<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1996
REGISTRATION NO. 333-15783
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
MERCURY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
LOUISIANA 4812 72-0647424
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
CM TOWER, SUITE 1900
ONE LAKESHORE DRIVE
LAKE CHARLES, LA 70629
(318) 436-9000
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
WILLIAM L. HENNING, JR.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
P.O. DRAWER 3104
LAKE CHARLES, LA 70602-3104
(318) 436-9000
(Name and address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
<TABLE>
<S> <C> <C>
ANTHONY J. CORRERO, III THOMAS G. HENNING BRYANT B. EDWARDS
LOUIS Y. FISHMAN SECRETARY AND GENERAL COUNSEL LATHAM & WATKINS
CORRERO FISHMAN HAYGOOD MERCURY, INC. 633 W. FIFTH STREET, SUITE 4000
PHELPS WEISS WALMSLEY P.O. DRAWER 3104 LOS ANGELES, CALIFORNIA 90071-2007
& CASTEIX, L.L.P. LAKE CHARLES, LA 70602-3104 (213) 485-1234
201 ST. CHARLES AVENUE, SUITE 4700 (318) 436-9000
NEW ORLEANS, LOUISIANA 70170-4700
(504) 586-5252
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
---------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
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* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
***************************************************************************
SUBJECT TO COMPLETION, DATED DECEMBER 20, 1996
PROSPECTUS
, 1997
2,750,000 SHARES
[US UNWIRED INC. LOGO]
CLASS A COMMON STOCK
All of the shares of Class A Common Stock, par value $.01 per share ("Class
A Common Stock"), being offered hereby (the "Offering") are being sold by US
Unwired Inc. (the "Company"). Prior to this Offering, there has been no public
market for the Class A Common Stock. See "Underwriting" for information relating
to the factors considered in determining the initial public offering price. It
is currently anticipated that the initial public offering price will be between
$ and $ per share.
The Company's authorized common stock includes Class A Common Stock and
Class B Common Stock, par value $.01 per share ("Class B Common Stock" and,
together with Class A Common Stock, "Common Stock"). The rights of Class A
Common Stock and Class B Common Stock are substantially identical, except that
holders of Class A Common Stock are entitled to one vote per share and holders
of Class B Common Stock are entitled to 10 votes per share. Both classes will
vote together as one class on all matters generally submitted to a vote of
shareholders, including the election of directors. Shares of Class B Common
Stock are convertible into Class A Common Stock on a share-for-share basis
subject to certain procedures and restrictions. See "Description of Capital
Stock." After the sale of the shares of Class A Common Stock offered hereby, the
Company's existing shareholders will own shares of Common Stock representing in
the aggregate approximately 97.6% of the voting power entitled to vote in
matters affecting shareholders generally.
Application has been made to have the Class A Common Stock quoted on the
Nasdaq National Market under the symbol "UNWR."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........................ $ $ $
Total(3)......................... $ $ $
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities pursuant to the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting expenses estimated at $500,000, which will be paid by the
Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 412,500 additional shares of Class A Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to the Public, Underwriting Discounts and Commissions and Proceeds to
the Company would be $ , $ and $ , respectively.
See "Underwriting."
The shares are being offered by the several Underwriters when, as and if
delivered to and accepted by the Underwriters and subject to various prior
conditions, including their right to reject orders in whole or in part. It is
expected that delivery of share certificates will be made in New York, New York
on or about , 1997.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
A.G. EDWARDS & SONS, INC.
THE ROBINSON-HUMPHREY COMPANY, INC.
<PAGE> 3
[INSERT GRAPHICS]
<PAGE> 4
CERTAIN TERMS
Wireless communications markets in the United States include (among others)
cellular markets and, more recently, Personal Communications Service ("PCS")
markets and are licensed and regulated by the Federal Communications Commission
(the "FCC"). The cellular markets are geographically divided into 306
Metropolitan Statistical Areas ("MSAs") and 428 Rural Service Areas ("RSAs")
devised by Rand McNally and adopted by the FCC. The PCS markets are similarly
divided into 51 Metropolitan Trading Areas ("MTAs") and 493 Basic Trading Areas
("BTAs"). The Company anticipates that PCS service will appear essentially the
same to the user as cellular service, except for certain issues of compatibility
when subscribers leave (or "roam" out of) the licensed area covered by the
wireless communications "System" of their service provider. Cellular and PCS
markets are sometimes measured by "Pops," which means the estimated population
of the specified market; and "Net Pops," which means such population multiplied
by the percentage interest the Company holds in the license for the particular
market. The number of Pops or Net Pops does not refer to subscribers and is not
necessarily indicative of the number of subscribers to the Company's Systems.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 under the Securities Act of
1933, as amended (the "Securities Act") with respect to the Class A Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement including the exhibits and schedules
thereto. For further information with respect to the Company and the Class A
Common Stock, reference is hereby made to such Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus as to
the contents of any contract or other document are not necessarily complete and,
in each instance, reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. Upon consummation of this Offering,
the Company will be subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith the Company will file periodic reports and other information with the
Commission relating to its business, financial statements and other matters.
Copies of the Registration Statement, including all exhibits thereto, may be
obtained from the Commission's principal office in Washington, D.C. and at the
following regional offices of the Commission: Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and at Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of all or any part thereof
may be obtained from the Public Reference Section, Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of the
prescribed fees. The Commission maintains a World Wide Web site on the Internet
which contains the foregoing information and the address of which is
"http://www.sec.gov."
The Company intends to furnish its shareholders annual reports containing
consolidated financial statements of the Company audited by its independent
auditors and quarterly reports containing unaudited condensed consolidated
financial statements for each of the first three quarters of each fiscal year.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information (including the financial statements and the notes thereto) included
elsewhere in this Prospectus. Unless otherwise indicated, all references to the
"Company" include it and its subsidiaries and their respective predecessors.
Except as otherwise indicated, the information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. Except for historical
financial information and unless otherwise indicated, all references herein to
Pops, Net Pops and the Company's Systems give effect to the consummation of the
Company's acquisition of 49% of the capital stock of Mississippi 34 Cellular
Corporation ("MS 34"). The acquisition is contingent upon, among other things,
the successful completion of this Offering.
THE COMPANY
The Company owns and operates cellular communications systems in 14 RSAs
and one MSA which, after giving effect to the acquisition of MS 34, together
have 1.4 million Net Pops. These markets consist primarily of four clusters that
are located in Louisiana, Mississippi, Alabama and Kansas. In its Louisiana
Cluster, the Company markets under the MERCURY CELLULAR AND PAGING(TM) trade
name and in its other clusters under the CELLULARONE(R) service mark. As of
September 30, 1996, the Company served approximately 77,000 cellular subscribers
through cellular Systems covering more than 72,000 square miles, and served over
14,000 paging subscribers by providing paging services in its Louisiana market
and by reselling such services in certain other markets. The Company owns a
24 1/3% limited partnership interest in Meretel Communications Limited
Partnership (the "PCS Partnership"), which, as the successful bidder in the FCC
auction, has been awarded five broadband PCS licenses that cover five BTAs with
an aggregate of 1.8 million Pops. These PCS markets, together with the Louisiana
Cluster cellular market, are expected to create a large seamless market
traversed by Interstate Highway 10 ("I-10") between Houston and New Orleans.
The Company focuses on RSAs and small MSAs because it believes that such
markets, which are usually less densely populated, generally provide greater
capacity for growth and less competition than most major markets. Cellular
service was generally introduced later in RSAs and small MSAs than in major
markets, with the result that, based on industry averages, cellular penetration
is currently lower and subscriber growth rates are significantly higher than in
major markets. The Company's markets exhibit positive characteristics for
wireless communications, including a high percentage of business customers with
substantial needs for wireless communications, such as those employed in the
agriculture and oil and gas industries, and a higher percentage of populations
accustomed to long travel times. Additionally, the Company's cellular service
areas cover approximately 1,100 highway miles, providing attractive sources for
roaming revenues.
The Company believes that the wireless communications industry will
continue to grow as enhanced services are offered at lower prices and as
customer awareness of the productivity, convenience and security benefits
associated with wireless communications increases. The Company believes it is
well positioned to take advantage of this growth opportunity. The Company's
growth strategy focuses on the following: (i) internal growth through increased
penetration in the Company's existing markets; (ii) acquisition of licenses
contiguous to the Company's existing market clusters from independent or smaller
licensees; (iii) acquisition of new market clusters; and (iv) acquisition of PCS
licenses, where available, to expand and complement its wireless network. In
addition, the Company believes that by geographically clustering service areas
it can offer high quality service at competitive prices with larger, seamless
service networks.
Since January 1, 1995, the Company has completed acquisitions of the Kansas
and Alabama Clusters, representing approximately 600,000 Net Pops. Upon
acquiring a cellular System, the Company's objective is to increase operating
cash flow by (i) emphasizing the Company's dedication to customer service and
satisfaction; (ii) implementing aggressive marketing of cellular service to add
subscribers and reduce the "churn rate" at which customers terminate service;
(iii) selectively upgrading the existing cellular network to increase signal
coverage, with the eventual goal of providing handheld quality network coverage;
(iv) implementing the Company's distribution strategy, which seeks to maximize
the Company's local market presence through local retail stores with a direct
sales force; and (v) using its centralized upper management
3
<PAGE> 6
and back office functions to support the needs of subscribers and of the
Company's retail sales offices, thereby maximizing economies of scale.
The Company seeks to position its cellular Systems, including its local
retail stores, as the quality local service provider. Management believes that
the Company's local presence through its retail stores enhances its ability to
provide a higher level of long-term customer service and satisfaction. The
Company's 22 retail stores are staffed with both sales and customer service
representatives, differentiating the Company from many of its competitors which
provide neither the same concentration of local sales locations nor the local
availability of customer service. The retail stores provide the Company with
greater control over the sales process than would be provided by the use of
independent agents alone, although the Company does use independent agents on a
selective basis to expand its distribution network. In addition, the Company's
billing and customer information system is operated by an affiliated corporation
which provides the Company with a high level of customization and access. The
Company believes that these factors enable its sales and customer service
personnel to be more responsive than competitors using third-party billing and
information systems.
In preparation for this Offering, the Company and its affiliate through
common control, Cameron Communications Corporation ("Cameron"), completed a
restructuring plan pursuant to which the wireless communications interests of
Cameron were separated from its landline telephone business and combined with
the wireless communications interests of the Company. Pursuant to an Agreement
and Plan of Reorganization, Cameron transferred to a new wholly-owned
subsidiary, Newco, all of Cameron's assets and liabilities other than its 96%
interest in the subsidiary that owns the licenses covering the Louisiana and
Kansas Clusters. Cameron distributed to its shareholders all of the shares of
Newco and then merged into the Company. In consideration for this merger,
shareholders of Cameron received, in exchange for their shares of Cameron,
shares of common stock of the Company which, together with all other then
outstanding shares, have been reclassified into Class B Common Stock. Following
the restructuring, the name of Newco was changed to "Cameron Communications
Corporation," and the name of the Company, which had been Mercury, Inc., was
changed to "US Unwired Inc." See "Certain Transactions -- Tax-Free
Restructuring."
Prior to this Offering, 78.0% of the Company's equity and voting power was
held by members of the Henning family, and the remaining 22.0% was owned by
approximately 11 minority shareholders. After this Offering, members of the
Henning family will own 62.7% of the Company's equity and 76.2% of the Company's
voting power. See "Principal Shareholders." The Henning family has been involved
in the communications industry since W. T. Henning founded a landline telephone
company in 1928 in southwest Louisiana. The Henning family became involved in
the wireless communications industry with the introduction of paging services in
1980 and cellular services in 1987. The Henning family will remain in the
landline business through their majority ownership of Cameron. See "Certain
Transactions."
In the ordinary course of its business, the Company analyzes acquisition
opportunities as they come to its attention. In November and December, 1996, the
Company entered into agreements to acquire from seven minority shareholders the
remaining 49% interest in MS 34, the subsidiary which owns the cellular licenses
covering the Mississippi-3 and Mississippi-4 RSAs. The consummation of the
acquisition is contingent upon, among other things, the successful completion of
this Offering. See "Markets and Systems -- Mississippi Cluster." See "Markets
and Systems -- System Development and Expansion."
4
<PAGE> 7
CELLULAR AND PAGING OPERATIONS
The Company's cellular markets are grouped geographically and strategically
into four clusters, known as the Louisiana, Mississippi, Alabama and Kansas
Clusters. The following table summarizes certain information concerning the
Company's cellular markets.
<TABLE>
<CAPTION>
INTERSTATE
& OTHER % OF HH
COMPANY WIRELINE OR HIGHWAY WITH EBI> DATE OF
MARKET TOTAL POPS OWNERSHIP% NET POPS NON-WIRELINE MILES $35K(A) ACQUISITION
- ------------------------ ---------- ---------- --------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Louisiana Cluster
Lake Charles, LA MSA.... 174,000 100.0% 174,000 WL 102 46.0% Aug. 1987(b)
De Soto, LA-3 B1(c)..... 59,000 100.0 59,000 WL 115 28.1 Apr. 1991(b)
Beauregard, LA-5
B1(c)................. 142,000 100.0 142,000 WL 175 30.6 Mar. 1991(b)
--------- --------- -----
Total Louisiana....... 375,000 375,000 392
--------- --------- -----
Mississippi Cluster
Tunica, MS-1............ 170,000 100.0 170,000 NWL 69 28.4 Apr. 1993
Bolivar, MS-3(d)........ 156,000 100.0 156,000 NWL 66 25.7 Apr. 1993
Yalobusha, MS-4(d)...... 127,000 100.0 127,000 NWL 62 31.5 Apr. 1993
Washington, MS-5(e)..... 160,000 -- -- NWL 76 33.2 Jan. 1994
--------- --------- -----
Total Mississippi..... 613,000 453,000 273
--------- --------- -----
Alabama Cluster
Lamar, AL-3............. 136,000 100.0 136,000 NWL 70 30.5 May 1996
Bibb, AL-4.............. 138,000 100.0 138,000 NWL 66 29.5 Jul. 1996
--------- --------- -----
Total Alabama......... 274,000 274,000 136
--------- --------- -----
Kansas Cluster
Cheyenne, KS-1.......... 27,000 100.0 27,000 NWL 84 32.2 Apr. 1995
Norton, KS-2............ 30,000 100.0 30,000 NWL 0 27.9 Apr. 1995
Wallace, KS-6........... 20,000 100.0 20,000 NWL 39 37.2 Apr. 1995
Trego, KS-7............. 78,000 100.0 78,000 NWL 112 37.1 Apr. 1995
Hamilton, KS-11......... 85,000 100.0 85,000 NWL 17 44.8 Apr. 1995
Hodgeman, KS-12......... 42,000 100.0 42,000 NWL 12 40.1 Apr. 1995
Edwards, KS-13.......... 28,000 100.0 28,000 NWL 6 33.3 Apr. 1995
Cimarron, OK-1(e)....... 24,000 -- -- NWL 7 34.9 Apr. 1995
--------- --------- -----
Total Kansas.......... 334,000 310,000 277
--------- --------- -----
Minority Interest
Chambers, TX-21(f)...... 21,000 25.0 5,300 WL 34 50.4 Apr. 1993
--------- --------- -----
TOTAL................. 1,617,000 1,417,300 1,112
========= ========= =====
</TABLE>
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(a) The percentage of households (HH) with effective buying income (EBI) greater
than $35,000 is based on Kagan's Cellular Telephone Atlas 1995. Effective
buying income is comparable to disposable after-tax income.
(b) The Company was the original licensee in these markets.
(c) These are partitioned cellular markets.
(d) These RSAs are licensed to a corporation in which the Company currently owns
a 51% interest. The Company has entered into agreements to acquire the
remaining 49% interest. The acquisition is contingent upon, among other
things, the successful completion of this Offering. See "Use of Proceeds."
(e) The Mississippi-5 RSA and Oklahoma-1 RSA are operated under interim
authority granted by the FCC pending auction of the licenses by the FCC. The
number of Company subscribers in these RSAs is insignificant.
(f) The Texas-21 RSA is owned by a partnership in which the Company owns a 25%
interest and in which GTE Mobilnet, which operates the System, owns a 75%
interest.
5
<PAGE> 8
The Company offers its subscribers cellular, and in certain markets paging,
services and, without additional charge, offers custom calling features such as
call forwarding, call waiting, conference calling and no-answer transfer. The
Company also provides voice message storage and retrieval free of charge in the
Kansas Cluster and at nominal rates in the other clusters. The Company has
roaming arrangements with virtually every cellular carrier in North America and
is a member of North American Cellular Network ("NACN"), a wireless network
linking non-wireline cellular operations throughout the United States, Canada,
Puerto Rico and the Virgin Islands. NACN participation allows the Company to
offer convenient cellular access to the Company's subscribers when they roam
throughout the United States and Canada.
The Company began offering paging services in the Louisiana Cluster in 1980
and, through a resale agreement with another provider, in Beaumont, Texas in
1995. The Company has entered into agreements to enable it to provide regional
and nationwide paging services. As of September 30, 1996, the Company had over
14,000 paging subscribers.
PCS OPERATIONS
As the successful bidder in the FCC's C-block auction, the PCS Partnership
has been granted five PCS licenses covering 1.8 million Pops in five BTAs. These
PCS markets and the Company's Louisiana Cluster cellular market are expected to
create a large seamless market between Houston and New Orleans. The Company
intends to provide its subscribers and the PCS Partnership's subscribers with
the ability to roam seamlessly throughout the Company's Louisiana Cluster and
the PCS Partnership's markets as soon as technically feasible at a reasonable
cost. Each of these BTA markets is presently in the design and engineering
stage. The PCS Partnership has retained the Company to manage the design,
construction and daily operations of the Lafayette, Beaumont and Lufkin BTAs,
for which the Company is paid a monthly management fee and is reimbursed for its
expenses. The Company has invested $2.9 million in the PCS Partnership and has
committed to contribute up to an additional $10.1 million. The PCS Partnership
bid $61.2 million for its licenses, which is payable over 10 years, and
currently estimates that capital expenditures of at least an additional $69.0
million will be required over the next 10 years to build out its PCS markets.
The PCS Partnership has obtained a commitment from the Rural Telephone Finance
Cooperative for $59.0 million of financing for capital expenditures under which
the Company would be required to guarantee repayment of up to $6.2 million.
There can be no assurance that the build-out of the PCS markets will not cost
materially more than is currently anticipated or that additional financing, if
required, will be available at all or in the absence of additional guarantees by
the Company and other partners.
PCS is a new generation of wireless communications, offering customers
advanced, secure, two-way digital wireless services and applications. Services
that permit sophisticated call management, enhanced two-way messaging and,
eventually, high-speed data and video transmission, will enable customers to
better manage personal and business needs. The Company believes that the
introduction of PCS into the wireless market will stimulate demand for wireless
communications services, attract customers who are not currently subscribers to
wireless service and increase usage by current wireless customers. PCS will
compete with existing cellular telephone service and may provide features not
currently offered by cellular providers.
6
<PAGE> 9
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock offered(1)....................... 2,750,000 shares
Common Stock to be outstanding after this Offering:
Class A Common Stock(1)(2).......................... 2,750,000 shares
Class B Common Stock................................ 11,250,000 shares
-----------------
Total(1)(2)................................. 14,000,000 shares
=================
</TABLE>
- ---------------
(1) Assumes no exercise of the Underwriters' over-allotment option.
(2) Does not include options to purchase an aggregate of up to approximately
270,000 shares of Class A Common Stock outstanding pursuant to the Company's
1997 Stock Option Plan.
---------------------
Use of Proceeds............... The Company intends to use approximately $11.6
million of the net proceeds to acquire the
remaining 49% of the capital stock of the
Company's subsidiary that owns the cellular
licenses covering the Mississippi-3 and
Mississippi-4 RSAs. The remainder of the net
proceeds will be used for acquisitions of
additional wireless Systems, the expansion of
existing cellular Systems and for general
corporate purposes. Pending such uses, the
proceeds will be applied to reduce existing
bank debt. See "Use of Proceeds" and
"Capitalization."
Voting Rights................. Holders of Class A Common Stock are entitled to
one vote per share while holders of Class B
Common Stock are entitled to 10 votes per
share. The Class A Common Stock and Class B
Common Stock will vote together as one class on
all matters submitted to a vote of shareholders
generally, including the election of directors.
Immediately following the consummation of this
Offering, the outstanding shares of Class A
Common Stock will represent approximately 2.4%
of the combined voting power of the outstanding
Common Stock (2.7% if the Underwriters' over-
allotment option is exercised in full). The
Company's existing shareholders will own shares
of Class B Common Stock representing in the
aggregate approximately 97.6% of the combined
voting power of the Common Stock (97.3% if the
Underwriters' over-allotment option is
exercised in full) and thereby will continue to
be able to control the election of the
Company's Board of Directors and generally will
be able to direct the affairs of the Company.
See "Principal Shareholders" and "Description
of Capital Stock."
Dividends on Common Stock..... Holders of Class A Common Stock and Class B
Common Stock will be entitled to share ratably,
as if a single class, in any dividends declared
by the Company on the Common Stock. The Company
does not anticipate paying dividends on its
Common Stock in the foreseeable future. See
"Dividend Policy" and "Description of Capital
Stock."
Conversion of Class B Common
Stock....................... Shares of Class B Common Stock are convertible
into Class A Common Stock on a share-for-share
basis subject to certain procedures and
restrictions. See "Description of Capital
Stock."
NASDAQ National Market
Symbol........................ UNWR
7
<PAGE> 10
SUMMARY FINANCIAL AND CERTAIN OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------- PRO FORMA COMBINED AS ADJUSTED(1)
YEAR ENDED -----------------------------------
DECEMBER 31, NINE MONTHS YEAR ENDED NINE MONTHS
----------------------------- ENDED DECEMBER 31, ENDED
1993 1994 1995 SEPTEMBER 30, 1996 1995 SEPTEMBER 30, 1996
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues............. $14,346 $22,553 $39,252 $ 43,858 $ 49,868 $ 48,401
Cost of service............ 4,513 7,445 11,430 11,622 14,121 12,653
Merchandise cost of
sales.................... 720 2,518 3,373 3,377 4,418 3,709
General and administrative
expense.................. 1,692 2,498 5,308 7,078 7,653 7,870
Sales and marketing
expense.................. 2,736 3,768 6,262 5,448 6,887 5,652
Depreciation and
amortization............. 2,037 2,892 5,686 6,432 10,057 8,285
Operating income........... 2,648 3,432 7,193 9,901 6,732 10,232
Interest income (expense),
net...................... 93 (630) (3,065) (4,302) (6,016) (4,623)
Income tax expense......... 1,317 1,914 2,291 2,375 918 2,345
Net income................. 1,909 1,750 2,603 3,751 110 3,488
Net income per share....... $ 0.17 $ 0.16 $ 0.23 $ 0.33 $ 0.01 $ 0.25
OTHER FINANCIAL DATA:
EBITDA(2).................. $ 4,685 $ 6,324 $12,879 $ 16,333 $ 16,789 $ 18,517
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL AS ADJUSTED(1)
AS OF AS OF
SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............ $ 3,035 $ 3,035
Property and equipment,
net...................... 26,407 26,407
Cellular licenses, net..... 76,355 87,938
Total assets............... 130,933 142,327
Long-term debt............. 87,682 63,960
Total liabilities and
minority interest........ 105,598 81,736
Shareholders' equity....... 25,335 60,591
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------------------
YEAR ENDED
DECEMBER 31, NINE MONTHS
----------------------------- ENDED
1993 1994 1995 SEPTEMBER 30, 1996
<S> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Ending subscribers......... 15,942 27,313 55,576 76,907
Penetration(3)............. 1.9% 3.3% 4.9% 5.4%
Churn(4)................... 1.2% 1.1% 1.4% 1.7%
Subscriber revenue per
average subscriber(5).... $ 61 $ 56 $ 58 $ 55
Selling & marketing costs
(all in) per net
additional
subscriber(6)............ $ 414 $ 465 $ 473 $ 599
</TABLE>
- ---------------
(1) The unaudited pro forma statement of operations data and EBITDA for the year
ended December 31, 1995 and the nine months ended September 30, 1996 include
the historical operations of the Company and give effect to the following as
if they occurred as of January 1, 1995: (i) the acquisition of the Kansas
Cluster, (ii) the acquisition of the Alabama-3 RSA, (iii) the acquisition of
the Alabama-4 RSA, (iv) this Offering and the application of the net
proceeds therefrom, including the acquisition of MS 34. The balance sheet
data as adjusted as of September 30, 1996 includes the historical accounts
of the Company and gives effect to the following as if they occurred as of
September 30, 1996: (i) this Offering and (ii) the application of the net
proceeds therefrom, including the acquisition of MS 34.
(2) EBITDA represents operating income before depreciation and amortization.
EBITDA is a measure commonly used in the telecommunications industry and is
presented to enhance the understanding of the Company's operating results
and is not intended to be a financial performance measure comparable to
similarly titled measures of other companies. EBITDA should not be regarded
as an alternative to either operating income or net income as an indicator
of operating performance, or to cash flows as a measure of liquidity.
Furthermore, EBITDA is not a GAAP-based financial measure, and it should not
be considered as an alternative to GAAP-based measures of financial
performance. See "Selected Financial Data" and the Consolidated Financial
Statements included elsewhere herein.
(3) Represents the ratio of ending subscribers to total Pops.
(4) Represents the average of the monthly churn rates during the periods
presented. Churn equals the ratio of disconnected monthly subscribers to
weighted average monthly subscribers.
(5) Includes cellular service subscriber revenue divided by average subscribers
for the period divided by the number of months in the period presented.
(6) Includes selling and marketing expense and equipment subsidy (merchandise
cost of sales net of merchandise sales) divided by net subscribers added
through normal operating activities (excludes subscribers added through
acquisitions).
8
<PAGE> 11
RISK FACTORS
In addition to the other matters described in this Prospectus, each
prospective purchaser of the Class A Common Stock offered hereby should consider
the specific risk factors set forth below.
GROWTH BY ACQUISITIONS
The Company's growth strategy relies in part upon the acquisition and
development of additional wireless communications Systems. There can be no
assurance, however, that suitable acquisitions will be available to the Company,
that the Company will be able to obtain additional financing for any such
acquisitions, if required, or that the Company will be able to compete
effectively for these Systems against other potential purchasers, most of which
are larger and have greater financial resources than the Company. In addition,
the Company will be subject to risks that its existing and new Systems will not
perform as expected and that the returns from such Systems will not justify the
consideration paid or to be paid for them or the capital expenditures needed to
develop them.
COMPETITION
Competition for subscribers among wireless licensees is based principally
upon the services and enhancements offered, the technical quality of the System,
customer service, System coverage, capacity and price. There are currently two
cellular providers, and there will be up to six PCS providers in each market.
The Company believes that PCS service will in most respects appear essentially
the same to the user as cellular service. Consequently, the Company believes
that the primary competitive impact of PCS service on cellular operators will be
the addition of up to six additional competitors in each cellular market, in
which cellular operators previously had only one competitor. In the future, the
Company may face increased competition from entities providing similar services
using other communications technologies and services. The Company also competes
with paging and dispatch service providers, resellers and, to a lesser extent,
landline telephone service providers. Competition is expected to be intense. New
technologies may evolve that compete with the Company's products and services. A
number of the Company's competitors have substantially greater resources than
the Company. Several of the Company's competitors are operating or planning to
operate, through joint ventures and affiliation arrangements, wireless
communications systems that encompass most of the continental United States. See
"Business -- Competition."
SERVICE MARKS
The Company uses the CELLULARONE(R) service mark in all of its cellular
markets except the Louisiana Cluster. AT&T Wireless, which had been the single
largest user of the CELLULARONE(R) mark, has reduced its use of the mark. If for
some reason the name CELLULARONE(R) were to suffer diminished marketing appeal,
the Company's ability both to attract new subscribers and retain existing
subscribers could be materially impaired. In such circumstances or otherwise,
the Company may be required to develop a new service mark. Competitors of the
Company possess, and others may develop over time, branding with significantly
greater name recognition than that of the Company. A failure by the Company to
maintain existing rights to its current cellular branding or to develop suitable
alternatives thereto would have a material adverse effect on the Company's
ability to market its products and services and could require the Company to
invest significant additional funds to develop such alternatives. See
"Business -- Trade Name; Service Mark."
GOVERNMENTAL REGULATION
The licensing, construction, operation, acquisition and sale of cellular
and PCS Systems, as well as the number of cellular, PCS and other wireless
licensees permitted in each market, are regulated by the FCC. Changes in the
regulation of such activities, such as a decision by the FCC to issue new
licenses or permit more than two licenses in each market for cellular
communications services or more than six licenses for PCS services, could have a
material adverse effect on the Company's operations. In addition, all cellular
and PCS licenses in the United States are granted for an initial 10-year term,
are subject to renewal and may be revoked by the FCC at any time for cause. The
Company believes that each of its cellular licenses would, if currently
9
<PAGE> 12
up for renewal, be renewed based upon FCC rules establishing a presumption in
favor of licensees that have provided "substantial" service during the past
license term and have substantially complied with their regulatory obligations
during the initial license period, but there can be no assurance that all of the
Company's licenses will be renewed. The wireless communications industry is also
subject to certain state and local governmental regulation. Operating costs are
affected by these and other governmental actions that are beyond the Company's
control. See "Business -- Governmental Regulation."
CERTAIN PCS RISKS
PCS Systems have no significant operating history in the United States and
there can be no assurance that these Systems will become profitable. There are
numerous significant risks associated with the PCS business in general and the
business of the PCS Partnership, in which the Company has a 24 1/3% interest, in
particular. First, PCS operators are free to choose from among several competing
digital signal transmission technologies, or standards, that are not
interoperable. At present, none of these competing technologies has emerged as
dominant among PCS Systems. The PCS Partnership has recently chosen to use one
of these technologies, CDMA, in its PCS Systems. There can be no assurance that
CDMA will become the, or even a, dominant technology in the United States. See
"The PCS Industry -- Operation of PCS Systems." If CDMA does not become the
dominant standard or is not able to compete successfully with other PCS
technologies, the PCS Partnership could be deprived of revenues from PCS
customers who roam into the PCS Partnership's markets and could lose PCS
customers who become dissatisfied because they are unable to roam outside the
PCS Partnership's markets. Significant customer loss and loss of roaming
revenues could have a material adverse effect on the PCS Partnership's results
of operations and liquidity. Second, successful build-out of a PCS System in
each of the PCS Partnership's BTAs is subject to completion of the network
design; acquisition of appropriate sites for base station equipment, which may
require zoning variances and local regulatory approval; the purchase and the
installation of the network equipment, which are susceptible to unpredictable
supply or construction delays; and satisfactory accommodation of microwave users
currently using the spectrum. Third, although the PCS Partnership, as the
successful bidder, has been issued five licenses by the FCC to operate PCS
Systems, these grants are subject to reconsideration by the FCC and review by a
court of competent jurisdiction. Fourth, the PCS Partnership may ultimately be
unable to finance the build-out and operation of its PCS Systems without
additional guarantees of financing from its partners, including the Company,
whose risk from the PCS Partnership could thereby be significantly increased.
The PCS Partnership has obtained a commitment for $59.0 million of financing, of
which the Company would be required to guarantee repayment of up to $6.2
million. See "Business -- PCS Operations," "-- Organization" and
"-- Regulation -- Licensing of PCS Systems."
RADIO FREQUENCY EMISSION CONCERNS; MEDICAL DEVICE INTERFERENCE
Media reports have suggested that certain radio frequency ("RF") emissions
from wireless handsets may be linked to various health concerns, including
cancer, and may interfere with various electronic medical devices, including
hearing aids and pacemakers. Concerns over RF emissions may have the effect of
discouraging the use of wireless handsets, which could have an adverse effect
upon the Company's business. The FCC has a rulemaking proceeding pending to
update the guidelines and methods it uses for evaluating RF emissions from radio
equipment, including wireless handsets. While the proposal would impose more
restrictive standards on RF emissions from lower power devices such as wireless
handsets, it is believed that all wireless handsets currently marketed by the
Company and in use by the Company's subscribers already comply with the proposed
standards.
EQUIPMENT FAILURE; NATURAL DISASTER
The Company's Systems include nine mobile telephone switching offices,
which are the point of connection between a wireless System and the local
landline telephone company, and approximately 93 cell sites, which are the base
stations from which the cellular signal is transmitted to and from the user's
handset. The Company does not carry "business interruption" insurance, and major
equipment failure or a natural disaster affecting these switching offices or
sites could have a material adverse effect on the Company's operations.
10
<PAGE> 13
CONTROL BY EXISTING SHAREHOLDERS; ANTI-TAKEOVER EFFECT OF DUAL CLASSES OF COMMON
STOCK
Holders of Class A Common Stock are entitled to one vote per share, while
holders of Class B Common Stock are entitled to 10 votes per share. Class B
Common Stock will not trade in the public market, and applicable transfer
restrictions prevent Class B Common Stock from being acquired by persons other
than those who held Class B Common Stock of the Company immediately prior to
this Offering, their affiliates and certain other "qualified holders." See
"Shares Eligible for Future Sale." Immediately following the consummation of
this Offering, the outstanding shares of Class A Common Stock will represent
approximately 2.4% of the combined voting power of the outstanding Common Stock
(2.7% if the Underwriters' over-allotment option is exercised in full). The
Company's existing shareholders, who will hold Class B shares, will continue to
be able to control the election of the Company's Board of Directors and
generally will be able to direct the affairs of the Company. Such control will
allow those persons to determine whether the Company should enter into
transactions involving an actual or potential change of control of the Company,
including transactions in which the holders of Class A Common Stock might
receive a premium for their shares over the then-prevailing market price, and
such control may therefore have a depressive effect on the market price for
Class A Common Stock.
NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
There has been no public market for the shares of the Company prior to this
Offering, and there is no assurance that a significant public market for the
Class A Common Stock will develop or be sustained after this Offering. The
initial public offering price of the Class A Common Stock will be determined by
negotiations between the Company and the representatives of the Underwriters.
See "Underwriting." The market price of the Class A Common Stock may be
extremely volatile. Factors such as fluctuations in the valuation of wireless
licenses, results of current and future FCC auctions, acquisitions by the
Company, significant announcements by the Company and its competitors, quarterly
fluctuations in the Company's operating results and general conditions in the
communications market may have a significant impact on the market price of the
Class A Common Stock. In addition, in recent years the stock market has
experienced extreme price and volume fluctuations. These fluctuations have had a
substantial effect on the market prices for many high technology and
communications companies, often unrelated to the operating performance of the
specific companies.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Class A Common Stock in the public market
after this Offering could adversely affect prevailing market prices. The Company
has agreed that, for a period of 180 days after the date of this Prospectus, it
will not sell additional shares of Common Stock or securities convertible into,
exercisable for, or exchangeable for, Common Stock without the prior consent of
Donaldson, Lufkin & Jenrette Securities Corporation. The Company's Articles of
Incorporation provide that, subject to certain limitations, Class B Common Stock
may be converted into Class A Common Stock. Sales of certain shares of Class B
Common Stock are subject to certain restrictions set forth in the Company's
Articles of Incorporation and pursuant to Rule 144 under the Securities Act. See
"Shares Eligible for Future Sale."
DILUTION
Purchasers of the Class A Common Stock offered hereby will suffer immediate
dilution of $16.04 in the net tangible book value per share of the Class A
Common Stock from the initial public offering price. See "Dilution."
BENEFITS OF THE OFFERING TO CURRENT SHAREHOLDERS
Prior to this Offering, the shares of common stock held by the Company's
current shareholders were reclassified into Class B Common Stock. See
"Description of Capital Stock" and "Shares Eligible for Future Sale." Such
shareholders will benefit from this Offering to the extent that a public market
for the Company's Common Stock is thereby created. Upon completion of this
Offering, based upon the difference between their
11
<PAGE> 14
acquisition cost of the Company's Common Stock prior to reclassification and the
value of such stock based on the public offering price and assuming conversion
to Class A Common Stock, the current shareholders will enjoy an aggregate
unrealized gain of approximately $156 million in their shares. None of such
shares are included in this Offering.
ABSENCE OF DIVIDENDS
The Company does not anticipate paying any dividends on its Common Stock in
the foreseeable future. See "Dividend Policy."
SEASONALITY
The Company, like the wireless communications industry in general, has
historically experienced significant subscriber growth during the fourth
calendar quarter. Accordingly, during such quarter the Company experiences
greater losses on merchandise sales and increases in sales and marketing
expenses. The Company has historically experienced highest usage and revenue per
subscriber during the summer months. The Company expects these trends to
continue.
CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES
THAT MAY AFFECT FUTURE RESULTS
This Prospectus contains forward-looking statements about the business,
financial condition and prospects of the Company. The actual results of the
Company could differ materially from those indicated by the forward-looking
statements because of various risks and uncertainties, including without
limitation changes in technology, customer demand, the availability of products,
changes in competition, the ability of the Company to expand its markets through
acquisitions in accordance with its plans, economic conditions, interest rate
fluctuations, dependence on manufacturers' product development, various risks
due to changes in products or technology, changes in FCC, tax and other
governmental rules and regulations applicable to the Company, and other risks
that are identified above. These risks and uncertainties are beyond the ability
of the Company to control, and in many cases the Company cannot predict the
risks and uncertainties that could cause its actual results to differ materially
from those indicated by the forward-looking statements. When used in this
Prospectus, the words "believes," "estimates," "plans," "expects," and
"anticipates" and similar expressions as they relate to the Company or its
management are intended to identify forward-looking statements.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Class A
Common Stock offered hereby (after deducting underwriting discounts and
commissions and estimated offering expenses) are estimated to be approximately
$35.3 million ($40.7 million if the Underwriters' over-allotment option is
exercised in full). The Company intends to use approximately $11.6 million of
the net proceeds of this Offering to acquire 49% of the capital stock of MS 34,
a Mississippi corporation which owns the cellular licenses covering the
Company's Mississippi-3 and Mississippi-4 RSAs. The Company presently owns 51%
of the capital stock of MS 34. The remainder of the net proceeds will be used
for acquisitions of additional Systems, the expansion of existing cellular
Systems and for general corporate purposes. Pending such uses, the proceeds will
be applied to reduce existing bank debt. The Company's long-term borrowings from
1994 through September 30, 1996 were made through various credit facilities
bearing various rates of interest at both fixed and variable terms ranging from
5.45% to 10.50%, with maturity dates ranging from December 20, 2002 to December
20, 2003. See Note 7 to the Consolidated Financial Statements of the Company
included elsewhere herein.
12
<PAGE> 15
DIVIDEND POLICY
The Company anticipates that any income generated in the foreseeable future
will be retained for the development and expansion of its business and the
repayment of indebtedness, and therefore the Company does not anticipate paying
dividends on its Common Stock in the foreseeable future. The payment of
dividends is restricted under the Company's long-term debt agreements.
DILUTION
The net tangible book deficit of the Company as of September 30, 1996, was
$52.4 million. Without taking into account any changes in such net tangible book
deficit after September 30, 1996, other than to give effect to the receipt of
net proceeds from the sale of the 2,750,000 shares of Class A Common Stock
offered at an assumed initial public offering price of $14.00 per share
(assuming the Underwriters' over-allotment option is not exercised), the net
tangible book deficit of the Company as adjusted for this Offering, would have
been $(2.04) per share, representing an immediate dilution to new investors of
$16.04 per share and an immediate increase of $2.62 per share to existing
shareholders. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price(1)........................... $14.00
------
Net tangible book deficit(2)..................................... $(4.66)
------
Decrease in net tangible book deficit per share attributable to
payments by new investors..................................... 2.62
------
Net tangible book deficit per share as adjusted for this
Offering(2)...................................................... (2.04)
------
Dilution per share to new investors(3)............................. $16.04
======
</TABLE>
- ---------------
(1) Before deducting the underwriting discounts and commissions and offering
expenses to be paid by the Company.
(2) "Net tangible book deficit per share" represents the amount of total assets
less total liabilities, excluding intangibles of $77.7 million before this
Offering and $89.1 million after this Offering, consisting primarily of
cellular licenses and deferred financing costs, divided by the number of
shares of Common Stock outstanding of 11,250,000 before this Offering and
14,000,000 after this Offering.
(3) Dilution is the difference between the amount of cash paid by new investors
for a share of Class A Common Stock and net tangible book deficit per share
as adjusted for this Offering.
The foregoing table assumes no exercise of outstanding stock options. As of
the date of this Prospectus, there are outstanding stock options to purchase up
to approximately 270,000 shares of Class A Common Stock at an exercise price of
approximately $14.00 per share. If all such options had been outstanding and
exercised at September 30, 1996, the consolidated net tangible book deficit per
share of Common Stock as of such date would have been $(4.22) and the
consolidated net tangible book deficit per share after this Offering would have
been $(1.73), representing an immediate dilution to new investors of $15.73 per
share and an immediate increase of $2.49 per share to existing shareholders.
The following table sets forth on a pro forma basis as of September 30,
1996, the number of shares of Common Stock purchased from the Company and the
total consideration paid and the average price per share paid by the existing
shareholders of the Company and by new investors purchasing shares in this
Offering, before deducting the underwriting discounts and commissions and
offering expenses.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- --------------------- PRICE PER
NUMBER PERCENT(1) AMOUNT PERCENT SHARE
---------- ---------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders(2)........... 11,250,000 80.4% $ -- --% $ --
New investors...................... 2,750,000 19.6 38,500,000 100.0 14.00
---------- ----- ----------- -----
Total.................... 14,000,000 100.0% $38,500,000 100.0%
========== ===== =========== =====
</TABLE>
- ---------------
(1) Percentage of total shares of Common Stock to be outstanding after this
Offering.
(2) The Common Stock held by existing shareholders has been issued over time
and, for purposes of this comparison, is assumed to have been issued for
nominal consideration.
13
<PAGE> 16
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 30, 1996, and the consolidated capitalization as
adjusted for this Offering. This table should be read in conjunction with the
financial statements appearing elsewhere in this Prospectus, including the notes
thereto, the "Unaudited Pro Forma Condensed Combined Financial Data" and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
Current portion of long-term debt....................................... $ 7,996 $ 7,996
======== =========
Long-term debt.......................................................... 87,682 63,960
Shareholders' equity:
Preferred Stock, no par value, 40,000,000 shares authorized and no
shares issued and outstanding actual and as adjusted............... -- --
Class A Common Stock, $.01 par value per share, 100,000,000 shares
authorized and no shares issued and outstanding actual, 2,750,000
shares outstanding as adjusted..................................... -- 28
Class B Common Stock, $.01 par value per share, 60,000,000 shares
authorized and 11,250,000 shares issued and outstanding actual and
as adjusted........................................................ 112 112
Additional paid-in capital............................................ 1,835 37,112
Retained earnings..................................................... 23,388 23,339
-------- ---------
Total shareholders' equity.................................... 25,335 60,591
-------- ---------
Total capitalization.......................................... $113,017 $ 124,551
======== =========
</TABLE>
14
<PAGE> 17
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following unaudited pro forma condensed combined statements of
operations of the Company for the year ended December 31, 1995 and the nine
months ended September 30, 1996 give effect to the following transactions as if
they occurred as of January 1, 1995: (i) the acquisition of the assets of
Miscellco Communications, Inc., which includes the System serving the Kansas
Cluster (Kansas-1, 2, 6, 7, 11, 12, 13 RSAs and Oklahoma-1 RSA) on April 30,
1995; (ii) the acquisition of the assets of West Alabama Cellular Telephone
Company, Inc., which includes the System serving Alabama-3 RSA on May 15, 1996;
(iii) the acquisition of the Alabama-4 RSA on July 1, 1996, and (iv) the sale by
the Company of the Class A Common Stock offered hereby (assuming no exercise of
the Underwriters' over-allotment option) and the application of the net proceeds
therefrom to acquire the remaining 49% of the common stock of MS 34, which
includes the System serving the Mississippi-3 and Mississippi-4 RSAs, and to
repay a portion of existing debt. The following condensed balance sheet as
adjusted as of September 30, 1996 gives effect to (iv) noted above as if such
transactions had occurred on September 30, 1996. The unaudited pro forma
condensed combined financial statements give effect to the aforementioned
acquisitions under the purchase method of accounting and the assumptions in the
accompanying notes to the pro forma condensed combined financial statements. The
historical financial statements relating to the Kansas and Alabama Clusters
include the financial position and results of operations of the Systems through
the date of acquisition by the Company. Results of operations of the acquired
companies for periods subsequent to the respective acquisition dates are
included in the historical results of operations of the Company.
