<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------
FORM 10/A
AMENDMENT NO. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
Under Section 12(b) or 12(g) of
THE SECURITIES EXCHANGE ACT OF 1934
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PCS 2000, L.P.
(Exact Name of Registrant as Specified in its charter)
<TABLE>
<S> <C>
Delaware 66-0514434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
640 Broadway 95476
Sonoma, California (Zip Code)
(Address of principal executive offices)
</TABLE>
Issuer's telephone number: (707) 938-2428
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be registered each class is to be registered
---------------- ------------------------------
Securities to be registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of class)
<PAGE> 2
ITEM 1. BUSINESS
General
PCS 2000, L.P., a Delaware limited partnership (the
"Partnership"), was formed on January 24, 1995 to own and operate broadband
personal communications service ("PCS") licenses to be acquired in auctions
conducted by the Federal Communications Commission (the "FCC"). The
Partnership competed for PCS licenses in frequency Block C, set aside for
"designated entities" ("Entrepreneurs") meeting certain financial and equity
structure requirements and that qualify for certain benefits under rules,
regulations and policies of the FCC and related statutory provisions ("FCC
Rules"), and was high bidder for 15 PCS licenses. Unicom Corporation, the
former general partner ("Unicom") of the Partnership and SuperTel
Communications Corp., the current general partner of the partnership
("SuperTel" or the "General Partner"), have taken steps to qualify the
Partnership for the maximum benefits allowed by the FCC for an Entrepreneur
under 47 C.F.R. Section Section 24.711(d) (installment payments) and 24.712(c)
(bidding credits) of the final rules of the FCC for PCS. See "Entrepreneur
Classes and Economic Preferences" below and "The Partnership -- Transfer of
General Partner's Interest." Unicom is not related to the parent of
Commonwealth Edison.
The Partnership has filed an application (the "Application")
with the FCC for the authority to acquire licenses to provide PCS services in
all Basic Trading Areas (collectively, the "Markets") in the United States and
bid at the Block C auction for the award of PCS licenses in Markets as
authorized under Part 24 of the FCC's rules (the "Auctions"). The Partnership
was high bidder for 15 PCS licenses (the "Licenses"), which cover 15 markets in
the United States and Puerto Rico. The Partnership expects to develop, own and
operate the licenses it is awarded. See "The Partnership -- The Partnership's
Business to Date" below. The Partnership's business strategy is to acquire PCS
licenses and operate such licenses with a view to providing capital
appreciation in the value of the Partnership's units of limited partnership
interest (the "Units").
The Partnership currently anticipates that it will take 18
months or more to complete the initial build-out of its PCS service and to
begin offering wireless service in the markets in which it expects to be
awarded licenses. Development of the infrastructure necessary to offer PCS
services is subject to delays, including those associated with design,
acquisition, installation and construction of wireless telephone systems. See
"Development of the Licenses" below.
The Agreement of Limited Partnership of PCS 2000, L.P. (the
"Partnership Agreement") provides that the Partnership will terminate on
December 31, 2005. The Partnership will dissolve on such date (unless
terminated earlier or unless the Partnership Agreement is amended to change
such date). The General Partner anticipates that it will have developed its
Licenses by such date, and depending upon business considerations, will have
restructured itself or transferred or sold its Licenses.
<PAGE> 3
BACKGROUND OF PERSONAL COMMUNICATIONS SERVICES BUSINESS AND FCC AUCTIONS
In 1993, Congress adopted the Omnibus Budget Reconciliation
Act of 1993 (the "Reconciliation Act") which, among other things, mandated
Auctions for the award of certain FCC licenses, including PCS licenses.
Pursuant to authority granted to the FCC by the Reconciliation Act, the FCC has
begun awarding PCS licenses through a process of competitive bidding auctions
in which there are multiple applications for the same license. The PCS
technology is expected to be a completely digital technology designed from
ground up to be a wireless "telecommunicator" system.
Since PCS will be digital, it is capable of numerous advanced
service features, including caller-ID, voice-prompting, voice-recognition,
scrambled (secure) calling, message and image delivery, intelligent call
transfer and follow-me calling, single number service (the same number can be
assigned to multiple PCS telephones in different locations) and auto-trace of
crank callers. E-mail access and personal computer compatibility can be
utilized by PCS subscribers if such features are incorporated into a given PCS
network.
PCS is a radio-based transmission technology which, like
cellular technology, uses the same frequencies over and over again in a
multiple-transmitter cell design. PCS uses frequencies in the 1900 MHz band,
not the 800 MHz band (which is used by cellular technology). PCS transmissions
are not as prone to out-of-cell interference, which can occur with the existing
cellular telephone frequencies. Presently, there are three PCS systems
operating in the United States. One began operations in Washington, D.C.
metropolitan area in the fourth quarter of 1995, another commenced
activities in Honolulu in the first quarter of 1996 and a third recently began
operations in Salt Lake City.
FREQUENCY BLOCKS
The FCC has divided the PCS spectrum into six frequency
blocks, designated Blocks A through F, such that there are six overlapping
licenses in each market in each geographic area of the country. Blocks A, B
and C are 30 MHz blocks, and Blocks D, E and F are 10 MHz blocks.
Thirty MHz blocks allow for the PCS operator to provide the full range of PCS
services described above to a larger number of subscribers. Conversely, 10 MHz
blocks allow the PCS operator to provide either a smaller range of PCS
services, such as paging or E-mail to a larger number of subscribers, or a
larger range of PCS services to a smaller number of subscribers. Subject to
certain restrictions applicable to Blocks C and F, PCS operators can combine
blocks to provide subscribers with a broader range of PCS services.
At the time of the Block C auction, FCC Rules allowed one
operator to own up to 40 MHz of PCS licenses serving the same market.
A cellular licensee (or affiliate) was permitted hold no more than one 10 MHz
PCS license in its service area, but starting in the year 2000, a cellular
licensee would have been permitted to hold 15 MHz of PCS spectrum. On June 24,
1996, the FCC has adopted rule changes that allow companies to hold up to 45
MHz of cellular, PCS and other commercial mobile service spectrum in any
combination. With this rule change, an existing cellular provider may acquire
up to two additional 10 MHz PCS licenses in a market in which it provides
services, and a person holding any Block A or Block B licenses in a particular
market may hold one 10 MHz license for the same area. This rule is subject to
reconsideration and review or appeal. A single licensee may hold 51 Block A or
B licenses nationally. Other than the 45 MHz ceiling per market described
above, there are no limitations on the number of Block D and E licenses that a
single operator may hold. With respect to Blocks C and F, no license holders
may hold more than 10% of the licenses available nationwide.
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FCC Rules permit any U.S. entity, regardless of size, to
participate in the Auctions at which Blocks A, B, D and E licenses have been
and will be sold. Blocks C and F, however, are set aside for Entrepreneurs,
which are entities meeting certain financial and equity structure requirements
and that qualify for certain benefits under rules, regulations and policies of
the FCC and related statutory provisions. The General Partner has taken steps
to qualify the Partnership as an Entrepreneur, and the Partnership was the high
bidder for the 15 Licenses in the Block C auction. Although the Partnership is
eligible to bid in the Block F auction, the General Partner has determined
not to do so because the General Partner believes that it must devote its
efforts to fully develop Block C Licenses it expects to be awarded. In
addition, the General Partner has considered the amount of capital the
Partnership will need to develop its Block C Licenses and the availability of
additional capital.
MAJOR TRADING AREA; BASIC TRADING AREA
PCS licenses will be awarded either on the basis of Major
Trading Areas (each, a "MTA") or Basic Trading Areas (each, a "BTA"). Each MTA
is comprised of one or more BTAs. The FCC has divided the entire United States
into 51 MTAs and 493 BTAs. The MTAs contain anywhere from one to 23 BTAs.
Block A and B licenses were awarded on the basis of MTAs. The Block C auctions
awarded, and the Block D, E and F auctions will award, BTA licenses covering
the entire country, including Puerto Rico, American Samoa, Guam, Northern
Mariana Islands and the U.S. Virgin Islands.
FCC AUCTIONS
The FCC began the PCS Auctions in December 1994. The first
auction was for Block A and B licenses, and lasted from December 1994 to
February 1995. This auction was open to all bidders, and the major
telecommunications companies were the principal participants in this auction,
which awarded 99 MTA licenses in frequency Blocks A and B (30 MHz licenses).
The price paid per person of population ("POP") for a 30 MHz license ranged
from $1 to $32. The average price was approximately $15.25 per POP. Total
auction proceeds were approximately $7.7 billion.
The auction for the Block C licenses, in which the Partnership
participated, began on December 18, 1995 and ended on May 6, 1996. This
auction, in which the Block C spectrum was offered in each of the 493 BTAs, was
restricted to companies which qualified as Entrepreneurs, as described below.
The prices bid per POP ranged approximately from $1.91 to $101.93. The average
price bid was $52.39 per POP. Total auction bids were approximately
$13.25 billion. These prices will be discounted, however, because of bidding
credits and installment financing options available to Entrepreneurs as
described below.
The remaining Auctions are to be scheduled for the Summer and
Fall of 1996 in which frequency Blocks D, E and F, all 10 MHz licenses, will be
issued on a BTA basis. In these Auctions, Blocks D and E will be open to all
bidders and Block F licenses are restricted to Entrepreneurs.
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ENTREPRENEUR CLASSES AND ECONOMIC PREFERENCES
Block C licenses were and Block F licenses will be reserved
for Entrepreneurs meeting certain limiting criteria set forth in FCC Rules.
Further, Entrepreneurs have been granted a set of preferences in the PCS
Auctions.
Under FCC Rules, an Entrepreneur is defined as an entity which
has less than (i) $500 million of assets and (ii) $125 million of annual gross
revenue over the prior two years. In addition, FCC Rules have defined four
classes of Entrepreneurs, with each class eligible for different economic
preferences in the Blocks C and F auctions. A "Large Business Entrepreneur" is
defined as an entity which has aggregate gross revenues for each of the last
two years between $75 million and $125 million. A "Business Entrepreneur" is
an entity which has aggregate gross revenues for each of the last two years
between $75 million and $40 million. A "Small Business" is an entity which has
less than $40 million of aggregate annual gross revenue averaged over the last
three years. A "Minority- or Women-Owned Business" is a Small Business entity
over which minorities and women exercise de facto and de jure control and which
meets certain FCC requirements.
In the Block C auction (as a result of constitutional
challenges to the benefits granted to Minority- or Women-Owned Businesses), the
FCC consented to granting the benefits originally intended for Minority- or
Women-Owned Businesses to all entities which fit the criteria for being a Small
Business. Accordingly, in the Block C auction, there were effectively three
classes of Entrepreneurs. On June 24, 1996, the FCC released new rules which
eliminated the preferences granted to Minority- or Women-Owned Businesses in
the Block F auction and created two classes of Small Businesses. The
Partnership, however, will not participate in the Block F auction.
Each of the classes of Entrepreneur was entitled to
participate in the restricted Block C auction. Further, each class was
entitled to differing economic preferences, which are summarized in the table
below. All Entrepreneurs qualified for the FCC's installment payment plan
under which the federal government will finance 90% of the winning auction bid
in the Block C spectrum. The terms of the installment plan vary according to
the Entrepreneurial class. A Large Business Entrepreneur can finance the
balance of its auction bid in the Block C auction at an interest rate equal to
the 10-year treasury bill rate at the date of grant of the license plus 3.5%,
with principal and interest amortized over the 10-year license term. A
Business Entrepreneur is entitled to similar terms in the Block C auction,
except that interest-only payments are permitted in the first year and that the
interest rate is the 10-year treasury bill rate plus 2.5%.
In the Block C auction, Small Businesses were entitled to
interest-only payments for the first six years and can amortize interest and
principal over the remaining four years of the license term. In the Block C
auction, the interest rate applicable to Small Businesses is the 10-year
treasury bill rate at the date of grant of the license. In addition, in the
Block C auction, Small Businesses were entitled to a bidding credit of 25%.
The bidding credits operate as follows: if a qualifying Entrepreneur submits a
winning bid, the price it will pay for the license is reduced
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by the bidding credit, and the reduced price is then eligible for the
installment payment benefits applicable to such an Entrepreneur.
Summary of Economic Preferences for Entrepreneurs in Block C Auction
<TABLE>
<CAPTION>
=========================================================================================
Installment Interest Rate/ Bidding
Plan Amortization Credit
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Large Business Yes 10-year treasury bill rate plus 3.5% n/a
Entrepreneur
Principal and interest amortized over the
10-year license term
- -----------------------------------------------------------------------------------------
Business Yes 10-year treasury bill rate plus 2.5% n/a
Entrepreneur
Interest-only payments permitted in the first
year and principal and interest amortized
over remaining nine years of the license term
- -----------------------------------------------------------------------------------------
Small Yes 10-year treasury bill rate 25% bidding
Businesses credit
Interest-only payments permitted for the
first six years and principal and interest
amortized over the remaining four years of
the license term
=========================================================================================
</TABLE>
GENERAL PARTNER STRUCTURE
As noted above, as originally promulgated, in order to be
classified as a Small Business and a Minority-or Women Owned Business, FCC
Rules required minorities and women to exercise control over the Partnership
through an entity that qualified as a Small Business. Unicom, and its
successor, the General Partner, were created to serve as the entity through
which these requirements could be met. The Partnership met these requirements
by placing management control of the Partnership in the General Partner,
restricting ownership of a majority of its shares of Common Stock (the "Common
Stock") to persons who are minorities and women, and providing the General
Partner with 25% of the equity of the Partnership. Accordingly, the General
Partner manages the Partnership and limited partners only have certain limited
rights amounting to less than de facto and de jure control.
APPLYING FOR A PCS LICENSE
The Partnership has filed with the FCC a Short Form
Application ("Form 175") which is the form all applicants must file to
participate in the Auctions. In its Form 175, the Partnership has certified
that it: (i) meets all of the FCC's requirements for PCS license holders,
including specific legal, technical, financial and other qualification
requirements for the licenses for which it has applied, that it is in
compliance with certain foreign ownership requirements, and that it is eligible
for the special benefits and credits it is claiming as a Small Business and
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<PAGE> 7
consents to FCC audits to verify such eligibility; (ii) is the real party in
interest and that no undisclosed agreements or understandings provide that
someone other than the Partnership will have an interest in the licenses for
which it has applied; and (iii) has not and will not enter into any agreements
or understandings regarding the amount to be bid, bidding strategies or the
license on which to bid, except with parties identified in the Form 175.
The Partnership was required to make a one-time up-front
bidding deposit to the FCC equal to $0.015 per POP per MHz for Block C
licenses, for the largest combination of MHz-POPs encompassed by licenses on
which the Partnership intended to bid. The Partnership made a deposit of $50
million, which entitled it to bid for 111 million POPs. The Partnership's
bidding in any single round was limited by the amount of this payment.
Approximately $34.5 million was credited toward the license down payments for
the 15 Licenses with respect to which the Partnership was the high bidder. The
remainder of the deposit is held by the FCC, will not accrue interest and the
excess over any penalties due will be refunded if the Partnership is not
awarded any licenses and is not subject to any of the withdrawal penalties.
See "The Partnership -- Bidding Error" and "-- Omaha Withdrawal."
The FCC's rules strictly prohibit collusion among bidders, and
strictly limit communi cations among applicants after the filing of Forms 175
to the extent such communications concern bids, bidding strategies and markets
on which bids will be placed while the auction is in progress.
AUCTION PROCEDURES
The Block C auction was conducted as a simultaneous multiple
round auction. This means that a bidder could move its bidding among different
markets in different rounds of the auction, providing only that in each round
the bidder does not exceed the total number of MHz-POP's covered by the
bidder's up-front payment or its then current eligibility. Activity rules
encourage bidding in each round to prevent bidders from "holding back" until
the end of the auction. Failure to satisfy the activity rules resulted in a
loss of eligibility for MHz-POPs, which eligibility could not be regained.
