<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 12, 2001
REGISTRATION NUMBER 333-47916
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO
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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<CAPTION>
DELAWARE 4812 75-2890997
<S> <C> <C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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)
--------------
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. [ ]
--------------
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>
[GRAPHIC OMITTED]
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.
Our 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. 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.
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.
Information about the proposed reorganization and the other proposals to
be presented at the special meeting is contained in the attached proxy
statement-prospectus. WE URGE YOU TO READ THIS MATERIAL CAREFULLY. IN
PARTICULAR, YOU SHOULD READ THE SECTION ENTITLED "RISK FACTORS" DESCRIBING THE
RISKS RELATING TO THE REORGANIZATION AND THE BUSINESS OF SUPERHOLDINGS
FOLLOWING THE REORGANIZATION.
The date, time and place of the special meeting is as follows:
[ ], 2001
[ ] a.m. local time
5225 S. Loop 289
Lubbock, Texas
We strongly support the reorganization and enthusiastically recommend that
you vote in favor of the reorganization proposals.
/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 [ ], 2001, and is first being
mailed to stockholders of Alamosa on or about [ ], 2001.
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
5225 S. LOOP 289
LUBBOCK, TEXAS 79424
NOTICE OF SPECIAL MEETING OF ALAMOSA PCS HOLDINGS, INC. STOCKHOLDERS
[ ], 2001
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 [ ], 2001 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 an 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,
2001, the number of shares of Alamosa common stock reserved for
issuance under the long-term incentive plan by 800,000 shares or such
lesser amount determined by the committee which administers the
long-term incentive plan.
4. To consider and vote upon a proposal to adopt the Alamosa employee
stock purchase plan pursuant to which:
o 600,000 shares of Alamosa common stock are initially reserved for
issuance; and
o beginning in the year 2002 and for each fiscal year thereafter, up to
an additional 200,000 shares of Alamosa common stock may be added to
the shares initially reserved for issuance.
5. 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 detail in the attached proxy
statement-prospectus. Holders of record of Alamosa common stock at the close of
business on January 11, 2001, 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.
<PAGE>
YOUR VOTE IS IMPORTANT. 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 provide them with instructions on how to
vote your shares.
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
[ ], 2001
<PAGE>
TABLE OF CONTENTS
<TABLE>
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QUESTIONS AND ANSWERS ABOUT
THE REORGANIZATION ........................... 1
SUMMARY ......................................... 3
MARKET PRICES AND DIVIDENDS ..................... 14
ALAMOSA PCS HOLDINGS, INC.
SELECTED HISTORICAL
FINANCIAL INFORMATION ........................ 16
ROBERTS WIRELESS
COMMUNICATIONS, L.L.C.
SELECTED HISTORICAL
FINANCIAL INFORMATION ........................ 18
WASHINGTON OREGON WIRELESS,
LLC SELECTED HISTORICAL
FINANCIAL INFORMATION ........................ 19
ALAMOSA HOLDINGS, INC.
SELECTED UNAUDITED PRO
FORMA FINANCIAL DATA ......................... 20
COMPARATIVE PER SHARE DATA ...................... 22
RISK FACTORS .................................... 23
Risks Relating to the Reorganization ......... 23
Risks Relating to Superholdings'
Business, Strategy and Operations ......... 27
Risks Related to the Relationships with
Sprint PCS ................................ 31
Risks Particular to Indebtedness of
Superholdings ............................. 34
Risks Related to the Wireless Personal
Communications Services Industry .......... 36
THE SPECIAL MEETING ............................. 39
Date, Time and Place of the Special
Meeting ................................... 39
Purpose of the Special Meeting ............... 39
Record Date for the Special Meeting .......... 39
Quorum; Votes Required for Approval
of the Proposals .......................... 39
Proxies ...................................... 40
Solicitation of Proxies ...................... 40
THE REORGANIZATION .............................. 41
General ...................................... 41
Background of the Reorganization ............. 41
Reasons for the Reorganization ............... 45
Opinions of Alamosa's Financial
Advisor ................................... 47
Interests of Alamosa Directors and
Executive Officers in the
Reorganization ............................ 53
Board of Directors and Management of
Superholdings after the
Reorganization ............................ 53
Superholdings Charter and By-Laws ............ 54
New Credit Facility .......................... 54
</TABLE>
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Material United States Federal Income
Tax Consequences of the
Reorganization ............................ 59
Regulatory Matters ........................... 61
Accounting Treatment ......................... 61
Restrictions on Sales of Shares by
Affiliates of Alamosa and Others .......... 62
Nasdaq National Market Listing of
Superholdings Common Stock to be
Issued in the Reorganization .............. 62
Appraisal Rights ............................. 62
Delisting and Deregistration of Alamosa
Common Stock after the
Reorganization ............................ 62
THE ALAMOSA MERGER .............................. 63
The Alamosa Merger ........................... 63
Conversion of Shares ......................... 63
Effective Time of the Alamosa Merger ......... 63
Conditions to the Alamosa Merger ............. 63
Procedure to Exchange Certificates ........... 64
Treatment of Alamosa Stock Options ........... 64
Covenants Regarding Completion of the
Transaction ............................... 65
Termination and Amendment .................... 65
THE ROBERTS MERGER .............................. 66
The Roberts Merger ........................... 66
Conversion of Membership Units ............... 66
Effective Time of the Roberts Merger ......... 66
Conditions to the Roberts Merger ............. 66
Covenant Relating to Conduct of
Business .................................. 69
Covenants Regarding Completion of the
Transaction ............................... 69
Covenants Regarding Compensation
Matters ................................... 69
Agreements with Michael and Steven
Roberts ................................... 70
Termination .................................. 72
Representations and Warranties ............... 74
Survival of Representations .................. 74
Indemnification .............................. 74
Amendment, Extension and Waiver .............. 75
Expenses ..................................... 75
Loan and Services Agreements ................. 75
THE WOW MERGER .................................. 78
The WOW Merger ............................... 78
Conversion of Membership Units ............... 78
Effective Time of the WOW Merger ............. 78
Conditions to the WOW Merger ................. 78
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Covenant Relating to Conduct of
Business .......................... 81
Covenants Regarding Completion of the
Transaction ....................... 81
Covenants Regarding Compensation
Matters ........................... 81
Termination .......................... 82
Representations and Warranties ....... 83
Survival of Representations .......... 84
Indemnification ...................... 84
Amendment, Extension and Waiver ...... 84
Expenses ............................. 85
Post-Closing Agreements .............. 85
Loan and Services Agreements ......... 85
Voting Agreement Between Alamosa
and Reagan W. Silber .............. 86
INFORMATION ABOUT ALAMOSA
PCS HOLDINGS, INC .................... 87
ALAMOSA'S MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ................ 103
DIRECTORS AND EXECUTIVE
OFFICERS OF ALAMOSA .................. 116
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS ................. 127
INFORMATION ABOUT ROBERTS
WIRELESS COMMUNICATIONS,
L.L.C. ............................... 131
ROBERTS' MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ................ 132
INFORMATION ABOUT
WASHINGTON OREGON
WIRELESS, LLC ........................ 138
WOW'S MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ................ 139
AFFILIATION AGREEMENTS WITH
SPRINT PCS ........................... 146
REGULATORY ENVIRONMENT .................. 157
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT OF ALAMOSA,
WOW HOLDINGS, ROBERTS
HOLDINGS AND SUPERHOLDINGS............ 162
Alamosa .............................. 162
Roberts Holdings ..................... 165
</TABLE>
<TABLE>
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WOW Holdings ......................... 166
Superholdings ........................ 167
DESCRIPTION OF SUPERHOLDINGS
CAPITAL STOCK ........................ 169
PROPOSAL 3: AMENDMENT TO
ALAMOSA'S 1999 LONG-TERM
INCENTIVE PLAN ....................... 176
PROPOSAL 4: ADOPTION OF THE
ALAMOSA EMPLOYEE STOCK
PURCHASE PLAN ........................ 180
PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (UNAUDITED) ............... 183
NOTES TO PRO FORMA
CONDENSED COMBINED
FINANCIAL STATEMENTS
(UNAUDITED) .......................... 190
LEGAL MATTERS ........................... 196
EXPERTS ................................. 196
OTHER MATTERS ........................... 196
STOCKHOLDER PROPOSALS ................... 196
STATEMENTS REGARDING
FORWARD-LOOKING
INFORMATION .......................... 197
WHERE YOU CAN FIND MORE
INFORMATION .......................... 198
INDEX TO FINANCIAL
STATEMENTS ........................... F-1
ALAMOSA FINANCIAL
STATEMENTS ........................... F-3
ROBERTS FINANCIAL STATEMENTS............. F-42
WOW FINANCIAL STATEMENTS ................ F-56
APPENDIX A--Amended and Restated
Agreement and Plan of
Reorganization--Alamosa
APPENDIX B--Amended and Restated
Agreement and Plan of
Reorganization--Roberts
APPENDIX C--Amended and Restated
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
APPENDIX G--Form of Employee Stock
Purchase Plan
</TABLE>
ii
<PAGE>
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: 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: WHAT IS THE RELATIONSHIP AMONG THE FOUR
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 any of the other three proposals. The
adoption of the Alamosa employee stock purchase plan is also not
conditioned on the approval of any of the other three 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
meeting or determining whether we have received the votes required
to approve the issuance of Superholdings common stock in the Roberts
and WOW acquisitions, the amendment to the long-term incentive plan
or the adoption of the Alamosa employee stock purchase 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; (iii) "FOR" the amendment to the long-term
incentive plan; and (iv) "FOR" the adoption of the Alamosa employee
stock purchase plan.
1
<PAGE>
o If you return your proxy card and abstain from voting on each of the
proposals, your proxy will have the same effect as a vote against (i)
the adoption of the Alamosa reorganization agreement, (ii) the
amendment to the long-term incentive plan and (iii) the adoption of
the Alamosa employee stock purchase 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 the proposals to approve (i) the
issuance of shares of Superholdings common stock in the WOW and Roberts
acquisitions, (ii) the amendment to the long-term incentive plan or
(iii) the adoption of the Alamosa employee stock purchase 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. If you are a holder of record, you can do this in
one of three ways:
o 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 40.
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?
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: 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
in the first quarter of 2001. 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
2
<PAGE>
SUMMARY
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 198 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 87, 131 AND 138)
ALAMOSA PCS HOLDINGS, INC.
5225 S. Loop 289
Lubbock, Texas 79424
(806) 722-1100
Alamosa is a provider of wireless personal communications 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 personal communications 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 20 additional markets: Albuquerque, Santa Fe and Las
Cruces, New Mexico; El Paso, Lubbock, Amarillo, Midland, Odessa, Abilene, San
Angelo and Eagle Pass-Del Rio, Texas; Flagstaff and Prescott, Arizona; Grand
Junction and Pueblo, Colorado; and Appleton-Oshkosh, Green Bay, Fond du Lac,
Manitowoc and Sheboygan, Wisconsin. Alamosa's systems cover approximately 4.4
million residents out of approximately 8.4 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 December 31, 2000, 132,940 Sprint PCS subscribers were
based in Alamosa's territory.
On December 14, 2000, Alamosa formed a new holding company pursuant to
Section 251(g) of the Delaware General Corporation Law. In that transaction,
each share of the former Alamosa PCS Holdings, Inc. was converted into one
share of the new holding company and the former public company (renamed Alamosa
(Delaware), Inc.) became a wholly-owned subsidiary of the new holding company,
which was renamed Alamosa PCS Holdings, Inc.
ROBERTS WIRELESS COMMUNICATIONS, L.L.C.
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. As of December 31, 2000, approximately 23,594
subscribers were based in Roberts territory. Roberts expects to be fully built
out by
3
<PAGE>
January 31, 2001 and to cover approximately 1.7 million total residents.
Roberts launched Sprint PCS Service in its first markets, Jefferson City and
Columbia, Missouri, in January 1999, and has since commenced service in six
additional markets: Joplin, Rolla, St. Joseph, Sedalia, Kansas City and
Springfield, Missouri.
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 communications services under the Sprint PCS brand name in
territories located primarily in Washington and Oregon with approximately 1.5
million residents. The WOW network is expected to cover approximately 1.1
million people by the end of 2001, 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 U.S. 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 limited Sprint PCS service in its first market near
Spokane, Washington in May 2000 and has since commenced service in seven
additional markets: Kennewick-Pasco-Richland, Walla Walla and Yakima,
Washington, and Medford-Grants Pass, Klamath Falls, Portland and Roseburg,
Oregon. As of December 31, 2000, WOW had 9,593 subscribers, and its network
covered approximately 717,500 residents.
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 41)
The "reorganization" is comprised of the following steps:
o Superholdings and Alamosa Sub I, Inc., a wholly-owned subsidiary of
Superholdings, were formed.
o Roberts formed a holding company, Roberts Wireless Holdings, L.L.C.,
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, 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,
o Roberts Holdings will merge with and into Superholdings, with
Superholdings surviving the merger,
o WOW Holdings will merge with and into Superholdings with
Superholdings surviving the merger, and
4
<PAGE>
o 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 Alamosa formed Alamosa Holdings, LLC to become the borrower under a
new senior secured credit facility of up to $305.0 million. See "The
Reorganization--New Credit Facility." Immediately following
completion of the reorganization,
o Alamosa (Delaware) will contribute all of the stock of its
operating subsidiaries to Alamosa Holdings, LLC, and
o Superholdings will contribute all of its ownership interests in
Roberts and WOW to Alamosa, which will contribute them to
Alamosa (Delaware), which will contribute them to Alamosa
Holdings, LLC.
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.
5
<PAGE>
STRUCTURE BEFORE THE REORGANIZATION
<TABLE>
<CAPTION>
Roberts WOW Alamosa
<S> <C> <C>
Members of Roberts Members of WOW Stockholders of Alamosa
Roberts Wireless WOW Holdings LLC Alamosa PCS Holdings, Inc.
Holdings L.L.C. ("WOW Holdings") ("Alamosa")
("Roberts Holdings")
100% 100% 100%
Roberts Wireless Washington Oregon Alamosa
Communications, L.L.C. Wireless, LLC (Delaware), Inc.
("Roberts") ("WOW") ("Alamosa (Delaware)")
100% 100%
Alamosa PCS, Inc. Alamosa
Operations, Inc.
100%
Alamosa
Operating Subs
</TABLE>
STRUCTURE AFTER THE REORGANIZATION
Former Roberts Members Former WOW Memebers Former Alamosa
Stockholders
16.7% 7.5% 75.8%
-----------------------------------------------------------------------------
Alamosa Holdings, Inc.
("Superholdings")
100%
-----------------------------------------------------------------------------
Alamosa
100%
-----------------------------------------------------------------------------
Alamosa (Delaware)
100% 100%
-----------------------------------------------------------------------------
Alamosa Holdings, LLC Alamosa
Operations, Inc.
100% 100% 100%
Roberts WOW Alamosa
PCS, Inc.
100%
Alamosa
Operating Subs
6
<PAGE>
UPON COMPLETION OF THE REORGANIZATION, SUPERHOLDINGS WILL ISSUE SHARES TO
ALAMOSA STOCKHOLDERS AND WILL ISSUE SHARES AND PAY CASH TO MEMBERS OF ROBERTS
HOLDINGS AND WOW HOLDINGS (SEE PAGES 63, 66 AND 78)
When the reorganization is complete:
o Each share of Alamosa common stock will represent 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 up to $12.5
million in cash.
ALAMOSA STOCKHOLDERS GENERALLY WILL NOT RECOGNIZE GAIN OR LOSS AS A RESULT OF
EXCHANGE OF THEIR SHARES (SEE PAGE 59)
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 47)
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 texts of the written opinions
of Salomon Smith Barney are 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 40)
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.
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
Alamosa's 1999 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" and a proposal to adopt the
Alamosa employee stock purchase plan as described below under the heading "We
Are Proposing the Adoption of the Alamosa Employee Stock Purchase 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.
7
<PAGE>
THE ALAMOSA BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE REORGANIZATION
PROPOSALS (SEE PAGE 45)
The Alamosa board of directors (with one director excusing himself and
abstaining) has determined 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 [ ], 2001 (SEE
PAGE 39)
The Alamosa special meeting will be held at Alamosa's executive offices at
5225 S. Loop 289, Lubbock, Texas on [ ], 2001 at [ ] a.m.,
local time.
ALAMOSA HAS SET JANUARY 11, 2001 AS THE RECORD DATE FOR THE SPECIAL MEETING
(SEE PAGE 39)
You can vote at the special meeting if you owned Alamosa common stock at
the close of business on January 11, 2001. On that date, there were [ ]
shares of Alamosa common stock outstanding and entitled to vote at the special
meeting.
As of January 11, 2001, the directors and executive officers of Alamosa
and their affiliates beneficially owned approximately 36,529,373 shares of
Alamosa common stock or approximately 60% of the outstanding shares of Alamosa
common stock entitled to vote at the special meeting. We currently anticipate
that all of such persons will vote their shares in favor of the reorganization
proposals.
ALAMOSA STOCKHOLDERS DO NOT HAVE APPRAISAL RIGHTS (SEE PAGE 62)
Under Delaware law, Alamosa stockholders are not entitled to appraisal
rights in connection with the reorganization.
BOARD OF DIRECTORS AND MANAGEMENT OF SUPERHOLDINGS FOLLOWING THE REORGANIZATION
(SEE PAGE 53)
Following the reorganization, the Superholdings board of directors will be
comprised of eleven members and will be divided into three classes as set forth
below. Each director will serve for a term of three years, or until his or her
successor has been elected and qualified.
<TABLE>
<S> <C> <C>
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
</TABLE>
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 ........... Chief Technology Officer and Senior Vice President of Engineering
and Network Operations
</TABLE>
8
<PAGE>
ALAMOSA'S EMPLOYEE STOCK OPTIONS WILL BE ASSUMED BY SUPERHOLDINGS (SEE PAGE 64)
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.
COMPLETION OF THE REORGANIZATION IS SUBJECT TO SPECIFIED CONDITIONS (SEE PAGES
63, 66 AND 78)
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.
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 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."
9
<PAGE>
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 65, 72 AND 82)
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:
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 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 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 HAVE RECEIVED ALL REGULATORY APPROVALS REQUIRED FOR COMPLETION OF THE
REORGANIZATION (SEE PAGE 61)
Completion of the Alamosa merger is subject to our making prior
notification to the Antitrust Division of the Department of Justice and to the
Federal Trade Commission and the expiration or early termination of the
applicable waiting period under the Hart-Scott-Rodino Act with respect to the
Alamosa merger. The applicable waiting period under the Hart-Scott-Rodino Act
with respect to the Alamosa merger expired on September 9, 2000.
10
<PAGE>
The completion of the WOW merger is subject to obtaining the consent of
the Federal Communications Commission to the transfer of control of certain
microwave licenses held by WOW and such consent becoming final. On November 22,
2000, the FCC issued the public notice of its consent to the transfer of
control of WOW's microwave licenses, and the FCC's consent became a "Final
Order" on January 2, 2001.
We know of no other regulatory approvals necessary to complete the
reorganization.
WE HAVE RECEIVED A COMMITMENT FOR A NEW SENIOR SECURED CREDIT FACILITY (SEE
PAGE 54)
On December 20, 2000, Alamosa announced that Superholdings had entered
into a commitment letter with Citicorp North America, Inc., Salomon Smith
Barney Inc., TD Securities (USA) Inc., First Union National Bank and Export
Development Corporation providing for a new senior secured credit facility of
up to $305.0 million to be made to Alamosa Holdings, LLC, a wholly-owned
subsidiary of Alamosa (Delaware). The proceeds of the new credit facility will
be used:
o to pay the cash portion of the merger consideration in the Roberts
and WOW mergers;
o to refinance existing indebtedness under Alamosa's $175.0 million
credit facility with EDC and under Roberts' and WOW's existing credit
facilities;
o to pay transaction costs; and
o for general corporate purposes, including funding capital
expenditures, subscriber acquisition and marketing costs, purchase of
spectrum and working capital needs.
The definitive agreements providing for the new credit facility have not been
completed. The obligation of each of Citicorp North America, Salomon Smith
Barney, TD Securities, First Union National Bank, EDC and other lenders which
may commit to provide the new credit facility to close and fund under the new
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 new 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 new credit
facility."
ACCOUNTING TREATMENT (SEE PAGE 61)
Each of the Roberts merger and the WOW merger will be accounted for under
the purchase method of accounting.
ALAMOSA OPERATIONS, INC. HAS ENTERED INTO SERVICES AGREEMENTS WITH ROBERTS AND
WOW (SEE PAGES 75 AND 85)
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.
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.
11
<PAGE>
ALAMOSA OPERATIONS HAS ENTERED INTO LOAN AGREEMENTS WITH ROBERTS, ROBERTS TOWER
AND WOW (SEE PAGES 75 AND 85)
MEMBERS OF ROBERTS HOLDINGS. On June 30, 2000, Alamosa Operations entered
into a $10.0 million loan agreement with Michael and Steven Roberts. The
proceeds of this loan were used to fund capital and operating requirements of
Roberts and Roberts Tower Company, a corporation owned and operated by Michael
and Steven Roberts.
ROBERTS. On July 31, 2000, Roberts and Alamosa Operations entered into a
loan agreement whereby Alamosa Operations agreed to lend up to $20.0 million to
Roberts, to be used only for the purposes of repaying certain amounts owed by
Michael and Steven Roberts under their June 30 loan agreement with Alamosa
Operations and 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, $20.0 million has been funded under the loan agreement.
ROBERTS TOWER. On October 18, 2000, Roberts Tower Company and Alamosa
Operations entered into a loan agreement whereby Alamosa Operations agreed to
lend up to $15.0 million to Roberts Tower Company to be used for the purposes
of repaying certain amounts owed by Michael and Steven Roberts under their June
30 loan agreement with Alamosa Operations and funding the construction of
wireless telecommunications towers to be leased by Roberts through the
completion of the Roberts merger. As of the date of this proxy
statement-prospectus, approximately $14.5 million has been funded under the
loan agreement.
WOW. On July 31, 2000, WOW and Alamosa Operations entered into a loan
agreement whereby Alamosa Operations agreed to lend up to $11.0 million to WOW,
to be used for (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 $8.3 million has been funded under
the loan agreement.
YOUR RIGHTS AS A STOCKHOLDER OF SUPERHOLDINGS WILL BE SUBSTANTIALLY THE SAME AS
YOUR RIGHTS AS A STOCKHOLDER OF ALAMOSA (SEE PAGE 169)
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 amended and restated certificate of
incorporation and the amended and restated 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.
WE ARE PROPOSING AN AMENDMENT TO ALAMOSA'S 1999 LONG-TERM INCENTIVE PLAN TO
INCREASE THE NUMBER OF SHARES UNDER THE PLAN (SEE PAGE 176)
To ensure that Alamosa and, 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,
2001, the number of shares of Alamosa's common stock reserved for
issuance under the long-term incentive plan by 800,000 shares or such
lesser amount determined by the committee which administers the long-
term incentive plan.
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.
12
<PAGE>
WE ARE PROPOSING THE ADOPTION OF THE ALAMOSA EMPLOYEE STOCK PURCHASE PLAN (SEE
PAGE 180)
In order to encourage employees to purchase shares of Alamosa common
stock, we adopted, subject to stockholder approval, the Alamosa employee stock
purchase plan. The employee stock purchase plan allows employees to purchase
common stock on a tax-advantaged basis. Under the employee stock purchase plan:
o 600,000 shares of Alamosa common stock are initially reserved for
issuance; and
o beginning in the year 2002 and for each fiscal year thereafter, up to
an additional 200,000 shares of Alamosa common stock may be added to
the shares initially reserved for issuance.
We have attached a form of the employee stock purchase plan as Appendix G
to this proxy statement-prospectus and encourage you to review it. Approval of
the employee stock purchase plan 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.
13
<PAGE>
MARKET PRICES AND DIVIDENDS
MARKET PRICES
ALAMOSA. 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
[ ], 2001, 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 January 11, 2001, 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 (ended December 31, 2000) .............................. $16 7/8 $ 6 1/8
2001
----
First Quarter (through , 2001) ................................... $ $
</TABLE>
SUPERHOLDINGS. 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.
ROBERTS AND WOW. 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 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 (Delaware) and Norwest Bank Minnesota, N.A., as trustee, restricts
Alamosa (Delaware) and subsidiaries of Alamosa (Delaware) from paying dividends
or making distributions, except (i) for any dividend or distribution that is
made solely to Alamosa (Delaware) or a subsidiary of Alamosa (Delaware) or (ii)
when the payment of such dividend or distribution would not cause Alamosa
(Delaware) and subsidiaries of Alamosa (Delaware) to fail to meet certain
financial tests set forth in the senior discount notes indenture. The credit
agreement, dated as of June 23, 2000, between Alamosa PCS, Inc., a subsidiary
of Alamosa (Delaware), as borrower, and Export Development Corporation, as
administrative agent, prohibits Alamosa PCS, Inc. and other subsidiaries of
Alamosa (Delaware) from paying dividends or making distributions, except for
distributions to fund the payment of the interest on the Alamosa (Delaware)
14
<PAGE>
senior discount notes. Accordingly, Alamosa is only able to pay dividends to
the extent Alamosa (Delaware) and its subsidiaries are permitted to do so under
the terms of the senior discount notes indenture and the EDC credit facility.
SUPERHOLDINGS. Following the reorganization, Superholdings does not expect
to pay cash dividends on its common stock 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 (Delaware), Alamosa Holdings,
LLC and their subsidiaries and the results of operations, financial condition,
capital expenditure plans, contractual restrictions, business prospects of
Superholdings and its subsidiaries and other relevant factors.
In connection with the reorganization, Superholdings intends to enter into
the new credit facility with Citibank, Salomon Smith Barney, TD Securities,
First Union National Bank, EDC and other lenders which may commit to provide
the new credit facility. Part of the proceeds of the new credit facility will
be used to, among other things, refinance the outstanding indebtedness under
the EDC credit facility. The new credit facility will contain restrictions on
the ability of Alamosa, Alamosa Holdings, LLC and their subsidiaries (including
Roberts and WOW) to pay dividends or make distributions on their capital stock.
The negative covenants set forth in the senior discount notes indenture will
continue to make it very difficult for Alamosa (Delaware) to pay any cash
dividends to Alamosa. Accordingly, Superholdings will only be able to pay
dividends to its common stockholders to the extent that Alamosa, Alamosa
(Delaware), Alamosa Holdings, LLC and their subsidiaries are permitted to do so
under the terms of the Alamosa senior discount notes indenture and the new
credit facility.
15
<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 nine months ended September 30, 2000 and for the nine months ended
September 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 nine month period ended September 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 September 30,
2000 and the related notes appearing elsewhere herein.
16
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
SELECTED HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NINE MONTHS JULY 16, 1998
ENDED SEPTEMBER 30, FOR THE (INCEPTION)
--------------------------------- YEAR ENDED THROUGH
2000 1999 DECEMBER 31, 1999 DECEMBER 31, 1998
------------ ------------------- ------------------ ------------------
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE DATA AND OTHER DATA)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C>
Revenue:
Service revenue ................................. $ 45,900 $ 1,123 $ 6,534 $ --
Product sales ................................... 6,002 813 2,450 --
--------- --------- --------- ---------
Total revenue .................................. 51,902 1,936 8,984 --
Cost and expenses:
Cost of service and operations .................. 33,370 2,228 7,441 --
Cost of products sold ........................... 11,637 1,844 5,939 --
Selling and marketing ........................... 25,762 4,203 10,811 --
General and administration ...................... 11,849 9,971 12,408 956
Depreciation and amortization ................... 7,763 937 3,057 2
--------- --------- --------- ---------
Total costs and expenses ....................... 90,381 19,183 39,656 958
Loss from operations ........................... (38,479) (17,247) (30,672) (958)
Net loss ....................................... (45,958) (17,688) (32,836) (924)
PER SHARE DATA:
Net loss per share of common stock, basic and
diluted ......................................... $ (0.77) $ (0.36) $ (0.68) $ (0.02)
Pro forma net loss per share of common stock ..... $ (0.77) $ (0.36) (1) $ (0.68) (1) $ (0.02) (1)
OTHER DATA:
Number of subscribers at end of period ........... 91,443 9,850 31,876 --
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AS OF
SEPTEMBER 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
-------------------- ------------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ........... $ 172,633 $ 5,656 $13,529
Property and equipment, net ......... 189,522 84,714 2,093
Total assets ........................ 412,984 104,492 15,674
Short-term debt (2) ................. 24 385 44
Long-term debt ...................... 208,161 (5) 72,753 (4) 708 (3)
Total liabilities ................... 247,687 93,052 1,598
Total stockholders' equity .......... 165,298 11,440 14,076
</TABLE>
----------
(1) 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 $23,510 of September 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
$202,827,743, EDC credit facility of $4,523,841, and capital lease
obligations of $809,173.
17
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, L.L.C.
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 nine months
ended September 30, 2000 and for the nine months ended September 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 nine
month period ended September 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
September 30, 2000, and the related notes appearing elsewhere herein.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NINE MONTHS MAY 6, 1998
ENDED SEPTEMBER 30, FOR THE (INCEPTION)
------------------------- YEAR ENDED THROUGH
2000 1999 DECEMBER 31, 1999 DECEMBER 31, 1998
----------- ----------- ------------------ ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Service revenue ........................ $ 8,560 $ 1,245 $ 2,494 $ --
Product sales .......................... 748 151 379 --
-------- -------- -------- ------
Total revenue ......................... 9,308 1,396 2,873 --
Costs and expenses:
Cost of service and operations ......... 6,281 1,153 1,749 --
Cost of product sold ................... 1,411 196 834 --
Selling and marketing .................. 2,955 881 2,025 --
General and administrative ............. 1,533 229 703 433
Depreciation and amortization .......... 4,191 1,663 1,799 2
-------- -------- -------- ------
Total costs and expenses .............. 16,371 4,122 7,110 435
Loss from operations .................. (7,063) (2,726) (4,237) (435)
Net loss .............................. (8,758) (2,781) (4,588) (432)
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
SEPTEMBER 30, 2000 DECEMBER 31, 1999
--------------------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ........... $ 1,375 $ 3,145
Property and equipment, net ......... 57,527 13,331
Total assets ........................ 69,998 27,343
Short-term debt ..................... -- --
Long-term debt ...................... 56,000 25,011
Total liabilities ................... 77,597 27,383
Total members' deficit .............. (7,598) (40)
</TABLE>
18
<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 and 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 nine months
ended September 30, 2000 and for the nine months ended September 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 nine month period ended September 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
September 30, 2000 and the related notes appearing elsewhere herein.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NINE MONTHS JULY 8, 1998
ENDED SEPTEMBER 30, FOR THE (INCEPTION)
----------------------- YEAR ENDED THROUGH
2000 1999 DECEMBER 31, 1999 DECEMBER 31, 1998
----------- --------- ------------------ ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Service revenue ........................ $ 358 $ -- $ -- $ --
Product sales .......................... 111 -- -- --
-------- ------ ------ -----
Total revenue ......................... 469 -- -- --
Cost and expenses
Cost of service and operations ......... 2,859 238 -- --
Cost of products sold .................. 218 -- -- --
Selling and marketing .................. 1,167 -- -- --
General and administrative ............. 2,706 205 986 60
Depreciation ........................... 486 -- 1 --
-------- ------ ------ -----
Total costs and expenses .............. 7,436 443 987 60
Loss from operations .................. (6,967) (443) (987) (60)
Net loss .............................. (7,236) (442) (980) (45)
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AS OF
SEPTEMBER 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
-------------------- ------------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ............... $ 2,120 $ 596 $ 4
Property and equipment, net ............. 33,179 10,413 --
Total assets ............................ 37,629 11,010 4
Short-term debt ......................... -- -- --
Long-term debt .......................... 23,010 -- --
Total liabilities ....................... 31,192 8,206 17
Total members' equity (deficit) ......... 6,438 2,804 (13)
</TABLE>
19
<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 nine months ended
September 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 nine months ended September 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 September 30, 2000 gives effect to
the reorganization as if it had occurred on September 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.
20
<PAGE>
ALAMOSA HOLDINGS, INC.
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 2000 DECEMBER 31, 1999
--------------------------- -------------------
<S> <C> <C>
SELECTED OPERATING DATA:
Revenue:
Service revenue .............................. $ 54,819,182 $ 9,028,061
Product sales ................................ 6,860,051 2,829,349
------------- -------------
Total revenue ............................... 61,679,233 11,857,410
------------- -------------
Costs and expenses ............................ 140,077,800 82,641,445
Interest and other income/(expense) ........... (12,302,029) (5,897,000)
Income tax benefit ............................ 31,803,739 25,486,945
------------- -------------
Net income/(loss) ............................. $ (58,896,857) $ (51,194,090)
============= =============
OTHER FINANCIAL DATA:
Capital expenditures (1) ...................... $ 166,771,547 $ 110,821,566
AS OF SEPTEMBER 30, 2000
---------------------------
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents ..................... $ 176,128,954
Short-term investments ........................ --
Property and equipment, net ................... 275,807,121
Total assets .................................. 1,130,105,081
Accounts payable and accrued expenses ......... 53,459,140
Long-term debt ................................ 311,738,569
Total liabilities ............................. 542,203,236
Total shareholders' equity .................... 587,901,845
</TABLE>
----------
(1) Capital expenditures represent additions to property and equipment.
21
<PAGE>
COMPARATIVE PER SHARE DATA
The following table reflects the historical net loss per share and book
value per share of Alamosa common stock in comparison with the pro forma net
loss per share 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,
historical per share data is not available.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2000 DECEMBER 31, 1999
-------------------------- -------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Net loss per share ........... $ (0.77) $ (0.74) $ (0.68) $(0.75)
Book value per share ......... 2.69 7.27 0.24 N/A
</TABLE>
22
<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 6.
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.
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, economies 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.
23
<PAGE>
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 NEW SENIOR
SECURED CREDIT FACILITY.
In connection with the completion of the reorganization, Superholdings
entered into a commitment letter with Citicorp North America, Salomon Smith
Barney, TD Securities, First Union National Bank and EDC providing for a new
senior credit facility of up to $305.0 million to be made to Alamosa Holdings,
LLC, a wholly-owned subsidiary of Alamosa (Delaware). The proceeds of the new
credit facility will be used:
o to pay the cash portion of the merger consideration for the Roberts
and WOW mergers;
o to refinance existing indebtedness under Alamosa's $175.0 million
credit facility with EDC and under Roberts' and WOW's existing credit
facilities;
o to pay transaction costs; and
o for general corporate purposes, including funding capital
expenditures, subscriber acquisition and marketing costs, purchase of
spectrum and working capital needs. See "The Reorganization--New
Credit Facility."
The commitment by each of Citicorp, Salomon Smith Barney, TD Securities,
First Union National, EDC and other lenders which may commit to provide the new
credit facility to close and fund the new 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
funds necessary to pay the cash portion of the merger consideration or to
refinance existing indebtedness of Roberts and WOW, whether from the new credit
facility or otherwise. Furthermore, in the Roberts reorganization agreement,
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.
If the conditions to funding under the new credit facility are not
satisfied, Superholdings may be unable to make an initial borrowing under the
new 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 indebtedness of Roberts and WOW or the build-out of Roberts and WOW's
networks. In such a situation, Superholdings would have to either seek a waiver
from the lenders under the new credit facility or obtain funding from another
source in order to complete the reorganization and avoid both a breach of the
reorganization agreements and, if the reorganization were completed without an
adequate funding source to refinance the indebtness of Roberts and WOW, a
default under WOW's and Roberts' existing credit agreements. Such a waiver from
the lenders, or a new credit facility or other alternate source of financing,
likely will only be available to Superholdings on terms less attractive than
those under the commitment letter, which could have adverse effects on
Superholdings' financial condition and results of operations.
SUPERHOLDINGS AND ALAMOSA COULD BE REQUIRED TO COMPLETE THE REORGANIZATION
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":
24
<PAGE>
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:
o result in liabilities to Superholdings (on a consolidated basis) at
or after completion of the Roberts merger of at least $40.0 million;
o 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
o 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 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:
o result in liabilities to Superholdings (on a consolidated basis) at
or after the 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 Alamosa, Superholdings,
Alamosa Sub or WOW to complete the WOW merger and the Alamosa merger.
25
<PAGE>
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
approximately 65% 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 corporate
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 any 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.
SUPERHOLDINGS' AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND
AMENDED AND RESTATED BY-LAWS WILL INCLUDE PROVISIONS THAT MAY DISCOURAGE A
CHANGE OF CONTROL TRANSACTION OR MAKE REMOVAL OF MEMBERS OF SUPERHOLDINGS'
BOARD OF DIRECTORS MORE DIFFICULT.
Some provisions of Superholdings' amended and restated certificate of
incorporation and amended and restated by-laws could have the effect of
delaying, discouraging or preventing a change in control of Superholdings or
making removal of members of Superholdings' board of directors more difficult.
