of a confidentiality obligation
to the other party, or
(v) information the release of which has been approved in writing
by the Disclosing Party;
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provided, that, further information received by Public, Superholdings or
Merger Sub shall cease to be Confidential Information after the Closing.
(b) Disclosure. The LLC Parties on the one hand, and Public,
Superholdings, and Merger Sub collectively on the other, will treat the
Confidential Information disclosed by the other as confidential, will use the
Confidential Information only in connection with their evaluation of the
transactions hereunder, and will not disclose it to others, except that each
party shall have the right to communicate the information to any of such party's
Representatives; provided, that, such Representative is informed that the
Confidential Information is confidential and such Representative agrees to be
bound by the terms of this Section 11.10. The parties shall be liable for any
breach of this Section 11.10 by any of their Representatives.
The parties acknowledge that Public and Superholdings may disclose
Confidential Information in connection with Public's and Superholdings'
obligations under the Exchange Act and the rules and regulations promulgated
thereunder, and in connection with Public's and Superholdings' registration of
offerings of securities under the Securities Act, and the rules and regulations
promulgated thereunder; provided, however, that prior to any such disclosure of
Confidential Information, Public or Superholdings shall provide LLC with the
opportunity to review and comment, if practicable, upon the disclosure. Any such
disclosures of Confidential Information by Public or Superholdings shall not be
a breach or violation of this Section 11.10.
Each of the LLC Parties acknowledge that (a) it is aware that the United
States securities laws prohibit any person who has material, nonpublic
information about a company from purchasing or selling securities of that
company, or from communicating that information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell those securities and (b) it is familiar with the Exchange
Act and the rules and regulations promulgated thereunder, and agrees that it
will neither use, not cause any third party to use, any Confidential Information
in contravention of the Exchange Act or any such rules and regulations,
including Rules 10b-5 and 14e-3.
If any Receiving Party becomes legally compelled by deposition, subpoena
or other court or governmental action to disclose any of the Confidential
Information, then such Receiving Party will give the Disclosing Party prompt
notice to that effect, and will cooperate with the Disclosing Party if the
Disclosing Party seeks to obtain a protective order concerning the Confidential
Information. The Receiving Party will disclose only such Confidential
Information as its counsel shall advise is legally required.
The parties acknowledge that remedies at law may be inadequate to protect
against breach of this Section 11.10. Each party hereby agrees in advance to the
granting of injunctive relief in the non-breaching party's or parties' favor
without proof of actual damages as a remedy for breach of this Section 11.10.
Upon termination of this Agreement, the Receiving Party will, at the
Disclosing Party's request, return to the Disclosing Party or destroy all
originals, copies, extracts or other reproductions of the Confidential
Information that the Disclosing Party provides, and destroy any
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Analysis.
11.11 Expenses. Except as otherwise expressly provided herein, each
party hereto will bear its respective expenses (third-party or otherwise)
incurred in connection with the preparation, execution and performance of this
Agreement, the Related Agreements and the transactions contemplated herein or
therein, including without limitation all fees and expenses of agents,
representatives, counsel and accountants. The LLC Parties shall not utilize
assets of LLC to pay such expenses. Notwithstanding the foregoing, LLC may pay
up to $400,000 for the expenses it incurs in connection with this Agreement for
its accountants, attorneys and HSR filing fees and up to $1.5 million for the
expenses it incurs in connection with this Agreement for financial advisory
services and fairness opinions. The parties hereby agree that the $400,000
limitation referred to in the preceding sentence shall not apply to any
accounting or legal expenses reasonably incurred by the LLC Parties in
connection with preparing, filing or maintaining the effectiveness of the Form
S-1 and/or the Form S-4, the occurrence of such expenses shall be subject to the
reasonable approval of Superholdings.
11.12 Responsibility for Merger Sub. Public shall be directly
responsible for assuring that Superholdings and Merger Sub perform all of their
obligations hereunder.
11.13 Lack of Services Agreement. If the Services Agreement does not go
into effect, then the references to the effective date of the Services Agreement
contained in Sections 3.2(a) (LLC Parties' Representations True), 3.3(a)
(Public's, Superholdings' and Merger Sub's Representations True) and 10.1(d)
(Commencing Actions) shall be deemed to mean the Closing Date.
* * * * *
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<PAGE>
This Agreement has been executed and delivered as of the date first
written above.
WASHINGTON OREGON WIRELESS, LLC:
By: /s/ Mitchell Moore
---------------------------------
Name: Mitchell Moore
Title: Chairman/CEO
WOW HOLDINGS, LLC:
By: /s/ Mitchell Moore
----------------------------------
Name: Mitchell Moore
Title: Chairman/CEO
THE MEMBERS:
CAL-ORE WIRELESS, INC.
By:
------------------------------------
Name: ______________________________
Title: ______________________________
CLEAR CREEK MUTUAL TELEPHONE CO.
By: /s/ Mitchell Moore
------------------------------------
Name: Mitchell Moore
Title: President
HENDERSON BAY, LLC
By:
------------------------------------
Name: ______________________________
Title: ______________________________
WOW INVESTMENT PARTNERS, LP
By: WOW Investment Partner LLC, General Partner
By:
-------------------------------------
Name: _______________________________
Title: _______________________________
This Agreement has been executed and delivered as of the date first
written above.
WASHINGTON OREGON WIRELESS, LLC:
By:
---------------------------------
Name: ___________________________
Title: ___________________________
WOW HOLDINGS, LLC:
By:
----------------------------------
Name: ____________________________
Title: ____________________________
THE MEMBERS:
CAL-ORE WIRELESS, INC.
By: /s/ Edward Ornabee
------------------------------------
Name: Edward Ornabee
Title: General Manager
CLEAR CREEK MUTUAL TELEPHONE CO.
By:
------------------------------------
Name: ______________________________
Title: ______________________________
HENDERSON BAY, LLC
By:
------------------------------------
Name: ______________________________
Title: ______________________________
WOW INVESTMENT PARTNERS, LP
By: WOW Investment Partner LLC, General Partner
By:
-------------------------------------
Name: _______________________________
Title: _______________________________
ALAMOSA PCS HOLDINGS, INC.:
By:
-------------------------------------
Name: _______________________________
Title: _______________________________
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<PAGE>
ALAMOSA HOLDINGS, INC.:
By:
-------------------------------------
Name: _______________________________
Title: _______________________________
ALAMOSA SUB I, INC.:
By:
-------------------------------------
Name: _______________________________
Title: _______________________________
This Agreement has been executed and delivered as of the date first
written above.
WASHINGTON OREGON WIRELESS, LLC:
By:
---------------------------------
Name: ____________________________
Title: ____________________________
WOW HOLDINGS, LLC:
By:
----------------------------------
Name: ____________________________
Title: ____________________________
THE MEMBERS:
CAL-ORE WIRELESS, INC.
By:
------------------------------------
Name: ______________________________
Title: ______________________________
CLEAR CREEK MUTUAL TELEPHONE CO.
By:
------------------------------------
Name: ______________________________
Title: ______________________________
HENDERSON BAY, LLC
By: /s/ William T. Weyerhaeuser
------------------------------------
Name: William T. Weyerhaeuser
Title: Sole Managing Member
WOW INVESTMENT PARTNERS, LP
By: WOW Investment Partner LLC, General Partner
By:
-------------------------------------
Name: _______________________________
Title: _______________________________
This Agreement has been executed and delivered as of the date first
written above.
WASHINGTON OREGON WIRELESS, LLC:
By:
---------------------------------
Name: ____________________________
Title: ____________________________
WOW HOLDINGS, LLC:
By:
----------------------------------
Name: ____________________________
Title: ____________________________
THE MEMBERS:
CAL-ORE WIRELESS, INC.
By:
------------------------------------
Name: ______________________________
Title: ______________________________
CLEAR CREEK MUTUAL TELEPHONE CO.
By:
------------------------------------
Name: ______________________________
Title: ______________________________
HENDERSON BAY, LLC
By:
------------------------------------
Name: ______________________________
Title: ______________________________
0
WOW INVESTMENT PARTNERS, LP
By: WOW Investment Partner LLC, General Partner
By: /s/ F. Howard Maneor
-------------------------------------
Name: F. Howard Maneor
Title: Vice President
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<PAGE>
EXHIBIT 1.2(b)
ESCROW AGREEMENT
This Escrow Agreement (the "Escrow Agreement") is dated
_____________________, 2000 by and among Alamosa Holdings, Inc., a Delaware
corporation ("Superholdings"), WOW Holdings, LLC, an Oregon limited liability
company that holds all of the Members' interests in LLC ("LLC Holdings"), F.
Howard Mandel as the Members' Agent (the "Members' Agent") and _______________
the ("Escrow Agent").
RECITALS
A. The parties are entering into this Escrow Agreement pursuant to Section
1.2(b) of that certain Agreement and Plan of Reorganization (the "Agreement")
dated as of July 31, 2000.
B. All capitalized terms used herein and not otherwise defined in this
Escrow Agreement will have the meanings assigned to them in the Agreement.
AGREEMENT
In consideration of the mutual covenants and agreements herein contained
and in the Agreement, the parties hereby agree as follows:
1. Creation of Escrow Account; Delivery of Funds. An escrow account
designated by Superholdings (the "Escrow Account") has been established by the
Escrow Agent. Superholdings has delivered to the Escrow Agent ________ shares
of Superholdings Stock (the "Escrow Deposit"), and corresponding stock powers,
to be held in the Escrow Account, and the Escrow Agent acknowledges receipt of
the Escrow Deposit pursuant to the terms and conditions of this Escrow
Agreement.
2. Escrow Adjustment. The Members may deposit additional shares of
Superholdings Stock with the Escrow Agent pursuant to the terms of the
Agreement (the "Escrow Adjustment") after the date hereof. The aggregate of the
Escrow Deposit and the Escrow Adjustment shall be defined as the "Escrow
Stock."
3. Holding Period. The Escrow Agent shall hold the Escrow Stock until
instructed pursuant to (a) instruments delivered to the Escrow Agent, signed by
the Members' Agent and Superholdings (each of whom covenant to deliver such
instruments to effectuate the terms of the Agreement) authorizing the Escrow
Agent to distribute all or part of the Escrow Stock in the manner described in
the instruments or (b) a final arbitration decision, pursuant to the terms of
Section 10.7 of the Agreement. The distribution of Escrow Stock shall be made
no later than two
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business days after receipt by the Escrow Agent of such instruments or a copy
of such arbitration decision.
4. Termination of Escrow. This Escrow Agreement shall terminate upon the
distribution of all Escrow Stock pursuant to the terms hereof.
5. Duties and Responsibilities of Escrow Agent.
5.1 Escrow Stock. By signing this Escrow Agreement, the Escrow Agent
agrees to hold and dispose of any and all Escrow Stock delivered to it in
accordance with the terms of the Escrow Agreement.
5.2 Attachment; Orders. If any property subject hereto is at any time
attached, garnished or levied upon under any arbitration or court order, or in
case the payment, assignment, transfer, conveyance or delivery of any such
property shall be stayed or enjoined by any arbitration or court order, or in
case any order, judgment or decree shall be made or entered by any arbitrator
or court affecting such property or any part thereof, then and in any of such
events, the Escrow Agent is authorized to rely upon and comply with any such
order, writ, judgment or decree which is deemed by any legal counsel of the
Escrow Agent's own choosing to be binding upon it; and if the Escrow Agent
complies with any such order, writ, judgment or decree, it shall not be liable
to any of the parties hereto or to any other person, firm or corporation by
reason of such compliance, even though such order, writ, judgment or decree may
be subsequently reversed, modified, annulled, set aside or vacated.
5.3 No Liabilities. The Escrow Agent shall not be personally liable for
any act taken or omitted hereunder if taken or omitted by it in good faith and
without gross negligence or wilful misconduct. The Escrow Agent also shall be
fully protected in relying upon any written notice, demand, certificate or
document that it believes in good faith to be genuine and effective.
5.4 Documents. The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of
documents now or hereafter deposited hereunder, or of any endorsement thereon,
or for any lack of endorsement thereon, nor shall it be responsible or liable
in any respect on account of the identity, authority or rights of the persons
executing or delivering or purporting to execute or deliver any such document
or endorsement, or this Escrow Agreement.
5.5 Instruments. The Escrow Agent shall follow all reasonable
instructions contained within instruments executed by the Members' Agent and
Superholdings.
6. Fees and Expenses of Escrow Agent. The Escrow Agent's fees for
performance of its duties hereunder are described in Exhibit A. The Escrow
Agent's fees, and any reimbursements owed to the Escrow Agent for out-of-pocket
expenses incurred by it in
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connection with the performance of such duties, shall be paid by Superholdings.
7. Indemnification of Escrow Agent. Superholdings and the Members covenant
and agree to jointly and severally indemnify the Escrow Agent and hold it
harmless against any loss, liability or expenses arising out of or in
connection with the performance of its duties hereunder, including but not
limited to, reasonable legal and other fees and expenses, and including
specifically, but without limitation, any legal or other expenses with respect
to any action for interpleader by the Escrow Agent, except that the Escrow
Agent shall not be indemnified against any such loss, liability or expense
arising out of its gross negligence or wilful misconduct. The Escrow Agent
shall be under no obligation to institute or defend any action, suit or legal
proceeding in connection herewith, unless first indemnified and held harmless
to its satisfaction in accordance with the foregoing.
8. Miscellaneous.
8.1. Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by certified or
registered mail, postage prepaid with return receipt requested, telecopy (with
hard copy delivered by overnight courier service), or delivered by hand,
messenger or overnight courier service, and shall be deemed given when received
at the addresses or telecopy numbers of the parties set forth below, or at such
other address or telecopy number furnished in writing to the other parties
hereto:
If to Superholdings: Alamosa PCS Holdings, Inc.
4403 Brownfield Highway
Lubbock, Texas 79407
Attention: David E. Sharbutt,
Chief Executive Officer
806.722.1127 (fax)
with copies to: Haynes and Boone, LLP
1600 N. Collins Blvd., Suite 2000
Richardson, Texas 75080
Attention: William S. Kleinman
972.692.9065 (fax)
If to LLC Holdings: Washington Oregon Wireless, LLC
5665 SW Meadows Road, Suite 100
Lake Oswego, Oregon 97035
Attention: Mitchell Moore,
Chairman and CEO
503.443.4647 (fax)
with copies to: F. Howard Mandel
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<PAGE>
30615 Shaker Blvd.
Pepper Pike, Ohio 44124
216.360.9998 (fax)
and with copies to: Duncan, Tiger & Tabor
582 E. Washington Street
P.O. Box 248
Stayton, Oregon 97383
Attention: Jennifer Niegel
503.769.2461 (fax)
and with copies to: Thompson Hine & Flory LLP
3900 Key Center
127 Public Square
Cleveland, Ohio 44114-1216
Attention: James R. Carlson
216.566.5800 (fax)
If to Members' Agent: F. Howard Mandel
30615 Shaker Blvd.
Pepper Pike, Ohio 44124
216.360.9998 (fax)
and with copies to: Duncan, Tiger & Tabor
582 E. Washington Street
P.O. Box 248
Stayton, Oregon 97383
Attention: Jennifer Niegel
503.769.2461 (fax)
and with copies to: Thompson Hine & Flory LLP
3900 Key Center
127 Public Square
Cleveland, Ohio 44114-1216
Attention: James R. Carlson
216.566.5800 (fax)
If to Escrow Agent:
Attention:
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<PAGE>
(fax)
with copies to:
Attention:
(fax)
8.2 Assignment. Neither this Escrow Agreement nor any of the parties'
rights hereunder shall be assignable without the prior written consent of the
other parties.