The following unaudited pro forma condensed combined financial information
has been prepared by the Company's management based in part on information
provided with respect to historical financial statements of the Systems included
elsewhere in this Prospectus. The unaudited pro forma data is not designed to
represent and does not represent what the Company's financial position or
results of operations actually would have been had the aforementioned
transactions been completed as of the date or the beginning of the periods
indicated, or to project the Company's financial position or results of
operations at any future date or for any future period. The pro forma condensed
combined financial statements should be read in conjunction with the financial
statements and notes of the Company contained elsewhere herein.
15
<PAGE> 18
US UNWIRED INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------- PRO FORMA
WEST PRO FORMA PRO FORMA OFFERING COMBINED
US UNWIRED MISCELLCO ALABAMA ALABAMA 4 ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
---------- --------- ------- --------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues....................... $39,252 $2,356 $3,366 $4,894 $ -- $49,868 $ -- $49,868
Costs and expenses:
Costs of service............. 11,430 416 854 1,421 -- 14,121 -- 14,121
Merchandise cost of sales.... 3,373 357 337 351 -- 4,418 -- 4,418
General and
administrative............. 5,308 550 1,129 666 -- 7,653 -- 7,653
Sales and marketing.......... 6,262 366 73 186 -- 6,887 -- 6,887
Depreciation and
amortization............... 5,686 250 252 455 2,835(a) 9,478 579(e) 10,057
---------- ------ ------ ------ ------- ------- --------- ----------
32,059 1,939 2,645 3,079 2,835 42,557 579 43,136
---------- ------ ------ ------ ------- ------- --------- ----------
Operating income............... 7,193 417 721 1,815 (2,835) 7,311 (579) 6,732
Other income (expense):
Interest expense, net........ (3,065) (317) (170) (460) (4,068)(b) (8,080) 2,064(d) (6,016)
Gain (loss) on sale of
assets..................... (32) -- -- -- -- (32) -- (32)
---------- ------ ------ ------ ------- ------- --------- ----------
Total other income (expense)... (3,097) (317) (170) (460) (4,068) (8,112) 2,064 (6,048)
---------- ------ ------ ------ ------- ------- --------- ----------
Income (loss) before income
taxes, minority interest and
equity in income of
affiliates................... 4,096 100 551 1,355 (6,903) (801) 1,485 684
---------- ------ ------ ------ ------- ------- --------- ----------
Income tax expense (benefit)... 2,291 -- -- 438 (2,375)(c) 354 564(f) 918
---------- ------ ------ ------ ------- ------- --------- ----------
Income (loss) before minority
interest and equity in income
of affiliates................ 1,805 100 551 917 (4,528) (1,155) 921 (234)
---------- ------ ------ ------ ------- ------- --------- ----------
Minority interest in losses of
subsidiary................... 454 -- -- -- -- 454 (454)(e) --
Equity in income of
affiliates................... 344 -- -- -- -- 344 -- 344
---------- ------ ------ ------ ------- ------- --------- ----------
Net income (loss) applicable to
common shareholders.......... $ 2,603 $ 100 $ 551 $ 917 $(4,528) $ (357) $ 467 $ 110
========== ====== ====== ====== ======= ======= ========= ==========
Net income per common share.... $ 0.23 $ 0.01
========== ==========
Weighted average number of
shares outstanding...........11,242,334 2,750,000 13,992,334
========== ========= ==========
</TABLE>
16
<PAGE> 19
US UNWIRED INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------- PRO FORMA
WEST PRO FORMA PRO FORMA OFFERING COMBINED AS
US UNWIRED ALABAMA ALABAMA 4 ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
---------- ------- --------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............................ $ 43,858 $1,641 $ 2,902 $ -- $48,401 $ -- $ 48,401
Costs and expenses:
Costs of service.................. 11,622 339 692 -- 12,653 -- 12,653
Merchandise costs of sales........ 3,377 155 177 -- 3,709 -- 3,709
General and administrative........ 7,078 529 263 -- 7,870 -- 7,870
Sales and marketing............... 5,448 37 167 -- 5,652 -- 5,652
Depreciation and amortization..... 6,432 102 563 754(a) 7,851 434(e) 8,285
---------- ------ ------ ------- ------- --------- ----------
33,957 1,162 1,862 754 37,735 434 38,169
---------- ------ ------ ------- ------- --------- ----------
Operating income.................... 9,901 479 1,040 (754) 10,666 (434) 10,232
Other income (expense):
Interest expense, net............. (4,302 ) (61 ) -- (1,808)(b) (6,171) 1,548(d) (4,623 )
---------- ------ ------ ------- ------- --------- ----------
Total other income (expense)........ (4,302 ) (61 ) -- (1,808) (6,171) 1,548 (4,623 )
---------- ------ ------ ------- ------- --------- ----------
Income (loss) before income taxes,
minority interest and equity in
income of affiliates.............. 5,599 418 1,040 (2,562) 4,495 1,114 5,609
---------- ------ ------ ------- ------- --------- ----------
Income tax expense (benefit)........ 2,375 -- 362 (815)(c) 1,922 423(f) 2,345
---------- ------ ------ ------- ------- --------- ----------
Income (loss) before minority
interest and equity in income of
affiliates........................ 3,224 418 678 (1,747) 2,573 691 3,264
---------- ------ ------ ------- ------- --------- ----------
Minority interest in losses of
subsidiary........................ 303 -- -- -- 303 (303)(e) --
Equity in income of affiliates...... 224 -- -- -- 224 -- 224
---------- ------ ------ ------- ------- --------- ----------
Net income applicable to common
shareholders...................... $ 3,751 $ 418 $ 678 $(1,747) $ 3,100 $ 388 $ 3,488
========== ====== ====== ======= ======= ========= ==========
Net income per common share......... $ 0.33 $ 0.25
========== ==========
Weighted average number of shares
outstanding....................... 11,250,000 2,750,000 14,000,000
========== ========= ==========
</TABLE>
17
<PAGE> 20
US UNWIRED INC.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL OFFERING
US UNWIRED ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents....................... $ 10,102 $ -- $ 10,102
Subscriber receivables, net..................... 7,977 -- 7,977
Other receivables............................... 694 -- 694
Inventory....................................... 1,683 -- 1,683
Prepaid expenses................................ 355 -- 355
-------- --------- ---------
Total current assets......................... 20,811(i) -- 20,811
Investments in unconsolidated affiliates.......... 5,426 -- 5,426
Property and equipment, net....................... 26,407(i) -- 26,407
Cellular licenses, net............................ 76,355(i) 11,583(g) 87,938
Deferred income taxes............................. 579 -- 579
Other assets...................................... 1,355 (189)(h) 1,166
-------- --------- ---------
Total assets................................. $130,933 $ 11,394 $ 142,327
======== ========= =========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses........... $ 9,780 $ -- $ 9,780
Current maturities of long-term debt............ 7,996 7,996
-------- --------- ---------
Total current liabilities.................... 17,776(i) 17,776
Long-term debt.................................... 87,682 (23,722)(g) 63,960
Minority interest................................. 140 (140)(h) --
Shareholders' equity.............................. 25,335 35,256(g)(h) 60,591
-------- --------- ---------
Total liabilities and shareholders' equity... $130,933 $ 11,394 $ 142,327
======== ========= =========
</TABLE>
18
<PAGE> 21
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
For purposes of determining the pro forma effect of the transactions
described in the previous pages on the Company's Unaudited Pro Forma Condensed
Combined Statements of Operations for the year ended December 31, 1995 and the
nine months ended September 30, 1996, the following adjustments have been made:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, 1995 1996
----------------- -----------------
<S> <C> <C>
(a) Represents incremental amortization and depreciation due
to the application of purchase accounting, which
increased the basis of intangible assets, primarily
license costs. Intangible assets are amortized on a
straight line basis over 20 years. Property and
equipment, which consists primarily of cell site
equipment, is depreciated on a straight line basis over
five years.
Elimination of historical amortization and
depreciation.......................................... $ (957) $ (665)
Amortization of cellular licenses....................... 2,454 927
Depreciation of cell site equipment..................... 1,338 492
------- -------
$ 2,835 $ 754
======= =======
(b) Represents the net effect on interest expense resulting
from (i) additional borrowings required to finance the
acquisition of the Kansas and Alabama Clusters under
bank credit facilities with a weighted average interest
rate of 8.7% per annum and (ii) interest on debt not
assumed in connection with such acquisitions.
Interest expense related to borrowings under bank
credit facilities.................................... $ 5,015 $ 1,869
Elimination of historical interest expense on debt not
assumed.............................................. (947) (61)
------- -------
$ 4,068 $ 1,808
======= =======
(c) Represents income tax benefit calculated using statutory
income tax rates applicable to the pro forma adjustments
and to record income tax on acquired companies where no
prior income taxes were provided....................... $(2,375) $ (815)
======= =======
(d) Represents the elimination of interest expense as a
result of the application of proceeds from this Offering
to repay a portion of the debt incurred in the
acquisitions of the Kansas and Alabama Clusters........ $ 2,064 $ 1,548
======= =======
(e) Represents the effect of the acquisition of the
remaining 49% of MS 34, using a portion of the Offering
proceeds
Elimination of minority interest....................... $ (454) $ (303)
======= =======
Amortization of cellular licenses over an assumed
useful life of 20 years................................ $ 579 $ 434
======= =======
(f) Represents income tax expense, calculated using
statutory income tax rates, applicable to the Offering
adjustments............................................ $ 564 $ 423
======= =======
</TABLE>
19
<PAGE> 22
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
For purposes of determining the pro forma effect of the transactions
described in the previous pages on the Company's Unaudited Pro Forma Condensed
Balance Sheet as of September 30, 1996, the following adjustments have been
made:
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1996
------------------
<S> <C>
(g) Represents the application of the net proceeds of this Offering to
acquire the remaining 49% of MS 34 and to repay a portion of debt
incurred in the acquisition of the Kansas and Alabama Clusters
Offering of Class A Common Stock, after deducting underwriting
discounts and commissions and estimated expenses of this Offering
(assumes the sale of 2,750,000 shares of Class A Common Stock at $14.00
per share, the midpoint of the range set forth on the cover of this
Prospectus)............................................................ $ 35,305
========
Acquisition of 49% of MS 34. For purposes of the pro forma financial
statements the Company has tentatively considered the fair value of the
acquired tangible assets to approximate their historical carrying
value, with the excess acquisition cost being attributable to cellular
licenses. It is the Company's intention, subsequent to the acquisition,
to evaluate more fully the acquired assets and, as a result, the
allocation of the acquisition costs among tangible and intangible
assets acquired may change............................................. $(11,583)
Retirement of long-term debt........................................... $(23,722)
--------
$(35,305)
========
(h) Represents the net adjustment to shareholders' equity, other assets and
minority interest to show the result of the write-off of deferred
financing costs associated with the early extinguishment of existing
debt, and the elimination of minority interest due to the acquisition of
49% of MS 34
Other assets........................................................... $ (189)
========
Minority interests..................................................... $ (140)
========
Shareholders' equity................................................... $ (49)
========
</TABLE>
(i) Historical US Unwired Inc. Unaudited Pro Forma Condensed Balance Sheet
includes amounts set forth in the following table which represent the
calculation of the purchase price of each acquisition and allocation of the
purchase price to specific tangible and intangible assets and liabilities.
<TABLE>
<CAPTION>
KS AL3 AL4 TOTAL
------- ------- ------- -------
<S> <C> <C> <C> <C>
Working capital............................. $ (60) $ 471 $ 98 $ 509
Property and equipment, net................. 4,626 1,385 3,868 9,879
Cellular licenses........................... 30,545 16,015 23,810 70,370
------- ------- ------- -------
$35,111 $17,871 $27,776 $80,758
======= ======= ======= =======
</TABLE>
20
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for the Company
for the fiscal years ended December 31, 1993, 1994, and 1995, and as of December
31, 1994 and 1995, and as of and for nine months ended September 30, 1996 is
derived from, and qualified by reference to, the consolidated financial
statements of the Company, which financial statements have been audited by KPMG
Peat Marwick LLP, independent certified public accountants. The consolidated
financial statements as of December 31, 1994 and 1995 and September 30, 1996,
and for the years ended December 31, 1993, 1994 and 1995 and the nine months
ended September 30, 1996, and the report thereon, are included elsewhere in this
Prospectus. The selected consolidated financial data set forth below for the
Company as of and for the nine months ended September 30, 1995 is derived from
unaudited consolidated financial statements of the Company included elsewhere in
this Prospectus and have been prepared on the same basis as the audited
financial statements and contain all adjustments, consisting of normal recurring
accruals, that the Company considers necessary for a fair presentation of the
financial position and results of operations for the periods presented. The
selected consolidated financial data set forth below for the Company for the
years ended December 31, 1991 and 1992 and as of December 31, 1991, 1992 and
1993, are derived from unaudited consolidated financial statements not included
elsewhere herein. The selected consolidated financial data set forth below
should be read in conjunction with the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements of the Company and notes thereto included elsewhere in this
Prospectus. The comparability of the information presented below is materially
affected by acquisitions of cellular Systems made by the Company in 1995 and
1996. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview."
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------------------------------------- -----------------------
1991 1992 1993 1994 1995 1995 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues.................... $ 9,189 $ 11,212 $ 14,346 $ 22,553 $ 39,252 $ 26,669 $ 43,858
Cost of service................... 2,814 2,963 4,513 7,445 11,430 7,891 11,622
Merchandise cost of sales......... 407 554 720 2,518 3,373 1,923 3,377
General and
administrative.................. 1,908 1,890 1,692 2,498 5,308 3,553 7,078
Sales and marketing............... 1,619 2,124 2,736 3,768 6,262 3,986 5,448
Depreciation and
amortization.................... 1,200 1,337 2,037 2,892 5,686 3,854 6,432
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income.................. 1,241 2,344 2,648 3,432 7,193 5,462 9,901
Interest income (expense), net.... 445 373 93 (630) (3,065) (2,018) (4,302)
Other income (expense),
net............................. 5 6 10 25 (32) -- --
Income tax expense................ 588 1,235 1,317 1,914 2,291 1,777 2,375
Minority interest in losses of
subsidiary...................... -- -- 401 439 454 380 303
Equity in income of affiliates.... 69 271 74 398 344 272 224
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income........................ $ 1,172 $ 1,759 $ 1,909 $ 1,750 $ 2,603 $ 2,319 $ 3,751
=========== =========== =========== =========== =========== =========== ===========
Net income per share.............. $ 0.11 $ 0.16 $ 0.17 $ 0.16 $ 0.23 $ 0.21 $ 0.33
=========== =========== =========== =========== =========== =========== ===========
Weighted average shares
outstanding..................... 10,933,782 10,933,782 10,933,782 11,108,874 11,242,334 11,239,783 11,250,000
=========== =========== =========== =========== =========== =========== ===========
Net cash provided by (used in)
operating activities............ (1,260) 3,465 7,537 $ 1,564 $ 6,737 $ 5,612 $ 8,938
Net cash used in investing
activities...................... (2,429) (4,275) (17,244) (5,184) (45,109) (40,824) (47,217)
Net cash provided by (used in)
financing activities............ (497) (1,675) 6,540 5,803 38,149 36,092 43,280
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
-------------------------------------------------------------- -----------------------
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................... $ 9,682 $ 6,751 $ 1,536 $ 6,322 $ 4,912 $ 4,395 $ 3,035
Property and equipment, net....... 5,371 5,663 11,882 13,261 20,911 21,429 26,407
Cellular licenses, net............ -- -- 10,969 10,095 38,784 39,225 76,355
Total assets...................... 16,506 16,461 29,908 35,640 78,754 77,295 130,933
Long-term debt.................... 2,293 618 7,728 13,020 49,274 47,764 87,682
Total liabilities and minority
interest........................ 3,638 1,834 13,373 16,982 57,351 56,176 105,598
Shareholders' equity.............. 12,868 14,627 16,535 18,658 21,403 21,119 25,335
</TABLE>
21
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and notes thereto and other
financial information included elsewhere in this Prospectus.
OVERVIEW
The Company owns and operates cellular communications Systems in 14 RSAs
and one MSA. The Company has been operating cellular Systems since 1987 and has
experienced rapid growth during the last few years. The Company's cellular
subscribers and penetration were approximately 77,000 and 5.4%, respectively, at
September 30, 1996 compared to approximately 9,000 and 2.4% at January 1, 1993.
The Company intends to continue to increase its total number of subscribers
through increased penetration of its existing markets and through acquisitions
of new markets. The Company's results of operations for the periods described
herein will not necessarily be indicative of future performance.
The Company's revenues consist primarily of subscriber revenues (including
access charges and usage charges), roaming revenues (fees charged for providing
services to subscribers of other cellular communications systems when such
subscribers "roam" by placing or receiving a phone call within one of the
Company's service areas) and merchandise sales (sales of cellular phones and
accessories). The Company offers equipment subsidies on phones (averaging
approximately $166 per net subscriber added in the nine months ended September
30, 1996) in order to attract new subscribers and expects to continue this
practice which is consistent with industry norms. Because of such promotional
discounts, increases in merchandise sales typically result in decreases in
operating income. The majority of the Company's revenues are derived from
subscriber revenues. Subscriber revenues and merchandise sales also include
amounts recognized for sales of paging service; however, revenues from paging
are expected to account for less than 4% of the Company's total revenues for the
year ended December 31, 1996.
Average monthly revenue per subscriber (based upon subscriber revenues
only) from its cellular operations decreased to $57.91 in 1995 compared to
$60.77 in 1993. The Company's decrease in average monthly revenue per
subscriber, which is consistent with industry trends, reflects its efforts to
expand its subscriber base and overall penetration by lowering its prices
(including roaming rates) and offering affordable rate plans in its markets. The
Company believes that, by lowering its prices and increasing the quality of its
services, it will build subscriber loyalty in its existing markets, reduce
potential churn and provide a competitive advantage against PCS and other
wireless competitors. The Company anticipates that, although the average monthly
subscriber revenue per subscriber may decline due to additional price decreases
and increased competition, these decreases will eventually be offset by an
enlarged subscriber base and by increased usage once subscribers begin taking
advantage of the full potential and utility of cellular phone service.
Cost of service consists of the costs of providing wireless service to
subscribers, which includes costs to access local exchange and long distance
carrier facilities, costs of maintaining the Company's wireless network, and
costs associated with subscribers roaming on other carriers' networks. Costs of
merchandise sales consist of inventory costs associated primarily with cellular
phones and related accessories. General and administrative expenses include
billing costs, administrative costs associated with maintaining subscribers,
which include customer service, accounting and other centralized functions, and
provisions for subscriber bad debt. Sales and marketing costs include costs
associated with acquiring subscribers, including sales, advertising and
promotional expenses. Depreciation and amortization include primarily
depreciation expense associated with the Company's property and equipment in
service and amortization associated with its wireless licenses for operational
markets.
EBITDA is a measure commonly used in the telecommunications industry and is
presented to enhance the understanding of the Company's operating results and is
not intended to be a financial performance measure comparable to similarly
titled measures of other companies. EBITDA should not be regarded as an
alternative to either operating income or net income as an indicator of
operating performance, or to cash flows as a measure of liquidity. Furthermore,
EBITDA is not a GAAP-based financial measure, and it should not be
22
<PAGE> 25
considered as an alternative to GAAP-based measures of financial performance.
See "Selected Financial Data."
The comparability of the information presented in Management's Discussion
and Analysis of Financial Condition and Results of Operations is materially
affected by acquisitions the Company completed in 1995 and 1996. On April 30,
1995, the Company acquired the assets of Miscellco Communications, Inc., which
include the Systems serving the Kansas Cluster, for approximately $35.1 million.
On May 15, 1996, the Company acquired the assets of West Alabama Cellular
Telephone Company, Inc., which include the System serving the Alabama-3 RSA, for
approximately $17.9 million. On July 1, 1996, the Company acquired the assets of
the Alabama-4 RSA for approximately $27.8 million. All of these acquisitions
were financed through bank debt.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
The Company had 76,907 cellular subscribers at September 30, 1996, an
increase of 21,331 or 38.4% from December 31, 1995. At September 30, 1995, the
Company had 48,475 subscribers, an increase of 21,162 or 77.5% from December 31,
1994. For the nine months ended September 30, 1996 and September 30, 1995, net
subscribers added through cellular System acquisitions were 8,800 and 10,900,
respectively. Excluding acquired cellular subscribers, the Company's net
subscribers increased by 12,531 or 22.6% in the nine months ended September 30,
1996 and 10,262 or 37.8% in the nine months ended September 30, 1995. Although
the aggregate number of net subscribers added continues to increase, the
resulting growth rates have declined due to the larger subscriber base.
Management expects that this trend will continue. Of the total subscribers added
in the nine-month period ended September 30, 1996, 61.7% were from direct
Company sales compared to 38.3% added through independent agent and retailer
distribution channels. This reflects the Company's focus on direct retail sales
channels.
REVENUES
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Subscriber revenues.............................................. $19,263 $32,635
Roaming revenues................................................. 6,248 9,609
Merchandise sales................................................ 998 1,287
Other revenue.................................................... 160 327
------- -------
Total revenues......................................... $26,669 $43,858
======= =======
</TABLE>
Subscriber revenues increased $13.3 million or 68.9% to $32.6 million for
the nine months ended September 30, 1996 from $19.4 million for the nine months
ended September 30, 1995. This increase was primarily due to the increased
number of cellular subscribers in 1996, including those acquired in the
acquisitions of the Kansas and Alabama Clusters. Average monthly cellular
subscriber revenue per subscriber was $54.74 for the nine months ended September
30, 1996 compared to $56.48 for the nine months ended September 30, 1995. The
Company believes the decrease in subscriber revenue per subscriber primarily
reflects price decreases implemented to build subscriber base and stimulate
cellular usage.
Roaming revenues were $9.6 million for the nine months ended September 30,
1996 compared to $6.2 million for the nine months ended September 30, 1995, an
increase of $3.4 million or 54.8%. Growth in the Company's roaming revenues
generally reflected increases in the Company's geographical coverage and market
penetration levels in adjacent markets and the cellular industry as a whole.
Roaming revenues as a percentage of total revenues declined to 21.9% for the
nine months ended September 30, 1996 from 23.4% for the nine months ended
September 30, 1995 as a result of the 68.9% growth in subscriber revenues, which
exceeded the 54.8% increase in roaming revenues. Although the Company expects
total roaming revenues to continue to increase as the Company and the cellular
industry grow, it expects its roaming revenues as a percentage of total revenues
to continue to decline as its subscriber base grows and it reduces roaming
rates.
23
<PAGE> 26
Merchandise sales, which consist primarily of cellular handset sales,
increased to $1.3 million for the nine months ended September 30, 1996 from
$998,339 for the nine months ended September 30, 1995. This $288,256 or 28.9%
increase was primarily due to the increase in subscriber additions partially
offset by a decrease in the average handset sales price. The Company anticipates
continued growth in merchandise sales as a result of increases in net subscriber
additions.
Other revenues, which consist primarily of microwave and management
operations, were $327,844 for the nine months ended September 30, 1996, compared
to $160,077 for the nine months ended September 30, 1995. This represents a
$167,767 or 104.8% increase which resulted primarily from the management
services provided to the PCS Partnership and other non-consolidated affiliates.
However, other revenues remained approximately 0.7% of total revenues for the
nine months ended September 30, 1996 and 1995.
OPERATING EXPENSES
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cost of service................................................ $ 7,891 $11,622
Merchandise cost of sales...................................... 1,923 3,377
General and administrative..................................... 3,553 7,078
Sales and marketing............................................ 3,986 5,448
Depreciation and amortization.................................. 3,854 6,432
------- -------
Total operating expenses............................. $21,207 $33,957
======= =======
</TABLE>
Cost of service increased to $11.6 million for the nine months ended
September 30, 1996 from $7.9 million for the nine months ended September 30,
1995. This increase was primarily attributable to the increased number of
subscribers which resulted in increased costs to access local exchange and long
distance carrier facilities and maintain the Company's expanding wireless
network. While cost of service increased $3.7 million or 46.8%, it decreased as
a percentage of service revenues to 27.3% for the nine months ended September
30, 1996 from 30.7% for the nine months ended September 30, 1995, which was
primarily due to efficiencies gained from the growing subscriber base. Service
revenues equal total revenues less merchandise sales.
Merchandise cost of sales increased to $3.4 million for the nine months
ended September 30, 1996 from $1.9 million for the nine months ended September
30, 1995, an increase of $1.5 million or 79.0%, which was primarily attributable
to the increased number of subscribers. The Company's margin (loss) from
merchandise sales was $2.1 million or 62% of merchandise costs for the nine
months ended September 30, 1996, and $924,179 or 48% for the nine months ended
September 30, 1995. The loss on merchandise sales is considered a cost of adding
net subscribers and, as such, is not deemed to have a material effect on the
Company's results of operations or financial condition. See the discussion of
sales and marketing costs below.
General and administrative costs increased to $7.1 million for the nine
months ended September 30, 1996 from $3.6 million for the nine months ended
September 30, 1995, an increase of $3.5 million or 97.2%. The increase was
largely attributable to the added costs associated with rapid expansion of the
Company's subscriber base. These costs represent salaries for an incremental
increase in the number of customer service representatives and increased costs
of service and collections. As a percentage of service revenues general and
administrative costs increased to 16.6% for the nine months ended September 30,
1996 from 13.8% for the nine months ended September 30, 1995. This increase
reflects the Company's commitment to quality customer service and the aggressive
promotion of its cellular service offset somewhat by economies of scale.
Sales and marketing costs increased to $5.4 million for the nine months
ended September 30, 1996 from $4.0 million for the nine months ended September
30, 1995, an increase of $1.4 million or 35.0%, which was primarily due to
subscriber additions. Sales and marketing costs per net subscriber added
(excluding equipment subsidy) increased to $433 for the nine months ended
September 30, 1996 from $387 for the nine
24
<PAGE> 27
months ended September 30, 1995. After giving effect to equipment subsidy, costs
per net subscriber added increased to $599 for the nine months ended September
30, 1996 from $476 for the nine months ended September 30, 1995, an increase
primarily attributable to added marketing costs in the acquired cellular
Systems, emphasizing the Company's aggressive marketing in newly acquired
Systems. The Company believes that, prior to its acquisition of these Systems,
past marketing efforts in the acquired Systems had been inadequate. The Company
does not expect this trend in costs per net subscriber to continue, as the
increase in the costs is attributable to bringing newly acquired markets up to
the Company's marketing standards. The increases in net cost per subscriber have
reduced results of operations below levels that would have been attained without
the increase; however, these decreases in operating results are not deemed to be
material.
Depreciation and amortization expense increased to $6.4 million for the
nine months ended September 30, 1996 from $3.9 million for the nine months ended
September 30, 1995. This $2.5 million or 64.1% increase is primarily
attributable to the expansion of the Company's cellular Systems, and to an
increase in gross cellular licensing costs and other assets to $82.9 million at
September 30, 1996 from $41.9 million at September 30, 1995.
OPERATING INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Operating income................................................. $5,462 $9,901
====== ======
</TABLE>
Total operating income increased to $9.9 million for the nine months ended
September 30, 1996 from $5.5 million for the nine months ended September 30,
1995. This increase of $4.4 million or 80.0% was due to increased revenues,
which exceeded increases in operating expenses.
OTHER INCOME (EXPENSE)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Interest expense............................................... $(2,253) $(4,516)
Interest income................................................ 235 214
------- -------
Total other income (expense)......................... $(2,018) $(4,302)
======= =======
</TABLE>
Interest expense increased to $4.5 million for the nine months ended
September 30, 1996 from $2.3 million for the nine months ended September 30,
1995. The $2.2 million or 95.7% increase was primarily attributable to an
increase in borrowings, which increased to $95.7 million at September 30, 1996
from $50.1 million at September 30, 1995, to fund the Company's expansion and
capital expenditures, and was partially offset by a decrease in interest income
to $213,952 for the nine months ended September 30, 1996 from $234,771 for the
nine months ended September 30, 1995. The interest expense was further affected
by a decline in the weighted average interest rate to 8.27% at September 30,
1996 from 8.88% at September 30, 1995.
NET INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Net income....................................................... $2,319 $3,751
====== ======
</TABLE>
25
<PAGE> 28
Net income increased to $3.8 million for the nine months ended September
30, 1996 from $2.3 million for the nine months ended September 30, 1995. This
$1.5 million or 65.2% increase was due to the changes described in the various
revenue and expense items which are primarily driven by the 58.7% increase in
subscribers. Net income was also impacted by income tax expense which increased
by $598,517 for the nine months ended September 30, 1996 over the same period in
1995. Income tax expense increased as a result of increased income, the effect
of state income taxes, and changes in the valuation allowance for deferred tax
assets caused primarily by changes in the net operating losses of the Company's
51% owned subsidiary.
EBITDA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1995 1996
------ -------
(IN THOUSANDS)
<S> <C> <C>
EBITDA.......................................................... $9,316 $16,333
====== =======
</TABLE>
EBITDA improved to $16.3 million for the nine months ended September 30,
1996 from $9.3 million for the nine months ended September 30, 1995. The $7.0
million or 75.3% increase was primarily the result of increased revenues due to
the increased subscriber base and the related cost efficiencies. As a result,
EBITDA as a percentage of revenues increased to 37.2% for the nine months ended
September 30, 1996 from 34.9% for the nine months ended September 30, 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
The Company had 55,576 cellular subscribers at December 31, 1995, an
increase of 28,263 or 103.5% during 1995. At December 31, 1994, the Company had
27,313 subscribers, an increase of 11,371 or 71.3% during 1994. During 1995 and
1994, net subscribers added through cellular System acquisitions were
approximately 10,900 and 0, respectively. Excluding such acquired cellular
subscribers in 1995, the percentage of net cellular subscriber additions
increased by 63.7%.
REVENUES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Subscriber revenues............................................ $14,548 $28,802
Roaming revenues............................................... 6,603 8,909
Merchandise sales.............................................. 1,002 1,404
Other revenue.................................................. 400 137
------- -------
Total revenues....................................... $22,553 $39,252
======= =======
</TABLE>
Subscriber revenues increased to $28.8 million in 1995 from $14.5 million
in 1994. This $14.3 million or 98.6% increase was primarily due to the 103.5%
growth in the number of subscribers, including subscribers added in the
acquisition of the Kansas Cluster. Average monthly cellular subscriber revenue
per subscriber was $57.91 in 1995, compared to $56.05 in 1994. The Company
believes this increase in average monthly subscriber revenue per subscriber is
due to the higher subscriber revenue per subscriber in the Kansas Cluster.
Roaming revenues were $8.9 million in 1995 compared to $6.6 million in
1994, an increase of $2.3 million or 34.9%. Growth in the Company's roaming
revenues generally reflected increases in the Company's geographical coverage
and market penetration levels in adjacent markets and the cellular industry as a
whole. Roaming revenues as a percentage of total revenues declined to 22.7% in
1995 from 29.3% in 1994 as a result of the 98.6% growth in subscriber revenues,
which exceeded the 34.9% increase in roaming revenues.
26
<PAGE> 29
Merchandise sales, which consist primarily of cellular handset sales,
increased to $1.4 million in 1995 from $1.0 million in 1994. This $401,204 or
40.0% increase was primarily due to the increase in subscriber additions
partially offset by a decrease in the average handset sales price. The Company
anticipates continued growth in merchandise sales as a result of increases in
subscriber additions.
Other revenues which consist primarily of management, microwave and
voicemail operations, were $136,962 in 1995 compared to $400,257 in 1994. This
$263,295 or 65.8% decrease was primarily the result of the Company's sale of the
voicemail operations in 1994.
OPERATING EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cost of service................................................ $ 7,445 $11,430
Merchandise cost of sales...................................... 2,518 3,373
General and administrative..................................... 2,498 5,308
Sales and marketing............................................ 3,768 6,262
Depreciation and amortization.................................. 2,892 5,686
------- -------
Total operating expenses............................. $19,121 $32,059
======= =======
</TABLE>
Cost of service increased to $11.4 million in 1995 from $7.4 million in
1994, primarily as a result of the 103.5% increase in the number of subscribers
(including acquired subscribers) which resulted in increased costs to access
local exchange and long distance carrier facilities and maintain the Company's
expanding wireless network. While cost of service increased $4.0 million or
54.1% for the year, it decreased as a percentage of service revenues to 30.2% in
1995 from 35.2% in 1994, which was primarily due to efficiencies gained from the
growing subscriber base.
Merchandise cost of sales increased to $3.4 million in 1995 from $2.5
million in 1994, an increase of $854,826 or 34.0%, which was primarily
attributable to the increased number of subscriber additions.
General and administrative costs increased to $5.3 million in 1995 from
$2.5 million in 1994, an increase of $2.8 million or 112.0%. The increase was
primarily attributable to the added costs associated with supporting the
increased subscriber base. These costs represent salaries for an incremental
increase in the number of customer service representatives and increased costs
of service and collections. As a percentage of service revenues, general and
administrative costs increased to 14.0% for 1995 from 11.6% in 1994. This
increase reflects the Company's commitment to quality customer service and its
aggressive promotion of cellular service offset somewhat by economies of scale.
The increase in general and administrative support costs was directly driven by
the acquisition of the Kansas Cluster.
Sales and marketing costs increased to $6.3 million in 1995 from $3.8
million in 1994, an increase of $2.5 million or 65.8%, which was primarily due
to subscriber additions and an increase in start-up marketing costs in newly
acquired markets. Sales and marketing costs per net subscriber added (excluding
equipment subsidy) increased to $360 in 1995 from $332 in 1994. After giving
effect to equipment subsidy, costs per net subscriber added increased to $473 in
1995 from $465 in 1994.
Depreciation and amortization expense was $5.7 million in 1995 compared to
$2.9 in 1994. This $2.8 million or 96.6% increase is primarily attributable to
the expansion of the Company's cellular Systems (including Systems acquired) and
to an increase in gross cellular licensing costs and other assets to $42.1
million at December 31, 1995 from $13.1 million at December 31, 1994.
27
<PAGE> 30
OPERATING INCOME
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Operating income................................................. $3,432 $7,193
====== ======
</TABLE>
Total operating income increased to $7.2 million in 1995 from $3.4 million
in 1994, an increase of $3.8 million or 111.8% due to increased revenues, which
exceeded increases in operating expenses.
OTHER INCOME (EXPENSE)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1994 1995
------ -------
(IN THOUSANDS)
<S> <C> <C>
Interest expense............................................... $ (790) $(3,401)
Interest income................................................ 160 336
Gain (loss) on sale of assets.................................. 25 (32)
------ -------
Total other income (expense)......................... $ (605) $(3,097)
====== =======
</TABLE>
Interest expense increased to $3.4 million in 1995 from $789,856 in 1994.
The $2.6 million or 330.5% increase was primarily attributable to an increase in
borrowings, which increased to $52.1 million at December 31, 1995 from $13.7
million at December 31, 1994, to fund the Company's expansion and capital
expenditures, and was partially offset by an increase in interest income to
$336,253 in 1995 from $160,405 in 1994. The interest expense was further
affected by an increase in the weighted average interest rate to 8.73% in 1995
from 8.51% in 1994.
NET INCOME
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Net income....................................................... $1,750 $2,603
====== ======
</TABLE>
Net income increased to $2.6 million in 1995 from $1.8 million in 1994.
This $853,355 or 48.8% increase was due to the changes described in the various
revenue and expense items which are primarily driven by the 103.5% increase in
the number of subscribers. Net income was also impacted by income tax expense
which increased by $376,745 in 1995. Income tax expense increased as a result of
increased income, the effect of state income taxes, and changes in the valuation
allowance for deferred tax assets caused primarily by changes in the net
operating losses of the Company's 51% owned subsidiary.
EBITDA
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1994 1995
------ -------
(IN THOUSANDS)
<S> <C> <C>
EBITDA.......................................................... $6,324 $12,879
====== =======
</TABLE>
EBITDA improved to $12.9 million in 1995 from $6.3 million in 1994. The
$6.6 million or 104.8% increase was primarily the result of increased revenues
due to the increased subscriber base and the related cost efficiencies. As a
result, EBITDA as a percentage of revenues increased to 32.8% in 1995 from 28.0%
in 1994.
28
<PAGE> 31
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
The Company had 27,313 cellular subscribers at December 31, 1994, an
increase of 11,371 or 71.3% during 1994. At December 31, 1993, the Company had
15,942 subscribers, an increase of 7,037 or 79.0% during 1993. During 1994 and
1993, there were no subscribers added through cellular System acquisitions.
REVENUES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1993 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Subscriber revenues............................................ $ 9,059 $14,548
Roaming revenues............................................... 4,085 6,603
Merchandise sales.............................................. 541 1,002
Other revenue.................................................. 661 400
------- -------
Total revenues....................................... $14,346 $22,553
======= =======
</TABLE>
Subscriber revenues increased to $14.6 million in 1994 from $9.1 million in
1993. This $5.5 million or 60.4% increase was primarily due to the 71.3% growth
in the number of subscribers. Average monthly cellular subscriber revenue per
subscriber was $56.05 in 1994, compared to $60.77 in 1993. This 7.8% decrease is
a result of price decreases implemented by the Company to build the subscriber
base and stimulate cellular usage.
Roaming revenues were $6.6 million in 1994 compared to $4.1 million in
1993, an increase of $2.5 million or 61.0%. Growth in the Company's roaming
revenues generally reflects increases in the Company's geographical coverage and
market penetration levels in adjacent markets and the cellular industry as a
whole. Roaming revenues as a percentage of total revenues increased to 29.3% in
1994 from 28.5% in 1993 as a result of significant increases in cell site
additions, primarily in newly acquired markets. These acquisitions resulted in
added geographic coverage and the addition and modification of several roaming
agreements.
Merchandise sales, which consist primarily of cellular handset sales,
increased to $1.0 million in 1994 from $540,961 in 1993. This $461,260 or 85.2%
increase was primarily due to the increase in subscriber additions partially
offset by a decrease in the average handset sales price. The Company anticipates
continued growth in merchandise sales as a result of increases in subscriber
additions.
Other revenue, which consists primarily of revenue from microwave and
voicemail operations, was $400,257 in 1994 compared to $661,369 in 1993. This
$261,112 or 39.5% decrease is primarily the result of the Company's decision to
focus on cellular telephone operations and to decrease voicemail operations,
primarily non-cellular related voicemail.
OPERATING EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1993 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cost of service................................................ $ 4,513 $ 7,445
Merchandise cost of sales...................................... 720 2,518
General and administrative..................................... 1,692 2,498
Sales and marketing............................................ 2,736 3,768
Depreciation and amortization.................................. 2,037 2,892
------- -------
Total operating expenses............................. $11,698 $19,121
======= =======
</TABLE>
Cost of service increased to $7.4 million in 1994 from $4.5 million in
1993. This increase was primarily a result of the 71.3% increase in the number
of subscribers which resulted in increased costs to access local exchange and
long distance carrier facilities and maintain the Company's expanding wireless
network. This
29
<PAGE> 32
represented an increase of $2.9 million or 64.4% for the year, and 35.2% and
34.3% of service revenues for 1994 and 1993, respectively. This increase was
principally attributable to start-up costs associated with the Mississippi
Cluster.
Merchandise cost of sales increased to $2.5 million in 1994 from $719,884
in 1993, an increase of $1.8 million or 249.7%, which was primarily attributable
to the increased number of subscribers.
General and administrative costs increased to $2.5 million in 1994 from
$1.7 million in 1993, an increase of $806,131 or 47.4%, which was primarily
attributable to the increase in the costs associated with supporting the
increased subscriber base. However, as a percentage of service revenues general
and administrative costs decreased to 11.8% in 1994 from 12.9% in 1993,
reflecting certain economies of scale.
Sales and marketing costs increased to $3.8 million in 1994 from $2.7
million in 1993, an increase of $1.1 million or 40.7% which was primarily due to
subscriber additions and an increase in start-up marketing costs in newly
acquired markets. Sales and marketing costs per net subscriber added (excluding
equipment subsidy) decreased to $331 in 1994 from $389 in 1993, a decrease
primarily attributable to improved efficiencies. After giving effect to
equipment subsidy, the costs per net subscriber added increased to $465 in 1994
from $414 in 1993.
Depreciation and amortization expense was $2.9 million in 1994 compared to
$2.0 million in 1993. This $855,580 or 42.0% increase is primarily attributable
to the expansion of the Company's cellular Systems and to an increase in gross
cellular licensing costs and other assets to $13.1 million at December 31, 1994
from $12.1 million at December 31, 1993.
OPERATING INCOME
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1993 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
Operating income................................................. $2,648 $3,432
====== ======
</TABLE>
Total operating income increased to $3.4 million in 1994 from $2.6 million
in 1993, an increase of $783,581 or 29.6% due to increased revenues, which
exceeded increases in operating expenses.
OTHER INCOME (EXPENSE)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1993 1994
----- -----
(IN THOUSANDS)
<S> <C> <C>
Interest expense.................................................. $(177) $(790)
Interest income................................................... 270 160
Gain on sale of assets............................................ 10 25
----- -----
Total other income (expense)............................ $ 103 $(605)
===== =====
</TABLE>
30
<PAGE> 33
Interest expense increased to $789,856 in 1994 from $177,472 in 1993. The
$612,384 or 345.1% increase was primarily attributable to an increase in
borrowings, which increased to $13.7 million at December 31, 1994 from $7.7
million at December 31, 1993, to fund the Company's expansion and capital
expenditures, partially offset by a decrease in interest income to $160,405 in
1994 from $269,548 in 1993. The interest expense was further affected by an
increase in the weighted average interest rate to 8.51% in 1994 from 5.85% in
1993.
NET INCOME
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1993 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
Net income....................................................... $1,909 $1,750
====== ======
</TABLE>
Net income decreased to $1.8 million in 1994 from $1.9 million in 1993.
This $158,847 or 8.4% decrease was due to the changes described in the various
revenue and expense items which are primarily driven by the 71.3% increase in
subscribers and related costs of borrowing to finance buildout. Net income was
also impacted by income tax expense, which increased by $597,464 in 1994. Income
tax expense increased as a result of increased income, the effect of state
income taxes, and changes in the valuation allowance for deferred tax assets
caused primarily by changes in the net operating losses of the Company's 51%
owned subsidiary.