These provisions include the following:
o a classified board, with each board member serving a three-year term;
o no authorization for stockholders to call a special meeting;
o no ability of stockholders to remove directors;
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.
26
<PAGE>
RISKS RELATING TO SUPERHOLDINGS' BUSINESS, STRATEGY AND OPERATIONS
EACH OF ALAMOSA, ROBERTS AND WOW HAS VERY LIMITED OPERATING HISTORIES AND
SUPERHOLDINGS 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.
The build-out of Alamosa's, Roberts' and WOW's portions of the Sprint PCS
network will require substantial capital. Superholdings estimates that it will
incur approximately $125-130 million in total capital expenditures through
December 31, 2001 for the build-out of Alamosa's, Roberts' and WOW's portions
of the Sprint PCS network. Superholdings plans to fund these requirements using
existing cash and funds available from the new 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 covenants to
be contained in the new 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
communications sites. Each of 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,
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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;
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 is especially dependent on Nortel for network equipment.
Pursuant to the equipment agreement with Nortel, Alamosa is required to
purchase a total of $167.0 million of equipment and services from Nortel. As of
September 30, 2000, Alamosa had remaining commitments of $39.2 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 Company, a corporation
owned and operated by Michael and Steven Roberts. If Roberts Tower Company 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 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.
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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.
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:
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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, Roberts' and WOW's 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.
SUPERHOLDINGS MAY HAVE DIFFICULTY OBTAINING EQUIPMENT THAT IS IN SHORT
SUPPLY, WHICH COULD CAUSE DELAYS IN THE BUILD-OUT OF ITS SUBSIDIARIES'
NETWORKS.
Alamosa, Roberts and WOW 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.
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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.
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 existing 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 AFTER THE COMPLETION OF THE
REORGANIZATION, AND AN ACCELERATION IS DECLARED UNDER THE NEW CREDIT
FACILITY, SPRINT PCS MAY HAVE THE RIGHT TO PURCHASE THE OPERATING ASSETS
OF ALAMOSA, ROBERTS AND WOW 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 this 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, after the
completion of the reorganization, an event of default under the new credit
facility. Each of the Alamosa, Roberts and WOW affiliation agreements provides
that upon the occurrence of an event of termination, Sprint PCS has the right
to purchase the operating assets of Alamosa, Roberts or WOW, as the case may
be, without further stockholder approval and for a price equal to 72% of the
"entire business value" of Alamosa, Roberts or WOW. 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, Roberts' or WOW's assets following
an event of termination under such company's affiliation agreement is currently
subject to the provisions of a consent and agreement entered into by Sprint PCS
for the benefit of the lenders under the credit facility for such company.
Pursuant to the terms of this consent and agreement, Sprint may not purchase
the operating assets of Alamosa, Roberts or WOW, as the case may be, until all
of such company's obligations under its credit facility have been paid in full
in cash and all commitments to advance credit under its credit facility have
been terminated or have expired. However, Sprint may purchase Alamosa's,
Roberts' or WOW's assets if it first pays all obligations due under such
company's credit facility and the credit facility is
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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 such company's 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 owed under such
company's credit facility.
It is a condition to the obligation of the lenders under the new credit
facility to close and fund the facility that Sprint PCS enters into a new
consent and agreement for the benefit of the lenders under the new credit
facility having terms and provisions which are similar to those contained in
the existing consents and agreements discussed above and such other terms and
provisions satisfactory to Citicorp USA, as administrative agent for the
lenders. See "Affiliation Agreements with Sprint PCS--Consents and Agreements
for the Benefit of the Lenders to the Sprint Network Partners."
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 network partners. 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 Sprint PCS' other network partners. 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 NETWORKS.
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.
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
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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 any of its affiliation agreements with
Alamosa, Roberts or WOW will be subject to the provisions of the consent and
agreement to be entered into by Sprint with Citicorp USA, as administrative
agent for the lenders, in connection with the new 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 any of these agreements at the expiration of its 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.
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
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territories of Alamosa, WOW and Roberts increases. Each of 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.
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.
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 September 30, 2000, Superholdings' outstanding long-term debt, on a
pro forma consolidated basis giving effect to the reorganization, totaled
approximately $311.7 million. In addition, Superholdings expects to incur
substantial additional debt following completion of the reorganization before
achieving break-even operating cash flow.
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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 the assets of Alamosa, Roberts
and WOW that will secure the new credit facility, Alamosa Holdings, LLC's
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 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 new 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 FOR ANY DRAWDOWN OF FUNDS UNDER THE NEW CREDIT FACILITY,
SUPERHOLDINGS MAY NOT BE ABLE TO DRAW DOWN ALL OF THE FUNDS IT ANTICIPATES
RECEIVING FROM THE LENDERS UNDER THE NEW CREDIT FACILITY AND MAY NOT BE
ABLE TO COMPLETE THE BUILD-OUT OF ITS SUBSIDIARIES' PORTIONS OF THE SPRINT
PCS NETWORK.
On the date on which the definitive documentation for the new credit
facility is executed and the reorganization is completed, $200.0 million must
be drawn under the term facility portion of the new credit facility. An
additional $55.0 million in term debt will be available for multiple drawings
for a period of 18 months thereafter. A revolving facility under the new credit
facility of $50.0 million will be available for multiple drawings prior to its
final maturity once all amounts under the new term facility have been fully
drawn.
Alamosa Holdings, LLC, as borrower under the new credit facility, will be
subject to selected financial covenants and other covenants and conditions that
must be satisfied at each funding date. If Alamosa Holdings, LLC does not meet
these conditions at each funding date, Alamosa Holdings, LLC will not be
permitted to borrow additional amounts under the new credit facility at such
time unless the lenders agree to waive these conditions. If other sources of
funds are not available, Alamosa, Roberts and WOW may be unable to complete the
build-out of their portions of the Sprint PCS network. If Alamosa, Roberts and
WOW do not have sufficient funds to complete their network build-out, Alamosa,
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 CAUSE ALAMOSA HOLDINGS,
LLC TO REPAY THE INDEBTEDNESS UNDER THE NEW CREDIT FACILITY AT MATURITY,
OR TO REFINANCE THE INDEBTEDNESS UNDER THE NEW CREDIT FACILITY.
Failure to repay the indebtedness under the new credit facility at
maturity will result in a default under the new credit facility.
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A default under the new credit facility could:
o prevent Alamosa, 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 Alamosa's, Roberts' and 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 and the new 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
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.
IF SUPERHOLDINGS OR ANY OF ITS SUBSIDIARIES DEFAULTS UNDER THE NEW CREDIT
FACILITY, THE LENDERS MAY DECLARE THE DEBT IMMEDIATELY DUE AND SPRINT PCS
WILL HAVE THE RIGHT TO EITHER PURCHASE THE ASSETS OF ALAMOSA, ROBERTS AND
WOW OR PURCHASE THE OUTSTANDING DEBT OBLIGATIONS UNDER THE NEW CREDIT
FACILITY AND FORECLOSE ON THE ASSETS OF ALAMOSA, ROBERTS AND WOW.
The new credit facility will require Alamosa Holdings, LLC and its
subsidiaries to comply with specified financial ratios and other performance
covenants. If Alamosa Holdings, LLC fails to comply with these covenants or
defaults on its obligations under the new credit facility, the lenders may
accelerate the maturity of the debt. If the lenders accelerate the debt, Sprint
PCS will have the right to either:
o purchase the operating assets of Alamosa, Roberts and WOW for an
amount equal to the greater of (i) 72% of the "entire business value"
of Alamosa, Roberts and WOW and (ii) the aggregate amount of the
outstanding debt under the new credit facility; or
o purchase the obligations under the new credit facility by repaying
the lenders in full in cash. To the extent Sprint PCS purchases these
obligations from the lenders, Sprint PCS's rights as a senior lender
would enable it to foreclose on the assets securing the new credit
facility 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 exercise either of these options, the lenders under
the new credit facility may sell the assets securing the facility to third
parties without approval of Superholdings' stockholders. In addition, if Sprint
PCS provides notice to the lenders under the new credit facility that Alamosa,
Roberts or WOW is in breach of its management agreement with Sprint PCS and, as
a result, Alamosa Holdings, LLC's obligations under the new credit facility are
accelerated and Sprint PCS does not elect to operate Superholdings' business,
the lenders under the new credit facility may designate a third party to
operate Superholdings' business without the approval of Superholdings'
stockholders.
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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
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;
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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
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 proposals to be presented at the special meeting of Alamosa
stockholders described below.
This proxy statement-prospectus is first being furnished to stockholders
of Alamosa on or about [ ], 2001.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting is scheduled to be held as follows:
[ ], 2001
[ ] 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 plan and to provide for an
automatic annual increase in shares available under the plan;
o consider and vote upon a proposal to adopt the Alamosa employee stock
purchase plan; and
o act on any other business that properly comes before the special
meeting or any adjournment or postponement of the special meeting.
A representative of PricewaterhouseCoopers LLP will be present at the
special meeting and will be available to respond to appropriate questions.
RECORD DATE FOR THE SPECIAL MEETING
The Alamosa board of directors has fixed the close of business on January
11, 2001 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.
QUORUM
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.
A broker who holds shares in nominee or "street name" for a customer who
is the beneficial owner of those shares is prohibited from giving a proxy to
vote those shares on any proposal to be voted on at the special meeting without
specific instructions from such customer with respect to such proposal.
Accordingly, if a broker receives voting instructions from a customer with
respect to one or more, but not all, of the proposals to be voted on at the
special meeting, the shares beneficially owned by such customer
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will not constitute "votes cast" or shares "entitled to vote" with respect to
any proposal for which the customer has not provided voting instructions to the
broker. These so-called "broker non-votes" will be counted as present at the
special meeting for purposes of determining whether a quorum exists.
VOTES REQUIRED FOR APPROVAL OF THE PROPOSALS
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. Abstentions and "broker non-votes"
will have the same effect as a vote against the adoption of the Alamosa
reorganization agreement.
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.
Abstentions and "broker non-votes" will not be counted as "votes cast" and
therefore will have no effect on the outcome of this proposal.
Approval of the proposed amendment to Alamosa's long-term incentive plan
and approval of the Alamosa employee stock purchase plan requires the
affirmative vote 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 each of these
proposals, but "broker non-votes" will have no effect on either of these
proposals.
As of the record date, directors and executive officers of Alamosa and
their affiliates beneficially owned approximately 36,529,373 shares of Alamosa
common stock, entitling them to exercise approximately 60% of the voting power
of Alamosa common stock entitled to vote at the special meeting. We currently
anticipate that all of these persons will vote their shares of Alamosa common
stock in favor of each of the proposals.
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 "FOR" approval of each of the four
proposals to be voted on at the special meeting. You are urged to mark the box
on your proxy card to indicate how to vote your shares.
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, including any
proposal to adjourn or postpone the special meeting. 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. Immediately 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 Superholdings and Alamosa Sub, a wholly-owned subsidiary of
Superholdings, were formed.
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 Holdings, 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 (see "The
Roberts Merger"), (ii) WOW Holdings will merge with and into
Superholdings with Superholdings surviving the merger (see "The WOW
Merger"), and (iii) Alamosa Sub will merge with and into Alamosa,
with Alamosa surviving the merger (see "The Alamosa Merger").
o Alamosa formed Alamosa Holdings, LLC to become the borrower under a
new senior secured credit facility of up to $305.0 million. See
"--New Credit Facility." Immediately following completion of the
mergers, (i) Alamosa (Delaware) will contribute all of the stock of
its operating subsidiaries to Alamosa Holdings, LLC, and (ii)
Superholdings will contribute all of its ownership interests in
Roberts and WOW to Alamosa, which will contribute them to Alamosa
(Delaware), which will contribute them to Alamosa Holdings, LLC.
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. See "--Board
of Directors and Management of Superholdings after 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,
L.L.C.-- 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 and expect to
complete the reorganization in the first quarter of 2001. 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, Reagan W.
Silber, Trevor Pearlman and several other individuals engaged in discussions
with WOW concerning a proposed equity investment by
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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 of 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.
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.
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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 North
America and Salomon Smith Barney the proposed terms of a $200.0 million credit
facility to be provided in connection with the Roberts and WOW mergers.
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 their 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, 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 terms of the proposed 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.
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<PAGE>
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.
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 proposed credit facility
to be provided by Citicorp 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--The 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 a commitment letter for the proposed $200.0
million credit facility, and Salomon Smith Barney delivered its written
opinions discussed under "--Opinions of Alamosa's Financial Advisor."
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<PAGE>
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."
On December 20, 2000, Alamosa announced that Superholdings had entered
into a commitment letter with Citicorp North America, Salomon Smith Barney, TD
Securities, First Union National Bank and EDC providing for a new senior
secured credit facility of up to $305.0 million to provide funding to Alamosa
for the cash portion of the merger consideration in the Roberts and WOW
mergers, the refinancing of existing indebtedness of Alamosa, Roberts and WOW
under their existing credit facilities, transaction costs in connection with
the reorganization and the working capital and other funding needs of the
combined company after the reorganization. See "--New Credit Facility." The
commitment letter for the new credit facility superseded the existing
commitment letter for the proposed $200 million credit facility with Citicorp.
REASONS FOR THE REORGANIZATION
The Alamosa board of directors (with one director excusing himself and
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 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;
45
<PAGE>
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 at such meeting (which oral opinion was subsequently
confirmed in writing on July 31, 2000) to the effect that, as of the
date thereof and 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 (see "--Opinions of Alamosa's
Financial Advisor");
o The terms of the proposed $200.0 million credit facility, as set
forth in the 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 (see "--Material United States Federal Income Tax
Consequences of the Reorganization"); 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 notwithstanding significant adverse changes in the
businesses of Alamosa, Roberts or WOW;
o the length of time anticipated 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 and/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 aggregate 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
adopted the reorganization agreements and approved the transactions
contemplated thereby after consideration of all of the facts, matters and
information brought to its attention. Taking into account
46
<PAGE>
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 TEXTS OF THE WRITTEN OPINIONS OF SALOMON SMITH BARNEY ARE SET
FORTH AS APPENDIX D AND APPENDIX E TO THIS PROXY STATEMENT-PROSPECTUS AND SET
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 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 ratio applicable to holders of Alamosa
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<PAGE>
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
<TABLE>
<S> <C>
POPs 23.5%
Covered POPs 23.5
Public market valuation range 15.2 - 20.8
Discounted cash flow valuation range 19.2 - 24.2
</TABLE>
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 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.
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<PAGE>
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:
MULTIPLE RANGE
<TABLE>
<CAPTION>
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
49
<PAGE>
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, 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
<TABLE>
<S> <C>
POPs 15.0%
Covered POPs 13.5
Public market valuation range 8.3 - 11.6
Discounted cash flow valuation range 9.9 - 12.9
</TABLE>
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.
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<PAGE>
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 $165 $200
Private market value 162 214
Discounted cash flow 204 240
</TABLE>
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:
MULTIPLE RANGE
<TABLE>
<CAPTION>
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.
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
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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
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 exchange ratios applicable to
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.
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Based on the estimated transaction value of the reorganization using recent
trading prices for Alamosa common stock, Salomon Smith Barney expects that the
its total fee will be approximately $3 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.
On December 20, 2000, Alamosa announced that Superholdings entered into a
commitment letter with Citicorp North America, Salomon Smith Barney, TD
Securities First Union National Bank and EDC providing for a new senior credit
facility of up to $305.0 million to be made to Alamosa Holdings, LLC in
connection with the reorganization. Citicorp USA will act as administrative
agent and collateral agent for the lenders under the new credit facility, and
Salomon Smith Barney (together with TD Securities) will act as exclusive
advisor, joint lead arranger and joint book manager with respect to the new
credit facility, for which each of them will receive substantial fees.
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
Silpearl Associates, LLC, 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 reorganization
agreements and in determining to approve the reorganization agreements and to
recommend to the stockholders of Alamosa that they vote "FOR" the
reorganization proposals.
BOARD OF DIRECTORS AND MANAGEMENT OF SUPERHOLDINGS AFTER THE REORGANIZATION
BOARD OF DIRECTORS OF SUPERHOLDINGS. Upon completion of 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, and will be compensated at the discretion of
the board of directors. See "Directors and Executive Officers of
Alamosa--Compensation of Directors."
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<TABLE>
<S> <C> <C>
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
</TABLE>
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 Chief Technology Officer and Senior Vice President of
Engineering and Network Operations
</TABLE>
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 amended and restated certificate of
incorporation and the amended and restated by-laws of Alamosa today, except
that stockholders of Superholdings will not have the right to call a special
stockholders meeting. In addition, Superholdings will not have authority to
vote its shares of Alamosa common stock in favor of any disposition by Alamosa
of any shares of Alamosa (Delaware) without the approval of the stockholders of
Superholdings and may only vote its shares of Alamosa common stock on any other
matter on which such shares are entitled to vote with respect to the voting by
Alamosa of its shares of Alamosa (Delaware) common stock in proportion to, or
at the direction of, the vote of the stockholders of Superholdings.
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."
NEW CREDIT FACILITY
On December 20, 2000, Alamosa announced that Superholdings had entered
into a commitment letter with Citicorp North America, Salomon Smith Barney, TD
Securities, First Union National Bank and EDC providing for a new senior
secured credit facility of up to $305.0 million to be made to Alamosa Holdings,
LLC, a wholly-owned subsidiary of Alamosa (Delaware). The proceeds of the new
credit facility will be used (i) to pay the cash portion of the merger
consideration for the Roberts and WOW mergers, (ii) to refinance existing
indebtedness under Alamosa's $175.0 million credit facility with EDC and under
Roberts' and WOW's existing credit facilities, (iii) to pay transaction costs
and (iv) for general corporate purposes, including funding capital
expenditures, subscriber acquisition and marketing costs, purchase of spectrum
and working capital needs. The definitive agreements providing for the new
credit facility have not been completed. The commitment letter will terminate
on the earlier of March 31, 2001 and the date of execution and delivery of
definitive documentation with respect to the new credit facility.
The new credit facility will be embodied in an agreement among Alamosa
Holdings, LLC, as borrower; Citicorp USA, as administrative agent and
collateral agent; Salomon Smith Barney, as advisor, joint lead arranger and
joint book manager; TD Securities, as advisor, joint lead arranger, joint book
manager and syndication agent; EDC, as lead arranger and co-documentation
agent; First Union National Bank, as documentation agent; First Union
Securities, Inc., as lead arranger; the other parties thereto; and a syndicate
of banking and financial institutions reasonably acceptable to the arrangers
and Alamosa Holdings, LLC.
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The commitment to provide the new credit facility requires that, in
connection with the closing of the new credit facility and the reorganization:
o Alamosa Holdings, LLC will receive an equity contribution of
approximately $150.0 million from Alamosa and/or a subsidiary of
Alamosa, and Alamosa Holdings, LLC will, to the extent necessary,
contribute to Alamosa PCS, Inc., Roberts and WOW sufficient equity to
ensure a maximum debt to equity ratio of 1.0:1.0 for each of Alamosa
PCS, Inc., Roberts and WOW (the "APCS Contribution"),
o Superholdings will contribute 100% of the ownership interests in
Roberts and WOW to Alamosa Holdings, LLC, and
o Alamosa will contribute 100% of the equity interests in Alamosa PCS,
Inc. to Alamosa Holdings, LLC.
Additionally, the commitments by each of Citicorp North America, Salomon
Smith Barney, EDC, First Union National Bank, TD Securities and other lenders
which commit to provide the new credit facility to close and fund the new
credit facility are subject to a number of conditions, including usual and
customary conditions and the following, some of which are beyond the control of
Superholdings, Alamosa Holdings, LLC and their subsidiaries:
o the completion of, and satisfaction of each of Citicorp North
America, Salomon Smith Barney, EDC and TD Securities in all respects
with, the results of their ongoing due diligence investigation of the
business, assets, operations, properties, condition (financial or
otherwise), contingent liabilities, prospects and material agreements
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 or 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 or capital market conditions that, in
the reasonable judgment of each of Citicorp North America, Salomon
Smith Barney, EDC or TD Securities, could materially impair the
syndication of the new credit facility;
o the accuracy and completeness in all material respects of all
representations that Superholdings, Alamosa Holdings, LLC and their
affiliates make to each of Citicorp North America, Salomon Smith
Barney, EDC and TD Securities and all information that Superholdings,
Alamosa Holdings, LLC and their affiliates furnish to each of
Citicorp North America, Salomon Smith Barney, EDC and TD Securities;
o the payment in full of all fees, expenses and other amounts payable
in connection with the commitment letter;
o the satisfaction of Citicorp North America, Salomon Smith Barney, EDC
and TD Securities in all respects with (i) the structure of the
Roberts merger, the WOW merger, the Alamosa Merger, the APCS
Contribution, the contribution by Superholdings of the ownership
interests in Roberts and WOW to Alamosa Holdings, LLC, the
contribution by Alamosa of the equity interests in Alamosa PCS, Inc.
to Alamosa Holdings, LLC, the refinancing and termination of the
existing Alamosa, Roberts and WOW credit facilities, and all related
tax, legal and accounting matters, (ii) the material terms of the
definitive documentation with respect to the new credit facility, any
amendments to the material terms of the agreements relating to the
reorganization and all other agreements to be entered into in
relation to the reorganization and (iii) the capitalization,
structure and ownership of Superholdings, Alamosa Holdings, LLC,
Roberts and WOW after giving effect to the reorganization and the new
credit facility;
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o the satisfaction of Citicorp North America, Salomon Smith Barney, EDC
and TD Securities that Superholdings, Alamosa Holdings, LLC, Roberts
and WOW are not subject to material contractual or other restrictions
that would be violated by the reorganization, the transactions
contemplated by the reorganization, or the new credit facility,
including the granting of security interests and guarantees and the
payment of dividends by subsidiaries;
o the satisfaction of Citicorp North America, Salomon Smith Barney, TD
Securities and EDC with the timing and schedule for the
reorganization, the transactions contemplated by the reorganization
and the new credit facility;
o the compliance with the terms of the commitment letter and fee
letters for the new credit facility, in form and substance
satisfactory to Citicorp North America, Salomon Smith Barney, TD
Securities and EDC;
o until the closing for the new credit facility, neither Alamosa
Holdings, LLC nor any of its affiliates, will have borrowed an
aggregate principal amount in excess of $80.0 million under Alamosa's
existing credit facility;
o the consummation of the Alamosa merger, Roberts merger and WOW merger
immediately prior to, and the consummation of the other transactions
contemplated by the reorganization transaction and the new credit
facility simultaneously with, the closing under the new credit
facility in accordance with applicable law, the related
reorganization agreements and such other agreements satisfactory to
the lenders;
o the satisfaction of the lenders with the capital structure, ownership
and indebtedness of Superholdings, Alamosa Holdings, LLC and their
subsidiaries after giving effect to the Alamosa merger, Roberts
merger and WOW merger, the reorganization, the new credit facility
and the transactions contemplated by the mergers, reorganization and
new credit facility;
o the satisfaction of Citicorp North America, Salomon Smith Barney, TD
Securities and EDC that the transaction costs will not exceed $17.8
million;
o the consummation of the Alamosa merger, Roberts merger and WOW
merger, the reorganization, the new credit facility and the
transactions contemplated by the mergers, reorganization and new
credit facility will not violate any applicable law, statute, rule or
regulation or conflict with, result in a default under, or require
any repurchase offer under, any material indenture or other agreement
of Superholdings, Alamosa Holdings, LLC or any of their subsidiaries;
o there not being any litigation or administrative proceeding that
could reasonably be expected to have a material adverse effect on the
Alamosa merger, the Roberts merger, the WOW merger, the
reorganization, the new credit facility, or the transactions
contemplated by the mergers, reorganization or new credit facility;
o the satisfaction of the lenders that the rating of the senior,
unsecured, non-credit enhanced publicly-held, long-term indebtedness
for borrower money of Alamosa by each of Moody's Investors Service,
Inc. and Standard & Poor's Rating Service, a division of McGraw-Hill,
Inc., shall be no lower than Caa1 and CCC, respectively;
o there not being any default in any significant respect under
Alamosa's, Roberts' or WOW's affiliation agreements with Spring PCS;
and
o Citicorp USA, as administrative agent for the lenders, entering into
a consent and agreement, on terms satisfactory to Citicorp USA, with
Sprint PCS that modifies Sprint PCS's rights and remedies under
Alamosa's, Roberts' and WOW's affiliation agreements with Sprint PCS,
for the benefit of the lenders under the new credit facility and any
refinancing thereof.
Each of the foregoing conditions may be waived by the lenders at their option.
Prior to the termination of the commitments to provide the new credit
facility, any of Citicorp North America, Salomon Smith Barney, TD Securities.
or EDC may terminate the commitments to provide the new credit facility if any
event occurs or information becomes available that, in its reasonable judgment,
results or is likely to result in the failure to satisfy any condition to the
commitments, which condition is not, in the reasonable judgment of such person,
capable of being satisfied by March 31, 2001.
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<PAGE>
Superholdings' and Alamosa's obligations to complete the reorganization
are not conditioned upon the closing and funding of any loans under the new
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 new credit
facility."
The following is a summary of the anticipated principal terms of the new
credit facility as contained in the commitment letter.
The new credit facility will consist of:
o a 7-year senior secured 18-month delayed draw term loan facility in
an aggregate principal amount of up to $255.0 million; and
o a 7-year senior secured revolving credit facility in an aggregate
principal amount of up to $50.0 million, part of which will be
available in the form of letters of credit.
Under the new credit facility, interest will accrue, at Alamosa Holdings,
LLC's option: (i) at the London Interbank Offered Rate adjusted for any
statutory reserves ("LIBOR"), or (ii) the base rate which is generally the
higher of the administrative agent's base rate, the federal funds effective
rate plus 0.50% or the administrative agent's base CD rate plus 0.50%, in each
case plus an interest margin which initially will be 4.00% for LIBOR borrowings
and 3.00% for base rate borrowings. The applicable interest margins will be
subject to reductions under a pricing grid to be agreed upon based on ratios of
Alamosa Holdings, LLC's total debt to its earnings before interest, taxes,
depreciation and amortization ("EBITDA"). The interest rate margins will
increase by an additional 200 basis points in the event Alamosa Holdings, LLC
fails to pay principal, interest or other amounts as they become due and
payable under the new credit facility.
Alamosa Holdings, LLC will also be required to pay quarterly in arrears a
commitment fee on the unfunded portion of the commitment of each lender. The
commitment fee will accrue at a rate per annum equal to (i) 1.50% on each day
when the utilization (determined by dividing the total amount of loans plus
outstanding letters of credit under the new credit facility by the total
commitment amount under the new credit facility) of the new credit facility is
less than or equal to 33.33%, (ii) 1.25% on each day when utilization is
greater than 33.33% but less than or equal to 66.66% and (iii) 1.00% on each
day when utilization is greater than 66.66%
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 new revolving credit facility.
On the date on which the definitive documentation for the new credit
facility is executed and the reorganization is completed, $200.0 million must
be drawn under the new term loan facility while an additional $55.0 million in
term debt will be available for multiple drawings in amounts to be agreed for a
period of 18 months thereafter. Any amount outstanding at the end of the
18-month period will amortize quarterly in amounts to be agreed beginning three
years and three months following the completion of the reorganization. The new
revolving credit facility of $50.0 million will be available for multiple
drawings prior to its final maturity, provided that no amounts under the new
revolving credit facility will be available until all amounts under the new
term facility have been fully drawn. The new revolving credit facility will
begin reducing quarterly in amounts to be agreed beginning three years and
three months following the closing of the new credit facility. All advances
under the new credit facility will be subject to usual and customary
conditions, including actual and pro forma covenant compliance and the
requirement that the ratio of senior debt to net property, plant and equipment
for the most recent fiscal quarter will not exceed 1:1.
Loans under the new term loan portion of the new credit facility will be
subject to mandatory prepayments from 50% of excess cash flow (to be agreed
upon) for each fiscal year commencing with the fiscal year ending December 31,
2003, 100% of the net cash proceeds (subject to exceptions and reinvestment
rights to be agreed upon) of asset sales or other dispositions (including
insurance and condemnation proceeds) of property by Alamosa (Delaware) and its
subsidiaries, and 100% of the net
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proceeds of issuances of debt obligations of Alamosa (Delaware) and its
subsidiaries (subject to exceptions to be agreed upon). After the term loans
are repaid in full, mandatory prepayments will be applied to permanently reduce
commitments under the revolving credit portion of the new credit facility.
All obligations of Alamosa Holdings, LLC under the new credit facility
will be unconditionally guaranteed on a senior basis by Superholdings, Alamosa,
Alamosa (Delaware) and, subject to certain exceptions, by each current and
future direct and indirect subsidiary of Alamosa (Delaware), including Alamosa
PCS, Inc., Roberts and WOW.
The new credit facility will be secured by a first priority pledge of all
of the capital stock of Alamosa Holdings, LLC and subject to certain
exceptions, each current and future direct and indirect subsidiary of Alamosa
(Delaware), as well as a first priority security interest in substantially all
of the assets (including all of the Sprint affiliation agreements with Alamosa,
Roberts and WOW) of Alamosa (Delaware) and, subject to certain exceptions, each
current and future direct and indirect subsidiary of Alamosa (Delaware).
The new credit facility contains customary events of default, including,
but not limited to:
o the non-payment of the principal, interest and other obligations
under the new credit facility;
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;
o bankruptcy;
o material judgments and certain events relating to compliance with the
Employee Retirement Income Security Act of 1974 and related
regulations;
o actual or asserted invalidity of the security documents or guaranties
of the new credit facility;
o loss of rights to benefit of or the occurrence of any default under
other material agreements that could reasonably be expected to result
in a material adverse effect on Alamosa Holdings, LLC;
o the occurrence of a change of control (to be agreed upon); 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, licences and other
agreements between any of Alamosa, WOW, Roberts and their
subsidiaries and Sprint PCS or under the consent and agreement to be
entered into between Citicorp USA, Inc., as administrative agent for
the lenders, and Sprint PCS.
The new credit facility will contain numerous affirmative and negative
covenants customary for credit facilities of a similar nature, including, but
not limited to, negative covenants imposing limitations on the ability of
Alamosa (Delaware), Alamosa Holdings, LLC and their subsidiaries, and as
appropriate, Superholdings, to, among other things, (i) declare dividends or
repurchase stock; (ii) prepay, redeem or repurchase debt; (iii) incur liens and
engage in sale-leaseback transactions; (iv) make loans and investments; (v)
incur additional debt, hedging agreements and contingent obligations; (vi)
issue preferred stock of subsidiaries; (vii) engage in mergers, acquisitions
and asset sales; (viii) engage in certain transactions with affiliates; (ix)
amend, waive or otherwise alter material agreements or enter into restrictive
agreements; and (x) alter the businesses they conduct.
Alamosa Holdings, LLC will also be subject to financial covenants,
including, but not limited to, the following financial covenants which will
apply for an initial period of time until it anticipates achieving positive
cash flows, including:
o minimum numbers of Sprint PCS subscribers;
o providing coverage to a minimum number of residents;
o minimum revenue;
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o maximum negative EBITDA;
o ratio of senior debt to total capital;
o ratio of total debt to total capital; and
o maximum capital expenditures.
After Alamosa Holdings, LLC has achieved positive cash flows, the
financial covenants will include, but not be limited to, the following:
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; and
o ratio of EBITDA to total cash interest expense for the most recent
period of four fiscal quarters.
Unless waived by the new credit facility lenders, the failure of
Superholdings, Alamosa Holdings, LLC and their subsidiaries to satisfy or
comply with any of the financial or other covenants, or the occurrence of an
event of default under the new credit facility, will entitle the lenders to
declare the outstanding borrowings under the new credit facility immediately
due and payable and exercise all or any of their other rights and remedies. Any
such acceleration or other exercise of rights and remedies would likely have a
material adverse effect on Superholdings, Alamosa, Alamosa (Delaware), Alamosa
Holdings, LLC and their subsidiaries.
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.
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:
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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.
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, if any);
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.
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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.
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.
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.
On November 22, 2000, the FCC issued the public notice of its consent to
the transfer of control of WOW's microwave licenses. With this notice, the
parties have the approval required from the FCC to complete the WOW merger. The
FCC's consent became a "final order" on January 2, 2001.
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--Post-Closing
Agreements--"Lock-up" Agreement."
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.
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 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
amended and restated certificate of incorporation and the amended and restated
by-laws of Alamosa in effect at the effective time will be certificate of
incorporation and by-laws of the surviving corporation.
CONVERSION OF SHARES
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.
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 on the closing date of the Alamosa merger.
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. However, Superholdings or Alamosa may delay
the closing, but not beyond March 31, 2001, in order to achieve satisfaction or
waiver of the conditions contained in one or more "sister agreement." 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 in the reorganization.
CONDITIONS TO THE ALAMOSA MERGER
The obligations of Alamosa, Superholdings and Alamosa Sub to complete the
Alamosa merger are subject to a number of conditions, including:
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 amended and restated
certificate of incorporation, amended and restated by-laws and
applicable law;
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 (this waiting period expired on September 9, 2000);
o there being 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.
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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 to be issued to Alamosa stockholders
in the Alamosa merger, together with any dividends or distributions with
respect thereto with a record date after the effective time of the Alamosa
merger.
As soon as practicable after the completion of the reorganization, a
transmittal letter will be mailed by the exchange agent to each Alamosa
stockholder. This transmittal letter will contain instructions for the
surrender of certificates representing Alamosa common stock in exchange for
shares of Superholdings common stock. Alamosa stockholders should complete and
sign the letter of transmittal and return it to the exchange agent together
with their stock certificates in accordance with the instructions.
YOU SHOULD NOT RETURN YOUR ALAMOSA COMMON STOCK CERTIFICATES WITH THE
ENCLOSED PROXY AND YOU SHOULD NOT FORWARD THEM TO THE EXCHANGE AGENT UNTIL YOU
RECEIVE A LETTER OF TRANSMITTAL AFTER COMPLETION OF THE REORGANIZATION.
In each case, taxes will be withheld as required. No interest will be paid
or accrued 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.
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 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 Alamosa's 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.
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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 consents as
are necessary for the completion 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. As a result of the
outstanding $14.5 million loan from Alamosa Operations to Roberts Tower,
Alamosa expects to withhold the full $4.0 million in cash consideration to be
applied against the outstanding balance of this loan.
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 amended and restated
certificate of incorporation, amended and restated by-laws and
applicable law;
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
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o the satisfaction of all conditions to the completion of the Alamosa
merger, except the condition precedent to the Alamosa merger 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.
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 reorganization agreement must be true and correct at the
closing, except as affected by the reorganization 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."
The 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 Operations
under the services agreement between Alamosa Operations and
Roberts.
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.
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.
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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 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."
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The Roberts 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 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.
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.
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;
o not 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. 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:
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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 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:
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.
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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
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 as
agreed to by the parties. The total amount of cash to be received by Michael
and Steven Roberts in conjunction with the asset transfers and as 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. Such
resale agreement may only be entered into by the parties in accordance with the
terms of their affiliation agreements with Sprint PCS. The failure to enter into
this resale agreement, for any reason, will not be a breach of the Roberts
reorganization agreement.
PAYMENT OF PENALTIES TO SPRINT PCS. Superholdings may be required to make
certain payments to Sprint PCS pursuant to the Roberts management agreement
with Sprint Spectrum, LP and SprintCom, Inc. at the closing of the
reorganization. For more information on these payments, see "Affiliations
Agreements with Sprint PCS--The Management Agreements--Network Build Out."
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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.
"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. 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 Michael and Steven Roberts executes, then Michael and Steven
Roberts may substitute the more preferable "lock-up" agreement in its entirety
for such "lock-up" agreement.
RESALE REGISTRATION STATEMENT. 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 must be replaced by any more
beneficial terms that may be contained in any reorganization agreement whereby
another business entity joins in 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 the conditions to Alamosa's and Superholdings' obligations to
complete the 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;
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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 the conditions to Roberts' obligations to complete 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.
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 holders of the requisite number of
membership interests of Roberts Holdings in the manner required pursuant to
Roberts Holdings' organizational documents and applicable law, 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
amended and restated certificate of incorporation and amended and restated
by-laws, Delaware law or the rules of the 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.
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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 a cash payment in 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;
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 other
transaction documents.
SURVIVAL OF REPRESENTATIONS
The representations and warranties of Alamosa, Superholdings, Alamosa Sub
and the members of Roberts Holdings 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. The representations and warranties of Roberts and Roberts Holdings
will be extinguished at the closing of the Roberts merger. 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
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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:
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 and the loan agreement between Alamosa
Operations and Roberts Tower Company are qualified in their entirety by
reference to the complete text of the loan agreement and services agreement
between Alamosa Operations and Roberts and the loan agreement between Alamosa
Operations and Roberts Tower Company, 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;
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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 of the Roberts merger, subject to earlier termination
in certain circumstances.