POST AUCTION PROCEDURES
Successful bidders had 10 business days after the conclusion
of the Block C auction to file a long form application ("Form 600") for the
markets purchased at auction. The Partnership timely filed its Form 600 and on
July 2, 1996 filed an amendment to the Form 600. Following the filing of the
original Form 600, the FCC issued a public notice which commenced a period
during which any interested party may file a petition to deny the Partnership's
Form 600. The period during which any party could file a petition to deny
commenced on May 2, 1996 and ended on July 1, 1996. Two parties have filed
petitions to deny the award of any of the Licenses to the Partnership. See
"The Partnership -- Petitions to Deny." Additionally, on July 11, 1996, the
FCC issued a public notice commencing a second 30-day period (which will end
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on August 12, 1996) during which any interested party may file a petition to
deny with respect to matters covered in the Partnership's July 2, 1996
amendment to its Form 600.
For Block C licenses, Entrepreneurs must make an initial
payment within 5 days of the end of the Block C auction to increase their
up-front bidding deposit to 5% of the purchase price, net of bidding credits,
and pay an additional 5% of the net purchase price after the grant of license,
with the remaining 90% payable in installments. If an Entrepreneur's initial
up-front bidding deposit is in excess of 10% of the purchase price, the FCC
will return the excess. As the Partnership was the high bidder for the 15
Licenses at an aggregate bid price of $344,293,125, the Partnership, which had
deposited $50 million at the commencement of the auction, should receive back
approximately $15.5 million in excess payments from the FCC, less any penalties
assessed by the FCC. See "The Partnership -- Bidding Error" and "-- Omaha
Withdrawal."
BUILD OUT REQUIREMENTS
All PCS license holders are required to meet certain
requirements imposed by the FCC relating to the provision of service in each
license area. Block C license holders must provide coverage to one-third of
the POPs in each license service area within five years of license grant and
two-thirds of the POPs in each license service area within ten years of license
grant. Failure to comply with the build-out requirements could subject
the Partnership to license forfeiture or other penalties, and may have a
material adverse effect on the financial condition of the Partnership.
DEVELOPMENT OF THE LICENSES
The Partnership currently anticipates requiring, for each of
the Licenses it expects to acquire, 18 months or more to complete the initial
build-out and to begin offering wireless service in the markets. Development
of the infrastructure necessary to offer PCS services is subject to delays and
risks, including those inherent in the general uncertainty associated with
design, acquisition, installation and construction of wireless telephone
systems. The successful implementation of the Licenses also depends on the
Partnership's ability to lease or acquire sites for the location of its base
station equipment, which includes the negotiation of lease or acquisition terms
for hundreds of sites per market (varying with the size of the market) and may
require in many instances that the Partnership obtain zoning variances or other
governmental or local regulatory approvals that are beyond the Partnership's
control. Delays in the site acquisition process as well as construction delays
and other factors could adversely affect the timing for build-out and
commercial operation of the Partnership's Licenses.
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THE PARTNERSHIP
THE GENERAL PARTNER
Unicom was incorporated in Puerto Rico in March 1993 and the
General Partner was incorporated in Puerto Rico in June 1996. Unicom was
structured to ensure that the Partnership would receive the maximum benefits
eligible to Entrepreneurs, including the benefits offered to a Small Business
and a Minority- or Women-Owned Business. As its successor, the General Partner
has also been structured like Unicom. (As described above, for Block C
licenses, the FCC subsequently determined to grant benefits that Minority- or
Women-Owned Businesses were to receive to all Small Businesses.) The
Partnership met these requirements by placing management control of the
Partnership in Unicom, restricting ownership of a majority of its shares of
common stock to persons who are minorities and women, and providing Unicom with
25% of the Partnership's equity. The General Partner also meets the same
requirements. All of the shares of General Partner are owned by Puerto Rican
individuals and Puerto Rico trusts, and more than 75% of the shares of General
Partner are beneficially owned by women or minorities. Currently, Fred H.
Martinez is the Chairman of General Partner's Board of Directors, and Richard
Reiss, Javier Lamoso, Gary H. Arizala, Margaret M. Minnich, Lawrence Odell,
James T. Perry and Daniel J. Parks are the other members of its Board of
Directors. Richard Reiss is the Chief Executive Officer of the General
Partner, Javier Lamoso is its President and Lawrence Odell is its Secretary.
Quentin L. Breen, formerly a Director of Unicom, is the
President of Romulus Telecommunications, Inc., a Puerto Rico corporation
("Romulus"). Mr. Breen and Anthony T. Easton, formerly a Director and acting
chief executive officer of Unicom, are beneficial owners of Romulus. Unicom
and Romulus entered into a Services Agreement, dated as of January 24, 1995,
whereby in exchange for a fee of up to 20% of the amount which the Partnership
raised in its private placement (the "Private Placement") of its Units, Romulus
agreed to prepare and file the Application with the FCC for licenses to provide
PCS services in certain Markets and bid at the FCC Auction for such licenses on
the Partnership's behalf. As the Partnership raised $65,112,500 in the Private
Placement, Romulus may be entitled to as much as $13,022,500. See "Bidding
Error" below and "Item 7 -- Payments to Romulus." The Application prepared by
Romulus included all information required by the FCC for authority to bid,
including any engineering and engineering forms required under the FCC reports
and orders, rules, regulations, and other guidelines issued by the FCC.
Mr. Easton and Mr. Breen, as principals of Romulus, were appointed as two
of the Partnership's representatives in bidding for Markets in the
Auctions. The Partnership, however, assumed direct responsibility for the
bidding. See "Bidding Error" below.
From January 26, 1995 through August 18, 1995, the Partnership
raised $65,112,500 in the Private Placement of its Units. The Partnership sold
a total of 2,604.5 Units in the Private Placement. Consistent with the terms
of the Private Placement, the proceeds were used as follows: (i) 80% of the
proceeds were used to bid for PCS licenses and will be used to develop, own and
operate any PCS licenses the Partnership acquires and (ii) 20% of the proceeds
have been allocated for payment to Romulus, for its services in preparing and
filing of Application
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and assisting the Partnership in bidding under the Services Agreement. One-
half of such fee ($6,511,250) is non-refundable and was paid to Romulus prior
to the commencement of the Auctions. The remaining one-half of such fee
($6,511,250) is held in a separate account controlled by Messrs. Breen and
Easton, and will be paid to Romulus only if the Partnership is successful in
acquiring at least one PCS license. The Partnership has filed a suit in
Puerto Rico attaching the amount held in this account until resolution of the
bidding error described below. If the Partnership is unsuccessful in obtaining
a PCS license, the $6,511,250 held in the account will be returned to the
Partnership. If the Partnership is unable to acquire any PCS licenses, the
Partnership shall return to the holders of Units (the "Investors") their
pro-rata investment (less the fee paid to Romulus and any other fees and
expenses the Partnership may incur), without interest.
THE PARTNERSHIP'S BUSINESS TO DATE
The Partnership's operations to date have focused on raising
capital in the Private Placement, preparing for the PCS Auctions, bidding in
the auction of Block C licenses and attempting to obtain the 15 Licenses. In
addition, the Partnership has been conducting preliminary discussions with
telecommunications equipment vendors and strategic service providers. See "The
Partnership's Plan of Operation" below.
The Partnership deposited $50 million with the FCC on November
18, 1995. The Partnership's deposit was the fifth largest deposit received by
the FCC and qualified the Partnership to bid on 111 million POPs. The
Partnership was an active bidder throughout the auction and was high bidder on
the 15 Licenses. The table below identifies each market to which the
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15 Licenses pertain, its population, the Partnership's winning bid and the net
price payable by the Partnership per person of population ("Price/POP").
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Market Name Population Bid* Price/POP*
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
San Juan, PR 2,170,250 $ 84,687,825 $39.02
- ----------------------------------------------------------------------------------------------
Mayaguez-Aguadilla, PR 1,325,600 $ 29,400,075 $21.75
- ----------------------------------------------------------------------------------------------
Salt Lake City-Ogden, UT 1,308,040 $ 82,293,825 $62.91
- ----------------------------------------------------------------------------------------------
Logan, UT 79,420 $ 276,825 $ 3.49
- ----------------------------------------------------------------------------------------------
Provo-Orem, UT 269,410 $ 6,678,075 $24.79
- ----------------------------------------------------------------------------------------------
Reno, NV 439,280 $ 27,802,575 $63.29
- ----------------------------------------------------------------------------------------------
Fresno, CA 755,580 $ 47,026,575 $62.24
- ----------------------------------------------------------------------------------------------
Bakersfield, CA 543,480 $ 26,941,575 $49.57
- ----------------------------------------------------------------------------------------------
Modesto, CA 418,980 $ 12,320,325 $29.41
- ----------------------------------------------------------------------------------------------
Visalia-Porterville, CA 413,390 $ 9,371,325 $22.67
- ----------------------------------------------------------------------------------------------
Redding, CA 253,260 $ 4,500,825 $17.77
- ----------------------------------------------------------------------------------------------
Merced, CA 192,710 $ 3,532,575 $18.33
- ----------------------------------------------------------------------------------------------
Eureka, CA 142,580 $ 1,181,325 $ 8.29
- ----------------------------------------------------------------------------------------------
Boise-Nampa, ID 416,500 $ 7,742,325 $18.59
- ----------------------------------------------------------------------------------------------
Lewiston-Moscow, ID 110,030 $ 537,075 $ 4.88
- ----------------------------------------------------------------------------------------------
Totals: 8,864,510 $ 344,293,125 $38.84
- ----------------------------------------------------------------------------------------------
</TABLE>
* Gives effect to the 25% bidding credit to which the Partnership is eligible
under FCC rules.
Although the Partnership is the high bidder for these markets, no
assurance can be made that the Partnership will receive PCS licenses in these
markets. FCC Rules provide other parties the opportunity to file petitions to
deny the licenses and two parties have filed such petitions with respect to the
Licenses. See "Petitions to Deny" below. In addition, FCC Rules provide an
opportunity for interested parties to file a petitions to deny with respect to
matters covered in the Partnership's amendment to its Form 600, which the
Partnership filed on July 2, 1996. This petition to deny period ends on August
12, 1996. FCC Rules also provide that a PCS license is awarded only after the
FCC determines that the recipient is qualified and that grant of a license is
in the public interest.
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BIDDING ERROR
On January 23, 1996, Anthony T. Easton entered an erroneous bid on
behalf of the Partnership for the Norfolk, Virginia market. Mr. Easton, in his
capacity as bidding agent and Director of Engineering of Romulus,
mistakenly entered a bid of $180,060,000 when he had meant to bid $18,006,000
(the "Bidding Error"). At the time, Mr. Easton was also the acting chief
executive officer of Unicom and a member of its Board of Directors. Unicom
engaged special counsel to investigate and report (the "Report") to Unicom the
circumstances surrounding the Bidding Error. Unicom also engaged Price
Waterhouse LLP to evaluate Romulus' bidding procedures and recommend steps to
ensure that no other errors would occur.
The Report concluded that a preponderance of the evidence indicated
that Mr. Easton prepared and directed submission of the erroneous bid, and that
Mr. Easton was most likely the person who erroneously typed an extra zero on
the erroneous bid, causing the bid to be changed from $18,006,000 to
$180,060,000. In addition, the Report concluded that a preponderance of the
evidence indicated that upon learning of the erroneous bid, Mr. Easton took
affirmative steps to conceal his possible responsibility for the mistake. The
Report stated that there was no evidence that any other person knowingly took
affirmative steps to conceal responsibility for the mistake.
Upon receiving the Report, the board of directors of Unicom asked for
and received Mr. Easton's resignation from his positions as acting chief
executive officer of Unicom and a member of its board of directors effective
February 19, 1996. Mr. Breen, who is President of Romulus and who was not
directly involved in the Bidding Error, resigned from his position as a member
of Unicom's board of directors on April 26, 1996. In addition, Unicom's board
of directors determined to assume greater control over the Partnership's
bidding, and to restrict Romulus' role. Accordingly, Unicom's management
oversaw the preparation and submission of all bids.
The Partnership withdrew the erroneous bid on January 24, 1996 and
requested the FCC to waive or reduce the amount of any withdrawal penalty.
Under FCC Rules, a bidder who withdraws a high bid during the course of an
auction is subject to a penalty equal to the difference between the amount bid
and the amount of the winning bid when the license is auctioned. Since the
high bid for the Norfolk, Virginia market was $87,569,000, the Partnership is
subject to a withdrawal penalty as high as $92,491,000. The FCC, however, has
not yet determined what the Partnership's penalty will be.
The FCC is investigating the circumstances surrounding the Bidding
Error and has not yet reached any conclusions with respect to the action it
will take. The Partnership is cooperating with the FCC's investigation. It is
possible that the FCC may disqualify the Partnership from obtaining any PCS
licenses or bring other enforcement action against it. Although no assurances
can be given, in the light of its conversations with staff of the FCC, the
General Partner believes that such actions are not likely because they would
result in
11
<PAGE> 13
significantly delaying commencement of PCS services in the affected markets and
because the General Partner has terminated the involvement of any alleged
wrongdoer.
Although the FCC may substantially reduce the amount of the withdrawal
penalty, the Partnership has determined to seek a full reimbursement, through
litigation if necessary, of any penalty and all costs related to it from
Romulus. The General Partner does not have specific information on the
financial condition of Romulus. The General Partner believes, however, that
Romulus could pay at least $6.5 million held in the account which the
Partnership has attached.
Romulus does not currently and will not in the future have any
involvement in the affairs of the General Partner or the Partnership.
TRANSFER OF THE GENERAL PARTNERSHIP INTEREST
Based upon the Report and after repeated discussions and consultations
with the FCC, Unicom's board of directors concluded that it was in the best
interest of the Partnership and the Investors that the beneficial interests of
Mr. Easton or any members of his family in Unicom be divested. Mr. Easton's
wife, Susan D. Easton, is the beneficiary of the SDE Trust which owned a
portion of the shares of Unicom. Since Unicom and the SDE Trust were unable to
come to an agreement on transferring such shares to Unicom or to a third party,
Unicom determined to sell all its assets, which consisted only of its general
partnership interest in the Partnership, to SuperTel. On June 18, 1996,
pursuant to an Asset Purchase Agreement, dated as of June 18, 1996, Unicom sold
its general partnership interest in the Partnership to SuperTel for $100,000 by
means of a nonrecourse 7% promissory note due in seven years.
Other than the SDE Trust and the Breen Family Trust, all stockholders
of Unicom received the same amount of shares of SuperTel that they held in
Unicom. The proportion of SuperTel shares that were not issued to the SDE
Trust were issued to Richard Reiss, Chief Executive Officer of SuperTel, and
are subject to an agreement that allows the Partnership to reacquire them at
nominal consideration for use as incentive compensation to hire the management
necessary to build and operate the 15 Licenses or to attract additional
investors. Mr. Breen is beneficiary of the Breen Family Trust, which was issued
a warrant instead of any SuperTel shares. The warrant provides the Breen
Family Trust the right to purchase for nominal consideration the same
proportion of SuperTel shares as it owned in Unicom only if the FCC awards the
Partnership its Licenses and if the FCC determines that Mr. Breen meets the
relevant character qualifications to hold a PCS license. In addition, Mr.
Breen beneficially owned three Partnership Units, and the Partnership
repurchased these Units at the original price paid by Mr. Breen.
The officers and directors of SuperTel are the same as those of
Unicom, other than Lawrence Odell, who was elected to the Board of Directors of
SuperTel, and Patricia J. Jordan who was not reelected to Unicom's board of
directors in the June 1996 stockholders meeting and who was not elected to the
Board of Directors of SuperTel.