EBITDA
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1993 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
EBITDA........................................................... $4,685 $6,324
====== ======
</TABLE>
EBITDA improved to $6.3 million in 1994 from $4.7 million in 1993. The $1.6
million or 34.0% increase is primarily the result of increased revenues due to
the increased subscriber base and the related cost efficiencies. However, EBITDA
as a percentage of revenues decreased to 28.0% in 1994 from 32.7% in 1993. This
is primarily the result of initial start-up operating costs in the newly
acquired markets that had no existing subscriber base.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes the proceeds from this Offering, together with
anticipated cash flows from operations, will be sufficient to fund capital
expenditures and working capital necessary for the continued growth of its
existing cellular operations for the next 12 months. In the ordinary course of
its business, the Company reviews potential acquisition opportunities and
expects to finance such future acquisitions in part with proceeds from this
Offering. Pending such uses, the proceeds will be applied to reduce existing
bank debt incurred to finance recent acquisitions. The Company currently
anticipates that, depending on the availability of favorable acquisition
opportunities and the rate of growth of the Company's cellular operations, it
may require funds in excess of the proceeds of this Offering to finance such
future acquisitions, to expand operations in existing markets, and to provide
working capital.
Historically, the Company has relied on bank financing to fund expansion.
At September 30, 1996, the Company had $95.7 million of debt outstanding. The
Company's long-term borrowings from 1994 through September 30, 1996 were made
through various credit facilities bearing various rates of interest at both
fixed and variable terms ranging from 5.45% to 10.50%, with maturity dates
ranging from December 20, 2002 to December 20, 2003. These facilities are
non-revolving loan agreements under which the Company has borrowed $100.3
million, and at September 30, 1996 approximately $2.1 million remains available
for borrowing under these credit facilities.
31
<PAGE> 34
The Company has initiated discussions with commercial lenders to secure a
credit facility to be available for future acquisition opportunities or other
working capital needs. Based on such discussions, the Company believes that such
a facility would provide for additional borrowings of up to approximately $80.0
million after applying an estimated $23.7 million of the proceeds from this
Offering to repay a portion of existing debt. To the extent that the proceeds
are used for purposes other than to repay existing debt, the Company does not
anticipate that this use would materially impact the Company's ability to obtain
the additional $80.0 million in financing, or materially impact its overall
financial condition.
Net cash provided by operations was $8.9 million for the nine months ended
September 30, 1996, consisting of $3.8 million of net income, $6.4 million of
depreciation and amortization and other adjustments consisting primarily of
changes in current assets and current liabilities. Net cash provided by
operations was $6.7 million in 1995 consisting of $2.6 million of net income,
$5.7 million of depreciation and amortization and other adjustments consisting
primarily of changes in current assets and current liabilities. Net cash
provided by operating activities was $1.6 million and $7.5 million in 1994 and
1993, respectively.
Net cash used in investing activities was $47.2 million for the nine months
ended September 30, 1996, which consisted primarily of capital expenditures for
property and equipment of $3.4 million and the acquisition of cellular
properties of $43.9 million. Net cash used in investing activities was $45.1
million in 1995, which consisted primarily of capital expenditures for property
and equipment of $5.9 million, the acquisition of cellular properties of $35.1
million and investments in unconsolidated subsidiaries of $4.9 million. Net cash
used in investing activities was $5.2 million and $17.2 million in 1994 and
1993, respectively.
Net cash provided by financing activities was $43.3 million for the nine
months ended September 30, 1996, which consisted primarily of additions to
long-term debt of $46.0 million for the acquisition of cellular properties. Net
cash provided by financing activities was $38.1 million in 1995, which consisted
primarily of additions to long-term debt of $40.3 million for the acquisition of
cellular properties. Net cash provided by financing activities was $5.8 million
and $6.5 million in 1994 and 1993, respectively.
The Company anticipates that it will expend approximately $5.0 million
during the remainder of 1996 and approximately $15.0 million in 1997 for
existing cellular System and capacity expansion and centralized infrastructure
improvements. The Company may be required to make expenditures sooner than
anticipated or in greater amounts than expected based on a number of variables,
including increased subscriber growth, increased losses resulting from
merchandise sales and increased construction costs associated with expanding
coverage areas.
In November and December 1996, the Company entered into agreements to
acquire from seven minority shareholders 49% of the capital stock of Mississippi
34 Cellular Corporation (MS 34), a corporation that holds the licenses covering
the Mississippi-3 and Mississippi-4 RSAs. The Company presently owns the
remaining 51% of the stock. Consummation of the acquisition is contingent upon,
among other things, the successful completion of this Offering.
In addition, the Company is obligated to fund up to approximately $13.0
million of capital to the PCS Partnership as part of the license acquisition
costs and other working capital needs. The Company has funded $2.9 million of
this obligation as of September 30, 1996. The PCS Partnership is subject to the
FCC build-out requirements and will therefore require significant additional
amounts to complete the build-out of its PCS systems. The potential sources of
such additional amounts include vendor loans, loans or capital contributions by
the various partners, or other third party financing. There are no current
agreements or plans with respect thereto. The PCS Partnership has obtained a
commitment from the Rural Telephone Finance Cooperative for $59.0 million of
financing for capital expenditures under which the Company would be required to
guarantee repayment of up to $6.2 million. There can be no assurance that the
build-out of the PCS markets will not cost materially more than is currently
anticipated, or that financing will be available at all or in the absence of
additional guarantees by the Company and other partners. To the extent that the
Company is required to make capital contributions to the PCS Partnership faster
than expected, the capital requirements are greater than anticipated or the
Company elects to take advantage of acquisition opportunities, including those
that may arise through future FCC auctions, the Company may require additional
funding to implement its business strategy.
32
<PAGE> 35
Based upon additional financing arrangements under negotiation, and
anticipated cash flows from operations, the Company believes that it will have
sufficient liquidity to accomplish its business objectives. Core business growth
is anticipated to increase the overall borrowing capacity of the Company beyond
current levels, and the Company believes that potential future acquisitions will
increase the capacity even further. The Company also believes that it will be
able to achieve more favorable financing terms after this Offering and that
these more favorable terms will further increase its financing capacity and its
liquidity.
SEASONALITY
The Company, and the wireless communications industry in general, have
historically experienced significant subscriber growth during the fourth
calendar quarter. Accordingly, during such quarter the Company experiences
greater losses on merchandise sales and increases in sales and marketing
expenses. The Company has historically experienced highest usage and revenue per
subscriber during the summer months. The Company expects these trends to
continue.
33
<PAGE> 36
BUSINESS
The Company owns and operates cellular communications systems in 14 RSAs
and one MSA which together have 1.4 million Net Pops. These markets consist
primarily of four clusters that are located in Louisiana, Mississippi, Alabama
and Kansas. In its Louisiana Cluster, the Company markets under the MERCURY
CELLULAR AND PAGING(TM) trade name and in its other clusters under the
CELLULARONE(R) service mark. As of September 30, 1996, the Company served
approximately 77,000 cellular subscribers through cellular Systems covering more
than 72,000 square miles, and served over 14,000 paging subscribers by providing
paging services in its Louisiana market and by reselling such services in
certain other markets. The Company owns a 24 1/3% limited partnership interest
in the PCS Partnership, which, as the successful bidder in the FCC auction, has
been granted five licenses for broadband PCS that cover five BTAs with an
aggregate population of 1.8 million Pops. These PCS markets, together with the
Louisiana Cluster cellular market, are expected to create a large seamless
market traversed by I-10 between Houston and New Orleans.
The Company was incorporated in Louisiana as Mercury, Inc. on March 3, 1967
to conduct telecommunications activities that complemented the local landline
telephone service of an affiliated corporation. See "Certain
Transactions -- Tax-Free Restructuring" for information concerning transactions
in which the Company recently acquired the wireless communications operations of
Cameron Communications Corporation ("Cameron"), an affiliate of the Company
through common control. The principal wholly-owned operating subsidiaries of the
Company are Mercury Cellular Telephone Company ("MCTC"), which owns the licenses
covering the Louisiana Cluster, and Mississippi One Cellular Telephone Company,
which owns the licenses covering the Mississippi-1 RSA and the Alabama-3 and
Alabama-4 RSAs. MCTC, in turn, owns 100% of the stock of Mercury Cellular of
Kansas, Inc. (which owns the licenses covering the Kansas Cluster), a 25%
limited partnership interest in GTE Mobilnet of Texas RSA 21 Limited Partnership
(which owns the licenses covering the Texas-21 RSA), a 24.33% interest in the
PCS Partnership and a 50% interest in Mercury Mobility, L.L.C. ("Mobility") (an
acquisition vehicle for additional PCS licenses). In addition, the Company owns
51% of the capital stock of MS 34 (which owns the licenses covering the
Mississippi-3 and Mississippi-4 RSAs) and has entered into agreements to acquire
the remaining 49% of the capital stock. See "Use of Proceeds." The Company's
principal affiliates through common control include Cameron, a landline
telephone holding company, and Mercury Information Technologies, Inc., a
technology services company ("MIT").
On September 19, 1996, the Company, Cameron and their respective
wholly-owned subsidiaries entered into an Agreement and Plan of Reorganization,
pursuant to which on October 31, 1996 (i) Cameron transferred all of its assets,
except its 96% interest in MCTC, to Newco, a new wholly-owned subsidiary of
Cameron, (ii) 100% of the stock of Newco was distributed to Cameron's
shareholders, and (iii) Cameron was merged into the Company. Thereafter, Newco
changed its name to "Cameron Communications Corporation." See "Certain
Transactions -- Tax-Free Restructuring."
The Henning family, whose members incorporated the Company and Cameron and
have always been their principal shareholders, has been involved in the
communications industry since W. T. Henning founded a landline telephone company
in 1928 in southwest Louisiana, where it still operates. The Henning family
became involved in the wireless communications industry with the introduction of
paging services in 1980 and cellular services in 1987.
The principal executive offices of the Company are located at One Lakeshore
Drive, Suite 1900, Lake Charles, Louisiana 70629, and its telephone number is
(318) 436-9000.
BUSINESS STRATEGY
GROWTH STRATEGY
The Company believes that the wireless communications industry will
continue to grow as enhanced services are offered at lower prices and as
customer awareness of the productivity, convenience and security benefits
associated with wireless communications increases. The Company believes it is
well positioned to take advantage of this growth opportunity. The Company's
growth strategy focuses on the following: (i) internal
34
<PAGE> 37
growth through increased penetration in the Company's existing markets; (ii)
acquisition of licenses contiguous to the Company's existing market clusters;
(iii) acquisition of new market clusters; and (iv) acquisition of PCS licenses
to expand and complement its wireless network. In addition, the Company believes
that by geographically clustering service areas it can best offer high quality
service at competitive prices with larger, seamless service networks.
OPERATING STRATEGY
Upon acquiring a cellular System, the Company's objective has been to
increase operating cash flow through the following practices:
Dedication to Customer Service. The Company trains its sales force and
customer service representatives in the Company's philosophy that long-term
customer service and satisfaction are critical to the Company's success.
The Company strives to minimize customer churn by maintaining a high level
of customer satisfaction through a variety of techniques, including tying
sales commissions to subscriber retention, outbound telemarketing to
subscribers on a regular basis, maintaining extended live customer service
operation hours, a quarterly customer newsletter and active post-sale
follow-ups for new customers. In addition, the Company provides to
subscribers in most of its markets free roadside assistance services that
include gas, a battery jump-start and tire changing assistance.
Aggressive Marketing of Cellular Service. The Company uses aggressive
marketing and customer maintenance programs to increase subscriber
activations and reduce customer churn. These programs include offering
distinctive local and roaming rate plans to emphasize the "value" and
"advantage" of the Company's cellular service, launching targeted
advertising campaigns which emphasize quality and value, and taking an
active role in community, government and charity organizations. Many of
these programs are designed to distinguish the Company's cellular service
as the "local" quality service provider by stressing local offices, local
sales personnel, the availability of local customer service and the
Company's commitment to the community. Each major market cluster of the
Company is under the responsibility of a local marketing manager.
Management believes that positioning its cellular service as the local
quality service often contrasts favorably with its larger competitors,
which frequently standardize service plans, do not provide local
availability of customer service and use third party billing vendors,
making it more difficult for these competitors to be as responsive to
customer needs.
System Engineering to Increase Signal Coverage. Where practical, the
Company strives to "fill in" the Cellular Geographic Service Area ("CGSA")
within its markets by adding network facilities to increase the coverage of
its radio signal. The Company monitors the signal coverage and selectively
seeks to add additional radio channels and/or cell sites to upgrade the
capacity and reach of the cellular signal, the ultimate goal being to
provide handheld quality network coverage. In addition, the Company has
local technicians and engineers in its markets to maintain the quality of
the local service network and to respond promptly to any System problems.
Strong Retail and Direct Sales Effort. A key element of the Company's
positioning in its markets is the use of 22 local retail stores. A local
direct sales force provides the Company with more control over the sales
process, especially in meeting subscriber growth goals, than if it were to
rely only on independent agents. Although the Company selectively includes
independent agents in its distribution strategy, management believes that
the Company's local presence enhances its ability to provide a higher level
of quality customer service and satisfaction. In addition, in 1995 the
Company began a program that uses Company sales personnel in independent
retail establishments, such as Wal-Mart and Sam's Club, as distribution
channels.
Centralized Upper Management and Backoffice Operations. For those
operations that are common to all markets, the Company takes advantage of
economies of scale by centralizing all the upper management and backoffice
operations at its corporate headquarters. This includes the upper
management for sales, marketing, engineering, customer service, credit and
collection and financial functions. By combining decentralized sales
management with the centralized upper management and backoffice
35
<PAGE> 38
functions, the Company can simultaneously take advantage of the economies
of scale while offering custom service through the decentralized sales
management and sales force.
MARKETS AND SYSTEMS
Cellular Markets
The Company's cellular markets are grouped geographically and strategically
into four clusters, known as the Louisiana, Mississippi, Alabama and Kansas
Clusters. The following table summarizes certain information concerning the
Company's cellular markets.
<TABLE>
<CAPTION>
INTERSTATE
& OTHER % OF HH
COMPANY WIRELINE OR HIGHWAY WITH EBI> DATE OF
MARKET TOTAL POPS OWNERSHIP% NET POPS NON-WIRELINE MILES $35K(A) ACQUISITION
- ------------------------ ---------- ---------- --------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Louisiana Cluster
Lake Charles, LA MSA.... 174,000 100.0% 174,000 WL 102 46.0% Aug. 1987(b)
De Soto, LA-3 B1(c)..... 59,000 100.0 59,000 WL 115 28.1 Apr. 1991(b)
Beauregard, LA-5
B1(c)................. 142,000 100.0 142,000 WL 175 30.6 Mar. 1991(b)
--------- --------- -----
Total Louisiana....... 375,000 375,000 392
--------- --------- -----
Mississippi Cluster
Tunica, MS-1............ 170,000 100.0 170,000 NWL 69 28.4 Apr. 1993
Bolivar, MS-3(d)........ 156,000 100.0 156,000 NWL 66 25.7 Apr. 1993
Yalobusha, MS-4(d)...... 127,000 100.0 127,000 NWL 62 31.5 Apr. 1993
Washington, MS-5(e)..... 160,000 -- -- NWL 76 33.2 Jan. 1994
--------- --------- -----
Total Mississippi..... 613,000 453,000 273
--------- --------- -----
Alabama Cluster
Lamar, AL-3............. 136,000 100.0 136,000 NWL 70 30.5 May 1996
Bibb, AL-4.............. 138,000 100.0 138,000 NWL 66 29.5 Jul. 1996
--------- --------- -----
Total Alabama......... 274,000 274,000 136
--------- --------- -----
Kansas Cluster
Cheyenne, KS-1.......... 27,000 100.0 27,000 NWL 84 32.2 Apr. 1995
Norton, KS-2............ 30,000 100.0 30,000 NWL 0 27.9 Apr. 1995
Wallace, KS-6........... 20,000 100.0 20,000 NWL 39 37.2 Apr. 1995
Trego, KS-7............. 78,000 100.0 78,000 NWL 112 37.1 Apr. 1995
Hamilton, KS-11......... 85,000 100.0 85,000 NWL 17 44.8 Apr. 1995
Hodgeman, KS-12......... 42,000 100.0 42,000 NWL 12 40.1 Apr. 1995
Edwards, KS-13.......... 28,000 100.0 28,000 NWL 6 33.3 Apr. 1995
Cimarron, OK-1(e)....... 24,000 -- -- NWL 7 34.9 Apr. 1995
--------- --------- -----
Total Kansas.......... 334,000 310,000 277
--------- --------- -----
Minority Interest
Chambers, TX-21(f)...... 21,000 25.0 5,300 WL 34 50.4 Apr. 1993
--------- --------- -----
TOTAL................. 1,617,000 1,417,300 1,112
========= ========= =====
</TABLE>
- ---------------
(a) The percentage of households (HH) with effective buying income (EBI) greater
than $35,000 is based on Kagan's Cellular Telephone Atlas 1995. Effective
buying income is comparable to disposable after-tax income.
(b) The Company was the original licensee in these markets.
(c) These are partitioned cellular markets.
(d) These RSAs are licensed to a corporation in which the Company currently owns
a 51% interest. The Company has entered into agreements to acquire the
remaining 49% interest. The acquisition is contingent upon, among other
things, the successful completion of this Offering. See "Use of Proceeds."
(e) The Mississippi-5 RSA and Oklahoma-1 RSA are operated under interim
authority granted by the FCC pending auction of the licenses by the FCC. The
number of Company subscribers in these RSAs is insignificant.
36
<PAGE> 39
(f) The Texas-21 RSA is owned by a partnership in which the Company owns a 25%
interest and in which GTE Mobilnet, which operates the System, owns a 75%
interest.
Louisiana Cluster
The Company's cellular operations began in August 1987 with the Lake
Charles, LA MSA, which the Company acquired in the FCC cellular lottery. The
Louisiana Cluster includes 174,000 Net Pops in the Lake Charles, LA MSA, 59,000
Net Pops in the Louisiana-3 RSA and 142,000 Net Pops in the Louisiana-5 RSA.
This cluster comprises more than 6,000 square miles and uses 21 cell sites,
which effectively cover 100% of the total geographic area. An additional five
cell sites are expected to be added by the end of 1997 to upgrade handheld
service. An upgrade to the cellular system in this cluster during 1995 included
the addition of digital channels. This upgrade enhanced System capacity,
provided a new marketing avenue for digital service and prepared the cluster to
complement the planned PCS Systems in which the Company has an interest through
the PCS Partnership. See "Markets and Systems -- PCS Markets." All licenses in
the Louisiana Cluster are in the "wireline band" (see "Governmental
Regulation -- Licensing of Cellular Telephone Systems") and are therefore
commonly referred to as wireline cellular licenses.
Although the Louisiana Cluster is comprised of a mid-sized MSA and parts of
two RSAs, the Company manages the cluster as if it were one market with both
urban and suburban features. The Louisiana Cluster is traversed by I-10, which
is a major source of roaming revenues. Lake Charles is the seat of parish
government for Calcasieu Parish, one of the larger parishes in Louisiana.
Several major petrochemical refineries are located in this market area, one of
which recently announced a $860 million expansion of its Lake Charles facility.
I-10 is a heavily traveled artery for many commuting employees, vendors and
contractors who conduct business with these entities. The Port of Lake Charles,
located at the edge of Lake Charles on the Calcasieu River (which opens into the
Gulf of Mexico), is a major bulk cargo port which handles cargo generated by the
local petrochemical facilities. Other major industries for the area include
lumber and agricultural related businesses that are heavy users of cellular
service. There are four riverboat casinos based in Lake Charles that use
cellular service for communications and data transmission. These casinos attract
customers from the surrounding area, including east Texas, and thereby generate
significant traffic which provides roaming revenues to the Company.
Additionally, a large facility of Northrop-Grumman, a major U.S. government
contractor, and McNeese State University are located in Lake Charles.
The Company's cellular service in the Louisiana Cluster is marketed under
the trade name MERCURY CELLULAR AND PAGING(TM). The Company's principal cellular
competitors in these markets are Western Cellular in the Lake Charles, LA MSA
and Centennial Cellular in the Louisiana-3 and -5 RSAs. Each of these
competitors uses the CELLULARONE(R) service mark.
Mississippi Cluster
In April 1993, the Company acquired the Mississippi-1 RSA and a 51%
interest in MS 34 which holds the licenses to operate the Mississippi-3 and
Mississippi-4 RSAs. In November and December 1996, the Company entered into
agreements with David Bailey, Wirt A. Yerger, III, Robert G. Mounger, William M.
Mounger, III, William Handell, III, E.B. Martin, Jr. and James A. Murrell, III
to purchase for $11.6 million their respective shares of common stock of MS 34.
These shares represent the remaining 49% interest in the corporation. The
consummation of the transaction is contingent upon, among other things, the
successful completion of this Offering. The Company manages for MS 34 the
design, construction and installation of the control point, base station and
business office sites, and the daily operations of the cellular System, for
which the Company is paid a monthly management fee and is reimbursed for its
capital costs and expenses. The Mississippi Cluster has 613,000 Pops, of which
453,000 are Net Pops. This cluster covers more than 11,000 square miles and uses
22 cell sites (with five additional sites expected to become operational by the
end of 1997), all of which can be upgraded to provide digital service. The
Mississippi Cluster is located just south of Memphis, Tennessee and north of
Jackson, Mississippi. All licenses in the Mississippi Cluster are in the
"non-wireline band" (see "Governmental Regulation -- Licensing of Cellular
Telephone Systems") and are therefore referred to as non-wireline cellular
licenses.
37
<PAGE> 40
The Company earns substantial roaming revenues in the Tunica, Mississippi-1
RSA market, which has 170,000 Net Pops and is directly adjacent to the Memphis,
TN MSA. Some of this revenue results from traffic attributable to the several
casinos located near Tunica. Much of the roaming traffic in the RSA is along
U.S. Highway 61 and Interstate Highway 55, both of which run north and south
from Memphis and continue south through Mississippi to Baton Rouge, Louisiana.
The Bolivar, Mississippi-3 RSA market services 156,000 Net Pops and covers
over 4,200 square miles. Two of the larger towns in this RSA are Greenwood and
Indianola. A number of colleges, including Mississippi State University,
Mississippi University for Women, Delta State University, the University of
Mississippi and Mississippi Valley State University, are located within 100
miles of this market. Each city and town is easily accessible to Greenwood and
surrounding towns via U.S. Highways 82 and 49, as well as Mississippi Highway 7.
The Yalobusha, Mississippi-4 RSA market is located next to the
Mississippi-3 RSA and has 127,000 Net Pops. The town of Grenada is the principal
community in this RSA. Area economic resources include timber and manufacturing.
The Company's cellular service in the Mississippi Cluster is marketed under
the CELLULARONE(R) service mark. Its principal cellular competitors in these
markets are BellSouth Mobility Services and Cellular South.
Alabama Cluster
The Company acquired the Alabama-3 RSA in May 1996 and acquired the
Alabama-4 RSA in July 1996. The Alabama Cluster covers more than 10,000 square
miles and uses 20 cell sites. An additional seven cell sites are expected to be
added by the end of 1997. The Company operates non-wireline cellular licenses in
this cluster, which has 274,000 Pops, all of which are Net Pops.
The Alabama Cluster is located along the western border of Alabama, and the
northern tip of the Alabama-3 RSA is directly adjacent to the Mississippi-4 RSA.
This cluster borders the Tuscaloosa, Birmingham and Montgomery, AL MSAs.
The Lamar, Alabama-3 RSA market is positioned along Alabama's western
border and serves 136,000 Net Pops. Interstate Highways 20 and 59, as well as
U.S. Highways 43 and 82, traverse the RSA en route to Tuscaloosa and Birmingham.
Traffic to and from Tuscaloosa, which is the site of the University of Alabama
and is less than 50 miles from the Alabama-3 RSA border, is a major source of
roaming revenue. Demopolis, which has two 130-acre industrial parks, is the
largest city in the RSA and is located on U.S. Highway 80.
The Bibb, Alabama-4 RSA market is adjacent to the Alabama-3 RSA and serves
138,000 Net Pops. Located less than 100 miles from Birmingham and Montgomery,
this RSA has 66 interstate and other highway miles. The major industries of
Alabama-3 include cattle, timber, cotton, milk and grain. The city of Selma, an
industrial community, is the hub of the RSA.
The Company's cellular service in this cluster is marketed under the
CELLULARONE(R) service mark. The Company's principal cellular competitors in
these markets are BellSouth Mobility Services in the Alabama-3 RSA and Frontier
Cellular in the Alabama-4 RSA.
Kansas Cluster
The Company acquired the Kansas Cluster in April 1995. This market has
334,000 Pops, of which 310,000 are Net Pops. It covers more than 45,000 square
miles and uses 30 cell sites. An additional seven cell sites are expected to be
added by the end of 1997. The Company operates the non-wireline cellular
licenses in this cluster.
The Kansas Cluster covers the entire western half of the State of Kansas
and has several U.S. highways running through it. Interstate Highway 70 extends
westward to connect the markets to Denver, Colorado and extends eastward to the
Topeka, KS and Kansas City, MO MSAs. While this market is relatively thinly
populated, it has features that are indicative of high cellular usage including
a concentration of small
38
<PAGE> 41
businesses and farms, longer commute times and well traveled roads. The Kansas
Cluster includes 277 interstate and other highway miles. Major industries
include oil and gas drilling, cattle and agriculture.
The Company's cellular service in the Kansas Cluster is marketed under the
CELLULARONE(R) service mark. The Company's principal cellular competitor in each
of these markets is Kansas Cellular, a consortium of rural telephone companies.
Paging Markets
The Company owns and operates its own paging network within the Louisiana
Cluster with paging licenses in the 158.10 and 152.84 MHz range. It
cross-markets paging and cellular services in this market. Paging is also
marketed in Beaumont, Texas and parts of the Mississippi Cluster through a
resale agreement with other providers.
The Louisiana paging license was acquired in 1980 and currently covers a
population of approximately 868,000 persons. The Company began marketing paging
in the Beaumont market, which has a population of approximately 369,000 persons,
in July 1995. As of September 30, 1996, the Company had over 14,000 paging
subscribers. In December 1994 and April 1995 the Company entered into agreements
to provide regional and nationwide paging services to the Company's paging
subscribers.
PCS Markets
The Company owns a 24 1/3% limited partnership interest in the PCS
Partnership, which has been granted five broadband PCS licenses in the FCC's
C-block auction, for a total of $61.2 million. These PCS markets offer a
strategic fit to the Company's existing cellular markets in the Louisiana
Cluster, with which they create a large seamless market cluster that covers the
areas along I-10 between Houston and New Orleans. The table below summarizes
certain information concerning these PCS markets:
<TABLE>
<CAPTION>
INTERSTATE
& OTHER % OF HH
COMPANY HIGHWAY WITH EBI>
MARKET TOTAL POPS OWNERSHIP % NET POPS MILES $35K(A)
----------------------------------- ---------- ----------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Baton Rouge, LA BTA #032........... 659,000 24.33% 160,000 369 48.1%
Beaumont, TX BTA #034.............. 450,000 24.33 109,000 293 41.9
Hammond, LA BTA #180............... 99,000 24.33 24,000 153 34.4
Lafayette, LA BTA #236............. 514,000 24.33 125,000 343 35.7
Lufkin, TX BTA #265................ 151,000 24.33 37,000 70 36.1
--------- -------
TOTAL.................... 1,873,000 455,000 1,228
========= =======
</TABLE>
- ---------------
(a) The percent of households (HH) with effective buying income (EBI) greater
than $35,000 is based on The 1995 PCS Atlas and Data Book. Effective buying
income is comparable to disposable after-tax income.
The PCS competitors in these markets will include Wireless Co. and PCS
PrimeCo. The PCS operations will also compete with cellular operators in these
markets such as AT&T Wireless Services, ALLTEL, BellSouth Mobility Services,
Centennial Cellular, GTE and US Cellular, among others.
The general partner of the PCS Partnership has contracted with the Company
to manage the design, construction and daily operations of the Lafayette,
Beaumont and Lufkin BTAs, for which the Company is paid a monthly management fee
and is reimbursed for its expenses. The general partner of the PCS Partnership
is Wireless Management Corporation, a Louisiana corporation owned in equal
proportions by Fort Bend Communications, Inc., a subsidiary of Fort Bend
Telephone Company, RBS Communications, Inc., a subsidiary of EATELCORP, Inc. and
MIT, an affiliate of the Company. The limited partners in the PCS Partnership,
in addition to the Company, are EATELCORP, Inc., a Louisiana corporation, Fort
Bend Telephone Company, a Texas corporation, and Meretel Wireless, Inc., a
Louisiana corporation. Each of the
39
<PAGE> 42
limited partners is a telecommunications company engaged in landline and
cellular operations in markets outside of the Company's markets.
CELLULAR AND PAGING OPERATIONS
Marketing
The Company's marketing strategy for its cellular and paging operations is
designed to generate continued net subscriber growth, while simultaneously
maintaining low subscriber addition costs. For the nine months ended September
30, 1996, the Company's average net cost to add a net cellular subscriber was
$599 (including an equipment subsidy of $166). The Company seeks to achieve
lower subscriber addition costs by using an in-house sales and marketing staff
and retail outlets and by maintaining a low churn rate relative to industry
averages.
In training and compensating its sales force, the Company emphasizes the
importance of customer service, high penetration levels and minimum costs per
subscriber. The Company's sales staff has a two-tier structure. A retail sales
force handles walk-in traffic, whereas a targeted sales staff solicits certain
industrial, governmental and other potential subscribers. The Company believes
that its internal sales force is better able than independent agents to select
and screen new subscribers and select pricing plans that match subscriber means
and needs. The Company motivates its direct sales force to sell appropriate rate
plans to subscribers by linking payment of commissions to subscriber retention,
thereby reducing churn. While the Company selectively uses independent agents,
it places internal sales personnel in the more highly visible and critical
market areas. The Company compensates the independent agents similarly, by
linking the agents' compensation to customer retention and lower churn. The
Company believes that this mix of internal sales personnel and independent
agents increases the Company's market presence and distribution capacity,
minimizes churn and maximizes customer retention and long-term subscriber
growth. In 1995, the Company implemented a retail distribution program that uses
independent retail establishments, such as Wal-Mart and Sam's Club, as
distribution channels. Under this program the retailer supplies cellular
telephones and accessories which are sold by the Company's sales personnel from
a kiosk at the retail location. The retailer retains the full purchase price of
the equipment sold, and the Company benefits by enrolling the purchaser as a new
subscriber. In each of the last two years, subscriber additions attributed to
the program accounted for less than 4% of total net subscriber additions for the
period.
"Mercury Monitor" is a program that seeks to ensure each customer is
enrolled in the most appropriate service program for his or her usage. This
program is implemented through the Company's sales force, customer service
personnel and a special division called Customer Care which is primarily
responsible for the program. Mercury Monitor not only enhances customer loyalty,
which reduces churn, but also provides an after-sale survey of how well the
sales force and customer service personnel performed in meeting the subscriber's
needs. This allows the Company to continually monitor and improve the various
sales and customer programs. In addition, the program promotes sales and
customer referrals and makes subscribers aware of additional calling features,
such as voicemail related services, call waiting and call forwarding.
The Company's sales force works principally out of the Company's retail
stores, in which the Company offers a full line of cellular products and
services. The Company operates 22 retail stores, 21 of which are fully equipped
to handle sales, customer service and telephone maintenance, and one of which
handles only paging sales and service. Certain of these stores are also
authorized warranty repair centers. The Company's stores provide
subscriber-friendly retail environments (large selection, an expert sales staff
and convenient locations) which make the sales process quick and easy for the
subscriber.
Products and Services
In addition to providing high-quality cellular telephone service in each of
its markets, the Company also offers, at no additional charge, various custom
calling features such as call forwarding, call waiting, conference calling and
no-answer transfer. Additionally, voice message storage and retrieval services
are offered without additional charge in the Kansas Cluster and at nominal rates
in the other clusters. The Company also sells cellular and paging equipment at
discount prices as an incentive to attract customers.
40
<PAGE> 43
In July 1996, the Company introduced in the Louisiana Cluster, and intends
to make available in its other cellular markets, a service that allows a
cellular subscriber to combine all of his or her telephone numbers (home,
business, cellular and pager) into a single number. Subscribers can instruct the
service to reach them at more than one telephone number or location at different
times of the day or to continue calling other locations until the subscriber is
located. This state-of-the-art technology gives someone calling a cellular
subscriber the option to leave a message or to remain on hold while the system
outdials predetermined phone numbers. When the system reaches the subscriber,
the subscriber has the option of immediately connecting to the caller to begin a
conversation or to connect the caller to the voice mailbox and listen while the
caller leaves a message. The Company is currently evaluating voice dialing and
intends to implement it when it becomes feasible.
Several rate plans are presented to subscribers so that each can choose the
plan that will best fit his or her expected calling needs. The Company designs
rate plans on a market-by-market basis, unlike some of its competitors that
offer only standardized rate plans. The Company's local sales market managers
also initiate ideas for new rate plans depending upon local market and
competitive conditions. Generally, rate plans consist of a high user plan, a
medium user plan, a basic plan and an economy plan. Most rate plans combine a
fixed monthly access fee, per minute usage charges and custom-calling features
in a package which is intended to provide value to the customer while enhancing
airtime use and revenues for the Company. In general, rate plans which include a
higher monthly access fee typically include a lower usage rate per minute. In
some markets, statewide long distance calling without additional long distance
charges is offered under certain rate plans. The Company conducts an on-going
review of competitors' equipment, service and pricing to maintain the Company's
competitiveness. Revisions to pricing of service plans and equipment are made as
appropriate to conditions in the local marketplace.
In most of its markets, the Company offers an emergency roadside assistance
service that is available on a 24-hour basis without additional charge to
cellular subscribers. This service, which the subscriber accesses by pressing
"*SOS," provides three gallons of gasoline, a battery jump-start and tire
changing assistance.
Reciprocal agreements between each of the Company's cellular Systems and
the cellular Systems of other operators allow their respective subscribers to
place calls in most cellular service areas throughout the country. Roamers are
charged usage fees which are generally higher than a given cellular System's
regular usage fees, thereby resulting in a higher profit margin. Roaming revenue
is a substantial source of revenue to the Company because a number of its
cellular Systems are located along major travel corridors and because certain of
the Company's Systems are in early stages of their growth cycle. The Company
subscribes to "net settlement" services through its roaming clearing house
arrangements. Net settlement provides for electronic exchange of funds between
carriers for roaming services and is administered through the clearing house and
a designated financial institution. This arrangement reduces the cost of billing
and collecting for these services.
Customer Service
Customer service is an essential element of the Company's marketing and
operating philosophy. The Company is committed to attracting new subscribers and
retaining existing subscribers by providing consistently high-quality customer
service both through its central office and in the local markets. In each of its
cellular service areas the Company maintains a local staff, including a sales
market manager, customer service representatives, technical staff, sales
representatives and installation and repair personnel. Each cellular service
area initiates its own customer-related functions such as credit evaluation,
subscriber activation, account adjustments and rate plan changes. Through the
use of sophisticated monitoring equipment, engineering technicians are able to
monitor the technical performance of the cellular service areas and respond
promptly to any need.
The Company's customers are able to report cellular telephone service or
account problems to a local office representative. The subscriber can also speak
with a customer service representative about technical issues or problems from
7:00 a.m. to 7:00 p.m. at the main customer service center located at the
corporate offices. In addition, the Company has a technical representative on
call 24 hours per day to respond to emergency subscriber needs. Whereas most
competitors either strictly centralize or decentralize customer
41
<PAGE> 44
service functions, the Company has structured its customer service both ways to
meet the particular needs of any subscriber at any given time.
System Development and Expansion
The Company develops its cellular service areas by adding channels to
existing cell sites and by building new cell sites. Such development is designed
to increase capacity and improve coverage in direct response to projected
subscriber demand, which is calculated for each cellular service area on a
cell-by-cell basis. These projections involve a traffic analysis of usage by
existing subscribers and an estimation of the number of additional subscribers
in each service area. In calculating projected subscriber demand, the Company
builds into its design assumptions a maximum call "blockage" rate of 1%
(percentage of calls that are not connected on the first attempt at peak usage
times during the day). After calculating projected subscriber demand, the
Company determines the most cost-efficient manner of meeting the projected
demand through a combination of augmenting channel capacity in existing cell
sites and building new cell sites.
The table below sets forth, by market, as of the dates indicated, the
number of the Company's operational and planned additional cell sites.
<TABLE>
<CAPTION>
CELL SITES
------------------------------------------
ADDITIONAL SITES
PLANNED BY
MARKETS AT DECEMBER 31, 1996 DECEMBER 31, 1997
--------------------------------------------------- --------------------- -----------------
<S> <C> <C>
Louisiana Cluster.................................. 21 5
Mississippi Cluster................................ 22 5
Alabama Cluster.................................... 20 7
Kansas Cluster..................................... 30 7
</TABLE>
Cell site expansion is expected to enable the Company to provide better
quality handheld coverage, continue to add subscribers, enhance use of the
Systems by existing subscribers, increase roamer traffic due to the larger
geographic area covered and further enhance the overall efficiency of the
network. The Company believes that the increased cellular coverage will have a
positive impact on market penetration and subscriber usage.
The Company continues to evaluate expansion through acquisitions of other
cellular and PCS properties that will further enhance its network. In evaluating
acquisition targets, the Company considers, among other things, demographic
factors, including population size and density, traffic patterns, cell site
coverage and required capital expenditures. In the ordinary course of its
business, the Company analyzes acquisition opportunities as they come to its
attention. In November and December 1996 the Company entered into agreements to
acquire from seven minority shareholders the remaining 49% interest in the
subsidiary which owns the cellular licenses covering Mississippi-3 and
Mississippi-4 RSAs. The consummation of the acquisition is contingent on the
successful completion of this Offering. See "Markets and Systems -- Mississippi
Cluster" and "Markets and Systems -- System Development and Expansion."
PCS OPERATIONS
General
As the successful bidder in the FCC's C-block auction, the PCS Partnership
has been awarded five PCS licenses covering 1.8 million Pops in five BTAs. These
PCS markets and the Company's Louisiana Cluster cellular market are expected to
create a large seamless market along I-10 between Houston and New Orleans. Each
of these BTA markets is presently in the design and engineering stage.
PCS is a new generation of wireless communications, offering customers
advanced, secure, two-way digital wireless services and applications. Services
that permit sophisticated call management, enhanced two-way messaging and,
eventually, high-speed data and video transmission, will enable customers to
better manage personal and business needs. The Company believes that the
introduction of PCS into the wireless
42
<PAGE> 45
market will stimulate demand for wireless communications services, attract
customers who are not currently subscribers to wireless service and increase
usage by current wireless customers. PCS will compete with existing cellular
telephone service, and will provide features not currently offered by cellular
providers.
Auction Process
The PCS Partnership participated in the C-block auction as a Small
Business, as defined by FCC rules, and the Company believes that the PCS
Partnership has satisfied all requirements necessary to qualify as a Small
Business, and it will continue to take any actions needed to maintain such
status. Nonetheless, if the PCS Partnership is found by the FCC to be ineligible
or otherwise disqualified from holding C-block PCS licenses, the FCC could
impose substantial financial and regulatory penalties on it, including the
refusal to grant PCS licenses.
The Company also holds a 50% interest in Mobility, which was organized in
1994 to participate in PCS auctions. Mobility is presently participating in the
third stage of the FCC's D, E and F-block auctions and is bidding on licenses
covering areas contiguous to the Company's existing markets in addition to other
licenses that appear advantageous to the Company. Mobility is participating in
the F-block auction as a Small Business and the Company believes that Mobility
has satisfied all requirements necessary to qualify as a Small Business.
Planned PCS Strategy
At present, PCS operators are free to choose from among several competing
digital signal transmission technologies, or standards, that are not
interoperable. These different technologies are known as GSM, CDMA and TDMA.
None of these competing technologies has yet emerged as dominant among PCS
systems. The PCS Partnership has recently entered into an agreement with Lucent
Technologies, Inc. to provide the PCS Partnership with PCS infrastructure,
including switches and handsets that use CDMA. There can be no certainty that
CDMA will become the, or even a, dominant technology in the United States. If
CDMA does not become the dominant standard or is not able to compete
successfully with other PCS technologies, the PCS Partnership could be deprived
of revenues from PCS customers who roam into the PCS Partnership's markets and
could lose PCS customers who become dissatisfied because they are unable to roam
outside the PCS Partnership's markets. See "Risk Factors -- Certain PCS Risks."
However, the Company believes that these technological impediments to the
ability of subscribers to a PCS System to roam into cellular systems or other
PCS systems will be resolved and that the ultimate economic effect of PCS will
be to increase from two to eight the number of potential competitors in a given
market. The Company perceives this as an opportunity for it to enter additional
markets that otherwise may not have been available to it at attractive prices
and to take advantage in those markets of the Company's experience in wireless
communications obtained through the operation of its cellular Systems.
The PCS Partnership's existing markets are contiguous to the Company's
Louisiana Cluster, thereby creating a substantially larger overall wireless
cluster that stretches along I-10 between Houston and New Orleans. This corridor
has historically high traffic density that generates substantial roaming
traffic. The Company intends to provide its subscribers and the PCS
Partnership's subscribers with the ability to roam seamlessly throughout the
Company's Louisiana Cluster and the PCS Partnership's markets as soon as
technically feasible at a reasonable cost. Each of the BTAs in the PCS
Partnership's market has many positive attributes as a stand-alone market.
According to The 1995 PCS Atlas and Data Book, each BTA has a central
metropolitan area with concentrated population densities. Each market is
expected to continue enjoying population growth over the next few years and each
has high interstate or other highway traffic volume.
Financing
The PCS Partnership's overall financing plan involves three sources. First,
the federal government will finance the license acquisition cost of $61.2
million with a 10-year debt facility under which only interest, at the 10-year
U.S. Treasury Note rate, is paid for the first six years and principal is
amortized in equal installments over the last four years. Second, the partners
have committed to make capital contributions of up
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to a total of $42.0 million, of which the Company has committed to contribute up
to $13.0 million (of which $2.9 million has been contributed to date), for
working capital requirements. Finally, the equipment and infrastructure
build-out will require external financing estimated at $69.0 million. The PCS
Partnership has obtained a financing commitment from the Rural Telephone Finance
Cooperative for $59.0 million under which the Company will guarantee repayment
of up to $6.2 million. There can be no assurance that the build-out of the PCS
markets will not cost materially more than is currently anticipated, or that
additional financing, if necessary, will be available at all in the absence of
additional guarantees by the Company and other partners.
TRADE NAME; SERVICE MARK
In its Louisiana Cluster the Company uses the trade name MERCURY CELLULAR
AND PAGING(TM) and in its other clusters uses the CELLULARONE(R) service mark.
The Company has no federal service mark registration of MERCURY CELLULAR AND
PAGING(TM) and, while it has not encountered any conflict with the use of that
name in Louisiana, it cannot be certain that such a conflict will not arise or
that such name could be used in other markets if desired.