LOAN AGREEMENT BETWEEN ALAMOSA OPERATIONS AND THE MEMBERS OF ROBERTS
HOLDINGS. On June 30, 2000, Alamosa Operations entered into a $10.0 million
loan agreement with Michael and Steven Roberts. The proceeds from this loan
were used to fund capital and operation requirements of Roberts and Roberts
Tower.
LOAN AGREEMENT BETWEEN ALAMOSA OPERATIONS AND ROBERTS. In connection with
Alamosa entering into the Roberts reorganization agreement, Alamosa Operations
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.
On July 31, 2000, Roberts and Alamosa Operations entered into a loan
agreement whereby Alamosa Operations agreed to lend up to $20.0 million to
Roberts, to be used only for the purposes of repaying certain amounts owed by
Michael and Steven Roberts under their June 30 loan agreement with Alamosa
Operations and 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, $20.0 million has been funded under the loan agreement.
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.
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.
LOAN AGREEMENT BETWEEN ALAMOSA OPERATIONS AND ROBERTS TOWER COMPANY. On
October 18, 2000, Roberts Tower Company and Alamosa Operations entered into a
loan agreement whereby Alamosa Operations agreed to lend up to $15.0 million to
Roberts Tower Company, to be used only for the purposes of repaying certain
amounts owed by Michael and Steven Roberts under their June 30 loan agreement
with Alamosa Operations and funding the construction of wireless
telecommunications towers to be leased by Roberts through the completion of the
Roberts merger. As of the date of this proxy statement-prospectus,
approximately $14.5 million has been funded under the loan agreement.
The loan bears interest at the lesser of (i) the maximum lawful rate under
applicable law and (ii) 12% and is due on the earlier of (i) March 31, 2001,
(ii) the closing date of the Roberts merger, or (iii) upon acceleration.
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Pursuant to the Roberts Tower loan agreement, Michael and Steven Roberts
agreed that, if the Roberts merger is not completed and all sums due under the
Roberts Tower loan agreement and related documents are not paid in full to
Alamosa Operations, Michael and Steven Roberts will cause Roberts Holdings to
assign, transfer and convey to Alamosa Operations all or a portion of its
membership interests in Roberts so that Alamosa Operations owns, on a fully
diluted basis, 10% of the total membership interests in Roberts, free and clear
of all liens and encumbrances, other than the pledge of and lien on such
interests to secure the obligations under the loan agreement, dated as of
September 8, 1999, between Roberts and DLJ (as successor to Lucent
Technologies, Inc.). If the fair market value of the 10% membership interest in
Roberts is determined to be equal to or greater than the obligations under the
Roberts Tower loan agreement, then the 10% membership interest in Roberts will
be transferred to Alamosa Operations in full satisfaction of the obligation of
Roberts Tower to repay the Roberts Tower loan. If the fair market value of the
10% membership interest is determined to be less than the obligations under the
Roberts Tower loan agreement, then the fair market value of the 10% membership
interest will be applied towards the payment of the Roberts Tower obligations
under the Roberts Tower loan agreement. The fair market value of the 10%
membership interest will be determined jointly by an investment banker selected
by Alamosa Operations and an investment banker selected by Roberts Tower.
In addition, if the Roberts merger is completed but all sums due under the
Roberts Tower loan agreement and related documents are not paid in full to
Alamosa Operations, Alamosa Operations may retain all or a portion of the cash
and Superholdings common stock payable to the Roberts brothers as consideration
in the Roberts merger and apply such cash and stock towards payment of the
amounts due under the loan, or, in the alternative, Alamosa Operations may
require the Roberts brothers to pledge such shares of Superholdings common
stock in a margin account or similar loan arrangement and tender the proceeds
of such loan to Alamosa Operations in repayment of the amounts due under the
loan.
In connection with the Roberts Tower loan, Michael and Steven Roberts have
given personal guarantees to assure the payment of the Roberts Tower loan by
Roberts Tower Company.
Roberts Tower Company also issued a warrant entitling Alamosa Operations
to purchase 50 shares of Roberts Tower Company common stock for $1.00 per
share, which represents 5% of the outstanding common stock of Roberts Tower
Company.
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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 those members of WOW Holdings who are parties to the
WOW reorganization agreement.
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) up to $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 up to $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 amended and restated
certificate of incorporation, amended and restated by-laws and
applicable law;
o the approval of the issuance of shares of Superholdings common stock
in the WOW 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 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 the satisfaction of all conditions to the completion of the Alamosa
merger, except the condition precedent to the Alamosa merger 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.
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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
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."
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 registration
statement on 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."
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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 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 as of September 1, 2000, 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."
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;
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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.
COVENANTS REGARDING COMPLETION OF THE TRANSACTION
SATISFACTION OF CONDITIONS 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.
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.
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
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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 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 any of 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";
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 the conditions to Alamosa's and Superholdings' obligations to
complete 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";
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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 the conditions to WOW's obligations to complete 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 was not adopted by holders of the requisite number of
membership interests of WOW Holdings in the manner required pursuant to WOW
Holdings' organizational documents and applicable law, 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 amended and restated
certificate of incorporation and amended and restated by-laws, Delaware law and
the rules of 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;
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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; and
o accuracy of the representations and warranties contained in all other
transaction documents.
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, 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. The
representations and warranties of WOW and WOW Holdings will be extinguished at
the closing of the WOW merger. 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 who are parties to the WOW reorganization agreement, 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.
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At any time prior to the completion of the WOW merger the parties may:
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.
POST-CLOSING AGREEMENTS
"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 each WOW member may substitute the more
preferable "lock-up" agreement in its entirety for such "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.
RESALE REGISTRATION STATEMENT. 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 (i) the first day the registration statement becomes effective and
(ii) October 1, 2001. These registration rights must be replaced by any more
beneficial terms that may be contained in any reorganization agreement whereby
another business entity joins in the reorganization.
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;
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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 completion of the WOW merger, subject to earlier termination in
certain circumstances.
LOAN AGREEMENT BETWEEN ALAMOSA OPERATIONS AND WOW. In connection with
Alamosa entering into 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.
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 $8.3 million 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. This loan is guaranteed by four members of
WOW Holdings owning in the aggregate in excess of 67% of the membership
interests 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
Silpearl Associates, LLC, 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 a director, the President and a 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 twenty additional markets: Albuquerque, Santa Fe and
Las Cruces, New Mexico; El Paso, Lubbock, Amarillo, Midland, Odessa, Abilene,
San Angelo and Eagle Pass-Del Rio, Texas; Flagstaff and Prescott, Arizona;
Grand Junction and Pueblo, Colorado; and Appleton-Oshkosh, Green Bay, Fond du
Lac, Manitowoc and Sheboygan, Wisconsin. Alamosa's systems cover approximately
4.4 million residents out of approximately 8.4 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 December 31, 2000, 132,940 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 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 Telecommunications, 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
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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.
On December 14, 2000, Alamosa formed a new holding company pursuant to a
merger under Section 251(g) of the Delaware General Corporation Law whereby
Alamosa was merged with a direct wholly owned subsidiary of a new holding
company, which was a direct wholly owned subsidiary of Alamosa. Each share of
the former Alamosa PCS Holdings, Inc. was converted into one share of the new
holding company and the former public company became a wholly owned subsidiary
of the new holding company. The Section 251(g) transaction did not require any
vote of the Alamosa stockholders. Upon effectiveness of the Section 251(g)
transaction, Alamosa's name was changed to Alamosa (Delaware), Inc. and the new
holding company's name was changed to Alamosa PCS Holdings, Inc. The common
stock of the new holding company is quoted on The Nasdaq National Market under
the same symbol used by Alamosa, "APCS."
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."
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.
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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
September 30, 2000, Alamosa had 91,443 Sprint PCS subscribers.
<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
Farmington,
139 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
</TABLE>
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<TABLE>
<CAPTION>
BTA NO. (1) TERRITORY STATE ESTIMATED TOTAL RESIDENTS (2)
------------- -------------------------- --------------------- ------------------------------
<S> <C> <C> <C>
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
Stevens
Point-Marshfield-
432 Wisconsin Rapids Wisconsin 214,597
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>
CUMULATIVE
ESTIMATED ESTIMATED COVERED
EXPECTED COMMERCIAL TOTAL CUMULATIVE RESIDENTS
LAUNCH DATE BY LICENSED COVERED AS A % OF TOTAL
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 2,014,074 4,530,401 54%
Colorado Springs (4) Colorado
Flagstaff Arizona
Grand Junction Colorado
Prescott Arizona
Pueblo Colorado
Appleton-Oshkosh Wisconsin
Fond du Lac Wisconsin
Green Bay Wisconsin
Manitowoc Wisconsin
Milwaukee (4) Wisconsin
Sheboygan Wisconsin
1ST QUARTER 2001 293,098 4,748,401 56%
El Centro-Calexico California
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
Wisconsin/
La Crosse-Winona Minnesota
Las Vegas (4) Arizona
Madison (4) Wisconsin
Minneapolis-St. Paul
(4) Minnesota
Phoenix (4) Arizona
San Diego (4) California
Sierra Vista-Douglas Arizona
</TABLE>
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<TABLE>
<CAPTION>
CUMULATIVE
ESTIMATED ESTIMATED COVERED
EXPECTED COMMERCIAL TOTAL CUMULATIVE RESIDENTS
LAUNCH DATE BY LICENSED COVERED AS A % OF TOTAL
QUARTER (1) TERRITORY STATE RESIDENTS (2) RESIDENTS (3) RESIDENTS
--------------------- -------------------- ----------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Stevens Point-
Marshfield-
Wisconsin Rapids Wisconsin
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 Alamosa's territory have roaming capabilities on other
networks. Alamosa has a network monitoring
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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 September 30, 2000, Alamosa's portion of the Sprint PCS network
included 266 base stations and four 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 September 30, 2000,
Alamosa had remaining commitments of $39.2 million under the Nortel equipment
agreement. These purchases may be financed pursuant to the EDC credit facility,
or, after the reorganization, pursuant to the new 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
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
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between Hicks R 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 the agreements were executed, the Chairman,
Chief Executive Officer, a director and shareholder of CHR Solutions. Mr.
Sharbutt no longer holds any of these positions at CHR Solutions. Those
agreements include the following:
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 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 January 28, 2000, Alamosa 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.
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:
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:
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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.
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.
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
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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 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.
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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 September 30, 2000, Alamosa owned and
operated 15 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 September 30, 2000, RadioShack had approximately 219 stores in
Alamosa's territory.
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:
<TABLE>
<S> <C>
o AAFES; o Edge in Communications;
o Audio Express; o K-Mart;
o Best Buy; o Dillards;
o Circuit City; o Foley's;
o Office Depot; o Ritz Camera;
o Office Max; o Kaufmann's; and
o Staples; o TSR Wireless.
o Heilig Meyer;
o Target;
</TABLE>
As of September 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
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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 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
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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 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 division multiple access handsets that support either the
time division multiple access or global system for mobile communications
technologies.
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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
communications needs satisfied by other current and developing technologies.
One- or two-way paging or beeper services that feature voice messaging and data
display as well as tone-only service may be adequate for potential customers
who do not need to speak to the caller.
In the future, 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
subscribers. Some of Alamosa's competitors also have established
infrastructures, marketing programs and brand names. In addition, some of
Alamosa's competitors may
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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.
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 September 30, 2000, Alamosa employed 503 full-time employees. None
of Alamosa's employees are represented by a labor union. Alamosa believes that
its relations with its employees are good.
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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 September 30, 2000, Alamosa had 15 Sprint
PCS retail stores and four switching centers. As of September 30, 2000, Alamosa
leased space on 266 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.
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 September 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 September 30, 2000, our accumulated deficit was $79.7
million. Through September 30, 2000, we incurred $200.3 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 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 twenty additional markets:
Albuquerque, Santa Fe and Las Cruces, New Mexico; El Paso, Lubbock, Amarillo,
Midland, Odessa, Abilene, San Angelo and Eagle Pass-Del Rio, Texas; Flagstaff
and Prescott, Arizona; Grand Junction and Pueblo, Colorado; and
Appleton-Oshkosh, Green Bay, Fond du Lac, Manitowoc and Sheboygan, Wisconsin.
Our systems cover approximately 4.4 million
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residents out of approximately 8.4 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
September 30, 2000, 91,443 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.
RESULTS OF OPERATIONS--FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2000
COMPARED TO THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1999
Alamosa launched its first wireless PCS network in Laredo, Texas, on June
21, 1999. Additionally, Alamosa launched wireless service in Las Cruces, New
Mexico and El Paso, Lubbock, Amarillo, Midland and Odessa, Texas during the
third quarter of 1999. Because of this very limited time of operations for the
quarter and nine months ended September 30, 1999, comparisons with the same
period of 2000 may not be meaningful.
NET LOSS. Our net loss for the quarter ended September 30, 2000 was
$17,470,158 compared to our net loss of $11,925,857 for the quarter ended
September 30, 1999. Our net loss for the nine months ended September 30, 2000
was $45,957,833 compared to our net loss of $17,688,419 for the nine months
ended September 30, 1999.
SERVICE REVENUES. Service revenues during the quarter and nine months
ended September 30, 2000 in the amounts of $20,754,150 and $45,900,325,
respectively, were comprised of subscriber revenue of $14,940,990 and
$32,771,109, respectively, and roaming revenue of $5,813,160 and $13,129,216,
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.
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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 nine months ended September 30, 2000, average monthly revenue per
user including roaming revenue was approximately $85. Without roaming revenue,
average monthly revenue per unit was approximately $60. For the quarter ended
September 30, 2000, our average monthly revenue per user including roaming
revenue, was approximately $87 and without roaming revenue was approximately
$63.
PRODUCT SALES. 100% of the revenue from the sale through our retail stores
(including sales to local indirects) of handsets and accessories net of an
allowance for returns, are recorded as product sales. Product sales during the
quarter ended September 30, 2000 totaled $2,228,949 as compared to $779,464 for
the quarter ended September 30, 1999. For the nine months ended September 30,
2000, product sales totaled $6,001,373 compared to $813,052 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 $14,919,232 during the
quarter ended September 30, 2000 related to providing wireless services to
customers. These expenses totaled $1,559,553 for the quarter ended September
30, 1999. For the nine months ended September 30, 2000 and 1999, these expenses
totaled $33,369,794 and $2,227,872, 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 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 $4,604,697 during
the quarter ended September 30, 2000 and $ 1,811,780 for the quarter ended
September 30, 1999. The cost of products sold totaled $11,636,860 and
$1,844,238 for the nine months ended September 30, 2000 and 1999, respectively.
These amounts include the total cost of accessories and handsets sold through
our retail stores (including sales to local indirects). The cost of handsets
exceeds the retail sales price because we subsidize the price of handsets for
competitive reasons. The handset subsidy included in cost of products sold
through our retail stores totaled $2,466,449 and $1,053,882 for the quarters
ended September 30, 2000 and 1999, respectively. For the nine months ended
September 30, 2000, the handset subsidy totaled $5,823,615 and $1,059,968 for
the nine months ended September 30, 1999.
SELLING AND MARKETING. Selling and marketing expenses totaled $11,566,835
during the quarter ended September 30, 2000 and $3,247,200 during the quarter
ended September 30, 1999. For the nine months ended September 30, 2000 and
1999, selling and marketing expenses totaled $25,761,765 and $4,203,078,
respectively. Sales and marketing expenses include advertising expenses,
promotion costs, sales commissions and expenses related to our distribution
channels and handset subsidy paid to Sprint PCS for customers based in our
territory that purchase handsets through Sprint PCS or its national retailers.
We incur handset subsidy expense, in addition to that incurred through our
retail stores, from other sales channels such as E-commerce, telemarketing and
Sprint PCS national resellers. The handset subsidy incurred from sources other
than our retail stores is included in selling and marketing. The amount of
handset subsidy included in selling and marketing totaled $970,738 for the
quarter ended September 30, 2000 and $300,771 for the quarter ended September
30, 1999. For the nine months ended September 30, 2000 and 1999, handset
subsidy included in selling and marketing totaled $3,232,415 and $343,494,
respectively.
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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 $2,986,753 for the
quarter ended September 30, 2000 and $1,723,650 for the quarter ended September
30, 1999. For the nine months ended September 30, 2000, these expenses amounted
to $6,443,953 and $3,149,453 for the nine months ended September 30, 1999.
During the nine months ended September 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
$511,116 for the quarter ended September 30, 2000 and $4,028,205 for the
quarter ended September 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 nine
months ended September 30, 2000 was $5,404,862 and $6,822,037 for the nine
months ended September 30, 1999.
RELATED PARTY EXPENSES. Related party expenses totaled $550,743 for the
quarter ended September 30, 2000 and $428,983 for the quarter ended September
30, 1999. Related party expenses totaled $1,466,950 and $654,135 for the nine-
month periods ended September 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 September 30, 2000 totaled $3,015,497 and $809,680 for the
quarter ended September 30, 1999. For the nine month periods ended September
30, 2000 and 1999, depreciation and amortization expenses totaled $7,763,434
and $936,736, 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 $4,112,352
and $103,675 during the quarters ended September 30, 2000 and 1999,
respectively, and $10,834,815 and $444,746 for the nine months ended September
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 $6,961,479 during the quarter
ended September 30, 2000 and $750,489 for the quarter ended September 30, 1999.
For the nine months ended September 30, 2000, interest expense totaled
$18,313,678 as compared to $885,868 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 and the EDC credit facility.
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.
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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.
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 $5,938,838
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 included in cost of products sold
through our retail stores totaled $3,535,532.
SELLING AND MARKETING. Selling and marketing expenses totaled $10,810,946
during the period. Sales and marketing expenses include advertising expenses,
promotion costs, sales commissions and expenses related to our distribution
channels and a handset subsidy paid to Sprint PCS for customers based in our
territory that purchase handsets through Sprint PCS or its national retailers.
We incur handset subsidy expense, in addition to that incurred through our
retail stores, from other sales channels such as E-commerce telemarketing and
Sprint PCS national resellers. The handset subsidy incurred from sources other
than our retail stores is included in selling and marketing. The amount of
handset subsidy included in selling and marketing, totaled $1,487,898 for the
period ended December 31, 1999.
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.
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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.
RESULTS OF OPERATIONS--FOR THE PERIOD JULY 16, 1998 (INCEPTION) THROUGH
DECEMBER 31, 1998
REVENUE, 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.
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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 amount of $175.0
million. The terms and conditions of the EDC credit facility 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 September 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.
In connection with the reorganization, Superholdings entered into a
commitment letter to provide for a new credit facility. Part of the proceeds of
the new credit facility will be used to refinance the EDC credit facility.
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 September
30, 2000, we had remaining commitments of $39.2 million under the Nortel
equipment agreement. These purchases from Nortel may be financed pursuant to
the EDC credit facility, or, after the reorganization, pursuant to the new
credit facility.
On February 4, 2000, we issued a $350.0 million face amount of senior
discount notes. The senior discount notes mature in ten years (February 15,
2010), carry a coupon rate of 127/8%, and provide for interest deferral for the
first five years. The senior discount notes will accrete to their $350 million
face amount by February 8, 2005, after which interest will be paid in cash
semiannually. See "-- Description of Our Indebtedness: Senior Discount Notes."
Net cash used in operating activities was $15,175,605 and $9,338,888 for
the nine months ended September 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 $121,269,132 for the nine months
ended September 30, 2000, and $18,784,600 for the nine months ended September
30, 1999. The cash used for the nine months ended September 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 payment for network build-out and related costs under notes receivable from
Roberts and its owners. The cash used for the nine months ended September 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 the purchase of office
equipment, telephone equipment and network infrastructure needed to begin
construction of our portion of the Sprint PCS network.
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Net cash provided by financing activities for the nine months ended
September 30, 2000 was $303,422,504, 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 $22,048,720 for the nine months ended September 30, 1999 and was
primarily related to capital contributions by our investors and borrowings from
our Nortel credit facility.
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 September 30, 2000, the primary sources of liquidity for Alamosa
were approximately $173.0 million in cash 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 September 30, 2000 the capital leases
totaled $832,683 and included long-term capital lease obligations of $809,173.
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.
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. The implementation of FIN
44 did not 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
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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 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 September 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
September 30, 2000, we had remaining commitments of $39.2 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 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.
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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.
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.
In connection with the reorganization, Superholdings entered into a
commitment letter with Citicorp, Salomon, EDC, First Union National Bank and TD
Securities providing for a new credit facility of up to $305 million. See "The
Reorganization--New Credit Facility." Part of the proceeds of the new credit
facility will be used to refinance the EDC credit facility.
CONSENT AND AGREEMENT FOR THE BENEFIT OF THE HOLDERS OF THE EDC CREDIT FACILITY
Sprint PCS has entered into two consents and agreements with Nortel, that
Nortel assigned to EDC and which have been acknowledged by us, that modify
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. The assignment of these
consents and agreements to EDC was a condition to the funding of any amounts
under the EDC credit facility. The consents and agreements with EDC generally
provide, 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 consents and agreements.
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.
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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.
As a condition precedent to the closing and funding of the new credit
facility, Sprint PCS must enter into a similar consent and agreement with
Citicorp USA, as administrative agent for the lenders, with respect to certain
rights of Sprint PCS's under the Alamosa, Roberts and WOW management agreements
with Sprint PCS.
For a more complete description of the consents and agreements, see
"Affiliation Agreements with Sprint PCS--Consents and Agreements for the
Benefit of the Lenders to the Sprint Network Partners."
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.
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
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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:
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 Credit Facility 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) ................. $ 54 $ 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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<PAGE>
----------
(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 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 .............. 46 Senior Vice President of Corporate Finance
Anthony Sabatino .............. 38 Chief Technology Officer and Senior Vice President
of Engineering and Network Operations
Michael R. Budagher ........... 42 Director
Ray M. Clapp, Jr .............. 40 Director
Scotty Hart ................... 50 Director
Thomas Hyde ................... 55 Director
Schuyler B. Marshall .......... 55 Director
Tom M. Phelps ................. 51 Director
Reagan W. Silber .............. 39 Director
Jimmy R. White ................ 61 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 was employed by CHR Solutions as a
Senior Consultant from October 1999 until November 2000. He was employed by CHR
Solutions from 1977 through 1999, where he 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 W. 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 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
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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 Chief Technology Officer
and 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 to 1999. 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. Since 1998, Mr. Hyde has served as Manager of Taylor Telephone
Cooperative, Inc., a landline telephone service provider, and from 1996 to 1997
he served as Assistant Manager of that company. He has also served as Manager
of Taylor Telecommunications, Inc., a cellular service provider. Prior to 1996,
Mr. Hyde was self- 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
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<PAGE>
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. Mr. Phelps has served as Chief Executive Officer of Nebraska
Wireless since October 2000. From September 1997 to October 2000 he served as
Executive Vice President and General Manager of ENMR Telephone Cooperative, a
telecommunications services provider, and of Telecommunications Holdings East,
since September 1997. From September 1997 to October 2000 Mr. Phelps was also
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. Mr. Silber is also on the board of managers of WOW. Mr.
Silber is a principal of Silpearl Associates, LLC, an affiliate of WOW
Investment Partners, L.P. which owns approximately 44.4% of the outstanding
membership interests of WOW Holdings.
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, since 1975. 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.
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;
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<PAGE>
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.
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.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------- --------------------------------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS OPTION 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.
(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.
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<PAGE>
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
----------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES IN PRICE
NAME OPTIONS (1) FISCAL YEAR (PER SHARE)
--------------------------- ------------- -------------- -------------
<S> <C> <C> <C>
David E. Sharbutt ......... 242,500 5% $ 1.15
1,455,000 29% $ 17.00
Jerry W. Brantley ......... 242,500 5% $ 1.15
1,455,000 29% $ 17.00
Kendall W. Cowan .......... 1,455,000 29% $ 17.00
W. Don Stull (3) .......... 48,500 1% $ 1.13
48,500 1% $ 1.25
48,500 1% $ 1.42
<CAPTION>
POTENTIAL
POTENTIAL REALIZABLE
REALIZED VALUE AT ASSUMED
VALUE AT ANNUAL RATE OF
INITIAL PUBLIC STOCK PRICE
EXPIRATION OFFERING PRICE APPRECIATION
NAME DATE OF $17($) FOR OPTION TERM (2)
--------------------------- ------------ ---------------- ---------------------------------
<S> <C> <C> <C> <C>
5%($) 10%($)
----------- -----------
David E. Sharbutt ......... 1/5/2009 3,843,625 6,436,243 10,413,828
1/5/2009 -- 15,555,709 39,421,220
Jerry W. Brantley ......... 1/5/2009 3,843,625 6,436,243 10,413,828
1/5/2009 -- 15,555,709 39,421,220
Kendall W. Cowan .......... 1/5/2009 -- 15,555,709 39,421,220
W. Don Stull (3) .......... 12/31/2006 769,714 1,288,238 2,083,755
12/31/2006 763,987 1,282,510 2,078,027
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.
(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 OPTION/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."
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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.
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
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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.
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
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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 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 COMMITTE 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.
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;
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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 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 no longer holds any of these positions at 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.
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 is a standard agency
agreement
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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.
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. 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.
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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 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
Upon completion of the reorganization, Michael and Steven Roberts will
become directors of Superholdings. Set forth below is a description of certain
agreements between Alamosa and its affiliates and Michael and Steven Roberts
and their affiliates.
MEMBERS OF ROBERTS HOLDINGS. On June 30, 2000, Alamosa Operations (as
lender) entered into a loan agreement with Michael and Steven Roberts (as
borrowers) whereby Alamosa Operations agreed to lend $10.0 million to Michael
and Steven Roberts. The proceeds from this loan were used to fund capital and
operation requirements of Roberts and Roberts Tower Company.
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.
ROBERTS TOWER LOAN AGREEMENT. On October 18, 2000, Alamosa Operations (as
lender) and Roberts Tower Company (as borrower) entered into a loan agreement
whereby Alamosa Operations agreed to lend up to $15.0 million to Roberts Tower
Company, to be used only for the purposes of repaying all amounts owed by
Michael and Steven Roberts under the loan agreement dated June 30, 2000,
between
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Michael and Steven Roberts (as borrowers) and Alamosa Operations (as lender)
and funding the construction of wireless telecommunications towers related to
Roberts through the completion of the Roberts merger.
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. Such
resale agreement may only be entered into by the parties in accordance with the
terms of their affiliation agreements with Sprint PCS.
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."
ROBERTS MASTER LEASE AGREEMENT. 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
Company, a corporation owned and operated by 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 six additional
markets: Joplin, Rolla, Kansas City, St. Joseph, Sedalia, and Springfield,
Missouri. Springfield and Jefferson City are located within the region known as
Lake of the Ozarks. Roberts' systems cover approximately 390,000 residents out
of approximately 636,500 total residents in those markets. Roberts expects to
cover a total of approximately 1.7 million residents by January 2001, 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 December 31, 2000, Roberts served approximately 23,594 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.
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, L.L.C."
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 September 30, 2000, its
accumulated deficit was $17 million. Through September 30, 2000, Roberts
incurred $72.9 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 six
additional markets: St. Joseph, Sedalia, Joplin, Rolla, Kansas City, and
Springfield, Missouri. Springfield and Jefferson City are located within the
region known as 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 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
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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 the 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 NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 1999
Because of the very limited time of operations for the nine months ended
September 30, 1999, comparisons with the same period of 2000 may not be
meaningful.
NET LOSS. Roberts' net loss for the nine months ended September 30, 2000
was $8,758,044 and consisted primarily of the cost of launching its St. Joseph,
Lake of the Ozarks, and Sedalia markets, plus operation of its master switching
center. Roberts' net loss for the nine months ended September 30, 1999 was
$2,780,761 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 nine months ended
September 30, 2000 and September 30, 1999, were in the amount of $8,560,002 and
$1,245,467, 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
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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 $92
for the period from January 1 to September 30, 2000 and approximately $100 for
the period from January 21 to September 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 nine month period ended September 30, 2000
totaled $747,956 as compared to $151,004 for the nine month period ended
September 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.
COST OF SERVICES. Expenses totaling $6,281,512 during the nine-month
period ended September 30, 2000 related to providing wireless services to
customers. These expenses totaled $1,153,509 for the nine-month period ended
September 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 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 $1,410,706 during
the nine-month period ended September 30, 2000 and $195,931 for the nine-month
period ended September 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 nine months ended September 30, 2000, the handset
subsidy totaled $566,354 as compared to $36,766 for the nine months ended
September 30, 1999.
SELLING AND MARKETING. For the nine months ended September 30, 2000 and
1999, selling and marketing expenses totaled $2,954,625 and $880,835,
respectively. Selling and marketing expenses include advertising expenses,
promotion costs, sales commissions and expenses related to our distribution
channels and handset subsidy paid to Sprint PCS for customers based in our
territory that purchase handsets through Sprint PCS or its national retailers.
Roberts incurs handset subsidy expense, in addition to that incurred through
the retail stores, from other sales channels such as E-commerce, telemarketing
and Sprint PCS national resellers. The handset subsidy incurred from sources
other than the retail stores is included in selling and marketing expenses. The
amount of handset subsidy included in selling and marketing expenses totaled
$690,993 for the nine months ended September 30, 2000 and $388,845 for the nine
months ended September 30, 1999.
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. For the nine months ended September 30,
2000 and September 30, 1999, these expenses amounted to $1,533,341 and
$229,496, respectively. Roberts incurred significant general and administrative
expenses related to the development of its system. Virtually all of the general
and administrative expenses related to the start-up of the business and were
expensed according to the 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 totaled
$4,190,641 during the nine-month period ended September 30, 2000 and $1,662,574
for the nine-month period ended September 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.
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INTEREST AND OTHER INCOME. Interest and other income totaled $97,358
during the nine-month period ended September 30, 2000 and $28,580 during the
nine-month period ended September 30, 1999. Interest income was generated from
the investment of equity and loan proceeds held in liquid accounts waiting to
be deployed. These amounts were $76,545 and $28,580 for the nine month periods
ending September 30, 2000, and 1999, respectively. Other income for the nine
months ended September 30, 2000 of $20,813 was from tower rental income.
INTEREST EXPENSE. Interest expense during the nine-month period ended
September 30, 2000 and September 30, 1999 totaled $1,792,535 and $83,467,
respectively, 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.
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.
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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 was 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 September 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 used in operating activities was $1,294,985 for the period ending
September 30, 2000, and was related primarily to the operating loss for the
period. Net cash provided by operating activities was $119,696 for the nine
months ended September 30, 1999.
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 investing activities was $45,732,172 for the nine months
ended September 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
$22,261,836 for the nine months ended September 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 nine-month period ended September 30, 2000, net cash provided by
financing activities was $45,257,661, primarily consisting of capital
contributions of $1,200,000, a DLJ draw of $30,988,561 and proceeds of
$13,793,343 from a loan agreement with Alamosa Operations. For the nine month
period ended September 30, 1999, net cash provided by financing activities was
$27,317,398, consisting of capital contributions from its members and proceeds
from long-term debt of $25,011,439.
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 September 30, 2000, Roberts' primary source of liquidity was
$1,375,260 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
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,
Salomon Smith Barney, EDC and TD Securities providing for a senior credit
facility of up to $305.0 million to be made to Alamosa Holdings, LLC (i) to pay
the cash portion of the merger consideration for the Roberts and WOW
acquisitions, (ii) to refinance existing indebtedness under Alamosa's $175.0
million credit facility with EDC, under Roberts' $56.0 million credit facility
with DLJ and under WOW's existing credit facility, (iii) to pay transaction
costs and (iv) for general corporate purposes, including funding capital
expenditures, subscriber acquisition and marketing costs, purchase of spectrum
and working capital needs of Alamosa, Roberts and WOW. See "The
Reorganization--New 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. As of December 31, 2000, WOW had
9,593 subscribers, and its network covered approximately 717,500 residents.
WOW has begun 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 be completed for Phase II and Phase III sites in
the first quarter of 2001.
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 $22.6 million had been drawn as of September 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 has been a development stage enterprise, with very limited revenues,
substantial losses and future capital requirements and an expectation of
continued losses. As of September 30, 2000, operations have commenced with the
first limited operations, with Phase I of WOW's network build-out becoming
operational. This has included the first 76 tower sites in WOW's territory
becoming 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. In addition 6 retail stores became
operational in September of 2000 and WOW began earning revenues on sales of
equipment and accessories.
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 September 30, 2000, WOW's accumulated deficit was $8.3 million.
Through September 30, 2000, WOW had incurred $33.6 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 and has since commenced service in seven additional
markets: Kennewick-Pasco-Richland, Walla Walla, Wenatchee and Yakima,
Washington, and Medford-Grants Pass, Klamath Falls and Roseburg, Oregon.
Additional markets are expected to become operational in 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 September 30, 2000,
there were 1,157 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 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.
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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 NINE MONTHS ENDED SEPTEMBER 30, 2000
COMPARED TO THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1999
Operating activity for the quarter and nine months ended September 30,
2000 were mainly directed toward the development and start-up of the business
infrastructure. Operations commenced late in the quarter ended September 30,
2000 with the first phase of the network build-out and six retail stores
becoming operational. Operating activity for the quarter and nine months ended
September 30, 1999 were directed toward the development and start-up of the of
business infrastructure. Because of this very limited time of operations for
the quarter and nine months ended September 30, 1999, comparisons with the same
period of 2000 may not be meaningful.
NET LOSS. Our net loss for the quarter ended September 30, 2000 was
$4,186,588 compared to our net loss of $168,470 for the quarter ended September
30, 1999. Our net loss for the nine months ended September 30, 2000 was
$7,236,317 compared to our net loss of $441,509 for the nine months ended
September 30, 1999. The increase in the losses incurred in the quarter and nine
months ended September 30, 2000 reflect the significantly increased activity in
bringing the Phase I tower sites and retail stores operational.
SERVICE REVENUES. WOW's first 8 tower sites became operational in May of
2000 and an additional 68 tower sites were added in the quarter ended September
30, 2000. Service revenues during the quarter and nine months ended September
30, 2000 in the amounts of $322,050 and $358,855, respectively, were composed
of roaming revenue. 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.
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PRODUCT SALES. 100% of the revenue from the sale through our retail stores
(including sales to local indirects) of handsets and accessories, net of an
allowance for returns, are recorded as product sales. Product sales during the
quarter ended September 30, 2000 totaled $110,722. For the nine months ended
September 30, 2000, product sales totaled $110,722. WOW had no product sales
for the quarter and nine months ended September 30, 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.
Total expenses were $4,276,362 during the quarter ended September 30,
2000, compared to $170,133 for the quarter ended September 30, 1999. Total
expenses for the nine months ended September 30, 2000 amounted to $7,436,128,
compared to $443,172 for the nine months ended September 30, 1999. The increase
in expenses relates to substantial increases in the cost of products sold,
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 and nine months ended
September 30, 2000. We were working toward bringing 68 more tower sites and six
retail stores operational in September 2000. As such, higher operating expenses
in 2000, especially the third quarter of 2000, reflect significantly increased
activity as we approached operational readiness.
COST OF SERVICE AND OPERATIONS. Expenses totaling $1,669,608 during the
quarter ended September 30, 2000 related to providing wireless services to
customers. These expenses totaled $64,450 for the quarter ended September 30,
1999. For the nine months ended September 30, 2000 and 1999, these expenses
totaled $2,859,005 and $238,168, 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 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 $217,928 during
the quarter ended September 30, 2000. The cost of products sold totaled
$217,928 for the nine months ended September 30, 2000. WOW had no cost of
products sold for the quarter and nine months ended September 30, 1999. These
amounts include the total cost of accessories and handsets sold through our
retail stores (including local indirects). The cost of handsets exceeds the
retail sales price because we subsidize the price of handsets for competitive
reasons.
SELLING AND MARKETING. Selling and marketing expenses totaled $968,630
during the quarter ended September 30, 2000. For the nine months ended
September 30, 2000, selling and marketing expenses totaled $1,166,865. WOW had
no selling and marketing expenses for the quarter and nine months ended
September 30, 1999. Sales and marketing expenses include advertising expenses,
promotion costs, sales commissions and expenses related to our distribution
channels and handset subsidy paid to Sprint PCS for customers based in our
territory that purchase handsets through Sprint PCS or its national retailers.
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 $995,893 for the
quarter ended September 30, 2000 and $105,683 for the quarter ended September
30, 1999. For the nine months ended September 30, 2000 and September 30, 1999,
these expenses amounted to $2,706,217 and $205,004, respectively. During the
nine months ended September 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."