8.3 Governing Law. This Escrow Agreement shall be construed in
accordance with the laws of the State of Texas, regardless of the choice of law
provisions of that state or any other jurisdiction.
8.4 Entire Escrow Agreement; Amendments. This Escrow Agreement
constitutes the complete agreement of the parties with respect to the subject
matter hereof. The waiver, amendment or modification of any provision of this
Escrow Agreement or any right, power or remedy hereunder, shall be effective if
(but only if) in writing and signed by each of the parties hereto.
8.5 Power and Authority. Each of the parties represents and warrants
that such party has full power and authority to execute, deliver and perform
this Escrow Agreement and to take any and all actions necessary with respect to
the Escrow Stock.
8.6 Counterparts. This Escrow Agreement may be executed in one or more
counterparts with all such counterparts constituting one and the same
instrument.
* * * * *
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<PAGE>
The parties hereto have executed and delivered this Escrow Agreement as of
the day and year first set forth above.
ALAMOSA HOLDINGS, INC.:
By:
Name:
Title:
WOW HOLDINGS, LLC:
By:
Name:
Title:
MEMBERS' AGENT:
By:
Name:
Title:
ESCROW AGENT:
By:
Name:
Title:
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<PAGE>
EXHIBIT 2.2(a)
LLC PARTIES CLOSING CERTIFICATE
This LLC Parties Closing Certificate (the "Certificate") is delivered
pursuant to Section 2.2(a) (Closing Certificate) of that certain Agreement and
Plan of Reorganization (the "Agreement") entered into as of July 31, 2000, by
and among Alamosa PCS Holdings, Inc., a Delaware corporation ("Public"),
Alamosa Holdings, Inc., a Delaware corporation ("Superholdings"), Alamosa Sub
I, Inc., a Delaware corporation and wholly-owned direct subsidiary of
Superholdings ("Merger Sub"), and Washington Oregon Wireless, LLC, an Oregon
limited liability company ("LLC"), WOW Holdings, LLC, an Oregon limited
liability company ("LLC Holdings") and members of LLC (the "Members"). LLC
(prior to Closing), LLC Holdings (when formed but prior to Closing) and the
Members are sometimes collectively referred to herein as the "LLC Parties." All
capitalized terms used herein and not otherwise defined in this Certificate
will have the meanings assigned to them in the Agreement.
The undersigned hereby certify, and represent and warrant to Public,
Superholdings and Merger Sub as follows:
1. Representations and Warranties. Except as set forth on the Schedule to
this Certificate, the LLC Parties' representations and warranties made in the
Agreement or any Related Agreement were true and correct in all respects at the
effective date of the Services Agreement. Actions by the Members, the Board of
Managers of LLC or LLC Holdings, or any employee or agent of LLC or LLC
Holdings (which employee or agent is not under the supervision of Public
pursuant to the Services Agreement) have not caused the LLC Parties'
representations and warranties made in the Agreement or any Related Agreement
to be untrue or incorrect in any respect at the Closing Date. The failure of
any of the persons identified in the preceding sentence to take actions that
(a) would have been taken in the ordinary course of LLC's and LLC Holdings'
business in the exercise of reasonable judgment and (b) were not delegated to
Public under the Services Agreement, have not caused the LLC Parties'
representations and warranties made in the Agreement or any Related Agreement
to be untrue or incorrect in any respect at the Closing Date. The following LLC
Parties' representations and warranties made in the Agreement are also true and
correct in all respects at the date hereof: Sections 6.1(b) (Validity and
Authorization; Power and Authority), 6.1(f) (State Takeover Statutes), 6.3(a)
(Capitalization), 6.3(b) (Capitalization of LLC Holdings), 6.3(c) (Ownership
and Transfer by Members), 6.3(d) (VAR Plan), 6.7(a) (Certain Information),
6.7(b) (Documents Delivered), 6.7(c) (No Brokers Fees; No Commissions) and
6.7(d) (Tax Advice).
2. Covenants. Except as set forth on the Schedule to this Certificate, the
LLC Parties, in all respects, have performed each agreement, and have complied
with each covenant, to be performed or complied with by them, or any of them,
on or prior to the Closing Date under the Agreement or any Related Agreement.
3. No Litigation. Except as set forth on the Schedule to this Certificate,
no action, suit or proceeding is pending, or to the undersigned's knowledge
threatened, and no preliminary
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<PAGE>
injunction, order, decree or ruling is in effect, seeking to restrain or
prohibit, or to obtain damages or other relief in connection with, the
execution and delivery of this Agreement, any Related Agreement or the
consummation of the transactions contemplated by any of the foregoing, to which
any of the undersigned is or would be a party.
* * * * *
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<PAGE>
SCHEDULE:
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<PAGE>
Executed as of _______________ ____, 2000.
WASHINGTON OREGON WIRELESS, LLC:
By:
Name:
Title:
WOW HOLDINGS, LLC:
By:
Name:
Title:
THE MEMBERS:
Name:
Name:
Name:
Name:
Name:
Name:
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<PAGE>
EXHIBIT 2.2(e)
Form of Opinion of LLC Parties' Counsel
1. Each of the Companies is a limited liability company duly organized and
validly existing under the laws of the State of Oregon. Each of the Companies
has all requisite power and authority to own, lease and operate all properties
and assets owned or leased by it and to conduct its business as previously and
currently conducted by it. Each of the Companies is qualified to do business in
each jurisdiction in which it is required to be so qualified, except where the
lack of such qualification would not have a material adverse effect on such
Company.
2. Each of the Companies has full power and authority to consummate the Parent
Merger and to execute, deliver and perform the Agreement, the Related Agreements
and the other instruments called for therein to which it is a party.
3. The Agreement and the Related Agreements have been duly authorized, executed
and delivered by each of the Companies and constitute (or, in the case of
Related Agreements or instruments called for by the Agreement or the Related
Agreements, to be executed by such Company at or before the Closing, upon
execution will constitute) the legal, valid and binding obligation of such
Company, enforceable against such Company in accordance with their terms.
4. Each of the Members has full requisite power and authority (or if a natural
person, capacity) to execute, deliver and perform the Agreement, the Related
Agreements and the other instruments called for therein to which such Member is
a party. The Agreement, the Related Agreements and the other instruments called
for therein to which such Member is a party have been duly executed and
delivered by each of the Members and constitute (or, in the case of Related
Agreements or instruments called for in the Agreement, to be executed by the
Member at or before the Closing, will constitute) the legal, valid and binding
obligation of the Member, enforceable against the Member in accordance with
their terms.
5. Each of the Companies is the holder of record of all of the issued and
outstanding shares of capital stock or interests, as appropriate, of its
Subsidiaries free and clear of any Liens.
6. The Members' Interests of LLC consist of 31,558,046 units and no preferred
units. There are no other equity interests of LLC either authorized or
outstanding. Except as set forth on the exhibit to this opinion, all of the
issued and outstanding units have been duly authorized and validly issued, are
fully paid and nonassessable and are free and clear of any preemptive rights. No
certificates have been issued to represent the Members' Interests. Except as set
forth on the exhibit to this opinion, there are no outstanding preemptive,
conversion or other rights, or other options, warrants or agreements granted by,
issued by, or binding upon, any Company for the issuance, sale,
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<PAGE>
purchase, repurchase, redemption, acquisition or other transfer of its equity
securities.
7. Each Member is the holder of record of the units set forth in the Agreement.
To our knowledge, no Member is a party to any contract, agreement or
understanding (other than the Agreement) relating to the issuance, sale,
redemption, purchase, repurchase, acquisition or other transfer or voting of
any units of Members' Interests or any other equity security of any Company,
other than LLC's operating agreement.
8. The Members' Interests of LLC Holdings consists of one unit and no preferred
units. There are no other equity interests of LLC Holdings either authorized or
outstanding pursuant to LLC's certificate of formation or organizational
agreements. Except as set forth on the exhibit to this opinion, all of the
issued and outstanding units are duly authorized and validly issued, fully paid
and nonassessable and free and clear of any preemptive rights. No certificates
were issued to represent the Members' Interests. Except as set forth on the
exhibit to this opinion, there are no outstanding preemptive, conversion or
other rights, or other options, warrants or agreements granted by, issued by,
or binding upon, LLC Holdings for the issuance, sale, purchase, repurchase,
redemption, acquisition or other transfer of its equity securities pursuant to
LLC's certificate of formation or organizational agreements.
9. The formation of LLC Holdings and its acquisition of LLC as contemplated
hereby will result in LLC Holdings' becoming the sole owner of LLC, holding its
interest in LLC free and clear of Liens created by the members of LLC in the
Members' Interests. Consummation of the transactions contemplated by this
Agreement will result in Superholdings' becoming the sole owner of LLC Holdings
and LLC, holding its interests in LLC Holdings and LLC free and clear of Liens
created by the members of LLC Holdings in the Members' Interests.
10. The execution, delivery and performance of the Agreement and the Related
Agreements, and the consummation of the transactions contemplated therein will
not result in any violation of the terms of, and will not contravene, conflict
with, accelerate the performance of the obligations required under, constitute
a default under or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of any Company
pursuant to, (i) the organizational document of such Company, (ii) any material
Order or Proceeding that such Company has disclosed pursuant to the Agreement,
(iii) any material law, rule or regulation applicable to any of them, or to
which any of them is a party or by which any of them or their property or
assets is bound, (iv) the Sprint, CoBank and Lucent consents or (v) the
Contracts (as such term is defined in Section 6.4(d)(i) (Definition) of the
Agreement) and as specified on the Disclosure Schedule to Section 6.1(e) (LLC
Parties Consents Required); [provided, however, the failure to deliver this
opinion with respect to agreements in clause (v) above as will not cause an LLC
Material Adverse Change and will not constitute a failure to
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<PAGE>
satisfy the delivery requirement of Section 2.2(a) (Closing Certificate) of the
Agreement.]
11. The consent or vote of the Members in favor of the transactions
contemplated by this Agreement and the Related Agreements was duly obtained
pursuant to the organizational documents of LLC and LLC Holdings and all
applicable state law (including Sections 63.130 and 63.487 of the OLLCA), and
no right of first refusal or similar restriction on transfer applies to the
conversion of the Members' Interests in the Parent Merger or the formation of
LLC Holdings and LLC Holdings' acquisition of LLC.
12. To the knowledge of Counsel, there are no Proceedings or Orders pending.
13. No state takeover statute is applicable to any Company in connection with
the Agreement, the Parent Merger or the other transactions contemplated
thereby.
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<PAGE>
EXHIBIT 2.3(a)
SUPERHOLDINGS CLOSING CERTIFICATE
This Superholdings Closing Certificate (the "Certificate") is delivered
pursuant to Section 2.3(a) (Closing Certificate) of that certain Agreement and
Plan of Reorganization (the "Agreement") entered into as of July 31, 2000, by
and among Alamosa PCS Holdings, Inc., a Delaware corporation ("Public"),
Alamosa Holdings, Inc., a Delaware corporation ("Superholdings"), Alamosa Sub
I, Inc., a Delaware corporation and wholly-owned direct subsidiary of
Superholdings ("Merger Sub"), and Washington Oregon Wireless, an Oregon limited
liability company ("LLC"), WOW Holdings, LLC, an Oregon limited liability
company ("LLC Holdings"), and members of LLC (the "Members"). LLC (prior to
Closing), LLC Holdings (when formed but prior to Closing) and the Members are
sometimes collectively referred to herein as the "LLC Parties." All capitalized
terms used herein and not otherwise defined in this Certificate will have the
meanings assigned to them in the Agreement.
The undersigned hereby certify, and represent and warrant to the LLC
Parties as follows:
1. Representations and Warranties. Except as set forth on the Schedule to
this Certificate, Superholdings', Public's and Merger Sub's representations and
warranties made in the Agreement or any Related Agreement were true and correct
in all respects at the effective date of the Services Agreement. The following
representations and warranties made by the Companies in the Agreement are also
true and correct in all respects at the date hereof: Sections 7.1(b) (Corporate
Power and Authority; Validity and Authorization), 7.3 (No Brokers Fees; No
Commissions), 7.7 (Capitalization), 7.8 (Capitalization of Superholdings) and
7.11 (Certain Information).
2. Covenants. Except as set forth on the Schedule to this Certificate,
Superholdings, Public and Merger Sub in all respects, have performed each
agreement, and have complied with each covenant, to be performed or complied
with by them, or any of them, on or prior to the Closing Date under the
Agreement or any Related Agreement.
3. No Litigation. Except as set forth on the Schedule to this Certificate,
no action, suit or proceeding is pending, or to the undersigned's knowledge
threatened, and no preliminary injunction, order, decree or ruling is in
effect, seeking to restrain or prohibit, or to obtain damages or other relief
in connection with, the execution and delivery of this Agreement, any Related
Agreement or the consummation of the transactions contemplated by any of the
foregoing, to which any of the undersigned is or would be a party.
* * * * *
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<PAGE>
SCHEDULE:
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<PAGE>
Executed as of _______________ ____, 2000.
ALAMOSA PCS HOLDINGS, INC.:
By:
Name:
Title:
ALAMOSA HOLDINGS, INC.:
By:
Name:
Title:
ALAMOSA SUB I, INC.:
By:
Name:
Title:
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<PAGE>
EXHIBIT 2.3(d)
Form of Opinion of Public's, Superholdings' and Merger Sub's Counsel
1. Each of Public, Superholdings and Merger Sub is a corporation duly organized
and validly existing under the laws of the State of Delaware and is in good
standing under such laws. Superholdings owns, beneficially and of record, all
of the issued and outstanding shares of capital stock of Merger Sub.
2. Each of Public, Superholdings and Merger Sub has full corporate power and
authority to execute, deliver and perform the Agreement and the Related
Agreements. The Agreement has been duly authorized, executed and delivered by
each of Public, Superholdings and Merger Sub and is enforceable against Public,
Superholdings and Merger Sub in accordance with its terms.