12
<PAGE> 14
The SDE Trust filed suit against the Partnership, challenging the
transfer of the General Partner's interest. Mr. Easton has filed a suit
seeking declaratory judgment that he is not responsible and should have no
liability for the Bidding Error. See "Item 8." The General Partner is
vigorously defending the interests of the Partnership in these cases.
PETITIONS TO DENY
Two parties have filed petitions to deny the award of any Licenses to
the Partnership. Susan D. Easton, the beneficiary of the SDE Trust, has filed a
petition maintaining that the Partnership should not receive any Licenses
because the SDE Trust's interest in the Partnership was extinguished as
described above. In addition, an Investor, WillowRun, L.P., has filed a
petition stating that the Partnership should not receive any Licenses on
grounds that the General Partner does not hold a 25% equity interest in the
Partnership, and that the General Partner was not truthful with the FCC or in
its disclosures to the Investors. In the alternative, WillowRun, L.P.
requested that the FCC release records that it collected in connection with its
investigation of the Bidding Error, that the Investors be fully informed of
developments and that the comment period for opposition to the award of any
Licenses to the Partnership be extended following release of such information.
The Partnership filed an opposition statement to the two petitions on
July 16, 1996. The General Partner believes that the petitions should be
summarily dismissed and intends to vigorously defend the Partnership's
interests.
Following the filing of the Partnership's opposition statement, the
parties who filed the petitions to deny have an opportunity to file a reply. If
the FCC determines that an interested party's petition raises substantial and
material questions of fact as to the bidder's qualifications, or is otherwise
unable to determine that the grant of the license serves the public interest,
it may call for a hearing to gather further evidence. Following such a
hearing, the FCC may grant the license or grant the petition and re-auction the
license. Grant of the license is subject to reconsideration by the FCC on its
own motion within 40 days, or interested parties may appeal the FCC's decision
at the United States Court of Appeals for the District of Columbia.
Although no assurances can be made, the General Partner expects that
the Partnership will ultimately prevail in these matters. As indicated above,
if either of the petitions to deny is granted, the Partnership may not receive
some or all of the Licenses, and failure to receive Licenses will have a
material adverse effect on the financial condition of the Partnership.
OMAHA WITHDRAWAL
The Partnership is subject to a withdrawal penalty of approximately
$1.25 million for its deliberate withdrawal of a bid for the PCS license
covering Omaha, Nebraska. At one point during the Block C auction, the
Partnership had targeted and was bidding for certain midwestern markets.
During the course of the auction, however, the Partnership determined to focus
its
13
<PAGE> 15
efforts in Puerto Rico and certain western markets. Accordingly, the
Partnership withdrew its bid for the Omaha market and is subject to the
withdrawal penalty.
THE PARTNERSHIP'S PLAN OF OPERATION
The Partnership's operations to date have focused on preparing for and
bidding in the PCS Auctions, attempting to be awarded the licences for which it
was the high bidder, raising financing and conducting preliminary discussions
with telecommunications equipment vendors and strategic service providers. The
Partnership's operations will continue in this manner through the foreseeable
remainder of the 1996 fiscal year and until the Partnership acquires 15
Licenses. The Partnership has no revenues (other than interest income) and is
likely to incur operating losses after commencing commercial operations until
such time, if ever, when its subscriber base generates revenue in excess of the
Partnership's expenses. Development of a significant subscriber base is likely
to take time, during which the Partnership must finance its operations by other
means than its revenues. Consequently, following the grant of 15 Licenses, the
Partnership will need additional debt or equity financing to hire and retain
qualified key employees, develop and construct the infrastructure necessary to
operate complex wireless telephone systems, introduce and market a new range of
service offerings on a commercial basis and otherwise operate its licensed PCS
systems. The Partnership believes, however, that the total equipment costs,
including design and engineering, will approximate some $20 per POP acquired.
In addition, the Partnership may need as much as $10 per POP to cover negative
cash flow from initial operations and other start-up costs before it becomes
profitable. Accordingly, as the Partnership was high bidder in 15 markets with
approximately 8.8 million POPs, the Partnership believes that it will need
approximately $264 million in additional financing.
The Partnership plans to be a leading provider of PCS in the markets
it acquires. It plans to construct its markets as quickly as possible to both
fulfill the FCC build out requirements as well as to have enough capacity to
handle the anticipated growth of its customer base. The Partnership believes
that being the first to offer PCS services in a market will be a key
competitive advantage. It plans to employ focused marketing strategies
targeted at specific audiences to build market share. The Partnership believes
that the characteristics of the markets it expects to acquire include early
adopters of new technologies, high level of education, above average income and
high growth areas. It plans to gain a competitive advantage by providing
quality service at a competitive price.
The Partnership is currently in various stages of discussions with a
variety of equipment vendors to determine the best selection of equipment with
the most attractive financing terms. The Partnership will select the vendors
that meet the Partnership's requirements for time to market, reliability of the
system, pricing and vendor financing. Presently, the Partnership has entered
into a agreement with respect to the Puerto Rico market with Ericsson, a PCS
equipment manufacturer. The agreement is binding only if the Partnership
obtains the Puerto Rico license and if Ericsson agrees to guarantee amounts the
Partnership would need to finance the acquisition and installation of the PCS
equipment.
14
<PAGE> 16
The Partnership plans to begin construction of its systems as soon as
it receives the licenses from the FCC. The Partnership is also conducting a
series of meetings with major Wall Street investment firms to discuss its long
term capital requirements. Although no assurances can be made that the
Partnership will be successful, it is anticipated that the Partnership will
complete a new round of financing in the second half of 1996. This financing
will be used as working capital.
If the Partnership is unable to develop the 15 Licenses, it can
transfer them to a third person only with FCC approval. Further, such a
transfer could subject the Partnership to a loss of its bidding credits unless,
within the first five years of receipt of the Licenses, the Partnership
transfers them to qualified Entrepreneurs, or unless the Licenses are
transferred after five years. Accordingly, the Partnership does not expect to
transfer any of its licenses until such time as it is not subject to such a
loss.
The General Partner has no plans or arrangements to purchase the
Partnership's assets.
ITEM 2. FINANCIAL INFORMATION
SELECTED FINANCIAL DATA FOR THE YEAR ENDED DECEMBER 31, 1995
The following table summarizes selected financial data of the
Partnership from the period from inception (January 24, 1995) to December 31,
1995, and for the quarters ended March 31.
15
<PAGE> 17
The table should be read in conjunction with the more detailed financial
statements contained in Item 15 below.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA January 24, 1995 Three Months Ended
(Date of Inception) to March 31
December 31, 1995 (unaudited)
(audited) 1995 1996
----------------------- ----------------------------
<S> <C> <C> <C>
Total Revenues:
Interest Earnings . . . . . . . . . . . . $1,469,099 $28,432 $27,167
Total expenses:
Consulting and legal services
rendered by related parties(1). . . . . . $6,756,250 $2,817,500 $247,057
Other Legal Fees. . . . . . . . . . . . . 368,704 159,285 252,703
Miscellaneous Consulting
Services . . . . . . . . . . . . . . . . 325,604 0 104,402
Travel. . . . . . . . . . . . . . . . . . 118,850 0 53,520
Insurance . . . . . . . . . . . . . . . . 32,000 0 32,000
Other Administrative
Expenses. . . . . . . . . . . . . . . . 68,769 86 12,743
---------- ---------- --------
Subtotal: . . . . . . . . . . . . . . . . . . . $7,670,177 $2,976,871 $702,425
Net Loss Attributable to General
Partner. . . . . . . . . . . . . . . . . . . . $1,550,270 $737,110 $168,814
Net Loss Attributable to
Unitholders ($1,785.68, $849.01
and $194.45 per Unit respectively) . . . . . . $4,650,808 $2,211,239 $506,444
Net Loss. . . . . . . . . . . . . . . . . . . . $6,201,078 $2,948,439 $675,258
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA December 31, 1995 March 31, 1996
(audited) (unaudited)
----------------------- -----------------------
<S> <C> <C>
Operating Capital . . . . . . . . . . . . . . . $ 2,727,541 $ 2,142,881
Total Assets. . . . . . . . . . . . . . . . . . 59,334,791 58,955,452
Liabilities . . . . . . . . . . . . . . . . . . 323,369 619,288
Unitholders' Equity (2,604.5 Units
and 1 general partnership interest). . . . . . 59,011,422 58,336,164
Book Value Per Unit . . . . . . . . . . . . . . 22,649 22,390
Restricted Cash (2) . . . . . . . . . . . . . . 6,511,250 6,511,250
- ---------------------------------
</TABLE>
16
<PAGE> 18
(1) Includes payments of $6,511,250 to Romulus in connection for its services
in preparation of the Application and bidding at Auctions, see "Item 7 --
Payments to Romulus," and other consulting fees.
(2) The Partnership has filed a suit attaching this amount. This amount will
be released only if the Partnership is successful in acquiring a PCS license
and after resolution of any penalties the FCC may assess in connection with the
Bidding Error. If the Partnership fails to acquire a PCS license, these funds
will be released into the Partnership's account and the Investors will be
reimbursed up to 90% of their original investment.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Introduction
The Partnership was formed in January 1995, and is managed by the
General Partner. The Partnership was organized to acquire, own and operate PCS
licenses in frequency Blocks C and F, and to take advantage of the benefits
that the FCC has set aside for Entrepreneurs.
Results of Operations
YEAR ENDED DECEMBER 31, 1995
Revenues
The Partnership's sole source of revenue for the year ended December
31, 1995 was the interest earned on the investments made from the capital
contributions made by the General Partner and the Investors prior to the
deposit by the Partnership with the FCC of $50 million and payment of other
Partnership expenses. Interest income for the year ended December 31, 1995 was
$1,469,099.
Expenses
Expenses for the year ended December 31, 1995 were $7,670,177.
General and administrative expenses for the year ended December 31, 1995 were
$752,323. In addition, the Partnership spent $6,917,854 on consulting
expenses.
Liquidity and Capital Resources
As of December 31, 1995, the Partnership had assets totaling
$59,334,791, consisting of $2,727,541 in cash and cash equivalents, $50 million
on deposit with the FCC, $6,511,250 in restricted cash, $96,000 in prepaid
expenses and current liabilities of $323,369. The Partnership's short term
investment objectives are, first, to assure conservation of principal, and
second, to obtain investment income. As a result, the Partnership invests
primarily in certificates of deposit.
17
<PAGE> 19
The Partnership's primary source of funding and capital resources has
been the capital contributions by the Investors and the General Partner, which
totaled approximately $65,212,500 in cash for the 1995 fiscal year.
During the fiscal year ended December 31, 1995, the primary use of the
Partnership's capital has been to deposit $50 million with the FCC in order to
participate in the Block C auction, and payment of its fees to Romulus.
QUARTER ENDED MARCH 31, 1996 COMPARED WITH QUARTER ENDED MARCH 31, 1995
Revenues
The Partnership's sole source of revenue for the quarter ended March
31, 1996 continued to be interest income. Interest income for this quarter was
$27,167. In the first quarter of 1995, the Partnership had interest earnings
of $28,432.
Expenses
Expenses for the quarter ended March 31, 1996 totaled $702,425.
General and administrative expenses for the quarter ended March 31, 1995 were
$216,462 (not including amounts paid to Romulus under the Services Agreement).
These expenses were higher than expenses for the first quarter of 1995 because
the Partnership began its operations late in March 1995.
Liquidity and Capital Resources
As of March 31, 1996, the Partnership had assets totaling $58,955,452,
primarily consisting of $2,142,881 in cash and cash equivalents, $50 million on
deposit with the FCC, $6,511,250 in restricted cash, $300,321 in other assets
and current liabilities of $519,288. As of March 31, 1995, the Partnership had
assets totaling $25,457,432, consisting of $25,457,432 in cash and cash
equivalents and current liabilities of $159,295. The Partnership's assets
increased from the first quarter of 1995 through the first quarter of 1996
because the Partnership had begun its Private Placement during the first
quarter of 1995.
The Partnership did not raise any capital during the quarter ended
March 31, 1996. The Partnership is continuing to seek additional capital for
purposes of developing the PCS licenses it expects to acquire. The
Partnership's efforts to raise additional capital is dependent on whether the
Partnership acquires any PCS licenses. Although no assurance can be made, the
Partnership expects to raise the additional amounts it needs to develop the PCS
licenses it acquires. The Partnership currently estimates it will need to
raise approximately $264 million to develop the PCS licenses it expects to
acquire.
18
<PAGE> 20
ITEM 3. PROPERTIES
The Partnership does not own any property as of the end of fiscal year
ended December 31, 1995. The Partnership sublets its principal offices in
California from its General Counsel at no charge.
When the Partnership acquires its PCS licenses, however, it will
embark on an aggressive build out phase which will include leasing sites where
its telephone switching equipment, relay stations and other equipment will be
located. In addition, the Partnership anticipates leasing offices in cities
where it acquires PCS licenses at such time as when necessary to develop its
PCS licenses. The Partnership also intends to establish a strategically
located principal office from where it can best manage the PCS licenses it
acquires.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Exclusive management and control of the Partnership's business is
vested in the General Partner. The Partnership has no employees, and is
managed and controlled by the Board of Directors and executive officers of the
General Partner. The General Partner owns 100% of the Partnership's general
partnership interest. The shares of General Partner are held by certain Puerto
Rican individuals and Puerto Rico trusts.
The following table sets forth as of July 15, 1996, information with
respect to beneficial ownership of the Partnership's Units by: (i) all persons
known to the General Partner to be the beneficial owner of 5.0% or more
thereof; (ii) each Director of the General Partner; (iii) each of the executive
officers of the General Partner; and (iv) all executive officers and Directors
as a group of the General Partner. All persons listed have sole voting and
investment power with respect to their Units unless otherwise indicated.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER UNITS BENEFICIALLY OWNED PERCENTAGE OWNERSHIP
<S> <C> <C>
Fred H. Martinez(1) 1 *
Richard Reiss(2) 1 *
Javier O. Lamoso(3) 0 *
Gary H. Arizala(4) 2 *
Margaret W. Minnich(5) 0 *
Daniel J. Parks(6) 4 *
James T. Perry(7) 2 *
John Duffy(8) 1 *
Lawrence Odell(9) 1 *
Eric Spackey(10) 0 *
All executive officers
and Directors of the General Partner
as a group (10 persons) 11 *
</TABLE>
19
<PAGE> 21
- -------------------
* Less than 1.0%.
(1) Mr. Martinez is Chairman of the Board of Directors of the General
Partner. Mr. Martinez and Mr. Odell are Trustees of Martinez Odell &
Calabria Pension Fund, which owns the Unit reflected in the table.
(2) Mr. Reiss is Chief Executive Officer and Treasurer of the General
Partner and a member of the Board of Directors.
(3) Mr. Lamoso is President of the General Partner and a member of the
Board of Directors.
(4) Mr. Arizala is a Director.
(5) Ms. Minnich is a Director. Does not include 10 Units held by The
Wealden Company, of which Ms. Minnich is a director and vice
president, and four Units held by J.B. Wharton, Jr. Residual Trust, of
which Ms. Minnich is a contingent beneficiary.
(6) Mr. Parks is a Director and General Counsel of the General Partner.
The Units reflected in the table consist of 4 Units held by a pension
plan, of which Mr. Parks and another individual are beneficiaries, and
of which Mr. Parks is a trustee.
(7) Mr. Perry is a Director.
(8) Mr. Duffy is Vice President, Finance, of the General Partner.
(9) Mr. Odell is a Director and Secretary of the General Partner. Mr.
Martinez and Mr. Odell are Trustees of Martinez Odell & Calabria
Pension Fund, which owns the Unit reflected in the table.
(10) Mr. Spackey is Vice President of the General Partner.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The Partnership has no employees and no directors or executive
officers. The Partnership is managed by the General Partner, whose directors
and executives officers are listed below.