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NON-CASH COMPENSATION EXPENSE. Non-cash compensation expense totaled
$19,000 for the quarter ended September 30, 2000 and consisted of grants under
WOW's value appreciation plan. 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. 12, "Accounting for Stock Based
Compensation." Total non-cash compensation expense recognized for the nine
months ended September 30, 2000 was $50,000. WOW had no non-cash compensation
expense for the quarter and nine months ended September 30, 1999.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization during the
quarter ended September 30, 2000 totaled $424,303. For the nine months ended
September 30, 2000, depreciation and amortization expenses totaled $486,113.
WOW had no depreciation or amortization for the quarter and nine months ended
September 30, 1999. WOW incurred amortization of deferred loan costs of $87,044
for the nine months ended September 30, 2000. Of the total amortization
expenses, $36,516 was capitalized as part of the cost of construction.
Depreciation is calculated using the straight-line method over the useful life
of the asset. For this quarter and the nine months ended September 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 for each market only after it
successfully launches that market.
RELATED PARTY EXPENSES. Related party expenses totaled $105,358 for the
quarter ended September 30, 2000 and $84,859 for the quarter ended September
30, 1999. Related party expense totaled $231,872 and $215,319 for the nine
month periods ended September 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 to 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 as well as related to the proposed
merger.
INTEREST AND OTHER INCOME. Interest and other income totaled $40,313
during the quarter ended September 30, 2000 and $113,545 for the nine months
ended September 30, 2000. Interest and other income for the quarter and nine
months ended September 30, 1999 was $1,663 and $1,663, 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 $735,538 for the quarter ended
September 30, 2000. For the nine months ended September 30, 2000, interest
expense totaled $972,550, incuding $87,044 of amortization of deferred
financing costs, of which $589,239 has been capitalized and $383,311 expensed.
WOW had no interest expense for the quarter and nine months ended September 30,
1999. Interest expense in 2000 is primarily due to the accretion of interest
related to the Senior Secured Notes.
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
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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 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 was 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 nine months ended September 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 $22,960,318
has been drawn as of September 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:
<TABLE>
<CAPTION>
DATES OF REDUCTION QUARTERLY AMOUNT OF REDUCTION
----------------------------------------------- ------------------------------
<S> <C>
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
</TABLE>
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 $7,654,461 for the nine months
ended September 30, 2000, and net cash provided from operating activities was
$19,995 for the nine months ended September 30, 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.
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Net cash used in investing activities was $22,935,839 and $2,034,455 for
the nine months ended September 30, 2000 and 1999, respectively. The cash used
for the nine months ended September 30, 2000 related primarily to purchasing
office equipment, constructing leasehold improvements, constructing the WOW
segment of the Sprint PCS wireless network and loan financing costs of
$1,616,896. The cash used for the nine months ended September 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 nine months ended
September 30, 2000 was $32,114,071, consisting of member contributions of
$11,520,649, capital acquisition costs of $750,000 and proceeds of $22,960,318
from the CoBank credit facility. Net cash provided by financing activities for
the nine months ended September 30, 1999 was $2,581,540 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 September 30, 2000, the primary sources of liquidity for WOW were
approximately $2,120,000 of cash, approximately $22.0 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 Operations 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,
Salomon Smith Barney, EDC, First Union National Bank and TD Securities
providing for a senior credit facility of up to $305.0 million to be made to
Alamosa Holdings, LLC (i) to pay the cash portion of the merger consideration
for the Roberts and WOW acquisitions, (ii) to refinance existing indebtedness
under Alamosa's $175.0 million credit facility with EDC, under WOW's credit
facility with CoBank and under Roberts' existing credit facility, (iii) to pay
transaction costs and (iv) for general corporate purposes, including funding
capital expenditures, subscriber acquisition and marketing costs, purchase of
spectrum and working capital needs of Alamosa, Roberts and WOW. See "The
Reorganization--New Credit Facility."
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.
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.
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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>
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 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.
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 following is a description of the material terms and provisions of the
affiliation agreements and the two Alamosa consents and agreements with Sprint
PCS and Nortel, which Nortel assigned to EDC, that modify the Alamosa
management agreement for the benefit of EDC, as administrative agent, and the
future holders of the EDC credit facility. See "--Consents and Agreements for
the Benefit of the Lenders to the Sprint Network Partners." 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. The terms and
provisions of these consents and agreements are substantially similar to those
contained in the consents and agreements between Sprint PCS and EDC.
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 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.
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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
partner's build-out within its 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 expansion area. If such network partner 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 has agreed to build out any
proposed expansion 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
expansion 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 plans will satisfy the
network build-out requirements set forth in their respective management
agreements.
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 at
Sprint's option.
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
Roberts management agreement, 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.
With respect to each of these markets for which the target dates have
passed, Roberts either has met the "hard launch" and full build-out requirements
or has been granted an extension by Sprint PCS under a "force majeure"
exception. All markets not currently in service are expected to be operational
by the end of January 2001.
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If Roberts does not achieve "hard launch" or full build-out coverage, as
applicable, in any of its markets within 90 days past the target date set forth
in Roberts management agreement and has not received a waiver or exception from
Sprint with respect to such market, 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 termination under the Roberts management
agreement. See "--Termination of Management Agreements."
"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;
o the minimum launch coverage footprint with respect to such market is
complete; 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 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 Alamosa 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.
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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 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."
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Under the Alamosa management agreement, Sprint PCS has agreed that it will
use commercial reasonableness to adjust the Sprint PCS retail store and customer
service requirements for cities located within Alamosa's territory that have a
population of less than 100,000.
NON-COMPETITION. No Sprint network partner may offer Sprint PCS products
and services outside its 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 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 either 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 network partner that is a party to such agreement is discussed
below.
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;
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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 entered into two consents and agreements with Nortel, which
Nortel assigned to EDC and which have been acknowledged by Alamosa, that modify
Sprint PCS's rights and remedies under the Alamosa affiliation agreements for
the benefit of EDC, as administrative agent, and the future lenders (if any)
under the EDC credit facility and any refinancing thereof. The consents and
agreements with EDC provide, among other things, that the Alamosa affiliation
agreements generally may not be terminated by Sprint PCS until all outstanding
indebtedness of Alamosa under the EDC credit facility is satisfied in full
pursuant to the terms of the consents and agreements. 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' existing credit facilities, on the other hand. See "--Consents and
Agreements for the Benefit of the Lenders to the Sprint Network Partners."
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
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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;
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
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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 the
negligence or willful misconduct of such Sprint network partner.
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 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. Each of the Sprint network partners has chosen to
initially delegate the performance of these services to Sprint PCS, but each
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. Each of 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."
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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
recognition, 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 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.
CONSENTS AND AGREEMENTS FOR THE BENEFIT OF THE LENDERS TO THE SPRINT NETWORK
PARTNERS
Sprint PCS entered into two consents and agreements with Nortel, which
Nortel assigned to EDC and Alamosa acknowledged, that modify Sprint PCS's
rights and remedies under the Alamosa affiliation agreements with Sprint PCS,
for the benefit of EDC and the future lenders (if any) under the EDC credit
facility and any refinancing thereof. The assignment of Nortel's rights and
obligations under these consents and agreements 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. The terms and provisions of these consents and agreements are
substantially similar to those contained in the consents and agreements between
Sprint PCS and EDC.
The Alamosa consents and agreements between Sprint PCS and EDC generally
provide, 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 all outstanding obligations under the
EDC credit facility are satisfied in full pursuant to the terms of
the consent and agreement, 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 or have expired.
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However, Sprint PCS retains the option to purchase Alamosa's assets
if it first pays all obligations under the EDC credit 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 all outstanding
obligations under the EDC credit facility are satisfied, Alamosa's
operating assets are sold after any Alamosa 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 under the EDC credit facility,
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 obligations of Alamosa under the EDC credit facility have been
accelerated after an Alamosa 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 consents and agreements 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 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.
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SALE OF OPERATING ASSETS OR THE PARTNERSHIP INTERESTS OF ALAMOSA'S
OPERATING SUBSIDUARIES 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 Alamosa's 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 Alamosa's 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 Alamosa's operating assets or the partnership interests of
its operating subsidiaries to any third party, subject to specified
conditions.
In connection with the completion of the reorganization, Superholdings has
entered into a commitment letter providing for a new credit facility. See "The
Reorganization--New Credit Facility." Part of the proceeds of the new credit
facility will be used to refinance the outstanding indebtedness under the EDC
credit facility and the respective credit facilities of Roberts and WOW. As a
condition precendent to the closing and funding of the new credit facility,
Sprint PCS must enter into a new consent and agreement with Citicorp USA, as
administrative agent for the lenders, that modifies the rights of Sprint PCS
under the Alamosa, Roberts and WOW affiliation agreements with Sprint PCS for
the benefit of the lenders under the new credit facility and that contains
terms and provisions which are similar to those contained in the existing
consents and agreements entered into by Sprint PCS prior to the closing and
funding of the new credit facility.
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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 an attributable
interest (defined as any general partnership interest or 20% or greater equity
or voting interest or certain other business relationships) in broadband
wireless personal communications service, cellular and specialized mobile radio
(SMR) licenses totaling more than 45 MHZ in any geographic area. The 45 MHZ cap
is raised to 55 MHZ for overlaps involving cellular Rural Service Areas. The
20% cap is raised to 40% where the owner is an investment company, a small
business or a rural telephone company. The geographic areas at issue are PCS
licensed service areas where there are overlaps involving 10% or more of the
population of such service area. An entity that manages the operations of a
broadband PCS, cellular, or SMR licensee pursuant to a management agreement
(such as Alamosa, Roberts, and WOW) is also considered to have an attributable
interest in the system it manages.
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.
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
157
<PAGE>
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 to the extent 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 so 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.
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.
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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 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 October 12, 2000, the FCC adopted several measures designed to remove
obstacles to competitive access to customers and facilities in commercial
multiple tenant environments, including the following:
o The FCC forbade telecommunications carriers in commercial settings
from entering into exclusive contracts with building owners,
including contracts that effectively restrict premises owners or
their agents from permitting access to other telecommunications
service providers.
o The FCC determined that utilities, including LECs must afford
telecommunications carriers and cable service providers reasonable
and nondiscriminatory access to conduits and rights-of-way located in
customer buildings and campuses, to the extent such conduits and
rights-of-way are owned or controlled by the utility.
The FCC also issued a further notice of proposed rulemaking seeking
comment on whether it should adopt additional rules in this area, including
extending certain regulations to include residential as well as commercial
buildings. The final result of 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.
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<PAGE>
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 September 30,
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
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.
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WIRELESS FACILITIES SITING
States and localities are not permitted to regulate the placement of
wireless facilities so as to "prohibit" the provision of wireless services or
to "discriminate" among providers of 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
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 January 11, 2001, 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 Alamosa directors;
o each of the Alamosa executive officers; and
o all executive officers and directors of Alamosa 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
Budagher Family, LLC ............................ 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 ................................ - *
Anthony Sabatino ................................ 30,000 (16) *
Reagan W. Silber ................................ 3,045,647 (17) 4.96%
Jimmy R. White .................................. 29,014 (18) *
ALL DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP (13 PERSONS) ........................ 13,033,211 21.2%
</TABLE>
* Less than one percent.
(1) Except as otherwise indicated in the footnotes below, the address for
each executive officer and director is 5225 S. Loop 289, Lubbock, Texas
79424.
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(2) Percentage of ownership is based on 61,359,856 shares of Alamosa common
stock outstanding as of January 11, 2001. 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 of record 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, LLC 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 of record 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) The share information reflected is based upon a statement on a Schedule
13D filed jointly by ENMR Telephone Cooperative, Inc., Plateau
Telecommunications, Inc. 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 of record 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 currently exercisable.
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
163
<PAGE>
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 currently exercisable.
(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 currently exercisable.
(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.
(16) These shares are issuable pursuant to options exercisable within 60 days.
(17) 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.
(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.
164
<PAGE>
ROBERTS HOLDINGS
The table below sets forth certain information regarding the beneficial
ownership of Roberts Holdings' units of membership interest as of January 11,
2001 by the two holders of Roberts Holdings' outstanding units of membership
interest.
<TABLE>
<CAPTION>
NUMBER OF UNITS
BENEFICIALLY PERCENTAGE OF
NAME AND ADDRESS OWNED (1) OWNERSHIP
---------------------------------- ---------------- --------------
<S> <C> <C>
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
</TABLE>
(1) At January 11, 2001, a total of 20,000 units of membership interest were
outstanding.
165
<PAGE>
WOW HOLDINGS
The following table presents information regarding the beneficial
ownership of units of membership interest of WOW Holdings as of January 11,
2001, with respect to:
o each person who, to our knowledge, is the beneficial owner of 5% or
more of the outstanding units of membership interest of WOW;
o each of the managers of WOW; and
o each of the executive officers.
<TABLE>
<CAPTION>
NUMBER OF UNITS
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, OR97045
Cal-Ore Wireless, Inc. ................... 2,915,256.50 (4) 9.2378%
719 West 3rd Street
P.O. Box 847
Dorris, CA96023
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 January 11, 2001, a total of 31,558,046.35 units of membership
interest were outstanding, no options to acquire units of membership
interest of WOW were exercisable within 60 days and no warrants to
acquire units of membership interest 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.
166
<PAGE>
SUPERHOLDINGS
The following table presents information regarding the pro forma
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 of Superholding;
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 is based on the information set forth
in the previous beneficial ownership tables and 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 1999 long-term incentive plan and all awards granted thereunder. Percentage
ownership is based on 80,909,849 shares of Superholdings common stock
outstanding after giving effect to the reorganization.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF
NAME AND ADDRESS OWNED OWNERSHIP
------------------------------------------------- ----------------- --------------
<S> <C> <C>
5% STOCKHOLDERS
Caroline Hunt Trust Estate ...................... 8,209,480 10.1%
100 Crescent Court, Suite 1700
Dallas, TX 75201
South Plains Telephone Cooperative, Inc ......... 8,769,732 10.8%
2425 Marshall Street
Lubbock, TX 79415
Budagher Family, LLC ............................ 7,312,776 9.0%
3702 Holland Avenue
Dallas, TX 75219
Taylor Telephone Cooperative, Inc ............... 5,175,700 6.4%
9796 N. Interstate 20
Merkel, TX 79536
DIRECTORS AND EXECUTIVE OFFICERS:
David E. Sharbutt ............................... 1,369,724 1.7%
Jerry W. Brantley ............................... 621,250 *
Michael R. Budagher ............................. 7,312,776 9.0%
Ray M. Clapp .................................... 107,175 *
Kendall W. Cowan ................................ 291,000 *
Scotty Hart ..................................... 29,300 *
Thomas Hyde ..................................... 28,000 *
Schuyler B. Marshall ............................ 138,000 *
Tom M. Phelps ................................... 31,325 *
Loyd I. Rinehart ................................ -- *
Michael V. Roberts .............................. 6,750,000 8.3%
Steven C. Roberts ............................... 6,750,000 8.3%
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF
NAME AND ADDRESS OWNED OWNERSHIP
---------------------------------- ----------------- --------------
<S> <C> <C>
Anthony Sabatino ................. 30,000 *
Reagan W. Silber (1) ............. 5,729,587 7.1%
Jimmy R. White ................... 29,014 *
ALL DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP (15 PERSONS) ......... 29,217,151 36.1%
</TABLE>
* Less than one percent.
(1) Includes 2,683,940 shares of Superholdings common stock to be issued to
WOW Investment Partners, L.P. in the WOW merger.
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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, stockholders of Alamosa will become
stockholders of Superholdings.
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 the amended and restated 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.
In addition, under the amended and restated by-laws of Superholdings,
Superholdings will not have authority to vote its shares of Alamosa common
stock in favor of any disposition by Alamosa of any shares of Alamosa
(Delaware) without the approval of the stockholders of Superholdings and may
only vote the shares of Alamosa common stock held by it on any matter on which
such shares are entitled to vote with respect to the voting by Alamosa of its
shares of Alamosa (Delaware) common stock in proportion to, or at the direction
of, the vote of the stockholders of Superholdings.
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.
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 (Delaware), Alamosa Holdings, LLC and their subsidiaries and the
results of operations, financial condition, capital expenditure plans,
contractual restrictions, business prospects of Superholdings and its
subsidiaries and other relevant factors. See "Market Prices and Dividends."
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,
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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.
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 business combination or the transaction 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 interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with that person's affiliates and associates, owns 15% or
more of Superholdings' voting stock.
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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' board of directors
more difficult. Substantially the same provisions are found in Alamosa's
existing certificate of incorporation and by-laws.
BOARD CLASSIFICATION. Superholdings' amended and restated 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' amended and restated 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' amended and
restated 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' amended and restated 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 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, appoint or remove directors, call a special meeting of the stockholders
or take action without a stockholder meeting. 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'
amended and restated certificate of incorporation will also contain fair price
provisions designed to provide safeguards for
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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 below) 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 announcement 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 consideration is treated
similarly); and
o certain "procedural" requirements are complied with, such as the
solicitation 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 amended and restated 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;
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,
certain 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, but 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 Alamosa before
the date of its initial public offering.
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
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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 incumbent management, even if these events would be perceived as favorable
to the interests of Superholdings' stockholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. The amended and restated
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 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.
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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 such
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 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 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, upon exercise thereof, 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;
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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 common stock or 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 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 may have certain anti-takeover effects.
The rights may 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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PROPOSAL 3: 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. Effective as of the reorganization,
Superholdings will assume the long-term incentive plan and awards under the
long-term incentive plan will relate to common stock of Superholdings.
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, directors and consultants of Alamosa, and, after the reorganization,
to employees of any subsidiary of Superholdings, including 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 common stock authorized 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,
2001, the number of shares of common stock authorized for issuance
under the long-term incentive plan by 800,000 shares, or such lesser
amount determined by the committee which administers the long-term
incentive plan. As of January 11, 2001 there were a total of
61,359,856 shares of 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.
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
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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
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
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<PAGE>
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 a 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;
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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<PAGE>
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 January [ ], 2001, 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 vote 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.
THE ALAMOSA BOARD OF DIRECTORS RECOMMENDS THAT ALAMOSA'S STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE AMENDMENT TO ALAMOSA'S 1999 LONG-TERM INCENTIVE PLAN.
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PROPOSAL 4: ADOPTION OF THE ALAMOSA EMPLOYEE STOCK PURCHASE PLAN
On January 10, 2001, Alamosa adopted, subject to stockholder approval, the
Alamosa employee stock purchase plan. The employee stock purchase plan is
designed to encourage the purchase by employees of shares of Alamosa common
stock and will become effective on March 1, 2001. We estimate that there will
be approximately 750 potential participants in the employee stock purchase
plan. Effective as of the reorganization, Superholdings will assume the
employee stock purchase plan, and purchases under the employee stock purchase
plan will be for common stock of Superholdings. Effective as of the
reorganization, eligible employees of Superholdings and its subsidiaries will
be able to participate in the employee stock purchase plan.
Alamosa will adopt the employee stock purchase plan if it receives
stockholder approval, even if the reorganization does not occur.
EMPLOYEE STOCK PURCHASE PLAN OVERVIEW
The employee stock purchase plan is intended to comply with the
requirements of Section 423 of the Code, and to assure the participants of the
tax advantages provided thereby (see "--Federal Income Tax Treatment"). In
order for the transfer of stock under the employee stock purchase plan to
qualify for this treatment, the employee stock purchase plan must be approved
by stockholders within 12 months of its adoption. The employee stock purchase
plan will be administered by a committee established by the board of directors.
The committee may make such rules and regulations and establish such procedures
for the administration of the employee stock purchase plan as it deems
appropriate.
SHARES AVAILABLE. The Board of Directors has authorized for issuance under
the employee stock purchase plan a total of 600,000 shares of Alamosa common
stock, plus an additional number of shares to be added on the last day of the
year beginning in 2001 equal to the lesser of (i) 200,000 or (ii) a lesser
amount determined by the committee, in any case, subject to adjustment by the
committee in the event of a recapitalization, stock split, stock dividend or
similar corporate transaction.
ELIGIBILITY. All Alamosa employees who have at least six months of service
and work more than 20 hours per week will be eligible to participate in the
employee stock purchase plan, except that an employee will not be eligible to
participate if he or she owns five percent or more of Alamosa common stock or
the common stock of any Alamosa subsidiary.
STOCK PURCHASES. Under the employee stock purchase plan, each eligible
employee will be permitted to purchase shares of Alamosa common stock through
regular payroll deductions and/or cash payments in an aggregate amount equal to
1% to 10% of the employee's compensation for each payroll period. The fair
market value of the shares of Alamosa common stock which may be purchased by
any employee under this or any other Alamosa plan that is intended to comply
with Section 423 of the Code during any calendar year may not exceed $25,000.
The employee stock purchase plan provides for a series of consecutive,
overlapping offering periods that generally will be 24 months long. Successive
six-month purchase periods will run during each offering period. Offering
periods generally will commence on March 1 and September 1 of each year during
the term of the plan, and purchase periods will run from March 1 to August 31
and from September 1 to February 28, or in a leap year, to February 29.
During each offering period, participating employees will be able to
purchase shares of common stock with payroll deductions at a purchase price
equal to 85% of the fair market value of the common stock at either the
beginning of each offering period or the end of each purchase period within the
offering period, whichever price is lower.
To the extent permitted by applicable laws, regulations, or stock exchange
rules, if the fair market value of the shares at the end of any purchase period
is lower than the fair market value of the shares on the date the related
offering period began, then all participants in that offering period will be
automatically withdrawn from the offering period immediately after the exercise
of their option on the date the purchase period ends. The participants will
automatically be re-enrolled in the immediately following offering period when
that offering period begins.
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The options granted to a participant under the employee stock purchase
plan are not transferable otherwise than by will or the laws of descent and
distribution, and are exercisable, during the participant's lifetime, only by
the participant.
CHANGE IN CONTROL. Unless otherwise determined by the committee, if a
Change in Control (as defined in the employee stock purchase plan) occurs
during the term of the employee stock purchase plan, any offering period then
in effect will terminate.
AMENDMENT, TERMINATION OF PLAN. The Alamosa board of directors may from
time to time amend or terminate the employee stock purchase plan; provided,
that no such amendment or termination may adversely affect the rights of any
participant without the consent of such participant and, to the extent required
by Section 423 of the Code or any other law, regulation or stock exchange rule,
no such amendment will be effective without the approval of stockholders
entitled to vote thereon. Additionally, the committee may make such amendments
as it deems necessary to comply with applicable laws, rules and regulations.
The full text of the employee stock purchase plan is attached as Appendix
G. The description set forth in this summary is qualified in its entirety by
reference to the text of the actual employee stock purchase plan.
NEW PLAN BENEFITS. Since the amount of benefits to be received by each
participant in the employee stock purchase plan is determined by his or her
elections, the amount of future benefits to be allocated to any individual or
group of individuals under the plan in any particular year is not determinable.
FEDERAL INCOME TAX TREATMENT. The following discussion is a brief summary
of certain relevant income tax effects applicable to awards under the employee
stock purchase plan. This summary is not intended to be exhaustive or to
constitute tax advice, and, among other things, does not describe state, local
or foreign income and other tax consequences. Reference should be made to the
Code and the regulations and interpretations thereunder for a complete
statement of all relevant federal tax consequences. Accordingly, a participant
should consult a tax adviser with respect to the tax aspects of transactions
under the employee stock purchase plan. For purposes of this discussion, the
right to purchase shares under the employee stock purchase plan is described as
an option.
The employee stock purchase plan is intended to qualify as an employee
stock purchase plan under Section 423 of the Code. Assuming such qualification,
a participant will not recognize any taxable income as a result of
participating in the employee stock purchase plan, exercising options granted
pursuant to employee stock purchase plan or receiving shares purchased pursuant
to such options. A participant may, however, be required to recognize taxable
income as described below.
If a participant disposes of any share purchased pursuant to the employee
stock purchase plan after the later to occur of (i) two years from the grant
date for the related option and (ii) one year after the exercise date for the
related option (such disposition, a "Qualifying Transfer"), or if he or she
dies (whenever occurring) while owning any share purchased under the employee
stock purchase plan, the participant generally will recognize compensation
income, for the taxable year in which such disposition or death occurs, in an
amount equal to the lesser of (i) the excess of the market value of the
disposed share at the time of such disposition over its purchase price, and
(ii) 15% of the market value of the disposed share on the grant date for the
option to which such disposed share relates. In the case of a Qualifying
Transfer, (a) the basis of the disposed share will be increased by an amount
equal to the amount of compensation income so recognized, and (b) the
participant will recognize a capital gain or loss, as the case may be, equal to
the difference between the amount realized from the disposition of the shares
and the basis for such shares.
If the participant disposes of any share other than by a Qualifying
Transfer, the participant generally will recognize compensation income in an
amount equal to the excess of the market value of the disposed share on the
date of disposition over its purchase price. In such event, we will be entitled
to a tax deduction equal to the amount of compensation income recognized by the
participant. Otherwise, we will not be entitled to any tax deduction with
respect to the grant or exercise of options under the employee
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stock purchase plan or the subsequent sale by participants of shares purchased
pursuant to the employee stock purchase plan. A transfer by the estate of the
participant of shares purchased by the participant under the employee stock
purchase plan has the same federal income tax effects on us as a Qualifying
Transfer.
VOTE REQUIRED FOR ADOPTION OF THE EMPLOYEE STOCK PURCHASE PLAN
Approval of the adoption of the employee stock purchase plan requires the
affirmative vote 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 adoption of the employee stock purchase plan, but "broker votes"
will have no effect on such proposal.
THE ALAMOSA BOARD OF DIRECTORS RECOMMENDS THAT ALAMOSA'S STOCKHOLDER VOTE
"FOR" THE ADOPTION OF THE ALAMOSA EMPLOYEE STOCK PURCHASE PLAN.
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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 nine months ended
September 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 nine months ended September 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 September 30, 2000 gives effect to
the reorganization as if it had occurred on September 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.
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.
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<PAGE>
ALAMOSA HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
ROBERTS MERGER
---------------------------------------
w ALAMOSA HISTORICAL
HISTORICAL PRO FORMA ROBERTS PRO FORMA
ALAMOSA ADJUSTMENTS WIRELESS ADJUSTMENTS
--------------- ---------------- -------------- ------------------------
(NOTE 1) (NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................. $ 172,633,478 $ -- $ 1,375,260 $ --
Short-term investments .................... -- -- -- --
Accounts receivable, net .................. 9,662,519 -- 548,206 --
Inventory ................................. 2,578,842 -- 143,887 --
Prepaid expenses and other assets ......... 774,179 17,463,977 133,900 --
------------- -------------- ------------ ----------------
Total current assets ..................... 185,649,018 17,463,977 2,201,253 --
Property and equipment, net ................ 189,521,616 -- 57,526,792 (4,420,226)
Notes receivable from Roberts and Roberts
Holdings' members ......................... 22,196,043 -- -- (13,793,343)
Debt issuance costs, net ................... 13,482,401 -- 1,901,371 (1,901,371)
Restricted cash ............................ -- -- -- --
Intangible and other noncurrent assets ..... 2,135,420 (17,463,977) 8,369,023 434,050,055(2a)
------------- -------------- ------------ ------------------
Total assets ............................. $ 412,984,498 $ -- $ 69,998,439 $ 413,935,115
============= ============== ============ ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ..... $ 37,171,288 $ -- $ 7,803,274 $ --
Accounts payable to related parties ....... 2,067,982 -- -- --
Current notes payable and installments
of capital leases ........................ 23,510 -- 13,793,343 (13,793,343)(2f)
Bank line of credit ....................... -- -- -- --
Microwave relocation obligation and
other current liabilities ................ 263,366 -- -- --
------------- -------------- ------------ ------------------
Total current liabilities ................ 39,526,146 -- 21,596,617 (13,793,343)
Capital lease obligations, noncurrent ..... 809,173 -- -- --
Long-term debt ............................ 207,351,584 -- 56,000,000 8,443,000
Deferred tax and other noncurrent
liabilities .............................. -- -- -- 119,521,030(2b)
------------- -------------- ------------ ------------------
Total liabilities ........................ 247,686,903 -- 77,596,617 114,170,687
------------- -------------- ------------ ------------------
<CAPTION>
WOW MERGER
-------------------------------------
HISTORICAL PRO FORMA
WOW ADJUSTMENTS TOTAL
-------------- ---------------------- ------------------
(NOTE 3)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................. $ 2,120,216 $ 176,128,954
Short-term investments .................... -- -- --
Accounts receivable, net .................. 45,495 -- 10,256,220
Inventory ................................. 612,044 -- 3,334,773
Prepaid expenses and other assets ......... 37,090 -- 18,409,146
------------ -- ---------------
Total current assets ..................... 2,814,845 -- 208,129,093
Property and equipment, net ................ 33,178,939 -- 275,807,121
Notes receivable from Roberts and Roberts
Holdings' members ......................... -- -- 8,402,700
Debt issuance costs, net ................... 1,529,852 (1,529,852) 13,482,401
Restricted cash ............................ -- -- --
Intangible and other noncurrent assets ..... 105,762 197,087,483(3a) 624,283,766
------------ ------------- ---------------
Total assets ............................. $ 37,629,398 $ 195,557,631 $ 1,130,105,081
============ ================= ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ..... $ 8,181,245 $ 303,333 $ 53,459,140
Accounts payable to related parties ....... -- -- 2,067,982
Current notes payable and installments
of capital leases ........................ -- -- 23,510
Bank line of credit ....................... --
Microwave relocation obligation and
other current liabilities ................ -- -- 263,366
------------ ----------------- ---------------
Total current liabilities ................ 8,181,245 303,333 55,813,998
Capital lease obligations, noncurrent ..... -- -- 809,173
Long-term debt ............................ 22,960,318 16,983,667 311,738,569
Deferred tax and other noncurrent
liabilities .............................. 50,000 54,270,466(3b) 173,841,496
------------ ----------------- ---------------
Total liabilities ........................ 31,191,563 71,557,466 542,203,236
------------ ----------------- ---------------
</TABLE>
184
<PAGE>
<TABLE>
<CAPTION>
ROBERTS MERGER
-------------------------------------
ALAMOSA HISTORICAL
HISTORICAL PRO FORMA ROBERTS PRO FORMA
ALAMOSA ADJUSTMENTS WIRELESS ADJUSTMENTS
---------------- ------------- --------------- ---------------------
(NOTE 1) (NOTE 2)
<S> <C> <C> <C> <C>
Commitments and contingencies
Mandatorily Redeemable Preferred Stock -- -- -- --
Shareholders' equity:
Preferred stock ............................. -- -- -- --
Shareholders' equity (deficit)/members'
equity (deficit) ........................... 166,849,598 -- (7,598,178) 300,354,428
Common stock ................................ -- -- -- --
Additional paid-in capital .................. -- -- -- --
Accumulated deficit ......................... -- -- -- --
Unearned compensation ....................... -- -- -- --
Capital contributed and subscribed .......... -- -- -- --
Capital contributed and subscribed --
related parties ............................ -- -- -- --
Capital acquisition cost .................... -- -- -- --
Capital subscription receivable ............. -- -- -- --
Unearned compensation ....................... (1,552,003) -- -- (590,000)(2c)
----------- -------- ---------- -----------
Total shareholders' equity ................. 165,297,595 -- (7,598,178) 299,764,428
----------- -------- ---------- -----------
Total liabilities, redeemable preferred $ $
stock and shareholders' equity ............. $412,984,498 $ -- 69,998,439 413,935,115
============ ========== ========== ==============
<CAPTION>
WOW MERGER
------------------------------
HISTORICAL PRO FORMA
WOW ADJUSTMENTS TOTAL
-------------- --------------- ----------------
(NOTE 3)
<S> <C> <C> <C>
Commitments and contingencies
Mandatorily Redeemable Preferred Stock -- -- --
Shareholders' equity:
Preferred stock ............................. -- -- --
Shareholders' equity (deficit)/members'
equity (deficit) ........................... 6,437,835 124,000,165 590,043,848
Common stock ................................ -- -- --
Additional paid-in capital .................. -- -- --
Accumulated deficit ......................... -- -- --
Unearned compensation ....................... -- -- --
Capital contributed and subscribed .......... -- -- --
Capital contributed and subscribed --
related parties ............................ -- -- --
Capital acquisition cost .................... -- -- --
Capital subscription receivable ............. -- -- --
Unearned compensation ....................... -- -- (2,142,003)
---------- ----------- -------------
Total shareholders' equity ................. 6,437,835 124,000,165 587,901,845
---------- ----------- -------------
Total liabilities, redeemable preferred $ $ $
stock and shareholders' equity ............. 37,629,398 195,557,631 1,130,105,081
========== =========== =============
</TABLE>
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ALAMOSA HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
ROBERTS MERGER
------------------------------------
ALAMOSA HISTORICAL
HISTORICAL PRO FORMA ROBERTS PRO FORMA
ALAMOSA ADJUSTMENTS WIRELESS ADJUSTMENTS
--------------- -------------- -------------- ---------------------
(NOTE 1) (NOTE 2)
<S> <C> <C> <C> <C>
Revenues:
Service revenues ............ $ 45,900,325 $ -- $ 8,560,002 $ --
Product sales ............... 6,001,373 -- 747,956 --
------------- ------------ ------------ --------------
Total revenue .............. 51,901,698 -- 9,307,958 --
------------- ------------ ------------ --------------
Costs and expenses:
Cost of service and
operations ................. 32,846,645 -- 6,281,512 --
Cost of service and
operations -- related
parties .................... 523,149 -- -- --
Cost of products sold ....... 11,636,860 -- 1,410,706 --
Selling and marketing ....... 25,311,135 -- 2,954,625 --
Selling and marketing --
related parties ............ 450,630 -- -- --
General and
administrative
expenses ................... 5,950,782 -- 1,533,341 262,500(2c)
Selling, general and
administrative ............. -- -- -- --
Equity participation
compensation expense 5,404,862 -- -- 88,500(2c)
General and
administrative --
related parties ............ 493,171 -- -- --
Depreciation and
amortization ............... 7,763,434 -- 4,190,641 17,372,571(2d)
------------- ------------ ------------ ----------------
Total costs and
expenses ................... 90,380,668 -- 16,370,825 17,723,571
------------- ------------ ------------ ----------------
Loss from operations ....... (38,478,970) -- (7,062,867) (17,723,571)
Interest and other income..... 10,834,815 -- 97,358 --
Interest expense ............. (18,313,678) (355,285) (1,792,535) (831,108)(2e)
------------- ------------ ------------ ----------------
Loss before income tax
benefit .................... (45,957,833) (355,285) (8,758,044) (18,554,679)
Income tax benefit ........... -- 17,598,985 -- 8,570,882 (2d)
------------- ------------ ------------ -----------------
<CAPTION>
WOW MERGER
---------------------------------------
HISTORICAL PRO FORMA
WOW ADJUSTMENTS TOTAL
--------------- ----------------------- ---------------
(NOTE 3)
<S> <C> <C> <C>
Revenues:
Service revenues ............ $ 358,855 $ -- $ 54,819,182
Product sales ............... 110,722 -- 6,860,051
------------- --------------- -------------
Total revenue .............. 469,577 -- 61,679,233
------------- --------------- -------------
Costs and expenses:
Cost of service and
operations ................. 2,859,005 -- 41,987,162
Cost of service and
operations -- related
parties .................... -- -- 523,149
Cost of products sold ....... 217,928 -- 13,265,494
Selling and marketing ....... 1,166,865 -- 29,432,625
Selling and marketing --
related parties ............ -- -- 450,630
General and
administrative
expenses ................... 2,706,217 -- 10,452,840
Selling, general and
administrative ............. -- -- --
Equity participation
compensation expense -- -- 5,493,362
General and
administrative --
related parties ............ -- -- 493,171
Depreciation and
amortization ............... 486,113 8,166,608(3d) 37,979,367
------------- ----------------- -------------
Total costs and
expenses ................... 7,436,128 8,166,608 140,077,800
------------- ----------------- -------------
Loss from operations ....... (6,966,551) (8,166,608) (78,398,567)
Interest and other income..... 113,545 -- 11,045,718
Interest expense ............. (383,311) (1,671,830)(3e) (23,347,747)
------------- ----------------- -------------
Loss before income tax
benefit .................... (7,236,317) (9,838,438) (90,700,596)
Income tax benefit ........... -- 5,633,872 (3d) 31,803,739
------------- ------------------ -------------
</TABLE>
186
<PAGE>
<TABLE>
<CAPTION>
ROBERTS MERGER
-------------------------------
ALAMOSA HISTORICAL
HISTORICAL PRO FORMA ROBERTS PRO FORMA
ALAMOSA ADJUSTMENTS WIRELESS ADJUSTMENTS
---------------- --------------- --------------- ---------------
(NOTE 1) (NOTE 2)
<S> <C> <C> <C> <C>
$ $ $
Net income/(loss) ....... (45,957,833) $ 17,243,700 (8,758,044) (9,983,797)
============== ============ ============= =============
Accretion and dividends
related to redeemable
preferred stock ........ -- -- -- --
Net loss available to $ $ $
common shareholders..... (45,957,833) $ 17,243,700 (8,758,044) (9,983,797)
Net loss per common
share, basic and
diluted ................ $ (0.77)
Weighted average
common shares
outstanding, basic
and diluted ............ 59,808,408
<CAPTION>
WOW MERGER
-------------------------------
HISTORICAL PRO FORMA
WOW ADJUSTMENTS TOTAL
--------------- --------------- ----------------
(NOTE 3)
<S> <C> <C> <C>
$ $ $
Net income/(loss) ....... (7,236,317) (4,204,566) (58,896,857)
============= ============= ==============
Accretion and dividends
related to redeemable
preferred stock ........ -- -- --
Net loss available to $ $ $
common shareholders..... (7,236,317) (4,204,566) (58,896,857)
Net loss per common
share, basic and
diluted ................ $ (0.74)
Weighted average
common shares
outstanding, basic
and diluted ............ 79,358,408
</TABLE>
187
<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
HISTORICAL PRO FORMA ROBERTS PRO FORMA
ALAMOSA ADJUSTMENTS WIRELESS ADJUSTMENTS
------------------ ---------------- ----------------- -----------------------
(NOTE 1) (NOTE 2)
<S> <C> <C> <C> <C>
Revenues:
Service revenues ............ $ 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 ....... 5,938,838 -- 834,236 --
Selling and marketing ....... 10,406,385 -- 2,025,429 --
Selling and marketing --
related parties ............ 404,561 -- -- --
General and
administrative
expenses ................... 3,711,548 -- 702,829 350,000(2c)
Selling, general and
administrative ............. -- -- -- --
Equity participation
compensation expense 8,199,511 -- -- 118,000(2c)
General and
administrative --
related parties ............ 497,427 -- -- --
Depreciation and
amortization ............... 3,056,923 -- 1,799,281 23,431,492(2d)
-------------- ------------ ------------- -----------------
Total costs and
expenses ................... 39,655,669 -- 7,110,340 23,899,492
-------------- ------------ ------------- -----------------
Loss from operations ....... (30,671,956) -- (4,236,643) (23,899,492)
Interest and other income 477,390 -- 65,739 --
Interest expense ............. (2,641,293) (51,241) (417,337) (1,108,144)(2e)
-------------- ------------ ------------- -----------------
Net loss before income
tax benefit ................ (32,835,859) (51,241) (4,588,241) (25,007,636)
Income tax benefit ........... -- 12,497,098 -- 8,733,965 (2d)
-------------- ------------ ------------- ------------------
Net income/(loss) .......... $ (32,835,859) $ 12,445,857 $ (4,588,241) $ (16,273,671)
============== ============ ============= ==================
<CAPTION>
WOW MERGER
---------------------------------------
HISTORICAL PRO FORMA
WOW ADJUSTMENTS TOTAL
--------------- ----------------------- ------------------
(NOTE 3)
<S> <C> <C> <C>
Revenues:
Service revenues ............ $ -- $ -- $ 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 ....... -- -- 6,773,074
Selling and marketing ....... -- -- 12,431,814
Selling and marketing --
related parties ............ -- -- 404,561
General and
administrative
expenses ................... 580,049 100,000(3c) 5,444,426
Selling, general and
administrative ............. -- -- --
Equity participation
compensation expense -- -- 8,317,511
General and
administrative --
related parties ............ 205,675 -- 703,102
Depreciation and
amortization ............... 923 10,888,811(3d) 39,177,430
----------- ----------------- --------------
Total costs and
expenses ................... 987,133 10,988,811 82,641,445
----------- ----------------- --------------
Loss from operations ....... (987,133) (10,988,811) (70,784,035)
Interest and other income 6,992 -- 550,121
Interest expense ............. -- (2,229,106)(3e) (6,447,121)
----------- ----------------- --------------
Net loss before income
tax benefit ................ (980,141) (13,217,917) (76,681,035)
Income tax benefit ........... -- 4,255,882 (3d) 25,486,945
----------- ------------------ --------------
Net income/(loss) .......... $ (980,141) $ (8,962,035) $ (51,194,090)
=========== ================== ==============
</TABLE>
188
<PAGE>
<TABLE>
<CAPTION>
ROBERTS MERGER WOW MERGER
------------------------- --------------------------
ALAMOSA HISTORICAL
HISTORICAL PRO FORMA ROBERTS PRO FORMA HISTORICAL PRO FORMA
ALAMOSA ADJUSTMENTS WIRELESS ADJUSTMENTS WOW ADJUSTMENTS TOTAL
-------------- ------------- ----------- ------------- ------------ ------------- --------------
(NOTE 1) (NOTE 2) (NOTE 3)
<S> <C> <C> <C> <C> <C> <C> <C>
Net loss per common
share, basic and
diluted ............. $ (0.68) $ (0.75)
Weighted average
common shares
outstanding, basic
and diluted ......... 48,500,008 68,050,008
</TABLE>
189
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 -- ALAMOSA PRO FORMA ADJUSTMENTS
The pro forma income tax expense 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.