3. When the Related Agreements to which each of Public, Superholdings and
Merger Sub is a party are delivered, such agreements will have been duly
authorized, executed and delivered by Public, Superholdings and Merger Sub, and
will constitute the legal, valid and binding obligations of Public,
Superholdings and Merger Sub, enforceable against Public, Superholdings and
Merger Sub in accordance with their terms.
4. The authorized capital stock of Public consists (i) of 95,000,000 shares of
Public Stock, of which 61,354,606 shares were issued and outstanding as of
April 20, 2000 and (ii) 5,000,000 shares of preferred stock, par value $0.01
per share, of which no shares were issued and outstanding as of April 20, 2000.
All of the issued and outstanding shares of Public Stock have been duly
authorized and validly issued, are fully paid and nonassessable and are free
and clear of any preemptive rights. Based upon our review of the minute books
of Public, as of March 31, 2000, there were no outstanding preemptive,
conversion or other rights, or other options, warrants or agreements granted
by, issued by, or binding upon, Public for the issuance, sale, purchase,
repurchase, redemption, acquisition or other transfer of its equity securities,
other than stock that may be issued pursuant to stock option plans or
agreements described in the SEC Documents.
5. The authorized capital stock of Superholdings immediately prior to the
Closing will consist (i) of at least 290,000,000 shares of Superholdings Stock
and (ii) at least 10,000,000 shares of preferred stock, par value $0.01 per
share. All of the issued and outstanding shares of Superholdings Stock will
have been duly authorized and validly issued, fully paid and nonassessable and
free and clear of any preemptive rights. Based upon our review of the minute
books of Superholdings, on the date of the Agreement, there were no outstanding
preemptive, conversion or other rights, or other options, warrants or
agreements granted by, issued by, or binding upon, Superholdings for the
issuance, sale, purchase, repurchase, redemption, acquisition or other transfer
of its equity securities, other than stock that may be issued pursuant to the
stock
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option plans and agreements of Public described in paragraph 4 above (after
consummation of the Subsidiary Merger), pursuant to the Agreement or the Sister
Agreements or pursuant to anticipated financing transactions.
6. The shares of Superholdings Stock, when issued, sold and delivered in
accordance with the terms of the Agreement will be duly and validly issued,
fully paid and nonassessable and issued free and clear of any Liens.
7. The execution, delivery and performance of the Agreement and the Related
Agreements, and the consummation of the transactions contemplated therein will
not result in any violation of the terms of, and will not contravene, conflict
with, accelerate the performance of the obligations required under, constitute
a default under or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of Public,
Superholdings or Merger Sub pursuant to, (i) the certificate of incorporation
or bylaws of Public, Superholdings or Merger Sub, (ii) any material Order or
Proceeding that Public, Superholdings or Merger Sub has disclosed pursuant to
the Agreement, (iii) any material law, rule or regulation applicable to any of
them, or to which any of them is a party or by which any of them or their
property or assets is bound, or (iv) the Agreements listed on the Disclosure
Schedule to Sections 7.2(a) or 7.2(b), taking into account the third party
consents or approvals that have been obtained.
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EXHIBIT 2.4(b)(i)
MEMBER AGREEMENT
This Member Agreement (the "Member Agreement") is delivered pursuant to
Sections 1.2(b) (Right to Withhold), 1.2(c) (Consideration Subject to
Agreements), 2.4(b)(i)(A) (Lock-Up Agreement), 2.4(b)(i)(B) (Indemnity
Agreement), 2.4(b)(i)(C) (Members' Release) and Section 10.2 (Indemnities) of
that certain Agreement and Plan of Reorganization (the "Agreement") entered
into as of July 31, 2000, by and among Alamosa PCS Holdings, Inc., a Delaware
corporation ("Public"), Alamosa Holdings, Inc., a Delaware corporation
("Superholdings"), Alamosa Sub I, Inc., a Delaware corporation and wholly-owned
direct subsidiary of Superholdings ("Merger Sub"), and Washington Oregon
Wireless, LLC, an Oregon limited liability company ("LLC"), WOW Holdings, LLC,
an Oregon limited liability company ("LLC Holdings"), and members of LLC (the
"Members"). As used herein, "Member Parties" shall be defined as the
undersigned Member and its direct and indirect beneficial owners. All
capitalized terms used herein and not otherwise defined in this Member
Agreement will have the meanings assigned to them in the Agreement. The parties
hereto agree as follows:
1. Lock-Up. The undersigned member hereby covenants to Public and
Superholdings that the undersigned will not, without the prior written consent
of Superholdings (which consent shall not be unreasonably withheld), (a) before
September 30, 2001, sell, pledge or otherwise dispose of the undersigned
member's holdings of Superholdings Stock, (b) enter into any transaction which
is designed to, or might reasonably be expected to, result in the disposition,
before September 30, 2001, of the undersigned member's holdings of
Superholdings Stock, (c) establish or increase a put equivalent position or
liquidate or decrease a call equivalent position (within the meaning of Section
16 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder)
that will be settled before September 30, 2001, with respect to any
Superholdings Stock or (d) publicly announce an intention to effect any such
transaction, other than (x) shares of Superholdings Stock disposed of as bona
fide gifts to persons who also enter into lock-up agreements in the form hereof
and (y) shares of Superholdings Stock acquired other than pursuant to the
Parent Merger. Notwithstanding the foregoing, the undersigned member may pledge
its holdings of Superholdings Stock before September 30, 2001; provided, that,
the pledgee agrees to be bound in writing by the terms of this Section 1 of the
Member Agreement with respect to such pledged Superholdings Stock. This Section
1 of this Member Agreement is the "Lock-Up Agreement" referred to in the
Agreement.
2. Registration Provisions.
(a) Certain Information. The undersigned Member hereby covenants to
provide to Public and Superholdings the information required by the Form S-1,
as provided by Section 4.2(c) (Form S-1) of the Agreement, as is reasonably
requested by Public and Superholdings as soon as possible, but no later than
five business days after the date of such request. In addition, the undersigned
Member hereby covenants that none of the information supplied or to be supplied
by the undersigned Member specifically for inclusion in the Form S-1 will, at
the time
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the Form S-1 is filed with the SEC, at any time that such form is amended or
supplemented and at the time it becomes effective or remains in effect under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading. Notwithstanding the foregoing, if the
undersigned Member becomes aware, at any time, of any untrue statement of a
material fact or omission of any material fact required to be stated in the
Form S-1 (or other appropriate registration statement form), then the
undersigned Member shall promptly notify Public and Superholdings of such
untrue statement, pursuant to Section 11.5 (Notices, Etc.) of the Agreement.
(b) Blackout. The undersigned member hereby agrees that if Superholdings
furnishes to the undersigned member a notice signed by the President of
Superholdings stating that Superholdings has determined in good faith that it
would be seriously detrimental to Superholdings and its stockholders for the
Form S-1 to be filed (or remain in effect) and it is therefore essential to
defer the filing of such Form S-1 (or temporarily suspend the effectiveness of
such registration statement or use of the related prospectus) (a "Blackout
Notice"), then Superholdings shall have the right (i) immediately to defer such
filing for a period of not more than sixty (60) days beyond the date by which
such Form S-1 was otherwise planned to be filed or (ii) suspend such
effectiveness for a period of not more than sixty (60) days (any such deferral
or suspension period of up to sixty (60) days, a "Blackout Period"). The
undersigned member agrees to cease any disposition during such Blackout Period
of the Superholdings Stock received by the undersigned member in connection
with the Parent Merger. Superholdings may not utilize any of its rights under
this Section 2 of this Member Agreement to defer the filing of the Form S- 1
(or suspend the effectiveness of the Form S-1) more than twice in any twelve
(12) month period.
(c) WOW Holdings Operating Agreement. The undersigned member has duly
executed and delivered to LLC Holdings the Operating Agreement of LLC Holdings.
3. Indemnity. The undersigned member hereby agrees to be bound by all of
the provisions of Article 10 of the Agreement (Indemnification), and the direct
and indirect owners of the undersigned's Members' Interests (who are
signatories below) shall also be so bound to the extent that they receive any
merger consideration or proceeds thereof. This Section 3 of this Member
Agreement is the "Indemnity Agreement" referred to in the Agreement.
4. Intent to Sell. The undersigned member hereby agrees that it has no
plan or intention to sell, exchange, transfer or otherwise dispose of any of
its Superholdings Stock received by such undersigned member in connection with
the Reorganization.
5. Members Releases. Superholdings hereby releases on its own behalf any
and all claims held or to be held by Superholdings against LLC, LLC Holdings,
and their successors, assigns, officers, directors, employees and agents, after
the Closing. The undersigned member hereby releases any and all claims held or
to be held by the undersigned member against LLC,
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LLC Holdings, and their successors, assigns, officers, directors, employees and
agents, but excluding any claims the undersigned member may have to unpaid
compensation and benefits. The undersigned member hereby agrees to be released
from any obligation under the operating agreements of LLC or LLC Holdings. This
Section 5 of this Member Agreement is the "Members Releases" referred to in the
Agreement.
6. Escrow Agreement. The Member Parties hereby agree to be bound by all of
the provisions of the Escrow Agreement, including the appointment of F. Howard
Mandel to serve as the Members' Agent, with the authority to negotiate and
settle all claims involving the Escrow Stock. The Member Parties hereby further
agree to indemnify and hold the Members' Agent harmless from and against any
and all loss, damage, cost, expense (including reasonable attorney's fees), or
any other charge, known or unknown, which may be made or asserted now or in the
future by or on behalf of the Member Parties against the Members' Agent arising
out of or attributable to the Members' Agent's actions under the Escrow
Agreement.
7. Consideration. The undersigned Member hereby acknowledges that the
consideration to be received by the undersigned Member pursuant to the
Agreement represents the amount of consideration the undersigned Member is
entitled to receive under the operating agreements of LLC or LLC Holdings and
satisfies in full any and all claims held or to be held by the undersigned
Member with respect to its membership interest in LLC or LLC Holdings.
8. Deliveries. The undersigned Member Parties shall deliver their holdings
of Superholdings Stock, and corresponding stock powers, to the Escrow Agent, if
applicable, in accordance with the Escrow Agreement and Section 10.2
(Indemnities) of the Agreement.
9. Investment Representations.
(a) Each of the undersigned Member Parties understands and acknowledges
that the Superholdings Stock is being offered and sold under the exemptions
from registration provided for in Section 4(2) of the Securities Act, including
Regulation D promulgated thereunder, and that Superholdings' reliance upon such
exemption is based in part upon the undersigned Member Parties'
representations, warranties and agreements contained in this Agreement.
(b) Each of the undersigned Member Parties has carefully read this
Agreement and, to the extent believed necessary, has discussed the
representations, warranties and agreements which each of the undersigned Member
Parties makes by signing it and the applicable limitations upon each of the
undersigned Member Parties' resale of the shares of Superholdings Stock with
the undersigned Member Parties' counsel.
(c) The Superholdings Stock to be issued to such undersigned Member
Parties in the Reorganization is being acquired by the undersigned Member
Parties solely for the undersigned Member Parties' own account, for investment
purposes only, and is not being acquired for resale, resyndication,
distribution, subdivision or fractionalization thereof, except pursuant to an
effective registration under the Securities Act or in a transaction exempt from
registration under the Securities Act. Each of the undersigned Member Parties
has no contract or arrangement with
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any person to sell, transfer or pledge to any person the shares of
Superholdings Stock or any part thereof, any interest herein or any rights
thereto, and each of the undersigned Member Parties has no present plans to
enter into any such contract or arrangement.
(d) Each of the undersigned Member Parties understands that it may not
sell or otherwise transfer its shares of Superholdings Stock unless such sale
or other transfer is registered under the Securities Act and the applicable
state securities laws or unless the sale or other transfer is exempt from the
registration requirements under the Securities Act and such other securities
laws, and that, as a result, the undersigned Member Parties must bear the
economic risk of the investment for an indefinite period of time. Each of the
undersigned Member Parties understands that Superholdings may require the
undersigned Member Parties to furnish an opinion of counsel satisfactory to
Superholdings that such sale or transfer is so exempt.
(e) Each of the undersigned Member Parties is able (i) to bear the
economic risk of an investment in Superholdings Stock, (ii) to hold the shares
of Superholdings Stock indefinitely, and (iii) to afford a complete loss of
this investment. Each of the undersigned Member Parties has adequate means of
providing for current needs and has no present need for liquidity in this
investment.
(f) Each of the undersigned Member Parties is an "accredited investor" as
that term is defined under Rule 501(a) of Regulation D, as amended, under the
Securities Act and possesses such knowledge and experience in financial and
business matters so that each of the undersigned Member Parties is capable of
evaluating the merits and risks of an investment in Superholdings Stock, and of
making an informed investment decision.
(g) Each of the undersigned Member Parties confirms that, in making the
decision to acquire the shares of Superholdings Stock in the Reorganization,
each of the undersigned Member Parties has relied solely upon independent
investigations made by the undersigned Member Parties and/or by the undersigned
Member Parties' representatives, including the undersigned Member Parties' own
professional tax and other advisors and that the undersigned Member Parties and
such representatives and advisors have been given the opportunity to ask
questions of, and to receive answers from, Superholdings concerning this
Agreement and the terms and conditions of the Reorganization, and to obtain any
information requested by the undersigned Member Parties concerning
Superholdings from such person, to the extent such persons possessed such
information or could acquire it without unreasonable effort or expense,
necessary for the undersigned Member Parties to make an informed investment in
Superholdings Stock.
(h) Each of the undersigned Member Parties consents to the placement of a
legend on the shares of Superholdings Stock to be issued to the undersigned
Member Parties in the Reorganization, which legend shall be substantially as
follows:
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"These securities are not registered under the
Securities Act of 1933, as amended, or any state
securities laws, and may not be offered, sold or
otherwise distributed for value, nor may these
securities be transferred on the books of
Superholdings, in the absence of such
registration unless Superholdings had received an
opinion of counsel or other evidence,
satisfactory to Superholdings and its counsel,
that such registration is not required."
Executed as of _______________ ____, 2000.
* * * * *
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ALAMOSA HOLDINGS, INC.:
By:
Name:
Title:
MEMBER:
Name:
DIRECT OWNERS OF MEMBER:
Name:
Name:
Name:
INDIRECT OWNERS OF MEMBER:
Name:
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Name:
Name:
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<PAGE>
APPENDIX D
1
[Letterhead of Salomon Smith Barney Inc.]
July 31, 2000
Board of Directors
Alamosa PCS Holdings, Inc.