Fred H. Martinez, Director and Chairman of the Board, age 51, is Chairman of
the Board of Trustees of the University of Puerto Rico from 1993 to the
present. From 1977 to 1978, Mr. Martinez was Director of the Puerto Rico
Income Tax Bureau. From 1977 to 1979 he was a Member of the Governor's
Economic Advisory Council, and 1977 to 1979, Chairman, Committee on Section
936, Government of Puerto Rico, 1978 to 1979, Assistant Secretary of the
Treasury, Internal Revenue, PR Treasury Department, 1978 to 1979, President,
Tax Committee, PR Chamber of Commerce. In 1993 he was Chairman of the Board of
Solid Wastes Management Authority, Government of PR. Mr. Martinez has
extensive experience in contract negotiations, corporate and tax law, and in
directing major institutions. He holds a B.S. in Economics from Villanova
University (1967), an LL.B. (law) from the University of Puerto Rico (1971),
and an LL.M (taxation) from Georgetown University (1972).
Richard Reiss, Director, Chief Executive Officer and Treasurer, age 49, has
been president of his own business consulting firm since 1979, specializing in
financial and management matters. Mr. Reiss has long experience in developing,
structuring and managing corporate equity and debt placements, and in the
overseeing and management of substantial businesses. Formerly Mr. Reiss was
Chief Financial Officer and Chief Operating Officer of Bacardi Corporation. He
has been a member of the Board of Directors of Banco Santander, Puerto Rico for
16 years. Since February 1996, Mr. Reiss has been a member of the Board of
Directors of Pepsi Cola
20
<PAGE> 22
Puerto Rico Bottling Co., Inc. Mr. Reiss is a member of the Board of Directors
of NovaComm Corporation, a manufacturer of access control units for financial
institutions, and was its President from 1995 to 1996. Mr. Reiss is a
certified public accountant and graduated magna cum laude from the University
of Puerto Rico with B.B.A. in business administration.
Javier O. Lamoso, Director and President, age 31, has had extensive experience
in the telecommunications industry and has been responsible for developing,
negotiating and overseeing numerous strategic operational, economic and
political aspects of the cellular telephone industry, including cell-site
acquisition, environmental impacts, leasing contractual arrangements and
inter-company relations with other operating telecommunications organizations,
including interexchange carriers and local telephone companies. Until
recently, Mr. Lamoso acted as counsel to the Puerto Rico Cable Operators
Association in various matters which include the negotiation of rates and
levies and the drafting of new legislation. From 1986 to 1987 Mr. Lamoso held a
non-legal position in the corporate finance department of Simpson, Thacher &
Bartlett, and was involved with 1987 successful external debt restructuring of
Chile. He holds a B.A. in Political Science/Economics from Fordham University
(1986), and a J.D. in law from the University of Puerto Rico (1990).
Gary H. Arizala, Director, age 58, is an entrepreneur and successful
businessman. Mr. Arizala has extensive experience in the cellular telephone
industry serving as Chairman of United Cellular Associates from 1988 to the
present and of Aikane Cellular from 1991 to the present. In these capacities
he directed the executive committee activities to oversee the development of
the ME-3 RSA cellular telephone system which was successfully acquired by
Telephone & Data Systems in early 1994. In 1972 Mr. Arizala founded
Alphabetland Preschool and Kindergarten, which he owns and operates.
Alphabetland provides high-quality child care and preschool education services
to 400 to 500 families annually through five child care centers located on
Oahu, Hawaii, and employs approximately 90 people. From 1963 to 1971, Mr.
Arizala was an Assistant Civil Engineer with the State of California
responsible for utilities relocation for the State Water Project. His duties
included negotiating plans and agreements with Southern California Edison,
Southern California Gas, the United State Forest Service among other major
private and public organizations. He is on the Guardian Advisory Council of
the National Federation of Independent Businesses, and an active member of the
Chamber of Commerce, Hawaii Visitors Bureau and Small Business Hawaii
organizations. Mr. Arizala holds a B.S. in Civil Engineering from the
University of Hawaii (1963).
Margaret W. Minnich, Director, age 41, has held management and supervisory
positions in Finance and Accounting over a 10-year period in the non-profit,
manufacturing and public accounting field. She has been a member of the board
of several privately-held companies and a private foundation for over seven
years. From 1992 to the present, she has served as Controller of the
California Wellness Foundation, and is responsible for all financial reporting,
accounting, budgeting and tax functions including investment performance and
asset allocation review of a $300 million investment portfolio, and managing
cash flow for an annual budget exceeding $40 million. From 1984 through 1990,
Ms. Minnich held several key positions with MICOM Communications Corporation,
including Manager of Financial Planning where she
21
<PAGE> 23
directed all accounting and financial functions. From 1981 to 1984, Ms.
Minnich was a Senior Accountant with Ernst & Young, Los Angeles, specializing
in electronics, aerospace and heavy industry fields. Ms. Minnich is a member
of the California Society of Certified Public Accountants, the Southern
California Association for Philanthropy, and serves on the Boards of the
Wharton Foundation and the Wealden Company. She holds a B.A. in Philosophy
from the University of Southern California (1978) and an MBA in accounting from
USC (1981).
Lawrence Odell, Director and Secretary, age 47, is the co-managing partner of
Puerto Rico's third largest law firm with substantial expertise in the fields
of corporate finance, administrative law, securities and banking. He is a
member of the Trial Lawyers Association of America, served as a member of the
Inter-American Law Review from 1973 to 1974, and has written for that
publication in the past. He holds a B.A. (1971) and a J.D. (1974) from the
Inter-American University of Puerto Rico, and an LL.M. in labor law from New
York University (1975). Mr. Odell has served in the capacity of secretary for
several major corporations, including Buenos Aires Embotelladora, S.A. (BAESA).
Daniel J. Parks, Director and General Counsel, age 51, is a lawyer with a
private practice located in Sonoma, California. Mr. Parks graduated from the
University of Hawaii with a B.S. in Geology in 1969 and received his Juris
Doctor degree from Hastings College of Law in 1972. For the past 10 years, Mr.
Parks has specialized in the tax, corporate and transactional aspects of the
representation of entities holding and operating FCC licenses. Mr. Parks is
also the proprietor of Parks Vineyards which owns premium vineyards in Sonoma
and Napa counties.
James T. Perry, Director, age 63, is a successful entrepreneur and businessman
with substantial experience in the real estate and retail foods industries.
From 1987 to the present, he has been general partner of Telenode Rincon, the
original owner and developer of the RSA cellular telephone system for PR-1,
which was successfully acquired by Cellular Communications, Inc., as well as
managing other cellular telephone and telecommunications holdings. From 1959
to 1975, Mr. Perry was the president and/or owner of several successful
licensed real estate firms including United Realty Group, Milwaukee, the
largest black-owned real estate firm in Wisconsin, and Perry and Sherard
Realty, Milwaukee, which specialized in rehabilitating and selling between 75
to 100 properties per year utilizing a staff of approximately 30 people. From
1975 to 1992, Mr. Perry owned and operated a McDonald's franchise in Saint
Louis, Missouri, and was responsible for all operations of this successful
business. Mr. Perry served in the U.S. Army in Korea, and has taken extensive
courses in the fields of general business and real estate. From 1988 to 1992
he was vice president of the Ronald McDonald Children's Charities, and from
1980 to 1984 he served as a member of the McDonald's Advertising Committee.
His memberships include the board of directors of the Skinker DeBaliviere
Business Association, Hamilton Community Schools, Saint Louis, and the
admissions committee of the Milwaukee Board of Realtors. He is a past
president of the Urban Brokers Association, and a director of the Multiple
Listing Service.
John Duffy, Vice President, Finance, age 46, has been associated with the
General Partner since September, 1994. Mr. Duffy is responsible for the
Partnership's capital raising activities. He
22
<PAGE> 24
was the principal in his own consulting firm from 1990 until joining the
General Partner. He worked with a variety of start up companies developing
business plans, market strategies and raising investment capital and was at
various times a client service representative of Romulus. Prior to that time,
he was employed with Drexel Burnham Lambert, an international securities firm
from 1981 to 1989, where he held the position of Vice President. Prior to
Drexel, Mr. Duffy was an Associate Vice President with Dean Witter Reynolds
from 1979 to 1981.
Eric Spackey, Vice President, age 34, was appointed Vice President of Business
Development and Planning of the General Partner in January 1996. Prior to
joining the General Partner, Mr. Spackey served as an independent consultant
providing strategic planning and business development to telecommunication,
finance, and health care organizations throughout Northern California. During
this same period, he served on the board of directors of Health Business
Development. Previously, he was affiliated with General Cellular Corporation
from 1990 to 1993, where he was most recently Manager of Financial Planning.
Mr. Spackey graduated from the University of California at Berkeley in 1986.
ITEM 6. EXECUTIVE COMPENSATION
The Partnership has no employees. It is managed by the General
Partner's Board of Directors and employees. The Partnership reimburses the
General Partner for all reasonable expenses incurred by it in connection with
managing the Partnership, including salaries and expenses of the General
Partner's employees who manage the Partnership.
The following table shows information concerning the annual and
long-term compensation of Anthony T. Easton, who acted as Unicom's chief
executive officer as of December 31, 1995. Mr. Easton did not receive a salary
from the Partnership or Unicom in 1995. Mr. Easton was reimbursed for the
expenses he incurred in connection with the affairs of the Partnership. Mr.
Easton resigned from his position as acting chief executive officer of Unicom
effective February 19, 1996. Richard Reiss was appointed Unicom's Chief
Executive Officer effective February 19, 1996, and is the Chief Executive
Officer of the General Partner. Presently, Mr. Reiss receives $6,000 per month
and $1,000 for each day he is traveling on behalf of the General Partner
outside Puerto Rico ($2,000 for each day he is traveling that is a holiday or a
weekend). Mr. Reiss is not paid for the first three days of travel in a month.
In addition, Mr. Reiss is reimbursed for expenses incurred in connection with
affairs of the Partnership. The General Partner had no employees whose annual
salary and bonus exceeded $100,000 in 1995. In addition, the General Partner
has not entered into any employment agreements with its officers.
23
<PAGE> 25
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------------- -----------
SECURITIES ALL OTHER
NAME & PRINCIPAL FISCAL OTHER ANNUAL UNDERLYING COMPENSA-
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS/SAR'S TION($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Anthony T. Easton 1995 $0 $0 $0 0 $0
Former Acting Chief
Executive Officer
</TABLE>
Directors receive an annual fee of $25,000 each, other than the
Chairman of the Board, Mr. Martinez, who receives an annual fee of $50,000, and
Mr. Reiss, who receives a fee of $12,000. Directors are reimbursed for their
reasonable expenses in attending board meetings.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GENERAL PARTNERSHIP INTEREST
Unicom contributed $100,000, which entitled it to receive 100% of the
Partnership's general partner interest. The general partnership interest was
transferred to SuperTel in exchange for $100,000. The general partner interest
entitles the General Partner to 25% of the equity of the Partnership. See
"Item 9."
MANAGEMENT FEE
The General Partner has amended the Agreement of Limited Partnership
of PCS 2000, L.P. (the "Partnership Agreement") to provide that the General
Partner will be entitled to reimbursement for all reasonable operating
expenses, plus 10% of such amount. The management fee is paid on a monthly
basis. The Partnership Agreement had originally provided for an annual
management fee equal to 1% of the amount of the Partnership's gross assets
including the value of the licenses purchased at the Block C auction, plus
reimbursement for all reasonable expenses and costs incurred in managing and
operating the Partnership. The General Partner, by a resolution approved by
its shareholders, amended the Partnership Agreement and reduced the management
fee because it believed the original fee would adversely affect the ability of
the Partnership to receive additional funding for developing the PCS licenses
it may acquire.
No management fee was paid in 1995.
24
<PAGE> 26
PAYMENTS TO ROMULUS
Romulus is entitled to a fee of $5,000 per Unit sold in the Private
Placement for preparation and filing of applications for PCS licenses and for
providing auction bidding services for the Partnership. See "Item 1 -- The
General Partner." Based upon the amount the Partnership raised in the Private
Placement, Romulus is entitled to up to $13,022,500. One-half of this fee was
non-refundable and was paid to Romulus prior to the commencement of the Block C
auction. The remaining one-half is held in a separate account controlled by
Messrs. Easton and Breen and will be paid to Romulus only if the Partnership
successfully acquires at least one PCS license. In accordance with the
Services Agreement, Romulus was paid $6,511,250 during 1995. The remaining
$6,511,250 is held in a separate account. The Partnership has filed a suit
attaching this account. If the Partnership is assessed any penalty because of
the Bidding Error, the Partnership will seek to reduce the amount payable from
the account by such penalty and related costs.
OTHER RELATIONSHIPS AND TRANSACTIONS
Mr. Martinez and Mr. Odell are partners of Martinez, Odell & Calabria,
a law firm which provides legal services to the General Partner and the
Partnership.
Mr. Breen beneficially owned three Partnership Units, and following
the Bidding Error, the Partnership repurchased these Units at the original
price paid by Mr. Breen.
ITEM 8. LEGAL PROCEEDINGS
The Partnership and its former general partner, Unicom, are parties to
three legal proceedings. The Partnership has filed suit in Puerto Rico and has
attached the Romulus account which holds $6.5 million. Mr. Easton has filed a
suit in Superior Court for the State of California, County of San Mateo,
seeking declaratory judgment that he is not responsible or liable for the
Bidding Error. Susan D. Easton, beneficiary of the SDE Trust and wife of Mr.
Easton, has filed suit in Superior Court for the State of California,
County of San Mateo, with respect to the transfer of the general partnership
interest to SuperTel. The General Partner believes that it has meritorious
defenses to such suits.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
There is no trading market for the Units, and it is unlikely that a
trading market will exist at any time in the future. Any transfer of the Units
is severely restricted by certain conditions outlined in the Partnership
Agreement, and requires the consent of the General Partner which can be
withheld in the General Partner's sole reasonable discretion. See "Item 11 --
Restrictions on Transfer."
25
<PAGE> 27
As of July 18, 1996, only the General Partner holds a general
partnership interest and 1,644 Investors hold an aggregate of 1,604.5 Units of
limited partnership interest.
There have been no cash distributions to the Investors to date. The
following summary of certain allocation provisions of the Partnership Agreement
is entirely qualified by reference to the Partnership Agreement, which is filed
as an Exhibit to this Form 10. As a general rule, the General Partner shall
cause the Partnership to make distributions, if any, of cash flow received from
operations of the Partnership which the General Partner, in its sole
discretion, determines to distribute to Investors ("Cash Flow"). All
distributions will be made 75% to the Investors and 25% to the General Partner.
Distributions to the Investors shall be apportioned among them in proportion to
the number of Units held by each Investor on the last day of the calendar
quarter to which such distribution relates.
The availability of Cash Flow for distribution to the Investors is
dependent upon the Partnership earning more than its expenses. No assurance
can be given that income in any year will be sufficient to generate Cash Flow
for distribution for the Investors or that there will not be cash deficits.
Further, because operating expenses are subject to increases, and increases in
revenue from Partnership operations may be subject to market limitations,
income from the Partnership in any year may not be sufficient to generate Cash
Flow.
Net losses from operations of the Partnership will be allocated as
follows: first, to the Investors to offset any profits previously allocated to
the Investors, and second, 75% to the Investors in accordance with the number
of Units held by each Investor and 25% to the General Partner. The gain from a
financing, refinancing, sale or other disposition of the Partnership's assets
(or from similar capital transactions) (collectively, "Capital Transactions")
will be allocated 75% to the Investors and 25% to the General Partner. The
loss from a Capital Transaction will be allocated in the same way that net
losses from the Partnership's operations will be allocated. Further adjustments
to capital accounts may be required and are authorized by the Partnership
Agreement to comply with the provisions of any future Internal Revenue Service
regulations.