On December 20, 2000, Alamosa announced that Superholdings had entered into a
commitment letter with a group of banks providing for a new senior credit
facility of up to $305 million, to be made to Alamosa Holdings, LLC. The
proceeds of the credit facility will be used to refinance Alamosa's existing
credit facility, to fund the cash portion of the consideration in the Roberts
and WOW mergers, to pay transaction costs, to fund the working capital and
build-out needs of Roberts and WOW, including the refinancing of their existing
debt, and for general corporate purposes. While the definitive agreements
providing for the credit facility have not been completed, the credit facility
is expected to be comprised of a term facility of $255 million and a revolving
credit facility of $50 million, each with a term of seven years. The rate of
interest will be based on LIBOR and is expected to be approximately 1/4% higher
than under Alamosa's existing debt facility. Alamosa Holdings, LLC will likely
be required to draw down $200 million upon closing of the credit facility.
The pro forma adjustment to interest expense reflects Alamosa's incremental
expense based on the anticipated increase in the rate of interest.
NOTE 2 -- THE ROBERTS MERGER
Pursuant to the Roberts reorganization agreement, the members of Roberts have
formed Roberts Wireless Holdings, L.L.C., 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
Roberts does not meet its network build-out timetables in certain markets. With
respect to each of these markets for which the target dates have passed, Roberts
either has met all launch and build-out requirements or has been granted an
extension by Sprint PCS under a "force majeure" exception. All markets not
currently in service are expected to be operational by the end of January 2001.
Therefore, contingent payments have not been included in the accompanying pro
forma financial statements.
If Roberts does not achieve "hard launch" or full build-out coverage, as
applicable, in any of its markets within 90 days past the target date set forth
in Roberts management agreement and has not received a waiver or exception from
Sprint with respect to such market, 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 termination under the Roberts management
agreement. See "--Termination of Management Agreements."
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.
190
<PAGE>
The pro forma adjustments represent the purchase accounting adjustments
necessary to reflect the Roberts merger. The aggregate purchase price was
calculated as follows:
<TABLE>
<S> <C>
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 ............................... 119,521,030(2b)
----------------
Total consideration ........................................ $ 420,130,280
================
</TABLE>
Goodwill was calculated as follows:
<TABLE>
<S> <C>
Total consideration ..................................... $ 420,130,280
Less:
Roberts members' equity at September 30, 2000 ......... (7,598,178)
Write-off deferred debt issuance costs and other
intangible assets .................................... (10,254,104)
Excluded assets ....................................... (4,420,226)(iv)
Estimated fair value of Sprint PCS affiliation and
operating agreements ................................. 322,881,758
--------------
Goodwill ............................................. $ 119,521,030
==============
</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:
<TABLE>
<S> <C>
Investment banking fees .............. $2,443,000
Legal, accounting and other .......... 2,000,000
----------
Total merger-related costs ......... $4,443,000
==========
</TABLE>
(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.
191
<PAGE>
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 $322,881,758 and goodwill of $119,521,030 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 $8,352,733.
(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 ......................... $322,881,758 $8,352,733 $ 314,529,025
Estimated effective tax rate ......... 38%
-------------
Deferred tax liability ............... $ 119,521,030
=============
</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.
(2d) The pro forma adjustment to depreciation and amortization expense
reflects the incremental amortization expense related to the intangible
assets as if the Roberts merger occurred on January 1, 1999. The
intangible assets related to the Sprint PCS affiliation and operating
agreements and goodwill were amortized over 18.7 years. These amounts
total $17,372,571 for the nine months ended September 30, 2000 and
$23,431,492 for the year ended December 31, 1999, exclusive of similar
amortization expense already recorded by Roberts. 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 and merger-related costs, assuming an annual interest rate of 13
1/8%, approximately 1/4% higher than Alamosa's current interest costs.
The increase is based on the expected terms of a new senior credit
facility as discussed in Note 1. These amounts total $831,108 for the
nine months ended September 30, 2000 and $1,108,144 for the year ended
December 31, 1999. A 1/8% variance in interest rates would increase or
decrease interest expense by $7,915 for the nine months ended
September 30, 2000 and $10,554 for the year ended December 31, 1999.
(2f) The adjustment represents entries to eliminate Alamosa's note receivable
and Roberts's corresponding note payable obtained pursuant to the loan
agreement dated July 31, 2000 whereby Alamosa Operations agreed to lend
up to $20 million to Roberts.
192
<PAGE>
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.
The pro forma adjustments represent the purchase accounting adjustments
necessary to reflect the WOW merger. The aggregate purchase price was
calculated as follows:
<TABLE>
<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 ...................................... 1,832,000 (ii)
Assumption of value appreciation plan obligations ......... 1,455,000 (iii)
Assumed deferred tax liability ............................ 54,270,466 (3b)
--------------
Total consideration ..................................... $ 200,495,466
==============
</TABLE>
Goodwill was calculated as follows:
<TABLE>
<S> <C>
Total consideration ........................................ $ 200,495,466
Less:
WOW members' equity at September 30, 2000, less
investment banking fees .................................. 4,937,835 (ii)
Write-off deferred debt issuance costs ..................... (1,529,852)
Estimated fair value of Sprint PCS affiliation and operating
agreements ............................................... 142,817,017
-------------
Goodwill ................................................. $ 54,270,466
=============
</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 WOW
merger, July 31, 2000.
193
<PAGE>
(ii) Anticipated costs of the WOW merger have been included as additional
purchase price and are:
<TABLE>
<S> <C>
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 September 30, 2000.
(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 $142,817,017 and goodwill of $54,270,466 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:
<TABLE>
<CAPTION>
ESTIMATED TAX TEMPORARY
FAIR VALUE BASIS DIFFERENCE
--------------- ------- -----------------
<S> <C> <C> <C>
Sprint PCS affiliation and operating
agreements ........................... $142,817,017 $ -- $ 142,817,017
Estimated effective tax rate ........... 38%
-------------
Deferred tax liability ................. $ 54,270,466
=============
</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.
194
<PAGE>
(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 $8,166,608 for the nine months ended September 30, 2000 and
$10,888,811 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
and merger-related costs, assuming an annual interest rate of 13 1/8%,
approximately 1/4% higher than Alamosa's current interest costs. The
increase is based on the expected terms of a new senior credit facility
as discussed in Note 1. These amounts total $1,671,830 for the nine
months ended September 30, 2000 and $2,229,106 for the year ended
December 31, 1999. A 1/8% variance in interest rates would increase or
decrease interest expense by $15,922 for the nine months ended September
30, 2000 and $21,230 for the year ended December 31, 1999.
195
<PAGE>
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, will be 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 from July 16, 1998 (inception) 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,
L.L.C. 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 (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.
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.
STOCKHOLDER PROPOSALS
Superholdings stockholders may submit proposals to be considered for
stockholder action at Superholdings' 2001 Annual Meeting of Stockholders if
they do so in accordance with applicable regulations of the SEC and applicable
provisions of Superholdings's bylaws. Any of these proposals must have been
received by the Secretary of Superholdings no later than a reasonable time
before Superholdings begins to print and mail its proxy materials in order to
be considered for inclusion in the proxy materials for Superholdings's 2001
Annual Meeting of stockholders. If a stockholder desires to bring business
before the 2001 Annual Meeting of Stockholders that is not a proposal submitted
to Superholdings for inclusion in Superholdings's proxy statement, notice must
be received by the Secretary of Superholdings not later than the tenth day
following the day on which public announcement of the date of such meeting is
made by Superholdings.
196
<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 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 23.
197
<PAGE>
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 [ ],
2001 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
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.
198
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
ALAMOSA PCS HOLDINGS, INC. AND SUBSIDIARIES AND PREDECESSORS
Consolidated Balance Sheets at September 30, 2000 (unaudited) and December 31, 1999 ...... F-3
Consolidated Statements of Operations (unaudited) for the three and nine months ended
September 30, 2000 and 1999 ............................................................. F-4
Consolidated Statement of Stockholders' Equity (unaudited) for the nine months ended
September 30, 2000 ...................................................................... F-5
Consolidated Statements of Cash Flows for the nine months ended September 30, 2000
(unaudited) 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-24
Report of Independent Accountants on Financial Statement Schedule ........................ F-39
Schedule II .............................................................................. F-40
ROBERTS WIRELESS COMMUNICATIONS, L.L.C. AND SUBSIDIARY
Consolidated Balance Sheets at September 30, 2000 (unaudited) and December 31, 1999 ...... F-41
Consolidated Statements of Operations (unaudited) for the nine months ended
September 30, 2000 and 1999 ............................................................. F-42
Consolidated Statements of Cash Flows (unaudited) for the nine months ended
September 30, 2000 and 1999 ............................................................. F-43
Notes to Consolidated Financial Statements ............................................... F-44
Independent Auditors' Report ............................................................. F-46
Consolidated Balance Sheet at December 31, 1999 .......................................... F-47
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-48
Consolidated Statement of Members' Equity (Deficit) for the year ended December 31,
1999 .................................................................................... F-49
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-50
Notes to Consolidated Financial Statements ............................................... F-51
WASHINGTON OREGON WIRELESS, LLC
Consolidated Balance Sheets at September 30, 2000 (unaudited) and December 31, 1999 ...... F-55
Consolidated Statements of Operations (unaudited) for the three and nine months ended
September 30, 2000 and 1999 ............................................................. F-56
Consolidated Statement of Members' Equity (Deficit) (unaudited) for the nine months
ended September 30, 2000 ................................................................ F-57
Consolidated Statements of Cash Flows (unaudited) for the nine months ended September
30, 2000 and 1999 ....................................................................... F-58
Notes to Consolidated Financial Statements ............................................... F-59
Independent Auditors' Report ............................................................. F-65
Balance Sheets at December 31, 1999 and 1998 ............................................. F-66
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
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-67
Statements of Members' Equity (Deficit) for the period July 8, 1998 (inception) through
December 31, 1999 .................................................................... F-68
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-69
Notes to Financial Statements ......................................................... F-70
</TABLE>
F-2
<PAGE>
ALAMOSA PCS HOLDINGS, INC. AND SUBSIDIARIES AND PREDECESSORS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
-------------------- ------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................ $ 172,633,478 $ 5,655,711
Accounts receivable, net of allowance for doubtful accounts of
$1,014,436 at September 30, 2000 and $161,704 at
December 31, 1999 .............................................. 9,662,519 1,675,636
Inventory ........................................................ 2,578,842 5,777,375
Prepaid expenses and other assets ................................ 774,179 882,516
------------- -------------
Total current assets ........................................... 185,649,018 13,991,238
Property and equipment, net ...................................... 189,521,616 84,713,724
Notes receivable from Roberts and Roberts Holdings'
members ........................................................ 22,196,043 --
Debt issuance costs, net ......................................... 13,482,401 3,743,308
Restricted cash .................................................. -- 518,017
Other noncurrent assets .......................................... 2,135,420 1,525,912
------------- -------------
Total assets ................................................... $ 412,984,498 $ 104,492,199
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ............................ $ 37,171,288 $ 15,203,103
Accounts payable to related parties .............................. 2,067,982 1,182,225
Current installments of capital leases ........................... 23,510 21,818
Bank line of credit .............................................. -- 363,665
Microwave relocation obligations ................................. 263,366 3,578,155
------------- -------------
Total current liabilities ...................................... 39,526,146 20,348,966
Long-term debt .................................................... 207,351,584 71,876,379
Capital lease obligations, noncurrent ............................. 809,173 827,024
------------- -------------
Total liabilities .............................................. 247,686,903 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,
61,354,856 and 48,500,008 issued and outstanding at
September 30, 2000 and December 31, 1999, respectively ......... 613,548 485,000
Additional paid-in capital ....................................... 245,953,564 50,824,876
Accumulated deficit .............................................. (79,717,514) (33,759,681)
Unearned compensation ............................................ (1,552,003) (6,110,365)
------------- -------------
Total stockholders' equity ..................................... 165,297,595 11,439,830
------------- -------------
Total liabilities and stockholders' equity ..................... $ 412,984,498 $ 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
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------------- -----------------------------------
2000 1999 2000 1999
---------------- ---------------- ---------------- ----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
Service revenue .............................. $ 20,754,150 $ 1,121,561 $ 45,900,325 $ 1,123,065
Product sales ................................ 2,228,949 779,464 6,001,373 813,052
------------- ------------- ------------- -------------
Total revenue .............................. 22,983,099 1,901,025 51,901,698 1,936,117
------------- ------------- ------------- -------------
Costs and expenses:
Cost of service and operations ............... 14,720,863 1,520,735 32,846,645 2,189,054
Cost of service and operations -- related
parties .................................... 198,369 38,818 523,149 38,818
Cost of products sold ........................ 4,604,697 1,811,780 11,636,860 1,844,238
Selling and marketing ........................ 11,328,579 3,016,576 25,311,135 3,882,642
Selling and marketing -- related parties ..... 238,256 230,624 450,630 320,436
General and administrative expenses
(excluding non-cash compensation
expense) ................................... 2,872,635 1,564,109 5,950,782 2,854,572
Equity participation compensation
expense .................................... 511,116 4,028,205 5,404,862 6,822,037
General and administrative -- related
parties .................................... 114,118 159,541 493,171 294,881
Depreciation and amortization ................ 3,015,497 809,680 7,763,434 936,736
------------- ------------- ------------- -------------
Total costs and expenses ................... 37,604,130 13,180,068 90,380,668 19,183,414
------------- ------------- ------------- -------------
Loss from operations ....................... (14,621,031) (11,279,043) (38,478,970) (17,247,297)
------------- ------------- ------------- -------------
Interest and other income ..................... 4,112,352 103,675 10,834,815 444,746
Interest expense .............................. (6,961,479) (750,489) (18,313,678) (885,868)
------------- ------------- ------------- -------------
Net loss ................................... $ (17,470,158) $ (11,925,857) $ (45,957,833) $ (17,688,419)
============= ============= ============= =============
Net loss per common share, basic
and diluted .................................. $ (0.28) $ (0.25) $ (0.77) $ (0.36)
============= ============= ============= =============
Weighted average common shares
outstanding, basic and diluted ............... 61,354,715 48,500,008 59,808,408 48,500,008
============= ============= ============= =============
</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
----------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Balance, January 1, 2000 ...... -- $ -- 48,500,008 $485,000
Initial public offering ....... -- -- 12,321,100 123,211
Exercise of stock options ..... -- -- 533,748 5,337
Amortization of unearned
compensation ................. -- -- -- --
Unearned compensation ......... -- -- -- --
Net loss ...................... -- -- -- --
----- ----- ---------- --------
Balance, September 30,
2000.......................... -- $ -- 61,354,856 $613,548
===== ===== ========== ========
<CAPTION>
ADDITIONAL
PAID-IN ACCUMULATED UNEARNED
CAPITAL DEFICIT COMPENSATION TOTAL
-------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Balance, January 1, 2000 ...... $ 50,824,876 $ (33,759,681) $ (6,110,365) $ 11,439,830
Initial public offering ....... 193,664,076 -- -- 193,787,287
Exercise of stock options ..... 618,112 -- -- 623,449
Amortization of unearned
compensation ................. -- -- 5,404,862 5,404,862
Unearned compensation ......... 846,500 -- (846,500) --
Net loss ...................... -- (45,957,833) -- (45,957,833)
------------ ------------- ------------ -------------
Balance, September 30,
2000.......................... $245,953,564 $ (79,717,514) $ (1,552,003) $ 165,297,595
============ ============= ============ =============
</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
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
-------------------- -------------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss ....................................................... $ (45,957,833) $ (17,688,419)
Adjustments to reconcile net loss to net cash used in
operating activities:
Non-cash compensation expense ................................ 5,404,862 6,822,037
Depreciation and amortization ................................ 7,763,434 936,736
Amortization of debt issuance costs .......................... 1,023,520 178,264
Deferred interest expense .................................... 16,599,368 544,055
Loss from disposition of interest rate cap premiums .......... 266,178 --
Loss from asset disposition .................................. 54,130 --
(Increase) decrease in asset accounts:
Accounts receivable ......................................... (7,986,883) (832,827)
Inventory ................................................... 3,198,533 (4,989,500)
Prepaid expenses and other assets ........................... (561,278) (653,311)
Increase (decrease) in liability accounts:
Accounts payable and accrued expenses ....................... 5,020,364 6,344,077
-------------- -------------
Net cash used in operating activities ....................... (15,175,605) (9,338,888)
-------------- -------------
Cash flows from investing activities:
Additions to property and equipment ............................ (98,209,298) (17,684,600)
Issuance of notes receivable to Roberts and Roberts Holdings'
members ...................................................... (22,196,043) --
Payment (issuance) of notes receivable from officer ............ 100,000 (100,000)
Acquisition related costs ...................................... (1,736,808) --
Purchase of minority interest in subsidiary .................... 255,000 --
Change in restricted cash ...................................... 518,017 (1,000,000)
-------------- -------------
Net cash used in investing activities ........................ (121,269,132) (18,784,600)
-------------- -------------
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) (230,942)
Stock options exercised ........................................ 623,449 --
Capital contributions .......................................... -- 10,000,000
Proceeds from issuance of long-term debt ....................... 7,758,175 12,289,626
Repayments of long-term debt ................................... (76,239,373) --
Payments on capital leases ..................................... (16,159) (20,633)
Interest rate cap premiums ..................................... (27,400) (233,700)
Bank overdraft ................................................. -- 244,369
-------------- -------------
Net cash provided by financing activities .................... 303,422,504 22,048,720
-------------- -------------
Net increase (decrease) in cash and cash equivalents ......... 166,977,767 (6,074,768)
Cash and cash equivalents at beginning of period ................ 5,655,711 13,529,077
-------------- -------------
Cash and cash equivalents at end of period ...................... $ 172,633,478 $ 7,454,309
============== =============
</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 consolidated balance sheet as of September 30, 2000, the consolidated
statements of operations for the three months and nine months ended September
30, 2000 and 1999, the consolidated statement of stockholders' equity for the
nine months ended September 30, 2000, and the consolidated statements of cash
flows for the nine months ended September 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. The financial statements as of and
for the period ended September 30, 1999 are audited. The financial statements
for the three months ended September 30, 1999 and as of and for the nine months
ended September 30, 2000 are unaudited. 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 nine months ended September
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,
Alamosa Wisconsin Limited Partnership, Alamosa Wisconsin GP, LLC, Alamosa
Finance, LLC, Alamosa Limited, LLC, Alamosa Delaware GP, LLC, Alamosa PCS, Inc
and Alamosa Operations, 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.
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
F-7
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
September 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:
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
-------------------- ------------------
(UNAUDITED)
<S> <C> <C>
Land and buildings ..................... $ 3,227,559 $ 2,817,426
Network equipment ...................... 130,092,578 76,867,836
Vehicles ............................... 1,135,415 477,353
Furniture and office equipment ......... 7,531,566 2,266,966
------------- ------------
141,987,118 82,429,581
Accumulated depreciation ............... (10,585,924) (2,974,674)
------------- ------------
Subtotal ............................ 131,401,194 79,454,907
------------- ------------
Microwave relocation costs ............. 3,943,315 3,578,155
Accumulated amortization ............... (222,672) (84,312)
------------- ------------
Subtotal ............................ 3,720,643 3,493,843
------------- ------------
Construction in progress:
Network equipment ..................... 50,442,513 374,680
Leasehold improvements ................ 3,957,266 1,390,294
------------- ------------
Subtotal ............................ 54,399,779 1,764,974
------------- ------------
Total ............................... $ 189,521,616 $ 84,713,724
============= ============
</TABLE>
5. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
-------------------- ------------------
(UNAUDITED)
<S> <C> <C>
Debt outstanding under credit facilities:
Senior Discount Notes ............................... $202,827,743 $ --
EDC Credit Facility ................................. 4,523,841 71,876,379
Bank line of credit ................................. -- 363,665
------------ -------------
Total debt ........................................... 207,351,584 72,240,044
Less current maturities .............................. -- 363,665
------------ -------------
Long-term debt, excluding current maturities ......... $207,351,584 $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:
F-8
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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;
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.
OPTIONAL REDEMPTION -- During the first thirty six (36) months after the
Notes Offering, Holdings 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%;
CHANGE OF CONTROL -- Upon a change of control as defined by the Notes
Offering, Holdings 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
RESTRICTIVE COVENANTS -- The indenture governing the Notes contain
covenants that, among other things and subject to important exceptions, limit
Holdings' ability and the ability of Holdings' 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 permitted Alamosa to borrow $250 million (which was
subsequently reduced to $175 million as a result of the prepayment of $75
million outstanding) under three commitment tranches through August 8, 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.
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.
Terms and conditions of the EDC Credit Facility after the assignment on
June 23, 2000 are essentially the same as before the assignment and second
amendment and restatement. However, the Company is no longer required to
maintain a $1 million cash balance as collateral against the EDC Credit
Facility.
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 6.81% at September 30, 2000. In
addition, an annual unused facility fee of 0.75% was charged beginning August
8, 2000 on the portion of the available credit that has not been borrowed.
Until the earliest of (a) the date the Tranche C Commitment is fully funded,
(b) August 8, 2002, or (c) February 8, 2002 (if we have not borrowed at least
$45.5 million under all three commitment tranches by that date), interest
accrued under the EDC credit facility 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
September 30, 2000 totaled $1,071,123. Unused facility fee for the period ended
September 30, 2000 totaled $188,234. Principal is payable in 20
F-9
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
quarterly installments beginning September 30, 2002 (except that installments
of principal must be paid beginning March 31, 2001 if we have 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, and are not currently a requirement of the 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 Nortel (and after the
assignment 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.
Alamosa incurred approximately $8,256,000 of costs associated with
obtaining the EDC Credit Facility. Those costs consisted of loan origination
fees, legal fees and other debt issuance costs that have been capitalized and
are being amortized to interest expense using the straight-line method over the
term of the EDC Credit Facility.
F-10
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. GUARANTOR FINANCIAL STATEMENTS
Set forth below are consolidating financial statements of the guarantor
and guarantor's subsidiaries and Alamosa Operations, Inc. ("Operations") which
is Holdings' non-guarantor subsidiary (the "Non-Guarantor Subsidiary") of the
Senior Discount Notes. Separate financial statements of each guarantor
subsidiary have not been provided because management has determined that they
are not material to investors.
CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 2000
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR &
GUARANTOR'S NON-GUARANTOR
SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................. $ 170,888 $ 1,745 $ -- $ 172,633
Accounts receivable, net of allowance ..... 9,363 300 -- 9,663
Intercompany receivable ................... 25,678 -- (25,678) --
Inventory ................................. 2,579 -- -- 2,579
Prepaid expenses and other assets ......... 443 331 -- 774
--------- -------- --------- ---------
Total current assets .................... 208,951 2,376 (25,678) 185,649
Property and equipment, net ................ 189,522 -- -- 189,522
Notes receivable ........................... -- 22,196 -- 22,196
Debt issuance costs, net ................... 13,482 -- -- 13,482
Other non-current assets ................... 398 1,737 -- 2,135
--------- -------- --------- ---------
Total assets ............................ $ 412,353 $ 26,309 $ (25,678) $ 412,984
========= ======== ========= =========
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued expenses...... $ 39,263 $ -- $ -- $ 39,263
Intercompany payable ...................... -- 25,678 (25,678) --
Microwave relocation obligation ........... 263 -- -- 263
--------- -------- --------- ---------
Total current liabilities ............... 39,526 25,678 (25,678) 39,526
Long-term debt ............................. 207,352 -- -- 207,352
Capital lease obligations .................. 809 -- -- 809
--------- -------- --------- ---------
Total liabilities ....................... 247,687 25,678 (25,678) 247,687
--------- -------- --------- ---------
Stockholders' Equity:
Preferred stock, par value $.01 per share
10,000,000 shares authorized; no
shares issued and outstanding ........... -- -- -- --
Common stock, $.01 par value;
290,000,000 shares authorized ........... -- -- -- --
61,354,856 issued and outstanding ....... 613 -- -- 613
Additional paid-in capital ................ 245,954 -- -- 245,954
Accumulated (deficit) earnings ............ (80,349) 631 -- (79,718)
Unearned compensation ..................... (1,552) -- -- (1,552)
--------- -------- --------- ---------
Total Equity ............................ 164,666 631 -- 165,297
--------- -------- --------- ---------
Total liabilities and stockholders'
equity ................................. $ 412,353 $ 26,309 $ (25,678) $ 412,984
========= ======== ========= =========
</TABLE>
F-11
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR & NON-
GUARANTOR'S GUARANTOR
SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Services revenues ...................... $ 45,901 $ -- $-- $ 45,901
Product sales .......................... 6,001 -- -- 6,001
---------- ---- --- ---------
Total revenue ....................... 51,902 -- -- 51,902
Cost of services and operations ......... 33,370 -- -- 33,370
Cost of products sold ................... 11,637 -- -- 11,637
Selling and marketing ................... 25,762 -- -- 25,762
General and administrative .............. 6,444 -- -- 6,444
Non-cash compensation ................... 5,405 -- -- 5,405
Depreciation and amortization ........... 7,763 -- -- 7,763
---------- ---- --- ---------
Loss from operations ................. (38,479) -- -- (38,479)
Interest and other income ............... 10,204 631 -- 10,835
Interest expense ........................ (18,314) -- -- (18,314)
---------- ---- --- ---------
Net income (loss) .................... $ (46,589) $631 $-- $ (45,958)
========== ==== === =========
</TABLE>
F-12
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR & NON-
GUARANTOR'S GUARANTOR
SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................ $ (46,589) $ 631 $ -- $ (45,958)
Adjustments to reconcile net loss to net cash
used in operating activities: ................... -- -- -- --
Non-cash compensation expense ................... 5,405 -- -- 5,405
Depreciation and amortization ................... 7,763 -- -- 7,763
Amortization of debt issuance costs ............. 1,024 -- -- 1,024
Deferred interest expense ....................... 16,599 -- -- 16,599
Loss from disposition of interest rate cap
premiums ...................................... 266 -- -- 266
Loss from asset disposition ..................... 54 -- -- 54
(Increase) decrease in asset accounts:
Accounts receivable ........................... (9,365) (300) 1,678 (7,987)
Inventory ..................................... 3,199 -- -- 3,199
Prepaid expense and other assets .............. (230) (331) -- (561)
Increase (decrease) in liability accounts:
Accounts payable and accrued expenses ......... 5,020 1,678 (1,678) 5,020
---------- --------- --------- ----------
Net cash provided by (used in) operating
activities ................................. (16,854) 1,678 -- (15,176)
---------- --------- --------- ----------
Cash flows from investing activities:
Additions to property and equipment ............. (98,209) -- -- (98,209)
Intercompany receivable ......................... (24,000) -- 24,000 --
Intercompany payable ............................ -- 24,000 (24,000) --
Issuance of notes receivable .................... 100 (22,196) -- (22,096)
Acquisition related costs ....................... -- (1,737) -- (1,737)
Purchase of minority interest in subsidiary ..... 255 -- -- 255
Change in restricted cash ....................... 518 -- -- 518
---------- --------- --------- ----------
Net cash provided by (used in) investing
activities ................................... (121,336) 67 -- (121,269)
---------- --------- --------- ----------
Cash flows from financing activities:
Equity offering proceeds ........................ 208,589 -- -- 208,589
Equity offering costs ........................... (13,599) -- -- (13,599)
Issuance of Senior Discount Notes ............... 187,096 -- -- 187,096
Debt issuance cost .............................. (10,763) -- -- (10,763)
Stock options exercised ......................... 623 -- -- 623
Proceeds from issuance of long-term debt ........ 7,758 -- -- 7,758
Repayments of long-term debt .................... (76,239) -- -- (76,239)
Payments on capital leases ...................... (16) -- -- (16)
Interest rate cap premiums ...................... (27) -- -- (27)
---------- --------- --------- ----------
Net cash provided by financing activities..... 303,422 -- -- 303,422
---------- --------- --------- ----------
Net increase in cash and cash equivalents..... 165,232 1,745 -- 166,977
Cash and cash equivalents at beginning of
period .......................................... 5,656 -- -- 5,656
---------- --------- --------- ----------
Cash and cash equivalents at end of period ....... $ 170,888 $ 1,745 $ -- $ 172,633
========== ========= ========= ==========
</TABLE>
F-13
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. 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 and September 30, 2000,
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 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 $6,822,037 was recorded as of
September 30, 1999. As of September 30, 2000, the Company has recorded unearned
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
September 30, 2000, non-cash compensation of $5,404,862 and $511,116 has been
recognized for the nine months and quarter, respectively. At September 30,
2000, the remaining unamortized unearned compensation totaled $1,552,003.
The following summarizes activity under the Company's stock option plans:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
-------------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
2000 1999
--------------- -------------
<S> <C> <C>
Options outstanding at beginning of period ........... 5,282,000 873,000
Granted .............................................. 2,003,150 5,282,000
Exercised ............................................ (506,417) --
Cancelled ............................................ (126,499) (873,000)
--------- ---------
Options outstanding at the end of the period ......... 6,652,234 5,282,000
========= =========
</TABLE>
8. 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, which was assigned by Nortel to EDC on June 23, 2000. Under the
Nortel equipment 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 September 30, 2000, Alamosa
had remaining commitments of approximately $39 million under the Nortel
equipment agreement.
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.
On July 31, 2000, Holdings signed definitive agreements to merge two
Sprint PCS affiliates, Roberts Wireless Communications, L.L.C ("Roberts") and
Washington Oregon Wireless, LLC ("WOW") into its operations through the
formation of a new holding company, Alamosa Holdings, Inc. ("Superholdings").
F-14
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Roberts has a management agreement with Sprint PCS to provide personal
communications services to approximately 2.5 million residents primarily in the
state of Missouri. WOW has a similar management agreement with Sprint PCS to
provide services to approximately 1.5 million people primarily in Washington
and Oregon.
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.
It is anticipated that both of these transactions will be accounted for under
the purchase accounting method.
The consummation of these transactions contemplates a merger of the
Company, pursuant to which the Company, Roberts and WOW will become
subsidiaries of Superholdings and the Company's stockholders will become
stockholders of Superholdings.
Roberts is a wholly owned subsidiary of Roberts Wireless Holdings, L.L.C.
("Roberts Holdings"). Pursuant to the Roberts merger agreement, the members of
Roberts Holdings will receive 13.5 million shares of Superholdings common stock
and approximately $4.0 million in cash. Superholdings will assume the net debt
of Roberts in the transaction, which amounted to approximately $56.0 million as
of September 30, 2000.
WOW is a wholly owned subsidiary of WOW Holdings, LLC ("WOW Holdings").
Pursuant to the WOW merger agreement, the members of WOW Holdings will receive
6.05 million shares of Superholdings common stock and $12.5 million in cash.
Superholdings will assume the net debt of WOW in the transaction, which
amounted to approximately $30 million as of September 30, 2000.
In addition, on July 31, 2000, Operations entered into services agreements
with Roberts and WOW, effective July 31, 2000 and September 1, 2000,
respectively, whereby Operations began to manage the operations of Roberts and
WOW, pending completion of the mergers. Operations provides various services in
connection with the operation of Roberts' and WOW's businesses, including (a)
all network management services, (b) management of all sales and marketing
services, (c) through the management agreements 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 and WOW each pay Operations a management fee of $100,000 per month for
the services provided by Operations and each reimburses Operations for certain
costs and expenses incurred or paid by Operations in providing these services.
The terms of the Roberts and WOW services agreements began on July 31,
2000 and September 1, 2000, respectively, and will end upon the completion of
the respective mergers, subject to earlier termination in certain
circumstances.
On June 30, 2000, Operations entered into a $10 million loan agreement
with Michael and Steven Roberts. The proceeds from this loan were used to fund
capital and operating requirements of Roberts and Roberts Tower Company. On
July 31, 2000, Roberts and Operations entered into a loan agreement for $20
million, 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 amounts of
the obligations of Michael and Steven Roberts under the loan agreement between
Michael and Steven Roberts (as borrowers) and Operations (as lender). As of
September 30, 2000, approximately $14 million had been funded under the Roberts
loan agreement.