4403 Brownfield Highway
Lubbock, Texas 79407
Members of the Board:
You have also requested our opinion as to the fairness, from a
financial point of view, to the holders of common stock, par value $.01 per
share ("Company Common Stock"), of Alamosa PCS Holdings, Inc. (the "Company"),
of the consideration to be received by such holders in connection with (i) the
proposed merger (the "Subsidiary Merger") of the Company with Alamosa Sub I,
Inc. ("Merger Sub"), a Delaware corporation and a wholly owned subsidiary of
Alamosa Holdings, Inc. ("Parent"), a Delaware corporation, and (ii) the
proposed merger (the "Parent Merger", and together with the Subsidiary Merger,
the "Mergers") of Parent with a limited liability company ("Roberts LLC
Holdings") that will be formed prior to the effective date of the Mergers to
hold membership interests in Roberts Wireless Communications, L.L.C. ("Roberts
LLC"), a Missouri limited liability company, pursuant to an Agreement and Plan
of Reorganization, dated as of July 31, 2000 (the "Reorganization Agreement"),
among the Company, Parent, Merger Sub, Roberts LLC and the members of Roberts
LLC (the "LLC Members"). Upon the effectiveness of the Mergers, (i) each issued
and outstanding share of Company Common Stock will be converted into and
represent the right to receive one (the "Alamosa Ratio") share of Parent Common
Stock (the "Subsidiary Merger Consideration") and (ii) the outstanding units of
Roberts LLC Holdings membership interests will be converted into and represent
the right to receive, in the aggregate, (a) 13,500,000 shares of Parent Common
Stock (the "Roberts Stock Consideration") and (b) $4,000,000 in cash (as
adjusted pursuant to the Reorganization Agreement) (as adjusted, the "Roberts
Cash Consideration" and, together
<PAGE>
2
with the Roberts Stock Consideration, the "Parent Merger Consideration").
In connection with rendering our opinion, we have reviewed certain
publicly available information concerning the Company and Roberts LLC and
certain other financial information concerning the Company and Roberts LLC,
including financial forecasts that were provided to us by the Company and
Roberts LLC, respectively. We have discussed the past and current business
operations, financial condition and prospects of the Company and Roberts LLC
with certain officers and employees of the Company and Roberts LLC,
respectively. We have also considered such other information, financial
studies, analyses, investigations and financial, economic and market criteria
that we deemed relevant.
In our review and analysis and in arriving at our opinion, we have
assumed and relied upon the accuracy and completeness of the information
reviewed by us for the purpose of this opinion and we have not assumed any
responsibility for independent verification of such information. With respect
to the financial forecasts of the Company and Roberts LLC, we have been advised
by the respective managements of the Company and Roberts LLC that such
forecasts have been reasonably prepared on bases reflecting their best
currently available estimates and judgments, and we express no opinion with
respect to such forecasts or the assumptions on which they are based. We have
not assumed any responsibility for any independent evaluation or appraisal of
any of the assets (including properties and facilities) or liabilities of the
Company or Roberts LLC.
Our opinion is necessarily based upon conditions as they exist and can
be evaluated on the date hereof. Our opinion as expressed below does not imply
any conclusion as to the likely trading range for Parent Common Stock following
the consummation of the Mergers, which may vary depending upon, among other
factors, changes in interest rates, dividend rates, market conditions, general
economic conditions and other factors that generally influence the price of
securities. Our opinion does not address the Company's underlying business
decision to effect the Mergers, and we express no view on the effect on the
Company of the Mergers and related transactions. Our opinion is directed only
to the fairness, from a financial point of view, of the Alamosa Ratio to
holders of Company Common Stock and does not constitute a recommendation
concerning how holders of Company Common Stock should vote with respect to the
transactions contemplated by the Reorganization Agreement.
We have acted as financial advisor to the Board of Directors of the
Company in connection with the Mergers and will receive a fee for our services,
a significant portion of which is contingent upon consummation of the Mergers.
In the ordinary course of business, we and our affiliates may
D-2
<PAGE>
3
actively trade the securities of the Company and Roberts LLC for our own
account and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities. In addition, we and our
affiliates have previously rendered certain investment banking and financial
advisory services to the Company for which we have received customary
compensation. We and our affiliates (including Citigroup Inc.) may have other
business relationships with the Company in the ordinary course of their
businesses.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Alamosa Ratio is fair to the holders of Company Common
Stock from a financial point of view.
Very truly yours,
/s/ Salomon Smith Barney Inc.
Salomon Smith Barney Inc.
D-3
<PAGE>
APPENDIX E
1
[Letterhead of Salomon Smith Barney Inc.]
July 31, 2000
Board of Directors
Alamosa PCS Holdings, Inc.
4403 Brownfield Highway
Lubbock, Texas 79407
Members of the Board:
You have requested our opinion as to the fairness, from a financial
point of view, to the holders of common stock, par value $.01 per share
("Company Common Stock"), of Alamosa PCS Holdings, Inc., a Delaware corporation
(the "Company"), of the consideration to be received by such holders in
connection with (i) the proposed merger (the "Subsidiary Merger") of the
Company with Alamosa Sub I, Inc. ("Merger Sub"), a Delaware corporation and a
wholly owned subsidiary of Alamosa Holdings, Inc. ("Parent"), and (ii) the
proposed merger (the "Parent Merger" and, together with the Subsidiary Merger,
the "Mergers") of Parent with WOW Holdings, LLC ("WOW LLC Holdings"), an Oregon
limited liability company formed to hold all the membership interests in
Washington Oregon Wireless LLC ("WOW LLC"), pursuant to an Agreement and Plan
of Reorganization, dated as of July 31, 2000 (the "WOW Reorganization
Agreement"), among the Company, Parent, Merger Sub, WOW LLC, the members of WOW
LLC (the "WOW LLC Members") and WOW LLC Holdings. Upon the effectiveness of the
Mergers, (i) each issued and outstanding share of Company Common Stock will be
converted into and represent the right to receive one (the "Alamosa Ratio")
share of common stock, par value $0.01 per share ("Parent Common Stock"), of
Parent (the "Subsidiary Merger Consideration") and (ii) the outstanding units
of WOW LLC Holdings membership interests will be converted into and represent
the right to receive, in the aggregate, (a) 6,050,000 shares of Parent Common
Stock (the "WOW Stock Consideration") and (b) $12,500,000 in cash (as adjusted
pursuant to the WOW Reorganization Agreement) (as so adjusted, the "WOW Cash
Consideration", and, together with
<PAGE>
2
the WOW Stock Consideration, the "Parent Merger Consideration").
In connection with rendering our opinion, we have reviewed certain
publicly available information concerning the Company and WOW LLC and certain
other financial information concerning the Company and WOW LLC, including
financial forecasts that were provided to us by the Company and WOW LLC,
respectively. We have discussed the past and current business operations,
financial condition and prospects of the Company and WOW LLC with certain
officers and employees of the Company and WOW LLC, respectively. We have also
considered such other information, financial studies, analyses, investigations
and financial, economic and market criteria that we deemed relevant.
In our review and analysis and in arriving at our opinion, we have
assumed and relied upon the accuracy and completeness of the information
reviewed by us for the purpose of this opinion and we have not assumed any
responsibility for independent verification of such information. With respect
to the financial forecasts of the Company and WOW LLC, we have been advised by
the respective managements of the Company and WOW LLC that such forecasts have
been reasonably prepared on bases reflecting their best currently available
estimates and judgments, and we express no opinion with respect to such
forecasts or the assumptions on which they are based. We have not assumed any
responsibility for any independent evaluation or appraisal of any of the assets
(including properties and facilities) or liabilities of the Company or WOW LLC.
Our opinion is necessarily based upon conditions as they exist and can
be evaluated on the date hereof. Our opinion as expressed below does not imply
any conclusion as to the likely trading range for Parent Common Stock following
the consummation of the Mergers, which may vary depending upon, among other
factors, changes in interest rates, dividend rates, market conditions, general
economic conditions and other factors that generally influence the price of
securities. Our opinion does not address the Company's underlying business
decision to effect the Mergers, and we express no view on the effect on the
Company of the Mergers and related transactions. Our opinion is directed only
to the fairness, from a financial point of view, of the Alamosa Ratio to
holders of Company Common Stock and does not constitute a recommendation
concerning how holders of Company Common Stock should vote with respect to the
transactions contemplated by the Reorganization Agreement.
We have acted as financial advisor to the Board of Directors of the
Company in connection with the Mergers and will receive a fee for our services,
a significant portion of which is contingent upon consummation of the Mergers.
In the ordinary course of business, we and our affiliates may actively trade
the securities of the Company for our own account and for the
accounts of customers and, accordingly,
E-2
<PAGE>
3
may at any time hold a long or short position in such securities. In addition,
we and our affiliates have previously rendered certain investment banking and
financial advisory services to the Company for which we have received customary
compensation. We and our affiliates (including Citigroup Inc.) may have other
business relationships with the Company in the ordinary course of their
businesses.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Alamosa Ratio is fair to the holders of Company Common
Stock from a financial point of view.
Very truly yours,
/s/ Salomon Smith Barney Inc.
Salomon Smith Barney Inc.
E-3
<PAGE>
APPENDIX F
FORM OF
AMENDED AND RESTATED
1999 LONG TERM INCENTIVE PLAN
The Alamosa PCS Holdings, Inc. 1999 Long-Term Incentive Plan
(hereinafter called the "Plan") was adopted by the Board of Directors of Alamosa
PCS Holdings, Inc., a Delaware corporation (hereinafter called the "Company"),
effective as of November 12, 1999, and was approved by the Company's
stockholders on ____________, 2000.
ARTICLE 1
PURPOSE
The purpose of the Plan is to attract and retain the services of key
management employees, Outside Directors and consultants of the Company and its
Subsidiaries and to provide such persons with a proprietary interest in the
Company through the granting of incentive stock options, non-qualified stock
options, stock appreciation rights, or restricted stock, whether granted singly,
or in combination, or in tandem, that will
(a) increase the interest of such persons in the Company's
welfare;
(b) furnish an incentive to such persons to continue their
services for the Company; and
(c) provide a means through which the Company may attract able
persons as employees, Outside Directors and consultants.
With respect to Reporting Participants, the Plan and all transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 promulgated under the Securities Exchange Act of 1934 (the "1934 Act"). To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void ab initio, to the extent permitted by
law and deemed advisable by the Committee.
ARTICLE 2
DEFINITIONS
For the purpose of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:
<PAGE>
2
2.1 "Award" means the grant of any Incentive Stock Option,
Non-qualified Stock Option, Restricted Stock or SAR whether granted singly, in
combination or in tandem (each individually referred to herein as an
"Incentive").
2.2 "Award Agreement" means a written agreement between a Participant
and the Company which sets out the terms of the grant of an Award.
2.3 "Award Period" means the period during which one or more Incentives
granted under an Award may be exercised.
2.4 "Board" means the board of directors of the Company.
2.5 "Change of Control" means any of the following: (i) Continuing
Directors cease to constitute at least fifty percent (50%) of the members of the
Board; (ii) the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; (iii) any consolidation, merger or
share exchange of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which shares of the Company's Common Stock
would be converted into cash, securities or other property; or (iv) any sale,
lease, exchange or other transfer (excluding transfer by way of pledge or
hypothecation) in one transaction or a series of related transactions, of all or
substantially all of the assets of the Company; provided, however, that a
transaction described in clause (iii) or (iv) shall not constitute a Change in
Control hereunder if after such transaction (I) Continuing Directors constitute
at least fifty percent (50%) of the members of the Board of Directors of the
continuing, surviving or acquiring entity, as the case may be or, if such entity
has a parent entity directly or indirectly holding at least a majority of the
voting power of the voting securities of the continuing, surviving or acquiring
entity, Continuing Directors constitute at least fifty percent (50%) of the
members of the Board of Directors of the entity that is the ultimate parent of
the continuing, surviving or acquiring entity, and (II) the continuing,
surviving or acquiring entity (or the ultimate parent of such continuing,
surviving or acquiring entity) assumes all outstanding Stock Options under this
Plan; provided, further, that a transaction described in clause (iv) shall not
constitute a Change in Control hereunder if such transaction occurs upon or as a
result of a default by the Company or any of its affiliates under (a) any credit
agreement or related agreement among the Company or any of its affiliates or
successors and Nortel Networks Inc. or any other lender, whether or not such
credit agreement or related agreement exists on the date of this Plan, or (b)
any management agreement or related agreement among the Company any or any of
its affiliates or successors and Sprint Spectrum, LP, SprintCom, Inc.,
WirelessCo, LP, Sprint Communications Company, LP or any of their affiliates or
successors, whether or not such management agreement or related agreement exists
on the date of this Plan. "Continuing Directors" means Board members who (x) at
the date of this Plan were directors or (y) become directors after the date of
this Plan and
APP-F-2
<PAGE>
3
whose election or nomination for election by the Company's stockholders was
approved by a vote of a majority of the directors then in office who were
directors at the date of this Plan or whose election or nomination for election
was previously so approved.
2.6 "Code" means the Internal Revenue Code of 1986, as amended.
2.7 "Committee" means the committee appointed or designated by the
Board to administer the Plan in accordance with Article 3 of this Plan.
2.8 "Common Stock" means the common stock, par value $0.01 per share,
which the Company is currently authorized to issue or may in the future be
authorized to issue.
2.9 "Company" means Alamosa PCS Holdings, Inc., a Delaware corporation,
and any successor entity.
2.10 "Date of Grant" means the effective date on which an Award is made
to a Participant as set forth in the applicable Award Agreement; provided,
however, that solely for purposes of Section 16 of the 1934 Act and the rules
and regulations promulgated thereunder, the Date of Grant of an Award shall be
the date of stockholder approval of the Plan if such date is later than the
effective date of such Award as set forth in the Award Agreement.
2.11 "Employee" means common law employee (as defined in accordance
with the Regulations and Revenue Rulings then applicable under Section 3401(c)
of the Code) of the Company or any Subsidiary of the Company.
2.12 "Fair Market Value" means, as of a particular date, (a) if the
shares of Common Stock are listed on a national securities exchange, the closing
sales price per share of Common Stock on the consolidated transaction reporting
system for the principal securities exchange for the Common Stock on that date,
or, if there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported, (b) if the shares of Common
Stock are not so listed but are quoted on the Nasdaq National Market System, the
closing sales price per share of Common Stock on the Nasdaq National Market
System on that date, or, if there shall have been no such sale so reported on
that date, on the last preceding date on which such a sale was so reported, (c)
if the Common Stock is not so listed or quoted, the mean between the closing bid
and asked price on that date, or, if there are no quotations available for such
date, on the last preceding date on which such quotations shall be available, as
reported by Nasdaq, or, if not reported by Nasdaq, by the National Quotation
Bureau, Inc., or (d) if none of the above is applicable, such amount as may be
determined by the Committee (acting on the advice of an Independent Third Party,
should the Committee elect in its sole discretion to utilize an Independent
Third
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4
Party for this purpose), in good faith, to be the fair market value per share of
Common Stock.