CELLULARONE(R) is a service mark registered with the United States Patent
and Trademark Office. The service mark is owned by CellularOne(R) Group, a
Delaware general partnership comprised of CellularOne(R) Marketing, Inc., a
subsidiary of Southwestern Bell Mobile Systems, together with CellularOne(R)
Development, Inc., a subsidiary of AT&T Wireless Services, Inc. and Vanguard
Cellular Systems, Inc. The Company uses the CELLULARONE(R) service mark pursuant
to its licensing agreement with CellularOne(R) Group. The licensing agreement
requires the Company to provide high quality cellular telephone service to its
customers and to maintain a certain minimum overall customer satisfaction rating
in surveys commissioned by CellularOne(R) Group. The agreement has an original
five-year term expiring in April 1998 and, assuming compliance by the Company
with the provisions of the agreement, may be renewed at the Company's option for
three additional five-year terms.
AT&T Wireless, which had been the single largest user of the CELLULARONE(R)
service mark, has reduced its use of the mark. If for some reason the name
CELLULARONE(R) were to suffer diminished marketing appeal, the Company's ability
both to attract new subscribers and retain existing subscribers could be
materially impaired. In such circumstances or otherwise, the Company may be
required to develop a new service mark. Competitors of the Company possess, and
others may develop over time, branding with significantly greater name
recognition than that of the Company. A failure by the Company to maintain
existing rights to its current cellular branding or to develop suitable
alternatives thereto would have a material adverse effect on the Company's
ability to market its products and services and could require the Company to
invest significant additional funds to develop such alternatives.
EMPLOYEES AND LABOR RELATIONS
The Company considers its labor relations to be good, and none of its
employees is covered by a collective bargaining agreement. As of September 30,
1996, the Company employed a total of 250 persons.
PROPERTIES
The Company leases approximately 40,000 square feet for its principal
executive offices, which are located in Lake Charles, Louisiana. The Company
owns two and leases 20 retail sales locations, which include administrative
offices and inventory storage space, and leases locations for microwave, cell
site and switching equipment.
LEGAL PROCEEDINGS
There are no material, pending legal proceedings to which the Company or
any of its subsidiaries or affiliates is a party or of which any of their
property is subject which, if adversely decided, would have a material adverse
effect on the Company. For information concerning certain legal proceedings
relating to FCC license grants, see "Risk Factors -- Certain PCS Risks,"
"Governmental Regulation" and "-- PCS Operations -- Auction Process."
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CERTAIN RESTRICTIONS
A Shareholders' Agreement between the Company and the minority shareholders
of the subsidiary that owns the Mississippi-3 and Mississippi-4 RSA cellular
licenses restricts transfers of shares, provides certain rights of first refusal
if shares are transferred and requires the affirmative vote of holders of 65% of
the shares to approve any business combination, any extension by the Company of
cellular telephone coverage from its Mississippi-1 RSA System into the
subsidiary's markets, any transaction between the subsidiary and the Company (or
any other shareholder of the subsidiary) and any financing of the subsidiary
exceeding $10.0 million. The Shareholders' Agreement will terminate upon
consummation of the Company's acquisition of the shareholders' minority
interests. See "Markets and Systems -- Mississippi Cluster."
The partnership agreement of the PCS Partnership provides that during the
term of the partnership, which expires December 31, 2015, and for two years
thereafter, no partner or its affiliates will compete (or own more than a 1%
interest in any entity that competes) with the PCS Partnership in the geographic
areas covered by the licenses acquired by the PCS Partnership in the C-block
auction. These provisions are expressly made applicable to any entity that
acquires a partner, but the acquiring entity is given 12 months within which to
dispose of any of its operations that violate the noncompetition provision. The
effect of this provision may be to make the Company a less attractive candidate
for acquisition by any entity with operations that would violate the
noncompetition provision. The partnership agreement further provides that
partnership interests may not be transferred without the consent of the general
partner and a majority of the limited partnership interests. Finally, although
the partners, including the Company, are required to make capital contributions
up to specified amounts, none is required without its express consent to bear
any other financial risk of the PCS Partnership such as providing or acting as a
guarantor for the PCS Partnership's financing. See "-- PCS Operations -- Planned
PCS Strategy; Financing."
THE CELLULAR TELEPHONE INDUSTRY
Overview
Cellular telephone service is provided by a wireless communications System
that uses radio frequencies to transmit voice and data. Broadly defined, the
wireless communications industry also includes one-way radio applications, such
as paging or beeper services, and two-way radio applications, such as cellular,
PCS and enhanced specialized mobile radio ("ESMR"). Historically, each
application has been licensed and operates in a distinct radio frequency block.
Introduced in 1983, cellular service is the predominant form of wireless
voice communications service currently available, with two cellular providers in
each market. Operating in a portion of the radio spectrum from 830-870 MHz,
cellular service is capable of providing high quality, high capacity service to
and from mobile, portable and stationary telephones. Cellular handsets are
affordable and easy to use. Fully equipped, multi-cell cellular Systems are
capable of handling thousands of calls at any given time and thus are capable of
providing service to hundreds of thousands of subscribers in a given market.
Over the past decade, cellular service has grown dramatically with over 33.8
million cellular subscribers in the United States as of December 31, 1995. The
following table sets forth certain domestic cellular industry statistics derived
from the Data Survey Results published semi-annually by the Cellular Telephone
Industry Association:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1991 1992 1993 1994 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
CELLULAR INDUSTRY STATISTICS
Total Service Revenues (in billions)................... $ 5.8 $ 7.8 $10.9 $14.2 $19.0
Ending Cellular Subscribers (in millions).............. 7.6 11.0 16.0 24.1 33.8
Subscriber Growth...................................... 43.0% 46.0% 45.1% 50.8% 40.0%
Average Monthly Service Revenue per Subscriber......... $74.10 $70.13 $67.13 $59.08 $54.90
Average Monthly Subscriber Revenue per Subscriber...... $64.96 $61.40 $58.74 $51.48 $47.59
Ending Penetration..................................... 3.0% 4.4% 6.2% 9.4% 13.0%
</TABLE>
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These statistics represent results for the cellular industry in the United
States as a whole. Average Monthly Service Revenue per Subscriber reflects per
subscriber revenue including roaming revenue, and Average Monthly Subscriber
Revenue per Subscriber reflects per subscriber revenue excluding roaming
revenue. In general, rural markets, where the Company concentrates its cellular
operations, were licensed later by the FCC than urban markets and, consequently,
have a shorter operating history. The Company has operated cellular Systems
since 1987. While the Company's cellular subscriber base is growing more rapidly
than the industry average, the Company's level of penetration is lower than the
overall industry average.
The Company believes that certain demographic characteristics of rural
markets facilitate commercial use of its cellular network. As compared to urban
residents, rural residents generally travel greater distances by personal
vehicle and have access to fewer public telephones along their routes. In
addition, the Company's cellular service area includes a high percentage of
business customers with substantial needs for wireless communications, such as
those employed in agriculture and oil and gas, and also includes numerous
destinations for outdoor recreational activities, such as boating, fishing and
hunting, which often increase cellular usage. The Company believes that these
factors will sustain demand for wireless communication services in the rural
marketplace.
Roaming revenues are generated by subscribers of other cellular carriers
traveling through the Company's cellular service area. Reciprocal agreements
among cellular System operators allow subscribers to place and receive calls in
most cellular service areas throughout the country. Roaming revenues result in
higher margins because roaming calls are usually priced at higher rates than
local calls and the Company does not incur sales commissions or other costs to
attract roaming customers.
Operation of Cellular Systems
Cellular telephone service is capable of providing high quality, high
capacity service to and from mobile, portable and fixed radio telephones.
Cellular telephone technology is based upon the division of a given market area
into a number of regions, or "cells," which in most cases are contiguous. Each
cell contains a low-power transmitter-receiver at a "base station" or "cell
site" that communicates by radio signal with cellular telephones located in the
cell. A cell generally has a radius ranging from two miles to more than 25
miles. Cell boundaries are determined by the strength of the signal emitted by
the cell's transmitter-receiver. Each cell site is connected to a MTSO (mobile
telephone switching office), which, in turn, is connected to the local landline
telephone network.
When a cellular subscriber in a particular cell enters a number, the
cellular telephone sends the call by radio signal to the cell's
transmitter-receiver, which then sends it to the MTSO. The MTSO completes the
call by connecting it with the landline telephone network or another cellular
telephone unit. Incoming calls are received by the MTSO, which instructs the
appropriate cell to complete the communications link by radio signal between the
cell's transmitter-receiver and the cellular telephone. By leaving the cellular
telephone on, a signal is emitted so the MTSO can sense in which cell the
cellular telephone is located. The MTSO also records information on system usage
and subscriber statistics.
FCC rules require that all cellular telephones be functionally compatible
with cellular telephone Systems in all markets within the United States and with
all frequencies allocated for cellular use, so that a cellular telephone may be
used wherever a subscriber is located, subject to appropriate arrangements for
service charges. Changes to cellular telephone numbers or other technical
adjustments to cellular telephones by the manufacturer or local cellular
telephone service businesses may be required, however, to enable the subscriber
to change from one cellular service provider to another within a service area.
Because cellular telephone Systems are fully interconnected with the
landline telephone network and long distance networks, subscribers can receive
and originate both local and long distance calls from their cellular telephones.
Cellular telephone Systems operate under interconnection agreements with various
local exchange carriers and interexchange carriers. The interconnection
agreements establish the manner in which the cellular telephone System
integrates with other telecommunications systems. By law, the cellular operator
and the local landline telephone company must cooperate in the interconnection
between the cellular and landline telephone systems, to permit cellular
subscribers to call landline subscribers and vice versa. The technical and
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financial details of such interconnection arrangements are subject to
negotiation and vary from system to system. On August 8, 1996, the FCC
promulgated new regulations governing the interconnection of wireless and
landline systems. If these regulations survive pending legal challenges
substantially as enacted, they may ultimately lower the interconnection rates to
be paid by the Company and increase interconnection revenues paid to the
Company.
THE PCS INDUSTRY
Overview
PCS is a term commonly used in the United States to describe a portion of
radio spectrum (1850-1990 MHz) that has been divided by the FCC into six blocks
(blocks A-F) to be used by PCS licensees to provide wireless communications
services. The first portions of PCS spectrum (the A, B and C-blocks, each 30
MHz) have been auctioned by the FCC as of May 1996, and licenses have been
granted for operating in the A and B-blocks. PCS will initially compete directly
with existing cellular telephone, paging and specialized mobile radio services.
PCS will also include features which are not currently offered by cellular
providers, such as data transmissions to and from portable computers, advanced
paging services and facsimile services. The Company believes that PCS providers
will be the first direct wireless competitors to cellular providers and the
first to offer mass market all-digital mobile networks that will increase
security of communications and capacity. In addition, PCS providers may be the
first to offer mass market wireless local loop applications, in competition with
wired local communications services. See "-- Government Regulation" for a
discussion of the FCC auction process and allocation of wireless licenses.
Operation of PCS Systems
PCS Systems and cellular Systems use similar technologies and hardware (for
example, PCS Systems use the same type of "cell site" architecture), but operate
on different frequencies and may use different technical and network standards.
As a result, as discussed further below, it initially may not be possible for
users of one type of System to "roam" on a different type of System outside of
their service area, or to hand off calls from one type of System to another.
This is also true for PCS subscribers seeking to roam in a PCS service area
served by operators using different technical standards.
PCS Systems are expected to operate under one of three principal digital
signal transmission technologies, or standards, that have been proposed by
various operators and vendors for use in PCS Systems: GSM, CDMA or TDMA, all
three of which are currently incompatible with each other. Accordingly, at the
present time a subscriber of a system that uses one technology will be unable to
use his handset when traveling in an area not served by PCS operators using the
same technology, unless the subscriber carries a dual-band handset that permits
the subscriber to use the cellular system in that area. Such dual-band handsets
are just becoming available and are expected to be more expensive than
single-band handsets. The Company expects that it will begin offering dual-band
handsets to its customers when the reliability of such handsets has been
satisfactorily demonstrated and when they are available at affordable prices or
competitive factors warrant their introduction. The Company cannot predict when
these events will occur.
COMPETITION; NEW TECHNOLOGY
Competition in the wireless communications industry is intense. Competition
for subscribers among wireless licensees is based primarily upon the services
and features offered, the technical quality of the wireless system, customer
service, system coverage, capacity and price. Such competition may increase to
the extent that licenses are transferred from smaller, stand-alone operators to
large, better capitalized and more experienced wireless communications
operators.
In each of its cellular markets the Company has one cellular competitor,
including BellSouth, Centennial Cellular, Frontier Cellular, Kansas Cellular and
Western Cellular, and will face new competition from up to six PCS licensees in
each of its cellular markets. The PCS Partnership's principal competitors in its
PCS markets are Wireless Co. and PCS PrimeCo, which will provide PCS services,
and the existing cellular providers, which include AT&T Wireless, GTE, US
Cellular and others. The Company also competes with
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paging and dispatch companies, resellers and landline telephone service
providers. Potential users of cellular systems may, however, find their
communications needs satisfied by other current and developing technologies.
One- or two-way paging or beeper services that feature voice messaging and data
display as well as tone only service may be adequate for potential subscribers
who do not need to speak to the caller. In the future, cellular service may also
compete more directly with traditional landline telephone service providers. See
"Risk Factors -- Competition."
The FCC requires all commercial wireless System operators to provide
service to "resellers" at non-discriminatory rates. A reseller provides cellular
service to customers but does not hold an FCC license or own infrastructure
facilities. Instead, the reseller buys blocks of cellular telephone numbers and
capacity (minutes) from a licensed carrier and resells service through its own
distribution network to the public. Thus, a reseller is both a customer of a
cellular licensee's services and also a competitor of that licensee. Several
small resellers currently operate in competition with the Company's Systems.
The PCS Partnership's PCS business will directly compete in each market
with up to five other PCS providers and with the two existing cellular service
providers. Such cellular providers have typically been operational for a number
of years. Many of them and many of the PCS providers have significantly greater
financial and technical resources than those available to the Company or the PCS
Partnership. Cellular providers may upgrade their systems to provide comparable
services in competition with the PCS Partnership's PCS Systems. The Company
believes that being first to offer PCS services in a market will be a key
competitive advantage. The PCS Partnership's goal is to achieve significant
market penetration by aggressively marketing competitively priced PCS services,
offering enhanced services not currently provided by analog or digital cellular
operators and providing superior customer service. In addition, the Company
believes that the PCS Partnership can become a low-cost provider of PCS services
by taking advantage, in those BTAs in which the Company will manage the PCS
operations of the PCS Partnership, of the existing business infrastructure
established for the Company's cellular operations, including management,
marketing, billing and customer service functions, and by emphasizing efficient
customer acquisition and retention.
The cost to the PCS Partnership of PCS handsets initially will be higher
than the Company's cost of cellular handsets. In order to compete effectively
with sellers of analog cellular handsets, the PCS Partnership may have to
subsidize the sale of its PCS handsets to a greater extent than sales of
cellular handsets are typically subsidized.
The Company expects that it and the PCS Partnership will face increased
competition from entities providing other communications technologies and
services. While some of these technologies and services are currently operating,
others are being developed or may be developed in the future. See "Risk
Factors -- Competition."
The FCC has licensed SMR dispatch System operators to construct "enhanced
specialized mobile radio" digital mobile communications systems on existing SMR
frequencies, referred to as ESMR, in many areas throughout the United States,
including most of the areas in which the Company operates. As a result of
advances in digital technology, ESMR operators have begun to design and deploy
digital mobile networks that increase the frequency capacity of ESMR systems to
a level that may be competitive with that of wireless systems. A limited number
of ESMR operators have recently begun offering short messaging, data services
and interconnected voice telephone services on a limited basis. Several ESMR
licensees have recently announced their intention to merge into one company and
plan to build and operate digital mobile networks in most major United States
markets.
The FCC has also allocated radio channels to a satellite system in which
transmissions from mobile units to satellites may augment or replace
transmissions to cellular or PCS cell sites. Several companies have announced
plans to design, construct, deploy and operate satellite-based
telecommunications systems worldwide. American Mobile Satellite Corporation has
designed a geosynchronous earth orbit satellite system for communications
services, which has recently begun providing voice services. Several low earth
orbit ("LEO") satellite systems have been proposed that would use multiple
satellites to provide worldwide coverage. The first LEO system is proposed for
service in 1998. In addition, others have applied to the FCC for licenses to
operate satellite communications and video transmission systems in the 28 GHz Ka
band. The
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Company does not currently view such systems as direct competitors, and in some
cases, such systems may complement the Company's service offerings.
Continuing technological advances in communications and FCC policies that
encourage the development of new spectrum-based technologies may result in new
technologies that compete with cellular and PCS systems. In addition, the
Omnibus Budget Reconciliation Act of 1993 requires, among other things, the
allocation to commercial use of a portion of 200 MHz of the spectrum currently
reserved for government use. It is expected that some portion of the spectrum
that is reallocated will be used to create new land-mobile services or to expand
existing land-mobile services.
GOVERNMENTAL REGULATION
The FCC regulates the licensing, construction, operation, acquisition and
sale of cellular and PCS Systems in the United States pursuant to the
Communications Act of 1934, as amended from time to time, and the rules,
regulations and policies promulgated by the FCC thereunder (the "Communications
Act"). The Communications Act governs applications to construct and operate
cellular and PCS Systems, licensing and administrative appeals and technical
standards for the provision of cellular and PCS service. The FCC also regulates
coordination of proposed frequency usage, height and power of base station
transmitting facilities and types of signals emitted by such stations. In
addition, the FCC regulates (or forbears from regulating) certain aspects of the
business operations of cellular and PCS Systems.
Licensing of Cellular Telephone Systems
For cellular licensing purposes, the FCC established 734 discrete
geographically defined market areas comprising 306 MSAs and 428 RSAs. In each
market area, the FCC awarded only two cellular licenses authorizing the use of
radio frequencies for cellular telephone service. The allocated cellular
frequencies were divided into two equal 25 MHz blocks. One block of frequencies
(known as the "wireline band") and the associated operating license were
initially reserved for exclusive use by entities owned and controlled by local
landline telephone companies or their affiliates. The second block of
frequencies (known as the "non-wireline band") initially was reserved for use by
entities that did not provide landline telephone service in the market area.
Upon the issuance of a construction permit, either wireline or nonwireline, such
construction permit could be sold to any qualified buyer, regardless of its
affiliation with a landline telephone company. The FCC generally prohibits a
single entity from holding an interest in both the wireline and the nonwireline
licensee in the same market.
Cellular authorizations are issued generally for a 10-year term beginning
on the date of the grant of the initial construction permit. Under FCC rules,
the authorized service area of a cellular provider in each of its markets is
referred to as the CGSA. A cellular licensee has the exclusive right to serve
the entire area that falls within the licensee's MSA or RSA for a period of five
years after the grant of the licensee's construction permit.
At the end of the five-year period, however, the licensee's exclusive CGSA
rights become limited to the area actually served by the licensee as of that
time, as determined pursuant to a formula adopted by the FCC. After the
five-year period any entity may apply to serve portions of the MSA or RSA not
being served by the licensee. The five-year exclusivity period has expired for
most licensees and parties have filed unserved area applications. After the
five-year exclusive period has expired, any entity may apply to serve any
unserved area of the market that comprises at least 50 contiguous square miles
outside of the licensee's CGSA.
Near the conclusion of the 10-year license term, licensees must file
applications with the FCC for renewal of their licenses. The FCC has established
rules and procedures to process cellular renewal applications filed by existing
carriers and the competing applications filed by renewal challengers. The
renewal proceeding is a two-step hearing process. The first step of the hearing
process is to determine whether the existing cellular licensee is entitled to a
renewal expectancy and otherwise remains basically qualified to hold a cellular
license. This first step is subject to waiver by the FCC upon a request by a
competing applicant proposing to provide service that far exceeds the service
presently being provided by the incumbent licensee. If no such waiver is
granted, two criteria are evaluated to determine whether the existing licensee
will receive a
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renewal expectancy: (i) whether the licensee has provided "substantial" service
during its past license term, defined as service which is sound, favorable and
substantially above a level of mediocre service which minimally might justify
renewal; and (ii) whether the licensee has substantially complied with
applicable FCC rules and policies and the Communications Act. Under this second
criterion, the FCC will not grant a renewal expectancy if a licensee has
demonstrated a pattern of noncompliance. If the FCC grants the licensee a
renewal expectancy during the first step of the hearing process and the licensee
is basically qualified, its license renewal application will be automatically
granted and any competing applications will be denied. If however, the FCC
denies the licensee's request for renewal expectancy or grants an applicant's
request for waiver of the first step, the licensee's application will be
comparatively evaluated under specifically enumerated criteria with the
applications filed by competing applicants.
Cellular radio service providers also must satisfy a variety of FCC
requirements relating to technical and reporting matters. One such requirement
is the coordination of proposed frequency usage with adjacent cellular users,
permittees and licensees in order to avoid electrical interference between
adjacent systems. In addition, the height and power of base station transmitting
facilities and the type of signals they emit must fall within specified
parameters. The FCC has also provided guidelines respecting cellular service
resale practices and the terms under which certain ancillary services may be
provided through cellular facilities.
Cellular and PCS systems are subject to certain Federal Aviation
Administration regulations respecting the location, lighting and construction of
transmitter towers and antennae and may be subject to regulation under the
National Environmental Policy Act and the environmental regulations of the FCC.
State or local zoning and land use regulations also apply to the Company's
activities. The Company uses common carrier point-to-point microwave facilities
to connect cell sites and to link them to the main switching office. These
facilities are separately licensed by the FCC and are subject to regulation as
to technical parameters and service.
The Communications Act preempts state and local regulation of the entry of,
or the rates charged by, any provider of commercial mobile radio service
("CMRS") or any private mobile radio service ("PMRS"), which includes cellular
(and PCS) service.
Transfers and Assignments of Cellular Licenses
The Communications Act and FCC rules require the FCC's prior approval of
the assignment or transfer of control of a construction permit or license for a
cellular system. Subject to FCC approval, a license or permit may be transferred
from a non-wireline entity to a wireline entity, or vice versa. Non-controlling
interests in an entity that holds a cellular license or cellular system
generally may be bought or sold without prior FCC approval. Any acquisition or
sale by the Company of cellular interests may also require the prior approval of
the Federal Trade Commission and the Department of Justice, if over a certain
size, as well as any state or local regulatory authorities having competent
jurisdiction.
In addition, the FCC's rules prohibit the alienation of any ownership
interest in an RSA application, or any entity holding such an application, prior
to the grant of a construction permit. For unserved cellular areas, no change of
control may take place until after the FCC has granted both a construction
permit and a license and the licensee has provided service to the public for at
least one year. These restrictions affect the ability of prospective purchasers,
including the Company, to enter into agreements for RSA and unserved area
acquisitions prior to the lapse of the applicable transfer restriction periods.
The restriction on sale of interests in RSA and unserved area applications and
on agreements for such sales should not have a greater effect on the Company
than other prospective buyers.
Licensing of PCS Systems
A PCS system operates under a protected geographic service area license
granted by the FCC for a particular market on one of six frequency blocks
allocated for broadband PCS service. The FCC has divided the United States and
its possessions and territories into PCS markets made up of 493 BTAs and 51
MTAs. As many as six licensees will compete in each PCS service area. The FCC
has allocated 120 MHz of spectrum into six individual blocks, each of which is
allocated to serve either MTAs or BTAs. The spectrum allocation
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includes two 30 MHz (A and B Blocks) licensed for each of the 51 MTAs, one 30
MHz block (C Block) licensed for each of the 493 BTAs and three 10 MHz blocks
(D, E and F Blocks) licensed for each of the 493 BTAs. A PCS license will be
awarded for each MTA or BTA in every block, for a total of more than 2,000
licenses.
Under the FCC's rules, no CMRS carrier may hold an attributable interest in
licenses for more than 45 MHz of PCS, cellular and SMR services regulated as
CMRS where there is significant overlap in any geographic area (significant
overlap will occur when at least 10% of the population of the PCS licensed
service area is within the CGSA(s) and/or SMR service area(s)). For example, an
entity may not hold an attributable interest (defined as a controlling or more
than 20% ownership interest) both in a cellular licensee and a 30 MHz PCS
licensee that holds licenses for geographic areas with significant overlaps.
When mutually exclusive applications (i.e., two or more applications
competing for the same service in the same geographic area) are filed for the
same MTA or BTA, those licenses will be awarded pursuant to auctions. The FCC
has adopted comprehensive rules that outline the bidding process, describe the
bidding application and payment process, establish penalties for certain bid
withdrawals, default or disqualification, establish regulatory safeguards,
reserve two of the six frequency blocks (the C and F-blocks) for "entrepreneurs"
and small businesses. The FCC has already completed the auction of the A, B and
C-block licenses.
All PCS licenses will be granted for a 10-year period, at the end of which
they must be renewed. The FCC has adopted specific standards to apply to PCS
renewals, under which the FCC will award a renewal expectancy to a PCS licensee
that (i) has provided substantial service during its past license term and (ii)
has substantially complied with the Communications Act. All 30 MHz broadband PCS
licensees must construct facilities that offer coverage to one-third of the
population of their service area within five years of their initial license
grants and to two-thirds of the population within 10 years. Licensees that fail
to meet the coverage requirements may be subject to forfeiture of the license.
FCC rules restrict the voluntary assignments or transfers of control of C and
F-block licenses. During the first five years of the license term, any proposed
assignee or transferee must meet the eligibility criteria for participation in
the entrepreneur block auction at the time the application for assignment or
transfer of control is filed, or the proposed assignee or transferee must hold
other licenses for C and F-blocks and, at the time of receipt of such licenses,
have met the same eligibility criteria. Any transfers or assignments during the
remaining 10 years of the license term are subject to unjust enrichment
penalties, i.e., forfeiture of any bidding credits and acceleration of any
installment payment plans should the assignee or transferee not qualify for the
same benefits. Violations of the Communications Act or the FCC's rules could
result in license revocations, forfeitures or fines. Non-controlling interests
in any entity that holds a PCS license or PCS System generally may be bought or
sold without FCC approval. Any acquisition or sale by the Company or PCS
Partnership of PCS interests may also require the prior approval of the Federal
Trade Commission and the Department of Justice if over a certain size, as well
as state or local regulatory authorities having competent jurisdiction.
For a period of up to five years after the grant of a PCS license (subject
to extension), a PCS licensee will be required to share spectrum with existing
licensees that operate certain fixed microwave systems within its license area.
To secure a sufficient amount of unencumbered spectrum to operate its PCS
Systems efficiently and with adequate population coverage, the PCS Partnership
will need to relocate many of these incumbent licenses. There can be no
assurance that the PCS Partnership will be successful in reaching timely
agreements with the existing microwave licensees needed to construct and operate
its PCS Systems or that any such agreements will be on terms favorable to it.
Foreign Ownership
The Communications Act prohibits the holding of a common carrier license
(such as a cellular or PCS license) by a corporation of which more than 20% of
the capital stock is owned directly or beneficially by aliens. This requirement
cannot be waived by the FCC. When a corporation controls another entity that
holds an FCC license, such corporation may not have more than 25% of its capital
stock owned directly or beneficially by aliens unless the FCC finds that the
public interest would be served by such additional foreign ownership. Failure to
comply with these requirements may result in the FCC issuing an order requiring
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<PAGE> 54
divestiture of alien ownership to bring the licensee into compliance with the
Communications Act. The Company has no knowledge of any present foreign
ownership in violation of these restrictions. The Company's Articles of
Incorporation permit it to redeem shares of Common Stock that are held by
persons whose ownership would cause a violation of the Communications Act or
would prevent the Company from holding or materially delay it from obtaining any
license. See "Description of Capital Stock -- Certain Charter, By-Law and
Statutory Provisions -- Redemption of Capital Stock."
Telecommunications Act of 1996
On February 8, 1996, the Telecommunications Act of 1996 (the
"Telecommunications Act") was signed into law, substantially revising the
regulation of communications. The Telecommunications Act seeks to enhance
competition and remove barriers to market entry, while deregulating the
communications industry to the greatest extent possible. To this end, local and
long-distance communications providers will, for the first time, be able to
compete in the other's market, and telephone and cable companies will likewise
be able to compete. To facilitate the entry of new carriers into existing
markets, the Telecommunications Act imposes certain interconnection and equal
access requirements on incumbent carriers. Additionally, all communications
carriers providing interstate communications services must contribute to the
federal universal service support mechanisms that the FCC will establish. The
Company cannot predict the outcome of the FCC's rulemaking proceedings to
promulgate regulations to implement the new law or the effect of the new
regulations on cellular service or PCS, and there can be no assurance that such
regulations will not adversely affect the Company's business or financial
condition.
At present, cellular providers, other than the regional Bell operating
companies, have the option of using only one designated long distance carrier.
The Telecommunications Act codifies the policy that CMRS providers will not be
required to provide equal access to long distance carriers. The FCC, however,
may require CMRS carriers to offer unblocked access (i.e., implemented by the
subscriber's use of a carrier identification code or other mechanisms at the
time of placing a call) to the long distance provider of the subscriber's
choice. The FCC has recently terminated its inquiry into the imposition of equal
access requirements on CMRS providers. The FCC recently adopted rules
implementing the interconnection policies imposed by the Telecommunications Act,
various aspects of which are being appealed in Federal court. While it is too
soon to predict the actual effect of these new rules, the Company believes that
they will result in a decrease in the Company's interconnection expense.
The Company believes that it is in compliance with all material
requirements under governmental regulations governing its operations, including
those of the FCC, the Department of Justice and the Federal Trade Commission.
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<PAGE> 55
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE OFFICE
------------------------------------------- --- ---------------------------------------
<S> <C> <C>
William L. Henning, Jr..................... 43 Chairman, Chief Executive Officer and
Director
Robert Piper............................... 38 President, Chief Operating Officer and
Director
Dusty J. Dumas............................. 33 Chief Financial Officer
Michael Clark.............................. 43 Vice President/General Manager
Paul Clifton............................... 39 Vice President/Engineering and
Technical Services
Thomas G. Henning.......................... 37 Secretary, General Counsel and Director
William L. Henning, Sr..................... 74 Director
John A. Henning............................ 40 Director
</TABLE>
WILLIAM L. HENNING, JR. has been involved since 1976 in the senior
management of entities comprising the landline telephone operations (the
"Landline Entities") of Cameron, an affiliate of the Company, and since 1984 in
the senior management of entities now comprising the Company's wireless
communications operations (the "Wireless Entities"), some of which were owned by
Cameron until consummation of the restructuring described under "Certain
Transactions -- Tax-Free Restructuring." Such management capacities have
included Director, Chairman, President and Vice President. Mr. Henning's time in
recent years has been allocated between the Wireless Entities (which since the
restructuring comprise the Company) and the Landline Entities of Cameron. After
consummation of this Offering, Mr. Henning will devote his time primarily to the
Company. Mr. Henning has served as a Director and President of the Company since
1988. Prior to that time he was the Company's General Manager for more than 12
years. Mr. Henning, a founder of the facilities-based long distance operations
of the Company, managed such operations as President from 1988 until it was sold
in 1990. He has for more than five years served as President of Mercury
Information Technologies, Inc. ("MIT") (see "Certain Transactions -- Affiliate
Transactions -- Management and Accounting Services"), which owns and operates a
cable television franchise, a voice mail service and an Internet access service.
Since 1991 he has served as a director of First National Bank of Lake Charles.
ROBERT PIPER joined the Company in 1985 as a comptroller. He was Vice
President and General Manager of the Company's long-distance operations from
1987 until such operations were sold in 1990, and of Wireless Entities,
including the Company, from 1987 until 1994, when he became Chief Financial
Officer with responsibility also for mergers and acquisitions. From 1995 until
the present time he has been the President and Chief Operating Officer of
Wireless Entities, including the Company. He served on the Board of Directors of
CTIA (the Cellular Telephone Industry Association) from 1992 to 1994.
DUSTY J. DUMAS joined the Company in January 1994 as its Chief Financial
Officer. For one year prior to that time he was a staff Certified Public
Accountant with the public accounting firm of McElroy, Quirk and Burch, Lake
Charles, Louisiana. From 1984 to 1989 he served at different times and in
different capacities with the public accounting firms of Grant Thornton, L.L.P.,
and Deloitte & Touche, L.L.P. From 1989 to 1993, he was assistant controller of
Chemical Waste Management, Inc., a chemical waste management company. He has
been a Certified Public Accountant since 1987 and a Certified Management
Accountant since 1993.
MICHAEL A. CLARK has served as Vice President and General Manager of the
Company since 1994. His responsibilities include the day-to-day management of
the operations of the Louisiana, Alabama, Kansas and Mississippi Clusters. From
1985 to 1993 he was Director of Data Processing for the Company's landline
affiliate.
PAUL CLIFTON has been the Company's Vice President for Engineering and
Technical Services since 1994. From 1993 to 1994, he was the Company's manager
of network systems, in which capacity he was responsible for overseeing all
engineering and technical aspects of the operations of the Wireless Entities.
From 1988 to
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<PAGE> 56
1993 he was traffic manager and then traffic coordinator for the Company's
landline affiliate, by which he was first employed in 1980. In those capacities
he was responsible for design and implementation projects associated with the
operation of cellular, paging, voice mail, central office, personal computer,
cable television and long distance operations.
THOMAS G. HENNING, an attorney, has been the General Counsel of the Company
and its landline affiliate since January 1994. Prior to becoming General
Counsel, Mr. Henning had since 1984 been an associate, and since 1988 a partner,
of the law firm of Stockwell, Sievert, Viccellio, Clements & Shaddock, L.L.P.,
Lake Charles, Louisiana. He has been an officer and Director of the Company
since 1988. He also serves as an officer and director of other Wireless
Entities.
WILLIAM L. HENNING, SR. practiced law for 10 years, following which he has
for more than 40 years been an executive officer and director of the Landline
Entities. He has been a Director of the Company since its incorporation in 1967.
He has been a director of the National Rural Telecom Association (formerly known
as the National REA Telephone Association) since 1973. He was President of the
Louisiana Telephone Association in 1955; a director of the West Calcasieu Port,
Harbor and Terminal District from 1964 to 1978; a director of the Calcasieu
Parish Industrial Development Board from 1972 to 1986; a director of the United
States Telephone Association from 1982 to 1988; a director of Calcasieu Marine
National Bank from 1985 to 1996; and a commissioner of the Chenault Industrial
Airpark Authority from 1986 to 1988.
JOHN A. HENNING served, from 1987 to 1995, as President of the Wireless
Entity that operated the Louisiana Cluster. Since 1988 he has served as an
officer of various Landline Entities. He has been an officer and Director of the
Company since 1988. He was a director of the Louisiana Telephone Association
from 1984 to 1995 and served as its President from 1993 to 1995. He has served
as a director of Cameron State Bank since 1988.
William L. Henning, Jr., Thomas G. Henning and John A. Henning are
brothers. William L. Henning, Sr. is their father.
The Company has undertaken, pursuant to a resolution of the Board of
Directors, to appoint within 12 months of the consummation of this Offering and
to maintain thereafter at least one independent director (defined as a director
who (a) is not an officer or employee of the Company or any of its subsidiaries,
(b) is not related to such officers, (c) is not the beneficial owner of 10% or
more of the Common Stock of the Company or related to such an owner, and (d) in
the view of the Company's Board of Directors, is free of any relationship that
would interfere with the exercise of independent judgment) on its Board of
Directors.
The Board of Directors is divided into three classes of nearly equal size
serving three-year staggered terms each. The initial Class I directors are John
A. Henning and Thomas G. Henning, whose terms expire in 1998. The initial Class
II directors are William L. Henning, Sr. and Robert Piper, whose terms expire in
1999. The initial Class III director is William L. Henning, Jr., whose term
expires in 2000. The independent director will be elected to Class III.
The Company's Board of Directors has established an Audit Committee and a
Compensation and Stock Option Committee. William L. Henning, Sr. and John A.
Henning are the members of both committees. It is expected that the independent
director referred to in the preceding paragraph will serve on each of these
committees. The Audit Committee recommends the annual engagement of the
Company's auditors, with whom the Audit Committee will review the scope of audit
and non-audit assignments, related fees, the accounting principles used by the
Company in financial reporting, internal financial auditing procedures and the
adequacy of the Company's internal control procedures. The Compensation
Committee determines officers' salaries and bonuses. The Board of Directors or a
committee appointed by the Board of Directors will administer the Company's
benefit plans that involve stock or interests therein. Further, the approval of
disinterested directors will be required for any material agreements or
arrangements between the Company and directors, officers, existing principal
shareholders and their affiliates. Prior to October 1996, the Company did not
have a compensation committee, and the functions of such a committee were
performed by the Board of Directors. William L. Henning, Jr., Thomas G. Henning
and Robert Piper, who are executive officers of the Company and serve on its
Board of Directors, participated in deliberations of the Board of Directors
concerning executive officer compensation.
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<PAGE> 57
Under the Company's By-Laws, the Board of Directors may establish an
Executive Committee which, if appointed, will consist of up to five members and
will have all powers of the Board of Directors when the Board is not in session
except powers expressly reserved to other committees. A unanimous vote of the
Executive Committee would be required for that committee to authorize the
issuance and sale of any shares of capital stock or any indebtedness other than
trade indebtedness incurred in the ordinary course of the Company's business and
other than indebtedness not in excess of $1.0 million.
NO EMPLOYMENT AGREEMENTS
The Company has no employment agreements with its officers or employees,
each of whom may terminate his or her employment, or be terminated, at will.
Persons employed by the Company within the last five years have agreed to be
subject to restrictions on competing with the Company should his or her
employment with the Company terminate.
DIRECTOR COMPENSATION
Directors have not previously been paid fees for service in their capacity
as directors. The Company anticipates that, following consummation of this
Offering, it will pay director fees to, and reimburse expenses incurred in
attending meetings of the Board and its Committees to, its independent
directors.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
executive officers for the year ended December 31, 1995 and expected to be
earned for the year ended December 31, 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
------------------------------
BONUS
------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY CASH STOCK COMPENSATION(1)
- ----------------------------------------- ---- ------- -------- ------- ---------------
<S> <C> <C> <C> <C> <C>
William L. Henning, Jr.
Chairman & Chief Executive Officer 1995 $42,000 $ 10,850 $40,500 $ 2,326
1996 52,000 100,000 45,000 1,763
Robert Piper
President & Chief Operating Officer 1995 58,156 11,200 20,250 4,425
1996 73,608 -- 45,000 4,730
Thomas G. Henning
Secretary & General Counsel 1995 25,000 10,500 40,500 790
1996 35,000 100,000 45,000 1,049
</TABLE>
- ---------------
(1) Does not include compensation from affiliated companies.
1997 STOCK OPTION PLAN
The Board of Directors of the Company has adopted, and the shareholders of
the Company have approved, the US Unwired Inc. 1997 Stock Option Plan (the
"Stock Option Plan"). Under the Stock Option Plan, stock options and other
equity-based awards may be granted to directors, officers, management and other
selected employees and consultants of the Company and its subsidiaries. The
Stock Option Plan will be administered by the Board of Directors or a committee
appointed by the Board of Directors and consisting solely of two or more
"non-employee directors" (the "Administrator").
The Board of Directors expects to grant, upon consummation of this
Offering, five year options to purchase up to approximately 270,000 shares of
Class A Common Stock to certain executive officers, employees and consultants of
the Company pursuant to the Stock Option Plan. The exercise price of each option
granted will be the initial public offering price per share of the Class A
Common Stock offered hereby. Such options will vest in equal 25% annual
installments over a four-year period.
The Administrator, which may grant stock options, stock appreciation rights
and other stock-based awards to eligible persons. In no event, however, may the
Administrator grant awards relating to more than 1,400,000 shares of Class A
Common Stock pursuant to the Stock Option Plan. Shares subject to awards that
are cancelled, forfeited or otherwise settled without the delivery of shares,
and shares surrendered to or
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<PAGE> 58
withheld by the Company in satisfaction of the exercise price or withholding tax
arising in connection with the exercise of an award, shall be added back to the
total number of shares in respect of which awards may be granted under the Stock
Option Plan.
Awards may be satisfied by the delivery of either authorized but unissued
Class A Common Stock or treasury shares. The Administrator may grant one or more
types of awards in any combination to a particular participant in a particular
year; however, no individual may be granted awards under the Stock Option Plan
relating to more than 75,000 shares in any year. No awards may be made under the
Stock Option Plan after the tenth anniversary of the effective date of the Stock
Option Plan, and no shares may be issued under the Stock Option Plan after that
date, except in respect of awards made prior to that date. Each award will be
confirmed by, and is subject to the terms of, an agreement executed by the
participant and the Company.
Following is a description of each type of award or grant that may be made
under the Stock Option Plan.
STOCK OPTIONS
Stock options may be incentive stock options that comply with the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") or nonqualified stock options that do not comply with Section 422
of the Code. The Administrator will determine the exercise price and other terms
and conditions of options, subject to the limitation that the exercise price of
options may not be less than fair market value of the underlying shares on the
date of grant.
To the extent permitted by the Administrator, the exercise price for an
option may be paid in shares of Class A Common Stock valued at their then fair
market value.
STOCK APPRECIATION RIGHTS
Stock appreciation rights ("SARs") may be granted in conjunction with all
or any part of a stock option or independently. Upon the exercise of an SAR, the
participant will be entitled to receive, for each share of Class A Common Stock
to which the exercised SAR relates, the excess of the fair market value per
share of Class A Common Stock on the date of exercise over the grant price of
the SAR. SARs shall have such terms and conditions as may be established by the
Administrator.
OTHER STOCK-BASED AWARDS
The Administrator has the authority under the Stock Option Plan to make
other awards that are valued in whole or in part by reference to, or are payable
in or otherwise based upon, shares of Class A Common Stock, including awards
valued by reference to the performance of a subsidiary of the Company. The
Administrator will determine the participants to whom and the times at which
these awards will be made, the number of shares of Class A Common Stock to be
awarded and all other terms and conditions of the awards.
Any award granted under the Stock Option Plan may include the right to
receive, either currently or on a deferred basis, dividends or dividend
equivalents with respect to the number of shares covered by the award.
If the Administrator determines that any stock split, stock dividend or
other distribution (whether in the form of cash, securities or other property),
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of shares, issuance of warrants or other
rights to purchase shares at a price below fair market value, or other similar
corporate event affects the Class A Common Stock such that an adjustment is
required in order to preserve the benefits intended under the Stock Option Plan,
then the Administrator may in its discretion (i) make equitable adjustments (a)
in the number and kind of shares that may be the subject of future awards under
the Stock Option Plan or (b) the number and kind of shares (or other securities
or property) subject to outstanding awards and the respective grant or exercise
thereof and (ii) if appropriate, provide for the payment of cash to a
participant.
The Stock Option Plan may be amended or terminated at any time by the Board
of Directors, except that no amendment may be made without shareholder approval
if such approval is necessary to comply with any tax or regulatory requirement.
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<PAGE> 59
The Stock Option Plan is not subject to any provision of ERISA and is not
qualified under Section 401(a) of the Code.
PRINCIPAL SHAREHOLDERS
The following table provides certain information regarding the beneficial
ownership of the Company's Common Stock upon the consummation of this Offering
by (i) each of the Company's directors and officers listed in the summary
compensation table, (ii) all directors and officers as a group and (iii) each
person known to the Company to be the beneficial owner of 5% or more of any
class of the Company's voting securities.