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.
In connection with the Roberts loan agreement, the 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 security interests
are not released, the 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.
F-15
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. As of September 30, 2000, no
amount had been funded under the WOW loan agreement.
The WOW 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 it has
received certain consents. This loan is guaranteed by certain members of WOW
Holdings.
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.
9. 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.
10. 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 nine months
ended September 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.
11. SUPPLEMENTAL DISCLOSURE TO STATEMENTS OF CASH FLOWS
Accounts payable at December 31, 1999 and September 30, 2000 include
$9,096,776 and $23,512,954, respectively, of property and equipment additions.
Additions to Property and Equipment of $98,209,298 in the consolidated
statements of cash flows for the nine months ended September 30, 2000 include
payments of accounts payable outstanding at December 31, 1999.
Capital lease obligations of $146,379 were incurred during the nine months
ended September 30, 1999.
12. 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
F-16
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 21, 2000.
The implementation of FIN 44 did not 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 or 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.
13. SUBSEQUENT EVENTS
SECTION 251(G)TRANSACTION -- On December 14, 2000, the Company formed a
new holding company pursuant to Section 251(g) of the Delaware General
Corporation Law. In that transaction, each share of the former Alamosa PCS
Holdings, Inc. was converted into one share of the new holding company and the
former public company (renamed Alamosa (Delaware), Inc.) became a wholly owned
subsidiary of the new holding company which was renamed Alamosa PCS Holdings,
Inc.
NEW CREDIT FACILITY -- On December 20, 2000, Alamosa entered into a
commitment letter with a group of banks providing for a new senior credit
facility of up to $305 million, to be made to Alamosa Holding, LLC. The
proceeds of the credit facility will be used to refinance Alamosa's existing
credit facility, to pay transactions and fund the cash portion of the
consideration in the Roberts and WOW mergers, to fund the working capital and
build-out needs of Roberts and WOW, including the refinancing of their existing
debt, and for general corporate purposes. While the definitive agreements
providing for the credit facility have not been completed, the credit facility
is expected to be comprised of a term facility of $255 million and a revolving
credit facility of $50 million, each with a term of seven years. Under the new
credit facility, interest will accrue, at Alamosa Holdings, LLC's option: (i)
at the London Interbank Offered Rate adjusted for any statutory reserves
("LIBOR"), or (ii) the base rate which is generally the higher of the
administrative agent's base rate, the federal funds effective rate plus 0.50%
or the administrative agent's base CD rate plus 0.50%, in each case plus an
interest margin which initially will be 4.00% for LIBOR borrowings and 3.00%
for base rate borrowings. The applicable interest margins will be subject to
reductions under a pricing grid to be agreed upon based on ratios of Alamosa's
Holdings, LLC's total debt to its earnings before interest, taxes, depreciation
and amortization ("EBITDA"). The interest rate margins will increase by an
additional 200 basis points in the event Alamosa Holdings, LLC fails to pay
interest or other amounts as they become due and payable under the new credit
facility.
Alamosa Holdings, LLC will also be required to pay quarterly in arrears a
commitment fee on the unfunded portion of the commitment of each lender. The
commitment fee will accrue at a rate per annum equal to (i) 1.50% on each day
when the utilization (determined by dividing the total amount of loans plus
outstanding letters of credit under the new credit facility by the total
commitment amount under the new credit facility) of the new credit facility is
less than or equal to 33.33%, (ii) 1.25% on each day when utilization is
greater than 33.33% but less than or equal to 66.66% and (iii) 1.00% on each
day when utilization is greater than 66.66%.
F-17
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 new revolving credit facility.
On the date on which the definitive documentation for the new credit
facility is executed and the reorganization is completed, $200.0 million must
be drawn under the new term loan facility while an additional $55.0 million in
term debt will be available for multiple drawings in amounts to be agreed for a
period of 18 months thereafter. Any amount outstanding at the end of the
18-month period will amortize quarterly in amounts to be agreed beginning three
years and three months following the completion of the reorganization. The new
revolving credit facility of $50.0 million will be available for multiple
drawings prior to its final maturity, provided that no amounts under the new
revolving credit facility will be available until all amounts under the new
term facility have been fully drawn. The new revolving credit facility will
begin reducing quarterly in amounts to be agreed beginning three years and
three months following the closing of the new credit facility. All advances
under the new credit facility will be subject to usual and customary
conditions, including actual and pro forma covenant compliance and the
requirement that the ratio of senior debt to net property, plant and equipment
for the most recent fiscal quarter will not exceed 1:1.
Loans under the new term loan portion of the new credit facility will be
subject to mandatory prepayments from 50% of excess cash flow (to be agreed
upon) for each fiscal year commencing with the fiscal year ending December 31,
2002, 100% of the net cash proceeds (subject to exceptions and reinvestment
rights to be agreed upon) of asset sales or other dispositions (including
insurance and condemnation proceeds) of property by Alamosa (Delaware) and its
subsidiaries, and 100% of the net proceeds of issuances of debt obligations of
Alamosa (Delaware) and its subsidiaries (subject to exceptions to be agreed
upon).
All obligations of Alamosa Holdings, LLC under the new credit facility
will be unconditionally guaranteed on a senior basis by Superholdings, Alamosa,
Alamosa (Delaware) and, subject to certain exceptions, by each current and
future direct and indirect subsidiary of Alamosa (Delaware), including Alamosa
PCS, Inc., Roberts and WOW.
The new credit facility will be secured by a first priority pledge of all
of the capital stock of Alamosa Holdings, LLC, and, subject to certain
exceptions, each current and future direct and indirect subsidiary of Alamosa
(Delaware) as well as a first priority interest in substantially all of the
assets of Alamosa (Delaware) and, subject to certain exceptions, each current
and future direct and indirect subsidiary of Alamosa (Delaware).
The new credit facility contains customary events of default as well as
numerous affirmative and negative covenants, including, but not limited to, the
following financial covenants which will apply for an initial period of time
until it anticipates achieving positive cash flows, including:
o minimum numbers of Sprint PCS subscribers;
o providing coverage to a minimum number of residents;
o minimum revenue;
o maximum negative EBITDA;
o ratio of senior debt to total capital;
o ratio of total debt to total capital; and
o maximum capital expenditures.
After Alamosa Holdings, LLC has achieved positive cash flows, the
financial covenants will include, but not be limited to the following:
F-18
<PAGE>
ALAMOSA PCS HOLDINGS, INC AND SUBSIDIARIES AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Unless waived by the new credit facility lenders, the failure of
Superholdings, Alamosa Holdings, LLC and their subsidiaries to satisfy or
comply with any of the financial or other covenants, or the occurrence of an
event of default under the new credit facility, will entitle the lenders to
declare the outstanding borrowings under the new credit facility immediately
due and payable and exercise all or any of their other rights and remedies. Any
such acceleration or other exercise of rights and remedies would likely have a
material adverse effect on Superholdings, Alamosa, Alamosa (Delaware), Alamosa
Holdings, LLC and their subsidiaries.
The commitment letter will terminate on the earlier of March 31, 2001 and
the date of execution of and delivery of definitive documentation with respect
to the new credit facility. The commitment letter for the new credit facility
superseded an existing commitment letter for a $200 million credit facility
with Citicorp.
LOAN AGREEMENT BETWEEN OPERATIONS AND ROBERTS TOWER COMPANY -- On October
18, 2000, Roberts Tower Company, a corporation owned and operated by Michael
and Steven Roberts, and Alamosa Operations entered into a loan agreement
whereby Operations agreed to lend up to $15.0 million to Roberts Tower Company,
to be used only for the purposes of repaying certain amounts owed by Michael
and Steven Roberts under the loan agreement dated June 30, 2000, between
Michael and Steven Roberts (as borrowers) and Operations (as lender) and
funding the construction of wireless telecommunications towers to be leased by
Roberts through the completion of the Roberts merger. As of January 10, 2001,
approximately $14.5 million has been funded under the Roberts Tower loan
agreement.
Pursuant to the Roberts Tower loan agreement, Michael and Steven Roberts
agreed that, if the Roberts merger is not completed, all sums due under the
Roberts Tower loan agreement and related documents are not paid in full to
Operations, and certain liens and security interests are not released, Michael
and Steven Roberts shall cause Roberts Holdings to assign, transfer and convey
to Operations all or a portion of its membership interests in Roberts so that
Operations owns, on a fully diluted basis, 10 % of the total membership
interests in Roberts, free and clear of all liens and encumbrances, other than
the pledge of and lien on such interests to secure the obligations under the
loan agreement, dated as of September 8, 1999, between Roberts and DLJ Capital
Funding, Inc. (as successor to Lucent Technologies, Inc.). If the fair market
value of the 10 % membership interest in Roberts is determined to be equal to
or greater than the obligations under the Roberts Tower loan agreement then the
10 % membership interest to Operations in full satisfaction of the obligation
of Roberts Tower Company to repay the Roberts Tower loan. If the fair market
value of the 10 % membership interest is determined to be less than the
obligations under the Roberts Tower loan agreement, then the fair market value
of the 10 % membership interest will be applied towards the payment of the
Roberts Tower obligations under the Roberts Tower loan agreement.
In connection with the Roberts Tower loan, Michael and Steven Roberts have
given personal guarantees to assure the payment of the Roberts Tower loan by
Roberts Tower Company.
Roberts Tower Company also issued a warrant entitling Operations to
purchase 50 shares of Roberts Tower Company common stock for $1.00 per share,
which represents 5% of the outstanding common stock of Roberts Tower Company.
F-19
<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-20
<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
============= ===========
LIABILITY 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-21
<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>
Revenue:
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 ......................................... 5,938,838 --
Selling and marketing ......................................... 10,406,385 --
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-22
<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
----------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
-------- -------- ------------- ----------
<S> <C> <C> <C> <C>
Balance, July 16, 1998
(inception) ..................... -- $ -- -- $ --
Members' contribution ............ -- -- 48,500,008 485,000
Net loss ......................... -- -- -- --
---- ------ ---------- --------
Balance, December 31, 1998 ....... -- -- 48,500,008 485,000
Members' contribution ............ -- -- -- --
Stock options .................... -- -- -- --
Amortization of unearned
compensation .................... -- -- -- --
Net loss ......................... -- -- -- --
---- ------ ---------- --------
Balance, December 31, 1999 ....... -- $ -- 48,500,008 $485,000
==== ====== ========== ========
<CAPTION>
ADDITIONAL
PAID-IN ACCUMULATED UNEARNED
CAPITAL DEFICIT COMPENSATION TOTAL
------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Balance, July 16, 1998
(inception) ..................... $ -- $ -- $ -- $ --
Members' contribution ............ 14,515,000 -- -- 15,000,000
Net loss ......................... -- (923,822) -- (923,822)
----------- ------------- ------------- --------------
Balance, December 31, 1998 ....... 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 ....... $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-23
<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 $ --
============= ============
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.
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.
F-25
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The members of the Company had the following Class I ownerships interests
as of December 31, 1998 and December 31, 1999:
<TABLE>
<S> <C>
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%
</TABLE>
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 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.
<TABLE>
<S> <C>
Asset lives are as follows:
Buildings 20 years
Network equipment 5-10 years
Vehicles 5 years
Furniture and office equipment 5-7 years
</TABLE>
Leasehold improvements are depreciated over the shorter of the remaining
term of the lease or the estimated useful life of the improvement.
F-26
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
F-27
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 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-28
<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.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
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
============ ==========
</TABLE>
F-29
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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:
<TABLE>
<CAPTION>
YEARS:
<S> <C>
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
===========
</TABLE>
Included in total minimum rental commitments is $1,508,000 which will be
paid to related parties.
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:
<TABLE>
<CAPTION>
YEARS:
<S> <C>
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
=========
</TABLE>
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.
F-30
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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 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.
F-31
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
F-32
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 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.
F-33
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
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
F-34
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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:
<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
F-35
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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:
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JULY 16, 1998
(INCEPTION)
YEAR ENDED THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- -------------------
<S> <C> <C>
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
</TABLE>
The following summarizes activity under the Company's stock option plans:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE EXERCISE
NUMBER OF OPTIONS PRICE PER SHARE
------------------------------------ -----------------------------------
FOR THE PERIOD FOR THE PERIOD
YEAR ENDED FROM JULY 16, 1998 YEAR ENDED FROM JULY 16, 1998
DECEMBER 31, (INCEPTION) THROUGH DECEMBER 31, (INCEPTION) THROUGH
1999 DECEMBER 31, 1998 1999 DECEMBER 31, 1998
-------------- --------------------- -------------- --------------------
<S> <C> <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
F-36
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Selected information related to the Company's interest rate cap agreements
is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
Notional amount ....................... $35,607,000 $ --
Fair value ............................ 125,815 --
Carrying amount ....................... 282,958 --
----------- ------
Net unrecognized gain (loss) .......... $ (157,143) $ --
=========== ======
</TABLE>
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
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.
F-37
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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;
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
F-38
<PAGE>
ALAMOSA PCS HOLDINGS, INC.
(FORMERLY ALAMOSA PCS LLC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-39
<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-40
<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
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-41
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, L.L.C. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ....................... $ 1,375,260 $ 3,144,756
Accounts receivable ............................. 548,206 389,951
Inventory ....................................... 143,887 226,968
Prepaid expenses ................................ 133,900 120,000
----------- -----------
Total current assets .......................... 2,201,253 3,881,675
----------- -----------
Property and equipment, net ...................... 57,526,792 13,331,321
Intangible assets, net ........................... 8,352,733 8,725,904
Debt issuance costs, net ......................... 1,901,371 1,403,583
Other noncurrent assets .......................... 16,290 --
----------- -----------
Total assets .................................. $69,998,439 $27,342,483
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ........... $ 7,803,274 $ 2,371,177
----------- -----------
Total current liabilities ..................... 7,803,274 2,371,177
----------- -----------
Notes Payable .................................... 13,793,343 --
Long-term debt ................................... 56,000,000 25,011,439
----------- -----------
Total liabilities ............................. $77,596,617 $27,382,616
----------- -----------
Members' equity:
Contributed capital ............................. 5,279,200 4,079,200
Contributed capital - related parties ........... 4,101,289 4,101,289
Accumulated deficit ............................. (8,220,623) (3,632,380)
Current year net income (loss) .................. (8,758,044) (4,588,242)
----------- -----------
Total members' equity ......................... (7,598,178) (40,133)
----------- -----------
Total liabilities and members' equity ......... $69,998,439 $27,342,483
=========== ===========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
F-42
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, L.L.C. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
Revenue:
Service revenue ........................ $ 8,560,002 $ 1,245,467
Product sales .......................... 747,956 151,004
------------ ------------
Total revenue ........................ 9,307,958 1,396,471
------------ ------------
Cost and expenses:
Cost of service and operations ......... 6,281,512 1,153,509
Cost of product sold ................... 1,410,706 195,931
Selling and marketing .................. 2,954,625 880,835
General and administrative ............. 1,533,341 229,496
Depreciation and amortization .......... 4,190,641 1,662,574
------------ ------------
Total costs and expenses ............. 16,370,825 4,122,345
------------ ------------
Loss from operations ................. (7,062,867) (2,725,874)
------------ ------------
Interest and other income ............... 97,358 28,580
Interest expense ........................ (1,792,535) (83,467)
------------ ------------
Net loss ............................. $ (8,758,044) $ (2,780,761)
============ ============
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
F-43
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, L.L.C. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
-------------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ........................................................ $ (8,758,044) $ (2,780,761)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization ................................. 3,591,014 1,662,574
Amortization of debt issuance costs ........................... 599,627 --
(Increase) decrease in asset accounts:
Accounts receivable ........................................... (158,256) --
Inventory ..................................................... 83,081 (203,052)
Prepaid expenses and other assets ............................. (13,900) --
Other noncurrent assets ....................................... (16,290) 1,000,000
Increase (decrease) in liability accounts:
Accounts payable and accrued expenses ......................... 3,377,783 440,935
------------- -------------
Net cash provided by (used in) operating activities .......... (1,294,985) 119,696
------------- -------------
Cash flows from investing activities:
Additions to property and equipment ............................. (45,732,172) (22,261,836)
------------- -------------
Net cash used in investing activities ........................ (45,732,172) (22,261,836)
------------- -------------
Cash flow from financing activities:
Debt issuance costs ............................................. (724,243) (1,389,201)
Contributed capital ............................................. 1,200,000 3,303,000
Contributed capital-related parties ............................. -- 392,160
Proceeds from notes payable ..................................... 13,793,343 --
Proceeds from long-term debt .................................... 30,988,561 25,011,439
------------- -------------
Net cash provided by financing activities .................... 45,257,661 27,317,398
------------- -------------
Net increase (decrease) in cash and cash equivalents ......... (1,769,496) 5,175,258
Cash and cash equivalents at beginning of period ................. 3,144,756 79,656
------------- -------------
Cash and cash equivalents at end of period ....................... $ 1,375,260 $ 5,254,914
============= =============
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
F-44
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, L.L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Roberts Wireless Communications, L.L.C. (the "Company") is a wholly-owned
subsidiary of Roberts Wireless Holdings, L.L.C. ("Roberts Holdings"). In the
opinion of the sole member of 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 September 30, 2000 and December 31,
1999 and the results of operations and cash flows for the nine months ended
September 30, 2000 and 1999. The results of operations for the nine months
ended September 30, 2000 and 1999 are not necessarily indicative of the results
to be expected for the full year.
During the nine months ended September 30, 2000, the Company borrowed
approximately $31,000,000 which was used to purchase communication equipment.
The September 30, 2000 accounts payable and accrued expenses is approximately
$5,400,000 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 September 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 agreed to waive the non-compliance issues at June 30, 2000
as well as any that existed at September 30, 2000.
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.
On July 31, 2000, Alamosa PCS Holdings, Inc. ("Alamosa") a Sprint PCS
affiliate, signed definitive agreements to merge the Company (the "Roberts
Reorganization Agreement") and Washington Oregon Wireless, LLC into its
operations through the formation of a new holding company, Alamosa Holdings,
Inc. ("Superholdings"). Pursuant to the Roberts Reorganization Agreement, the
members of Roberts Holdings will receive 13.5 million shares of Superholdings
common stock and approximately $4.0 million in cash. The merger is contingent
upon the completion of the conditions to consummate the transaction as
contained in the Roberts Reorganization Agreement.
In addition, on July 31, 2000, the Company entered into a services
agreement with Alamosa Operations, Inc. ("Operations") a subsidiary of Alamosa,
effective July 31, 2000, whereby Operations began to manage the operations of
the Company, pending completion of the merger. Operations provides various
services in connection with the operation of the Company's business, including
(a) all network management services, (b) management of all sales and marketing
services, (c) through the management agreements 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, the
Company pays Operations a management fee of $100,000 per month for the services
provided by Operations and reimburses Operations for certain costs and expenses
incurred or paid by Operations in providing these services.
On June 30, 2000, Operations entered into a $10 million loan agreement
with Michael and Steven Roberts. The proceeds from this loan were used to fund
capital and operation requirements of the Company and Roberts Tower Company. On
July 31, 2000, the Company and Operations entered into a loan agreement (the
"Loan Agreement") for $20 million, to be used only for the purposes of repaying
the amounts owed by Michael and Steven Roberts under the June 30 loan agreement
between Michael and Steven Roberts and Operations and of funding the Company's
working capital needs from July 31, 2000 through the completion of the merger.
As of January 10, 2001, approximately $20 million had been funded under the
Loan Agreement.
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.
F-45
<PAGE>
In connection with the Loan Agreement, the members of Roberts Holdings
entered into an agreement providing that, if the merger is not completed, all
sums due under the Loan Agreement and related documents are not paid in full to
Operations, and certain liens and security interests are not released, the
members of the Company will jointly and severally convey to Operations all or a
portion of their respective membership interests in the Company so that
Operations owns on a fully diluted basis, 15% of the total membership interests
in the Company, free and clear of all liens and encumbrances.
When the merger is completed, all amounts due to Operations by the Company
under the 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 the Company), or (b) remain a debt obligation of the Company,
subject to a subordination agreement in favor of the senior lender to
Superholdings.
On October 18, 2000, Roberts Tower Company, a corporation owned and
operated by Michael and Steven Roberts, and Operations entered into a loan
agreement (the "Roberts Tower Loan Agreement") whereby Operations agreed to
lend up to $15.0 million to Roberts Tower Company, to be used only for the
purposes of repaying certain amounts owed by Michael and Steven Roberts under
the June 30 loan agreement, between Michael and Steven Roberts (as borrowers)
and Operations (as lender) and funding the construction of wireless
telecommunications towers related to Roberts through the completion of the
merger. As of January 10, 2001, approximately $14.5 million has been funded
under the Roberts Tower loan agreement.
Pursuant to the Roberts Tower Loan Agreement, Michael and Steven Roberts
agreed that, if the Roberts merger is not completed, all sums due under the
Roberts Tower Loan Agreement and related documents are not paid in full to
Operations, and certain liens and security interests are not released, Michael
and Steven Roberts shall cause Roberts Holdings to assign, transfer and convey
to Alamosa Operations all or a portion of its membership interests in Roberts
so that Alamosa Operations owns, on a fully diluted basis, 10% of the total
membership interests in Roberts, free and clear of all liens and encumbrances,
other than the pledge of and lien on such interests to secure the obligations
under the loan agreement, dated as of September 8, 1999, between Roberts and
Lucent Technologies, Inc., assignor of all of its rights and obligations under
such loan agreement to DLJ Capital Funding, Inc. If the fair market value of
the 10% membership interest in Roberts is determined to be equal to or greater
than the obligations under the Roberts Tower loan agreement and those other
loan documents, then the 10% membership interest to Alamosa Operations will
replace the obligation of Roberts Tower Company to repay the Roberts Tower
loan. If the fair market value of the 10% membership interest is determined to
be less than the obligations under the Roberts Tower Loan Agreement, then the
fair market value of the 10% membership interest will be applied towards the
payment of the Roberts Tower obligations under the Roberts Tower Loan
Agreement.
In connection with the Roberts Tower loan, Michael and Steven Roberts have
given personal guarantees to assure the payment of the Roberts Tower loan by
Roberts Tower Company.
Also Roberts Tower Company issued a warrant entitling Operations to
purchase 50 shares of Roberts Tower Company common stock for $1.00 per share.
F-46
<PAGE>
INDEPENDENT AUDITORS' REPORT
Members
Roberts Wireless Communications, L.L.C.
We have audited the accompanying consolidated balance sheet of Roberts
Wireless Communications, L.L.C. (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, L.L.C. 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 and October 31, 2000.
F-47
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, L.L.C. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<S> <C>
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
============
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
F-48
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, L.L.C. 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>
Revenue:
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-49
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, L.L.C. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY (DEFICIT)
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
MEMBERS'
CONTRIBUTED CONTRIBUTED CAPITAL ACCUMULATED EQUITY
CAPITAL MEMBERS RELATED 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-50
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, L.L.C. 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>
The accompanying notes are an integral part of
the consolidated financial statements.
F-51
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, L.L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS POLICIES
NATURE OF OPERATIONS
Roberts Wireless Communications, L.L.C. (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.
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.
F-52
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, L.L.C. AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
Property and equipment are depreciated using the straight-line method
based on estimated useful lives of the assets. Asset lives are as follows:
<TABLE>
<S> <C>
Buildings 39 years
Furniture and Fixtures 5-7 years
Communication Equipment 5-15 years
Vehicles 5 years
</TABLE>
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 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-53
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, L.L.C. AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
3. LONG-TERM DEBT
<TABLE>
<S> <C>
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
===========
</TABLE>
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:
<TABLE>
<CAPTION>
LEVERAGE APPLICABLE MARGIN FOR ABR BORROWINGS
-------- ------------------------------------
<S> <C>
(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%
</TABLE>
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:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -----------
<S> <C>
2000 $ 0
2001 0
2002 0
2003 5,002,288
2004 5,002,288
Thereafter 15,006,863
-----------
$25,011,439
===========
</TABLE>
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. Management
believes the agreements with Alamosa PCS Holdings, Inc., which include the $20
million cash infusion received from Alamosa Operations, Inc., make it no
longer necessary for the members to reserve additional equity for the Company.
F-54
<PAGE>
ROBERTS WIRELESS COMMUNICATIONS, L.L.C. AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
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:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
2000 $140,000
2001 140,000
2002 140,000
2003 140,000
2004 140,000
--------
$700,000
========
</TABLE>
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.
The terms of the definitive agreement call for members of the Company to
receive 13,500,000 shares of Alamosa Holdings, Inc. common stock and $4 million
in cash. The definitive agreement also calls for the Company to transfer to the
members, Roberts Tower Company, or other entities controlled by them, certain
assets that include real estate, towers, Nortel base stations and retail store
sites that were funded directly or indirectly with capital contributions to the
Company by the members. The total value of the assets to be transferred
approximates $4,420,000.
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-55
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
-------------------- ------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ....................... $ 2,120,216 $ 596,445
Accounts receivable ............................. 45,495 --
Inventory ....................................... 612,044 --
Prepaid expenses ................................ 37,090 --
------------ ------------
Total current assets .......................... 2,814,845 596,445
Property and equipment, net ...................... 33,178,939 10,413,155
Intangible assets ................................ -- --
Notes Receivable ................................. -- --
Debt issuance costs, net ......................... 1,529,852 --
Other noncurrent assets .......................... 105,762 --
------------ ------------
Total assets .................................. $ 37,629,398 $ 11,009,600
============ ============
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ........... $ 8,181,245 $ 8,206,097
------------ ------------
Total current liabilities ..................... 8,181,245 8,206,097
Senior secured notes payable ..................... 22,960,318 --
Other noncurrent liabilities ..................... 50,000 --
Long-term debt -- --
------------ ------------
Total liabilities ............................. 31,191,563 8,206,097
------------ ------------
Commitments
Members' equity:
Additional paid in capital ...................... 14,699,769 3,829,120
Accumulated deficit ............................. (1,025,617) --
Current year net income (loss) .................. (7,236,317) (1,025,617)
------------ ------------
Total members' equity ......................... 6,437,835 2,803,503
------------ ------------
Total liabilities and members' equity ......... $ 37,629,398 $ 11,009,600
============ ============
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
F-56
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE NINE THREE NINE
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Revenue:
Service revenue ............................ $ 322,050 $ 358,855 $ -- $ --
Product sales .............................. 110,722 110,722 -- --
------------ ------------ ---------- ----------
Total revenue ............................ 432,772 469,577 -- --
------------ ------------ ---------- ----------
Costs and expenses:
Cost of service and operations ............. 1,669,608 2,859,005 64,450 238,168
Cost of products sold ...................... 217,928 217,928 -- --
Selling and marketing ...................... 968,630 1,166,865 -- --
General and administrative ................. 995,893 2,706,217 105,683 205,004
Depreciation ............................... 424,303 486,113 --
------------ ------------ ----------
Total costs and expenses ................. 4,276,362 7,436,128 170,133 443,172
------------ ------------ ---------- ----------
Loss from operations ..................... (3,843,590) (6,966,551) (170,133) (443,172)
------------ ------------ ---------- ----------
Interest and other income (expense) ......... 40,313 113,545 1,663 1,663
Interest expense ............................ (383,311) (383,311) -- --
------------ ------------ ---------- ----------
Net loss ................................. $ (4,186,588) $ (7,236,317) $ (168,470) $ (441,509)
============ ============ ========== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-57
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
CAPITAL TOTAL
CONTRIBUTED ACCUMULATED ACQUISITION MEMBERS'
CAPITAL DEFICIT COST EQUITY (DEFICIT)
------------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C>
Members' equity at December 31, 1999 .......... $ 3,829,120 $ (1,025,617) $ -- $ 2,803,503
Activity during the nine months ended
September 30, 2000:
Capital contributions ........................ 11,620,649 -- -- 11,620,649
Capital acquisition cost ..................... -- -- (750,000) (750,000)
Net loss ..................................... -- (7,236,317) -- (7,236,317)
----------- ------------ ---------- ------------
Net loss ..................................... 15,449,769 (8,261,934) $ (750,000) 6,437,835
----------- ------------ ---------- ------------
Members' equity at September 30, 2000 ......... $15,449,769 $ (8,261,934) $ (750,000) $ 6,437,835
=========== ============ ========== ============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-58
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
-------------------- -------------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................................. $ (7,236,317) $ (441,509)
Adjustments to reconcile net loss to net cash used in operating activities:
Contributed services .................................................... 100,000 --
Noncurrent employee compensation ........................................ 50,000
Depreciation and amortization ........................................... 399,069
Amortization of debt issuance costs ..................................... 87,044
(Increase) decrease in asset accounts:
Accounts receivable .................................................... (45,495) (43)
Inventory .............................................................. (612,044)
Prepaid expenses and other assets ...................................... (37,090)
Other current assets ................................................... -- (4,058)
Increase (decrease) in liability accounts:
Accounts payable and accrued expenses .................................. (359,628) 465,605
------------- ------------
Net cash (used in) provided by operating activities .................. (7,654,461) 19,995
------------- ------------
Cash flows from investing activities:
Additions to property and equipment ....................................... (22,830,077) (2,034,455)
Purchase of other assets .................................................. (105,762) --
------------- ------------
Net cash used in investing activities ................................ (22,935,839) (2,034,455)
------------- ------------
Cash flows from financing activities:
Contributed capital ....................................................... 11,520,649 2,581,540
Proceeds from notes payable ............................................... 22,960,318
Loan financing costs ...................................................... (1,616,896)
Capital acquisition costs ................................................. (750,000) --
------------- ------------
Net cash provided by financing activities ............................ 32,114,071 2,581,540
------------- ------------
Net increase (decrease) in cash and cash equivalents ................. 1,523,771 567,080
Cash and cash equivalents at beginning of period ........................... 596,445 4,080
------------- ------------
Cash and cash equivalents at end of period ................................. $ 2,120,216 $ 571,160
============= ============
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
F-59
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED 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 September 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 September 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 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
F-60
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
nine months ended September 30, 2000, total interest incurred was $972,550
(including $87,044 of amortization of deferred financing costs) of which
$589,239 has been capitalized. The Company incurred no interest for the nine
months ended September 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 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.
F-61
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Based upon the Amended and Restated Operating Agreement, the capital is
callable as follows:
<TABLE>
<S> <C>
2000 $14,633,731
2001 1,969,000
2002 810,000
2003 575,000
-----------
$17,987,731
===========
</TABLE>
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 $54,576 and $116,114 for the nine months ended
September 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.
Another member of the Company, Duncan, Tiger and Tabor, provided legal
services to the Company. Payments for these services totaled $70,344 and
$51,374 for the nine months ended September 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 $856,952 and $47,831
for the nine months ended September 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:
<TABLE>
<S> <C>
2000 $ 4,150,000
2001 9,100,000
2002 2,110,000
2003 1,230,000
2004 1,950,000
2005 1,230,000
-----------
$19,770,000
===========
</TABLE>
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
F-62
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
agreements on 77 sites (73 of which had commenced at September 30, 2000) with
annual lease payments totaling $1,595,250. An additional 28 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:
<TABLE>
<S> <C>
2000 $ 589,000
2001 3,148,000
2002 3,507,000
2003 3,556,000
2004 3,606,000
2005 3,657,000
-----------
$18,063,000
===========
</TABLE>
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:
<TABLE>
<S> <C>
2000 $ 103,600
2001 414,300
2002 410,200
2003 294,500
2004 226,700
2005 67,800
----------
$1,517,100
==========
</TABLE>
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 September 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 September 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 $50,000 of compensation cost for the nine
months ended September 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
F-63
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 $13,176. The plan also allows for
potential profit sharing contributions up to the discretion of the Company.
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:
<TABLE>
<CAPTION>
QUARTERLY AMOUNT OF
DATES OF REDUCTION REDUCTION
------------------ -------------------
<S> <C>
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
</TABLE>
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 September 30, 2000 the Company has borrowed $22,960,318 on this
credit facility, with interest rates ranging from 9.58% to 10.05%. Subsequent
to September 30, 2000 the Company has borrowed an additional $3,000,000.
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 nine months ended
September 30, 2000 amounted to $80,744 of which $36,815 was capitalized during
the second quarter of 2000 and prior to any market launches (none in 1999).
10. RECENT DEVELOPMENTS
On July 31, 2000, Alamosa PCS Holdings, Inc. ("Alamosa") a Sprint PCS
affiliate, signed definitive agreements to merge the Company (the "WOW
Reorganization Agreement") and Roberts Wireless Communications, L.L.C. into its
operations through the formation of a new holding company, Alamosa Holdings,
Inc. ("Superholdings"). Pursuant to the WOW Reorganization Agreement, the
members of the Company will receive 6.05 million shares of Superholdings common
stock and $12.5 million in cash. The merger is contingent upon the completion
of the conditions to consummate the transaction as contained in the WOW
Reorganization Agreement.
F-64
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 Agreement and Plan of Reorganization, 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.
In addition, on July 31, 2000, the Company entered into a services
agreements with Alamosa Operations, Inc. ("Operations") a subsidiary of
Alamosa, effective September 1, 2000, whereby Operations began to manage the
operations of the Company, pending completion of the merger. Operations
provides various services in connection with the operation of the Company's
business, including (a) all network management services, (b) management of all
sales and marketing services, (c) through the management agreements 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,
the Company pays Operations a management fee of $100,000 per month for the
services provided by Operations and reimburses Operations for certain costs and
expenses incurred or paid by Operations in providing these services.
Also, on July 31, 2000, the Company and Operations entered into a loan
agreement (the "Loan Agreement") whereby Operations will lend up to $11 million
to the Company to be used only for the purposes of (a) satisfying certain
capital contribution requirements under the Company's operating agreement, and
(b) funding the Company's working capital needs from July 31, 2000 through the
completion of the merger. As of January 10, 2001, approximately $8.3 million
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 or upon demand. Operations is
not obligated to make any advances under the Loan Agreement until it has
received certain consents. This loan is guaranteed by certain members of the
Company.
When the merger is completed, all amounts due to Operations by the Company
under the Loan Agreement may, at Operations' option either, (a) be deemed paid
in full (in such case, this loan will be characterized as a capital
contribution by Operations to the Company), or (b) remain a debt obligation of
the Company, subject to a subordination agreement in favor of the senior lender
to Superholdings.
F-65
<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-66
<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-67
<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-68
<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-69
<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-70
<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 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
F-71
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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 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:
<TABLE>
<CAPTION>
MEMBERS AT NEW
DECEMBER 31, 1999 MEMBERS TOTAL
------------------- -------------- --------------
<S> <C> <C> <C>
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
=========== =========== ===========
</TABLE>
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.
F-72
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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:
<TABLE>
<S> <C>
2000 $29,550,000
2001 6,840,000
2002 2,110,000
2003 1,230,000
2004 2,195,000
-----------
$41,925,000
===========
</TABLE>
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:
<TABLE>
<S> <C>
2000 $ 1,729,350
2001 3,334,356
2002 3,491,167
2003 3,615,059
2004 3,742,434
-----------
$15,912,366
===========
</TABLE>
The Company has leases for building, office and retail space under leases
expiring through 2004. Future minimum payments under these leases are:
<TABLE>
<S> <C>
2000 $ 270,107
2001 300,614
2002 313,299
2003 225,865
2004 217,143
----------
$1,327,028
==========
</TABLE>
F-73
<PAGE>
WASHINGTON OREGON WIRELESS, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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.
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.
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APPENDIX A
================================================================================
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
ALAMOSA PCS HOLDINGS, INC.
ALAMOSA SUB I, INC.
ALAMOSA (DELAWARE), INC.
AND
ALAMOSA HOLDINGS, INC.