The Partnership may realize net proceeds (that is, proceeds available
after the payment of certain fees and expenses including payments to the
General Partner or its affiliates) from a Capital Transaction. No assurance
can be given, however, as to the availability of a Capital Transaction or the
amount of net cash proceeds therefrom. Any amounts received by the Partnership
which constitute amounts derived from a Capital Transaction, will be treated as
being received from operations of the Partnership and will be distributed to
Investors only if the General Partner determines to do so.
The General Partner is entitled to reimbursement of all reasonable
operating expenses, plus 10% of such amount. See "Item 7 -- Management Fee."
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
26
<PAGE> 28
From January 26, 1995 to August 18, 1995, the Partnership conducted
the Private Placement of the Units in accordance with Regulation D promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). A total
of 2,604.5 Units were sold to 1,641 Investors for an aggregate price of
$65,112,500.
The offering was made in reliance upon, among others, the exemption
from registration pursuant to Section 4(2) thereof and Regulation D of the
Rules and Regulations of the Securities and Exchange Commission for an offer
and sale of securities which do not involve a public offering. The sales
qualified for an exempt offering under Rule 506 of Regulation D because all of
the Investors, other than one, are Accredited Investors as defined by
Regulation D.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The Partnership was formed as a limited partnership under the Delaware
Revised Uniform Limited Partnership Act (the "Revised Act"). The rights and
obligations of the partners are governed by the Partnership Agreement. The
following summary of certain provisions of the Partnership Agreement is
entirely qualified by reference to the Partnership Agreement, which is filed as
an Exhibit to this Form 10.
DESCRIPTION OF THE UNITS
The Partnership Agreement authorized the issuance and sale of Units
for $25,000 a Unit, payable in cash or property including contractual rights or
other assets that may be acceptable to the General Partner in its sole
discretion. A total of 2,604.5 Units were issued in the Private Placement.
THE RESPONSIBILITIES OF THE GENERAL PARTNER
The General Partner has full, exclusive and complete responsibility
and discretion in the management or control of the Partnership, and the
Investors have no authority to transact business for, or participate in the
management activities and decisions of, the Partnership. The General Partner
is expressly authorized to, on behalf of the Partnership, borrow money and
issue evidences of indebtedness in connection therewith, refinance, increase
the amount of or otherwise amend the terms of any indebtedness and to secure
such indebtedness by a security agreement, pledge or other lien on Partnership
assets. Certain other major decisions affecting the Partnership, however,
including the sale of all or substantially all of the assets of the
Partnership, a material change in the business or purpose of the Partnership
and the voluntary withdrawal of a General Partner, are decided only with the
consent of the General Partner and Investors holding at least a majority of the
then outstanding Units held by Investors. The authority of the General Partner
is subject to certain other express restrictions set forth in the Partnership
Agreement.
The General Partner is not required to devote full time to Partnership
business and is specifically permitted to engage in any other business,
including, but not limited to, acting as a
27
<PAGE> 29
general partner on other partnerships formed for purposes similar to the
purpose of the Partnership. The General Partner may not, however, indirectly
or directly compete with the business of the Partnership without first offering
to share these investment opportunities with the Investors or the Partnership.
The General Partner has the exclusive right to admit any person as an
additional general partner of the Partnership upon, in most cases, the approval
of Investors holding at least a majority of the then outstanding Units held by
Investors. In addition, the General Partner may, without the consent of the
Investors, substitute in its stead as General Partner, any entity which has by
merger or otherwise, acquired substantially all of the assets of the General
Partner and continued its business, provided that such substitution does not
violate FCC Rules applicable to PCS or cause the Partnership to lose its status
as an Entrepreneur.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER
The General Partner is accountable to the Partnership as a fiduciary,
and consequently must exercise good faith and integrity in handling the affairs
of the Partnership. Under the Revised Act, a limited partner may bring a
derivative action to the same extent as a stockholder under Delaware
corporation law to enforce a right of the limited partnership to recover a
judgment. There is no express statutory authority for a limited partners'
class action in Delaware, and the Supreme Court of Delaware has not held that a
limited partner may institute legal action on behalf of himself or herself and
all other similarly situated limited partners to recover damages for a breach
by a general partner of its fiduciary duties. Similarly, the Partnership
Agreement contains no provisions for a class action by limited partners.
Accordingly, legal remedies may not be available or affordable if the General
Partner breaches its fiduciary obligations to the Partnership.
If the General Partner is sued, the General Partner will determine,
based on all the facts and circumstances in the case, whether it believed that
its actions constituted a breach of its fiduciary responsibility. If the suit
were to proceed under circumstances where the General Partner believed that it
did not breach its fiduciary duty, the General Partner may use any defenses
which it or any other defendant in a similar position would have, including
those described below and any other available legal or equitable defenses (such
as estoppel, expiration of the statute of limitations or applicability of the
statute of frauds).
WITHDRAWAL, RETIREMENT, REMOVAL OR SUBSTITUTION OF THE GENERAL PARTNER
The General Partner may voluntarily retire only with the approval of
Investors holding at least a majority of the then outstanding Units held by
Investors and provided that such withdrawal does not violate FCC Rules
applicable to PCS or cause the Partnership to lose its status as an
Entrepreneur. The General Partner will retire automatically upon filing of its
certificate of dissolution or its equivalent. Upon retirement or removal, the
General Partner will become a limited partner and as such will not have any
right to participate in the management of the affairs of the Partnership but
will continue to own its Partnership interest and the retained
28
<PAGE> 30
rights which it owned as a general partner. The terminated General Partner's
interest in the Partnership will be converted to an Investor's interest, and
the terminated General Partner will be entitled to vote with the other
Investors on any matters requiring their consent, or the terminated General
Partner may elect to cause the Partnership to pay for the terminated General
Partner's interest. The value of the terminated General Partner's interest
will be the fair market value of such interest as determined by agreement
between the terminated General Partner and the Partnership (which agreement
will require the approval of a majority in interest of the Investors), or if
they cannot agree, by an independent, qualified appraiser mutually selected by
the terminated General Partner and either the remaining General Partner or
Investors holding a majority of the outstanding Units held by Investors, or if
such appraiser cannot be selected, by binding arbitration in San Juan, Puerto
Rico. The General Partner may substitute in its place without the Investors'
consent any entity that has acquired substantially all of its assets and
continued its business if such substitution does not violate the FCC Rules.
TERMINATION OF THE PARTNERSHIP
The Partnership will continue in full force and effect until December
31, 2005, except that the Partnership shall be dissolved prior to such date
upon the happening of any of the following events:
(a) the sale or other disposition of all or substantially all of the
assets of the Partnership;
(b) the entry of a decree of judicial dissolution of the Partnership;
(c) the election of a General Partner to dissolve the Partnership;
(d) the election to dissolve the Partnership made in writing by
Investors holding at least 75% of the then outstanding Units; or
(e) if a General Partner ceases to be a General Partner, unless (i)
there remains a general partner of the Partnership and the remaining general
partners elect to continue the Partnership within 60 days or (ii) there is no
remaining General Partner and the Investors elect within 90 days to continue
the Partnership in accordance with Section 10(a) of the Partnership Agreement.
Upon dissolution of the Partnership, the Partnership's assets will be
liquidated and the proceeds of liquidation will be applied and distributed as
described under Item 9 above.
LIABILITY OF INVESTORS TO THIRD PARTIES
The General Partner will be liable for all debts, liabilities and
obligations of the Partnership, except for non-recourse indebtedness (if any)
to the extent not paid by the Partnership. The Partnership Agreement, however,
limits the liability of the General Partner and certain other persons to the
Partnership and to Investors, and provides for indemnification of such persons
in the case of liability to third parties, under certain circumstances and
subject to certain exceptions and limitations. See "Fiduciary Responsibility
of the General Partner" and "Item 12" below.
29
<PAGE> 31
Under the Revised Act, a limited partner is not liable for the debts,
liabilities and obligations of the Partnership in excess of his or her Capital
Contribution and his or her share of undistributed net income as long as he or
she does not take part in the management or control of the Partnership's
business. Under Delaware law, however, an Investor may be liable for
Partnership debts up to the amount of any distribution made to such Investor if
the Investor knew at the time of such distribution that, after giving effect to
the distribution, all liabilities of the Partnership, other than liabilities to
Investors on account of their interests in the Partnership and liabilities for
which the recourse of creditors is limited to specified property of the
Partnership, exceed the fair value of the Partnership's assets, except that for
purposes of calculating the assets of the Partnership, assets subject to
liabilities for which the recourse of creditors is limited to specified
property of the Partnership will be included only to the extent that the fair
market value of the assets exceeds the liability. If the Investor receives a
distribution in violation of this limitation or the Partnership Agreement, he
or she is liable to the Partnership for return of the distribution for a period
of three years from the date of the distribution. An Investor may also be
liable for the return of distributions under applicable laws for such three
year period.
AMENDMENTS AND POWER OF ATTORNEY
The General Partner may utilize the power of attorney granted to it by each
Investor to execute certain types of amendments to the Partnership Agreement.
In particular, the Partnership Agreement provides that the power of attorney
permits the General Partner to execute and deliver all instruments and file all
documents required to carry out the provisions of the Partnership Agreement,
including, without limitation, the following:
(a) any certificates and any amendments that may be required to qualify or
continue the Partnership and conduct its business;
(b) any amendments to the Partnership Agreement in accordance with the
terms thereof;
(c) any certificate or other instrument necessary to reflect the
dissolution and termination of the Partnership;
(d) any amendment that (i) does not have a material adverse effect upon
the Investors; (ii) adds to the representations or obligations of the General
Partner or surrenders any right or power granted to the General Partner herein;
(iii) corrects any error or resolves any ambiguity in or inconsistency between
any of the provisions hereof; (iv) deletes or adds any provision required to be
so deleted or added by any state securities commission or other governmental
authority; or (v) is deemed to be necessary or desirable, in the reasonable
determination of the General Partner, (A) to satisfy any requirements,
conditions or guidelines contained in any regulation, ruling, order directive
or opinion of any federal or state agency or judicial authority or contained in
any federal or state statute (including any amendment in accordance with
Section 5.2 and Section 7.1(a) of the Partnership Agreement) or (B) to preserve
the status of the Partnership as a partnership for federal income tax purposes
or to ensure that Investors will be treated as limited partners for federal
income tax purposes.
30
<PAGE> 32
In addition, the General Partner may amend the Partnership Agreement upon
the advice of counsel that such amendment is necessary for the Partnership to
comply with FCC Rules and regulations as currently existing or as modified by
the FCC in the future. In the event any such amendment is made by the General
Partner and such amendment has a material adverse effect on the Investors, then
each Investor has 10 days after notification of the change to notify the
General Partner that as to such Investor the amendment is not accepted and that
such Investor chooses to withdraw from the Partnership and receive a refund of
the cash portion of such Investor's capital contribution.
Other than as provided above, the Partnership Agreement may not otherwise be
modified or amended except with the consent of the General Partner and
Investors holding a majority of the then outstanding Units.
Investors have no appraisal, or dissenters, rights in the event that they
are opposed to a duly adopted amendment of the Partnership Agreement except
with respect to amendments required to qualify the Partnership under FCC Rules
pertaining to PCS.
VOTING RIGHTS OF INVESTORS
The Partnership Agreement provides that Investors holding at least 75% of
the then outstanding Units held by Investors have the right to remove any
general partner. The FCC rules do not permit removal of the General Partner
for three years after grant of a Block C license, and restrict the
Partnership's ability to replace the General Partner for five years after grant
of such licenses. FCC Rules may require the Partnership Agreement to be
amended to remove or restrict such right of removal. The General Partner shall
not amend this provision unless its legal counsel advises that such amendment
is required by the FCC. If the Partnership Agreement is required to be
amended, Investors may lose any ability they have to remove the General
Partner.
The approval of Investors holding at least a majority of the then
outstanding Units held by Investors will be required for the admission of an
additional or successor General Partner if there is one or more remaining
General Partner; however, the admission of an additional General Partner also
requires the approval of the then General Partner. The unanimous approval of
the Investors is required for the admission of a General Partner and an
election to continue the business of the Partnership where there is no
remaining General Partner, unless (i) the remaining General Partner was
removed, in which case the approval of Investors holding at least 75% of the
then outstanding Units held by Investors is required for such admission and
election or (ii) the last remaining General Partner voluntarily withdrew as a
General Partner, in which case the approval of Investors holding at least a
majority of the then outstanding Units held by Investors is required for such
admission and election. The approval of the General Partner and Investors
holding at least a majority of the then outstanding Units held by Investors is
required to cause a material change to be made in the business or purpose of
the Partnership, permit the voluntary withdrawal of the General Partner, or
permit the merger or other reorganization of the Partnership, to the extent
approval of Investors is required under the Revised Act.
31
<PAGE> 33
REPORTS TO INVESTORS
The General Partner sends, within 90 days after the end of each calendar
year, to each Investor such tax information as necessary for the preparation by
such Investor up the Investor's federal tax return, and such other reports as
may be required by the Revised Act.
ACCOUNTING BOOKS AND RECORDS
The Partnership method of accounting will be selected by the General
Partner, and will be in accordance with generally accepted accounting
principles and its fiscal year is the calendar year. An annual audit of the
financial statements of the Partnership will be conducted by the independent
certified public accountant firm of Price Waterhouse. The books and records of
the Partnership will be maintained at its principal place of business and will
be available at reasonable hours during the business day for inspection by any
Investor or his duly authorized representative.
TAX ELECTIONS
Upon the transfer of the interest of an Investor in the Partnership, the
Partnership, in the General Partner's sole discretion, may elect, pursuant to
Section 754 of the Code, to adjust the basis of the Partnership's interest in
its property. All other elections required or permitted to be made by the
Partnership under the Code will be made by the General Partner in such manner
as will be most advantageous to the Investors.
CAPITAL CALLS AND ADDITIONAL INVESTORS
If the General Partner determines that additional capital is required by the
Partnership, the General Partner must make a call for additional Capital
Contributions (a "Capital Call") and notify each Investor of the total amount
of the Capital Call and of the total number of additional Units that the
Partnership will offer to issue and sell (and the price per Unit) in order to
raise the amount of the Capital Call. Each Investor has the right to make an
additional Capital Contribution to the Partnership in proportion to the number
of Units such Investor holds. If any Investors declines to participate in the
Capital Call, or fails to pay the additional Capital Contribution when due, the
General Partner may, in its absolute discretion, (i) offer to the other
Investors the opportunity to make additional Capital Contributions in an
aggregate amount equal to all or a portion of the total Capital Call remaining
unpaid, (ii) purchase the Units itself, and/or (iii) offer to third parties the
opportunity to purchase the Units. Failure to participate in the Capital Call
will result in the Investor's proportionate interest in the Partnership will be
reduced. The General Partner is not required to participate in any Capital
Calls and its equity interest in the Partnership will not be reduced.
32
<PAGE> 34
MEETINGS
The General Partner may at any time call a meeting of the Investors and is
required to call such a meeting or vote following receipt of a written request
therefor signed by 20% or more of the outstanding Units. The Partnership does
not intend to hold annual meetings of Investors.
RESTRICTIONS ON TRANSFER
Investors bear the economic risk of the investment for an indefinite period
of time because the Units were not registered under the Securities Act and
therefore may not be sold unless they are subsequently registered under the
Securities Act or an exemption from registration is available. Each Investor
who acquired a Unit represented that he purchased it for his own account for
investment purposes and not with a view toward resale or distribution, and
agreed not to sell a Unit without registration under applicable federal and
state securities laws, unless there is an available exemption thereunder. In
addition, the General Partner may require that, before an Investor's interest
is transferred, the transferror deliver to the General Partner a legal opinion
satisfactory to it and counsel to the Partnership to the effect that the
transfer will not violate federal or state securities laws.