<TABLE>
<CAPTION>
CLASS A AND CLASS B COMMON
STOCK(1)
CLASS A CLASS B --------------------------
COMMON STOCK(1) COMMON STOCK(1) PERCENTAGE
-------------------- ----------------------- PERCENTAGE OF COMBINED
PERCENTAGE PERCENTAGE OF COMBINED VOTING
NAME OF BENEFICIAL OWNER SHARES OF CLASS SHARES OF CLASS CLASSES POWER
- ----------------------------------- ------ ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
William L. Henning, Sr. ........... -- -- 4,613,011(2) 41.0% 32.9% 40.0%
William L. Henning, Jr. ........... -- -- 1,043,988(3) 9.3 7.5 9.1
John A. Henning.................... -- -- 994,058(3) 8.8 7.1 8.6
Thomas G. Henning.................. -- -- 1,343,561(4) 11.9 9.6 11.7
Thomas D. Henning.................. -- -- 779,596 6.9 5.6 6.8
Robert Piper....................... -- -- 33,286(5) 0.3 0.2 0.3
All officers and directors as a
group (8 persons total, 5 with
ownership interests)............. -- -- 8,027,904 71.4 57.3 69.7
</TABLE>
- ---------------
(1) As used in this table "beneficial ownership" means the sole or shared power
to vote or direct the voting or to dispose or direct the disposition of any
security. A person is deemed as of any date to have "beneficial ownership"
of any security that such person has a right to acquire within 60 days after
such date, except that shares of Class A Common Stock issuable upon
conversion of Class B Common Stock (see "Description of Capital Stock") are
shown only as Class B Common Stock beneficially owned and not also as Class
A Common Stock beneficially owned. Any security that any person named above
has the right to acquire within 60 days (other than Class A Common Stock
issuable upon conversion of Class B Common Stock) is deemed to be
outstanding for purposes of calculating the ownership percentage of any
other person.
(2) Includes the community property interest of Mrs. Henning. Also includes Mr.
Henning's proportionate interest in 33,286 shares held by a general
partnership comprised of Mr. and Mrs. William L. Henning, Sr., William L.
Henning, Jr., John A. Henning and Thomas G. Henning, based on his interest
in that partnership.
(3) Excludes 116,501 shares held in each of two trusts for the benefit of the
minor children of William L. Henning Jr. and John A. Henning, respectively,
of which shares each of them disclaims beneficial ownership. Includes each
of William L. Henning, Jr.'s and John A. Henning's proportionate interest in
33,286 shares held by a general partnership comprised of Mr. and Mrs.
William L. Henning, Sr., William L. Henning, Jr., John A. Henning and Thomas
G. Henning, based on each of their respective interests in that partnership.
(4) Includes 233,002 shares held by Mr. Henning as trustee for the minor
children of William L. Henning, Jr. and John A. Henning (see Note (3)
above), and 116,501 shares held by Mr. Henning as trustee for his own minor
children, of all of which shares he disclaims beneficial ownership. Also
includes Mr. Henning's proportionate interest in 33,286 shares held by a
general partnership comprised of Mr. and Mrs. William L. Henning, Sr.,
William L. Henning, Jr., John A. Henning and Thomas G. Henning, based on his
interest in that partnership.
(5) Includes the community property interest of Dr. Eileen Piper, the spouse of
Robert Piper.
CERTAIN TRANSACTIONS
TAX-FREE RESTRUCTURING
In preparation for this Offering, the Company and its affiliate through
common control, Cameron Communications Corporation ("Cameron"), completed a
restructuring plan pursuant to which the wireless communications interests of
Cameron were separated from its landline telephone business and combined with
the wireless communications interests of the Company (the "Tax-Free
Restructuring"). To accomplish this restructuring, on September 19, 1996
Cameron, the Company, MCTC (of which Cameron then owned 96%, and the Company
then owned 4%), Mercury Cellular of Kansas, Inc. (then a wholly-owned subsidiary
of
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<PAGE> 60
MCTC), Mississippi One Cellular Telephone Company (a wholly-owned subsidiary of
the Company), Cameron Telephone Company (then a wholly-owned subsidiary of
Cameron), Elizabeth Telephone Company (a 98% subsidiary of Cameron Telephone
Company), and CCC Holding Company ("Newco," then a wholly-owned subsidiary of
Cameron formed to facilitate the restructuring) entered into an Agreement and
Plan of Reorganization (the "Reorganization Agreement"). Pursuant to the
Reorganization Agreement, the following transactions occurred on October 31,
1996. Cameron transferred to Newco all of Cameron's assets and liabilities,
other than its 96% interest in MCTC. Next, Cameron "spun off" (transferred), as
a distribution to its shareholders, all of the shares of Newco. Then, Cameron
was merged into the Company. In consideration for this merger, shareholders of
Cameron received, in exchange for their shares of Cameron, shares of common
stock of the Company which, together with all other then outstanding shares,
have been reclassified into Class B Common Stock. Following the restructuring,
the name of Newco was changed to "Cameron Communications Corporation," and the
name of the Company, which had been Mercury, Inc., was changed to "US Unwired
Inc."
The Reorganization Agreement further provides for the allocation of
obligations and liabilities between Newco and the Company. In general, Newco
will be responsible for all obligations and liabilities relating to the landline
communications business and the Company will be responsible for those relating
to the wireless communications business. Liabilities of a corporate nature, such
as indemnification of officers and directors and securities law liabilities
relating to the issuance of securities in connection with the restructuring, are
allocated to Newco if the liability is attributable to Cameron as it existed
prior to the restructuring, and otherwise to the Company. If an obligation or
liability that is to be allocated to Newco or the Company is asserted against
the other of them, the one to which the obligation or liability was allocated by
the Reorganization Agreement will defend and indemnify the one against which it
is asserted.
Prior to the restructuring, Cameron received from the Internal Revenue
Service a private letter ruling to the effect that no gain or loss would be
recognized by Cameron or its shareholders by virtue of the transfer of assets to
Newco or the spin-off of Newco to Cameron's shareholders, because those
transactions would qualify as a reorganization under Section 368(a)(1)(D) of the
Code and a distribution under Section 355 of the Code. In addition, tax counsel
for the Company had informed it that the merger of Cameron into the Company
would qualify as a reorganization under Section 368(a)(1)(A) of the Code so that
no gain or loss would be recognized by the respective corporations or their
shareholders by virtue of that merger.
AFFILIATE TRANSACTIONS
GENERAL
During a period of many years prior to the restructuring described in the
preceding section, the Company, Cameron and their respective subsidiaries
entered into a variety of contractual relationships with one another and with
other companies under common control. Certain current transactions are
summarized below. There have been additional transactions which have included
cost sharing arrangements among the companies and their affiliates, sharing of
services and salary expenses of personnel, including officers of the companies,
and inter-company sales of assets, including transfers of the assets of a local
long distance company that was subsequently sold by the Company to a third
party.
BILL PROCESSING SERVICES
In 1995, Cameron entered into agreements with MCTC, Cameron Telephone
Company, Elizabeth Telephone Company, Mississippi One Cellular Telephone
Company, Mercury Cellular of Kansas, Inc. and Mississippi 34 Cellular
Corporation, all of which were then subsidiaries of it and/or the Company, under
which Cameron performs bill processing and related services for each of those
corporations. Each agreement had an initial term of six months and is now
subject to termination by either party on 30 days' notice. Prior to the
execution of these agreements, Cameron provided comparable services under oral
agreements. The aggregate amounts paid to Cameron by subsidiaries engaged in the
wireless communications business for all such services during the years ended
December 31, 1993, 1994 and 1995 were $553,000, $635,000 and $1.1 million,
respectively, and $1.3 million for the nine-month period ended September 30,
1996.
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<PAGE> 61
Upon consummation of the restructuring transactions described above, Newco
succeeded to the interest of Cameron in these agreements. The Company believes
that the terms of these agreements are no less favorable to it than terms that
would be available from unaffiliated third persons.
SYSTEM MANAGEMENT AND CONSTRUCTION SERVICES
On May 1, 1996, the Company entered into agreements with MCTC and Mercury
Cellular of Kansas, Inc. (then subsidiaries of Cameron and now, because of the
restructuring, wholly-owned subsidiaries of the Company) under which the Company
provides construction and management services for the respective systems owned
by those corporations. Such services include reviewing and, if necessary,
modifying system design; obtaining governmental and regulatory approvals;
preparation of control point, base station and business office sites; purchase
and installation of switching and base station equipment; negotiating
interconnection to the local exchange switched telephone network; and general
management of the operations of the system. In return for these services, each
of the corporations pays the Company a management fee and reimburses it for all
of its expenses. The management fees used by the two corporations under the
agreements have been $216,000 per month and $42,000 per month. Prior to these
agreements being entered into, the Company provided comparable services for the
corporations under oral arrangements. The aggregate amounts paid to the Company
for such services, including expense reimbursements, during the years ended
December 31, 1993, 1994 and 1995, respectively, were $1.4 million, $1.7 million
and $3.3 million. These amounts have been eliminated in the consolidated
financial statements of the Company.
LONG DISTANCE SERVICES
The Company purchases long distance service from Cameron and resells the
service to the Company's customers. The rates paid by the Company for this
service are comparable to rates at similar volumes charged by Cameron to other
customers and are competitive with rates that the Company would expect to pay
for similar service from an unaffiliated third party. In the years ending
December 31, 1993, 1994 and 1995, the Company paid Cameron $225,000, $228,000
and $386,000, respectively. For the nine months ended September 30, 1996, the
Company paid Cameron $495,000 for long distance service.
FLIGHT SERVICES
The Company has been and is expected to continue to be permitted to use,
for the rate of $2.75 per air mile, a Mitsubishi Diamond 1A aircraft owned and
operated by Cameron. In the years ended December 31, 1993, 1994 and 1995, the
Company paid Cameron $21,000, $23,000 and $85,000, respectively, for flight
services. It is believed that the rates paid for these services are rates that
the Company would be required to pay to an unaffiliated third party for
equivalent services. For the nine months ended September 30, 1996, the Company
paid Cameron $56,000 for such flight services.
MISCELLANEOUS EXPENSE ARRANGEMENTS
The Company and Cameron have historically used certain common vendors and
suppliers to provide various materials and routine services, such as office
supplies, advertising, computer programming and maintenance services. Each of
the Company, Cameron and their subsidiaries bears its proportionate share of
such expenses.
LOAN FROM CAMERON SUBSIDIARY
The Company's acquisition of the Mississippi and Alabama Clusters has been
financed by a direct loan from Cameron Telephone Company, a subsidiary of
Cameron, and a series of pass-through financings from CoBank through CTC
Financial, Inc., a subsidiary of Cameron Telephone Company, to the Company and
its subsidiaries, MCTC and Mississippi One Cellular Telephone Company. On
November 27, 1996, the Company repaid the direct loan from Cameron Telephone
Company with proceeds from an amendment of the pass-through financing.
Thereafter, CTC Financial, Inc. assigned its interest in the pass-through
financings to Mercury Cellular of Kansas, Inc., a subsidiary of the Company. As
of November 30, 1996 the pass-through
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<PAGE> 62
financings were in an aggregate principal amount of $67.7 million. These loans
are represented by a series of promissory notes executed between September 1994
and July 1996. The notes were executed in stages as funds were required for the
acquisition and build-out of the Company's cellular telephone properties. The
notes bear rates of interest ranging from 8.12% to 10.11% and mature at
different times between December 31, 1996 and December 20, 2003. The notes are
governed by the terms of loan agreements to which the Company, Mississippi One
Cellular Telephone Company, MCTC and Mercury Cellular of Kansas are parties and
which provide, generally as to the bulk of the borrowings, that the Company will
pay interest, only, for a period of up to two years and will thereafter pay
principal and interest in monthly installments for a fixed term. The loans are
secured by mortgages of the Company's Kansas, Alabama and Mississippi real
property, the grant of a security interest in the Company's personal property
and continuing guarantees of the Company. All of these loans are secured by
pledges of or mortgages on the assets of the Company and its subsidiaries and
guarantees of the Company and William L. Henning, Sr., a principal shareholder
of the Company. After this Offering, the Company intends to consolidate the
loans from CoBank to the Company and its subsidiaries.
MANAGEMENT AND OTHER SERVICES
William L. Henning, Jr., the Company's Chairman of the Board and Chief
Executive Officer and a principal shareholder of the Company; John A. Henning, a
Director and a principal shareholder of the Company; and Thomas G. Henning, the
Secretary and General Counsel and a principal shareholder of the Company, own
equal interests in MIT, which has, since January 1, 1996, paid the Company a
monthly fee of $2,300 for certain accounting services and a monthly fee of
$3,218 for certain management services. In 1994, in connection with the
Company's decision to focus on its wireless communication services, the Company
sold its voicemail operations and assets to MIT for $424,497. MIT provides the
Company with voicemail services which the Company uses itself and also resells
to its cellular subscribers. During the nine months ended September 30, 1996,
the Company has paid MIT $216,000 for such services and paid MIT $154,000 for
such services during the year ended December 31, 1995. Pursuant to an agreement
dated October 27, 1995, the Company retains 15% of the revenues from customer
voicemail services to the Company in exchange for the Company providing MIT with
billing, collecting, advertising and network services associated with the
voicemail services offered by MIT. Before October 27, the terms of the October
27, 1995 agreement were implemented pursuant to an oral agreement between the
Company and MIT. The Company believes that the terms of these arrangements are
no less fair to the Company than would be expected in comparable arrangements
with unaffiliated third persons. However, since the exchange of services between
the Company and MIT provides each with substantial information about the
business operations of the other, it is unlikely that the Company would be
willing to enter into such arrangements with unaffiliated third persons. Under
an agreement dated June 6, 1996, with Maas.net, LLC, a limited liability company
that is owned 63% by MIT and 27% by Mr. Henning, Jr., the Company pays Maas.net
$2,000 per month for certain Internet services.
PCS PARTNERSHIP
MIT owns a one-third interest in Wireless Management Corporation, the
corporation that serves as general partner of the PCS Partnership. For
information concerning the partnership agreement, see
"Business -- Organization."
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 100,000,000 shares
of Class A Common Stock, par value $.01 per share; 60,000,000 shares of Class B
Common Stock, par value $.01 per share; and 40,000,000 shares of preferred
stock, no par value (the "Preferred Stock"). Immediately prior to the Company's
issuance of Class A Common Stock pursuant to this Offering, there were
11,250,000 shares of Class B Common Stock and no shares of Class A Common Stock
or Preferred Stock issued and outstanding and the Company had approximately 16
holders of record of its Class B Common Stock.
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<PAGE> 63
COMMON STOCK
The Company has two classes of authorized Common Stock, Class A Common
Stock and Class B Common Stock. Other than as described herein with respect to
voting rights and transfer restrictions applicable to the Class B shares, the
Class A and Class B shares have identical rights. The Class A Common Stock has
one vote per share and the Class B Common Stock has 10 votes per share. The
Class A and Class B shares vote together in the election of Directors and
generally with respect to all matters for which a vote of shareholders is
required.
Shares of Class B Common Stock generally convert automatically into shares
of Class A Common Stock on a share-for-share basis immediately upon any transfer
of the Class B Common Stock other than a transfer from an original holder of
Class B Common Stock to certain "qualified holders," who are other original
holders of Class B Common Stock, descendants of such persons, entities owned
exclusively by any of such persons, or trustees or other fiduciaries for any of
them. Holders of Class B Common Stock are subject to certain transfer
restrictions that are described under the heading "Shares Eligible for Future
Sale," including a requirement that Class B shares be first offered to other
Class B shareholders before any transfer can be made to anyone other than a
"qualified holder" and before any related conversion into Class A Common Stock.
Such restrictions do not apply to the Class A Common Stock.
Holders of Common Stock have no cumulative voting rights and no preemptive,
subscription or sinking fund rights. Subject to preferences that may be
applicable to any then outstanding Preferred Stock, holders of Common Stock will
be entitled to receive ratably such dividends as may be declared by the Board of
Directors out of funds legally available therefore. See "Dividend Policy." In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock will be entitled to share ratably in all assets remaining after
payment of liabilities and the liquidation preference to any then outstanding
Preferred Stock.
PREFERRED STOCK
The Company is authorized under its Articles of Incorporation to issue
40,000,000 shares of Preferred Stock, which may be issued from time to time in
one or more series upon authorization by the Company's Board of Directors. The
Board of Directors, without further approval of the shareholders, is authorized
to fix the dividend rights and terms, conversion rights, voting rights,
redemption rights and terms, liquidation preferences and any other rights,
preferences, privileges and restrictions applicable to each series of Preferred
Stock. The issuance of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, adversely affect the voting power of the holders of Common Stock
and, under certain circumstances, make it more difficult for a third party to
gain control of the Company, discourage bids for the Company's Common Stock at a
premium or otherwise adversely affect the market price of the Class A Common
Stock. The Company has no current plans to issue any Preferred Stock.
CERTAIN CHARTER, BY-LAW AND STATUTORY PROVISIONS
The following sections describe certain provisions of the Company's
Articles of Incorporation and By-Laws, and of the Louisiana Business Corporation
Law ("LBCL").
CLASSIFIED BOARD OF DIRECTORS
The Articles of Incorporation divide the members of the Board of Directors
into three classes as nearly equal in size as possible serving three-year
staggered terms each. The initial Class I directors are John A. Henning and
Thomas G. Henning, whose terms expire in 1998. The initial Class II directors
are William L. Henning, Sr. and Robert Piper, whose terms expire in 1999. The
initial Class III director is William L. Henning, Jr., whose term expires in
2000. The independent director will be appointed to Class III.
SPECIAL MEETINGS OF SHAREHOLDERS
The Articles of Incorporation and By-Laws provide that meetings of the
shareholders of the Company may be called only by the Board of Directors, the
Chairman of the Board, or the President, or upon written
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<PAGE> 64
request of any shareholder or shareholders holding in the aggregate 60% of the
total voting power of the Company. In addition, a special meeting of
shareholders of any class or series may be called upon written request of any
shareholder or group of shareholders holding in the aggregate 60% of the total
voting power of such class or series.
ADVANCE NOTICE REQUIREMENTS FOR DIRECTOR NOMINATIONS
The Company's By-Laws provide that nominations of persons for election to
the Board of Directors of the Company may be made at a meeting of shareholders
by or at the direction of the Board of Directors or by any shareholder of record
of the Company entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in the By-Laws. Such nominations,
other than those made by or at the direction of the Board of Directors, shall be
made pursuant to timely notice in writing to the Secretary of the Company. To be
timely, a shareholder's notice must be delivered or mailed and received at the
principal office of the Company not less than 45 days nor more than 90 days
prior to the meeting, provided, however, that in the event that less than 55
days' notice or prior public disclosure of the date of the meeting is given or
made to shareholders, notice by the shareholder to be timely must be received no
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made.
DIRECTOR AND OFFICER INDEMNIFICATION AND LIMITATION OF LIABILITY
As permitted by the LBCL, the Company's Articles of Incorporation contain
provisions eliminating the personal liability of directors and officers to the
Company and its shareholders for monetary damages for breaches of their
fiduciary duties as directors or officers, except for (i) a breach of a
director's or officer's duty of loyalty to the Company or its shareholders, (ii)
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) liability for unlawful distributions of the
Company's assets to, or redemptions or repurchases of the Company's shares from,
shareholders of the Company, under and to the extent provided in the LBCL, and
(iv) any transaction in which a director or officer receives an improper
personal benefit. As a result of the inclusion of such provisions, shareholders
may be unable to recover monetary damages against directors or officers for
actions taken by them that constitute negligence or gross negligence or that are
in violation of their fiduciary duties, although it may still be possible to
obtain injunctive or other equitable relief with respect to such actions. If
equitable remedies are found not to be available to shareholders in any
particular case, shareholders may not have any effective remedy against the
challenged conduct.
The Company's Articles of Incorporation and By-Laws provide in effect that
the Company shall, to the fullest extent permitted by the LBCL, as amended from
time to time, indemnify and advance expenses to each of its directors and
officers, and may so indemnify and advance expenses to employees and agents.
The Company believes the foregoing provisions are necessary to attract and
retain qualified persons as directors and officers. Prior to the consummation of
this Offering, the Company intends to enter into separate indemnification
agreements with each of its directors and executive officers in order to
effectuate such provisions.
REDEMPTION OF CAPITAL STOCK
The Company's Articles of Incorporation permit it to redeem shares of its
capital stock from any shareholder(s) whose ownership causes the Company to
violate foreign ownership restrictions applicable to FCC licensees (see
"Business -- Governmental Regulation -- Foreign Ownership") or otherwise would
prevent the Company from holding or delay it in obtaining any governmental
license or franchise that is necessary to conduct any material portion of its
communications business or would materially increase the Company's cost of
obtaining or operating under any such license or franchise. Shares to be
redeemed are to be selected in a manner determined by the Board of Directors.
The redemption price is the average market price for the 10 trading days
preceding the day on which notice of redemption is given. The redemption price
may be paid in cash or in debt or equity securities of the Company or any other
entity.
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REMOVAL OF DIRECTORS; FILLING VACANCIES ON BOARD OF DIRECTORS
The Articles of Incorporation provide that any director elected by holders
of the Common Stock may be removed, with or without cause, by a vote of a
majority of the total voting power of the Common Stock at any meeting of
shareholders. The Articles of Incorporation provide that any vacancies on the
Board of Directors (including any resulting from an increase in the authorized
number of directors) may be filled by the affirmative vote of a majority of the
directors remaining in office, provided that the shareholders have the right, at
any special meeting called for that purpose prior to such action by the Board,
to fill the vacancy.
ADOPTION AND AMENDMENT OF BY-LAWS
The Articles of Incorporation and By-Laws provide that the By-Laws may be
adopted, amended, or repealed by a majority vote of the Board of Directors,
subject to any power granted by the LBCL to shareholders to change or repeal any
By-Laws so adopted or amended. Any amendment to the By-Laws that would add a
matter not expressly covered in the By-Laws prior to such amendment will be
deemed the adoption of a new By-Law and not an amendment.
SPECIAL SHAREHOLDER VOTING REQUIREMENTS
The Articles of Incorporation provide that any proposal to approve a
merger, consolidation, share exchange, disposition of all or substantially all
of the Company's assets, dissolution, or any amendment to the Articles of
Incorporation, requires the affirmative vote of a majority of the total voting
power, with all classes and series voting together as if a single class. The
LBCL provides that if a proposed amendment to the Articles of Incorporation
would adversely affect, within the meaning of the LBCL, the shares of any class
of capital stock, then the amendment must also be approved by holders of the
shares of that class. Under the Company's Articles of Incorporation, such
approval would require the affirmative vote of holders of a majority of the
voting power present of that class.
TRANSFER AGENT
The Company's transfer agent for its Class A Common Stock is First Chicago
Trust Company of New York.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no market for the Class A Common
Stock of the Company. Future sales of substantial amounts of Class A Common
Stock in the public market could adversely affect prevailing market prices.
Upon the closing of this Offering, the Company will have 14,000,000 shares
of Common Stock outstanding (14,412,500 shares if the Underwriters'
over-allotment option is exercised in full), of which 2,750,000 shares will be
shares of Class A Common Stock sold in this Offering (3,162,500 shares if the
Underwriters' over-allotment option is exercised in full), and 11,250,000 shares
will be shares of Class B Common Stock. Of these shares, the 2,750,000 shares of
Class A Common Stock sold in this Offering (3,162,500 shares if the
Underwriters' over-allotment option is exercised in full) will be freely
tradeable without restriction (except as to affiliates of the Company) and the
11,250,000 outstanding shares of Class B Common Stock will be "restricted
securities" as defined in Rule 144 under the Securities Act. Without
consideration of the restrictions described below, 3,861,184 of the restricted
shares would be available for immediate sale in the public market 91 days after
the date of this Prospectus, subject to volume and other limitations under Rule
144; and on February 14, 1997 and February 19, 1998, 116,501 shares and 66,572
shares will become eligible, respectively. In addition, subject to certain
restrictions set forth in the Company's Articles of Incorporation described
below, on October 31, 1998, when the holding period imposed by the Internal
Revenue Service as a condition to the Tax-Free Restructuring expires, 7,588,532
shares will become eligible for sale without restriction in the public market.
The Rule 144 restrictions generally terminate, except as to affiliates of the
Company, three years after the securities are acquired from the
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<PAGE> 66
Company or any affiliate of the Company. The Commission is considering certain
amendments to Rule 144 that, if adopted, would shorten by one year each of the
time periods referred to in the three preceding sentences, except that no such
date would be earlier than the 91st day after the date of this Prospectus.
All of the officers, directors and shareholders of the Company who hold in
the aggregate 11,250,000 of the Class B shares have agreed, subject to certain
limitations, that for a period of 180 days after the date of this Prospectus
they will not, without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation, offer, sell, contract to sell, grant any option to
purchase, or otherwise dispose of any Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or in any other manner
transfer all or a portion of the economic consequences associated with the
ownership of Common Stock. If and to the extent Donaldson, Lufkin & Jenrette
Securities Corporation should release such shares earlier, they would be
available for immediate sale in the public market subject to restrictions
contained in the Company's Articles of Incorporation and applicable to shares of
Class B Common Stock. Under these restrictions, a holder of Class B Common Stock
who desires to sell them in the public market must first offer them at a price
determined pursuant to a formula based on the public market price to all other
holders of Class B Common Stock and to the Company and, to any extent to which
the shares are not thereby purchased, may convert them to Class A Common Stock
for sale in the public market. The offering shareholder may withdraw the offer
under certain circumstances, depending on changes in the market price. The
Articles of Incorporation further provide, however, that no holder may sell such
converted shares in the public market if such sale would cause the number of
such shares that have been sold in the public market by such holder and such
holder's affiliates (and any other holder(s) acting in concert with them) during
the three-month period ending on the date of such sale to exceed 1% of the total
number of shares of Class A Common Stock outstanding on such date. This
limitation may be waived by holders of a majority of the Class B Common Stock,
and such holders have agreed to grant a waiver for sales made for the purpose of
paying estate and similar taxes of a deceased shareholder. In addition, the
Company has agreed with the holders of Class B Common Stock, subject to certain
limitations, to provide piggyback registration rights for holders of Class B
Common Stock.
The Company has also agreed that, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation, it will not offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, for
a period of 180 days after the date of this Prospectus, subject to certain
limited exceptions. See "Underwriting." The Company intends to file a
registration statement covering the sale of shares of Class A Common Stock
available for issuance upon exercise of options under the 1997 Stock Option Plan
within 180 days after the date of this Prospectus.
In general, under Rule 144 as currently in effect, if two years have
elapsed since the later of the date of acquisition of restricted shares from the
Company or any "affiliate" of the Company, as that term is defined under the
Securities Act, the acquiror or subsequent holder thereof is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of the Company's Class A Common
Stock (such 1% would be 27,500 shares immediately after this Offering or 31,625
shares if the Underwriter's over-allotment option is exercised in full) or the
average weekly trading volume of the Company's Common Stock on all exchanges
and/or reported through the automated quotation system of a registered
securities association during the four calendar weeks preceding the date of
which notice of the sale is filed with the Commission. Sales under Rule 144 are
also subject to certain manner of sales provisions, notice requirements and the
availability of current public information about the Company. If three years
have elapsed since the later of the date of acquisition of restricted shares
from the Company or from any affiliate of the Company, and the acquiror or
subsequent holder thereof is deemed not to have been an affiliate of the Company
at any time during the 90 days preceding a sale, such person would be entitled
to sell such shares in the public market under Rule 144(k) without regard to the
volume limitations, manner of sales provisions, public information requirements
or notice requirements.
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UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), the Underwriters named below (the
"Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities Corporation,
A.G. Edwards & Sons, Inc. and The Robinson-Humphrey Company, Inc. are acting as
representatives (the "Representatives"), have severally agreed to purchase from
the Company the respective number of shares of Class A Common Stock set forth in
the table below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.......................
A.G. Edwards & Sons, Inc. ................................................
The Robinson-Humphrey Company, Inc. ......................................
---------
Total........................................................... 2,750,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Class A Common
Stock offered hereby are subject to approval of certain legal matters by counsel
and to certain other conditions. If any shares of Class A Common Stock are
purchased by the Underwriters pursuant to the Underwriting Agreement, all such
shares (other than shares covered by the over-allotment option described below)
must be purchased.
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Class A Common Stock to the public initially at the price
to the public set forth on the cover page of this Prospectus and to certain
dealers (who may include the Underwriters) at such price less a concession not
to exceed $ per share. The Underwriters may allow, and such dealers may
reallow, discounts not in excess of $ per share to any other Underwriter and
certain other dealers. After this Offering, the offering price and other selling
terms may be changed by the Representatives.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
The Company has granted the Underwriters an option to purchase up to an
aggregate of 412,500 additional shares of Class A Common Stock, at the public
offering price net of underwriting discounts and commissions, solely to cover
over-allotments. Such option may be exercised at any time within 30 days after
the date of this Prospectus. To the extent that the Underwriters exercise such
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase a number of option shares proportionate to such
Underwriter's initial commitment as indicated in the preceding table.
The Company, all of the current officers and directors and certain
shareholders of the Company have agreed, subject to certain limited exceptions,
not to offer, sell, contract to sell, grant any option to purchase, or otherwise
dispose of any Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or in any other manner transfer all or a portion
of the economic consequences associated with the ownership of Common Stock for a
period of 180 days after the date of this Prospectus, without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation.
Up to an aggregate of shares of Class A Common Stock, or
approximately % of the shares offered hereby, have been reserved for sale
to certain employees of the Company and its affiliates and other persons
designated by the Company. The price per share of the shares to be sold to these
persons is the same as the price to the public in this Offering. The maximum
investment of any such person may be limited by the
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Company in its sole discretion. This program will be administered by Donaldson,
Lufkin & Jenrette Securities Corporation. The Underwriters do not intend to
confirm sales of the Class A Common Stock offered hereby to any accounts over
which they exercise discretionary authority.
Prior to this Offering, there has been no public market for the Class A
Common Stock. The initial public offering price will be determined by
negotiations among the Company and the Representatives. Among the factors to be
considered in such negotiations will be the history of, and the prospects for,
the Company and the industry in which it competes, an assessment of the
Company's management, the Company's past and present operations, its past and
present income and the trend of such income, the prospects for future income of
the Company, the present state of the Company's development, the general
condition of the securities markets at the time of this Offering and the market
prices of publicly traded common stocks of comparable companies in recent
periods.
LEGAL MATTERS
The validity of the Class A Common Stock and certain other legal matters in
connection with this Offering will be passed upon for the Company by Correro
Fishman Haygood Phelps Weiss Walmsley & Casteix, L.L.P., New Orleans, Louisiana.
Certain legal matters in connection with the Class A Common Stock offered hereby
will be passed upon for the Underwriters by Latham & Watkins, Los Angeles,
California.
EXPERTS
The consolidated financial statements of US Unwired Inc. and subsidiaries
as of December 31, 1994 and 1995 and September 30, 1996 and for each of the
years in the three-year period ended December 31, 1995 and the nine months ended
September 30, 1996, and the financial statements of Miscellco Communications,
Inc. for the year ended December 31, 1994 and the four-month period ended April
30, 1995, and the financial statements of West Alabama Cellular Telephone
Company, Inc. as of December 31, 1995 and May 15, 1996 and for the year ended
December 31, 1995 and the period from January 1, 1996 to May 15, 1996, and the
financial statements of Alabama 4 System as of June 30, 1996 and for the period
October 1, 1995 to November 6, 1995 and the period from November 7, 1995 to June
30, 1996, have been included herein and in the Registration Statement in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the financial statements of
Alabama 4 System contains an explanatory paragraph that refers to a business
combination in 1995 accounted for as a purchase involving assets comprising a
portion of Alabama 4 System. As a result of the acquisition, financial
information of Alabama 4 System for periods after November 6, 1995 is presented
on a different cost basis than that for periods before November 6, 1995 and,
therefore, such information is not comparable.
The balance sheet of Alabama 4 System as of September 30, 1995 and the
related statements of operations, stockholders' equity (deficit) and cash flows
for the years ended September 30, 1994 and 1995 have been included herein and in
the Registration Statement in reliance on the report of Elliot H. Goldberg, CPA,
P.C., independent auditor, upon the authority of such person as an expert in
accounting and auditing.
The statements of operations, stockholders' equity and cash flows of
Miscellco Communications, Inc. for the year ended December 31, 1993 have been
included herein and in the Registration Statement in reliance upon the report of
Smith, Turner & Reeves, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
US UNWIRED INC.:
Independent Auditors' Report........................................................ F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and
September 30, 1996............................................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1993, 1994
and 1995 and the nine months ended September 30, 1995 (unaudited) and 1996....... F-4
Consolidated Statements of Shareholders' Equity for the years ended December 31,
1993, 1994 and 1995 and the nine months ended September 30, 1996................. F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994
and 1995 and the nine months ended September 30, 1995 (unaudited) and 1996....... F-6
Notes to Consolidated Financial Statements.......................................... F-7
MISCELLCO COMMUNICATIONS, INC.:
Independent Auditors' Report........................................................ F-19
Independent Auditors' Report........................................................ F-20
Statements of Operations for the years ended December 31, 1993, 1994 and the four
months ended April 30, 1995...................................................... F-21
Statements of Stockholders' Equity for the years ended December 31, 1993 and 1994
and the four months ended April 30, 1995......................................... F-22
Statements of Cash Flows for the years ended December 31, 1993 and 1994 and the four
months ended April 30, 1995...................................................... F-23
Notes to Financial Statements....................................................... F-24
WEST ALABAMA CELLULAR TELEPHONE COMPANY, INC.:
Independent Auditors' Report........................................................ F-26
Balance Sheets as of December 31, 1995 and May 15, 1996............................. F-27
Statements of Operations for the year ended December 31, 1995 and the period from
January 1, 1996 to May 15, 1996.................................................. F-28
Statements of Stockholders' Equity (Deficit) for the year ended December 31, 1995
and the period from January 1, 1996 to May 15, 1996.............................. F-29
Statements of Cash Flows for the year ended December 31, 1995 and the period from
January 1, 1996 to May 15, 1996.................................................. F-30
Notes to Financial Statements....................................................... F-31
ALABAMA 4 SYSTEM:
Independent Auditors' Report........................................................ F-34
Independent Auditors' Report........................................................ F-35
Balance Sheets as of September 30, 1995 and June 30, 1996........................... F-36
Statements of Operations for the years ended September 30, 1994 and 1995, the period
from October 1, 1995 to November 6, 1995 and the period from November 7, 1995
to June 30, 1996................................................................. F-37
Statements of Stockholders' Equity (Deficit) for the years ended September 30, 1994
and 1995, the period from October 1, 1995 to November 6, 1995 and the period from
November 7, 1995 to June 30, 1996................................................ F-38
Statements of Cash Flows for the years ended September 30, 1994 and 1995, the period
from October 1, 1995 to November 6, 1995 and the period from November 7, 1995 to
June 30, 1996.................................................................... F-39
Notes to Financial Statements....................................................... F-40
</TABLE>
F-1
<PAGE> 70
When the transactions referred to in note 15 of the Notes to Consolidated
Financial Statements have been consummated, we will be in a position to render
the following report.
KPMG Peat Marwick LLP
December 18, 1996
INDEPENDENT AUDITORS' REPORT
The Board of Directors
US Unwired Inc. and subsidiaries:
We have audited the accompanying consolidated balance sheets of US Unwired
Inc. and subsidiaries as of December 31, 1994 and 1995, and September 30, 1996,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1995 and the nine-month period ended September 30, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of US Unwired
Inc. and subsidiaries as of December 31, 1994 and 1995, and September 30, 1996
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1995 and the nine-month period ended
September 30, 1996 in conformity with generally accepted accounting principles.
New Orleans, Louisiana
December 13, 1996, except as to note 15
which is as of
F-2
<PAGE> 71
US UNWIRED INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1994 1995 1996
----------- ----------- -------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 5,323,594 $ 5,101,601 $ 10,101,783
Subscriber receivables (less allowance for
doubtful accounts of $339,898, $1,006,000 and
$2,213,570 at December 31, 1994 and 1995 and
September 30, 1996, respectively)............. 2,445,891 5,474,179 7,977,430
Receivable from affiliate........................ 424,497 -- --
Other receivables................................ 266,066 235,439 693,521
Inventory........................................ 804,878 1,600,570 1,683,137
Prepaid expenses................................. 121,644 133,515 355,431
----------- ----------- ------------
Total current assets..................... 9,386,570 12,545,304 20,811,302
Investments in unconsolidated affiliates........... 554,291 5,449,719 5,426,434
Property and equipment, net of accumulated
depreciation of $9,702,939, $13,484,855 and
$17,473,925 as of December 31, 1994 and 1995 and
September 30, 1996, respectively................. 13,261,076 20,911,272 26,407,022
Cellular licenses, net of accumulated amortization
of $1,008,478, $2,779,000 and $5,282,800 as of
December 31, 1994 and 1995 and September 30,
1996, respectively............................... 10,094,786 38,784,432 76,355,260
Deferred income taxes.............................. 351,635 483,862 578,950
Other assets....................................... 1,992,064 579,262 1,354,495
----------- ----------- ------------
Total assets............................. $35,640,422 $78,753,851 $ 130,933,463
=========== =========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................. $ 1,368,685 $ 2,821,966 $ 4,842,935
Accrued expenses................................. 1,030,227 2,034,406 4,938,173
Current maturities of long-term debt............. 665,762 2,776,828 7,996,363
----------- ----------- ------------
Total current liabilities................ 3,064,674 7,633,200 17,777,471
Long-term debt..................................... 13,020,412 49,274,443 87,681,399
Minority interest.................................. 896,902 442,981 139,935
Shareholders' equity:
Preferred stock, authorized 40,000,000 shares;
none issued or outstanding.................... -- -- --
Common stock, $0.01 par value
Class A: Authorized 100,000,000 shares; none
issued or outstanding....................... -- -- --
Class B: Authorized 60,000,000 shares; issued
and outstanding, 11,066,927, 11,183,428 and
11,250,000 shares at December 31, 1994 and
1995 and September 30, 1996, respectively... 110,669 111,834 112,500
Additional paid-in capital....................... 1,514,724 1,655,309 1,834,643
Retained earnings................................ 17,033,041 19,636,084 23,387,515
----------- ----------- ------------
Total shareholders' equity............... 18,658,434 21,403,227 25,334,658
Commitments and contingencies
----------- ----------- ------------
Total liabilities and shareholders'
equity................................. $35,640,422 $78,753,851 $ 130,933,463
=========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 72
US UNWIRED INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- --------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Cellular service:
Subscriber...................... $ 9,059,203 $14,547,619 $28,801,812 $19,262,669 $32,635,016
Roaming......................... 4,084,268 6,603,242 8,909,395 6,248,134 9,609,479
Merchandise sales.................. 540,961 1,002,221 1,403,425 998,339 1,286,595
Other revenue...................... 661,369 400,257 136,962 160,077 327,844
----------- ----------- ----------- ----------- -----------
14,345,801 22,553,339 39,251,594 26,669,219 43,858,934
----------- ----------- ----------- ----------- -----------
Operating expenses:
Cost of service.................... 4,512,823 7,444,662 11,430,334 7,891,366 11,621,569
Merchandise cost of sales.......... 719,884 2,517,994 3,372,820 1,922,518 3,376,837
General and administrative......... 1,692,353 2,498,484 5,308,109 3,553,544 7,078,436
Sales and marketing................ 2,735,772 3,768,069 6,261,559 3,986,169 5,448,448
Depreciation and amortization...... 2,036,877 2,892,457 5,685,911 3,853,731 6,432,076
----------- ----------- ----------- ----------- -----------
11,697,709 19,121,666 32,058,733 21,207,328 33,957,366
----------- ----------- ----------- ----------- -----------
Operating income..................... 2,648,092 3,431,673 7,192,861 5,461,891 9,901,568
----------- ----------- ----------- ----------- -----------
Other income (expense):
Interest expense................... (177,472) (789,856) (3,401,424) (2,253,020) (4,516,120)
Interest income.................... 269,548 160,405 336,253 234,771 213,952
Gain (loss) on sale of assets...... 9,984 24,611 (32,137) -- --
----------- ----------- ----------- ----------- -----------
Total other income
(expense)................ 102,060 (604,840) (3,097,308) (2,018,249) (4,302,168)
----------- ----------- ----------- ----------- -----------
Income before income taxes, minority
interest and equity in income of
affiliates......................... 2,750,152 2,826,833 4,095,553 3,443,642 5,599,400
Income tax expense................... 1,316,648 1,914,112 2,290,857 1,776,572 2,375,089
----------- ----------- ----------- ----------- -----------
Income before minority interest and
equity in income of affiliates..... 1,433,504 912,721 1,804,696 1,667,070 3,224,311
Minority interest in losses of
subsidiary......................... 401,292 439,172 453,921 379,170 303,046
Equity in income of affiliates....... 73,739 397,795 344,426 272,316 224,074
----------- ----------- ----------- ----------- -----------
Net income........................... $ 1,908,535 $ 1,749,688 $ 2,603,043 $ 2,318,556 $ 3,751,431
=========== =========== =========== =========== ===========
Net income per share................. $ 0.17 $ 0.16 $ 0.23 $ 0.21 $ 0.33
=========== =========== =========== =========== ===========
Weighted average shares
outstanding........................ 10,933,782 11,108,874 11,242,334 11,239,783 11,250,000
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 73
US UNWIRED INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
CLASS A CLASS B ADDITIONAL
PREFERRED COMMON COMMON PAID-IN RETAINED
STOCK STOCK STOCK CAPITAL EARNINGS TOTAL
--------- ------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993..................... $ -- $ -- $108,672 $1,143,428 $13,374,818 $14,626,918
Net income..................................... -- -- -- -- 1,908,535 1,908,535
--------- ------- -------- ---------- ----------- -----------
Balance at December 31, 1993................... -- -- 108,672 1,143,428 15,283,353 16,535,453
Issuance of 199,716.42 shares of Class B Common
Stock........................................ -- -- 1,997 112,003 -- 114,000
Contributed capital............................ -- -- -- 259,293 -- 259,293
Net income..................................... -- -- -- -- 1,749,688 1,749,688
--------- ------- -------- ---------- ----------- -----------
Balance at December 31, 1994................... -- -- 110,669 1,514,724 17,033,041 18,658,434
Issuance of 116,501.24 shares of Class B Common
Stock........................................ -- -- 1,165 140,585 -- 141,750
Net income..................................... -- -- -- -- 2,603,043 2,603,043
--------- ------- -------- ---------- ----------- -----------
Balance at December 31, 1995................... -- -- 111,834 1,655,309 19,636,084 21,403,227
Issuance of 66,572.14 shares of Class B Common
Stock........................................ -- -- 666 179,334 -- 180,000
Net income..................................... -- -- -- -- 3,751,431 3,751,431
--------- ------- -------- ---------- ----------- -----------
Balance at September 30, 1996.................. $ -- $ -- $112,500 $1,834,643 $23,387,515 $25,334,658
========= ======= ======== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 74
US UNWIRED INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------- ----------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Net income............................... $ 1,908,535 $ 1,749,688 $ 2,603,043 $ 2,318,556 $ 3,751,431
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization.......... 2,036,877 2,892,457 5,685,911 3,853,731 6,432,076
Minority interest...................... (401,292) (439,172) (453,921) (379,171) (303,046)
Unearned revenue....................... 89,000 158,000 227,000 160,000 153,000
Bad debt provision..................... 154,344 106,349 589,338 299,717 1,120,351
Deferred tax expense................... 75,593 (330,179) (132,227) (56,419) (95,088)
Gain on the sale of assets............. (9,984) (24,611) (32,137) --
Equity in income of affiliates......... (73,739) (397,795) (344,426) (272,316) (224,074)
Non-cash compensation.................. -- 114,000 141,750 141,750 180,000
Changes in operating assets and
liabilities:
Subscriber receivables................... (185,758) (1,087,295) (2,834,096) (1,449,966) (2,861,574)
Receivable from affiliates............... (542,139) 542,139 424,497 424,497 --
Other receivables........................ (272,892) 11,658 30,627 29,374 (458,082)
Inventory................................ (99,524) (578,223) (639,131) (111,782) 47,981
Prepaid expenses......................... (75,323) (23,313) 357 (262,147) (215,285)
Other assets............................. 1,485,346 937,485 2,534,922 2,556,359 (407,300)
Accounts payable......................... 1,576,843 (876,938) 1,199,684 (1,104,527) 933,174
Accrued expenses......................... 1,870,811 (1,190,584) (2,263,800) (536,087) 884,142
------------ ------------ ------------ ------------ ------------
net cash provided by operating
activities...................... 7,536,698 1,563,666 6,737,391 5,611,569 8,937,706
------------ ------------ ------------ ------------ ------------
Cash flows from investing activities:
Purchase of property and equipment....... (8,038,020) (4,460,389) (5,850,687) (3,498,578) (3,554,589)
Proceeds from sale of property and
equipment.............................. 20,800 756,443 404,084 420,535 2,226
Acquisition of Kansas RSAs............... -- -- (35,111,038) (35,111,038) --
Acquisition of Alabama RSA 3............. -- -- -- -- (16,386,173)
Acquisition of Alabama RSA 4............. -- -- -- -- (27,526,313)
Acquisition of Mississippi RSA 1......... (6,000,000) -- -- -- --
Acquisition of Mississippi RSAs 3 and
4...................................... (3,042,608) -- -- -- --
Transfer to escrow....................... -- (1,736,517) -- -- --
Distributions from unconsolidated
affiliates............................. -- 360,909 368,998 285,299 2,247,359
Investment in unconsolidated
affiliates............................. (184,016) (104,828) (4,920,000) (2,920,000) (2,000,000)
------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities...................... (17,243,844) (5,184,382) (45,108,643) (40,823,782) (47,217,490)
------------ ------------ ------------ ------------ ------------
Cash flows from financing activities:
Proceeds from long-term debt, including
interest capitalized................... 6,539,970 7,625,966 40,321,946 37,862,813 46,026,906
Principal payments on long-term debt..... -- (1,668,076) (1,956,849) (1,448,203) (2,400,415)
Deferred financing costs................. -- (155,189) (215,838) (322,935) (346,525)
------------ ------------ ------------ ------------ ------------
Net cash provided by financing
activities...................... 6,539,970 5,802,701 38,149,259 36,091,675 43,279,966
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash... (3,167,176) 2,181,985 (221,993) 879,462 5,000,182
Cash at beginning of period................ 6,308,785 3,141,609 5,323,594 5,323,594 5,101,601
------------ ------------ ------------ ------------ ------------
Cash at end of period...................... $ 3,141,609 $ 5,323,594 $ 5,101,601 $ 6,203,056 $ 10,101,783
============ ============ ============ ============ ============
Supplemental disclosures of cash flow
information:
Cash paid for interest................... $ 60,361 $ 30,532 $ 2,190,027 $ 2,094,352 $ 4,108,555
============ ============ ============ ============ ============
Cash paid for income taxes............... $ 1,530,595 $ 2,534,902 $ 2,280,200 $ 1,756,200 $ 2,315,000
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 75
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Organization
US Unwired Inc. ("Company") is principally engaged in the ownership and
operation of wireless communications systems in the south-central and the
mid-western United States. At December 31, 1995, the Company owned and operated
cellular communications systems in 14 Rural Service Areas ("RSAs"), excluding
two RSAs which it operates under interim operating authority from the Federal
Communications Commission ("FCC"), and one Metropolitan Statistical Area
("MSA"). These markets are clustered into geographic regions that include
portions of Louisiana, Mississippi, Alabama, Texas, Kansas and Oklahoma.