DECEMBER 14, 2000
AN INDEX OF DEFINED TERMS BEGINS ON PAGE A-ii
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 Mergers ............................................................. 2
1.1 The Mergers ......................................................... 2
(a) The Mergers ..................................................... 2
(b) Consummation .................................................... 2
(c) Effective Time of the Merger .................................... 3
(d) Effect of the Merger ............................................ 3
(e) The Surviving Corporation's Certificate of Incorporation;
Bylaws; Directors and Officers .................................. 3
1.2 Terms of the Merger ................................................. 3
(a) Conversion of Public Stock ...................................... 3
(b) Conversion of Merger Sub Stock .................................. 3
(c) Rights as Holders of Public Stock and Merger Sub Stock .......... 3
(d) Treasury Stock .................................................. 3
1.3 Stock Options. ...................................................... 3
(a) Options ......................................................... 3
(b) Option Plans .................................................... 3
(c) Stock Reserve; Form S-8; Listing Application .................... 4
1.4 Exchange Agent. ..................................................... 4
1.5 Exchange Procedure. ................................................. 4
1.6 Distributions with Respect to Unexchanged Shares .................... 4
1.7 Cancellation and Retirement of Shares ............................... 5
1.8 Termination of Exchange Fund ........................................ 5
1.9 No Liability ........................................................ 5
1.10 Tax Withholding ..................................................... 5
ARTICLE 2 Closing the Transaction ............................................. 5
2.1 Closing ............................................................. 5
ARTICLE 3 Conditions To Consummating the Transaction .......................... 5
3.1 Obligations of Public, Superholdings and Merger Sub ................. 5
(a) Stockholder Approval ............................................ 6
(b) HSR Act ......................................................... 6
(c) No Litigation ................................................... 6
(d) Other Conditions to Closing ..................................... 6
ARTICLE 4 Termination ......................................................... 6
4.1 Reasons for Termination ............................................. 6
4.2 Effect of Termination ............................................... 6
ARTICLE 5 Covenants of the Parties ............................................ 6
5.1 Satisfaction of Conditions to Closing ............................... 6
(a) Defending the Agreement ......................................... 6
(b) Lifting Injunctions ............................................. 6
(c) Other Actions ................................................... 6
5.2 Section 16(b) Resolution - Superholdings ............................ 6
5.3 Section 16(b) Resolution - Public ................................... 7
5.4 Public Stockholders Meeting ......................................... 7
ARTICLE 6 Miscellaneous ....................................................... 7
6.1 Successors and Assigns .............................................. 7
6.2 Entire Agreement .................................................... 7
6.3 Amendment ........................................................... 7
6.4 Governing Law ....................................................... 7
6.5 Extension; Waiver ................................................... 7
6.6 Notices, Etc ........................................................ 8
6.7 Third Party Beneficiary, Etc. ....................................... 8
6.8 Reformation; Severability ........................................... 8
6.9 Counterparts ........................................................ 8
6.10 Titles and Subtitles ................................................ 8
</TABLE>
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<PAGE>
INDEX OF DEFINED TERMS
PAGE
----
251(g) Merger .................................... 1
Agreement ........................................ 1
APCS ............................................. 1
Articles ......................................... 8
Certificates of Merger ........................... 2
Closing .......................................... 5
Closing Date ..................................... 5
Code ............................................. 1
DGCL ............................................. 2
Effective Time ................................... 3
Exchange Agent ................................... 4
Exchange Fund .................................... 4
First Agreement .................................. 1
HSR Act .......................................... 6
Merger Consideration ............................. 3
Merger Sub ....................................... 1
Merger Sub Stock ................................. 1
Option Plan ...................................... 3
Options .......................................... 3
Parent Mergers ................................... 1
Public ........................................... 1
Public Stock ..................................... 3
Public Stockholders Meeting ...................... 7
Reorganization ................................... 2
Roberts Agreement ................................ 1
Roberts LLC ...................................... 1
Roberts LLC Holdings ............................. 1
Roberts Merger ................................... 1
Sections ......................................... 8
Sister Agreements ................................ 2
Subsidiary Merger ................................ 1
Subsidiary Merger Surviving Corporation .......... 2
Substitute Option ................................ 3
Superholdings .................................... 1
Superholdings Stock .............................. 1
Tax .............................................. 4
Taxes ............................................ 4
Ten Acquisition .................................. 1
WOW Agreement .................................... 1
WOW LLC .......................................... 1
WOW LLC Holdings ................................. 1
WOW Merger ....................................... 1
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AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement") is entered into as of December 14, 2000, by and among Alamosa PCS
Holdings, Inc., a Delaware corporation ("Public"), Alamosa (Delaware), Inc., a
Delaware corporation and a wholly-owned subsidiary of Public formerly known as
"Alamosa PCS Holdings, Inc." ("APCS"), 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. Superholdings, Merger Sub and APCS entered into an Agreement and Plan of
Reorganization, dated as of July 31, 2000 (the "First Agreement"),
pursuant to which APCS agreed to merge with Merger Sub, with APCS
continuing as the surviving corporation.
B. Pursuant to an Agreement and Plan of Merger, dated as of December 13, 2000,
by and among APCS, Public and Ten Acquisition, Inc., a Delaware
corporation and a wholly-owned subsidiary of Public ("Ten Acquisition"),
Ten Acquisition merged (the "251(g) Merger") with and into APCS, with APCS
continuing as the surviving corporation.
C. At the effective time of the 251(g) Merger: (i) all stockholders of APCS
became stockholders of Public, (ii) APCS became a wholly owned subsidiary
of Public, (iii) Public took APCS' former name, and (iv) APCS changed its
name to "Alamosa (Delaware), Inc."
D. 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 APCS, Superholdings, Merger Sub,
Roberts LLC and the members of Roberts LLC, dated as of July 31, 2000 (the
"Roberts Agreement").
E. 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 APCS, Superholdings, Merger Sub, WOW LLC, WOW
Holdings LLC and certain members of WOW LLC, dated as of July 31, 2000
(the "WOW Agreement").
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 Mergers in a tax-efficient manner, such acquisitions should be
structured as transactions described in Section 351(a) of the Internal
Revenue Code of 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.
H. 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.
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I. 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.
J. 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.
K. 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."
L. 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.
M. Public, Superholdings and Merger Sub may enter into other agreements (any
such other agreements, the Roberts Agreement and the WOW Agreement being
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").
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(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").
(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 (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
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 the Public 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.
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(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 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 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
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<PAGE>
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.
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:
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(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.
(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 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 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
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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, APCS, 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 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 I 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.
A-7
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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, APCS, Superholdings Alamosa PCS Holdings, Inc.
or Merger Sub: 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)
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.
* * * * *
A-8
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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
ALAMOSA (DELAWARE), INC.:
By: /s/ David E. Sharbutt
-----------------------------------
Name: David E. Sharbutt
Title: Chief Executive Officer
A-9
<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 B-vii
================================================================================
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TABLE OF CONTENTS
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ARTICLE 1 Mergers ............................................................... B-2
1.1 The Mergers ........................................................... B-2
(a) The Mergers ....................................................... B-2
(b) Consummation of the Mergers ....................................... B-3
(c) Effective Time of the Mergers ..................................... B-3
(d) Effect of the Mergers ............................................. B-3
(e) The Surviving Corporations' Certificates of Incorporation; Bylaws;
Directors and Officers ............................................ B-3
1.2 Terms of the Merger ................................................... B-3
(a) Consideration for the Parent Merger ............................... B-3
(b) Right to Withhold ................................................. B-3
(c) Consideration Subject to Agreements ............................... B-4
(d) Antidilution ...................................................... B-4
(e) Sister Agreements ................................................. B-4
(f) Conversion of Public Stock ........................................ B-4
(g) Conversion of Merger Sub Stock .................................... B-4
(h) Treasury Stock .................................................... B-4
(i) Rights as Holders ................................................ B-4
1.3 Stock Options ......................................................... B-5
(a) [Intentionally deleted] ........................................... B-5
(b) [Intentionally deleted] ........................................... B-5
(c) [Intentionally deleted] ........................................... B-5
1.4 Exchange Agent ........................................................ B-5
1.5 Exchange Procedure .................................................... B-5
1.6 Distributions with Respect to Unexchanged Shares ...................... B-5
1.7 Cancellation and Retirement of Units .................................. B-6
1.8 No Fractional Shares .................................................. B-6
(a) No Certificates ................................................... B-6
(b) Cash Payments ..................................................... B-6
1.9 Investment of Exchange Fund ........................................... B-6
1.10 Termination of Exchange Fund .......................................... B-6
1.11 No Liability .......................................................... B-6
1.12 Tax Withholding ....................................................... B-6
ARTICLE 2 Closing the Transaction ............................................... B-7
2.1 Closing ............................................................... B-7
2.2 LLC Parties' Deliveries at Closing to Superholdings ................... B-7
(a) Closing Certificate ............................................... B-7
(b) Consents and Approvals ............................................ B-7
(c) Proceedings and Documents ......................................... B-7
(d) Good Standing Certificates ........................................ B-7
(e) Opinions of LLC Parties' Counsel .................................. B-7
(f) Tower Closing Certificate ......................................... B-7
(g) Other Instruments ................................................. B-8
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2.3 Superholdings' and Public's Deliveries at Closing to LLC ............... B-8
(a) Closing Certificate ................................................ B-8
(b) Proceedings and Documents .......................................... B-8
(c) Consents and Approvals ............................................. B-8
(d) Opinion of Public's, Superholdings' and Merger Sub's Counsel ....... B-8
(e) Other Instruments .................................................. B-8
2.4 Related Agreements ..................................................... B-8
(a) Prior to Closing ................................................... B-8
(b) At Closing ......................................................... B-8
(c) At Closing if Completed ............................................ B-9
ARTICLE 3 Conditions To Consummating The Transaction ............................. B-9
3.1 Joint Conditions ....................................................... B-9
(a) Public Stockholder Approval ........................................ B-9
(b) LLC Members Approval ............................................... B-9
(c) HSR Act ............................................................ B-9
(d) Nasdaq Listing ..................................................... B-9
(e) Merger ............................................................. B-9
(f) Subsidiary Merger .................................................. B-9
3.2 Public's, Superholdings' and Merger Sub's Conditions ................... B-10
(a) LLC Parties' Representations True .................................. B-10
(b) LLC Parties' Compliance with Agreement ............................. B-10
(c) LLC Parties Consents ............................................... B-10
(d) Public Consents .................................................... B-11
(e) Permits ............................................................ B-11
(f) LLC Members Approval ............................................... B-11
(g) Form S-4 ........................................................... B-11
(h) No Litigation ...................................................... B-11
(i) Approvals .......................................................... B-11
(j) Members Obligations ................................................ B-11
(k) Related Agreements ................................................. B-11
(l) Landlord Consents .................................................. B-11
3.3 LLC Parties' Conditions to Closing ..................................... B-12
(a) Public's, Superholdings' and Merger Sub's Representations True ..... B-12
(b) Public's Superholdings' and Merger Sub's Compliance with
Agreement .............................................................. B-12
(c) No Litigation ...................................................... B-12
(d) Public Consents .................................................... B-12
(e) Approvals .......................................................... B-12
ARTICLE 4 Covenants Regarding Consummation of the Transaction .................... B-12
4.1 Satisfaction of Conditions to Closing .................................. B-12
(a) Joint Responsibilities ............................................. B-12
(b) LLC Parties' Responsibilities ...................................... B-13
(c) Public's, Superholdings' and Merger Sub's Responsibilities ......... B-13
4.2 Preparation of the Proxy Statement, Form S-4 and Form S-1 .............. B-14
(a) Preparation ........................................................ B-14
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B-ii
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(b) Proxy Statement and Form S-4 .............................. B-14
(c) Form S-1 .................................................. B-14
(d) Public's and Superholdings' Actions ....................... B-15
4.3 Accountants' Letters .......................................... B-15
(a) From LLC Holdings ......................................... B-15
(b) From Public and Superholdings ............................. B-15
4.4 Public Stockholders Meeting ................................... B-15
4.5 Votes and Recommendations ..................................... B-15
4.6 LLC Members Meeting; LLC Holdings ............................. B-16
4.7 Public Announcements .......................................... B-16
4.8 No Solicitation; Acquisition Proposals ........................ B-16
(a) No Solicitation ........................................... B-16
(b) Approval .................................................. B-16
(c) Voting Agreement .......................................... B-16
(d) Acquisition Proposal ...................................... B-16
4.9 Leases ........................................................ B-17
4.10 Affiliates and Certain Members ................................ B-17
4.11 Pooling of Interests .......................................... B-17
4.12 Employment Agreements ......................................... B-17
4.13 Consulting Agreements ......................................... B-17
4.14 Reissuance of LLC Audited Financial Statements ................ B-17
4.15 Master Lease Agreement ........................................ B-18
4.16 Asset Transfers ............................................... B-18
4.17 Joint Venture Development Agreement ........................... B-18
4.18 Resale Agreement .............................................. B-18
4.19 Stock Options ................................................. B-19
4.20 Other Assets .................................................. B-19
4.21 Fee for Consent of Senior Lender .............................. B-19
4.22 Sprint Payments by Members .................................... B-19
4.23 Superholdings Sprint Payments ................................. B-19
4.24 Legends ....................................................... B-20
4.25 Directors ..................................................... B-20
ARTICLE 5 Termination ................................................... B-20
5.1 Reasons for Termination ....................................... B-20
(a) By Mutual Consent ......................................... B-20
(b) By Public or Superholdings ................................ B-20
(c) By LLC .................................................... B-20
(d) Drop Dead Date ............................................ B-21
(e) Prohibition of the Reorganization ......................... B-21
5.2 Notice of Problems ............................................ B-21
5.3 Public and Superholdings Termination Procedure ................ B-21
5.4 LLC's Termination Procedure ................................... B-21
5.5 Effect of Termination ......................................... B-22
ARTICLE 6 Representations and Warranties of LLC and the Members ......... B-22
6.1 LLC; Entry Into Agreements .................................... B-22
</TABLE>
B-iii
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(a) Organization and Good Standing .......................... B-22
(b) Validity and Authorization; Power and Authority ......... B-22
(c) Subsidiaries ............................................ B-23
(d) No Conflict ............................................. B-23
(e) LLC Parties Consents Required ........................... B-23
(f) State Takeover Statutes ................................. B-24
6.2 Financial Information ....................................... B-24
(a) Financial Statements; Books and Records ................. B-24
(b) Conduct of Business ..................................... B-24
(c) No Material Adverse Effect .............................. B-25
(d) Projections ............................................. B-25
6.3 Members' Interests .......................................... B-25
(a) Capitalization .......................................... B-25
(b) Capitalization of LLC Holdings .......................... B-25
(c) Ownership and Transfer by Members ....................... B-26
6.4 Assets ...................................................... B-26
(a) Personal Property ....................................... B-26
(b) Real Property ........................................... B-27
(c) Intellectual Property ................................... B-28
(d) Contracts ............................................... B-29
(e) Necessary Assets ........................................ B-32
6.5 Liabilities ................................................. B-32
(a) No Liabilities .......................................... B-32
(b) Tax Matters ............................................. B-32
(c) Litigation .............................................. B-33
(d) Employee Liabilities .................................... B-33
(e) Warranties .............................................. B-34
(f) Products Liability ...................................... B-34
6.6 Business .................................................... B-34
(a) Customers and Suppliers ................................. B-34
(b) Insurance ............................................... B-34
(c) Employees ............................................... B-34
(d) Worker's Compensation ................................... B-35
(e) ERISA ................................................... B-35
(f) Conflicts of Interest ................................... B-36
(g) LLC Legal Requirements .................................. B-36
(h) Environmental Matters ................................... B-37
(i) Build-out Plan ......................................... B-38
6.7 Other ....................................................... B-38
(a) Certain Information ..................................... B-38
(b) Documents Delivered ..................................... B-38
(c) No Brokers Fees; No Commissions ......................... B-38
(d) Advice .................................................. B-38
(e) Disclosure .............................................. B-38
6.8 Investment Representations .................................. B-38
</TABLE>
B-iv
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ARTICLE 7 Representations and Warranties of Public, Superholdings and Merger Sub B-39
7.1 Entry Into Agreements ................................................. B-39
(a) Organization and Good Standing .................................... B-39
(b) Corporate Power and Authority; Validity and Authorization ......... B-39
7.2 Conflicts and Consents ................................................ B-40
(a) No Conflict ....................................................... B-40
(b) Consents Obtained ................................................. B-40
7.3 No Brokers Fees; No Commissions ....................................... B-40
7.4 Superholdings Stock ................................................... B-40
7.5 SEC Documents ......................................................... B-40
7.6 No Material Adverse Effect ............................................ B-40
7.7 Capitalization ........................................................ B-40
7.8 Capitalization of Superholdings ....................................... B-41
7.9 No Liabilities ........................................................ B-41
7.10 Compliance with Laws .................................................. B-41
7.11 Certain Information ................................................... B-41
7.12 Litigation ............................................................ B-41
7.13 Disclosure ............................................................ B-42
7.14 Reorganization ........................................................ B-42
ARTICLE 8 Covenants of the Parties .............................................. B-42
8.1 Services Agreement .................................................... B-42
8.2 Conduct of Business of LLC Pending Closing ............................ B-42
8.3 Access to Information and Employees ................................... B-42
8.4 Financial Statements .................................................. B-43
8.5 Payment of Indebtedness of Related Persons ............................ B-43
8.6 Records of LLC ........................................................ B-43
8.7 Employee Benefit Plans ................................................ B-43
8.8 Tower Payables ........................................................ B-43
ARTICLE 9 Post-Closing Agreements ............................................... B-43
9.1 Further Actions ....................................................... B-43
9.2 Cooperation ........................................................... B-43
9.3 Tax Returns ........................................................... B-44
9.4 Access to Information; Confidentiality ................................ B-44
9.5 [Intentionally deleted] ............................................... B-44
9.6 Name .................................................................. B-44
9.7 Tower Payables ........................................................ B-44
9.8 Reorganization ........................................................ B-44
9.9 Insurance ............................................................. B-44
ARTICLE 10 Indemnification ....................................................... B-44
10.1 Survival; Etc ......................................................... B-44
(a) Contents of this Agreement ........................................ B-44
(b) No Effect on Liability ............................................ B-44
(c) Survival .......................................................... B-44
(d) Commencing Actions ................................................ B-45
(e) Materiality ....................................................... B-45
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10.2 Indemnities ............................................ B-45
(a) Indemnification of Superholdings ................... B-45
(b) Indemnification of the Members ..................... B-46
(c) Contribution ....................................... B-46
(d) Form of Payment; Interim Losses .................... B-46
(e) Termination Fee .................................... B-47
10.3 Limitations on Indemnities ............................. B-48
(a) Basket ............................................. B-48
(b) Cap ................................................ B-48
(c) Services Agreement ................................. B-48
(d) Damages ............................................ B-48
(e) Exclusivity ........................................ B-48
(f) Indemnification of Escrow Agent .................... B-48
10.4 Notice and Opportunity to Defend ....................... B-49
(a) Notice, Etc ........................................ B-49
(b) Defense Costs ...................................... B-49
(c) Third Party Claims ................................. B-49
10.5 Delays or Omissions, Etc ............................... B-49
10.6 Governing Law; Attorneys' Fees ......................... B-50
10.7 Dispute Resolution ..................................... B-50
(a) Arbitration ........................................ B-50
(b) Emergency Relief ................................... B-51
(c) Definition of Parties .............................. B-51
ARTICLE 11 Miscellaneous .......................................... B-51
11.1 Successors and Assigns ................................. B-51
11.2 Entire Agreement ....................................... B-51
11.3 Amendment .............................................. B-52
11.4 Extension; Waiver ...................................... B-52
11.5 Notices, Etc ........................................... B-52
11.6 Third Party Beneficiary, Etc ........................... B-52
11.7 Reformation; Severability .............................. B-53
11.8 Counterparts ........................................... B-53
11.9 Titles and Subtitles ................................... B-53
11.10 Confidentiality ........................................ B-53
(a) Confidential Information ........................... B-53
(b) Disclosure ......................................... B-53
11.11 Expenses ............................................... B-54
11.12 Responsibility for Superholdings and Merger Sub ........ B-54
11.13 Knowledge .............................................. B-54
B-vi
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INDEX OF PRINCIPAL TERMS
PAGE
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AAA .......................................... B-52
Accounts Receivable .......................... B-27
Accounts ..................................... B-27
Affiliate Letter ............................. B-17
Agreement .................................... B-1, B-58, B-62,
B-67, B-69, B-72
Analysis ..................................... B-55
Approvals .................................... B-12
Asserted Liability ........................... B-50
Blackout Notice .............................. B-72
Cause of Action .............................. B-19
Certificate .................................. B-62, B-67, B-69
Closing ...................................... B-7
Code ......................................... B-2
Consulting Agreements ........................ B-18
Contracts .................................... B-30, B-31
Copyrights ................................... B-29
Credit Agreement ............................. B-32
Default ...................................... B-32
Defense Costs ................................ B-51
DGCL ......................................... B-3
EDC .......................................... B-11
Effective Time ............................... B-3
employee benefit plan ........................ B-36
Employee Benefit Plans ....................... B-36
Employment Agreements ........................ B-18
Equipment Leases ............................. B-27
ERISA ........................................ B-36
Escrow Account ............................... B-4, B-58
Escrow Adjustment ............................ B-48, B-58
Escrow Agent ................................. B-4, B-58
Escrow Agreement ............................. B-4, B-58
Escrow Deposit ............................... B-48, B-58
Event of Default ............................. B-32
Exchange Act ................................. B-14
Exchange Agent ............................... B-5
Exchange Fund ................................ B-5
Form S-1 ..................................... B-15
Form S-4 ..................................... B-14
Good Standing Certificate .................... B-7
HSR Act ...................................... B-10
Indemnified Party ............................ B-50
Indemnifying Party ........................... B-50
Indemnity Agreement .......................... B-9
Interim Loss Value ........................... B-48
Interim Losses ............................... B-48
Joint Venture Development Agreement .......... B-19
K.G. ......................................... B-18
B-vii
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Landlord Consents ......................... B-12
Leases .................................... B-17
Lenders ................................... B-32
Letters ................................... B-53
Licenses .................................. B-37
LLC Financial Statements .................. B-24
LLC Holdings .............................. B-1
LLC Legal Requirements .................... B-37
LLC Parties Closing Certificate ........... B-7
LLC Parties Consents ...................... B-24
LLC Parties' Delegated Conditions ......... B-13
LLC Records ............................... B-39
LLC ....................................... B-1, B-62, B-67,
B-69, B-72
Losses .................................... B-47
M.R. ...................................... B-9
Marks ..................................... B-29
Master Lease Agreement .................... B-18
Material Adverse Change ................... B-46
material adverse effect ................... B-46
Member Agreement .......................... B-72
Member Indemnified Claim .................. B-47
Member Indemnitors ........................ B-47
Members Meeting ........................... B-16
Members Required Vote ..................... B-23
Members ................................... B-1, B-58, B-62,
B-67, B-69, B-72
Members' Releases ......................... B-9
Merger Sub Stock .......................... B-1
Merger Sub ................................ B-1, B-62, B-67,
B-69, B-72
Orders .................................... B-34
Outside Confidentiality Agreement ......... B-35
Parent Merger ............................. B-1
Parent Surviving Corporation .............. B-2
Patents ................................... B-29
Paying Member Indemnitor .................. B-47
Per Unit Cash Consideration ............... B-3
Permits ................................... B-11
Permitted Liens ........................... B-27
Personal Property ......................... B-27
Policies .................................. B-35
Prior Policies ............................ B-35
Proceedings ............................... B-34
Projections ............................... B-26
Proxy Statement ........................... B-14
Public Consents ........................... B-41
Public Legal Requirements ................. B-42
Public Loan Agreement ..................... B-8
Public Stock .............................. B-4
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Public Stockholders Meeting ............................................ B-16
Public ................................................................. B-1, B-62, B-67,
B-69, B-72
Public's, Superholdings' and Merger Sub's Delegated Conditions ......... B-14
Real Property .......................................................... B-28
Remaining Member Indemnitors ........................................... B-47
Resale Agreement ....................................................... B-19
S.R. ................................................................... B-9
SEC Documents .......................................................... B-41
SEC Filing Date ........................................................ B-14
SEC .................................................................... B-11
Securities Act ......................................................... B-14
Services Agreement ..................................................... B-8
Sister Agreements ...................................................... B-2
Sister Lock-Up ......................................................... B-9
Sprint Management Agreement ............................................ B-31
Sprint ................................................................. B-31
Subsidiaries ........................................................... B-23
Subsidiary Merger Agreement ............................................ B-1
Subsidiary Merger ...................................................... B-1
Subsidiary Surviving Corporation ....................................... B-2
Superholdings Closing Certificate ...................................... B-8
Superholdings Indemnitees .............................................. B-47
Superholdings Indemnitors .............................................. B-47
Superholdings Stock .................................................... B-1
Superholdings .......................................................... B-1, B-58, B-62,
B-67, B-69, B-72
Technology Contracts ................................................... B-29
Termination Date ....................................................... B-21
Termination Fee ........................................................ B-49
Tower Closing Certificate .............................................. B-8
Tower Company .......................................................... B-8
Tower Leases ........................................................... B-28
Trade Secrets .......................................................... B-29
Transferrable Licenses ................................................. B-37
</TABLE>
B-ix
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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>
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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.
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)
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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.
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 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
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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
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.
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(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 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 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
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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 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
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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 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, 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 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 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.
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(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.
(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
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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 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 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
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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 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
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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 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
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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.
(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.
(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.
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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
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.
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(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 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
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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 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.
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.
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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.
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.
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(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
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.
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
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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 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
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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 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.
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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 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
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.
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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 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.
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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 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 termination fee of $7.5 million to
Public.
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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.
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").
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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) 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
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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 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
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
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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 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
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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").
(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.
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(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. 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.
(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.
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(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
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
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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 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
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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
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.
(L) Sprint Management Agreement. No Event of Termination (as
defined therein) has occurred under the Sprint Management Agreement.
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(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 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.
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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 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.
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<PAGE>
(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.
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.
(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.
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<PAGE>
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 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
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<PAGE>
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 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 Section 406
or any "prohibited transaction" under Code Section 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 Section
408 or Code Section 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 Section 601 et seq. and Code
Section 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 Section
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 Section
414. No Employee Pension Benefit Plan is or has ever been subject to Title
IV of ERISA or Code Section 412.
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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 Section 4999 is imposed on that Person.
(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.
(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
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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.
(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
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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 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,
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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 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 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. 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.
(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
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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, 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
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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 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 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
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(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
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
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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, 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.
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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 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 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.
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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 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
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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 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. 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
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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 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
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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 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
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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 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 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.
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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.
(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.
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(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
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
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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
(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 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
B-54
<PAGE>
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 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
B-55
<PAGE>
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 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.
* * * * *
B-56
<PAGE>
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
B-57
<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"), 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.
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.
B-58
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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:
B-59
<PAGE>
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 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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<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:
------------------------------
MEMBERS:
-----------------------------------------------
Steven C. Roberts
-----------------------------------------------
Michael V. Roberts
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 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.
* * * * *
B-62
<PAGE>
B-63
<PAGE>
Executed as of , 2000.
ROBERTS WIRELESS COMMUNICATIONS, L.L.C.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
THE MEMBERS:
---------------------------------------
Name: Steven C. Roberts
----------------------------------------
Name: Michael V. Roberts
B-64
<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 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.
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.
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<PAGE>
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.
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<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-67
<PAGE>
Executed as of , 2000.
ROBERTS TOWER COMPANY:
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
B-68
<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.
* * * * *
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<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:
---------------------------------
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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.
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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 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
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<PAGE>
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 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.
* * * * *
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ALAMOSA HOLDINGS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
THE MEMBERS:
---------------------------------------
Name: Steven C. Roberts
---------------------------------------
Name: Michael V. Roberts
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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>
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<S> <C> <C>
ARTICLE 1 Mergers ........................................................... C-2
1.1 The Mergers ....................................................... C-2
(a) The Mergers ................................................... C-2
(b) Consummation of the Mergers ................................... C-3
(c) Effective Time of the Mergers ................................. C-3
(d) Effect of the Mergers ......................................... C-3
(e) The Surviving Corporations' Certificates of Incorporation;
Bylaws; Directors and Officers ................................ C-3
1.2 Terms of the Merger ............................................... C-3
(a) Consideration for the Parent Merger ........................... C-3
(b) Right to Withhold ............................................. C-4
(c) Consideration Subject to Agreements ........................... C-4
(d) Antidilution .................................................. C-4
(e) Sister Agreements ............................................. C-4
(f) Conversion of Public Stock. ................................... C-4
(g) Conversion of Merger Sub Stock ................................ C-4
(h) Treasury Stock ................................................ C-4
(i) Rights as Holders ............................................. C-4
1.3 VAR Plan .......................................................... C-5
(a) [Intentionally deleted] ....................................... C-5
(b) [Intentionally deleted] ....................................... C-5
(c) [Intentionally deleted] ....................................... C-5
(d) VAR Plan ...................................................... C-5
1.4 Exchange Agent .................................................... C-5
1.5 Exchange Procedure ................................................ C-5
1.6 Distributions with Respect to Unexchanged Shares .................. C-6
1.7 Cancellation and Retirement of Units .............................. C-6
1.8 No Fractional Shares .............................................. C-6
(a) No Certificates ............................................... C-6
(b) Cash Payments ................................................. C-6
1.9 Investment of Exchange Fund ....................................... C-6
1.10 Termination of Exchange Fund ...................................... C-6
1.11 No Liability ...................................................... C-7
1.12 Tax Withholding ................................................... C-7
ARTICLE 2 Closing the Transaction ........................................... C-7
2.1 Closing ........................................................... C-7
2.2 LLC Parties' Deliveries at Closing to Superholdings ............... C-7
(a) Closing Certificate ........................................... C-7
(b) Consents and Approvals ........................................ C-7
(c) Proceedings and Documents ..................................... C-7
(d) Certificates of Existence ..................................... C-8
(e) Opinions of LLC Parties' Counsel .............................. C-8
(f) Other Instruments ............................................. C-8
2.3 Superholdings' and Public's Deliveries at Closing to LLC .......... C-8
(a) Closing Certificate ........................................... C-8
(b) Proceedings and Documents ..................................... C-8
(c) Consents and Approvals ........................................ C-8
(d) Opinion of Public's, Superholdings' and Merger Sub's
Counsel ....................................................... C-8
(e) Section 16(b) Resolution ...................................... C-8
(f) Other Instruments ............................................. C-8
2.4 Related Agreements ................................................ C-8
(a) Prior to Closing .............................................. C-8
(b) At Closing .................................................... C-9
</TABLE>
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<S> <C> <C>
ARTICLE 3 Conditions To Consummating The Transaction .......................... C-9
3.1 Joint Conditions .................................................... C-9
(a) Public Stockholder Approval ..................................... C-10
(b) HSR Act ......................................................... C-10
(c) Nasdaq Listing .................................................. C-10
(d) Merger .......................................................... C-10
(e) Subsidiary Merger ............................................... C-10
3.2 Public's, Superholdings' and Merger Sub's Conditions ................ C-10
(a) LLC Parties' Representations True ............................... C-10
(b) LLC Parties' Compliance with Agreement .......................... C-11
(c) LLC Parties Consents ............................................ C-11
(d) Public Consents ................................................. C-11
(e) Permits ......................................................... C-11
(f) LLC Members Approval ............................................ C-11
(g) Form S-4 ........................................................ C-11
(h) No Litigation ................................................... C-11
(i) Approvals ....................................................... C-11
(j) Members Obligations ............................................. C-12
(k) Related Agreements .............................................. C-12
3.3 LLC Parties' Conditions to Closing .................................. C-12
(a) Public's, Superholdings' and Merger Sub's Representations
True ............................................................ C-12
(b) Public's, Superholdings' and Merger Sub's Compliance with
Agreement ....................................................... C-12
(c) Public Consents ................................................. C-12
(d) No Litigation ................................................... C-12
(e) Approvals ....................................................... C-12
ARTICLE 4 Covenants Regarding Consummation of the Transaction ................. C-13
4.1 Satisfaction of Conditions to Closing ............................... C-13
(a) Joint Responsibilities .......................................... C-13
(b) LLC Parties' Responsibilities ................................... C-13
(c) Public's, Superholdings' and Merger Sub's Responsibilities ...... C-14
4.2 Preparation of the Proxy Statement, Form S-4 and Form S-1 ........... C-14
(a) Preparation ..................................................... C-14
(b) Proxy Statement and Form S-4 .................................... C-14
(c) Form S-1 ........................................................ C-15
(d) Public's and Superholdings' Actions ............................. C-15
4.3 Accountants' Letters ................................................ C-15
(a) From LLC Holdings ............................................... C-15
(b) From Public and Superholdings ................................... C-16
4.4 Public Stockholders Meeting ......................................... C-16
4.5 Votes and Recommendations ........................................... C-16
4.6 LLC Members Meeting; LLC Holdings ................................... C-16
4.7 Public Announcements ................................................ C-16
4.8 No Solicitation; Acquisition Proposals .............................. C-17
(a) No Solicitation ................................................. C-17
(b) Approval ........................................................ C-17
(c) Voting Agreement ................................................ C-17
(d) Acquisition Proposal ............................................ C-17
4.9 Affiliates and Certain Members ...................................... C-17
4.10 Pooling of Interests ................................................ C-17
4.11 Loan Agreement ...................................................... C-18
4.12 Employment Agreements ............................................... C-18
4.13 Consulting Agreement ................................................ C-18
4.14 Reissuance of LLC Audited Financial Statements ...................... C-18
4.15 Legends ............................................................. C-18
ARTICLE 5 Termination ......................................................... C-18
</TABLE>
C-ii
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<TABLE>
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<S> <C> <C>
5.1 Reasons for Termination ........................................ C-18
(a) By Mutual Consent .......................................... C-18
(b) By Public or Superholdings ................................. C-18
(c) By LLC ..................................................... C-19
(d) Drop Dead Date ............................................. C-19
(e) Prohibition of the Reorganization .......................... C-19
5.2 Notice of Problems ............................................. C-19
5.3 Public's and Superholdings' Termination Procedure .............. C-20
5.4 LLC'sTermination Procedure ..................................... C-20
5.5 Effect of Termination .......................................... C-20
ARTICLE 6 Representations and Warranties of LLC and the Members .......... C-20
6.1 LLC; Entry Into Agreements ..................................... C-21
(a) Organization and Existence ................................. C-21
(b) Validity and Authorization; Power and Authority ............ C-21
(c) Subsidiaries ............................................... C-21
(d) No Conflict ................................................ C-22
(e) LLC Parties Consents Required .............................. C-22
(f) State Takeover Statutes .................................... C-22
6.2 Financial Information .......................................... C-22
(a) Financial Statements; Books and Records .................... C-22
(b) Conduct of Business ........................................ C-23
(c) No Material Adverse Effect ................................. C-24
(d) Projections ................................................ C-24
6.3 Members' Interests ............................................. C-24
(a) Capitalization ............................................. C-24
(b) Capitalization of LLC Holdings ............................. C-24
(c) Ownership and Transfer by Members .......................... C-24
(d) VAR Plan ................................................... C-24
6.4 Assets ......................................................... C-24
(a) Personal Property .......................................... C-24
(b) Real Property .............................................. C-25
(c) Intellectual Property ...................................... C-26
(d) Contracts .................................................. C-28
(e) Necessary Assets ........................................... C-30
6.5 Liabilities .................................................... C-30
(a) No Liabilities ............................................. C-30
(b) Tax Matters ................................................ C-31
(c) Litigation ................................................. C-32
(d) Employee Liabilities ....................................... C-32
(e) Warranties ................................................. C-32
6.6 Business ....................................................... C-32
(a) Suppliers .................................................. C-32
(b) Insurance .................................................. C-33
(c) Employees .................................................. C-33
(d) Worker's Compensation ...................................... C-33
(e) ERISA ...................................................... C-33
(f) Conflicts of Interest ...................................... C-34
(g) LLC Legal Requirements ..................................... C-35
(h) Environmental Matters ...................................... C-35
(i) Build-out Plan ............................................. C-36
6.7 Other .......................................................... C-36
(a) Certain Information ........................................ C-36
(b) Documents Delivered ........................................ C-37
(c) No Brokers Fees; No Commissions ............................ C-37
(d) Tax Advice ................................................. C-37
(e) Disclosure ................................................. C-37
6.8 Investment Representations ..................................... C-37
</TABLE>
C-iii
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<TABLE>
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<S> <C> <C>
ARTICLE 7 Representations and Warranties of Public, Superholdings and
Merger Sub ................................................ C-38
7.1 Entry Into Agreements ..................................... C-38
(a) Organization and Good Standing ........................ C-38
(b) Corporate Power and Authority; Validity and
Authorization ......................................... C-38
7.2 Conflicts and Consents .................................... C-38
(a) No Conflict ........................................... C-38
(b) Consents Obtained ..................................... C-39
7.3 No Brokers Fees; No Commissions ........................... C-39
7.4 Superholdings Stock ....................................... C-39
7.5 SEC Documents ............................................. C-39
7.6 No Material Adverse Effect ................................ C-39
7.7 Capitalization ............................................ C-39
7.8 Capitalization of Superholdings ........................... C-39
7.9 No Liabilities ............................................ C-40
7.10 Compliance with Laws ...................................... C-40
7.11 Certain Information ....................................... C-40
7.12 Disclosure ................................................ C-40
ARTICLE 8 Covenants of the Parties .................................. C-40
8.1 Services Agreement ........................................ C-40
8.2 Conduct of Business of LLC Pending Closing ................ C-40
8.3 Access to Information and Employees ....................... C-41
8.4 Financial Statements. ..................................... C-41
8.5 Payment of Indebtedness of Related Persons ................ C-41
8.6 Records of LLC ............................................ C-41
8.7 Employee Benefit Plans .................................... C-41
8.8 Section 16(b) Resolution .................................. C-41
ARTICLE 9 Post-Closing Agreements ................................... C-42
9.1 Further Actions ........................................... C-42
9.2 Cooperation ............................................... C-42
9.3 LLC Nominee Election ...................................... C-42
9.4 Tax Returns ............................................... C-42
9.5 Access to Information; Confidentiality .................... C-42
ARTICLE 10 Indemnification ........................................... C-43
10.1 Survival; Etc ............................................. C-43
(a) Contents of this Agreement ............................ C-43
(b) No Effect on Liability ................................ C-43
(c) Survival .............................................. C-43
(d) Commencing Actions .................................... C-43
(e) Materiality ........................................... C-43
10.2 Indemnities ............................................... C-44
(a) Indemnification of Superholdings ...................... C-44
(b) Indemnification of the Members ........................ C-44
(c) Contribution .......................................... C-44
(d) Form of Payment; Interim Losses ....................... C-45
10.3 Limitations on Indemnities ................................ C-46
(a) Basket ................................................ C-46
(b) Cap ................................................... C-46
(c) Services Agreement .................................... C-46
(d) Damages ............................................... C-46
(e) Exclusivity ........................................... C-46
(f) Indemnification of Escrow Agent ....................... C-47
10.4 Notice and Opportunity to Defend .......................... C-47
(a) Notice, Etc ........................................... C-47
(b) Defense Costs ......................................... C-47
(c) Third Party Claims .................................... C-47
</TABLE>
C-iv
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PAGE
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10.5 Delays or Omissions, Etc ................ C-48
10.6 Governing Law; Attorneys' Fees .......... C-48
10.7 Dispute Resolution ...................... C-48
(a) Arbitration ......................... C-48
(b) Emergency Relief .................... C-49
ARTICLE 11 Miscellaneous ........................... C-49
11.1 Successors and Assigns .................. C-49
11.2 Entire Agreement ........................ C-49
11.3 Amendment ............................... C-50
11.4 Extension; Waiver ....................... C-50
11.5 Notices, Etc ............................ C-50
11.6 Third Party Beneficiary, Etc ............ C-52
11.7 Reformation; Severability ............... C-52
11.8 Counterparts ............................ C-52
11.9 Titles and Subtitles .................... C-53
11.10 Confidentiality ......................... C-53
(a) Confidential Information ............ C-53
(b) Disclosure .......................... C-53
11.11 Expenses ................................ C-54
11.12 Responsibility for Merger Sub ........... C-54
11.13 Lack of Services Agreement .............. C-54
C-v
<PAGE>
INDEX OF PRINCIPAL TERMS
PAGE
----
AAA .................................... C-48
Accounts ............................... C-25
Affiliates Letter ...................... C-17
Agreement .............................. C-1, C-59, C-64,
C-69, C-73
Analysis ............................... C-53
Approvals .............................. C-12
Asserted Liability ..................... C-47
Blackout Notice ........................ C-74
Cash Consideration ..................... C-3
Certificate of Existence ............... C-8
Certificate ............................ C-64, C-69
Closing ................................ C-7
CoBank ................................. C-8
Code ................................... C-2
Consulting Agreement ................... C-18
Contracts .............................. C-28
Copyrights ............................. C-27
Credit Agreement ....................... C-29
Deductible ............................. C-46
Default ................................ C-29
Defense Costs .......................... C-47
DGCL ................................... C-3
EDC .................................... C-11
Effective Time ......................... C-3
employee benefit plan .................. C-33
Employee Benefit Plans ................. C-34
Employee Pension Benefit Plan .......... C-34
Employment Agreements .................. C-18
Equipment Leases ....................... C-25
ERISA .................................. C-33
Escrow Account ......................... C-4, C-59
Escrow Adjustment ...................... C-45, C-59
Escrow Agent ........................... C-4, C-59
Escrow Agreement ....................... C-4, C-59
Escrow Deposit ......................... C-45, C-59
Event of Default ....................... C-29
Exchange Act ........................... C-15
Exchange Agent ......................... C-5
Exchange Fund .......................... C-5
Form S-1 ............................... C-15
Form S-4 ............................... C-14
HSR Act ................................ C-10
Indemnified Party ...................... C-47
Indemnifying Party ..................... C-47
Indemnity Agreement .................... C-9
Interim Loss Value ..................... C-45
Interim Losses ......................... C-45
C-vi
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PAGE
----
Lenders ................................... C-29
Letters ................................... C-49
Licenses .................................. C-35
LLC Financial Statements .................. C-22
LLC Holdings .............................. C-1, C-59, C-64,
C-69, C-73
LLC Legal Requirements .................... C-35
LLC Nominee ............................... C-42
LLC Parties Closing Certificate ........... C-7
LLC Parties Consents ...................... C-22
LLC Parties' Delegated Conditions ......... C-13
LLC Records ............................... C-37
LLC ....................................... C-1, C-64, C-69,
C-73
Lock-Up Agreement ......................... C-9
Losses .................................... C-44
Lucent .................................... C-8
Marks ..................................... C-27
Material Adverse Change ................... C-43
material adverse effect ................... C-43
Member Agreement .......................... C-9, C-73
Member Guaranty ........................... C-9
Member Indemnitors ........................ C-44
Members Meeting ........................... C-16
Members Required Vote ..................... C-21
Members ................................... C-1, C-64, C-69,
C-73
Members' Agent ............................ C-4, C-59
Members' Releases ......................... C-9
Merger Sub Stock .......................... C-1
Merger Sub ................................ C-1, C-64, C-69,
C-73
OLLCA ..................................... C-3
Orders .................................... C-32
Outside Confidentiality Agreement ......... C-33
Parent Merger ............................. C-1
Parent Surviving Corporation .............. C-2
Patents ................................... C-27
Permits ................................... C-11
Permitted Liens ........................... C-25
Personal Property ......................... C-24
Policies .................................. C-33
Prior Policies ............................ C-33
Proceedings ............................... C-32
Projections ............................... C-24
Promissory Note ........................... C-9
Proxy Statement ........................... C-14
Public Consents ........................... C-39
Public Legal Requirements ................. C-40
Public Loan Agreement ..................... C-9
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<TABLE>
<CAPTION>
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<S> <C>
Public Stock ........................................................... C-4
Public Stockholders Meeting ............................................ C-16
Public ................................................................. C-1, C-64, C-69,
C-73
Public's, Superholdings' and Merger Sub's Delegated Conditions ......... C-14
Real Property .......................................................... C-25
SEC Documents .......................................................... C-39
SEC Filing Date ........................................................ C-14
SEC .................................................................... C-11
Securities Act ......................................................... C-14
Services Agreement ..................................................... C-8
Sister Agreements ...................................................... C-2
Sister Lock-Up ......................................................... C-9
Sprint Management Agreement ............................................ C-28
Sprint ................................................................. C-8
Subsidiaries ........................................................... C-21
Subsidiary Merger Agreement ............................................ C-1
Subsidiary Merger ...................................................... C-1
Subsidiary Surviving Corporation ....................................... C-3
Superholdings Closing Certificate ...................................... C-8
Superholdings Indemnitees .............................................. C-44
Superholdings Indemnitors .............................................. C-44
Superholdings Stock .................................................... C-1
Superholdings .......................................................... C-1, C-59, C-64,
C-69, C-73
Technology Contracts ................................................... C-27
Termination Date ....................................................... C-19
Tower Leases ........................................................... C-26
Trade Secrets .......................................................... C-27
VAR Obligations ........................................................ C-5
VAR Plan ............................................................... C-5
</TABLE>
C-viii
<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>
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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 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").