In addition, the Partnership Agreement provides that Investors may not sell,
transfer, assign, pledge or otherwise dispose of all or any part of a Unit
without the General Partner's written consent (which consent will not be
unreasonably withheld). In determining whether to grant consent to an
assignment, the General Partner may, in its discretion, require that the
following conditions, be complied with: (i) the assignee consents in writing
to be bound by the terms and conditions of the Partnership Agreement; (ii) the
assignee delivers an opinion of counsel satisfactory to the General Partner, to
the effect that (A) the Partnership would not lose its status as an
Entrepreneur under FCC Rules applicable to PCS or would otherwise violate, or
suffer material adverse consequences under, FCC Rules applicable to PCS; (B)
the Partnership would not become subject to the Department of Labor's plan
asset regulations as a result of the assignment; (C) the assignment would be in
compliance with all the requirements of the Revised Act; and (D) the assignment
would be in compliance with federal securities laws and state securities laws;
and (iii) the assignee pay any reasonable charges of the General Partner or the
Partnership in connection with the substitution.
A legend has been placed on the Partnership Agreement and certificates
representing the Units referring to the restrictions on transferability and
sale of the Units. In addition, a notation has been made on the records of the
Partnership that the sale and transferability of the Units are restricted.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Partnership Agreement provides that, in general, the Partnership, its
receiver or trustee shall indemnify and hold harmless the General Partner and
its affiliates for any liability or loss
33
<PAGE> 35
(including attorneys fees) suffered by such persons by reason of any (i) act
performed by such persons on behalf of or in furtherance of the Partnership's
business or (ii) inaction by such persons, if the conduct of such persons does
not constitute fraud or willful misconduct and such persons reasonably
believed, at time of the action or inaction, that such conduct was in
connection with the Partnership's business and in best interests of the
Partnership.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Partnership
or the General Partner pursuant to the provisions described above, the
Partnership has been informed 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.
34
<PAGE> 36
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
[PRICE WATERHOUSE LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
February 28, 1996
To the Partners of
PCS 2000, L.P.
We have audited the accompanying statement of assets, liabilities, and
partners' capital of PCS 2000, L.P. (the "Partnership") as of December 31,
1995 and the related statements of revenues and expenses, of cash flows, and
of changes in partners' capital accounts for the period from inception on
January 24, 1995 to December 31, 1995. These financial statements are the
responsibility of the Partnership'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 accompanying financial statements audited by us present
fairly, in all material respects, the assets, liabilities, and partners'
capital of PCS 2000, L.P. as of December 31, 1995 and its revenues, cash
flows, and changes in partners' capital accounts for the period from inception
on January 24, 1995 to December 31, 1995 in conformity with generally accepted
accounting principles.
/s/ PRICE WATERHOUSE
San Juan, Puerto Rico
35
<PAGE> 37
PCS 2000, L.P.
STATEMENT OF ASSETS, LIABILITIES AND
PARTNERS' CAPITAL
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 2,727,541
Prepaid expenses 96,000
Other current assets - deposits 50,000,000
Restricted cash 6,511,250
-----------
$59,334,791
===========
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
<S> <C>
Liabilities:
Bank overdraft $ 46,173
Accounts payable and accrued liabilities 130,634
Accounts payable to related parties 146,562
-----------
Total liabilities 323,369
-----------
Contingency (Note 7)
Limited partners' capital (2,604 1/2 units issued) 65,112,500
General partner's capital 100,000
Undistributed losses (6,201,078)
-----------
Total partners' capital 59,011,422
-----------
Total liabilities and partners' capital $59,334,791
===========
</TABLE>
The accompanying notes are an integral part of this statement.
36
<PAGE> 38
PCS 2000, L.P.
STATEMENT OF REVENUES AND EXPENSES
FOR THE PERIOD FROM INCEPTION ON JANUARY 24, 1995
TO DECEMBER 31, 1995
<TABLE>
<S> <C>
Revenues:
Interest income $1,469,099
----------
Expenses:
Consulting and legal services rendered by
related parties 6,756,250
Other legal fees 368,704
Miscellaneous consulting services 325,604
Travel 118,850
Insurance 32,000
Other administrative expenses 68,769
----------
7,670,177
----------
Net loss attributable to general partner 1,550,270
Net loss attributable to limited partners
($1,785.68 per limited partnership unit) 4,650,808
----------
Net loss $6,201,078
==========
</TABLE>
The accompanying notes are an integral part of this statement.
37
<PAGE> 39
PCS 2000, L.P.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION ON JANUARY 24, 1995
TO DECEMBER 31, 1995
<TABLE>
<S> <C>
Cash flows from operating activities -
Net loss ($ 6,201,078)
------------
Adjustments to reconcile net income for the
period to net cash used by operating activities:
Increase in prepaid expenses (96,000)
Increase in bank overdraft 46,173
Increase in accounts payable and accrued liabilities 130,634
Increase in accounts payable to related parties 146,562
-----------
Total adjustments 227,369
-----------
Net cash used by operating activities (5,973,709)
-----------
Cash flows used in investing activities -
FCC auction deposit (50,000,000)
-----------
Cash flows from financing activities:
Capital investment by partners 65,212,500
Restricted cash (6,511,250)
-----------
Net cash from financing activities 58,701,250
-----------
Cash and cash equivalents at end of period $ 2,727,541
===========
</TABLE>
The accompanying notes are an integral part of this statement.
38
<PAGE> 40
PCS 2000, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL ACCOUNTS
FOR THE PERIOD FROM INCEPTION ON JANUARY 24, 1995
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
General Limited Partners
Partner (2,604 1/2 units) Total
------- ----------------- -----
<S> <C> <C> <C>
Capital invested $ 100,000 $65,112,500 $65,212,500
Share of undistributed losses (1,550,270) (4,650,808) (6,201,078)
---------- ------------ ----------
Ending (deficit) capital at
December 31, 1995 ($1,450,270) $60,461,692 $59,011,422
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
39
<PAGE> 41
PCS 2000, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - REPORTING ENTITY AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES:
PCS 2000, L.P. (the Partnership) is a limited partnership organized on January
24, 1995 under the laws of the State of Delaware. The Partnership was formed
to file applications with the Federal Communications Commission ("FCC") under
personal communications service ("PCS") frequency Block C, originally
restricted to minorities, small businesses and designated entities, to become a
provider of broadband PCS, a new telecommunications technology. The
partnership will terminate on December 31, 2005, or earlier upon the occurrence
of certain specified events as detailed in the Partnership Agreement.
The general partner of the partnership is Unicom Corporation, a Puerto Rico
corporation. A related party of the general partner, Romulus
Telecommunications, Inc., will be preparing the FCC applications for the
partnership and assisting in the FCC auction process. The total share of the
income and losses of the general partner is 25% as per the Partnership's
Agreement. Approximately 1,600 limited partners also invested in the
partnership through a private placement.
Basis of accounting and fiscal year
The Partnership's records are maintained on the accrual basis of accounting for
financial reporting and tax purposes. The fiscal year of the Partnership ends
on December 31.
Cash equivalents
The Partnership considers all highly liquid investment instruments purchased
with an original maturity of three months or less to be cash equivalents.
PCS Licenses
Upon the acquisition of the licenses, if any is finally obtained, the
Partnership will record them at cost, to be amortized over the life of the
licenses (ten years).
40
<PAGE> 42
Page 2
NOTE 2 - LIQUIDITY:
As of December 31, 1995, the restricted cash amounting to $6,511,250 is held in
trust by Romulus Telecommunications, Inc. and is restricted for payment of all
services related to the auction process. The amount is payable only if the
Partnership obtains at least one PCS license.
The Partnership's working capital needs will be covered by the outstanding cash
of $2,727,541 and, once the deposit of the FCC is returned, by the excess cash
that will not be required as a down-payment for the purchase of the licenses.
NOTE 3 - AUCTION DEPOSITS:
This account represents the deposits placed with the FCC to participate in the
auctions for the licenses mentioned above. This deposit will be partly used
for the downpayment of the licenses to be acquired, if any is finally obtained.
NOTE 4 - PARTNERS' CAPITAL:
The limited partners' capital is composed of 2,604 1/2 units distributed among
approximately 1,600 limited partners.
The Partnership Agreement provides that the Partnership may sell additional
limited partnership interests after the initial offering to raise additional
equity.
Cash flow received from normal operations of the Partnership which the general
partner, in its sole discretion, determines to distribute to the investors
("Cash Flow") of the Partnership, will be distributed 75% to the limited
partners and 25% to the general partner. The operating losses of the
Partnership for federal income tax purposes will be allocated first to the
partners as necessary to offset any profits previously allocated to them until
each partner has cumulative losses equal to cumulative profits previously
allocated to each partner, and second, 75% to the limited partners in
accordance with the number of Units held by each limited partner and 25% to the
general partner; provided, however, that any losses that would have the effect
of causing or increasing a partner's capital account deficit will be allocated
first, pro rata to the other partners in accordance with their respective share
of partnership distributions, and second, when such allocations can be made
without increasing a partner's capital account deficit, to the general partner.
NOTE 5 - RELATED PARTY TRANSACTIONS:
During 1995, the Partnership incurred legal and consulting expenses paid to
limited partners and members of the Board of Directors amounting to
approximately $245,000.
Additionally, the application, preparation and auction bidding services were
performed by a related party for which a fee of $6,511,250 was paid and an
additional $6,511,250 remains as a contingent fee upon acquisition of at least
one PCS license.
41
<PAGE> 43
Page 3
The Partnership Agreement provides for payment of a management fee to its
General Partner, equal to the reasonable costs of operating the business of the
Corporation, plus 10% of such aggregate amount, which fee will be payable
monthly, on the first day of each month during the year. Expenses to be
reimbursed shall include, but shall not be limited to, compensation, costs, and
expenses related to the officers, directors, and employees in the performance
of their duties. This fee is contingent upon obtaining a PCS license, but
shall be made retroactive to January 24, 1995. No such fee has been paid nor
accrued during 1995 as there is no certainty that a license will be awarded by
the FCC, although the amount has been estimated to be approximately $417,000.
In addition, the General Partner will be entitled to 25% of all distributions
made by the Partnership.
NOTE 6 - INCOME TAX:
No provision for income taxes has been made in the financial statements of the
Partnership because, as a limited partnership, it is not subject to income tax
and the tax effect of its activities accrues to the partners.
Taxable income to the General and Limited Partners differs from that reported
in the statement of revenues and expenses mainly due to different treatment of
operational expenses incurred in 1995 for tax and book purposes. Since the
partnership has not been assigned any PCS licenses yet, all operating expenses
were deferred for tax purposes creating a temporary difference for the
partners. These expenses will be amortized over a period not exceeding 10
years. The taxable income for the partners is $1,469,099 determined as
follows:
<TABLE>
<S> <C>
Net loss per books ($6,201,078)
Add - Operating expenses deferred until
a PCS license is assigned to the Partnership 7,670,177
-----------
Taxable income $1,469,099
==========
</TABLE>
There are no other significant differences between taxable income for the
partners and the net loss reported in the statement of revenues and expenses.
NOTE 7 - CONTINGENCY:
During 1995, the Partnership inadvertently submitted an incorrect bid for one
of the licenses being auctioned. Although the Partnership withdrew the
submitted bid immediately, the FCC may impose a very substantial penalty for
withdrawal of a high bid consisting of the difference between the bid withdrawn
and the eventual highest bid (as of February 28, 1996, the maximum penalty
would be approximately $160,000,000).
42
<PAGE> 44
Page 4
The General Partner has met with FCC officials and has filed a petition for a
waiver of this penalty or, in the alternative, a substantial reduction in the
penalty amount, as these rules were made to deter frivolous and manipulative
bids and not errors. Although no final determination has been made at the date
of the financial statements, the General Partner is optimistic that the FCC
will agree either to a waiver or a substantial reduction of the penalty.
NOTE 8 - SUBSEQUENT EVENT:
The Partnership is currently bidding for PCS licenses under the FCC auction
process. In addition, it is currently under negotiation with other companies
for possible additional financing for the acquisition and eventual operation of
PCS licenses.
43
<PAGE> 45
PCS 2000, L. P.
STATEMENT OF ASSETS, LIABILITIES
AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
ASSETS
3/31/96 12/31/95
------- --------
<S> <C> <C>
Cash and cash equivalents $ 2,142,881 2,727,541
Account receivable from related parties 226,178
Prepaid expenses 64,000 96,000
Other current assets - deposits 50,000,000 50,000,000
Restricted cash 6,511,250 6,511,250
Equipment 11,143
------------- -----------
$ 58,955,452 59,334,791
============= ===========
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
<S> <C> <C>
Liabilities:
Bank overdraft $ 46,173
Accounts payable and accrued liabilities 246,624 130,634
Accounts payable to related parties 372,664 146,562
------------- -----------
Total liabilities 619,288 323,369
------------- -----------
Contingency (Note 7)
Limited partners' capital (2,604.5 units issued) $ 65,112,500 65,112,500
General partners' capital 100,000 100,000
Undistributed losses (6,201,078) (6,201,078)
Net loss (675,258)
------------- -----------
Total partners' capital 58,336,164 59,011,422
------------- -----------
Total liabilities and partners' capital 58,955,452 59,334,791
============= ===========
</TABLE>
THE ACCOMPANYING NOTES ARE INTEGRAL PART OF THIS STATEMENT
44
<PAGE> 46
PCS 2000, L. P.
STATEMENT OF REVENUES AND EXPENSES
<TABLE>
<CAPTION>
Three months ended
--------------------------------
Revenues: 3/31/96 3/31/95*
------- -------
<S> <C> <C>
Interest income $ 27,167 28,432
------------ ------------
Expenses:
Consulting and legal services rendered by related parties 247,057 2,817,500
Other legal fees 252,703 159,285
Miscellaneous consulting services 104,402
Insurance 32,000
Travel 53,520
Other administrative expenses 12,743 86
------------ ------------
Total Expenses 702,425 2,976,871
============ ============
Net loss $ (675,258) (2,948,439)
============ ============
Net loss attributable to general partner (168,814) (737,110)
------------ ------------
Net loss attributable to limited partners (506,444) (2,211,329)
------------ ------------
Net loss per limited partner unit $ (194.45) (849.04.)
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE INTEGRAL PART OF THIS STATEMENT
* REPRESENTS THE PERIOD FROM INCEPTION ON JANUARY 24, 1995 TO MARCH 31, 1995.
45
<PAGE> 47
PCS 2000, L. P.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended
-------------------------------------------
3/31/96 3/31/95*
------------ -------------
<S> <C> <C>
Cash flows from operating activities
Net loss ($ 675,258) ($ 2,948,439)
------------ -------------
Adjustments to reconcile net loss for the
period to net cash used by operating activities
Decrease in prepaid expenses 32,000
Decrease in bank overdraft (46,173)
Increase in accounts receivable (28,432)
Increase in account payable 115,991 154,295
Increase in accounts payable to related parties 226,102 5,000
------------ -------------
Total adjustments 327,920 130,863
------------ -------------
Net cash used by operating activities (347,338) (2,817,576)
------------ -------------
Cash flows used in investing activities
Computers (11,143)
Loans to related party (226,179)
------------
Net cash used in investing activities (237,322)
------------
Cash flows from financing activities:
Capital investment by partners 28,275,000
Restricted cash (2,817,500)
-------------
Net cash from financing activities 25,457,500
-------------
Net increase (decrease) in cash (584,660) 22,639,924
============ =============
Summary
Net increase (decrease) in cash (584,660) 22,639,924
Cash and cash equivalents at the beginning of the period (2,727,541) 0
------------ -------------
Cash and cash equivalents at the end of the period $ 2,142,881 22,639,924
============ =============
</TABLE>
THE ACCOMPANYING NOTES ARE INTEGRAL PART OF THIS STATEMENT
* REPRESENTS THE PERIOD FROM INCEPTION ON JANUARY 24, 1995 TO MARCH 31, 1995.