(b) Consolidation Policy
The consolidated financial statements include the accounts of US Unwired
Inc. and its majority-owned subsidiaries. All significant intercompany balances
and transactions are eliminated in consolidation. Losses of subsidiaries
attributable to minority shareholders in excess of the minority interest in the
equity capital of the subsidiary are not eliminated in consolidation.
(c) Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with remaining maturities of three
months or less to be cash equivalents.
(d) Inventory
Inventory consists of cellular telephones and related accessories and is
carried at the lower of cost or market. Cost is determined by the first-in,
first-out method.
(e) Property and Equipment
Property and equipment is stated at cost and depreciated on a straight-line
basis over the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Buildings.................................................................... 31.5
Leasehold improvements....................................................... 5
Cellular facilities and equipment............................................ 5 to 7
Furniture and fixtures....................................................... 5
Vehicles..................................................................... 5
</TABLE>
Routine maintenance and repairs are charged to operating expense while
costs of betterments and renewals are capitalized.
Cellular equipment held under capital leases is amortized on a
straight-line basis over the lease term of 5 years. Amortization of assets held
under capital leases is included in depreciation and amortization.
(f) Cellular Licenses and Other Assets
Cellular licenses consist primarily of costs incurred in connection with
the Company's acquisition of cellular licenses and systems. These assets are
recorded at cost and amortized using the straight-line method over an estimated
useful life of 20 years. The Company annually evaluates the propriety of the
carrying values
F-7
<PAGE> 76
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
of its cellular licenses and other system-related assets using estimated
undiscounted future cash flows of the market to which the license relates to
determine whether current events or circumstances warrant adjustments to reduce
the carrying amounts to fair value. There have been no such reductions through
December 31, 1995.
Other assets include deferred financing costs incurred in connection with
the issuance of the Company's long-term debt which are capitalized and amortized
over the terms of the related debt using the interest method.
(g) Investments in Unconsolidated Affiliates
The Company's investments in less than majority-owned affiliated companies
in which the Company's interest is 20% or more are accounted for using the
equity method and equity in earnings are reported as investment income.
(h) Revenue Recognition
The Company earns revenue by providing access to and usage of its cellular
and paging networks and sales of cellular and paging merchandise. Access revenue
is billed one month in advance and is recognized when earned. Usage revenue is
recognized when the service is rendered. Both access and usage revenues are
classified as service revenues in the accompanying statements of operations.
Revenues from sales of merchandise are recognized when the merchandise is
delivered.
(i) Commissions
Commissions are paid to sales agents for customer activations and are
recognized in the month the customer is activated within the cellular system.
(j) Income Taxes
The Company accounts for income taxes using the asset and liability method,
under which deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(k) Stock Based Compensation
The Company plans to adopt a stock option plan providing for the grant of a
fixed number of shares to employees with an exercise price equal to the fair
value of the shares at the date of grant. The Company will account for stock
option grants in accordance with APB Opinion 25, Accounting for Stock Issued to
Employees, and accordingly, will recognize no compensation expense for stock
option grants. The Company will continue to apply the provision of APB 25 with
regard to financial statement recognition of stock-based compensation to
employees.
(l) Net Income Per Share
Net income per share is based on net income divided by the weighted average
number of common shares outstanding during the period presented. All share and
per share data have been restated to give effect to the recapitalization and
reorganization discussed in note 2 to the Consolidated Financial Statements. All
shares issued within one year of this Offering have been treated as outstanding
for all periods presented.
F-8
<PAGE> 77
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
(m) Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(n) Interim Financial Information
In the opinion of management, the accompanying interim consolidated
financial information of the Company contains all adjustments, consisting only
of those of a normal recurring nature, necessary to present fairly the Company's
results of its operations and cash flows for the nine-month period ended
September 30, 1995 and 1996. These interim results are not necessarily
indicative of the results to be expected for the full fiscal year.
(2) RECAPITALIZATION AND REORGANIZATION
The Company was incorporated as Mercury, Inc. in 1967 by the principal
shareholders of Cameron Communications Corporation ("Cameron") to provide
complimentary services to Cameron's local landline telephone service. Prior to
October 31, 1996, the cellular and paging communications services provided by
the Company were conducted by a subsidiary of Cameron and by the Company and its
subsidiaries, all of which were affiliated through common stock ownership
control by a related group of shareholders. In anticipation of the Company's
initial public offering of its common stock, effective October 31, 1996, the
Company and Cameron completed a reorganization plan for the purpose of combining
the wireless communications businesses of these related entities and separating
the wireless communications business of Cameron from its traditional landline
telephone business.
To accomplish the restructuring, the Company and Cameron executed a series
of transactions which included the following: (i) transfer of the landline
telephone business to a newly-formed subsidiary of Cameron ("Newco") and
spin-off of Newco to its shareholders, and (ii) merger of Cameron into the
Company and issuance of 2.192108 shares of Class B Common Stock of the Company
on a pro-rata basis to Cameron shareholders, resulting in the combination of all
wireless telecommunications businesses within the Company. In October 1996, the
Board of Directors of the Company authorized the issuance of Class A Common
Stock, $0.01 par value per share, to be registered under Securities Act of 1933
in the Company's initial public offering.
The combination of the wireless communications business represents a
combination of entities under common control and has been accounted for at
historical cost in a manner similar to that in pooling-of-interests accounting.
The spin-off of the landline telephone business, which has been consummated
prior to the date of this Prospectus, has been treated as a change in reporting
entity, and the historical financial statements have been restated in accordance
with Staff Accounting Bulletin No. 93 since the Company and Newco are in
dissimilar businesses, have been managed and financed historically as if they
were autonomous and will continue to be managed and financed autonomously after
the spin-off. In addition, all share and per share amounts have been
retroactively adjusted to give effect to the issuance of Class B Common Stock
described above.
(3) ACQUISITIONS
In December 1992, the Company acquired a 36.25% interest in Mississippi 34
Cellular Corporation ("MS 34") for approximately $2.6 million. In April 1993,
the Company purchased an additional 14.75%
F-9
<PAGE> 78
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
interest in MS 34 for approximately $900,000 bringing the total investment to
51%. The Company's investment in MS 34 was accounted for using the equity method
from December 1992 until April 1993, when the Company acquired its controlling
interest. The acquisition of MS 34 has been accounted for using the purchase
method of accounting and, accordingly, the results of operations of MS 34 have
been consolidated from the date on which the Company acquired majority ownership
of MS 34.
In April 1995, the Company purchased the assets of Miscellco
Communications, Inc., principally consisting of the Kansas-1, 2, 6, 7, 11, 12
and 13 RSAs for a purchase price of approximately $35.1 million. In May 1996,
the Company purchased the assets of West Alabama Cellular Telephone Company,
Inc., principally consisting of the Alabama-3 RSA, for a purchase price of
approximately $17.9 million. In July 1996, the Company purchased the Alabama 4
System assets from PriCellular Corporation principally consisting of the
Alabama-4 RSA, for a purchase price of approximately $27.8 million. These
acquisitions have been accounted for using the purchase method of accounting
and, accordingly, the results of operations of the acquired businesses are
included in the results of operations of the Company from the effective dates of
the acquisitions. The Company recorded cellular licenses acquired in these
transactions in the amounts of $30.5 and $39.9 million, respectively, during the
year ended December 31, 1995 and the nine months ended September 30, 1996, which
are being amortized over a twenty-year period using the straight-line method.
Pro forma unaudited consolidated operating results of the Company and the
acquired businesses for the years ended December 31, 1994 and 1995 and the nine
months ended September 30, 1996, assuming the acquisitions had been made as of
January 1, 1994 with respect to Miscellco and January 1, 1995 with respect to
the Alabama-3 and Alabama-4 RSAs, are summarized below:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------- SEPTEMBER 30,
1994 1995 1996
----------- ----------- -------------
<S> <C> <C> <C>
Revenues...................................... $28,544,000 $49,868,000 $ 48,401,000
Net income (loss)............................. $(1,277,000) $ (357,000) $ 3,100,000
Net income (loss) per common share............ $ (0.11) $ (0.03) $ 0.28
</TABLE>
(4) PROPERTY AND EQUIPMENT
Major categories of property and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- SEPTEMBER 30,
1994 1995 1996
----------- ------------ -------------
<S> <C> <C> <C>
Land...................................... $ 1,102,897 $ 1,130,302 $ 1,130,302
Buildings................................. 1,411,592 1,854,277 2,374,293
Leasehold improvements.................... 55,409 207,158 210,499
Cellular facilities and equipment......... 19,604,054 29,407,076 36,698,825
Furniture and fixtures.................... 599,450 1,110,567 1,544,510
Vehicles.................................. -- 156,756 178,998
Construction in progress.................. 190,613 529,991 1,743,520
----------- ------------ -------------
22,964,015 34,396,127 43,880,947
Less accumulated depreciation... (9,702,939) (13,484,855) (17,473,925)
----------- ------------ -------------
$13,261,076 $ 20,911,272 $ 26,407,022
=========== ============ =============
</TABLE>
F-10
<PAGE> 79
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
During the year ended December 31, 1995, the Company began leasing certain
cellular equipment under agreements classified as capital leases. The following
is a summary of equipment held under capital leases as of December 31, 1995 and
September 30, 1996:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Cellular facilities and equipment.......................... $3,144,276 $ 3,144,276
Less accumulated depreciation.............................. (302,352) (766,364)
---------- -----------
$2,841,924 $ 2,377,912
========== ===========
</TABLE>
(5) INVESTMENTS IN UNCONSOLIDATED AFFILIATES
Investments in unconsolidated affiliates at December 31, 1994 and 1995 and
September 30, 1996 consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
PERCENTAGE ---------------------- SEPTEMBER 30,
OWNERSHIP 1994 1995 1996
---------- -------- ---------- -------------
<S> <C> <C> <C> <C>
Meretel Communications, L.P............ 24.33% $ -- $2,920,000 $ 2,920,000
Mercury Mobility, L.L.C................ 50% 1,500 2,001,500 2,001,500
GTE Mobilnet of Texas RSA #21 Limited
Partnership.......................... 25% 552,791 528,219 504,934
-------- ---------- -----------
$554,291 $5,449,719 $ 5,426,434
======== ========== ===========
</TABLE>
Summary financial information for GTE Mobilnet of Texas RSA #21 Limited
Partnership is as follows for the years ended December 31, 1994 and 1995 and the
nine months ended September 30, 1996 (unaudited) respectively:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1994 1995 1996
---------- ---------- -------------
<S> <C> <C> <C>
Total assets.................................. $2,307,919 $2,248,559 $ 2,379,779
Total liabilities............................. 96,752 135,679 103,530
---------- ---------- -----------
Partners' capital............................. $2,211,167 $2,112,880 $ 2,276,249
========== ========== ===========
Revenues...................................... $2,281,484 $2,067,719 $ 1,659,820
========== ========== ===========
Operating expenses............................ $ 707,786 $ 716,345 $ 523,587
========== ========== ===========
Net income.................................... $1,591,181 $1,377,703 $ 1,152,806
========== ========== ===========
</TABLE>
In June 1995 the Company invested approximately $2.9 million in Meretel
Communications L.P. (the "PCS Partnership") and has committed to make additional
capital contributions of up to approximately $10.1 million upon the successful
acquisition of one or more licenses in certain FCC auctions for broadband
personal communications services ("PCS") licenses. In May 1996, the FCC
completed the auctions for which the PCS Partnership was formed to participate,
and the PCS Partnership was the high bidder for five PCS licenses for a total
bid price of $61.2 million. Four of these licenses were granted in October 1996.
Mercury Mobility, L.L.C. ("Mobility") was organized in September 1994 for
the purpose of participating in certain FCC auctions for PCS licenses. The
Company and a related party each have a 50% equity interest in Mobility. As of
September 30, 1996, Mobility has not commenced active operations.
F-11
<PAGE> 80
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
(6) ACCRUED EXPENSES
Accrued expenses consists of the following at December 31, 1994 and 1995
and September 30, 1996:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1994 1995 1996
---------- ---------- -------------
<S> <C> <C> <C>
Accrued taxes, other than income.............. $ 186,791 $ 382,593 $ 482,148
Accrued interest expense...................... 32,493 295,471 777,256
Accrued payroll............................... 100,000 262,312 300,000
Unearned revenue and customer deposits........ 429,359 700,017 899,360
Escrow payable................................ -- -- 1,735,000
Other......................................... 281,584 394,013 744,409
---------- ---------- ----------
$1,030,227 $2,034,406 $ 4,938,173
========== ========== ==========
</TABLE>
(7) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
-------------------------- 30,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Debt outstanding under credit facilities:
Bank financing.............................. $ 2,446,075 $36,448,395 $80,356,066
Vendor financing............................ 7,763,922 9,690,298 9,690,298
Capitalized lease obligation.................. -- 2,950,869 2,549,208
Subordinated note payable to a related party,
interest at 5.45%, principal and interest
payable in quarterly installments, due
January 2002................................ 2,740,415 2,891,709 3,012,190
Other notes payable to related parties........ 735,762 70,000 70,000
----------- ----------- -----------
13,686,174 52,051,271 95,677,762
Less current maturities............. (665,762) (2,776,828) (7,996,363)
----------- ----------- -----------
Long-term debt, excluding current
maturities.................................. $13,020,412 $49,274,443 $87,681,399
=========== =========== ===========
</TABLE>
Long-term obligations mature as follows:
<TABLE>
<CAPTION>
DEBT LEASES TOTAL
----------- ---------- -----------
<S> <C> <C> <C>
September 30, 1997........................... $ 7,463,387 $ 764,135 $ 8,227,522
September 30, 1998........................... 8,018,528 764,135 8,782,663
September 30, 1999........................... 11,044,892 764,135 11,809,027
September 30, 2000........................... 13,002,696 685,608 13,688,304
September 30, 2001........................... 15,979,157 31,012 16,010,169
Thereafter................................... 37,619,894 -- 37,619,894
----------- ---------- -----------
$93,128,554 $3,009,025 $96,137,579
=========== ========== ===========
</TABLE>
Long-term lease obligation includes amounts representing interest at 8.24%
totaling $613,437 and $459,817 at December 31, 1995 and September 30, 1996,
respectively.
F-12
<PAGE> 81
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
The notes outstanding under the bank credit facilities include a loan from
Cameron Telephone Company, a subsidiary of Cameron, and joint financing
arrangements with CTC Financial, Inc., a subsidiary of Cameron Telephone
Company, pursuant to which funds have been loaned to CTC Financial, Inc. and
reloaned on a pass-through basis to the Company. On November 22, 1996, CTC
Financial, Inc. assigned its interest in the loans to Mercury Cellular of
Kansas, Inc., a subsidiary of the Company. The notes outstanding under the bank
credit facilities generally provide for monthly amortization of principal and
interest with final maturities at various dates through December 20, 2002. The
notes outstanding under the vendor credit facility provide for quarterly
interest payments beginning March 1996 and quarterly amortization of principal
beginning December 1997 with the final maturity on December 20, 2003. Weighted
average interest rates, under the credit facilities are comprised of a
combination of fixed rates over the term of the note or variable rates based on
either a variable lending rate established by a commercial bank plus a margin
ranging up to 1% or the average offering rate for three-month commercial paper
of major corporations, are 9.33%, 8.92% and 8.27% at December 31, 1994 and 1995
and September 30, 1996, respectively. As of September 30, 1996, the Company had
an unused commitment with a commercial bank of approximately $2.1 million which
expires December 31, 1996. Substantially all of the assets of the Company are
pledged to secure the Company's obligations under the various loans and credit
facilities described above. Under key covenants outlined in the credit
facilities, the Company is restricted from paying dividends, and must meet
certain minimum operating results, a maximum leverage ratio, and a minimum debt
service coverage ratio, among other requirements.
(8) INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1993, 1994,
and 1995 and the nine months ended September 30, 1996 are as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Federal:
Current........................... $1,051,668 $1,923,534 $2,082,151 $ 2,117,134
Deferred.......................... 67,636 (295,423) (118,307) (85,079)
---------- ---------- ---------- -----------
1,119,304 1,628,111 1,963,844 2,032,055
---------- ---------- ---------- -----------
State:
Current........................... 189,387 320,757 340,933 353,043
Deferred.......................... 7,957 (34,756) (13,920) (10,009)
---------- ---------- ---------- -----------
197,344 286,001 327,013 343,034
---------- ---------- ---------- -----------
Total..................... $1,316,648 $1,914,112 $2,290,857 $ 2,375,089
========== ========== ========== ===========
</TABLE>
F-13
<PAGE> 82
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
Income tax benefit differed from the amounts computed by applying the U.S.
federal income tax rate of 34% for the years ended December 31, 1993, 1994 and
1995 and the nine months ended September 30, 1996 to income before income taxes,
minority interest and equity in income of affiliates as a result of the
following:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Computed "expected" tax expense..... $ 935,052 $ 961,123 $1,392,488 $ 1,903,796
Change in valuation allowance....... 315,840 594,716 635,622 137,419
State income taxes, net of federal
income taxes...................... 127,007 183,859 208,332 193,172
Gain from sale of voice mail
operations........................ -- 88,159 -- --
Equity in income of affiliates...... 25,071 135,250 117,105 76,185
Other, net.......................... (86,322) (48,995) (62,690) 64,517
---------- ---------- ---------- ----------
$1,316,648 $1,914,112 $2,290,857 $ 2,375,089
========== ========== ========== ===========
</TABLE>
The tax effects of temporary differences that give rise to the significant
components of deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1994 1995 1996
---------- ----------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Operating loss carryforwards................. $1,306,123 $ 2,359,372 $ 2,473,872
Allowance for doubtful accounts.............. 129,161 382,280 841,157
Accrued interest to related parties.......... 277,109 304,901 330,948
Unearned revenue............................. 140,000 231,000 316,000
Other........................................ 38,000 76,000 114,000
---------- ----------- ------------
Gross deferred tax asset............. 1,890,393 3,353,553 4,075,977
Less valuation allowance....................... (947,041) (1,582,663) (1,720,082)
---------- ----------- ------------
Net deferred tax asset............... 943,352 1,770,890 2,355,895
Deferred tax liabilities --
Fixed assets, principally due to differences
in depreciation........................... 484,447 1,179,758 1,669,675
Other........................................ 107,270 107,270 107,270
---------- ----------- ------------
Deferred tax liabilities............. 591,717 1,287,028 1,776,945
---------- ----------- ------------
$ 351,635 $ 483,862 $ 578,950
========== =========== ============
</TABLE>
In assessing the realizability of deferred tax assets, the Company
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. The Company
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income and tax planning strategies in making this assessment. Based upon
these considerations, the Company has provided a valuation allowance to reduce
the carrying value of deferred tax assets related to net operating losses of the
Company's 51% owned subsidiary to the amounts that can be realized through
future reversals of existing taxable temporary differences.
Prior to consummation of the reorganization described in Note 2, certain of
the Company's cellular and paging activities were included in the consolidated
federal income tax returns of Cameron and US Unwired Inc. Effective November 1,
1996, the Company will file a consolidated federal income tax return which will
F-14
<PAGE> 83
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
include US Unwired Inc. and its qualifying subsidiaries. MS 34, a 51%-owned
subsidiary, files a separate federal income tax return.
The Company has obtained a private letter ruling from the Internal Revenue
Service to the effect that no gain or loss would be recognized by Cameron or its
shareholders by virtue of the transfer of assets or spin-off of Cameron's
landbased telephone business. In addition, tax counsel for the Company has
informed it that the merger of Cameron into the Company qualifies as a
reorganization under Section 368(a)(1)(A) of the Internal Revenue Code so that
no gain or loss would be recognized by the respective corporations or their
shareholders by virtue of the merger.
The Company had the following net operating loss carryforwards ("NOL") as
of September 30, 1996 for Federal income tax purposes, expiring in the year
indicated.
<TABLE>
<CAPTION>
COMPANY NOL EXPIRATION
------- ---------- ----------
<S> <C> <C>
US Unwired Inc............................................... $1,340,000 2007
MS 34........................................................ 4,790,000 2007
</TABLE>
(9) SHAREHOLDERS' EQUITY
The Company is authorized by its Articles of Incorporation to issue
40,000,000 shares of preferred stock upon the authorization of the Company's
Board of Directors. The Board of Directors is authorized to fix the dividend
rights and terms, conversion and voting rights, redemption rights and other
privileges and restrictions applicable to the stock.
The Company has two classes of authorized common stock, Class A Common
Stock and Class B Common Stock. Other than as to voting rights and transfer
restrictions applicable to the Class B shares, the Class A and Class B shares
have identical rights.
Class A shares have one vote per share and Class B shares have ten votes
per share. Shares of Class B Common Stock generally convert automatically into
shares of Class A Common Stock on a share-for-share basis upon the transfer of
the Class B shares to other than a "qualified holder," generally the original
holders of Class B shares. Class B shares are also subject to other transfer
restrictions.
In February 1994, January 1995 and January 1996 the Company granted to key
employees shares of Common Stock that, after the reclassification of Common
Stock discussed in Note 2, amounts to 199,716.42, 116,501.24 and 66,572.14
shares, respectively, of Class B Common Stock. The shares were issued at the
fair market value of the Company's common stock, based upon an independent
valuation, at the date of the grant. The Company recognized compensation expense
of $114,000 and $141,750, respectively, during the years ended December 31, 1994
and 1995, and $180,000 during the nine months ended September 30, 1996 in
accordance with APB 25.
(10) COMMITMENTS AND CONTINGENCIES
The Company participates in a 401(k) retirement plan (the "401(k) plan")
sponsored by a related party for the benefit of its employees. Employees are
eligible to participate in the 401(k) plan when the employee has completed one
year of service and has attained an age of 18. Under the 401(k) plan,
participating employees may defer a portion of their pretax earnings up to
certain limits prescribed by the Internal Revenue Service. The Company
contributes a discretionary match equal to a percentage of the amount deferred
by the employee and a discretionary amount determined by the Company from
current or accumulated net profits. The Company's contributions are fully vested
upon the completion of 5 years of service. Compensation expense related to the
401(k) plan was approximately $37,000, $63,000, $118,000 and $82,000 for the
years ended December 31, 1993, 1994, 1995 and the nine months ended September
30, 1996, respectively.
F-15
<PAGE> 84
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
The Company is a party to various operating leases for facilities and
equipment. Future minimum lease payments due under operating leases are as
follows:
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30,
- --------------------------
<S> <C> <C>
1997............................................. $384,881
1998............................................. 294,448
1999............................................. 264,479
2000............................................. 175,245
2001............................................. 139,294
Thereafter....................................... 316,141
</TABLE>
Rental expense related to operating leases was $147,529, $214,444, $459,740
and $542,873, for the years ended December 31, 1993, 1994 and 1995 and the nine
months ended September 30, 1996, respectively.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
The Company has agreed to guarantee repayment of up to $6.2 million, plus
interest and fees thereon, under a commitment for financing obtained by the PCS
Partnership from Rural Telephone Finance Corporation ("RTFC").
(11) CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by Financial Accounting Standards
Board Statement No. 105, consist primarily of cash and accounts receivable. The
Company places its cash and temporary cash investments with high credit quality
financial services companies. Collectibility of subscriber receivables is
impacted by economic trends in each of the Company's markets and the Company has
provided an allowance which it believes is adequate to absorb losses from
uncollectible accounts.
(12) SUPPLEMENTAL CASH FLOW DISCLOSURE
The Company has consummated the acquisition of various cellular operations,
along with certain other assets, during the three years ended December 31, 1995
and the nine months ended September 30, 1995 (unaudited) and 1996. In connection
with these acquisitions, the following assets were acquired and liabilities
assumed:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
------------------------------------------ ---------------------------
1993 1994 1995 1995 1996
----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Property and equipment.... $ 246,451 $ -- $ 4,625,989 $ 4,625,989 $ 5,252,898
Intangible assets......... 11,076,716 -- 30,544,636 30,544,636 39,825,102
Long-term debt............ (570,000) -- -- -- --
Other assets and
liabilities excluding
cash and cash
equivalents............. 26,807 -- (59,587) (59,587) 569,486
Minority interest......... (1,737,366) -- -- -- --
----------- ----------- ------------ ------------ ------------
$ 9,042,608 $ -- $ 35,111,038 $ 35,111,038 $45,647,486
=========== =========== ============ ============ ============
</TABLE>
F-16
<PAGE> 85
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
Included in cash and cash equivalents at September 30, 1996 is $1,735,000
placed in escrow as contingent consideration for certain acquisitions, and a
corresponding liability has been included in accrued expenses in the
accompanying balance sheet.
In 1994, the Company received a note receivable for the sale of the assets
of the voicemail operations in the amount of $424,497 from a related party.
(13) DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, subscriber receivables,
accrued interest and other receivables, and accounts payable and accrued
expenses approximate fair value because of the short maturity of these items.
The estimated fair value of the Company's long-term debt at September 30, 1996
is $97,784,725, compared to its carrying value of $95,677,762. The estimated
fair value of the Company's long-term debt at December 31, 1995 is $54,595,646,
compared to its carrying value of $52,051,271. The fair value of long-term debt
is valued at future cash flows discounted using the current borrowing rate for
loans of a comparable maturity.
Fair value estimates are subject to inherent limitations. Estimates of fair
value are made at a specific point in time, based on relevant market information
and information about the financial instrument. The estimated fair values of
financial instruments presented above are not necessarily indicative of amounts
the Company might realize in actual market transactions. Estimates of fair value
are subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
(14) RELATED PARTY TRANSACTIONS
During 1994, in connection with the Company's decision to focus on its
wireless communications services, the Company completed a transaction to divest
its voicemail operation and assets to Mercury Information Technologies, Inc.
("MIT"), a company owned by certain of the Company's principal shareholders for
a sales price of $424,497. The carrying value of the assets sold was $165,204,
resulting in contributed capital of $259,293 reflected in the 1994 statement of
stockholders' equity.
During each of the three years ended December 31, 1995, and for the nine
months ended September 30, 1996 the Company has utilized certain bill processing
services of Cameron. The aggregate amounts paid to Cameron for such services
during the years ended December 31, 1993, 1994 and 1995 and for the nine months
ended September 30, 1996 totaled $552,448, $634,573, $1,049,607 and $1,294,699,
respectively.
The Company also purchases long distance services from Cameron pursuant to
an oral agreement and resells the service to the Company's customers. The
aggregate amounts paid to Cameron for such services during the years ended
December 31, 1993, 1994 and 1995, and for the nine months ended September 30,
1996 totaled $225,000, $228,000, $386,000 and $495,000, respectively.
During the year ended December 31, 1995 and the nine months ended September
30, 1996, the Company paid $154,000 and $216,000, respectively, to MIT for
voicemail services which the Company uses itself and also resells to its
cellular subscribers.
(15) SUBSEQUENT EVENTS
In the Company issued 16,643.034544 shares of Class B Common Stock in
exchange for each outstanding share of Common Stock of the Company in a
reclassification of the Common Stock. The Company also changed its name from
Mercury, Inc. to US Unwired Inc. Accordingly, the accompanying financial
statements of the Company reflect the change of Company's name to US Unwired
Inc., and all share
F-17
<PAGE> 86
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
and per share amounts therein have been retroactively adjusted to give effect to
the reclassification of the Common Stock.
In , 1997, the Company adopted the US Unwired Inc. 1997 Stock Option
Plan (the "Plan"), which provides for the grant of stock options and other
equity-based awards to key employees of the Company. The total number of shares
of Class A Common Stock which may be granted pursuant to the Plan is 1,400,000.
The Plan will terminate on the tenth anniversary of the effective date of the
Plan.
Option awards and the exercise price of options granted under the Plan will
be determined by the Compensation Committee of the Board of Directors, but may
not be less than 100% of the fair market value of the Class A Common Stock on
the date of the grant, and the term of the grant may not exceed 10 years from
the date of the grant. Options granted under the Plan will vest upon a proposed
sale of substantially all of the assets of the Company, or the merger of the
Company with or into another corporation. Options vest over a four-year period
commencing on the date of the grant and expire five years from the date of the
grant. Options granted in conjunction with adoption of the Plan in
1997 totaled shares at an exercise price of $ per share.
On or about December 1, 1996 the Company completed agreements with the
minority shareholders of MS 34 to acquire the remaining 49% of the outstanding
stock for approximately $11.6 million in cash, bringing the Company's ownership
of MS 34 to 100%. The agreement is contingent upon completion of the Company's
initial public offering, and will be funded with proceeds from the offering.
F-18
<PAGE> 87
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Miscellco Communications, Inc.:
We have audited the accompanying statements of operations, stockholders'
equity and cash flows of Miscellco Communications, Inc. for the year ended
December 31, 1994 and the four-month period ended April 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Miscellco
Communications, Inc. for the year ended December 31, 1994 and the four-month
period ended April 30, 1995, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
August 2, 1996
New Orleans, Louisiana
F-19
<PAGE> 88
The Board of Directors
Miscellco Communications, Inc.
Jackson, Mississippi
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying statements of operations, stockholders'
equity and cash flows of Miscellco Communications, Inc. for the year ended
December 31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Miscellco
Communications, Inc. for the year ended December 31, 1993, in conformity with
generally accepted accounting principles.
SMITH, TURNER & REEVES
March 3, 1994
Jackson, Mississippi
F-20
<PAGE> 89
MISCELLCO COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED FOUR MONTHS
DECEMBER 31, ENDED
-------------------------- APRIL 30,
1993 1994 1995
----------- ---------- -----------
<S> <C> <C> <C>
Revenues:
Cellular service.................................... $ 3,124,105 $5,428,903 $ 2,224,085
Merchandise and installation sales.................. 610,311 562,119 132,280
----------- ---------- -----------
3,734,416 5,991,022 2,356,365
----------- ---------- -----------
Operating expenses:
System operations................................... 955,166 1,069,816 415,660
Cost of equipment and installation sales............ 752,310 874,094 357,433
Marketing and selling............................... 1,100,950 1,212,686 366,066
General and administrative.......................... 1,098,935 1,992,729 550,210
Depreciation and amortization....................... 486,889 683,197 249,736
----------- ---------- -----------
4,394,250 5,832,522 1,939,105
----------- ---------- -----------
Operating income (loss)............................... (659,834) 158,500 417,260
----------- ---------- -----------
Other income (expense):
Interest expense.................................... (403,235) (729,280) (317,680)
Other............................................... 13,455 1,402 843
----------- ---------- -----------
Total other expense......................... (389,780) (727,878) (316,837)
----------- ---------- -----------
Net income (loss)........................... $(1,049,614) $ (569,378) $ 100,423
=========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE> 90
MISCELLCO COMMUNICATIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1992............... $ 420,400 $2,827,948 $(3,452,492) $ (204,144)
Net loss................................... -- -- (1,049,614) (1,049,614)
Issuance of 22,105 shares of common
stock.................................... 22,105 359,006 -- 381,111
Exercise of stock options (note 2)......... 15,631 109,417 -- 125,048
--------- ----------- ----------- -----------
Balance at December 31, 1993............... 458,136 3,296,371 (4,502,106) (747,599)
Net loss................................... -- -- (569,378) (569,378)
Exercise of stock options (note 2)......... 4,981 61,705 -- 66,686
Repurchase and retirement of 102,956 shares
of common stock.......................... (102,956) (692,565) (2,954,479) (3,750,000)
--------- ----------- ----------- -----------
Balance at December 31, 1994............... 360,161 2,665,511 (8,025,963) (5,000,291)
Net income................................. -- -- 100,423 100,423
--------- ----------- ----------- -----------
Balance at April 30, 1995.................. $ 360,161 $2,665,511 $(7,925,540) $(4,899,868)
========= =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE> 91
MISCELLCO COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED FOUR MONTHS
DECEMBER 31, ENDED
--------------------------- APRIL 30,
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................. $(1,049,614) $ (569,378) $ 100,423
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization................... 486,889 683,197 249,736
Compensation expense for employee stock options
exercised..................................... 109,417 61,705 --
(Gain) loss on sale of assets................... (10,265) 862 --
Increase in allowance for uncollectible
accounts...................................... 8,000 13,000 5,000
Changes in operating assets and liabilities:
Receivables................................... (312,662) (322,223) (269,167)
Inventory..................................... (82,787) (106,718) 152,399
Prepaid expenses.............................. (108,170) 70,018 73,041
Other assets.................................. (319) (1,778) 18
Accounts payable.............................. 396,975 (271,529) (197,843)
Customer deposits and advance billings........ 166,724 91,669 32,380
Accrued expenses.............................. (21,672) 158,115 (114,582)
----------- ----------- ---------
Net cash provided by (used in) operating
activities............................... (417,484) (193,060) 31,405
----------- ----------- ---------
Cash flows from investing activities:
Purchases of property and equipment................ (592,253) (1,944,641) (450,505)
Disposals of property and equipment................ 352,352 3,514 --
Acquisition of intangible assets................... (12,631) (594,392) (7,608)
----------- ----------- ---------
Net cash used in investing activities...... (252,532) (2,535,519) (458,113)
----------- ----------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt........... 558,144 11,393,588 355,000
Principal payments on long-term debt............... (210,962) (4,835,245) (33,334)
Proceeds from issuance of common stock............. 381,111 4,981 --
Payments to repurchase common stock................ -- (3,750,000) --
----------- ----------- ---------
Net cash provided by financing
activities............................... 728,293 2,813,324 321,666
Net increase (decrease) in cash and cash
equivalents.............................. 58,277 84,745 (105,042)
Cash and cash equivalents, beginning of period....... 13,420 71,697 156,442
----------- ----------- ---------
Cash and cash equivalents, end of period............. $ 71,697 $ 156,442 $ 51,400
=========== =========== =========
Cash payments for interest........................... $ 379,938 $ 641,827 $ 354,873
=========== =========== =========
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE> 92
MISCELLCO COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994
AND THE FOUR-MONTH PERIOD ENDED APRIL 30, 1995
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Miscellco Communications, Inc. (the Company) owns and operates cellular
telephone service in the following rural service areas (RSAs) of Kansas and
Oklahoma: KS1, KS2, KS6, KS7, KS11, KS12, KS13 and OK1. The RSAs are
geographically outlined by the Federal Communications Commission (FCC). In 1989
through 1994 the Company was awarded the non-wireline A band rights and given
construction permits to construct the above RSAs in compliance with FCC
regulations and guidelines. The OK1 RSA is operated under an interim operating
authority granted by the FCC.
Effective April 30, 1995, the assets of the Company were sold to Mercury
Cellular of Kansas, Inc. (Mercury), a Louisiana corporation for a purchase price
of $35,895,663. The accompanying financial statements reflect the results of
operations of the Company for the respective periods prior to the sale of the
Company's assets to Mercury.
(b) Property and Equipment
Property and equipment are stated at cost and include, among other items,
the cost of transmission equipment, structures and installation equipment.
Depreciation is calculated on a straight-line basis over the estimated useful
lives of the assets. Routine maintenance and repairs are charged to operating
expense while costs of betterments and renewals are capitalized.
(c) Intangible Assets
Intangible assets consist primarily of costs incurred in connection with
the Company's acquisition of cellular licenses. These assets are recorded at
cost and amortized using the straight-line method over a ten year period.
(d) Inventory
Inventory consists of cellular telephones and equipment held for resale and
is stated at the lower of average cost or market.
(e) Revenue Recognition
The Company earns revenue by providing access to the cellular network and
for usage of the cellular network. Access revenue is billed one month in advance
and is recognized when earned. Usage revenue is recognized when the service is
rendered. Both access and usage revenues are classified as cellular service
revenues in the accompanying statements of operations. Revenues from the sale
and installation of merchandise is recognized when merchandise is delivered.
(f) Income Taxes
No income taxes have been provided as the stockholders of the Company
elected to file as an S-corporation.
(g) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-24
<PAGE> 93
MISCELLCO COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
(h) Cash and Cash Equivalents
Cash and cash equivalents include cash on deposit and money market mutual
funds.
(2) STOCKHOLDERS' EQUITY
In March 1991, the Company adopted stock option plans (the Plans) for two
key employees. The Plans, as amended, provided the right and option to acquire
37,051 shares of the Company's common stock. The exercise price of the options
granted under the plan was $1 per share. Effective August 24, 1994, the plans
were amended and terminated resulting in the issuance of the final 4,981 shares
to be issued under the plan. During 1993 and 1994, 15,631 and 4,981 shares of
common stock were issued under the plan with related compensation expense of
$109,417 and $61,705, respectively.
(3) OPERATING LEASES
The Company leases equipment, towers and office space under operating
leases having expiration dates 1995 through 2003. Generally, the Company is
responsible for executory costs such as maintenance and taxes. The minimum
future rental payments under the noncancelable operating leases for each of the
succeeding five years and in the aggregate follow:
<TABLE>
<S> <C>
1995.............................................. $106,100
1996.............................................. 68,445
1997.............................................. 63,034
1998.............................................. 62,616
1999.............................................. 62,616
Thereafter........................................ 189,098
--------
$551,909
========
</TABLE>
Rental expense associated with the operating leases was $202,236, $249,061
and $108,048 for the years ended December 31, 1993 and 1994, and for the
four-month period ended April 30, 1995, respectively. Management anticipates
that these leases will be renewed or replaced upon expiration.