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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.
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
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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 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
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.
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(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 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
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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 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 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.
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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 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.
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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 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 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
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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. 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").
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(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).
(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.
(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:
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(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, 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.
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"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 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
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
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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 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.
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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
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.
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(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
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.
(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
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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 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
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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.
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.
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.
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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 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
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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 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
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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 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, 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
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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.
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
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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 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 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
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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 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
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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 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.
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(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 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 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
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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.
(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
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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, 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.
(i) Intellectual Property. The term "Intellectual Property" shall
include all fictitious business names, trade names, registered and
unregistered trademarks, service marks and
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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 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
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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 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.
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(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.
(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.
(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).
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(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.
(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
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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.
(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 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.
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(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 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,
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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 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 Section 3(2) (hereinafter, an "Employee Pension Benefit
Plan")) or otherwise is an "employee benefit plan" (as defined in ERISA Section
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 Section 406 or "prohibited transaction" under Code Section
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
Section 408 or Code Section 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 Section 601 et seq. and Code Section 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 Section 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 Section 414. No
Employee Pension Benefit Plan is or has ever been subject to Title IV of ERISA
or Code Section 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 Section
4999 is imposed on that Person.
(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.
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(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 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.
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(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.
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
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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.
(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 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
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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.
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,
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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 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.
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.
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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 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).
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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
goodwill 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.
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 Superholdings shall pass a resolution approving, for purposes of
Rule 16b-3 of the Exchange Act, the issuance of Superholdings Stock pursuant to
the Parent Merger and the Subsidiary Merger, to the directors,
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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).
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.
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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
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.
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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 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
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,
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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.
(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,
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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.
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 for the other party's
reasonable out-of-pocket costs and expenses of furnishing such cooperation.
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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:
(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.
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(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 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.
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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 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)
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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 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)
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Henderson Bay, LLC
1145 West Broadway Plaza, Suite 1500
Tacoma Financial Center
Tacoma, Washington 98402
Attention: Nick Spika
360.458.3909 (fax)
WOW Investment Partners, LP
2711 Haskell Ave., 5th Floor
Dallas, Texas 75204
Attention: F. Howard Mandel
214.360.9998 (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 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.
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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;
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.
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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 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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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: /s/ Edward Ormsbee
----------------------------------
Name: Edward Ormsbee
Title: General Manager
CLEAR CREEK MUTUAL TELEPHONE CO.
By: /s/ Mitchell Moore
----------------------------------
Name: Mitchell Moore
Title: President
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: /s/ F. Howard Maneor
----------------------------------
Name: F. Howard Maneor
Title: Vice 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"), 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 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
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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 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)
C-57
<PAGE>
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 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)
C-58
<PAGE>
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 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.
* * * * *
C-59
<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:
--------------------------
C-60
<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 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.
* * * * *
C-61
<PAGE>
C-62
<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:
---------------------------------
C-63
<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, 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.
C-64
<PAGE>
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 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.
C-65
<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.
* * * * *
C-66
<PAGE>
C-67
<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:
-------------------------------
C-68
<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 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.
C-69
<PAGE>
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 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
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<PAGE>
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, 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.
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<PAGE>
(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 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:
"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.
* * * * *
C-72
<PAGE>
ALAMOSA HOLDINGS, INC.:
By:
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Name:
--------------------------------
Title:
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MEMBER:
Name:
--------------------------------
DIRECT OWNERS OF MEMBER:
-------------------------------------
Name:
--------------------------------
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Name:
--------------------------------
-------------------------------------
Name:
--------------------------------
INDIRECT OWNERS OF MEMBER:
-------------------------------------
Name:
--------------------------------
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Name:
--------------------------------
-------------------------------------
Name:
--------------------------------
C-73
<PAGE>
APPENDIX D
[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 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
<PAGE>
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 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-2
<PAGE>
APPENDIX E
[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 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,
<PAGE>
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, 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-2
<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:
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
APP-F-1
<PAGE>
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 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 Party for this purpose), in good
faith, to be the fair market value per share of Common Stock.
APP-F-2
<PAGE>
"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.
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)
APP-F-3
<PAGE>
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.
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 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.
APP-F-4
<PAGE>
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, 2001 by a number of shares
equal to [800,000] shares or such lesser amount determined by the Committee.
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.
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 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
APP-F-5
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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 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) 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
APP-F-6
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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.
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-7
<PAGE>
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 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.
APP-F-8
<PAGE>
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.
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-9
<PAGE>
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 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
APP-F-10
<PAGE>
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) 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 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.
APP-F-11
<PAGE>
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 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
APP-F-12
<PAGE>
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 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):
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."
APP-F-13
<PAGE>
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-14
<PAGE>
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-15
<PAGE>
APPENDIX G
FORM OF
ALAMOSA PCS HOLDINGS, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The Alamosa PCS Holdings, Inc. Employee Stock Purchase Plan
(the "Plan") is being established for the benefit of employees of Alamosa PCS
Holdings, Inc., a Delaware corporation (the "Company"), and its Designated
Subsidiaries. The Plan is intended to provide the employees of an Employer with
an opportunity to purchase common shares, par value $.01, of the Company (the
"Shares"). It is the intention of the Company that the Plan qualify as an
"employee stock purchase plan" within the meaning of Section 423 of the Code,
and the provisions of the Plan shall be construed in a manner consistent with
the requirements of such Section of the Code.
2. Definitions.
a. "Board" shall mean the Board of Directors of the Company.
b. "Change in Capitalization" shall mean any increase, reduction, or
change or exchange of Shares for a different number or kind of shares or
other securities of the Company by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, share dividend,
share split or reverse share split, combination or exchange of shares,
repurchase of Shares, change in corporate structure or otherwise.
c. "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 Company Shares 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 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.
d. "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
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e. "Committee" shall mean the Compensation Committee or any other
committee of members of the Board appointed by the Board to administer the
Plan and to perform the functions set forth herein.
f. "Company" shall mean Alamosa Holdings, Inc., a corporation
organized under the laws of the State of Delaware, or any successor
corporation.
g. "Compensation" shall mean any earnings reportable as W-2 wages for
Federal income tax withholding purposes and any elective contributions
made by the Participant's Employer on the Participant's behalf to the
Alamosa PCS Contributions Savings Plan (or any successor plan thereto).
h. "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status
as an Employee shall not be considered interrupted in the case of a leave
of absence agreed to in writing by the Employee's Employer, if such leave
is for a continuous period of not more than one year or re-employment upon
the expiration of such leave is guaranteed by contract or statute.
i. "Designated Subsidiaries" shall mean the subsidiaries of the
Company which have been designated by the Board from time to time in its
sole discretion as eligible to participate in the Plan, which may include
corporations which become subsidiaries of the Company after the adoption
of the Plan.
j. "Employee" shall mean any person, including an officer, who as of
an Offering Date has been regularly employed on a full-time basis by the
Company, a wholly owned Subsidiary of the Company or a Designated
Subsidiary of the Company for at least six months; provided, however, that
an Employee shall not include any individual whose customary period of
employment is for five months or less in any calendar year.
k. "Employer" shall mean, as to any particular Employee, the
corporation which employs such Employee, whether it is the Company, a
wholly owned Subsidiary of the Company or a Designated Subsidiary of the
Company.
l. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
m. "Exercise Date" shall mean the last business day of each Purchase
Period, except as the Committee may otherwise provide.
n. "Fair Market Value" per Share as of a particular date shall mean
(i) the closing sales price per Share on such date, as reported by the
Composite Transactions reporting system or if not so reported, as reported
by the New York Stock Exchange or (ii) in the event the Shares are not
traded on such date, the closing price per Share, as so reported in the
immediately preceding date on which trading occurred, or if not so
reported, as reported by any national securities exchange on which the
Shares are listed.
o. "Offering Date" shall mean the first Trading Day of each Offering
Period of the Plan. The Offering Date of an Offering Period is the grant
date for the options offered in such Offering Period.
p. "Offering Period" shall mean a period as described in Section 4
hereof.
q. "Parent" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of
granting an option, each of the corporations other than the Company owns
shares possessing 50% or more of the total combined voting power of all
classes of shares in one of the other corporations in such chain.
r. "Participant" shall mean an Employee who participates in the Plan.
s. "Plan" shall mean the Alamosa Holdings, Inc. Employee Stock
Purchase Plan, as amended from time to time.
t. "Plan Year" shall mean the calendar year.
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u. "Purchase Period" shall mean each approximately six-month period,
within an Offering Period, commencing on the Trading Day next following
the last previous Exercise Date in such Offering Period and ending with
the next Exercise Date in such Offering Period, except that the first
Purchase Period of any Offering Period shall commence on the first Trading
Day of such Offering Period and end with the next Exercise Date.
v. "Shares" shall mean shares of the common stock, par value $.01 per
share, of the Company.
w. "Subsidiary" shall mean any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company if, at the
time of granting an option, each of the corporations other than the last
corporation in the unbroken chain owns shares possessing fifty percent
(50%) or more of the total combined voting power of all classes of shares
in one of the other corporations in such chain.
x. "Trading Day" shall mean a day on which national stock exchanges
and the NASDAQ system are open for trading.
y. "Year of Service" shall mean each successive period of twelve
consecutive months (from an Employee's original employment date) during
which the Employee's hours of employment are 1,000 hours or more.
3. Eligibility.
a. Subject to the requirements of Section 3.b. hereof, any person who
is an Employee as of an Offering Date shall be eligible to participate in
the Plan and be granted an option for the Offering Period commencing on
such Offering Date.
b. Notwithstanding any provisions of the Plan to the contrary, no
Employee shall be granted an option under the Plan if, immediately after
the grant, (i) such Employee (or any other person whose shares would be
attributed to such Employee pursuant to Section 424(d) of the Code) would
own shares and/or hold outstanding options to purchase shares possessing
five percent (5%) or more of the total combined voting power or value of
all classes of shares of the Company or of any Subsidiary or Parent of the
Company, or (ii) such Employee's right to purchase shares under all
employee stock purchase plans (as described in Section 423 of the Code) of
the Company and any Subsidiary or Parent of the Company would accrue at a
rate which exceeds twenty-five thousand dollars ($25,000) of Fair Market
Value of such shares (determined at the time such option is granted) for
any calendar year in which such option would be outstanding at any time.
Any amounts received from an Employee which cannot be used to purchase
Shares as a result of this limitation will be returned as soon as possible
to the Employee without interest.
4. Offering Periods. The Plan shall be implemented by a series of
consecutive, overlapping Offering Periods. The first such Offering Period shall
commence on the first Trading Day on or following March 1, 2001 and end on the
last Trading Day on or before August 31, 2001. Unless otherwise determined by
the Committee, each subsequent Offering Period shall have a duration of two
years, commencing on the first Trading Day on or after March 1 and September 1
of each year. The Plan shall continue until terminated in accordance with
Section 19 hereof. Subject to Section 19 hereof, the Committee shall have the
power to change the duration and/or the frequency of Offering Periods and/or
Purchase Periods with respect to future offerings and shall use its best
efforts to notify Employees of any such change at least 15 days prior to the
scheduled beginning of the first Offering Period to be affected. In no event
shall any option granted hereunder be exercisable more than 27 months from its
date of grant.
To the extent permitted by any applicable laws, regulations, or stock
exchange rules, if the Fair Market Value of the Shares on any Exercise Date in
an Offering Period is lower than the Fair Market Value of the Shares on the
Offering Date of such Offering Period, then all Participants in such Offering
Period shall be automatically withdrawn from such Offering Period immediately
after the exercise of their option on such Exercise Date and automatically
re-enrolled in the immediately following Offering Period as of the first day
thereof.
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5. Grant of Option; Participation; Price.
a. On each Offering Date the Company shall commence an offering by
granting each eligible Employee an option to purchase Shares, subject to
the limitations set forth in Sections 3b and 11 hereof. Each option so
granted shall be exercisable for the number of Shares described in Section
8 hereof and shall be exercisable only on the Exercise Date.
b. Each eligible Employee may elect to become a Participant in the
Plan with respect to an Offering Period by filing a subscription agreement
with his or her Employer authorizing payroll deductions in accordance with
Section 6 hereof and filing it with the Company or the Employer in
accordance with the form's instructions at least ten business days prior
to the applicable Offering Date, unless a later time for filing the
subscription agreement is set by the Committee for all Employees with
respect to a given offering. Such authorization will remain in effect for
subsequent Offering Periods, until modified or terminated by the
Participant by giving written notice to his or her Employer prior to the
next occurring Exercise Date. Additionally, a Participant may participate
to a greater extent by authorizing reinvestment of dividends on the Shares
held in his or her account (by giving written notice to the Company) or by
making cash payments to be credited to his or her account under the Plan
in accordance with Section 6 hereof.
c. The option price per Share subject to an offering shall be 85% of
the Fair Market Value of a Share on (i) the Offering Date or (ii) the
Exercise Date, whichever is lower.
6. Payroll Deductions and Cash Payments.
a. Subject to Section 5b hereof, a Participant may, in accordance
with rules and procedures adopted by the Committee, authorize a payroll
deduction of any whole percentage from one percent to ten percent of such
Participant's Compensation each pay period (the permissible range within
such percentages to be determined by the Committee from time to time). A
Participant may increase or decrease such payroll deduction (including a
cessation of payroll deductions) at any time but not more frequently than
once each Offering Period, by filing a new authorization form with his or
her Employer. All payroll deductions made by a Participant shall be
credited to such Participant's account under the Plan.
b. Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3b hereof, a Participant's
payroll deductions may be decreased to 0% at any time during a Purchase
Period. Payroll deductions shall recommence at the rate provided in such
Participant's subscription agreement at the beginning of the first
Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the Participant as provided in Section 9 hereof.
c. A Participant may withdraw from the Plan as provided in Section 9,
which will terminate his or her payroll deductions for the Purchase Period
in which such withdrawal occurs. A Participant may increase or decrease
the rate of his or her payroll deductions during an Offering Period by
completing and filing with the Employer a new subscription agreement
authorizing a change in payroll deduction rate. The Committee may, in its
discretion, limit the number of rate changes by a Participant during an
Offering Period. A change in rate shall be effective as of the next
payroll period following the date of filing of the new subscription
agreement.
7. Exercise of Option.
a. Unless a Participant withdraws from the Plan as provided in
Section 9 hereof, or unless the Committee otherwise provides, such
Participant's election to purchase Shares shall be exercised automatically
on the Exercise Date, and the maximum number of Shares (excluding any
fractional Share) subject to such option will be purchased for such
Participant at the applicable option price with (i) the accumulated
payroll deductions, (ii) cash dividends paid on Shares which have been
credited to the Participant's account under the Plan pursuant to Section
10 hereof, and (iii) any additional cash payments made by the Participant
and credited to the Participant's account under the Plan in accordance
with Section 6 hereof.
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b. Any cash balance remaining in a Participant's account after an
Exercise Date will be carried forward to the Participant's account for the
purchase of Shares on the next Exercise Date if the Participant has
elected to continue to participate in the Plan. Otherwise the Participant
will receive a cash payment equal to the cash balance of his or her
account.
c. The Shares purchased upon exercise of an option hereunder shall be
credited to the Participant's account under the Plan as of the Exercise
Date and shall be deemed to be transferred to the Participant on such date
(except that no Shares purchased during the first Offering Period
hereunder shall be credited to the Participant's account until payment of
the aggregate option price has been completed within the Offering Period).
Except as otherwise provided herein, the Participant shall have all rights
of a shareholder with respect to such Shares upon their being credited to
the Participant's account.
8. Delivery of Shares.
a. As promptly as practicable after receipt by the Company of a
written request for withdrawal of Shares from any Participant, the Company
shall arrange the delivery to such Participant of a share certificate
representing the Shares in the Participant's account which the Participant
requests to withdraw. Subject to Section 8b hereof, withdrawals may be
made no more frequently than once each Offering Period. Shares received
upon share dividends or share splits shall be treated as having been
purchased on the Exercise Date of the Shares to which they relate.
b. Notwithstanding anything in Section 8a hereof to the contrary,
Shares may be withdrawn by a Participant more than once during an Offering
Period under the following circumstances: (i) within 60 days following a
Change in Control of the Company or (ii) upon the approval of the
Committee, in its sole discretion.
9. Withdrawal; Termination of Employment.
a. A Participant may withdraw at any time all, but not less than all,
cash amounts in his or her account under the Plan that have not been used
to purchase Shares (including, without limitation, the payroll deductions,
cash dividends and cash payments credited to such Participant's account)
by giving written notice to the Company prior to the next occurring
Exercise Date. All such payroll deductions, cash dividends and cash
payments credited to such Participant's account shall be paid to such
Participant promptly after receipt of such Participant's notice of
withdrawal and such Participant's option for the Offering Period in which
the withdrawal occurs shall be automatically terminated. No further
payroll deductions for the purchase of Shares will be made for such
Participant during such Offering Period, and any additional cash dividends
during the Offering Period shall be distributed to the Participant.
b. Upon termination of a Participant's Continuous Status as an
Employee during the Offering Period for any reason, including voluntary
termination, retirement or death, the payroll deductions, cash dividends
and cash payments credited to such Participant's account that have not
been used to purchase Shares (and, as to the first Offering Period, any
such amounts credited to the account for partial payment for Shares as to
which payment has not been completed) shall be returned (and any future
cash dividends shall be distributed) to such Participant or, in the case
of such Participant's death, to the person or persons entitled thereto
under Section 13 hereof, and such Participant's option will be
automatically terminated.
c. A Participant's withdrawal from an offering will not have any
effect upon such Participant's eligibility to participate in a succeeding
offering or in any similar plan which may hereafter be adopted by the
Company.
10. Dividends and Interest.
a. Cash dividends paid on Shares held in a Participant's account
shall be credited to such Participant's account and used in addition to
payroll deductions (and cash contributions, if any) to purchase Shares on
the Exercise Date. Dividends paid in Shares or share splits of the Shares
shall be credited to the accounts of Participants. Dividends paid in
property other than cash or Shares shall be distributed to Participants as
soon as practicable.
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b. No interest shall accrue on or be payable with respect to any cash
amount credited to a Participant under the Plan.
11. Shares.
a. Subject to adjustment as provided in Section 17 hereof, the
maximum number of Shares which shall be reserved for sale under the Plan
shall be 600,000 Shares, plus an annual increase to be added on the
first day of the Company's fiscal year beginning in 2002 equal to the
lesser of (i) 200,000 Shares or (ii) such lesser amount determined by the
Committee. Such Shares shall be either authorized and unissued Shares or
Shares which have been reacquired by the Company. If the total number of
Shares which would otherwise be subject to options granted pursuant to
Section 5a hereof on an Offering Date exceeds the number of Shares then
available under the Plan (after deduction of all Shares for which options
have been exercised or are then outstanding), the Committee shall make a
pro rata allocation of the Shares remaining available for option grant in
as uniform a manner as shall be practicable and as it shall determine to
be equitable. In such event, the Committee shall give written notice to
each Participant of such reduction of the number of option Shares affected
thereby and shall similarly reduce the rate of payroll deductions, if
necessary.
b. Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or, at the election of the
Participant, in the name of the Participant and another person as joint
tenants with rights of survivorship.
12. Administration. The Plan shall be administered by the Committee, and
the Committee may select administrator(s) to whom its duties and
responsibilities hereunder may be delegated. The Committee shall have full
power and authority, subject to the provisions of the Plan, to promulgate such
rules and regulations as it deems necessary for the proper administration of
the Plan, to interpret the provisions and supervise the administration of the
Plan, and to take all action in connection therewith or in relation thereto as
it deems necessary or advisable. Any decision reduced to writing and signed by
a majority of the members of the Committee shall be fully effective as if it
had been made at a meeting duly held. Except as otherwise provided by the
Committee, each Employer shall be charged with all expenses incurred in the
administration of the Plan with respect to such Employer's Employees. No member
of the Committee shall be personally liable for any action, determination, or
interpretation made in good faith with respect to the Plan, and all members of
the Committee shall be fully indemnified by the Company with respect to any
such action, determination or interpretation. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, the Participant (or any person claiming any rights under
the Plan from or through any Participant) and any shareholder.
13. Designation of Beneficiary.
a. A Participant may file with the Company, on forms supplied by the
Company, a written designation of a beneficiary who is to receive any
Shares and cash remaining in such Participant's account under the Plan in
the event of the Participant's death.
b. Such designation of beneficiary may be changed by the Participant
at any time by written notice to the Company, on forms supplied by the
Company. In the event of the death of a Participant and in the absence of
a beneficiary validly designated under the Plan who is living at the time
of such Participant's death, the Company shall deliver such Shares and/or
cash to the executor or administrator of the estate of the Participant or,
if no such executor or administrator has been appointed (to the knowledge
of the Company), the Company, in its discretion, may deliver such Shares
and/or cash to the spouse or to any one or more dependents or relatives of
the Participant in accordance with the applicable laws of descent and
distribution, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.
14. Transferability. Neither payroll deductions, dividends, dividend
reinvestments or cash payments credited to a Participant's account nor any
rights with regard to the exercise of an option or to receive Shares under the
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
by the Participant (other than by will, the laws of descent and distribution or
as provided in Section 13
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hereof). Any such attempt at assignment, transfer, pledge or other disposition
shall be without effect, except that the Company may treat such act as an
election to withdraw funds in accordance with Section 9 hereof.
15. Use of Funds. All payroll deductions, dividends, reinvested dividends
and additional cash payments received or held by the Company under the Plan may
be used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such funds.
16. Reports. Individual accounts will be maintained for each Participant
in the Plan. Statements of account will be given to Participants as soon as
practicable following each Offering Period, which statements will set forth the
amounts of payroll deductions, dividends, dividend reinvestments and additional
cash payments, the per Share purchase price, the number of Shares purchased,
the aggregate Shares in the Participant's account and the remaining cash
balance, if any.
17. Effect of Certain Changes. In the event of a Change in Capitalization
or the distribution of an extraordinary dividend, the Committee shall
conclusively determine the appropriate equitable adjustments, if any, to be
made under the Plan, including without limitation adjustments to the number of
Shares which have been authorized for issuance under the Plan but have not yet
been placed under option, as well as the price per Share covered by each option
under the Plan which has not yet been exercised. In the event of a Change in
Control of the Company, Offering Periods shall terminate unless otherwise
provided by the Committee.
18. Term of Plan. Subject to the Board's right to discontinue the Plan
(and thereby end its Term) pursuant to Section 19 hereof, the Term of the Plan
(and its last Offering Period) shall end on the tenth anniversary of the
commencement of the first Offering Period. Upon any discontinuance of the Plan,
unless the Committee shall determine otherwise, any assets remaining in the
Participants' accounts under the Plan shall be delivered to the respective
Participant (or the Participant's legal representative) as soon as practicable.
19. Amendment to and Discontinuance of Plan. The Board may at any time
amend, suspend or discontinue the Plan. Except as provided in Section 17
hereof, no such suspension or discontinuance may adversely affect options
previously granted and no amendment may make any change in any option
theretofore granted which adversely affects the rights of any Participant which
accrued prior to the date of effectiveness of such amendment without the
consent of such Participant. No amendment shall be effective unless it receives
the requisite approval of the shareholders of the Company if such shareholder
approval of such amendment is required to comply with Rule 16b-3 under the
Exchange Act or Section 423 of the Code or to comply with any other applicable
law, regulation or stock exchange rule.
20. Notices. All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Regulations and Other Approvals; Governing Law
a. This Plan and the rights of all persons claiming hereunder shall
be construed and determined in accordance with the laws of the State of
Delaware without giving effect to the choice of law principles thereof,
except to the extent that such law is preempted by federal law.
b. The obligation of the Company to sell or deliver Shares with
respect to options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal
and state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.
c. To the extent applicable hereto, the Plan is intended to comply
with Rule 16b-3 under the Exchange Act, and the Committee shall interpret
and administer the provisions of the Plan in a manner consistent
therewith. Any provisions inconsistent with such Rule shall be inoperative
and shall not affect the validity of the Plan.
22. Withholding of Taxes. If the Participant makes a disposition, within
the meaning of Section 424(c) of the Code and regulations promulgated
thereunder, of any Share or Shares issued to such
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Participant pursuant to such Participant's exercise of an option, and such
disposition occurs within the two-year period commencing on the day after the
Offering Date or within the one-year period commencing on the day after the
Exercise Date, such Participant shall, within ten (10) days of such
disposition, notify the Company thereof and thereafter immediately deliver to
the Company any amount of Federal, state or local income taxes and other
amounts which the Company informs the Participant the Company is required to
withhold.
23. Effective Date. The Plan shall be effective as of March 1, 2001,
subject to the approval of the Plan by the shareholders of the Company within
12 months before or after the date the Plan is adopted.
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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
II-1
<PAGE>
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.
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 December 14, 2000, by and among
Alamosa PCS Holdings, Inc., Alamosa Holdings, Inc., Alamosa (Delaware) 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 Form of Amended and Restated Certificate of Incorporation of the Registrant.
3.3**** By-laws of the Registrant.
3.4 Form of 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 ChaseMellon
Shareholder Services, L.L.C., 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.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
--------------------- --------------------------------------------------------------------------------------
<S> <C>
10.4** Amendment No. 3 to DMS-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.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
--------------------- ------------------------------------------------------------------------------------------
<S> <C>
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.
10.30 Guaranty, dated as of July 31, 2000, by WOW Investment Partners, L.P. for the benefit
of Alamosa Operations, Inc.
10.31 Guaranty, dated as of July 31, 2000, by Henderson Bay, LLC for the benefit of Alamosa
Operations, Inc.
10.32 Guaranty, dated as of July 31, 2000, by Cal-Ore Wireless, Inc. for the benefit of Alamosa
Operations, Inc.
10.33 Guaranty, dated as of July 31, 2000, by Clear Creek Mutual Telephone Company for the
benefit of Alamosa Operations, Inc.
10.34 Loan Agreement, dated as of October 18, 2000, between Alamosa Operations, Inc., as
lender, and Roberts Tower Company, as borrower.
10.35 Guaranty, dated as of October 18, 2000, by Michael V. Roberts in favor of Alamosa
Operations, Inc.
10.36 Guaranty, dated as of October 18, 2000, by Steven C. Roberts in favor of Alamosa
Operations, Inc.
10.37 Consent, dated as of December 14, 2000, of Export Development Corporation.
10.38 Guaranty, dated as of December 14, 2000, by Alamosa PCS Holdings, Inc. in favor of
Export Development Corporation.
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.
99.1 Proxy Card.
</TABLE>
----------
* 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.
**** Previously filed, together with Alamosa Holdings, Inc.'s Registration
Statement on Form S-4, file no. 333-47916, dated October 13, 2000, and
incorporated herein by reference.
+ Exhibit is a management contract or compensatory plan.
II-4
<PAGE>
(ii) Financial Statement Schedules.
None.
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.
(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
II-5
<PAGE>
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.
II-6
<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 January 12, 2001.
ALAMOSA HOLDINGS, INC.
By: /s/ DAVID E. SHARBUTT
-----------------------------------
David E. Sharbutt
President and Sole Director
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 January, 2001.
<TABLE>
<CAPTION>
NAME TITLE
---------------------------- -----------------------------------------
<S> <C>
/s/ David E. Sharbutt President and Sole Director
-------------------------
David E. Sharbutt
January 12, 2001* Vice President, Treasurer and Secretary
-------------------------
Kendall W. Cowan
</TABLE>
*By: /s/ David E. Sharbutt
------------------
David E. Sharbutt
Attorney-in-Fact
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
--------------------------------------------------------------------------------------------------------------
<S> <C>
2.1 Amended and Restated Agreement and Plan of Reorganization, dated as of December 14, 2000, by and
among Alamosa PCS Holdings, Inc., Alamosa Holdings, Inc., Alamosa (Delaware), 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 Form of Amended and Restated Certificate of Incorporation of the Registrant.
3.3**** By-laws of the Registrant.
3.4 Form of 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 ChaseMellon Shareholder Services,
L.L.C., 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.
II-8
<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
Roberts Wireless Communciations, LLC, as borrower.
10.30 Guaranty, dated as of July 31, 2000, by WOW Investment Partners, L.P. for the benefit of
Alamosa Operations, Inc.
10.31 Guaranty, dated as of July 31, 2000, by Henderson Bay, LLC for the benefit of Alamosa
Operations, Inc.
10.32 Guaranty, dated as of July 31, 2000, by Cal-Ore Wireless, Inc. for the benefit of Alamosa
Operations, Inc.
10.33 Guaranty, dated as of July 31, 2000, by Clear Creek Mutual Telephone Company for the benefit
of Alamosa Operations, Inc.
10.34 Loan Agreement, dated as of October 18, 2000, between Alamosa Operations, Inc., as lender, and
Roberts Tower Company, as borrower.
10.35 Guaranty, dated as of October 18, 2000, by Michael V. Roberts in favor of Alamosa Operations, Inc.
10.36 Guaranty, dated as of October 18, 2000, by Steven C. Roberts in favor of Alamosa Operations, Inc.
10.37 Consent, dated as of December 14, 2000, of Export Development Corporation.
10.38 Guaranty, dated as of December 14, 2000, by Alamosa PCS Holdings, Inc. in favor of Export Development
Corporation.
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.
99.1 Proxy Card.
II-9
<PAGE>
-------------
* Previously filed, together with Alamosa PCS Holdings, Inc.'s Registration Statement 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.
**** Previously filed, together with Alamosa Holdings, Inc.'s Registration Statement on Form S-4,
file no. 333-47916, dated October 13, 2000, and incorporated herein by reference.
+ Exhibit is a management contract or compensatory plan.
</TABLE>
II-10