"Independent Third Party" means an individual or entity independent of
the Company having experience in providing investment banking or similar
appraisal or valuation services and with expertise generally in the valuation of
securities or other property for purposes of this Plan. The Committee may
utilize one or more Independent Third Parties.
2.13 "Incentive Stock Option" or "ISO" means an incentive stock option
within the meaning of Section 422 of the Code, granted pursuant to this Plan.
2.14 "Non-qualified Stock Option" or "NQSO" means a non-qualified stock
option, granted pursuant to this Plan.
2.15 "Option Price" means the price which must be paid by a Participant
upon exercise of a Stock Option to purchase a share of Common Stock.
2.16 "Outside Director" means a director of the Company who is not an
Employee.
2.17 "Participant" shall mean an Employee or Outside Director of, or a
consultant to, the Company or a Subsidiary to whom an Award is granted under
this Plan.
2.18 "Plan" means this Alamosa PCS Holdings, Inc. 1999 Long-Term
Incentive Plan, as amended from time to time.
2.19 "Reporting Participant" means a Participant who is subject to the
reporting requirements of Section 16 of the 1934 Act.
2.20 "Restricted Stock" means shares of Common Stock issued or
transferred to a Participant pursuant to Section 6.4 of this Plan which are
subject to restrictions or limitations set forth in this Plan and in the related
Award Agreement.
2.21 "Retirement" means any Termination of Service solely due to
retirement upon attainment of age sixty-five (65), or permitted early retirement
as determined by the Committee.
2.22 "SAR" or "stock appreciation right" means the right to receive a
payment, in cash and/or Common Stock, equal to the excess of the Fair Market
Value of a specified number of shares of Common Stock on the date the SAR is
exercised over the SAR Price for such shares.
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5
2.23 "SAR Price" means the exercise price of each share of Common Stock
covered by a SAR, determined on the Date of Grant of the SAR.
2.24 "Stock Option" means a Non-qualified Stock Option or an Incentive
Stock Option.
2.25 "Subsidiary" means (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing a majority of
the total combined voting power of all classes of stock in one of the other
corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general
partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and
(iii) any partnership or limited liability company, if the partners or members
thereof are composed only of the Company, any corporation listed in item (i)
above or any limited partnership listed in item (ii) above. "Subsidiaries" means
more than one of any such corporations, limited partnerships, partnerships or
limited liability companies.
2.26 "Termination of Service" occurs when: a Participant who is an
Employee of the Company or any Subsidiary shall cease to serve as an Employee of
the Company and its Subsidiaries, for any reason; or, a Participant who is an
Outside Director of the Company shall cease to serve as a director of the
Company for any reason.
2.27 "Total and Permanent Disability" means a Participant is qualified
for long-term disability benefits under the Company's disability plan or
insurance policy; or, if no such plan or policy is then in existence, that the
Participant, because of ill health, physical or mental disability or any other
reason beyond his or her control, is unable to perform his or her duties of
employment for a period of six (6) continuous months, as determined in good
faith by the Committee; provided that, with respect to any Incentive Stock
Option, Total and Permanent Disability shall have the meaning given it under the
rules governing Incentive Stock Options under the Code.
ARTICLE 3
ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board
(the "Committee"). The Committee shall consist of not fewer than two persons.
Any member of the Committee may be removed at any time, with or without cause,
by resolution of the Board. Any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board.
APP-F-5
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6
Membership on the Committee shall be limited to those members of the
Board who are "outside directors" under Section 162(m) of the Code. The
Committee shall select one of its members to act as its Chairman. A majority of
the Committee shall constitute a quorum, and the act of a majority of the
members of the Committee present at a meeting at which a quorum is present shall
be the act of the Committee.
The Committee shall determine and designate from time to time the
eligible persons to whom Awards will be granted and shall set forth in each
related Award Agreement the Award Period, the Date of Grant, and such other
terms, provisions, limitations, and performance requirements, as are approved by
the Committee, but not inconsistent with the Plan. The Committee shall determine
whether an Award shall include one type of Incentive, two or more Incentives
granted in combination, or two or more Incentives granted in tandem (that is, a
joint grant where exercise of one Incentive results in cancellation of all or a
portion of the other Incentive).
The Committee, in its discretion, shall (i) interpret the Plan, (ii)
prescribe, amend, and rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and (iii) make such other determinations and
take such other action as it deems necessary or advisable in the administration
of the Plan. Any interpretation, determination, or other action made or taken by
the Committee shall be final, binding, and conclusive on all interested parties.
With respect to restrictions in the Plan that are based on the
requirements of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the
Code, Section 162(m) of the Code, the rules of any exchange or inter-dealer
quotation system upon which the Company's securities are listed or quoted, or
any other applicable law, rule or restriction (collectively, "applicable law"),
to the extent that any such restrictions are no longer required by applicable
law, the Committee shall have the sole discretion and authority to grant Awards
that are not subject to such mandated restrictions and/or to waive any such
mandated restrictions with respect to outstanding Awards.
ARTICLE 4
ELIGIBILITY
Any Employee (including an Employee who is also a director or an
officer), Outside Director, or consultant of the Company whose judgment,
initiative, and efforts contributed or may be expected to contribute to the
successful performance of the Company is eligible to participate in the Plan;
provided that only Employees shall be eligible to receive Incentive Stock
Options. The Committee, upon its own action, may grant, but shall not be
required to grant, an Award to any Employee, Outside Director, or consultant of
the Company or any Subsidiary. Awards may be granted by the Committee at any
time and from time to time to new Participants, or to then
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7
Participants, or to a greater or lesser number of Participants, and may include
or exclude previous Participants, as the Committee shall determine. Except as
required by this Plan, Awards granted at different times need not contain
similar provisions. The Committee's determinations under the Plan (including
without limitation determinations of which Employees, Outside Directors, or
consultants, if any, are to receive Awards, the form, amount and timing of such
Awards, the terms and provisions of such Awards and the agreements evidencing
same) need not be uniform and may be made by it selectively among Participants
who receive, or are eligible to receive, Awards under the Plan.
ARTICLE 5
SHARES SUBJECT TO PLAN
Subject to adjustment as provided in Articles 13 and 14, the maximum
number of shares of Common Stock that may be delivered pursuant to Awards
granted under the Plan is thirteen million (13,000,000) shares as increased on
each December 31 from and including December 31, 2000 by a number of shares
equal to one percent (1%) of the number of shares of Common Stock outstanding on
such date. Shares of Common Stock previously subject to Awards which are
forfeited, terminated, settled in cash in lieu of Common Stock, or exchanged for
Awards that do not involve Common Stock, or expired unexercised and any shares
of Common Stock surrendered to the Company in payment of the exercise price of
Stock Options issued under the Plan shall again be available for awards under
the Plan. Notwithstanding the foregoing, in no event shall the number of shares
of Common Stock subject to Incentive Stock Options exceed, in the aggregate,
thirteen million (13,000,000) shares of Common Stock.
Shares to be issued may be made available from authorized but unissued Common
Stock, Common Stock held by the Company in its treasury, or Common Stock
purchased by the Company on the open market or otherwise. During the term of
this Plan, the Company will at all times reserve and keep available the number
of shares of Common Stock that shall be sufficient to satisfy the requirements
of this Plan.
ARTICLE 6
GRANT OF AWARDS
6.1 IN GENERAL. The grant of an Award shall be authorized by the
Committee and shall be evidenced by an Award Agreement setting forth the
Incentive or Incentives being granted, the total number of shares of Common
Stock subject to the Incentive(s), the Option Price (if applicable), the Award
Period, the Date of Grant, and such other terms, provisions, limitations, and
performance objectives, as are approved by the Committee, but not inconsistent
with the Plan. The Company shall execute an Award Agreement with a Participant
after the Committee approves the issuance of an Award. Any Award granted
pursuant to this Plan must be granted within ten (10) years of the date of
adoption of this Plan. The Plan shall be submitted to the
APP-F-7
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8
Company's stockholders for approval; however, the Committee may grant Awards
under the Plan prior to the time of stockholder approval. Any such Award granted
prior to such stockholder approval shall be made subject to such stockholder
approval. The grant of an Award to a Participant shall not be deemed either to
entitle the Participant to, or to disqualify the Participant from, receipt of
any other Award under the Plan.
If the Committee establishes a purchase price for an Award, the
Participant must accept such Award within a period of thirty (30) days (or such
shorter period as the Committee may specify) after the Date of Grant by
executing the applicable Award Agreement and paying such purchase price.
6.2 MAXIMUM ISO GRANTS. The Committee may not grant Incentive Stock
Options under the Plan to any Employee which would permit the aggregate Fair
Market Value (determined on the Date of Grant) of the Common Stock with respect
to which Incentive Stock Options (under this and any other plan of the Company
and its Subsidiaries) are exercisable for the first time by such Employee during
any calendar year to exceed $100,000. To the extent any Stock Option granted
under this Plan which is designated as an Incentive Stock Option exceeds this
limit or otherwise fails to qualify as an Incentive Stock Option, such Stock
Option (or any such portion thereof) shall be a Non-qualified Stock Option.
6.3 MAXIMUM INDIVIDUAL GRANTS. No Participant may receive during any
fiscal year of the Company Awards covering an aggregate of more than two million
(2,000,000) shares of Common Stock.
6.4 RESTRICTED STOCK. If Restricted Stock is granted to a Participant
under an Award, the Committee shall set forth in the related Award Agreement:
(i) the number of shares of Common Stock awarded, (ii) the price, if any, to be
paid by the Participant for such Restricted Stock, (iii) the time or times
within which such Award may be subject to forfeiture, (iv) specified performance
goals of the Company, a Subsidiary, any division thereof or any group of
Employees of the Company, or other criteria, which the Committee determines must
be met in order to remove any restrictions (including vesting) on such Award,
and (v) all other terms, limitations, restrictions, and conditions of the
Restricted Stock, which shall be consistent with this Plan. The provisions of
Restricted Stock need not be the same with respect to each Participant.
(a) LEGEND ON SHARES. Each Participant who is awarded Restricted Stock
shall be issued a stock certificate or certificates in respect of such shares of
Common Stock. Such certificate(s) shall be registered in the name of the
Participant, and shall bear an appropriate legend referring to the terms,
conditions, and
APP-F-8
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9
restrictions applicable to such Restricted Stock, substantially as provided in
Section 17.9 of the Plan.
The Committee may require that the stock certificates evidencing shares
of Restricted Stock be held in custody by the Company until the restrictions
thereon shall have lapsed, and that the Participant deliver to the Committee a
stock power or stock powers, endorsed in blank, relating to the shares of
Restricted Stock.
(b) RESTRICTIONS AND CONDITIONS. Shares of Restricted Stock shall be
subject to the following restrictions and conditions:
(i) Subject to the other provisions of this Plan and the terms
of the particular Award Agreements, during such period as may be
determined by the Committee commencing on the Date of Grant (the
"Restriction Period"), the Participant shall not be permitted to sell,
transfer, pledge or assign shares of Restricted Stock. Except for these
limitations, the Committee may in its sole discretion, remove any or
all of the restrictions on such Restricted Stock whenever it may
determine that, by reason of changes in applicable laws or other
changes in circumstances arising after the date of the Award, such
action is appropriate.
(ii) Except as provided in sub-paragraph (i) above, the
Participant shall have, with respect to his or her Restricted Stock,
all of the rights of a stockholder of the Company, including the right
to vote the shares, and the right to receive any dividends thereon.
Certificates for shares of Common Stock free of restriction under this
Plan shall be delivered to the Participant promptly after, and only
after, the Restriction Period shall expire without forfeiture in
respect of such shares of Common Stock. Certificates for the shares of
Common Stock forfeited under the provisions of the Plan and the
applicable Award Agreement shall be promptly returned to the Company by
the forfeiting Participant. Each Award Agreement shall require that (x)
each Participant, by his or her acceptance of Restricted Stock, shall
irrevocably grant to the Company a power of attorney to transfer any
shares so forfeited to the Company and agrees to execute any documents
requested by the Company in connection with such forfeiture and
transfer, and (y) such provisions regarding returns and transfers of
stock certificates with respect to forfeited shares of Common Stock
shall be specifically performable by the Company in a court of equity
or law.
(iii) The Restriction Period of Restricted Stock shall
commence on the Date of Grant and, subject to Article 14 of the Plan,
unless otherwise established by the Committee in the Award Agreement
setting forth the terms of the Restricted Stock, shall expire upon
satisfaction of the conditions set forth in the Award Agreement; such
conditions may provide for vesting based on (i)
APP-F-9
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10
length of continuous service, (ii) achievement of specific business
objectives, (iii) increases in specified indices, (iv) attainment of
specified growth rates, or (v) other comparable measurements of Company
performance, as may be determined by the Committee in its sole
discretion.
(iv) Subject to the provisions of the particular Award
Agreement, upon Termination of Service for any reason during the
Restriction Period, the nonvested shares of Restricted Stock shall be
forfeited by the Participant. In the event a Participant has paid any
consideration to the Company for such forfeited Restricted Stock, the
Company shall, as soon as practicable after the event causing
forfeiture (but in any event within five (5) business days), pay to the
Participant, in cash, an amount equal to the total consideration paid
by the Participant for such forfeited shares. Upon any forfeiture, all
rights of a Participant with respect to the forfeited shares of the
Restricted Stock shall cease and terminate, without any further
obligation on the part of the Company.
6.5 SAR. An SAR shall entitle the Participant at his election to
surrender to the Company the SAR, or portion thereof, as the Participant shall
choose, and to receive from the Company in exchange therefor cash in an amount
equal to the excess (if any) of the Fair Market Value (as of the date of the
exercise of the SAR) per share over the SAR Price per share specified in such
SAR, multiplied by the total number of shares of the SAR being surrendered. In
the discretion of the Committee, the Company may satisfy its obligation upon
exercise of a SAR by the distribution of that number of shares of Common Stock
having an aggregate Fair Market Value (as of the date of the exercise of the
SAR) equal to the amount of cash otherwise payable to the Participant, with a
cash settlement to be made for any fractional share interests, or the Company
may settle such obligation in part with shares of Common Stock and in part with
cash.
6.6 TANDEM AWARDS. The Committee may grant two or more Incentives in
one Award in the form of a "tandem award," so that the right of the Participant
to exercise one Incentive shall be canceled if, and to the extent, the other
Incentive is exercised. For example, if a Stock Option and a SAR are issued in a
tandem Award, and the Participant exercises the SAR with respect to 100 shares
of Common Stock, the right of the Participant to exercise the related Stock
Option shall be canceled to the extent of 100 shares of Common Stock.