F-25
<PAGE> 94
INDEPENDENT AUDITORS' REPORT
The Board of Directors
West Alabama Cellular Telephone Company, Inc.:
We have audited the accompanying balance sheets of West Alabama Cellular
Telephone Company, Inc. as of December 31, 1995 and May 15, 1996, and the
related statements of operations, stockholders' equity (deficit) and cash flows
for the year ended December 31, 1995 and the period from January 1, 1996 to May
15, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of West Alabama Cellular
Telephone Company, Inc. as of December 31, 1995 and May 15, 1996, and the
results of its operations and cash flows for the year ended December 31, 1995
and the period from January 1, 1996 to May 15, 1996 in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
New Orleans, Louisiana
August 16, 1996
F-26
<PAGE> 95
WEST ALABAMA CELLULAR TELEPHONE COMPANY, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MAY 15,
1995 1996
------------ ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................ $ 568,756 739,044
Subscriber receivables (less allowance for doubtful accounts of
$85,500 and $11,813 at December 31, 1995 and May 15, 1996,
respectively)................................................. 399,143 567,392
Inventory........................................................ 88,262..... 54,160
Prepaid expenses................................................. 11,319 5,538
---------- ----------
Total current assets..................................... 1,067,480 1,366,134
Property and equipment, net........................................ 1,447,612 1,364,882
Other assets....................................................... 7,302 4,564
---------- ----------
Total assets............................................. $2,522,394 2,735,580
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of vendor note payable........................... 300,564 300,564
Note payable to affiliate........................................ 300,000 300,000
Accounts payable................................................. 218,644 183,397
Accrued expenses................................................. 165,746 146,481
---------- ----------
Total current liabilities................................ 984,954 930,442
---------- ----------
Long-term vendor note payable...................................... 1,577,973 1,427,691
Stockholders' equity (deficit):
Common stock, $1 par value, 5,000 shares authorized, 1,150 issued
and outstanding at December 31, 1995 and May 15, 1996,
respectively.................................................. 1,150 1,150
Additional paid-in capital....................................... 61,963 61,963
Retained earnings (deficit)...................................... (103,646) 314,334
---------- ----------
Total stockholders' equity (deficit)..................... (40,533) 377,447
---------- ----------
Commitments and contingencies
Total liabilities and stockholders' equity (deficit)..... $2,522,394 2,735,580
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-27
<PAGE> 96
WEST ALABAMA CELLULAR TELEPHONE COMPANY, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED JANUARY 1,
DECEMBER 31, 1996 TO MAY
1995 15, 1996
------------ -----------
<S> <C> <C>
Revenues:
Cellular service................................................. $3,226,218 1,541,434
Merchandise sales................................................ 114,029 52,939
Miscellaneous.................................................... 25,634 46,589
---------- ----------
3,365,881 1,640,962
---------- ----------
Operating expenses:
Cost of service.................................................. 854,388 339,173
Merchandise cost of sales........................................ 336,664 154,728
Sales and marketing.............................................. 72,490 36,788
General and administrative....................................... 908,112 521,073
Bad debt expense................................................. 220,896 7,969
Depreciation and amortization.................................... 252,400 102,265
---------- ----------
2,644,950 1,161,996
---------- ----------
Operating income......................................... 720,931 478,966
---------- ----------
Other (income) expense:
Interest expense................................................. 213,998 69,995
Interest income.................................................. (43,737) (9,009)
Gain on sale of assets........................................... (333) --
---------- ----------
Total other expense...................................... 169,928 60,986
---------- ----------
Net income............................................... $ 551,003 417,980
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-28
<PAGE> 97
WEST ALABAMA CELLULAR TELEPHONE COMPANY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1995.......................... $1,150 61,963 (319,128) (256,015)
Net income.......................................... -- -- 551,003 551,003
Distributions....................................... -- -- (335,521) (335,521)
------ ------ -------- --------
Balance at December 31, 1995........................ 1,150 61,963 (103,646) (40,533)
Net income.......................................... -- -- 417,980 417,980
------ ------ -------- --------
Balance at May 15, 1996............................. $1,150 61,963 314,334 377,447
====== ====== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-29
<PAGE> 98
WEST ALABAMA CELLULAR TELEPHONE COMPANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
YEAR ENDED 1996 TO
DECEMBER 31, MAY 15,
1995 1996
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income...................................................... $ 551,003 417,980
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization................................ 252,400 102,265
Gain on sale of assets....................................... (333) --
Changes in operating assets and liabilities:
Subscriber receivables..................................... (83,869) (168,249)
Inventory.................................................. 20,163 34,102
Prepaid expenses........................................... (3,116) 5,781
Accounts payable........................................... 128,393 (35,247)
Accrued expenses........................................... 10,175 (19,265)
---------- ----------
Net cash provided by operating activities............... 874,816 337,367
---------- ----------
Cash flows from investing activities:
Proceeds from sale of equipment................................. 7,000 --
Capital expenditures............................................ (789,517) (16,797)
---------- ----------
Net cash used in investing activities................... (782,517) (16,797)
---------- ----------
Cash flows from financing activities:
Principal payments on note payable.............................. (226,737) (150,282)
Distributions to shareholders................................... (335,521) --
Proceeds from note payable to affiliate......................... 300,000 --
---------- ----------
Net cash flows used in financing activities............. (262,258) (150,282)
---------- ----------
Net increase (decrease) in cash and cash equivalents.............. (169,959) 170,288
Beginning cash and cash equivalents............................... 738,715 568,756
---------- ----------
Ending cash and cash equivalents.................................. $ 568,756 739,044
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-30
<PAGE> 99
WEST ALABAMA CELLULAR TELEPHONE COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Organization
West Alabama Cellular Telephone Company, Inc. (the Company) was
incorporated on February 2, 1991 under the laws of Alabama. The Company provides
cellular telephone service to the general public and commercial customers in the
Demopolis, Fayette, and Marengo, Alabama area.
On May 15, 1996, the Company sold substantially all of its assets to
Mississippi One Cellular Telephone Company for $17,870,000. The assets sold
included the cellular licenses for the Rural Service Area known as Alabama 3,
the related system subscribers, permits and authorizations, and certain personal
property used in the operation of the system. The accompanying financial
statements reflect the financial position and results of operations of the
Company as of and for the period immediately prior to the sale of the assets to
Mississippi One Cellular Telephone Company.
(b) Inventory
Inventory consists of cellular telephone equipment for sale in the course
of the Company's activities and is valued using the lower of cost, on a
first-in, first-out basis, or market.
(c) Property and equipment
Property and equipment are stated at cost. Depreciation is being provided
by the straight-line and accelerated methods over the estimated useful lives of
the assets as follows:
<TABLE>
<S> <C>
Cellular equipment............................................ 5 to 15 years
Buildings..................................................... 15 to 31 years
Automobiles................................................... 5 years
Office equipment.............................................. 5 to 7 years
</TABLE>
Routine maintenance and repairs are charged to operating expense while
costs of betterments and renewals are capitalized.
(d) Revenue Recognition
The Company earns revenue by providing access to its cellular network and
for usage of the cellular network. Access revenue is billed one month in advance
and is recognized when earned. Usage revenue is recognized when the service is
rendered. Both access and usage revenues are classified as cellular service
revenues in the accompanying statements of operations. Revenues from the sale
and installation of merchandise is recognized when merchandise is delivered.
(e) Commissions
Commissions are paid to sales agents for customer activations and are
recognized in the month the customer is activated within the cellular system.
(f) Income Taxes
The Company is an S-Corporation for federal and state income tax reporting
purposes. Federal and state income taxes are paid by the stockholders on their
respective share of the Company's income.
F-31
<PAGE> 100
WEST ALABAMA CELLULAR TELEPHONE COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(g) Cash Flow Information
The Company considers all short-term investments with remaining maturities
of three months or less to be cash equivalents.
Cash paid for interest for the year ended December 31, 1995 and the period
from January 1, 1996 to May 15, 1996 was $200,125 and $90,631, respectively.
(h) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) PROPERTY AND EQUIPMENT
Major categories of property and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MAY 15,
1995 1996
------------ -----------
<S> <C> <C>
Cellular equipment........................................ $ 2,506,422 $ 2,519,467
Buildings................................................. 109,194 109,194
Automobiles............................................... 20,481 20,481
Office equipment.......................................... 48,770 52,521
----------- -----------
2,684,867 2,701,663
Less accumulated depreciation........................... (1,237,255) (1,336,781)
----------- -----------
$ 1,447,612 $ 1,364,882
=========== ===========
</TABLE>
(3) NOTE PAYABLE
The note payable is to the Company's principal supplier of equipment used
to construct the cellular telephone system. The funds advanced were used for
acquisition of equipment and services and working capital. The principal amount
of the note is due in quarterly payments of $75,141 over a seven-year period
beginning three years after the date of conditional acceptance which was in
December 1991. Interest is payable quarterly, in addition to any principal
amounts due, and is calculated at 1.25% per annum in excess of the Corporate
Base Rate of Chase Manhattan Bank in effect on the first day of each calendar
quarter. The interest rate on the note is 9.0% as of May 15, 1996.
Subsequent to May 15, 1996, the unpaid principal balance was paid in full
with proceeds received from the sale of the assets of the Company.
(4) OPERATING LEASES
The Company is obligated under several noncancelable operating lease
commitments having remaining terms in excess of one year. The annual minimum
lease payments under noncancelable operating leases as of May 15, 1996, are as
follows:
<TABLE>
<S> <C>
1997............................................... $38,260
1998............................................... 28,740
1999............................................... 21,665
2000............................................... 5,950
</TABLE>
F-32
<PAGE> 101
WEST ALABAMA CELLULAR TELEPHONE COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Rental expense under the operating leases was $34,116 and $14,161 for the
year ended December 31, 1995 and the period from January 1, 1996 to May 15,
1996, respectively. Management anticipates these leases will be renewed or
replaced upon expiration.
(5) CONCENTRATION OF CREDIT RISK
Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by Financial Accounting Standards
Board Statement No. 105, consist primarily of cash and accounts receivable. The
Company places its cash and temporary cash investments with high credit quality
financial services companies. Collectibility of subscriber accounts receivable
is impacted by economic trends in each of the Company's markets and the Company
has provided an allowance which it believes is adequate to absorb losses from
uncollectible accounts.
(6) RELATED PARTY TRANSACTIONS
The Company has a note payable in the amount of $300,000 to a company that
is 100% owned by the Company's shareholders as of December 31, 1995 and May 15,
1996. The terms of the note call for interest at the rate of 5% with the
principal balance to be paid on January 14, 1997. Accrued interest on the note
as of December 31, 1995 and May 15, 1996 was $15,000 and $20,625, respectively.
(7) DISCLOSURE ABOUT FAIR VALUE
The carrying amounts of financial instruments approximate fair value
principally because of the short maturity or variable interest rate of the
instruments. Fair value estimates are subject to inherent limitations. Estimates
of fair value are made at a specific point in time, based on relevant market
information and information about the financial instrument. The estimated fair
values of financial instruments presented above are not necessarily indicative
of amounts the Company might realize in actual market transactions. Estimates of
fair value are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
F-33
<PAGE> 102
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Alabama 4 System:
We have audited the accompanying balance sheet of Alabama 4 System as of
June 30, 1996, and the related statements of operations, stockholders' equity
(deficit), and cash flows for the period from October 1, 1995 to November 6,
1995 and the period from November 7, 1995 to June 30, 1996. These financial
statements are the responsibility of the System's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Alabama 4 System as of June
30, 1996, and the results of its operations and its cash flows for the period
from October 1, 1995 to November 6, 1995 and the period from November 7, 1995 to
June 30, 1996, in conformity with generally accepted accounting principles.
As discussed in note 1 to the financial statements, on November 7, 1995,
PriCellular and its wholly owned subsidiary Northland Cellular purchased certain
assets of the Alabama 4 System in a business combination accounted for as a
purchase. As a result of the acquisition, financial information for the period
after November 6, 1995 is presented on a different cost basis than that for the
periods before November 6, 1995 and, therefore, such information is not
comparable.
KPMG Peat Marwick LLP
New Orleans, Louisiana
September 18, 1996
F-34
<PAGE> 103
INDEPENDENT AUDITORS' REPORT
Dominion Cellular, Inc.
Clanton, Alabama
We have audited the accompanying balance sheet of Dominion Cellular, Inc.
(Alabama 4 System) as of September 30, 1995, and the statements of operations,
stockholders' equity (deficit), and cash flows for the years ended September 30,
1994 and 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dominion Cellular, Inc.
(Alabama 4 System) as of September 30, 1995, and the results of its operations
and its cash flow for the years ended September 30, 1994 and 1995, in conformity
with generally accepted accounting principles.
Elliot H. Goldberg, CPA, P.C.
Rockville Centre, N.Y.
December 16, 1995
F-35
<PAGE> 104
ALABAMA 4 SYSTEM
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1995 1996
------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents..................................... $ 322,057 $ 44,033
Subscriber receivables (less allowance for doubtful accounts
of $133,070 and $77,734 at September 30, 1995 and June 30,
1996, respectively)........................................ 808,780 634,866
Receivable from parent........................................ 2,100,000 2,470,978
Receivable from affiliates.................................... -- 412,632
Inventory..................................................... 43,535 79,287
Prepaid expenses and other.................................... 33,592 5,216
----------- -----------
Total current assets.................................. 3,307,964 3,647,012
Property and equipment, net..................................... 4,007,474 3,736,719
Cellular telephone license costs, net of accumulated
amortization of $103,839 and $357,395 at September 30, 1995
and June 30, 1996, respectively............................... 28,284 21,215,502
----------- -----------
Total assets.......................................... $ 7,343,722 $28,599,233
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................. $ 288,877 $ 279,516
Accrued expenses and other liabilities........................ 263,358 82,578
Payable to affiliates......................................... -- 659,441
Payable to parent............................................. 1,019,537 --
Current maturities of long-term debt.......................... 4,986,057 --
---------- -----------
Total current liabilities............................. 6,557,829 1,021,535
Stockholders' equity:
Common stock, $.001 par value, 50,000 shares authorized,
issued and outstanding at September 30, 1995............... 50 --
Common stock, $.01 par value, 1,000 shares authorized, 100
shares issued and outstanding at June 30, 1996............. -- 1
Additional paid-in capital.................................... 50,050 26,817,177
Retained earnings............................................. 735,793 760,520
----------- -----------
Total stockholders' equity............................ 785,893 27,577,698
Commitments and contingencies
----------- -----------
Total liabilities and stockholders' equity............ $ 7,343,722 $28,599,233
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-36
<PAGE> 105
ALABAMA 4 SYSTEM
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, OCTOBER 1, 1995 NOVEMBER 7, 1995
----------------------- TO TO
1994 1995 NOVEMBER 6, 1995 JUNE 30, 1996
---------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Cellular service:
Subscriber.................... $ 881,364 $1,268,938 $143,770 $1,858,815
Roaming....................... 2,126,971 3,357,745 401,796 1,833,219
Merchandise sales................ 147,725 150,985 7,654 60,049
Other revenue.................... 28,997 115,912 2,636 15,300
---------- ---------- -------- ----------
3,185,057 4,893,580 555,856 3,767,383
---------- ---------- -------- ----------
Operating expenses:
Cost of service.................. 752,245 1,420,857 176,948 896,420
Merchandise cost of sales........ 251,744 351,395 26,794 291,890
General and administrative....... 807,529 665,985 92,898 358,070
Sales and marketing.............. 116,967 185,400 21,383 251,405
Depreciation and amortization.... 336,643 454,953 45,495 756,648
---------- ---------- -------- ----------
2,265,128 3,078,590 363,518 2,554,433
---------- ---------- -------- ----------
Operating income................... 919,929 1,814,990 192,338 1,212,950
Other expense -- interest.......... 306,007 460,476 185,076 --
---------- ---------- -------- ----------
Income before income taxes......... 613,922 1,354,514 7,262 1,212,950
Income tax provision............... -- 437,720 2,709 452,430
---------- ---------- -------- ----------
Net income......................... $ 613,922 $ 916,794 $ 4,553 $ 760,520
========== ========== ======== ==========
</TABLE>
See accompanying notes to financial statements.
F-37
<PAGE> 106
ALABAMA 4 SYSTEM
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
------ ----------- --------- -----------
<S> <C> <C> <C> <C>
Balance at October 1, 1993..................... $ 50 $ 50,050 $(794,923) $ (744,823)
Net income for year............................ -- -- 613,922 613,922
---- ----------- --------- -----------
Balance at September 30, 1994.................. 50 50,050 (181,001) (130,901)
Net income for year............................ -- -- 916,794 916,794
---- ----------- --------- -----------
Balance at September 30, 1995.................. 50 50,050 735,793 785,893
Net income for period October 1, 1995 to
November 6, 1995............................. -- -- 4,553 4,553
---- ----------- --------- -----------
Balance at November 6, 1995.................... 50 50,050 740,346 790,446
Elimination of Dominion equity................. (50) (50,050) (740,346) (790,446)
Investment of PriCellular...................... 1 26,817,177 -- 26,817,178
Net income for period November 7, 1995 to
June 30, 1996................................ -- -- 760,520 760,520
---- ----------- --------- -----------
Balance at June 30, 1996....................... $ 1 $26,817,177 $ 760,520 $27,577,698
==== =========== ========= ===========
</TABLE>
See accompanying notes to financial statements.
F-38
<PAGE> 107
ALABAMA 4 SYSTEM
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30 OCTOBER 1, 1995 NOVEMBER 7, 1995
-------------------------- TO TO
1994 1995 NOVEMBER 6, 1995 JUNE 30, 1996
----------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income...................... $ 613,922 $ 916,794 $ 4,553 $ 760,520
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Depreciation and
amortization............... 336,643 454,953 45,495 756,648
Bad debt provision........... 134,000 (82,140) -- --
Changes in operating assets
and liabilities:
(Increase) decrease in:
Subscriber
receivables........... (413,924) (232,525) (168,281) (357,654)
Inventory............... (40,739) 24,897 -- (47,010)
Prepaid expenses and
other................. (13,318) (4,607) (200) 7,127
Receivable from parent
and affiliates........ 288,906 (2,100,000) -- (1,558,720)
Increase (decrease) in:
Accounts payable,
accrued expenses and
other liabilities..... 403,343 (101,967) (60,314) (235,997)
Payable to parent....... -- 753,034 (35,291) --
Payable to affiliate.... -- -- -- 659,441
----------- ---------- -------- ----------
Net cash provided by (used
in) operating activities... 1,308,833 (371,561) (214,038) (15,645)
----------- ---------- -------- ----------
Cash flows from investing
activities:
Capital expenditures............ (1,406,510) (1,154,793) (4,886) (60,264)
Acquisition of Alabama 4 RSA.... -- -- -- 16,809
----------- ---------- -------- ----------
Net cash used in investing
activities................. (1,406,510) (1,154,793) (4,886) (43,455)
----------- ---------- -------- ----------
Cash flows from financing
activities:
Proceeds from issuance of
long-term debt............... 55,441 2,000,000 -- --
Principal payments on long-term
debt......................... -- (299,272) -- --
----------- ---------- -------- ----------
Net cash provided by
financing activities....... 55,441 1,700,728 -- --
----------- ---------- -------- ----------
Net increase (decrease) in
cash....................... (42,236) 174,374 (218,924) (59,100)
Cash at beginning of period....... 189,919 147,683 322,057 103,133
----------- ---------- -------- ----------
Cash at end of period............. $ 147,683 $ 322,057 $103,133 $ 44,033
=========== ========== ======== ==========
Supplemental disclosure of cash
flow information -- cash payment
for interest.................... $ 306,007 $ 345,079 $246,954 $ --
=========== ========== ======== ==========
</TABLE>
See accompanying notes to financial statements.
F-39
<PAGE> 108
ALABAMA 4 SYSTEM
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Background and Basis of Presentation
The accompanying financial statements reflect the historical financial
position, results of operations and cash flows of the assets and liabilities
comprising the wireless communication system in the Bibb County, Alabama, Rural
Service Area ("RSA") Alabama 4 ("the System"). Until November 7, 1995, the
assets and liabilities comprising the System were owned by Dominion Cellular,
Inc. ("Dominion"), a wholly owned subsidiary of Dominion Resources, Inc.
Accordingly, the financial statements as of September 30, 1995 and for the
years ended September 30, 1994 and 1995 and the period from October 1, 1995 to
November 6, 1995 reflects Dominion's historical cost of the assets and
liabilities comprising the System.
On November 7, 1995, PriCellular and its wholly owned subsidiary Northland
Cellular ("PriCellular") purchased for approximately $25,300,000 the cellular
assets comprising the System from Dominion (see note 7). PriCellular accounted
for the acquisition as a purchase and, accordingly, established a new cost basis
with respect to the assets purchased from Dominion.
The financial information as of June 30, 1996 and for the period from
November 7, 1995 to June 30, 1996 reflects PriCellular's historical cost of the
assets and liabilities comprising the System. As a result of the acquisition and
the different cost basis with respect to the assets and liabilities comprising
the System, financial information for periods before and after November 7, 1995
are not comparable.
On July 1, 1996, Mercury, Inc. purchased substantially all of the System's
assets from PriCellular for approximately $27,500,000. The assets acquired
included the licenses in the RSA known as Alabama 4, the related system
subscribers, permits and authorization, and certain personal property used in
the operation of the system.
(b) Cash and Cash Equivalents
For purposes of the statement of cash flows, the System considers all
temporary cash investments with original maturities of three months or less to
be cash and cash equivalents.
(c) Inventory
Inventory is stated at the lower of cost or market. Cost is determined by
the first-in, first-out method. Inventory consists principally of cellular
telephones and related accessories.
(d) Property and Equipment
Property and equipment is stated at cost and depreciated on a straight-line
basis over the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings and leasehold improvements............................... 30 years
Operating equipment................................................ 10 years
Furniture and fixtures............................................. 7 years
</TABLE>
Routine maintenance and repairs are charged to operating expense while costs of
betterments and renewals are capitalized.
(e) Cellular Licenses and Other Assets
Cellular telephone license costs prior to November 7, 1995, represent
expenses incurred by the System for the acquisition of site locations, zoning
approvals, and technical and other expenses related to construction and
obtaining the necessary approvals and licenses to operate and preparing to
operate a cellular telephone
F-40
<PAGE> 109
ALABAMA 4 SYSTEM
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
system. These costs are capitalized and are amortized through charges to
operations over their estimated useful lives, currently estimated to be five
years.
Cellular licenses recorded in connection with the acquisition of the system
on November 7, 1995 are recorded at cost and amortized using the straight-line
method over the assets estimated useful lives, 40 years. The System annually
evaluates the propriety of the carrying values of its cellular licenses using
estimated undiscounted future cash flows of the market to which the license
relates, and estimates of the market value of the cellular systems to determine
whether current events or circumstances warrant adjustments to reduce the
carrying amounts to fair value. There have been no such reductions through June
30, 1996.
(f) Revenue Recognition
The System earns revenue by providing access to and usage of the cellular
network and sales of cellular merchandise. Access revenue is billed one month in
advance and is recognized when earned. Usage revenue is recognized when the
service is rendered. Both access and usage revenues are classified as service
revenues in the accompanying statements of operations. Revenues from the sale
and installation of merchandise is recognized when the merchandise is delivered.
(g) Commissions
Commissions are paid to sales agents for customer activations and are
recognized in the month the customer is activated within the cellular system.
(h) Income Taxes
The System accounts for income taxes using the asset and liability method,
under which deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
The System is included in the consolidated federal income tax return of
Dominion Resources, Inc. and PriCellular for the respective periods of
ownership. An income tax provision is reflected in the System's separate
financial statements based on applicable statutory rates. Amounts to be settled
among members of the group are included in amounts payable to parent in the
accompanying balance sheet. The related payables to parent were $437,720 and
$452,430 at September 30, 1995 and June 30, 1996, respectively.
The principal temporary difference between the basis of assets and
liabilities for financial reporting and tax purposes relates to operating losses
incurred prior to 1993. Net deferred tax assets related to such differences were
offset by a valuation allowance. The valuation allowance was reduced during 1994
and 1995 in the amounts of $233,000 and $69,000, respectively, which accounts
for the difference between the actual effective tax rate and the expected tax
rate for 1994 and 1995.
(i) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
F-41
<PAGE> 110
ALABAMA 4 SYSTEM
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(2) PROPERTY AND EQUIPMENT
Major categories of property and equipment are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1995 1996
------------- ---------
<S> <C> <C>
Operating equipment......................................... $ 3,245,769 4,029,379
Cell site preparation and equipment......................... 1,764,489 --
Furniture and fixtures...................................... 117,459 106,592
----------- ---------
5,127,717 4,135,971
Less accumulated depreciation and amortization.............. (1,120,243) (399,252)
----------- ---------
$ 4,007,474 3,736,719
=========== =========
</TABLE>
(3) LONG-TERM DEBT
Long-term debt at September 30, 1995 includes notes payable to Motorola,
Inc. ("Motorola") in the amount of $2,986,057. The System entered into a
Cellular System Purchase Agreement with Motorola ("Purchase Agreement") pursuant
to which the System purchased and Motorola designed, manufactured, and produced
specified cellular fixed network equipment together with expansion products,
hardware, and software products and related services. Pursuant to the Purchase
Agreement, Motorola assisted in the construction and implementation of the
system.
Motorola agreed to lend up to $1,650,000 to purchase equipment and services
to be provided primarily by Motorola for construction and installation of the
cellular telephone system and up to $950,000 for working capital. All such loans
were repayable interest only until the third year after Dominion placed the
cellular telephone system into commercial service and then paid over a four year
period on a seven year amortization schedule. Interest was calculated at the
rate of 3% per annum in excess of the Chase Manhattan Bank's Corporate Base
Rate, which was 9% at September 30, 1995. Dominion has the right to repay such
loans in whole or in part and the Financing Agreement also provides for certain
mandatory prepayments including prepayments equal to 75% of Dominion's "Free
Cash Flow" (operating cash flow less non-financed capital purchases and debt
service).
The Financing Agreement required the parent Company (Dominion Resources) to
execute a Stock Pledge Agreement pledging all of the issued and outstanding
capital stock of Dominion with Motorola as collateral. As additional collateral,
Dominion has assigned all of its cell site, tower, and building leases to
Motorola together with a security interest in all of its tangible and intangible
assets. The Financing Agreement contains certain financial covenants and
restrictions on the payment of dividends, which Dominion has complied with.
In conjunction with the sale of the System's cellular telephone system, the
outstanding indebtedness to Motorola was paid from proceeds of the sale which
took place in November 1995.
In anticipation of the execution of the Asset Purchase Agreement,
PriCellular extended a $2,000,000 loan to the System on April 7, 1995. From the
$2,000,000 of loan proceeds, the System (1) made a $1,417,598 loan to an entity
of which the System's principal stockholder is a creditor; (2) paid $250,000 to
a corporation owned by the System's president and her husband in payment of
bills rendered for previously completed cell site and tower construction for the
System; and (3) prepaid $125,000 of indebtedness owed to an entity owned by
members of the principal stockholder's immediate family. The balance was applied
to legal and professional fees related to the sale of the System. The $2,000,000
loan was repaid with interest at 8% from proceeds of the sale of the System
which took place in November 1995.
F-42
<PAGE> 111
ALABAMA 4 SYSTEM
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) COMMITMENTS AND CONTINGENCIES
The Company is obligated under several noncancelable operating lease
commitments having remaining terms in excess of one year. Future minimum lease
payments due under these leases as of June 30, 1996 are as follows:
<TABLE>
<S> <C>
1997............................................................... $10,500
1998............................................................... 6,000
1999............................................................... 2,600
2000............................................................... 2,400
2001............................................................... 2,000
</TABLE>
Rental expense related to other operating leases were $72,000, $101,100,
$5,800 and $23,800 for the years ended September 30, 1994 and 1995 the period
from October 1, 1995 to November 6, 1995 and the period from November 7, 1995 to
June 30, 1996, respectively.
(5) CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by Financial Accounting Standards
Board Statement No. 105, consist primarily of cash and accounts receivable. All
deposits in demand deposit accounts are within existing FDIC insurance levels.
The Company has not experienced any losses on its deposits. Subscriber accounts
receivable collectibility is impacted by economic trends in each of the
Company's markets. Such receivables are typically collected between thirty and
sixty days.
(6) RELATED PARTY TRANSACTIONS
At September 30, 1995, Dominion has $581,817 included in due to parent
related to funds provided during the fiscal year in connection with new cell
site equipment purchases.
Effective August 1, 1995, PriCellular became the manager of the System
pursuant to a management agreement providing for a management fee to be paid to
PriCellular equal to 7% of the gross revenues of the System during the term of
the management agreement. Through November 7, 1995, the Company accrued $114,600
in connection with the management agreement.
(7) PURCHASE OF ASSETS FROM DOMINION BY PRICELLULAR
On November 7, 1995 the sale of the System from Dominion was recorded and
payable by PriCellular in cash and stock for approximately $25,300,000. The cash
portion of the purchase price received by Dominion was reduced to the extent
required to repay Dominion's outstanding debt to Motorola (approximately
$2,864,000) and to repay the 8%, $2,000,000 loan extended to Dominion by
PriCellular. An aggregate $400,000 was placed in escrow for a one year period
following the closing to ensure the accuracy of Dominion's representations and
warranties.
In connection with this purchase, the following assets were acquired and
liabilities assumed by PriCellular and contributed to their wholly owned
subsidiary:
<TABLE>
<S> <C>
Property and equipment......................................... $ 4,075,707
Intangible assets.............................................. 21,572,898
Contributed capital............................................ (25,346,898)
Other assets and liabilities excluding cash and cash
equivalents.................................................. (318,516)
------------
Increase in cash due to acquisition............................ $ (16,809)
============
</TABLE>
F-43
<PAGE> 112
ALABAMA 4 SYSTEM
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(8) DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL STATEMENTS
The carrying amounts of financial instruments approximate fair value
principally because of the short maturity of these items. Fair value estimates
are subject to inherent limitations. Estimates of fair value are made at a
specific point in time, based on relevant market information and information
about the financial instrument. The estimated fair values of financial
instruments presented above are not necessarily indicative of amounts the
Company might realize in actual market transactions. Estimates of fair value are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
F-44
<PAGE> 113
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Terms......................... 2
Additional Information................ 2
Prospectus Summary.................... 3
Risk Factors.......................... 9
Use of Proceeds....................... 12
Dividend Policy....................... 12
Dilution.............................. 13
Capitalization........................ 14
Unaudited Pro Forma Condensed Combined
Financial Data...................... 15
Selected Consolidated Financial
Data................................ 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 34
Management............................ 54
Principal Shareholders................ 58
Certain Transactions.................. 58
Description of Capital Stock.......... 61
Shares Eligible for Future Sale....... 64
Underwriting.......................... 66
Legal Matters......................... 67
Experts............................... 67
Index to Financial Statements......... F-1
</TABLE>
---------------------
THROUGH AND INCLUDING , 1997 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,750,000 SHARES
[US UNWIRED INC. LOGO]
CLASS A COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
A.G. EDWARDS & SONS, INC.
THE ROBINSON-HUMPHREY
COMPANY, INC.
, 1997
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 114
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of expenses incurred in connection
with this Registration Statement. All such expenses will be paid by the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....................... $ 14,375
NASD fee.................................................................. 5,244
NASDAQ National Market listing fee........................................ 1,000
Legal fees and expenses................................................... *
Accounting fees and expenses.............................................. *
Printing and engraving expenses........................................... *
Blue Sky fees and expenses................................................ *
Miscellaneous expenses.................................................... *
--------
TOTAL........................................................... *
========
</TABLE>
- ---------------
* To be filed by amendment.
All of the above items are estimates except the Securities and Exchange
Commission registration fee and the NASD filing fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 83 of the Louisiana Business Corporation Law (the "LBCL") gives
Louisiana corporations broad powers to indemnify their present and former
directors and officers and those of affiliated corporations against expenses
incurred in the defense of any lawsuit to which they are made parties by reason
of being or having been such directors or officers; subject to specific
conditions and exclusions gives a director or officer who successfully defends
an action the right to be so indemnified; and authorizes Louisiana corporations
to buy directors' and officers' liability insurance. Such indemnification is not
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, authorization of shareholders or otherwise.
The Company's By-laws make mandatory the indemnification of directors and
officers permitted by the LBCL. The standard to be applied in evaluating any
claim for indemnification (excluding claims for expenses incurred in connection
with the successful defense of any proceeding or matter therein for which
indemnification is mandatory without reference to any such standard) is whether
the claimant acted in good faith and in a manner he reasonably believed to be in
or not opposed to, the best interests of the Company. With respect to any
criminal action or proceeding, the standard is that the claimant had no
reasonable cause to believe the conduct was unlawful. No indemnification is
permitted in respect of any claim, issue or matter as to which a director or
officer shall have been adjudged by a court of competent jurisdiction to be
liable for willful or intentional misconduct or to have obtained an improper
personal benefit, unless, and only to the extent that the court shall determine
upon application that, in view of all the circumstances of the case, he is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
In addition, the Company's Articles of Incorporation provide that, pursuant
to Louisiana law, its directors shall not be liable for monetary damages for
breach of the directors' fiduciary duty of care to the Company and its
shareholders. This provision in the Articles of Incorporation does not eliminate
the duty of care, and in appropriate circumstances equitable remedies such as
injunctive or other forms of nonmonetary relief will remain available under
Louisiana law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company for acts
or omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under
II-1
<PAGE> 115
Louisiana law. The Company also intends to enter into separate indemnification
agreements with each of its directors to effectuate these indemnity provisions
and to purchase directors' and officers' liability insurance.
The Underwriters have also agreed to indemnify the directors and certain of
the Company's officers against certain liabilities, including liabilities under
the Securities Act of 1933, as amended, or to contribute to payments that such
directors and officers may be required to make in respect thereof.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On October 31, 1996, Cameron Communications Corporation ("Cameron") merged
into the Company (the "Merger"). In consideration of the Merger, shareholders of
Cameron received 2.192108 shares of Common Stock, par value $50 per share, of
the Company (the "Old Common Stock") in exchange for each share of common stock
of Cameron owned by them on the effective date of the Merger, for a total of
455.958460 shares of Old Common Stock. The issuance of Old Common Stock as
consideration for the Merger is exempt under Section 4(2) of the Securities Act
of 1933 (the "Act") and/or Regulation D thereunder as a transaction by an issuer
not involving any public offering. Fourteen Cameron shareholders received Old
Common Stock in the Merger. Seven of them were also shareholders of the Company
at the time of the Merger. Of those seven shareholders, four are officers and/or
directors of the Company. Of the remaining seven Cameron shareholders, four are
members of the same family who were represented by counsel in connection with
the Merger. All Cameron shareholders were provided with extensive information
about Cameron, the Company and the Merger before the Special Meeting of
Shareholders held on October 11, 1996 at which the Merger was approved.
Certificates representing the shares of Old Common Stock were appropriately
legended to prevent resales or retransfers in violation of registration
requirements. Subsequent to the Merger, each share of Old Common Stock of the
Company was reclassified into 16,643 shares of Class B Common Stock.
Certificates representing the Class B Common Stock contain the same restrictive
legends as those representing the Old Common Stock.
In each of 1994, 1995 and 1996, the Company awarded Old Common Stock as
bonuses to certain officers of the Company in recognition of services performed
on its behalf. Each of William L. Henning, Jr., John A. Henning and Thomas G.
Henning received four shares of Old Common Stock in 1994, two shares of Old
Common Stock in 1995 and one share of Old Common Stock in 1996. Robert Piper
received one share of Old Common Stock in 1995 and one share in 1996. A total of
23 shares of Old Common Stock were so awarded. The issuance of the Old Common
Stock as bonuses in each instance was exempt from registration under Section
4(2) of the Act as a transaction by an issuer not involving any public offering.
Each of the recipients was an officer and a director of the Company at the time
of each bonus award. Each share of Old Common Stock was subsequently
reclassified into 16,643 shares of Class B Common Stock. Certificates
representing the Class B Common Stock were appropriately legended to prevent
resales or retransfers in violation of registration requirements.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
1.1 -- Form of Underwriting Agreement++
2.1 -- Agreement and Plan of Reorganization by and among Cameron
Communications Corporation, Mercury, Inc., Mercury Cellular Telephone
Company, Mercury Cellular of Kansas, Inc., Mississippi One Cellular
Telephone Company, CCC Holding Company, Cameron Telephone Company,
and Elizabeth Telephone Company dated September 19, 1996*
2.2 -- Joint Agreement of Merger of Cameron Communication Corporation with
and into Mercury, Inc.*
3.1 -- Form of Articles of Incorporation of US Unwired Inc.*
</TABLE>
II-2
<PAGE> 116
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
3.2 -- Form of By-Laws of US Unwired Inc.*
4.1 -- Amended and Restated Loan Agreement By and Between CoBank, ACB and
CTC Financial, Inc., dated September 27, 1994, in the principal sum
of $17,400,000+
4.2 -- Amended and Restated Continuing Guaranty By and Between Miss One
Cellular Telephone Co. and CoBank, ACB, dated September 27, 1994, in
the principal sum of $17,400,000+
4.3 -- Amended and Restated Promissory Note By CTC Financial, Inc. in favor
of CoBank dated May 15, 1996 in the principal sum of $17,400,000+
4.4 -- First Amendment and Supplement to Security Agreement By and Between
Miss One and CoBank, ACB dated May 15, 1996+
4.5 -- First Amendment and Supplement to Deed of Trust, Security Agreement,
and Fixture Filing By and Between Miss One to Karen Hawkins, Trustee
in the principal sum of CoBank, ACB dated May 15, 1996+
4.6 -- Mortgage By Miss One to and for the benefit of CoBank, ACB dated May
15, 1996 in the principal sum of $17,400,000+
4.7 -- Continuing Guaranty made by Mercury, Inc. for the benefit of CoBank,
ACB, dated May 15, 1996, in the principal sum of $17,400,000+
4.8 -- First Amendment and Supplement to Pledge Agreement By and Between
Mercury, Inc. and CoBank, ACB, dated May 15, 1996, in the principal
sum of $17,400,000+
4.9 -- Limited Recourse Continuing Guaranty By William Henning, Sr., in
favor of CoBank, ACB, dated May 15, 1996, in the principal sum of
$17,400,000+
4.10 -- Amended and Restated Act of Subordination By Cameron Telephone and
Miss One in favor of CoBank, ACB, dated September 27, 1996+
4.11 -- Amended and Restated Promissory Note By Miss One in favor of CTC
Financial, dated May 15, 1996, in the principal sum of $17,400,000+
4.12 -- Security Agreement By and Between Mercury, Inc. and CoBank, ACB,
dated July 1, 1996+
4.13 -- First Amendment and Supplement to Amended and Restated Loan Agreement
By and Between CoBank, ACB and CTC Financial, Inc., dated July 1,
1996+
4.14 -- Second Amended and Restated Promissory Note By Miss One in favor of
CTC Financial, Inc., dated July 1, 1996, in the principal sum of
$32,400,000+
4.15 -- Second Amended and Restated Promissory Note By CTC Financial, Inc. in
favor of CoBank, ACB, dated July 1, 1996, in the principal sum of
$32,400,000+
4.16 -- First Amendment and Supplement to Amended and Restated Continuing
Guaranty By and Between Miss One and CoBank, ACB, dated July 1, 1996+
4.17 -- Second Amendment and Supplement to Security Agreement By and Between
Miss One and CoBank, ACB, dated July 1, 1996+
4.18 -- Second Amendment and Supplement to Deed of Trust By and Between Miss
One and Karen Hawkins, Trustee for CoBank, ACB, dated July 1, 1996+
4.19 -- First Amendment and Supplement to Mortgage By and Between Miss One
and CoBank, ACB, dated July 1, 1996+
4.20 -- First Amendment and Supplement to Continuing Guaranty Made by
Mercury, Inc. in favor of CoBank, ACB, dated July 1, 1996+
4.21 -- Second Amendment and Supplement to Pledge Agreement By and Between
Mercury, Inc. and CoBank, ACB, dated July 1, 1996+
</TABLE>
II-3
<PAGE> 117
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
4.22 -- First Amendment to Limited Recourse Continuing Guaranty By and
Between William Henning, Sr. and CoBank, ACB, dated July 1, 1996*
4.23 -- First Amendment and Supplement to Amended and Restated Act of
Subordination by and Among Cameron Telephone, Miss One and CoBank,
ACB, dated July 1, 1996+
4.24 -- Promissory Note dated May 15, 1996 by CTC Financial, Inc. in favor of
CoBank, ACB, in the principal sum of $5,000,000+
4.25 -- Promissory Note dated May 15, 1996 by Mercury, Inc. in favor of CTC
Financial, Inc. in the principal sum of $5,000,000+
4.26 -- Loan Agreement By and Between CoBank, ACB, and CTC Financial, Inc.
dated July 1, 1996 in the principal sum of $13,000,000+
4.27 -- Promissory Note By CTC Financial, Inc. in favor of CoBank, ACB, dated
July 1, 1996 in the principal sum of $13,000,000+
4.28 -- First Amendment and Supplement to Continuing Guaranty By and Between
Mercury Cellular Telephone Co. and CoBank, ACB, dated July 1, 1996+
4.29 -- First Amendment and Supplement to Security Agreement By and Between
Mercury Cellular Telephone Co. and CoBank, ACB, dated July 1, 1996+
4.30 -- First Amendment and Supplement to Mortgage and Security Agreement
Mercury Cellular Telephone Co. and CoBank, ACB, dated July 1, 1996+
4.31 -- First Amendment and Supplement to Limited Recourse Continuing
Guaranty By and Between Cameron Communications Corporation and
CoBank, ACB, dated July 1, 1996+
4.32 -- First Amendment and Supplement to Pledge Agreement By and Between
Cameron Communications Corporation and CoBank, ACB, dated July 1,
1996+
4.33 -- First Amendment and Supplement to Limited Recourse Continuing
Guaranty By and Between Mercury and CoBank, ACB, dated July 1, 1996+
4.34 -- First Amendment and Supplement to Pledge Agreement By and Between
Mercury, Inc. and CoBank, ACB, dated July 1, 1996+
4.35 -- Act of Subordination By Mercury Cellular Telephone Company and Miss
One, in favor of CoBank, ACB, dated July 1, 1996+
4.36 -- Promissory Note Mississippi-34 Cellular Corp. to Cameron
Communications Corp., dated November 20, 1992, in the principal sum
of $20,000+
4.37 -- Subordination Agreement By and Among Robert G. Mounger, William M.
Mounger, II, William Yandell, III and Wirt A. Yerger, III,
Mississippi-34 Cellular Corporation and Mercury, Inc., dated November
20, 1992+
4.38 -- Promissory Note By Miss-3 Cellular Corporation in favor of Robert
Mounger, dated March 27, 1992, in the principal sum of $16,500+
4.39 -- Promissory Note By Miss-3 Cellular Corporation in favor of Robert
Mounger, dated April 15, 1992, in the principal sum of $7,500+
4.40 -- Promissory Note By Miss-3 Cellular Corporation in favor of Robert
Mounger, II, dated April 1, 1992, in the principal sum of $17,500.00+
4.41 -- Promissory Note By Miss-3 Cellular Corporation in favor of William M.
Yandell, III dated April 30, 1992, in the principal sum of
$17,500.00+
4.42 -- Promissory Note By Miss-3 Cellular Corporation in favor of Wirt A.
Yerger, III, dated May 12, 1992, in the principal sum of $2,500.00+
</TABLE>
II-4
<PAGE> 118
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
4.43 -- Promissory Note By Miss-3 Cellular Corporation, in favor of Wirt A.