46
<PAGE> 48
PCS 2000, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL ACCOUNTS
FROM JANUARY 1, 1996 TO MARCH 31, 1996
<TABLE>
General Limited
------- -------
Partner Partners Total
------- -------- -----
(2,604.5 units)
<S> <C> <C> <C>
Beginning (deficit) capital at $ (1,450,270) $ 60,461,692 $ 59,011,422
January 1, 1996
Share of undistributed losses $ (168,814) (506,444) (675,258)
------------- --------------- --------------
Ending (deficit) capital at $ (1,619,084) 59,955,248 58,336,164
March 31, 1996 ============= =============== ==============
</TABLE>
Total partnership units issued and outstanding as of March 31,1996 amounted to
2,604.5
47
<PAGE> 49
PCS 2000. L.P.
(a limited partnership (the "Partnership"))
NOTES TO INTERIM FINANCIAL STATEMENTS
NOTE 1 - INTERIM FINANCIAL DATA:
The interim financial data is unaudited; however, in the opinion of
management, the interim data includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the results of
the interim periods.
NOTE 2 - RELATED PARTY TRANSACTIONS:
During the quarter, the Partnership granted a loan of $100,000 to its general
partner, Unicom Corporation. The loan has no stated interest rate nor
maturity.
The partnership agreement provides for payment of a management fee to the
general partner, equal to the reasonable costs of operating the business of
the Partnership, plus 10% of such aggregate amount, which fee will be payable
monthly, on the first day of each month during the year. Expenses to be
reimbursed include, but are not limited to, compensation costs, and expenses
related to officers, directors, and employees in the performance of their
duties. This fee is contingent upon the Partnership obtaining a Personal
Communications Service ("PCS") license from the Federal Communications
Commission (the "FCC"), but shall be made retroactive to January 24, 1995. No
such fee has been paid nor accrued as there is no certainty that a license
will be awarded by the FCC, although the amount has been estimated to be
approximately $88,500 for the quarter ended March 31, 1996, plus $417,000 for
the 1995 fiscal year. In addition, the general partner will be entitled to
25% of all distributions made by the partnership.
NOTE 3 - CONTINGENCY:
During 1995, the partnership inadvertently submitted an incorrect bid for one
of the licenses being sought. Although the partnership withdrew the submitted
bid immediately, the FCC may impose a very substantial penalty for withdrawal
of a high bid consisting of the difference between the bid withdrawn and the
eventual highest bid (as of June 30, 1996, the maximum penalty would be
approximately $92,491,000).
The general partner has met with FCC officials and has filed a petition for a
waiver of this penalty or, in the alternative, a substantial reduction in the
penalty amount, as these rules were made to deter frivolous and manipulative
bids and not errors. Although no final determination has been made at the
date of the financial statements, the general partner is optimistic that the
FCC will agree either to a waiver or a substantial reduction of the penalty.
48
<PAGE> 50
Page 2
NOTE 4 - SUBSEQUENT EVENTS:
The partnership is currently in negotiation with other companies for possible
additional financing for the acquisition and eventual operation of PCS
licenses.
The Partnership is subject to a withdrawal penalty of approximately $1.25
million for its deliberate withdrawal of a bid for the PCS license covering
Omaha, Nebraska. At one point during the Block C auction, the Partnership had
targeted and was bidding for certain midwestern markets. During the course of
the auction, however, the Partnership determined to focus its efforts in
Puerto Rico and certain western markets. Accordingly, the Partnership
withdrew its bid for the Omaha market and is subject to the withdrawal
penalty.
Based on the results of an internal investigation of the bidding error (see
Note 3), Unicom's Board of Directors concluded that it was in the best
interest of the Partnership that the ownership interests of a former director
and acting chief executive officer of Unicom and members of his family in
Unicom be divested. Since Unicom and the former director and his family were
unable to come to an agreement on transferring such interests to Unicom or to
a third party, Unicom determined to sell all its assets, which consisted only
of its general partnership interest, to SuperTel Communications Corp. On June
18, 1996, Unicom sold its general partnership interest to SuperTel for
$100,000 by means of a nonrecourse promissory note. The stockholders,
officers and directors of SuperTel are essentially the same as those of
Unicom. All stockholders of Unicom received the same amount of shares of
SuperTel that they held in Unicom, except for shares held by two trusts for
the benefit of the respective families of two former directors of Unicom.
The transfer of the Company's interest is the subject of a lawsuit brought by
the wife of a former director. The general partner is vigorously defending the
interests of the Partnership in these cases; it believes it has meritorious
defenses to such suits and that the outcome of such suits will not adversely
affect future operations of the Partnership.
Additionally, two parties have filed petitions with the FCC to deny the award
of any licenses to the Partnership. The Partnership will file an opposition
statement to the two petitions. The Company believes that the petitions
should be summarily dismissed and intends to vigorously defend the
Partnership's interests.
Although no assurances can be made, the Company expects that the Partnership
will ultimately prevail in these matters, since if either of the petitions to
deny are granted, the Partnership may not receive some or all of the licenses,
and failure to receive licenses will have a material adverse effect on the
financial condition of the Partnership.
49
<PAGE> 51
[PRICE WATERHOUSE LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Unicom Corporation
In our opinion, the accompanying balance sheet presents fairly, in all material
respects, the financial position of Unicom Corporation at February 29, 1996 in
conformity with generally accepted accounting principles. This financial
statement is the responsibility of the Company's management; our responsibility
is to express an opinion on this financial statement based on our audit. We
conducted our audit of this statement in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse
- --------------------
Price Waterhouse
San Juan, Puerto Rico
April 25, 1996
50
<PAGE> 52
UNICOM CORPORATION
BALANCE SHEET
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Assets
Cash $ 54,786
Accounts receivable from affiliated company 442
Investment in subsidiaries 1,000
-------
Total assets $56,228
=======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<S> <C>
Liabilities
Accounts payable and accruals $ 415
Accounts payable to affiliated company 229,293
Loan payable to bank 350,000
--------
Total liabilities 579,708
--------
Stockholders' Deficiency
Preferred stock, no par value, 1,000 shares authorized,
none issued
Common stock, no par value, 1,000 shares issued and
outstanding 100,000
Deficit (623,480)
--------
(523,480)
--------
Total liabilities and stockholders' deficiency $ 56,228
========
</TABLE>
The accompanying notes are an integral part of this statement.
51
<PAGE> 53
UNICOM CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - REPORTING ENTITY AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES:
Unicom Corporation (the "Company" or "Unicom") was organized on March 5, 1993
under the laws of the Commonwealth of Puerto Rico. It was created to serve as
administrator to joint ventures with affiliated companies. The Company's
fiscal year ends on the last day of February.
During 1995, most of the Company's transactions were related to the
administration of PCS 2000, L.P. (the "Partnership"), a limited partnership
organized on February 14, 1995 under the laws of the State of Delaware, for
which the Company serves as the general partner. The Partnership is engaged in
the acquisition of licenses to serve as provider of a new communications
technology called Personal Communications Service ("PCS").
The partnership agreement of PCS 2000, L.P. provides for payment of a
management fee to its general partner, equal to the reasonable costs of
operating the business of the Partnership, plus 10% of such aggregate amount,
which fee will be payable monthly, on the first day of each month during the
year. Expenses to be reimbursed include, but are not limited to, compensation
costs, and expenses related to officers, directors, and employees in the
performance of their duties. This fee is contingent upon the Partnership
obtaining a PCS license from the Federal Communications Commission (the "FCC"),
but shall be made retroactive to January 24, 1995. No such fee has been
received nor accrued during fiscal year 1996 as there is no certainty that a
license will be awarded by the FCC although the amount has been estimated to be
approximately $417,000. The Company will also be reimbursed by the
Partnership for all expenses incurred directly related to the Partnership
operations, which will not be subject to the management fee cost- plus
arrangement. In addition, the Company will be entitled to 25% of all
distributions made by the Partnership.
Cash equivalents
The Company considers certificates of deposits or any other similar highly
liquid instrument purchased with an original maturity of three months or less
as cash equivalents.
52
<PAGE> 54
Page 2
Investment in subsidiaries
The investment in subsidiaries represent an unconsolidated minority interest of
33% in a joint-venture which is accounted for at cost amounting to $1,000, and
an investment in PCS 2000, L.P. amounting to $100,000. Unicom accounts for the
investment in the limited partnership using the equity method. As of February
29, 1996, the Company's share in the undistributed losses of the Partnership
amounted to approximately $1,660,000, therefore, the carrying value of its
investment was written down to zero.
NOTE 2 - RELATED PARTY TRANSACTIONS:
All related party transactions are loans from and to affiliated companies made
in the normal course of business.
NOTE 3 - INCOME TAX:
The Company is exempt under the provisions of the Puerto Rico Tax Incentives
Act of 1987, covering services such as telecommunications consulting, business
brokerage, equipment leasing and management services, among others. The
exemption commenced on April 22, 1993 for income and property tax, and on July
1, 1993 for municipal license tax for a period of 10 years and is as follows:
Property and Income Tax - 90%
Municipal License Tax - 60%
During 1996 a request for a one year deferral of the income tax exemption was
made to extend the ten year exemption period.
At February 29, 1996 the Company has available net operating loss
carryforwards amounting to approximately $58,000, expiring $5,600 in 2000 and
$52,000 in 2001. No deferred tax assets have been recorded from future
benefits of existing net operating losses and other miscellaneous future
deductions, since there is no certainty that the Company will realize the
benefits of such future deductions.
NOTE 4 - LOAN PAYABLE:
The Company entered into three notes payable with a financial institution
guaranteed by certificates of deposits held by a related party, Romulus
Telecommunications, Inc. The notes are automatically renewed every month and
interest is charged to the Company's bank account based on the following:
<TABLE>
<CAPTION>
Principal Interest rate
--------- -------------
<S> <C>
$100,000 7.75%
100,000 7.75%
150,000 6.85%
</TABLE>
53
<PAGE> 55
Page 3
Total interest paid during 1995 on the loans payable to the bank amounted to
approximately $14,000.
NOTE 5 - CAPITAL:
The Corporation is authorized to issue 1,000 shares of restricted non-voting
preferred stock, without par value. These shares are divided into classes,
from class A to J with 100 shares each class. Upon their issuance, the
Corporation has the option to redeem them at their issuance price plus accrued
dividends.
NOTE 6- CONTINGENCY:
During 1995, the Partnership inadvertently submitted an incorrect bid for one
of the licenses being sought. Although the Partnership withdrew the submitted
bid immediately, the FCC may impose a very substantial penalty for withdrawal
of a high bid consisting of the difference between the bid withdrawn and the
eventual highest bid (as of June 30, 1996, the maximum penalty would be
approximately $92,491,000).
The Company has met with FCC officials and has filed a petition for a waiver
of this penalty or, in the alternative, a substantial reduction in the penalty
amount, as these rules were made to deter frivolous and manipulative bids and
not errors. Although no final determination has been made at the date of the
financial statements, the Company is optimistic that the FCC will agree either
to a waiver or a substantial reduction of the penalty.
NOTE 7- SUBSEQUENT EVENTS:
Based on the results of an internal investigation of the bidding error (see
Note 6), Unicom's Board of Directors concluded that it was in the best interest
of the Partnership that the ownership interests of a former director and acting
chief executive officer of Unicom and any members of his family in Unicom be
divested. Since Unicom and the director and his family were unable to come to
an agreement on transferring such interests to Unicom or to a third party,
Unicom determined to sell all its assets, which consisted only of its general
partnership interest to SuperTel Communications Corp. On June 18, 1996, Unicom
sold its general partnership interest to SuperTel for $100,000 by means of a
nonrecourse promissory note. The stockholders, officers and directors of
SuperTel are essentially the same as those of Unicom. All stockholders of
Unicom received the same amount of shares of SuperTel that they held in Unicom
except for shares held by two trusts for the benefit of the respective families
of two former directors of Unicom.
The transfer of the Company's interest is the subject of a lawsuit brought by
the wife of a former director. The Company is vigorously defending the
interests of the Partnership in these cases; it believes it has meritorious
defenses to such suits and that the outcome of such suits will not adversely
affect future operations of the Partnership.
54
<PAGE> 56
Page 4
Additionally, two parties have filed petitions with the FCC to deny the award
of any licenses to the Partnership. The Partnership will file an opposition
statement to the two petitions. The Company believes that the petitions should
be summarily dismissed and intends to vigorously defend the Partnership's
interests.
Although no assurances can be made, the Company expects that the Partnership
will ultimately prevail in these matters, since if either of the petitions to
deny are granted, the Partnership may not receive some or all of the licenses,
and failure to receive licenses will have a material adverse effect on the
financial condition of the Partnership.
55
<PAGE> 57
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Index to Financial Statements
<TABLE>
<CAPTION>
PCS 2000, L.P. Page
- -------------- ----
<S> <C>
Report of Independent Accountants 35
Statement of Assets, Liabilities and Partners' Capital as of December 31, 1995 36
Statement of Revenues and Expenses from Inception to December 31, 1995 37
Statement of Cash Flow from Inception to December 31, 1995 38
Statement of Changes in Partners' Capital Accounts from Inception to
December 31, 1995 39
Notes to Financial Statements 40
PCS 2000, L.P. Statement of Assets, Liabilities and
Partners' Capital, (unaudited) 44
PCS 2000, L.P. Statement of Revenues and Expenses (unaudited) 45
PCS 2000, L.P. Statement of Cash Flows (unaudited) 46
PCS 2000, L.P. Statement of Changes in Partners' Capital Accounts from
January 1, 1996 to March 31, 1996 (unaudited) 47
Notes to Interim Financial Statements 48
Unicom Corporation
- ------------------
Report of Independent Accountants
Balance Sheet, February 29, 1996
</TABLE>
(b) Exhibits
Exhibit
Number
- -------
3.1** Agreement of Limited Partnership of PCS 2000, L.P.
10.1** Form of Services Agreement between PCS 2000, L.P. and Romulus
Telecommunications, Inc.
10.2* Asset Purchase Agreement, dated as of June 18, 1996, by and between
SuperTel Communications Corp. and Unicom Corporation.
- ---------------------
* Filed herewith
** Previously filed
56
<PAGE> 58
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
PCS 2000, L.P.
By: SuperTel Communications Corp.
By: /s/ Javier O. Lamoso
-----------------------------
Name: Javier O. Lamoso
Title: President
<TABLE>
<CAPTION>
Capacity in
Signature Which Signed Date
--------- ------------ ----
<S> <C> <C>
/s/ Fred H. Martinez Director and Chairman July 18, 1996
- ------------------------- of the Board ----------------
Fred H. Martinez
/s/ Richard Reiss Director, Chief Executive July 18, 1996
- ------------------------- Officer and Treasurer ----------------
Richard Reiss
/s/ Javier O. Lamoso Director and President July 19, 1996
- ------------------------- ----------------
Javier O. Lamoso
/s/ Gary H. Arizala Director July 18, 1996
- ------------------------- ----------------
Gary H. Arizala
Director
- ------------------------- ----------------
Margaret W. Minnich
Director
- ------------------------- -----------------
Lawrence Odell
/s/ Daniel J. Parks Director July 18, 1996
- ------------------------- -----------------
Daniel J. Parks
Director
- ------------------------- ------------------
James T. Perry
</TABLE>
57
<PAGE> 59
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Page
- ------- ----
<S> <C>
3.1** Agreement of Limited Partnership of PCS 2000, L.P.
10.1** Form of Services Agreement between PCS 2000, L.P. and Romulus
Telecommunications, Inc.
10.2* Asset Purchase Agreement, dated as of June 18, 1996, by and
between SuperTel Communications Corp. and Unicom Corporation.
</TABLE>
- ---------------------
* Filed herewith
** Previously filed
58
<PAGE> 1
EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (HEREINAFTER THE "AGREEMENT"), MADE AS
OF THE 18TH DAY OF JUNE, 1996 BY AND BETWEEN SUPERTEL COMMUNICATIONS CORP.