APP-F-10
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11
ARTICLE 7
OPTION PRICE; SAR PRICE
The Option Price for any share of Common Stock which may be purchased
under a Non-qualified Stock Option and the SAR Price for any share of Common
Stock subject to a SAR may be less than, equal to, or greater than the Fair
Market Value of the share on the Date of Grant. The Option Price for any share
of Common Stock which may be purchased under an Incentive Stock Option must be
at least equal to the Fair Market Value of the share on the Date of Grant; if an
Incentive Stock Option is granted to an Employee who owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more than ten
percent (10%) of the combined voting power of all classes of stock of the
Company (or any parent or Subsidiary), the Option Price shall be at least 110%
of the Fair Market Value of the Common Stock on the Date of Grant.
ARTICLE 8
AWARD PERIOD; VESTING
8.1 AWARD PERIOD. Subject to the other provisions of this Plan, the
Committee may, in its discretion, provide that an Incentive may not be exercised
in whole or in part for any period or periods of time or beyond any date
specified in the Award Agreement. Except as provided in the Award Agreement, an
Incentive may be exercised in whole or in part at any time during its term. The
Award Period for an Incentive shall be reduced or terminated upon Termination of
Service in accordance with this Article 8 and Article 9. No Incentive granted
under the Plan may be exercised at any time after the end of its Award Period.
No portion of any Incentive may be exercised after the expiration of ten (10)
years from its Date of Grant. However, if an Employee owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more than ten
percent (10%) of the combined voting power of all classes of stock of the
Company (or any parent or Subsidiary) and an Incentive Stock Option is granted
to such Employee, the term of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no more than five (5) years
from the Date of Grant.
8.2 VESTING. The Committee, in its sole discretion, may determine that
an Incentive will be immediately exercisable, in whole or in part, or that all
or any portion may not be exercised until a date, or dates, subsequent to its
Date of Grant, or until the occurrence of one or more specified events, subject
in any case to the terms of the Plan. If the Committee imposes conditions upon
exercise, then subsequent to the Date of Grant, the Committee may, in its sole
discretion, accelerate the date on which all or any portion of the Incentive may
be exercised.
APP-F-11
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ARTICLE 9
TERMINATION OF SERVICE
In the event of Termination of Service of a Participant, an Incentive
may only be exercised as determined by the Committee and provided in the Award
Agreement.
ARTICLE 10
EXERCISE OF INCENTIVE
10.1 IN GENERAL. A vested Incentive may be exercised during its Award
Period, subject to limitations and restrictions set forth in the Award Agreement
and in Article 9. A vested Incentive may be exercised at such times and in such
amounts as provided in this Plan and the applicable Award Agreement, subject to
the terms, conditions, and restrictions of the Plan.
In no event may an Incentive be exercised or shares of Common Stock be
issued pursuant to an Award if a necessary listing or quotation of the shares of
Common Stock on a stock exchange or inter-dealer quotation system or any
registration under state or federal securities laws required under the
circumstances has not been accomplished. No Incentive may be exercised for a
fractional share of Common Stock. The granting of an Incentive shall impose no
obligation upon the Participant to exercise that Incentive.
(a) STOCK OPTIONS. Subject to such administrative regulations as the
Committee may from time to time adopt, a Stock Option may be exercised by the
delivery of written notice to the Committee setting forth the number of shares
of Common Stock with respect to which the Stock Option is to be exercised and
the date of exercise thereof (the "Exercise Date") which shall be at least three
(3) days after giving such notice unless an earlier time shall have been
mutually agreed upon. On the Exercise Date, the Participant shall deliver to the
Company consideration with a value equal to the total Option Price of the shares
to be purchased, payable as follows: (a) cash, check, bank draft, or money order
payable to the order of the Company, (b) Common Stock (including Restricted
Stock) owned by the Participant on the Exercise Date, valued at its Fair Market
Value on the Exercise Date, (c) by delivery (including by FAX) to the Company or
its designated agent of an executed irrevocable option exercise form together
with irrevocable instructions from the Participant to a broker or dealer,
reasonably acceptable to the Company, to sell certain of the shares of Common
Stock purchased upon exercise of the Stock Option or to pledge such shares as
collateral for a loan and promptly deliver to the Company the amount of sale or
loan proceeds necessary to pay such purchase price, and/or (d) in any other form
of valid consideration that is acceptable to the Committee in its sole
discretion. In the event that shares of Restricted Stock are tendered as
consideration for the exercise of a Stock Option, a number of shares of Common
Stock issued upon the exercise of the Stock
APP-F-12
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13
Option equal to the number of shares of Restricted Stock used as consideration
therefor shall be subject to the same restrictions and provisions as the
Restricted Stock so submitted.
Upon payment of all amounts due from the Participant, the Company shall
cause certificates for the Common Stock then being purchased to be delivered as
directed by the Participant (or the person exercising the Participant's Stock
Option in the event of his death) at its principal business office promptly
after the Exercise Date; provided that if the Participant has exercised an
Incentive Stock Option, the Company may at its option retain physical possession
of the certificate evidencing the shares acquired upon exercise until the
expiration of the holding periods described in Section 422(a)(1) of the Code.
The obligation of the Company to deliver shares of Common Stock shall, however,
be subject to the condition that if at any time the Committee shall determine in
its discretion that the listing, registration, or qualification of the Stock
Option or the Common Stock upon any securities exchange or inter-dealer
quotation system or under any state or federal law, or the consent or approval
of any governmental regulatory body, is necessary as a condition of, or in
connection with, the Stock Option or the issuance or purchase of shares of
Common Stock thereunder, the Stock Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent, or approval
shall have been effected or obtained free of any conditions not reasonably
acceptable to the Committee.
If the Participant fails to pay for any of the Common Stock specified
in such notice or fails to accept delivery thereof, the Participant's right to
purchase such Common Stock may be terminated by the Company.
(b) SARS. Subject to the conditions of this Section 10.1(b) and such
administrative regulations as the Committee may from time to time adopt, a SAR
may be exercised by the delivery (including by FAX) of written notice to the
Committee setting forth the number of shares of Common Stock with respect to
which the SAR is to be exercised and the date of exercise thereof (the "Exercise
Date") which shall be at least three (3) days after giving such notice unless an
earlier time shall have been mutually agreed upon. On the Exercise Date, the
Participant shall receive from the Company in exchange therefor cash in an
amount equal to the excess (if any) of the Fair Market Value (as of the date of
the exercise of the SAR) per share of Common Stock over the SAR Price per share
specified in such SAR, multiplied by the total number of shares of Common Stock
of the SAR being surrendered. In the discretion of the Committee, the Company
may satisfy its obligation upon exercise of a SAR by the distribution of that
number of shares of Common Stock having an aggregate Fair Market Value (as of
the date of the exercise of the SAR) equal to the amount of cash otherwise
payable to the Participant, with a cash settlement to be made for any fractional
share interests, or the Company may settle such obligation in part with shares
of Common Stock and in part with cash.
APP-F-13
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14
10.2 DISQUALIFYING DISPOSITION OF ISO. If shares of Common Stock
acquired upon exercise of an Incentive Stock Option are disposed of by a
Participant prior to the expiration of either two (2) years from the Date of
Grant of such Stock Option or one (1) year from the transfer of shares of Common
Stock to the Participant pursuant to the exercise of such Stock Option, or in
any other disqualifying disposition within the meaning of Section 422 of the
Code, such Participant shall notify the Company in writing of the date and terms
of such disposition. A disqualifying disposition by a Participant shall not
affect the status of any other Stock Option granted under the Plan as an
Incentive Stock Option within the meaning of Section 422 of the Code.
ARTICLE 11
AMENDMENT OR DISCONTINUANCE
Subject to the limitations set forth in this Article 11, the Board may
at any time and from time to time, without the consent of the Participants,
alter, amend, revise, suspend, or discontinue the Plan in whole or in part;
provided, however, that no amendment which requires stockholder approval in
order for the Plan and Incentives awarded under the Plan to continue to comply
with Sections 162(m), 421, and 422 of the Code, including any successors to such
Sections, shall be effective unless such amendment shall be approved by the
requisite vote of the stockholders of the Company entitled to vote thereon. Any
such amendment shall, to the extent deemed necessary or advisable by the
committee, be applicable to any outstanding Incentives theretofore granted under
the Plan, notwithstanding any contrary provisions contained in any stock option
agreement. In the event of any such amendment to the Plan, the holder of any
Incentive outstanding under the Plan shall, upon request of the Committee and as
a condition to the exercisability thereof, execute a conforming amendment in the
form prescribed by the Committee to any Award Agreement relating thereto.
Notwithstanding anything contained in this Plan to the contrary, unless required
by law, no action contemplated or permitted by this Article 11 shall adversely
affect any rights of Participants or obligations of the Company to Participants
with respect to any Incentive theretofore granted under the Plan without the
consent of the affected Participant.
ARTICLE 12
TERM
The Plan shall be effective from the date that this Plan is approved by
the Board. Unless sooner terminated by action of the Board, the Plan will
terminate on November 11, 2009, but Incentives granted before that date will
continue to be effective in accordance with their terms and conditions.
APP-F-14
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15
ARTICLE 13
CAPITAL ADJUSTMENTS
If at any time while the Plan is in effect, or Incentives are
outstanding, there shall be any increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from (1) the declaration or payment
of a stock dividend, (2) any recapitalization resulting in a stock split-up,
combination, or exchange of shares of Common Stock, or (3) other increase or
decrease in such shares of Common Stock effected without receipt of
consideration by the Company, then and in such event:
(i) An appropriate adjustment shall be made in the maximum
number of shares of Common Stock then subject to being awarded under
the Plan and in the maximum number of shares of Common Stock that may
be awarded to a Participant to the end that the same proportion of the
Company's issued and outstanding shares of Common Stock shall continue
to be subject to being so awarded.
(ii) Appropriate adjustments shall be made in the number of
shares of Common Stock and the Option Price thereof then subject to
purchase pursuant to each such Stock Option previously granted and
unexercised, to the end that the same proportion of the Company's
issued and outstanding shares of Common Stock in each such instance
shall remain subject to purchase at the same aggregate Option Price.
(iii) Appropriate adjustments shall be made in the number of
SARs and the SAR Price thereof then subject to exercise pursuant to
each such SAR previously granted and unexercised, to the end that the
same proportion of the Company's issued and outstanding shares of
Common Stock in each instance shall remain subject to exercise at the
same aggregate SAR Price.
(iv) Appropriate adjustments shall be made in the number of
outstanding shares of Restricted Stock with respect to which
restrictions have not yet lapsed prior to any such change. Except as
otherwise expressly provided herein, the issuance by the Company of
shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with
direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and
no adjustment by reason thereof shall be made with respect to (i) the
number of or Option Price of shares of Common Stock then subject to
outstanding Stock Options granted under the Plan, (ii) the number of or
SAR Price or SARs then subject to outstanding
APP-F-15
<PAGE>
16
SARs granted under the Plan, or (iii) the number of outstanding shares of
Restricted Stock.
Upon the occurrence of each event requiring an adjustment with respect
to any Incentive, the Company shall mail to each affected Participant its
computation of such adjustment which shall be conclusive and shall be binding
upon each such Participant.
ARTICLE 14
RECAPITALIZATION, MERGER AND
CONSOLIDATION; CHANGE IN CONTROL
(a) The existence of this Plan and Incentives granted
hereunder shall not affect in any way the right or power of the Company
or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company's
capital structure and its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or preference
stocks ranking prior to or otherwise affecting the Common Stock or the
rights thereof (or any rights, options, or warrants to purchase same),
or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
(b) Subject to any required action by the stockholders, if the
Company shall be the surviving or resulting corporation in any merger,
consolidation or share exchange, any Incentive granted hereunder shall
pertain to and apply to the securities or rights (including cash,
property, or assets) to which a holder of the number of shares of
Common Stock subject to the Incentive would have been entitled.
(c) In the event of any merger, consolidation or share
exchange pursuant to which the Company is not the surviving or
resulting corporation, there shall be substituted for each share of
Common Stock subject to the unexercised portions of such outstanding
Incentives, that number of shares of each class of stock or other
securities or that amount of cash, property, or assets of the
surviving, resulting or consolidated company which were distributed or
distributable to the stockholders of the Company in respect to each
share of Common Stock held by them, such outstanding Incentives to be
thereafter exercisable for such stock, securities, cash, or property in
accordance with their terms. Notwithstanding the foregoing, however,
all such Incentives may be canceled by the Company as of the effective
date of any such reorganization, merger, consolidation, share exchange
or any dissolution or liquidation of the Company by giving notice to
each holder thereof or his personal representative of its intention to
do so and by permitting the purchase during the thirty (30)
APP-F-16
<PAGE>
17
day period next preceding such effective date of all of the shares of
Common Stock subject to such outstanding Incentives.
(d) In the event of a Change of Control, then, notwithstanding
any other provision in this Plan to the contrary, all unmatured
installments of Incentives outstanding shall thereupon automatically be
accelerated and exercisable in full and all Restriction Periods
applicable to Awards of Restricted Stock shall automatically expire.
The determination of the Committee that any of the foregoing conditions
has been met shall be binding and conclusive on all parties.
ARTICLE 15
LIQUIDATION OR DISSOLUTION
In case the Company shall, at any time while any Incentive under this
Plan shall be in force and remain unexpired, (i) sell all or substantially all
of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each
Participant shall be thereafter entitled to receive, in lieu of each share of
Common Stock of the Company which such Participant would have been entitled to
receive under the Incentive, the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon any such sale,
dissolution, liquidation, or winding up with respect to each share of Common
Stock of the Company. If the Company shall, at any time prior to the expiration
of any Incentive, make any partial distribution of its assets, in the nature of
a partial liquidation, whether payable in cash or in kind (but excluding the
distribution of a cash dividend payable out of earned surplus and designated as
such) then in such event the Option Prices or SAR Prices then in effect with
respect to each Stock Option or SAR shall be reduced, on the payment date of
such distribution, in proportion to the percentage reduction in the tangible
book value of the shares of the Company's Common Stock (determined in accordance
with generally accepted accounting principles) resulting by reason of such
distribution.
ARTICLE 16
INCENTIVES IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER ENTITIES
Incentives may be granted under the Plan from time to time in
substitution for similar instruments held by employees or directors of a
corporation, partnership, or limited liability company who become or are about
to become management Employees or Outside Directors of the Company or any
Subsidiary as a result of a merger or consolidation of the employing corporation
with the Company, the acquisition by the Company of equity of the employing
entity, or any other similar transaction pursuant to which the Company becomes
the successor employer. The terms and conditions of the substitute Incentives so
granted may vary from the terms and conditions set forth
APP-F-17
<PAGE>
18
in this Plan to such extent as the Board at the time of grant may deem
appropriate to conform, in whole or in part, to the provisions of the Incentives
in substitution for which they are granted.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 INVESTMENT INTENT. The Company may require that there be presented
to and filed with it by any Participant under the Plan, such evidence as it may
deem necessary to establish that the Incentives granted or the shares of Common
Stock to be purchased or transferred are being acquired for investment and not
with a view to their distribution.
17.2 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any
Incentive granted under the Plan shall confer upon any Participant any right
with respect to continuance of employment by the Company or any Subsidiary.
17.3 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or
the Committee, nor any officer or Employee of the Company acting on behalf of
the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in respect of any such
action, determination, or interpretation.
17.4 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any
action of the Board or the Committee shall be deemed to give any person any
right to be granted an Award or any other rights except as may be evidenced by
an Award Agreement, or any amendment thereto, duly authorized by the Committee
and executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.
17.5 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. Notwithstanding
anything contained herein to the contrary, the Company shall not be required to
sell or issue shares of Common Stock under any Incentive if the issuance thereof
would constitute a violation by the Participant or the Company of any provisions
of any law or regulation of any governmental authority or any national
securities exchange or inter-dealer quotation system or other forum in which
shares of Common Stock are quoted or traded (including without limitation
Section 16 of the 1934 Act and Section 162(m) of the Code); and, as a condition
of any sale or issuance of shares of Common Stock under an Incentive, the
Committee may require such agreements or undertakings, if any, as the Committee
may deem necessary or advisable to assure
APP-F-18
<PAGE>
19
compliance with any such law or regulation. The Plan, the grant and exercise of
Incentives hereunder, and the obligation of the Company to sell and deliver
shares of Common Stock, shall be subject to all applicable federal and state
laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required.
17.6 TAX REQUIREMENTS. The Company shall have the right to deduct from
all amounts hereunder paid in cash or other form, any Federal, state, or local
taxes required by law to be withheld with respect to such payments. The
Participant receiving shares of Common Stock issued under the Plan shall be
required to pay the Company the amount of any taxes which the Company is
required to withhold with respect to such shares of Common Stock.
Notwithstanding the foregoing, in the event of an assignment of a Non-qualified
Stock Option or SAR pursuant to Section 17.7, the Participant who assigns the
Non-qualified Stock Option or SAR shall remain subject to withholding taxes upon
exercise of the Non-qualified Stock Option or SAR by the transferee to the
extent required by the Code or the rules and regulations promulgated thereunder.
Such payments shall be required to be made prior to the delivery of any
certificate representing such shares of Common Stock. Such payment may be made
in cash, by check, or through the delivery of shares of Common Stock owned by
the Participant but not acquired from the Company within six (6) months prior to
such payment (which may be effected by the actual delivery of shares of Common
Stock by the Participant or by the Company's withholding a number of shares to
be issued upon the exercise of a Stock Option, if applicable), which shares have
an aggregate Fair Market Value equal to the required minimum withholding
payment, or any combination thereof.
17.7 ASSIGNABILITY. Incentive Stock Options may not be transferred or
assigned other than by will or the laws of descent and distribution and may be
exercised during the lifetime of the Participant only by the Participant or the
Participant's legally authorized representative, and each Award Agreement in
respect of an Incentive Stock Option shall so provide. The designation by a
Participant of a beneficiary will not constitute a transfer of the Stock Option.
The Committee may waive or modify any limitation contained in the preceding
sentences of this Section 17.7 that is not required for compliance with Section
422 of the Code.
The Committee may, in its discretion, authorize all or a portion of a
Non-qualified Stock Option or SAR to be granted to a Participant to be on terms
which permit transfer by such Participant to (i) the spouse, children or
grandchildren of the Participant ("Immediate Family Members"), (ii) a trust or
trusts for the exclusive benefit of such Immediate Family Members, (iii) a
partnership in which such Immediate Family Members are the only partners, (iv)
an entity exempt from federal income tax pursuant to Section 501(c)(3) of the
Code or any successor provision, or (v) a split interest trust or pooled income
fund described in Section 2522(c)(2) of the Code
APP-F-19
<PAGE>
20
or any successor provision, provided that (x) there shall be no consideration
for any such transfer, (y) the Award Agreement pursuant to which such
Non-qualified Stock Option or SAR is granted must be approved by the Committee
and must expressly provide for transferability in a manner consistent with this
Section, and (z) subsequent transfers of transferred Non-qualified Stock Options
or SARs shall be prohibited except those by will or the laws of descent and
distribution. In addition, the Committee may, in its discretion, authorize all
or a portion of a Non-qualified Stock Option or SAR to be granted to an Outside
Director to be on terms which permit transfer by such Outside Director of a
portion or all of such an Award to his or her employer, provided that (x) the
Award Agreement pursuant to which such Nonqualified Stock Option or SAR is
granted must be approved by the Committee and must expressly provide for
transferability in a manner consistent with this Section, and (y) unless
specifically authorized in the Award Agreement, subsequent transfers of
transferred Non-qualified Stock Options or SARs shall be prohibited except those
by will or the laws of descent and distribution.
Following any transfer, any such Non-qualified Stock Option and SAR
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of Articles 10, 11,
13, 15 and 17 hereof the term "Participant" shall be deemed to include the
transferee. The events of Termination of Service shall continue to be applied
with respect to the original Participant, following which the Non-qualified
Stock Options and SARs shall be exercisable by the transferee only to the extent
and for the periods specified in the Award Agreement. The Committee and the
Company shall have no obligation to inform any transferee of a Non-qualified
Stock Option or SAR of any expiration, termination, lapse or acceleration of
such Option. The Company shall have no obligation to register with any federal
or state securities commission or agency any Common Stock issuable or issued
under a Non-qualified Stock Option or SAR that has been transferred by a
Participant under this Section 17.7.
17.8 USE OF PROCEEDS. Proceeds from the sale of shares of Common Stock
pursuant to Incentives granted under this Plan shall constitute general funds of
the Company.
17.9 LEGEND. Each certificate representing shares of Restricted Stock
issued to a Participant shall bear the following legend, or a similar legend
deemed by the Company to constitute an appropriate notice of the provisions
hereof (any such certificate not having such legend shall be surrendered upon
demand by the Company and so endorsed):
APP-F-20
<PAGE>
21
On the face of the certificate:
"Transfer of this stock is restricted in accordance
with conditions printed on the reverse of this
certificate."
On the reverse:
"The shares of stock evidenced by this certificate
are subject to and transferrable only in accordance
with that certain Alamosa PCS Holdings, Inc. 1999
Long- Term Incentive Plan, a copy of which is on file
at the principal office of the Company in Lubbock,
Texas. No transfer or pledge of the shares evidenced
hereby may be made except in accordance with and
subject to the provisions of said Plan. By acceptance
of this certificate, any holder, transferee or
pledgee hereof agrees to be bound by all of the
provisions of said Plan."
The following legend shall be inserted on a certificate evidencing
Common Stock issued under the Plan if the shares were not issued in a
transaction registered under the applicable federal and state securities laws:
"Shares of stock represented by this certificate have
been acquired by the holder for investment and not
for resale, transfer or distribution, have been
issued pursuant to exemptions from the registration
requirements of applicable state and federal
securities laws, and may not be offered for sale,
sold or transferred other than pursuant to effective
registration under such laws, or in transactions
otherwise in compliance with such laws, and upon
evidence satisfactory to the Company of compliance
with such laws, as to which the Company may rely upon
an opinion of counsel satisfactory to the Company."
A copy of this Plan shall be kept on file in the principal office of
the Company in Lubbock, Texas.
* * * * * * * * * * * * * * *
APP-F-21
<PAGE>
22
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed as of ___________, 2000, by its Chief Executive Officer and Secretary
pursuant to prior action taken by the Board.
ALAMOSA PCS HOLDINGS, INC.
By:
------------------------------------------
David E. Sharbutt, Chief Executive Officer
Attest:
--------------------------------
Secretary
APP-F-22
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporate Law (the "DGCL") generally
provides that a corporation may indemnify directors, officers, employees or
agents against liabilities they may incur in such capacities provided certain
standards are met, including good faith and the reasonable belief that the
particular action was in, or not opposed to, the best interests of the
corporation.
Subsection (a) of Section 145 of the DGCL ("Section 145") empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), by reason of the fact that he is or was
a director, officer, employee or agent of the corporation or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
under standards similar to those set forth above, except that no indemnification
may be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation, unless and only to the
extent that the Delaware Court of Chancery or the court in which such action or
suit was brought shall determine that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.
Section 145 further provides that, among other things, to the extent that a
director or officer of a corporation has been successful in the defense of any
action, suit or proceeding referred to in Subsections (a) and (b) of Section
145, or in the defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and that a corporation is empowered to
purchase and maintain insurance on behalf of a director or officer of the
corporation against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify against such liability under
Section 145.
Indemnification as described above shall be granted in a specific case only
upon a determination that indemnification is proper under the circumstances
using the applicable standard of conduct which is made by (a) a majority of
directors who were not parties to such proceeding, (b) independent legal counsel
in a written opinion if there are no such disinterested directors or if such
disinterested directors so direct, or (c) the shareholders.
The Amended and Restated Certificate of Incorporation of Alamosa Holdings,
Inc. (the "Registrant") at the time of the closing of the reorganization will
provide that the liability of the directors of the Registrant to the Registrant
or any of its stockholders for monetary damages arising from acts or omissions
occurring in their capacity as directors will be limited to the fullest extent
permitted by the laws of Delaware or any other applicable law. This limitation
does not apply with respect to any action in which a director would be liable
under Section 174 of the DGCL nor does it apply with respect to any liability in
which a director (1) breached his duty of loyalty to the Registrant or its
stockholders; (2) did not act in good faith or, in failing to act, did not act
in good faith; (3) acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in a manner
involving intentional misconduct or a knowing violation of law; or (4) derived
an improper personal benefit.
The Registrant's Amended and Restated Certificate of Incorporation at the
time of closing will provide that the Registrant will indemnify its directors,
officers and employees and former directors, officers and employees to the
fullest extent permitted by the laws of Delaware or any other applicable law.
II-1
<PAGE>
At the time of the closing of the reorganization the Registrant will have
directors' and officers' liability insurance covering its directors and
officers.
Item 21. Exhibits and Financial Statement Schedules.
(i) Exhibits. The following is a complete list of Exhibits filed as part of
this Registration Statement, which are incorporated herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
--------------------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Reorganization, dated as of July 31, 2000, by and among Alamosa PCS
Holdings, Inc., Alamosa Holdings, Inc., and Alamosa Sub I, Inc., (included as Appendix A to
the proxy statement-prospectus forming a part of this registration statement and incorporated
herein by reference).
2.2 Amended and Restated Agreement and Plan of Reorganization, dated as of July 31, 2000, by and
among Alamosa PCS Holdings, Inc., Alamosa Holdings, Inc., Alamosa Sub I, Inc., Roberts
Wireless Communications, LLC, and Members of Roberts Wireless Communications, LLC (included as
Appendix B to the proxy statement-prospectus forming a part of this registration statement and
incorporated herein by reference).
2.3 Amended and Restated Agreement and Plan of Reorganization, dated as of July 31, 2000, by and
among Alamosa PCS Holdings, Inc., Alamosa Holdings, Inc., Alamosa Sub I, Inc., Washington Oregon
Wireless, LLC, Members of Washington Oregon Wireless, LLC and WOW Holdings, LLC (included as
Appendix C to the proxy statement-prospectus forming a part of this registration statement and
incorporated herein by reference).
3.1 Certificate of Incorporation of the Registrant.
3.2* Amended and Restated Certificate of Incorporation of the Registrant.
3.3 By-laws of the Registrant.
3.4* Amended and Restated By-laws of the Registrant.
4.1 Specimen Common Stock Certificate.
4.2** Form of Indenture for 12 7/8% Senior Discount Notes due 2010.
4.3** Form of Global Note relating to the Senior Discount Notes due 2010.
4.4*** Rights Agreement between Alamosa PCS Holdings, Inc. and ChaseMellon Shareholder Services,
L.L.C., as rights agent.
4.5* Form of Rights Agreement between Alamosa Holdings, Inc. and , as rights agent.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
8.1 Opinion of Haynes and Boone, LLP regarding tax matters.
10.1*** CDMA 1900 SprintCom Additional Affiliate Agreement dated as of December 21, 1998 by and between
Alamosa PCS, LLC and Northern Telecom, Inc.
10.2*** Amendment No. 1 to DMS-MTX Cellular Supply Agreement dated as of January 12, 1999 by and between
Alamosa PCS, LLC and Nortel Networks Inc. as an amendment to Exhibit 10.1 described above.
II-2
<PAGE>
EXHIBIT
NUMBER EXHIBIT TITLE
--------------------------------------------------------------------------------------------------------------
10.3*** Amendment No. 2 to DMS-MTX Cellular Supply Agreement dated as of March 1, 1999 by and between
Alamosa PCS, LLC and Nortel Networks Inc. as an amendment to Exhibits 10.1 and 10.2 described
above.
10.4*** Amendment No. 3 to DM S-MTX Cellular Supply Agreement dated as of August 11, 1999 by and between
Alamosa PCS, LLC and Nortel Networks Inc. as an amendment to Exhibits 10.1, 10.2 and 10.3
described above.
10.5*** Sprint PCS Management Agreement (Wisconsin), as amended, dated as of December 6, 1999 by and
between Sprint Spectrum, LP, WirelessCo, LP and Alamosa Wisconsin Limited Partnership.
10.6*** Sprint PCS Services Agreement (Wisconsin,) dated as of December 6, 1999, by and between Sprint
Spectrum, LP and Alamosa Wisconsin Limited Partnership.
10.7*** Sprint Trademark and Service Mark License Agreement (Wisconsin), dated as of December 6, 1999, by
and between Sprint Communications Company, LP and Alamosa Wisconsin Limited Partnership.
10.8*** Sprint Spectrum Trademark and Service Mark License Agreement (Wisconsin), dated as of December 6,
1999, by and between Sprint Spectrum, LP and Alamosa Wisconsin Limited Partnership.
10.9*** Engineering Service Contract, System Design and Construction Inspection, dated as of July 27,
1998, as amended, by and between Alamosa PCS, LLC and Hicks & Ragland Engineering Co., Inc.
10.10*** Master Site Development and Lease Agreement, as amended, dated as of August 1998, by and between
Alamosa PCS, LLC and Specialty Capital Services, Inc.
10.11 Second Amended and Restated Credit Agreement, dated as of June 23, 2000, by and among Alamosa
PCS, Inc., as borrower, Alamosa PCS Holdings, Inc., Texas Telecommunications, LP, Alamosa
Wisconsin Limited Partnership, Alamosa Delaware GP, LLC, Alamosa Finance, LLC and Alamosa
Limited, LLC as guarantors and Export Development Corporation, as administrative agent, for a
$250,000,000 credit facility.