(hereinafter the "BUYER"), a corporation organized and existing under the laws
of the Commonwealth of Puerto Rico (the "Commonwealth"), and UNICOM
CORPORATION, a corporation organized and existing under the laws of the
Commonwealth (hereinafter the "SELLER" or "Unicom").
WITNESSETH:
WHEREAS, Unicom is the general partner of PCS 2000, L.P., a limited
partnership organized and existing under the laws of the state of Delaware (the
"Partnership"), which is participating in the bidding for personal
communication system ("PCS") licenses from the Federal Communications
Commission (the "FCC") and, in such connection, Unicom provides certain
management and administrative services for the Partnership (the "Business");
and,
WHEREAS, Unicom's assets consist primarily of the entire general
partnership interest in the Partnership (equivalent to twenty five percent
(25%) of the total interest in the Partnership) and for which Unicom
contributed to the Partnership the amount of ONE HUNDRED THOUSAND DOLLARS
($100,000) (the "General Partnership Interest"); and,
WHEREAS, in connection with the bidding process with the FCC for the
PCS licenses, certain events transpired during the FCC's
<PAGE> 2
2
Block C PCS Auction which resulted in a bidding error made by Mr. Anthony
Easton, an officer, director and whose wife is beneficial shareholder of Unicom
and was one of the bidding agents registered with the FCC and authorized to
execute bids on behalf of the Partnership, and an apparent intent by Mr. Easton
to cover-up such error from the FCC and the Board of Directors of Unicom, all
such events as described in an investigative report dated February 19, 1996
prepared by the firm of Young, Vogl, Harlick, Wilson & Simpson, LLP, an
independent firm of attorneys retained by the Board of Directors of Unicom, to
investigate such matter (the "Independent Counsel Report"); and,
WHEREAS, as a result of the above described bidding error, the
apparent intent to cover-up said error by Mr. Easton and his apparent lack of
candor with respect to the FCC, all as set forth in the Independent Counsel
Report, Mr. Easton has lost all credibility and trustworthiness with the Board
of Directors of Unicom as well as with the other shareholders of Unicom.
Additionally, his apparent dishonesty and lack of candor, as viewed by the FCC,
has placed Unicom and PCS 2000 in a precarious situation in respect of the
granting of the PCS licenses concerning all such markets for which PCS 2000 was
the highest bidder.
WHEREAS, Mr. Easton's reputation and prior business dealings have
caused banks, investment bankers, suppliers and potential business associates
to refrain from pursuing their respective
<PAGE> 3
3
business interests with PCS 2000 without assurances that Mr. Easton and his
wife will not have any future participation in the activities of PCS 2000 or
its general partner, including as equity holders in any of such entities;
WHEREAS, the Board of Directors of Unicom has determined that the
business relationships currently being engaged in and developed with the
referenced banks, investment bankers, suppliers and potential business
associates are essential to the survival of PCS 2000; and
WHEREAS, since Mrs. Easton has not acquiesced to the sale of her
shares to Unicom or otherwise, the Board of Directors and shareholders of
Unicom have deemed it in the best interests of PCS 2000, its limited partners
and Unicom to transfer and sell all of Unicom's assets to BUYER, subject to the
terms and conditions hereinafter set forth, in order to continue the
Partnership with a different general Partner.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. SALE AND PURCHASE OF ASSETS.
1.1. Acquired Assets. Upon the terms and subject to the
conditions of this Agreement, BUYER purchases from SELLER, and SELLER sells,
assigns, conveys, transfers and delivers to BUYER, the General Partnership
Interest together with all of the assets
<PAGE> 4
4
listed and described in Schedule 1.1 attached hereto and made to form a part
hereof, and any rights with respect thereto and any and all agreements,
contracts, leases, licenses, rights, instruments or other commitments,
arrangements or understandings of any kind in any manner relating to the
Business and any licenses, permits, registrations, certificates, consents,
approvals, authorizations, waivers, releases, discharges, waivers and filings
necessary in connection with the operation of the Business. Such assets shall
be collectively referred to herein as the "Acquired Assets".
1.2. Purchase Price. Subject to the terms and conditions
of this Agreement, in reliance upon SELLER's representations, warranties and
agreements herein contained, and in consideration for the aforesaid sale,
conveyance and assignment, there shall be delivered to the SELLER, in full
payment for the Acquired Assets, the aggregate amount of One Hundred Thousand
Dollars ($100,000.00) (the "Purchase Price"), payable by the execution and
delivery by BUYER of a promissory note substantially in the form of Exhibit A
hereto in the amount of One Hundred Thousand Dollars (US $100,000.00) bearing
interest at the rate of seven percent (7%) per annum, and due seven years after
the Closing Date (the "Promissory Note").
1.3. Assumption of Certain Liabilities. BUYER shall and
agrees to assume all liabilities related or attaching to the Acquired Assets,
together with such other liabilities listed and
<PAGE> 5
5
described in Schedule 1.3 attached hereto (collectively, the "Assumed
Liabilities").
1.4. Continuance of the Business by Buyer. It is the
intention of the BUYER to continue with the Business as conducted by the
SELLER, and for such purposes, BUYER and SELLER agree to perform such acts and
to undertake such matters as may be necessary or required for BUYER to conduct
the Business as previously conducted by SELLER. In this connection, Buyer
agrees to fully and unconditionally assume all of the responsibilities,
obligations, duties, powers and functions as General Partner of Unicom, all
pursuant to the same terms and conditions set forth in the Agreement of Limited
Partnership of PCS 2000.
1.5. Employees. BUYER represents that it shall employ all
the employees of SELLER at the same rate of compensation and amount of benefits
received by the Employees as of the date hereof and that it assumes all
obligations related to such employees. After the Closing Date, BUYER shall be
responsible for any payments required under any federal or Commonwealth labor
laws in connection with the employment of the Employees. With respect to any
Employees which were participants or entitled to any benefits under any
employee benefit plan of the SELLER, BUYER agrees to set up a similar plan for
such Employees, to which any benefits and contributions held under SELLER's
plan shall be deposited, or determine and establish a method to equitably
compensate such
<PAGE> 6
6
Employees for the benefits to which they would otherwise be entitled under
SELLER's employee benefits plan, if any.
2. CLOSING
2.1. Closing. The purchase and sale of the Acquired Assets
shall take place at a closing (the "Closing") to be held at the law offices of
Martinez Odell & Calabria, 16th Floor, Banco Popular Center, San Juan, Puerto
Rico on June 18, 1996.
3. DOCUMENTS TO BE DELIVERED AT CLOSING. Subject to the provisions of
Sections 6 and 7 hereof, at the Closing:
(a) SELLER shall deliver to BUYER (unless previously
delivered): (i) a certificate of corporate resolution executed by SELLER's
Secretary authorizing the execution of this Agreement, the performance of the
transactions contemplated herein and the person appearing on behalf of SELLER
in this Agreement to do so on its behalf; and (ii) all other documents,
instruments and writings required to be delivered or reasonably required to be
delivered by the SELLER at or prior to the Closing relating to the sale of the
Acquired Assets.
(b) BUYER shall deliver or cause to be delivered to SELLER
(unless previously delivered): (i) a certificate of corporate resolution
issued by BUYER's Secretary authorizing the execution by BUYER of this
Agreement, the performance of the transactions contemplated herein and the
person appearing on behalf of BUYER in this Agreement; (ii) the Promissory
Note; and
<PAGE> 7
7
(iii) any other previously undelivered documents, instruments or writings
reasonably required to be delivered by BUYER at or prior to the Closing
pursuant to this Agreement relating to the sale of the Acquired Assets.
4. REPRESENTATIONS AND WARRANTIES OF SELLER.
4.1. Binding Agreement. This Agreement shall be, when duly executed
and delivered by SELLER, a legal, valid and binding obligation of SELLER,
enforceable in accordance with its terms.
4.2. No Conflict. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the performance of and
compliance with the terms and conditions hereof do not and will not (after
notice or lapse of time or both): (i) contravene any statute, rule or
regulation, or any judgment, decree or order of any court or governmental
authority binding on SELLER; (ii) conflict with or violate any term, condition
or provision of the Articles of Incorporation or By-Laws of SELLER; or (iii)
conflict with, result in a breach of any provision, or constitute a default or
an event of default under any liens, mortgages, chattel mortgages, security
interests of all kinds, statutory and tax liens, attachments, levies,
indentures, notes, agreements, leases, contracts, licenses, obligations,
product or service warranties, instruments or other commitments, arrangements
or understandings of any kind, to which SELLER is a
<PAGE> 8
8
party and by which the Acquired Assets may be materially bound or affected.
4.3. Consents. Any consent or approval of any creditor or obligor
of, or of any court or governmental authority having jurisdiction over, SELLER
necessary in connection with the execution, delivery or performance of this
Agreement, including without limitation, any consent required as a condition to
the validity or enforceability of the transfer and conveyance of any of the
Acquired Assets to BUYER has been or will be obtained prior to the Closing.
4.4. Title to and Condition of the Acquired Assets. SELLER has
good and marketable title in and to all of the Acquired Assets, free and clear
of any and all security interests, mortgages, pledges, liens, encumbrances,
leases or charges, except for Permitted Liens, which title of SELLER shall be
vested in BUYER, upon execution and delivery at Closing of the necessary
instruments of transfer pursuant to Section 3 hereof, free of any and all
claims from creditors of SELLER and from any other persons, corporations,
government agencies and entities, except in respect to the Permitted Liens.
4.5. Taxes. SELLER has duly and timely filed all applicable
federal, state, and municipal returns and declarations with respect to all
federal, state, and municipal income, property, excise, employment and other
taxes of any nature
<PAGE> 9
9
whatsoever required to be filed through the date hereof in connection with the
Acquired Assets and prospectively up to the Closing Date.
5. REPRESENTATIONS AND WARRANTIES OF BUYER.
5.1. Binding Agreement. This Agreement shall be, when duly
executed and delivered by BUYER, a legal, valid and binding obligation of
BUYER, enforceable in accordance with its terms.
5.2. No Conflict. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
performance of and compliance with the terms and conditions hereof do not and
will not (after notice or lapse of time or both): (i) contravene any statute,
rule or regulation, or any judgment, decree or order of any court or
governmental authority binding on BUYER; (ii) conflict with or violate any
term, condition or provision of the Articles of Incorporation or By-Laws of
BUYER; or (iii) conflict with, result in a breach of any provision, or
constitute a default or an event of default under any liens, mortgages, chattel
mortgages, security interests of all kinds, statutory and tax liens,
attachments, levies, indentures, notes, agreements, leases, contracts,
licenses, obligations, product or service warranties, instruments or other
commitments, arrangements or understandings of any kind, to which BUYER is a
party or by which any of its properties may be materially bound or affected.
<PAGE> 10
10
5.3. Consents. No consent or approval of any creditor or
obligor of, or of any court or governmental authority having jurisdiction over,
BUYER is necessary in connection with the execution, delivery or performance of
this Agreement.
6. CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligations of BUYER
hereunder and the continued validity of this Agreement shall be contingent upon
the fulfillment and continuance of the following conditions:
6.1. True Representations and Warranties. All of the
representations and warranties of SELLER contained herein shall be true and
correct as of the Closing Date and on and as of the date on which any
post-closing transactions contemplated by this Agreement are consummated and,
that SELLER shall, on or before the Closing Date, have performed all of its
obligations, covenants and agreements hereunder which by the terms hereof are
to be performed on or before the Closing Date.
6.2 Delivery of Documents. SELLER shall have executed and
delivered to BUYER at the Closing the Bill of Sale, the Assignment and
Assumption of Agreements and any and all other necessary or required documents
to vest in the BUYER the title over the Acquired Assets.
6.3 Delivery of Indemnity Agreement. The Partnership
shall have executed and delivered an Indemnity Agreement in which the
Partnership indemnifies and holds harmless BUYER and SELLER and
<PAGE> 11
11
the shareholders, directors and officers thereof for, among other things, the
valuation of the Acquired Assets and the consummation of the transactions
contemplated hereby.
6.4 Approval of the Transfer by the FCC. The approval of
the FCC shall be filed for within 30 days after the date hereof.
7. CONDITIONS TO THE OBLIGATIONS OF SELLER. The
obligations of SELLER hereunder and the continued validity of this Agreement
shall be contingent upon the fulfillment and continuance of the following
conditions:
7.1. True Representations and Warranties. All of the
representations and warranties of BUYER contained herein shall be true and
correct as of the Closing Date and on and as of the moment on which the
post-closing transactions contemplated by this Agreement are consummated and,
SELLER shall, on or before the Closing Date, have performed all of its
obligations, covenants and agreements hereunder which, by the terms hereof, are
to be performed on or before the Closing Date.
7.2. Delivery of Purchase Price. BUYER shall have delivered
to SELLER at the Closing the Purchase Price in the manner and as set forth in
Section 1.2 hereof.
7.3 Delivery of Documents. BUYER shall have executed and
delivered to SELLER at the Closing the Promissory Note together with any and
all documents necessary to relieve SELLER from liability under the Assumed
Liabilities.
<PAGE> 12
12
7.4 Approval of the Transfer by the FCC. The approval of
the FCC shall be filed for within 30 days after the date hereof.
8. COVENANTS OF THE SELLER AND BUYER.
8.1 Buyer and Seller shall course an Application for
Transfer of Control to be filed with the FCC within 15 days after the execution
hereof.
8.2. Further Assurances. From time to time after the
Closing, SELLER, at its own expense, will execute and deliver such other
documents and take such other action as BUYER may request in order to more
effectively transfer, convey, assign and deliver to BUYER and to place BUYER in
possession or control of the Acquired Assets or assist in the collection of the
Acquired Assets or to enable BUYER to exercise and enjoy all rights and
benefits of SELLER with respect thereto.
9. INDEMNIFICATION.
Each of the parties hereto agrees to indemnify and hold the other
party harmless from and against any and all liabilities, damages, losses,
costs, expenses, liabilities and deficiencies, including without limitation,
attorneys fees, court costs and legal expenses, resulting from, arising out of,
or in any way connected with any misrepresentation, breach of warranty, or
non-fulfillment or breach of any agreement, covenant or obligation of such
party under this Agreement.
<PAGE> 13
13
10. MISCELLANEOUS.
10.1. Severability. If any term or provision of this
Agreement shall to any extent be held invalid or unenforceable under any
applicable laws, such invalidity will in no way affect the validity or
enforceability of any other term or provision of this Agreement that can be
given effect without the invalid term or provision.
10.2. Successors and Assigns. Neither SELLER nor BUYER may
assign this Agreement, or any rights or obligations hereunder, in whole or in
part, without the prior written consent of the other party hereto. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns.
10.3. Applicable Law. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the Commonwealth of
Puerto Rico.
10.4. Section Headings. Section headings are for
convenience only and shall not limit or otherwise affect the meaning or
construction of any of the provisions of this Agreement.
10.5. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
<PAGE> 14
14
IN WITNESS WHEREOF, SELLER and BUYER have caused this Agreement to be
executed by their duly authorized officers and/or representatives as of the day
and year first-above written.
BUYER SELLER
SUPERTEL COMMUNICATIONS CORP. UNICOM CORPORATION
By: By:
--------------------------- -------------------------
Name: Name:
Title: Title:
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-24-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 2,727 2,142
<SECURITIES> 0 0
<RECEIVABLES> 0 226
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 59,334 58,944
<PP&E> 0 11
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 59,334 59,955
<CURRENT-LIABILITIES> 323 619
<BONDS> 0 0
0 0
0 0
<COMMON> 65,212 65,212
<OTHER-SE> (6,201) (6,876)
<TOTAL-LIABILITY-AND-EQUITY> 59,334 58,955
<SALES> 0 0
<TOTAL-REVENUES> 1,469 27
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 7,670 702
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (6,201) (675)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (6,201) (675)
<EPS-PRIMARY> (1,785) (194)
<EPS-DILUTED> (1,785) (194)
</TABLE>