10.12+*** Alamosa PCS Holdings, Inc. 1999 Long-Term Incentive Plan.
10.13*** Employment Agreement, effective as of October 1, 1999, by and between Alamosa PCS LLC and David E.
Sharbutt.
10.14*** Employment Agreement, effective as of December 1, 1999, by and between Alamosa PCS, LLC and
Kendall W. Cowan.
10.15*** Sprint PCS Management Agreement, as amended, dated as of December 23, 1999, by and between Sprint
Spectrum, LP, WirelessCo, LP, Cox Communications PCS, L.P., Cox CPS License, LLC, SprintCom, Inc.
and Alamosa PCS, LLC.
10.16*** Sprint PCS Services Agreement, dated as of December 23, 1999, by and between Sprint Spectrum, LP
and Alamosa PCS, LLC.
10.17*** Sprint Trademark and Service Mark License Agreement, dated as of December 23, 1999 by and between
Sprint Communications Company, LP and Alamosa PCS, LLC.
10.18*** Sprint Spectrum Trademark and Service Mark Agreement, dated as of December 23, 1999, by and
between Sprint Spectrum, LP and Alamosa PCS, LLC.
10.19**** Amendment No. 4 to DMS-MTX Cellular Supply Agreement by and between Alamosa PCS, LLC and Nortel
Networks Inc. as an amendment to Exhibits 10.1, 10.2, 10.3 and 10.4 described above, effective as
of February 8, 2000.
10.20+*** Amended and Restated Employment Agreement effective as of October 1, 1999 by and between Alamosa
PCS, LLC and Jerry Brantley.
10.21+ Amended and Restated Employment Agreement, effective as of October 1, 1999, by and between
Alamosa PCS, LLC and W. Don Stull.
10.22**** Amended and Restated Master Design Build Agreement, dated as of March 21, 2000, by and between
Texas Telecommunications, L.P. and Alamosa Wisconsin Limited Partnership and SBA Towers, Inc.
10.23 Amended and Restated Consent and Agreement, dated as of February 8, 2000, by and between Nortel
Networks, Inc., Sprint Spectrum, LP, Sprint Communications Company, LP, WirelessCo, LP, Cox
Communications PCS, L.P., Cox PCS License, LLC and SprintCom, Inc.
10.24 Consent and Agreement, dated as of February 8, 2000, by and between Nortel Networks, Inc., Sprint
Spectrum, LP, Sprint Communications Company, LP and WirelessCo, LP.
10.25+ Employment Agreement effective as of June 1, 2000, by and between Alamosa, Texas
Telecommunications, LP and Loyd Rinehart.
10.26 Services Agreement, dated as of July 31, 2000, by and between Alamosa Operations, Inc. and
Washington Oregon Wireless, LLC.
10.27 Services Agreement, dated as of July 31, 2000, by and between Alamosa Operations, Inc. and
Roberts Wireless Communciations, LLC.
10.28 Loan Agreement, dated as of July 31, 2000, between Alamosa Operations, Inc., as lender, and
Washington Oregon Wireless, LLC, as borrower.
10.29 Loan Agreement, dated as of July 31, 2000, between Alamosa Operations, Inc., as lender, and and
Roberts Wireless Communciations, LLC, as borrower.
21.1 Subsidiaries of Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
II-3
<PAGE>
EXHIBIT
NUMBER EXHIBIT TITLE
--------------------------------------------------------------------------------------------------------------
23.2 Consent of Melman, Alton & Co.
23.3 Consent of Aldrich, Kibride & Tatone, LLP.
24.1 Powers of Attorney (see the signature page to this Form S-4 Registration Statement).
99.1 Proxy Card.
-------------
* To be filed by Amendment.
** Previously filed, together with Alamosa PCS Holdings, Inc.'s Registration on Form S-1,
file no. 333-93499, dated Februaury 4, 2000, and incorproated herein by reference.
*** Previously filed, together with Alamosa PCS Holdings, Inc.'s Registration Statement on Form S-1,
file no. 333-89995, dated February 4, 2000, and incorporated herein by reference.
**** Previously filed, together with Alamosa PCS Holdings, Inc.'s annual report on Form 10-K,
file no. 001-15657-05, dated March 24, 2000, and incorporated herein by reference.
+ Exhibit is a management contract or compensatory plan.
(ii) Financial Statement Schedules.
None.
</TABLE>
Item 22. Undertakings.
The undersigned Registrant hereby undertakes:
(A)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(B) For purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (and each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed 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.
(C) 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.
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<PAGE>
(D) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
(E) 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) under the Securities Act of 1933, 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.
(F) That every prospectus: (i) that is filed pursuant to paragraph (E)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 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 of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act of 1933 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
Securities Act and will be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on October 12, 2000.
ALAMOSA HOLDINGS, INC.
By: /s/ DAVID E. SHARBUTT
---------------------
David E. Sharbutt
Chairman of the Board of Directors and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 12th day of October, 2000.
POWER OF ATTORNEY
We, the undersigned officers and directors of Alamosa Holdings, Inc.,
hereby severally and individually constitute and appoint David E. Sharbutt, the
true and lawful attorney and agent (with full power of substitution and
resubstitution in each case) of each of us to execute in the name, place and
stead of each of us (individually and in any capacity stated below) any and all
amendments to this registration statement and all instruments necessary or
advisable in connection therewith and to file the same with the Securities and
Exchange Commission, said attorney and agent to have power to act and to have
full power and authority to do and perform in the name and on behalf of each of
the undersigned every act whatsoever necessary or advisable to be done in the
premises as fully and to all intents and purposes as any of the undersigned
might or could do in person and we hereby ratify and confirm our signatures as
they may be signed by our said attorney and agent to any and all such amendments
and instruments.
NAME TITLE DATE
---------------------------- ----------------------------- ----------------
/s/ David E. Sharbutt President and Sole Director October 12, 2000
----------------------------
David E. Sharbutt
/s/ Kendall W. Cowan October 12, 2000
----------------------------
Kendall W. Cowan Vice President, Treasurer
and Secretary
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
--------------------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Reorganization, dated as of July 31, 2000, by and among Alamosa PCS
Holdings, Inc., Alamosa Holdings, Inc., and Alamosa Sub I, Inc., (included as Appendix A to the
proxy statement-prospectus forming a part of this registration statement and incorporated herein
by reference).
2.2 Amended and Restated Agreement and Plan of Reorganization, dated as of July 31, 2000, by and
among Alamosa PCS Holdings, Inc., Alamosa Holdings, Inc., Alamosa Sub I, Inc., Roberts Wireless
Communications, LLC, and Members of Roberts Wireless Communications, LLC (included as Appendix B
to the proxy statement-prospectus forming a part of this registration statement and incorporated
herein by reference).
2.3 Amended and Restated Agreement and Plan of Reorganization, dated as of July 31, 2000, by and
among Alamosa PCS Holdings, Inc., Alamosa Holdings, Inc., Alamosa Sub I, Inc., Washington Oregon
Wireless, LLC, Members of Washington Oregon Wireless, LLC and WOW Holdings, LLC (included as
Appendix C to the proxy statement-prospectus forming a part of this registration statement and
incorporated herein by reference).
3.1 Certificate of Incorporation of the Registrant.
3.2* Amended and Restated Certificate of Incorporation of the Registrant.
3.3 By-laws of the Registrant.
3.4* Amended and Restated By-laws of the Registrant.
4.1 Specimen Common Stock Certificate.
4.2** Form of Indenture for 12 7/8% Senior Discount Notes due 2010.
4.3** Form of Global Note relating to the Senior Discount Notes due 2010.
4.4*** Rights Agreement between Alamosa PCS Holdings, Inc. and ChaseMellon Shareholder Services,
L.L.C., as rights agent.
4.5* Form of Rights Agreement between Alamosa Holdings, Inc. and , as rights agent.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
8.1 Opinion of Haynes and Boone, LLP regarding tax matters.
10.1*** CDMA 1900 SprintCom Additional Affiliate Agreement dated as of December 21, 1998 by and
between Alamosa PCS, LLC and Northern Telecom, Inc.
10.2*** Amendment No. 1 to DMS-MTX Cellular Supply Agreement dated as of January 12, 1999 by and
between Alamosa PCS, LLC and Nortel Networks Inc. as an amendment to Exhibit 10.1 described
above.
10.3*** Amendment No. 2 to DMS-MTX Cellular Supply Agreement dated as of March 1, 1999 by and between
Alamosa PCS, LLC and Nortel Networks Inc. as an amendment to Exhibits 10.1 and 10.2 described
above.
10.4*** Amendment No. 3 to DM S-MTX Cellular Supply Agreement dated as of August 11, 1999 by and
between Alamosa PCS, LLC and Nortel Networks Inc. as an amendment to Exhibits 10.1, 10.2 and
10.3 described above.
10.5*** Sprint PCS Management Agreement (Wisconsin), as amended, dated as of December 6, 1999 by and
between Sprint Spectrum, LP, WirelessCo, LP and Alamosa Wisconsin Limited Partnership.
10.6*** Sprint PCS Services Agreement (Wisconsin,) dated as of December 6, 1999, by and between Sprint
Spectrum, LP and Alamosa Wisconsin Limited Partnership.
10.7*** Sprint Trademark and Service Mark License Agreement (Wisconsin), dated as of December 6, 1999, by
and between Sprint Communications Company, LP and Alamosa Wisconsin Limited Partnership.
10.8*** Sprint Spectrum Trademark and Service Mark License Agreement (Wisconsin), dated as of December 6,
1999, by and between Sprint Spectrum, LP and Alamosa Wisconsin Limited Partnership.
10.9*** Engineering Service Contract, System Design and Construction Inspection, dated as of July 27,
1998, as amended, by and between Alamosa PCS, LLC and Hicks & Ragland Engineering Co., Inc.
10.10*** Master Site Development and Lease Agreement, as amended, dated as of August 1998, by and between
Alamosa PCS, LLC and Specialty Capital Services, Inc.
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<PAGE>
EXHIBIT
NUMBER EXHIBIT TITLE
--------------------------------------------------------------------------------------------------------------
10.11 Second Amended and Restated Credit Agreement, dated as of June 23, 2000, by and among Alamosa
PCS, Inc., as borrower, Alamosa PCS Holdings, Inc., Texas Telecommunications, LP, Alamosa
Wisconsin Limited Partnership, Alamosa Delaware GP, LLC, Alamosa Finance, LLC and Alamosa
Limited, LLC as guarantors and Export Development Corporation, as administrative agent, for a
$250,000,000 credit facility.
10.12+*** Alamosa PCS Holdings, Inc. 1999 Long-Term Incentive Plan.
10.13*** Employment Agreement, effective as of October 1, 1999, by and between Alamosa PCS LLC and David E.
Sharbutt.
10.14*** Employment Agreement, effective as of December 1, 1999, by and between Alamosa PCS, LLC and
Kendall W. Cowan.
10.15*** Sprint PCS Management Agreement, as amended, dated as of December 23, 1999, by and between Sprint
Spectrum, LP, WirelessCo, LP, Cox Communications PCS, L.P., Cox CPS License, LLC, SprintCom, Inc.
and Alamosa PCS, LLC.
10.16*** Sprint PCS Services Agreement, dated as of December 23, 1999, by and between Sprint Spectrum, LP
and Alamosa PCS, LLC.
10.17*** Sprint Trademark and Service Mark License Agreement, dated as of December 23, 1999 by and between
Sprint Communications Company, LP and Alamosa PCS, LLC.
10.18*** Sprint Spectrum Trademark and Service Mark Agreement, dated as of December 23, 1999, by and
between Sprint Spectrum, LP and Alamosa PCS, LLC.
10.19**** Amendment No. 4 to DMS-MTX Cellular Supply Agreement by and between Alamosa PCS, LLC and Nortel
Networks Inc. as an amendment to Exhibits 10.1, 10.2, 10.3 and 10.4 described above, effective as
of February 8, 2000.
10.20+*** Amended and Restated Employment Agreement effective as of October 1, 1999 by and between Alamosa
PCS, LLC and Jerry Brantley.
10.21+ Amended and Restated Employment Agreement, effective as of October 1, 1999, by and between
Alamosa PCS, LLC and W. Don Stull.
10.22**** Amended and Restated Master Design Build Agreement, dated as of March 21, 2000, by and between
Texas Telecommunications, L.P. and Alamosa Wisconsin Limited Partnership and SBA Towers, Inc.
10.23 Amended and Restated Consent and Agreement, dated as of February 8, 2000, by and between Nortel
Networks, Inc., Sprint Spectrum, LP, Sprint Communications Company, LP, WirelessCo, LP, Cox
Communications PCS, L.P., Cox PCS License, LLC and SprintCom, Inc.
10.24 Consent and Agreement, dated as of February 8, 2000, by and between Nortel Networks, Inc., Sprint
Spectrum, LP, Sprint Communications Company, LP and WirelessCo, LP.
10.25+ Employment Agreement effective as of June 1, 2000, by and between Alamosa, Texas
Telecommunications, LP and Loyd Rinehart.
10.26 Services Agreement, dated as of July 31, 2000, by and between Alamosa Operations, Inc. and
Washington Oregon Wireless, LLC.
10.27 Services Agreement, dated as of July 31, 2000, by and between Alamosa Operations, Inc. and
Roberts Wireless Communciations, LLC.
10.28 Loan Agreement, dated as of July 31, 2000, between Alamosa Operations, Inc., as lender, and
Washington Oregon Wireless, LLC, as borrower.
10.29 Loan Agreement, dated as of July 31, 2000, between Alamosa Operations, Inc., as lender, and and
Roberts Wireless Communciations, LLC, as borrower.
21.1 Subsidiaries of Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Melman, Alton & Co.
23.3 Consent of Aldrich, Kibride & Tatone, LLP.
24.1 Powers of Attorney (see the signature page to this Form S-4 Registration Statement).
99.1 Proxy Card.
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-------------
* To be filed by Amendment.
** Previously filed, together with Alamosa PCS Holdings, Inc.'s Registration on Form S-1,
file no. 333-93499, dated Februaury 4, 2000, and incorproated herein by reference.
*** Previously filed, together with Alamosa PCS Holdings, Inc.'s Registration Statement on Form S-1,
file no. 333-89995, dated February 4, 2000, and incorporated herein by reference.
**** Previously filed, together with Alamosa PCS Holdings, Inc.'s annual report on Form 10-K,
file no. 001-15657-05, dated March 24, 2000, and incorporated herein by reference.
+ Exhibit is a management contract or compensatory plan.
</TABLE>
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