Yerger, III dated March 25, 1992, in the principal sum of $25,000+
4.44 -- Pledge Agreement By and Among the owners of capital stock of Miss-34
Cellular Corporation and AT&T Credit Corporation, dated December 20,
1993++
4.45 -- Capital Note By Miss-34 Cellular Corporation to AT&T Credit
Corporation, dated December 30, 1993, in the principal sum of
$1,684,987++
4.46 -- Deed of Trust, Security Agreement, Financing Statement and Assignment
of Rents and Leases Entered into by Miss-34 Cellular Corporation in
favor of AT&T Credit Corporation, dated December 20, 1993, in the
principal sum of $9,980,000++
4.47 -- Equipment Note Miss-34 By Cellular Corporation in favor of AT&T
Credit Corporation, dated December 30, 1993, in the principal sum of
$2,138,836++
4.48 -- General Agreement for Purchase Between AT&T and Mercury
Communications Company of Cellular Systems, dated July 7-9, 1993++
4.49 -- Mortgage and Security Agreement By Mercury Cellular Telephone Co. in
favor of CoBank, ACB, dated April 20, 1995+
4.50 -- Security Agreement By and Between Mercury Cellular Telephone Company
and CoBank dated, April 20, 1995+
4.51 -- Loan Agreement By and Between CoBank, ACB and CTC Financial, Inc.,
dated April 20, 1995 dated April 20, 1995+
4.52 -- Continuing Guaranty By Mercury Cellular Telephone Company for the
benefit of CoBank, ACB dated April 20, 1995+
4.53 -- Limited Recourse Continuing By Mercury, Inc. for the benefit of
CoBank, ACB, dated April 20, 1995+
4.54 -- Limited Recourse Continuing Guaranty By Cameron Communications
Corporation for the benefit of CoBank, ACB, dated April 20, 1995+
4.55 -- Promissory Note by CTC Financial, Inc. to CoBank, ACB, dated April
20, 1995, in the principal sum of $18,000,000*
4.56 -- Promissory Note By Mercury Cellular Telephone Co. in favor of CTC
Financial, Inc. dated April 20, 1995, in the principal sum of
$18,000,000+
4.57 -- Pledge Agreement By and Between Cameron Communications Corporation
and CoBank, ACB, dated April 20, 1995+
4.58 -- Pledge Agreement By and Between Mercury, Inc. and CoBank, ACB, dated
April 20, 1995+
4.59 -- Security Agreement By and Between Mercury Cellular Telephone Company
and CoBank, ACB, dated April 20, 1995+
4.60 -- Security Agreement By and Between Mercury Cellular of Kansas, Inc.
and CoBank, ACB, dated April 5, 1995+
4.61 -- Loan Agreement By and Between CoBank, ACB and Mercury Cellular of
Kansas, Inc., dated April 20, 1995, in the principal sum of
$17,100,000+
4.62 -- Limited Recourse Continuing Guaranty By Mercury Cellular Telephone
Company in favor of CoBank, ACB, dated April 20, 1995+
4.63 -- Collateral Assignment of Tenant's Interest in Leases By and Between
Mercury Cellular of Kansas, Inc. and CoBank, ACB, dated April 20,
1995, in the principal sum of $17,100,000+
</TABLE>
II-5
<PAGE> 119
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
4.64 -- Security Agreement By and Between Mercury Cellular of Kansas, Inc.
and CoBank, ACB, dated April 20, 1995+
4.65 -- Pledge Agreement By and Between Mercury Cellular Telephone Company
and CoBank, ACB, dated April 20, 1995+
4.66 -- Promissory Note By Mercury Cellular of Kansas, Inc. in favor of
CoBank, ACB, dated April 20, 1995, in the principal sum of
$17,100,000+
4.67 -- Loan and Security Agreement dated as of December 20, 1993 between
Mississippi-34 Cellular Corporation and AT&T Credit Corporation++
4.68 -- Promissory Note dated April 14, 1993 in the principal sum of
$2,779,924 by Mercury, Inc. in favor of Cameron Telephone Company.+
4.69 -- First Amendment and Supplement to Loan Agreement between CoBank, ACB,
and Mercury Cellular of Kansas, Inc. dated as of December 15, 1996*
4.70 -- Agreement Regarding Amendments to Loan Documents between CTC
Financial, Inc., Mercury, Inc., Mississippi One Cellular Telephone
Company, William L. Henning, Sr. and CoBank, ACB, dated as of
November 15, 1996*
4.71 -- Assignment, Assumption and Agreement Regarding Amendments to Loan
Documents between CoBank, ACB, Mercury Cellular of Kansas, Inc,
Mercury, Inc., et al., dated as of December 15, 1996*
4.72 -- Promissory Note by Mercury Cellular Telephone Company in favor of CTC
Financial, Inc. dated November 25, 1996 in the principal sum of
$4,000,000*
4.73 -- Second Amendment and Supplement to Continuing Guaranty between
Mercury Cellular Telephone Company, Inc. and CoBank, ACB, dated as of
November 25, 1996*
4.74 -- Loan Agreement between CTC Financial, Inc. and CoBank, ACB, dated as
of November 25, 1996*
4.75 -- First Amendment and Supplement to Act of Subordination between
Mercury Cellular Telephone Company, Mississippi One Cellular
Telephone Company and CoBank, ACB, dated as of November 25, 1996*
4.76 -- Promissory Note by CTC Financial, Inc. in favor of CoBank, ACB, dated
November 25, 1996 in the principal sum of $4,000,000*
4.77 -- Assumption Agreement between CoBank, ACB, and Mercury, Inc. dated
October 31, 1996*
5.1 -- Opinion of Correro Fishman Haygood Phelps Weiss Walmsley & Casteix,
L.L.P. re: legality of Class A Common Stock++
10.1 -- BTA Management and Construction Services Agreement By and Between
Mercury, Inc. and Meretel Communications, Limited Partnership dated
July 1, 1996*
10.2 -- Articles of Partnership in Commendam of Meretel Communications
Limited Partnership By and Among Wireless Management Corporation and
Eatel Corp, Inc., Mercury Cellular Telephone Company, Fort Bend
Telephone Company and Meretel Wireless, Inc. dated July 25, 1995*
10.3 -- Nationwide Messaging Reseller Agreement By and Between MobileComm
Nationwide Operations, Inc. and Mercury Cellular Telephone Co. dated
December 19, 1994+
10.4 -- Arch Nationwide Paging Reseller Agreement By and Between Arch
Nationwide Paging and Mercury Cellular Telephone Company, dated April
7, 1995+
</TABLE>
II-6
<PAGE> 120
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
10.5 -- RSA Management and Construction Services Agreement By and Between
Mercury Inc. and Miss-34 Cellular Corporation dated June 1, 1994*
10.6 -- RSA Management and Construction Services Agreement By and Between
Mercury, Inc. and Miss.-1 Telephone Co. dated May 1, 1996*
10.7 -- RSA Management and Construction Services Agreement By and Between
Mercury, Inc. and Mercury Cellular Telephone Co. dated May 1, 1996*
10.8 -- RSA Management and Construction Services Agreement By and Between
Mercury, Inc. and Mercury Cellular of Kansas, Inc., dated May 1,
1996*
10.9 -- Intentionally omitted
10.10 -- Asset Purchase Agreement By and Between West Alabama Cellular
telephone Company, Inc. and Mississippi One Cellular Telephone Co.,
dated March 4, 1996+
10.11 -- CellularOne License Agreement Between CellularOne Group and Mercury,
Inc., dated April 13, 1993+
10.12 -- Management and Accounting Services By and Between Mercury Information
Technologies, Inc. and Mercury, Inc. Agreement dated November 7,
1995+
10.13 -- MIS Services Agreement By and Between Mercury, Inc. and Maas.net,
LLC, dated June 6, 1996+
10.14 -- Lease Agreement By and Between William L. Henning and Lena B. Henning
and Mercury Cellular Telephone Company, Inc., dated January 1, 1990+
10.15 -- Lease By and Between Mercury, Inc. ("Lessor") and Mercury Cellular
Telephone Company ("Lessee"), dated March 1, 1992+
10.16 -- Commitment Letter, dated September 13, 1996, from CoBank, ACB*
10.17 -- Purchase Agreement By and Between Miscellco Communications, Inc. and
Mercury Cellular of Kansas, Inc. dated April 19, 1995+
10.18 -- Letter Agreement dated October 18, 1995 between Cameron
Communications Corporation and Mercury Information Technologies,
Inc.+
10.19 -- Act of Sale dated August 31, 1994 between Mercury, Inc. and
Mississippi One Cellular Telephone Company.+
10.20 -- US Unwired Inc. 1997 Stock Option Plan++
10.21 -- Commitment Letter dated October 24, 1996 from Rural Telephone
Financial Cooperative to Wireless Management Corporation*
10.22 -- Form of Stock Purchase Agreement between Mercury, Inc., David Bailey,
E. B. Martin, Jr., William M. Mounger, II, Robert M. Mounger, James
A. Murrell, III, William M. Yandall, III and Wirt A. Yeager, III*
11 -- Statement regarding computation of per share earnings*
21 -- List of Subsidiaries+
23.1 -- Consent of KPMG Peat Marwick LLP*
23.2 -- Consent of KPMG Peat Marwick LLP*
23.3 -- Consent of KPMG Peat Marwick LLP*
23.4 -- Consent of KPMG Peat Marwick LLP*
23.5 -- Consent of Smith, Turner & Reeves*
23.6 -- Consent of Elliot Goldberg CPA*
23.7 -- Consent of Correro Fishman Haygood Phelps Weiss Walmsley & Casteix,
L.L.P. (included in opinion filed as Exhibit 5.1)++
</TABLE>
II-7
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
24.1 -- Powers of Attorney (included on the Signature Page)+
27.1 -- Financial Data Schedule*
</TABLE>
- ---------------
* Filed herewith.
+ Previously filed.
++ To be filed by amendment.
(b) Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted because they are inapplicable or the
requested information is shown in the consolidated financial statements or
notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery of each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at the
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons pursuant
to the provisions described in Item 14, above, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
II-8
<PAGE> 122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Lake Charles, State of
Louisiana, on December , 1996.
MERCURY, INC.
By: /s/ WILLIAM L. HENNING, JR.
------------------------------------
William L. Henning, Jr.
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<C> <S> <C>
/s/ WILLIAM L. HENNING, JR. Chairman, Chief Executive December , 1996
- --------------------------------------------- Officer and Director
William L. Henning, Jr.
/s/ ROBERT PIPER President, Chief Operating December , 1996
- --------------------------------------------- Officer and Director
Robert Piper
/s/ DUSTY J. DUMAS Chief Financial Officer December , 1996
- ---------------------------------------------
Dusty J. Dumas
/s/ THOMAS G. HENNING Secretary, General Counsel December , 1996
- --------------------------------------------- and Director
Thomas G. Henning
/s/ WILLIAM L. HENNING, SR. Director December , 1996
- ---------------------------------------------
William L. Henning, Sr.
/s/ JOHN A. HENNING Director December , 1996
- ---------------------------------------------
John A. Henning
</TABLE>
II-9
<PAGE> 123
SCHEDULE II
US UNWIRED INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------------- -------- ---------- -------- ----------
BALANCE
AT
BEGINNING CHARGED TO BALANCE
OF COSTS AND AT END
DESCRIPTION PERIOD EXPENSES OTHER OF PERIOD
- ------------------------------------------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C>
1993
Deducted in balance sheet from subscriber
receivables:
Allowance for doubtful accounts............. $ 22,686 $154,344 $ 68,165 $ 245,195
-------- -------- -------- ----------
1994
Deducted in balance sheet from subscriber
receivables:
Allowance for doubtful accounts............. $245,195 $106,349 $(11,646) $ 339,898
-------- -------- -------- ----------
1995
Deducted in balance sheet from subscriber
receivables:
Allowance for doubtful accounts............. $339,898 $589,338 $ 76,764 $1,006,000
-------- -------- -------- ----------
</TABLE>
<PAGE> 124
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- --------------------
<C> <S>
1.1 -- Form of Underwriting Agreement++
2.1 -- Agreement and Plan of Reorganization by and among Cameron
Communications Corporation, Mercury, Inc., Mercury Cellular Telephone
Company, Mercury Cellular of Kansas, Inc., Mississippi One Cellular
Telephone Company, CCC Holding Company, Cameron Telephone Company,
and Elizabeth Telephone Company dated September 19, 1996*
2.2 -- Joint Agreement of Merger of Cameron Communication Corporation with
and into Mercury, Inc.*
3.1 -- Form of Articles of Incorporation of US Unwired Inc.*
3.2 -- Form of By-Laws of US Unwired Inc.*
4.1 -- Amended and Restated Loan Agreement By and Between CoBank, ACB and
CTC Financial, Inc., dated September 27, 1994, in the principal sum
of $17,400,000+
4.2 -- Amended and Restated Continuing Guaranty By and Between Miss One
Cellular Telephone Co. and CoBank, ACB, dated September 27, 1994, in
the principal sum of $17,400,000+
4.3 -- Amended and Restated Promissory Note By CTC Financial, Inc. in favor
of CoBank dated May 15, 1996 in the principal sum of $17,400,000+
4.4 -- First Amendment and Supplement to Security Agreement By and Between
Miss One and CoBank, ACB dated May 15, 1996+
4.5 -- First Amendment and Supplement to Deed of Trust, Security Agreement,
and Fixture Filing By and Between Miss One to Karen Hawkins, Trustee
in the principal sum of CoBank, ACB dated May 15, 1996+
4.6 -- Mortgage By Miss One to and for the benefit of CoBank, ACB dated May
15, 1996 in the principal sum of $17,400,000+
4.7 -- Continuing Guaranty made by Mercury, Inc. for the benefit of CoBank,
ACB, dated May 15, 1996, in the principal sum of $17,400,000+
4.8 -- First Amendment and Supplement to Pledge Agreement By and Between
Mercury, Inc. and CoBank, ACB, dated May 15, 1996, in the principal
sum of $17,400,000+
4.9 -- Limited Recourse Continuing Guaranty By William Henning, Sr., in
favor of CoBank, ACB, dated May 15, 1996, in the principal sum of
$17,400,000+
4.10 -- Amended and Restated Act of Subordination By Cameron Telephone and
Miss One in favor of CoBank, ACB, dated September 27, 1996+
4.11 -- Amended and Restated Promissory Note By Miss One in favor of CTC
Financial, dated May 15, 1996, in the principal sum of $17,400,000+
4.12 -- Security Agreement By and Between Mercury, Inc. and CoBank, ACB,
dated July 1, 1996+
4.13 -- First Amendment and Supplement to Amended and Restated Loan Agreement
By and Between CoBank, ACB and CTC Financial, Inc., dated July 1,
1996+
4.14 -- Second Amended and Restated Promissory Note By Miss One in favor of
CTC Financial, Inc., dated July 1, 1996, in the principal sum of
$32,400,000+
4.15 -- Second Amended and Restated Promissory Note By CTC Financial, Inc. in
favor of CoBank, ACB, dated July 1, 1996, in the principal sum of
$32,400,000+
</TABLE>
<PAGE> 125
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- --------------------
<C> <S>
4.16 -- First Amendment and Supplement to Amended and Restated Continuing
Guaranty By and Between Miss One and CoBank, ACB, dated July 1, 1996+
4.17 -- Second Amendment and Supplement to Security Agreement By and Between
Miss One and CoBank, ACB, dated July 1, 1996+
4.18 -- Second Amendment and Supplement to Deed of Trust By and Between Miss
One and Karen Hawkins, Trustee for CoBank, ACB, dated July 1, 1996+
4.19 -- First Amendment and Supplement to Mortgage By and Between Miss One
and CoBank, ACB, dated July 1, 1996+
4.20 -- First Amendment and Supplement to Continuing Guaranty Made by
Mercury, Inc. in favor of CoBank, ACB, dated July 1, 1996+
4.21 -- Second Amendment and Supplement to Pledge Agreement By and Between
Mercury, Inc. and CoBank, ACB, dated July 1, 1996+
4.22 -- First Amendment to Limited Recourse Continuing Guaranty By and
Between William Henning, Sr. and CoBank, ACB, dated July 1, 1996*
4.23 -- First Amendment and Supplement to Amended and Restated Act of
Subordination by and Among Cameron Telephone, Miss One and CoBank,
ACB, dated July 1, 1996+
4.24 -- Promissory Note dated May 15, 1996 by CTC Financial, Inc. in favor of
CoBank, ACB, in the principal sum of $5,000,000+
4.25 -- Promissory Note dated May 15, 1996 by Mercury, Inc. in favor of CTC
Financial, Inc. in the principal sum of $5,000,000+
4.26 -- Loan Agreement By and Between CoBank, ACB, and CTC Financial, Inc.
dated July 1, 1996 in the principal sum of $13,000,000+
4.27 -- Promissory Note By CTC Financial, Inc. in favor of CoBank, ACB, dated
July 1, 1996 in the principal sum of $13,000,000+
4.28 -- First Amendment and Supplement to Continuing Guaranty By and Between
Mercury Cellular Telephone Co. and CoBank, ACB, dated July 1, 1996+
4.29 -- First Amendment and Supplement to Security Agreement By and Between
Mercury Cellular Telephone Co. and CoBank, ACB, dated July 1, 1996+
4.30 -- First Amendment and Supplement to Mortgage and Security Agreement
Mercury Cellular Telephone Co. and CoBank, ACB, dated July 1, 1996+
4.31 -- First Amendment and Supplement to Limited Recourse Continuing
Guaranty By and Between Cameron Communications Corporation and
CoBank, ACB, dated July 1, 1996+
4.32 -- First Amendment and Supplement to Pledge Agreement By and Between
Cameron Communications Corporation and CoBank, ACB, dated July 1,
1996+
4.33 -- First Amendment and Supplement to Limited Recourse Continuing
Guaranty By and Between Mercury and CoBank, ACB, dated July 1, 1996+
4.34 -- First Amendment and Supplement to Pledge Agreement By and Between
Mercury, Inc. and CoBank, ACB, dated July 1, 1996+
4.35 -- Act of Subordination By Mercury Cellular Telephone Company and Miss
One, in favor of CoBank, ACB, dated July 1, 1996+
4.36 -- Promissory Note Mississippi-34 Cellular Corp. to Cameron
Communications Corp., dated November 20, 1992, in the principal sum
of $20,000+
</TABLE>
<PAGE> 126
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- --------------------
<C> <S>
4.37 -- Subordination Agreement By and Among Robert G. Mounger, William M.
Mounger, II, William Yandell, III and Wirt A. Yerger, III,
Mississippi-34 Cellular Corporation and Mercury, Inc., dated November
20, 1992+
4.38 -- Promissory Note By Miss-3 Cellular Corporation in favor of Robert
Mounger, dated March 27, 1992, in the principal sum of $16,500+
4.39 -- Promissory Note By Miss-3 Cellular Corporation in favor of Robert
Mounger, dated April 15, 1992, in the principal sum of $7,500+
4.40 -- Promissory Note By Miss-3 Cellular Corporation in favor of Robert
Mounger, II, dated April 1, 1992, in the principal sum of $17,500.00+
4.41 -- Promissory Note By Miss-3 Cellular Corporation in favor of William M.
Yandell, III dated April 30, 1992, in the principal sum of
$17,500.00+
4.42 -- Promissory Note By Miss-3 Cellular Corporation in favor of Wirt A.
Yerger, III, dated May 12, 1992, in the principal sum of $2,500.00+
4.43 -- Promissory Note By Miss-3 Cellular Corporation, in favor of Wirt A.
Yerger, III dated March 25, 1992, in the principal sum of $25,000+
4.44 -- Pledge Agreement By and Among the owners of capital stock of Miss-34
Cellular Corporation and AT&T Credit Corporation, dated December 20,
1993++
4.45 -- Capital Note By Miss-34 Cellular Corporation to AT&T Credit
Corporation, dated December 30, 1993, in the principal sum of
$1,684,987++
4.46 -- Deed of Trust, Security Agreement, Financing Statement and Assignment
of Rents and Leases Entered into by Miss-34 Cellular Corporation in
favor of AT&T Credit Corporation, dated December 20, 1993, in the
principal sum of $9,980,000++
4.47 -- Equipment Note Miss-34 By Cellular Corporation in favor of AT&T
Credit Corporation, dated December 30, 1993, in the principal sum of
$2,138,836++
4.48 -- General Agreement for Purchase Between AT&T and Mercury
Communications Company of Cellular Systems, dated July 7-9, 1993++
4.49 -- Mortgage and Security Agreement By Mercury Cellular Telephone Co. in
favor of CoBank, ACB, dated April 20, 1995+
4.50 -- Security Agreement By and Between Mercury Cellular Telephone Company
and CoBank dated, April 20, 1995+
4.51 -- Loan Agreement By and Between CoBank, ACB and CTC Financial, Inc.,
dated April 20, 1995 dated April 20, 1995+
4.52 -- Continuing Guaranty By Mercury Cellular Telephone Company for the
benefit of CoBank, ACB dated April 20, 1995+
4.53 -- Limited Recourse Continuing By Mercury, Inc. for the benefit of
CoBank, ACB, dated April 20, 1995+
4.54 -- Limited Recourse Continuing Guaranty By Cameron Communications
Corporation for the benefit of CoBank, ACB, dated April 20, 1995+
4.55 -- Promissory Note by CTC Financial, Inc. to CoBank, ACB, dated April
20, 1995, in the principal sum of $18,000,000*
4.56 -- Promissory Note By Mercury Cellular Telephone Co. in favor of CTC
Financial, Inc. dated April 20, 1995, in the principal sum of
$18,000,000+
4.57 -- Pledge Agreement By and Between Cameron Communications Corporation
and CoBank, ACB, dated April 20, 1995+
</TABLE>
<PAGE> 127
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- --------------------
<C> <S>
4.58 -- Pledge Agreement By and Between Mercury, Inc. and CoBank, ACB, dated
April 20, 1995+
4.59 -- Security Agreement By and Between Mercury Cellular Telephone Company
and CoBank, ACB, dated April 20, 1995+
4.60 -- Security Agreement By and Between Mercury Cellular of Kansas, Inc.
and CoBank, ACB, dated April 5, 1995+
4.61 -- Loan Agreement By and Between CoBank, ACB and Mercury Cellular of
Kansas, Inc., dated April 20, 1995, in the principal sum of
$17,100,000+
4.62 -- Limited Recourse Continuing Guaranty By Mercury Cellular Telephone
Company in favor of CoBank, ACB, dated April 20, 1995+
4.63 -- Collateral Assignment of Tenant's Interest in Leases By and Between
Mercury Cellular of Kansas, Inc. and CoBank, ACB, dated April 20,
1995, in the principal sum of $17,100,000+
4.64 -- Security Agreement By and Between Mercury Cellular of Kansas, Inc.
and CoBank, ACB, dated April 20, 1995+
4.65 -- Pledge Agreement By and Between Mercury Cellular Telephone Company
and CoBank, ACB, dated April 20, 1995+
4.66 -- Promissory Note By Mercury Cellular of Kansas, Inc. in favor of
CoBank, ACB, dated April 20, 1995, in the principal sum of
$17,100,000+
4.67 -- Loan and Security Agreement dated as of December 20, 1993 between
Mississippi-34 Cellular Corporation and AT&T Credit Corporation++
4.68 -- Promissory Note dated April 14, 1993 in the principal sum of
$2,779,924 by Mercury, Inc. in favor of Cameron Telephone Company.+
4.69 -- First Amendment and Supplement to Loan Agreement between CoBank, ACB,
and Mercury Cellular of Kansas, Inc. dated as of December 15, 1996*
4.70 -- Agreement Regarding Amendments to Loan Documents between CTC
Financial, Inc., Mercury, Inc., Mississippi One Cellular Telephone
Company, William L. Henning, Sr. and CoBank, ACB, dated as of
November 15, 1996*
4.71 -- Assignment, Assumption and Agreement Regarding Amendments to Loan
Documents between CoBank, ACB, Mercury Cellular of Kansas, Inc,
Mercury, Inc., et al., dated as of December 15, 1996*
4.72 -- Promissory Note by Mercury Cellular Telephone Company in favor of CTC
Financial, Inc. dated November 25, 1996 in the principal sum of
$4,000,000*
4.73 -- Second Amendment and Supplement to Continuing Guaranty between
Mercury Cellular Telephone Company, Inc. and CoBank, ACB, dated as of
November 25, 1996*
4.74 -- Loan Agreement between CTC Financial, Inc. and CoBank, ACB, dated as
of November 25, 1996*
4.75 -- First Amendment and Supplement to Act of Subordination between
Mercury Cellular Telephone Company, Mississippi One Cellular
Telephone Company and CoBank, ACB, dated as of November 25, 1996*
4.76 -- Promissory Note by CTC Financial, Inc. in favor of CoBank, ACB, dated
November 25, 1996 in the principal sum of $4,000,000*
</TABLE>
<PAGE> 128
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- --------------------
<C> <S>
4.77 -- Assumption Agreement between CoBank, ACB, and Mercury, Inc. dated
October 31, 1996*
5.1 -- Opinion of Correro Fishman Haygood Phelps Weiss Walmsley & Casteix,
L.L.P. re: legality of Class A Common Stock++
10.1 -- BTA Management and Construction Services Agreement By and Between
Mercury, Inc. and Meretel Communications, Limited Partnership dated
July 1, 1996*
10.2 -- Articles of Partnership in Commendam of Meretel Communications
Limited Partnership By and Among Wireless Management Corporation and
Eatel Corp, Inc., Mercury Cellular Telephone Company, Fort Bend
Telephone Company and Meretel Wireless, Inc. dated July 25, 1995*
10.3 -- Nationwide Messaging Reseller Agreement By and Between MobileComm
Nationwide Operations, Inc. and Mercury Cellular Telephone Co. dated
December 19, 1994+
10.4 -- Arch Nationwide Paging Reseller Agreement By and Between Arch
Nationwide Paging and Mercury Cellular Telephone Company, dated April
7, 1995+
10.5 -- RSA Management and Construction Services Agreement By and Between
Mercury Inc. and Miss-34 Cellular Corporation dated June 1, 1994*
10.6 -- RSA Management and Construction Services Agreement By and Between
Mercury, Inc. and Miss.-1 Telephone Co. dated May 1, 1996*
10.7 -- RSA Management and Construction Services Agreement By and Between
Mercury, Inc. and Mercury Cellular Telephone Co. dated May 1, 1996*
10.8 -- RSA Management and Construction Services Agreement By and Between
Mercury, Inc. and Mercury Cellular of Kansas, Inc., dated May 1,
1996*
10.9 -- Intentionally omitted
10.10 -- Asset Purchase Agreement By and Between West Alabama Cellular
telephone Company, Inc. and Mississippi One Cellular Telephone Co.,
dated March 4, 1996+
10.11 -- CellularOne License Agreement Between CellularOne Group and Mercury,
Inc., dated April 13, 1993+
10.12 -- Management and Accounting Services By and Between Mercury Information
Technologies, Inc. and Mercury, Inc. Agreement dated November 7,
1995+
10.13 -- MIS Services Agreement By and Between Mercury, Inc. and Maas.net,
LLC, dated June 6, 1996+
10.14 -- Lease Agreement By and Between William L. Henning and Lena B. Henning
and Mercury Cellular Telephone Company, Inc., dated January 1, 1990+
10.15 -- Lease By and Between Mercury, Inc. ("Lessor") and Mercury Cellular
Telephone Company ("Lessee"), dated March 1, 1992+
10.16 -- Commitment Letter, dated September 13, 1996, from CoBank, ACB*
10.17 -- Purchase Agreement By and Between Miscellco Communications, Inc. and
Mercury Cellular of Kansas, Inc. dated April 19, 1995+
10.18 -- Letter Agreement dated October 18, 1995 between Cameron
Communications Corporation and Mercury Information Technologies,
Inc.+
10.19 -- Act of Sale dated August 31, 1994 between Mercury, Inc. and
Mississippi One Cellular Telephone Company.+
10.20 -- US Unwired Inc. 1997 Stock Option Plan++
</TABLE>
<PAGE> 129
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
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<C> <S>
10.21 -- Commitment Letter dated October 24, 1996 from Rural Telephone
Financial Cooperative to Wireless Management Corporation*
10.22 -- Form of Stock Purchase Agreement between Mercury, Inc., David Bailey,
E. B. Martin, Jr., William M. Mounger, II, Robert M. Mounger, James
A. Murrell, III, William M. Yandall, III and Wirt A. Yeager, III*
11 -- Statement regarding computation of per share earnings*
21 -- List of Subsidiaries+
23.1 -- Consent of KPMG Peat Marwick LLP*
23.2 -- Consent of KPMG Peat Marwick LLP*
23.3 -- Consent of KPMG Peat Marwick LLP*
23.4 -- Consent of KPMG Peat Marwick LLP*
23.5 -- Consent of Smith, Turner & Reeves*
23.6 -- Consent of Elliot Goldberg CPA*
23.7 -- Consent of Correro Fishman Haygood Phelps Weiss Walmsley & Casteix,
L.L.P. (included in opinion filed as Exhibit 5.1)++
24.1 -- Powers of Attorney (included on the Signature Page)+
27.1 -- Financial Data Schedule*
</TABLE>
- ---------------
* Filed herewith.
+ Previously filed.
++ To be filed by amendment.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is entered
into as of the 19th day of September, 1996, by and among the following
corporations, each of which is a Louisiana corporation:
CAMERON COMMUNICATIONS CORPORATION ("Cameron"),
MERCURY, INC. ("Mercury"),
MERCURY CELLULAR TELEPHONE COMPANY ("MCTC"),
MERCURY CELLULAR OF KANSAS, INC. ("MCK"),
MISSISSIPPI ONE CELLULAR TELEPHONE COMPANY ("Miss One"),
CCC HOLDING COMPANY ("Newco"),
CAMERON TELEPHONE COMPANY ("CTC"), and
ELIZABETH TELEPHONE COMPANY ("ETC").
WHEREAS, the parties hereto desire to enter into the reorganization
contemplated hereby so that the wireless communications interests of Cameron
will be separated from its landline telephone business; such wireless interests
of Cameron will be combined with the wireless telephone business of Mercury;
and such landline telephone business of Cameron will be spun off to the
shareholders of Cameron;
NOW THEREFORE, the parties hereto agree as follows.
SECTION 1
THE REORGANIZATION
1.1 Reorganization Transactions. On the Reorganization Date (defined
below) the following transactions (collectively, the "Reorganization
Transactions") will occur, in the sequence in which they are set forth in this
Section 1.1.
(a) Cameron will transfer to Newco, pursuant to an Asset
Transfer Agreement in the form of Schedule 1.1(a) annexed hereto (the "Asset
Transfer Agreement"), the assets (subject to the liabilities) of Cameron
described therein, which assets constitute all of the assets of Cameron other
than its interests in MCTC and Newco (and include the right, following the
consummation of the Reorganization Transactions, to use of the corporate name
"Cameron Communications Corporation") and which liabilities constitute all of
the liabilities and obligations of Cameron.
(b) Following the consummation of the transaction described in
Section 1.1(a), Cameron will distribute to its shareholders all of the capital
stock of Newco (the "Spin-Off").
<PAGE> 2
(c) Following the consummation of the transaction described in
Section 1.1(b), Cameron will be merged into Mercury pursuant to a Joint
Agreement of Merger in the form of Schedule 1.1(c) annexed hereto (the "Joint
Agreement").
1.2 Optional Further Transactions. Following the consummation of the
Reorganization Transactions described in Section 1.1, Mercury may elect
(subject to the last sentence of Section 1.3) to consummate pursuant to this
Agreement, on the Reorganization Date or within 90 days thereafter, any of the
following further transactions (collectively, the "Optional Transactions"):
(a) MCK, a wholly owned subsidiary of MCTC, may be merged into MCTC pursuant to
a Certificate of Merger in the form of Schedule 1.2(a) (the "MCK/MCTC Merger
Certificate"); (b) MCTC, which will following the Reorganization Transactions
be a wholly owned subsidiary of Mercury, may be merged into Mercury pursuant to
a Certificate of Merger in the form of Schedule 1.2(b) (the "MCTC/Mercury
Merger Certificate"); and (c) Miss One, a wholly owned subsidiary of Mercury,
may be merged into Mercury pursuant to a Certificate of Merger in the form of
Schedule 1.2(c) (the "Miss One/Mercury Merger Certificate" and, collectively
with the Asset Transfer Agreement, the Joint Agreement, the MCK/MCTC Merger
Certificate and the MCTC/Mercury Merger Certificate, the "Ancillary
Agreements").
1.3 Form of Transactions. The transactions described in Sections
1.1(a) and 1.1(b) are intended to constitute a reorganization under Section
368(a)(1)(D) of the Internal Revenue Code of 1986 (the "Code") and a
distribution under Section 355 of the Code. The transaction described in
Section 1.1(c) is intended to constitute a reorganization under Section
368(a)(1)(A) of the Code. The Optional Transactions described in Section 1.2
will, if consummated, be intended to qualify as a reorganization under Section
368(a)(1)(A) or (D) of the Code and/or a liquidation under Section 332 of the
Code, and Mercury may exercise its option to consummate only those Optional
Transactions which, in the opinion of Mercury's tax counsel, will so qualify.
SECTION 2.
REORGANIZATION DATE;
ACTIONS ON AND FOLLOWING THE REORGANIZATION DATE
2.1 Reorganization Date. The Reorganization Date shall be the date
on which shall occur the consummation of the Reorganization Transactions
described in Section 1.1, and shall be such date as Cameron shall determine,
but shall not be earlier than the date on which all conditions to the
obligation of the parties to consummate the Reorganization Transactions are
satisfied or waived.
2.2 Actions on the Reorganization Date. On the Reorganization Date
the parties to each of the Reorganization Transactions will cause them to occur
in the sequence described in Section 1.1, to wit: (a) the parties to the Asset
Transfer Agreement will execute that Agreement
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<PAGE> 3
and cause to occur the "Closing" thereunder; (b) Cameron will accomplish the
Spin- Off; and (c) the parties to the Joint Agreement will cause it to be
executed and filed in the office of the Secretary of State of Louisiana (the
"Secretary of State"). Certificates representing shares of Newco distributed
in the Spin-Off shall be legended as provided in Schedule 2.2. To the extent
Mercury may have elected by the Reorganization Date to consummate any of the
Optional Transactions then, as applicable: (i) the parties to the MCK/MCTC
Merger Certificate will cause it to be filed in the office of the Secretary of
State; (ii) the parties to the MCTC/Mercury Merger Certificate will cause it to
be filed in the office of the Secretary of State; and (iii) the parties to the
Miss One/Mercury Merger Certificate will cause it to be filed in the office of
the Secretary of State.
2.3 Actions Following Reorganization Transactions.
(a) If Mercury elects following the Reorganization Date to
consummate any of the Optional Transactions then the filing contemplated by the
last sentence of Section 2.2 shall be made as to such transaction or
transactions as soon as practicable following such election.
(b) Mercury will file certified copies of the certificates of
merger issued by the Secretary of State in each Parish in which such filing is
required pursuant to Section 112F(2)(b) or 112G(3) of the Louisiana Business
Corporation Law.
(c) Mercury will promptly mail to the former shareholders of
Cameron a letter of transmittal for use by such shareholders in exchanging
certificates representing shares of Cameron for certificates representing
shares of Mercury into which such Cameron shares will, as and at the rate
provided in the Joint Agreement, have been converted by virtue of the merger of
Cameron into Mercury. Mercury warrants and represents that such shares of
Mercury will, when issued and delivered in accordance with the Joint Agreement
and this Agreement, be duly and validly issued, fully paid and nonassessable,
and that immediately following such issuance such shares will constitute not
less than 67.45362% of the total outstanding capital stock of Mercury.
Certificates representing such shares will be legended as provided in Schedule
2.2, whether or not the holder of any such certificate has signed the agreement
referred to in Section 5.10.
SECTION 3.
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Each party represents and warrants to the other parties that:
3.1 Corporate Status; Approvals. It is a corporation duly organized
and validly existing in good standing under the laws of Louisiana. This
Agreement and, to the extent it is a
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<PAGE> 4
party thereto, the Reorganization Transactions have been duly approved by all
necessary corporate action on its part except approval by its shareholders.
3.2 No Conflicts. The execution of this Agreement and the
consummation of the Reorganization Transactions do not and will not conflict
with or cause a breach or default under any provision of its Articles of
Incorporation or its By- Laws (if any), or of any material agreement,
commitment, rule, order or decree to which it is a party or by which it or its
assets is bound.
3.3 Financial Statements. Its financial statements at December 31,
1995, and for the year then ended, and at June 30, 1996, and for the six months
then ended, copies of which are annexed as Schedule 3.3 hereto, fairly present
its financial position as of such dates and the results of its operations for
the respective periods then ended, all in accordance with generally accepted
accounting principles consistently applied, except for the absence of footnote
disclosures and, in the case of interim financial statements, the absence of
adjustments consisting of normal recurring accruals.
3.4 Material Adverse Changes. There have been no material adverse
changes in its financial condition, results of operations, business, properties
or prospects since June 30, 1996.
3.5 Properties. It has good and merchantable title to all of the
properties and assets reflected as owned, and has valid leasehold estates in
any properties reflected as leased, on its balance sheet at June 30, 1996 (its
"June 30 Balance Sheet"), free and clear of any encumbrances other than those
that are reflected in Schedule 3.5 or in its financial statements that are
referred to in Section 3.3, or those that arise by operation of law.
3.6 Compliance With Legal Requirements. It holds all licenses and
franchises that are material to the conduct of its business as the same has
been, and is expected to continue to be, conducted. It is in compliance in all
material respects with all laws, regulations, reporting and licensing
requirements and orders applicable to its business the breach or violation of
which would, either individually or in the aggregate, have a material adverse
effect on its financial condition or results of operations.
3.7 Subsidiaries and Interests. Except as set forth in Schedule 3.7,
it has no interest of any kind in any corporation, partnership, limited
liability company, joint venture or other entity. Those interests reflected in
Schedule 3.7 are owned by it in full ownership and without restriction, other
than as set forth in Schedule 3.7 and other than restrictions under laws and
regulations of general application.
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<PAGE> 5
3.8 Capital Stock. Its authorized and issued capital stock is as set
forth in Schedule 3.8 and it has no agreement or commitments under which it is
obligated to issue or sell any shares of its capital stock.
3.9 Material Contracts. It has disclosed to each other party hereto
a description of its material contracts. Except as so disclosed it is not in
default under any of such contracts and it knows of no material default
thereunder by any other party to such contracts.
3.10 Absence of Undisclosed Liabilities. It has no obligation or
liability (contingent or otherwise) except (i) as reflected in its financial
statements referred to in Section 3.3, including any notes thereto, (ii) as
reflected by this Agreement, (iii) as has been disclosed to each other party
hereto, and (iv) for commitments and obligations made, or liabilities incurred,
since June 30, 1996, in the ordinary course of its business consistent with
past practices.
3.11 Benefit Plans. It has disclosed to each other party hereto all
pension, retirement, profit sharing, supplemental or excess retirement, stock
option, stock purchase, savings, employee stock ownership, restricted stock,
phantom stock, stock ownership, life insurance, disability, vacation pay,
severance pay, incentive, deferred compensation, bonus or benefit arrangement,
health or hospitalization program, fringe benefit or perquisite arrangement or
other similar plan as in effect with respect to it. Such plans that are
covered by ERISA, if any, comply with the requirements thereof.
3.12 Litigation. There are no pending or known threatened actions,
suits or proceedings, judicial, regulatory or other, that pertain to it except
as set forth on Schedule 3.12, and except for routine litigation incidental to
its business and for which any resultant liability is fully insured (subject to
any normal retention or deductible).
3.13 Insurance. Its businesses and properties are covered by adequate
insurance coverage, except that it does not carry business interruption
insurance.
SECTION 4.
COVENANTS
4.1 Conduct of Business. Until the earlier of the Reorganization
Date or the termination of this Agreement, it will operate its business only in
the usual and customary course and, except as otherwise contemplated by this
Agreement or as consented to by each other party hereto will not until after
the earlier of the Reorganization Date or the termination of this Agreement
amend its articles of incorporation or by-laws; pay any dividends; issue or
commit to issue any shares of its capital stock or rights to purchase or
acquire same; contractually incur any material lien or encumbrance other than
as contemplated by Schedule 5.8; acquire any
-5-
<PAGE> 6
corporation or other entity or any business thereof; take any action that would
reasonably be known by it to cause any breach in any of its warranties and
representations hereunder, as if such warranties and representations were made
immediately following the taking of such action; or sell, except in the
ordinary course of its business consistent with its past practices, any of its
assets or business or any of its interests reflected in Schedule 3.7.
4.2 Investigations. Prior to the Reorganization Date, it will
furnish to each other party hereto such information with respect to its
business and properties as any such party may reasonably request.
4.3 Best Efforts. It will use its best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things, necessary to
consummate and make effective, as soon as practicable, the transactions
contemplated by this Agreement, and to obtain all consents of all third parties
and governmental bodies necessary or desirable for such purpose; provided, that
no party shall be required by this section to waive any condition to such
party's obligation to consummate the Reorganization Transactions.
4.4 Shareholder Approval. Each party shall call a meeting of its
shareholders to consider approval of the transactions contemplated by this
Agreement. Mercury and Cameron will prepare a Joint Information Statement to
be sent to their respective shareholders with respect to the transactions
contemplated by this Agreement.
4.5 Consents and Approvals. The parties will take appropriate action
to give any required notices to, and obtain any consents of, regulatory
authorities or third parties required with respect to the Reorganization
Transactions or the Optional Transactions, including, without limitation, (a)
approvals of the Federal Communications Commission, (b) approval of the
partners of the Meretel Partnership, and (c) any required notification under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Each of the parties
hereby consents to the Reorganization Transactions and the Optional
Transactions to the extent the consent of such party is required or desirable
in connection therewith and, effective upon the closing under the Asset
Transfer Agreement, each party releases Cameron from those of Cameron's
obligations and liabilities that are being expressly assumed by Newco under the
Asset Transfer Agreement and agrees to look solely to Newco and its
subsidiaries for the performance thereof.
4.6 Confidentiality. If the Reorganization Transactions are not
consummated, each party agrees to maintain the confidentiality of all
information it obtained concerning each other party by reason of, or in
connection with the transactions contemplated by, this Agreement, except to any
extent disclosure may be required by law.
4.7 Records Retention and Availability; Confidentiality. The parties
shall retain their respective records in accordance with legal requirements and
existing policy, and each party shall
-6-
<PAGE> 7
make available to any other party such records as such other party may
reasonably require for purposes of preparing tax returns and financial
statements and for any other reasonable purpose. Nonpublic or other
confidential information made available to any party under this Section will be
kept confidential by it except to any extent disclosure may be required by law.
SECTION 5.
CONDITIONS
The obligation of each party to consummate the Reorganization
Transactions is subject to the conditions listed below. Each of such
conditions (other than legal or regulatory requirements) may be waived by any
party, and any unfulfilled condition shall be deemed waived if the transaction
referred to in Section 1.1(a) is consummated. Upon consummation of that
transaction, all of the following conditions shall be deemed to have been
satisfied or waived as to each other Reorganization Transaction.
5.1 Regulatory and Other Consents and Approvals. All notifications
to, and consents, approvals and authorizations of, regulatory authorities or
third persons required with respect to the consummation of the Reorganization
Transactions shall have been duly made or obtained and shall be in full force
and effect, and no such approval or authorization shall be conditioned in such
a manner as would materially and adversely affect the business of the parties
following such consummation.
5.2 Representations, Warranties and Covenants. The representations
and warranties of each other party to this Agreement shall be true and correct
in all material respects on the Reorganization Date, as if made on that Date;
each such other party shall have complied with all of its agreements and
covenants to have been complied with by it prior to the consummation of the
Reorganization Transactions; and each such other party shall have delivered a
certificate of its chief executive and financial officers to that effect.
5.3 Shareholder Approval. The shareholders of each party hereto
shall have duly approved the Reorganization Transactions and the Optional
Transactions to the extent required by the Louisiana Business Corporation Law;
and such approval by the shareholders of Cameron and Mercury shall have been by
a vote of not less than 80% of the total voting power of each.
5.4 Release; No Adverse Proceedings. There shall be no pending or
threatened proceeding to enjoin or prohibit any of the Reorganization
Transactions or to alter the same or obtain damages with respect thereto or
with respect to the business or operations of any party, including (without
limitation) any demand for action or threatened action by shareholders of
Cameron or Mercury, directly or derivatively; and each such shareholder shall
have released
-7-
<PAGE> 8
Cameron and Mercury from any such demand or action by an instrument
satisfactory to Cameron and Mercury.
5.5 Tax Matters. The parties shall have received a private letter
ruling from the Internal Revenue Service with respect to the transactions
contemplated by Sections 1.1(a) and 1.1(b) (the "Spin-Off Transactions"), and
an opinion of tax counsel with respect to the transaction contemplated by
Section 1.1(c) (the "Merger"), in form and substance satisfactory to them, to
the combined effect that the Spin-Off Transactions qualify as tax-free
transactions under Section 368(a)(1)(D) and Section 355 of the Code, and that
the Merger qualifies as a reorganization under Section 368(a)(1)(A) of the
Code.
5.6 Accounting Matters. The independent accountants of Mercury shall
not have taken the position that the Mergers do not qualify for pooling-of-
interests or "as if" pooling-of-interests accounting treatment under generally
accepted accounting principles or the accounting rules and regulations of the
Securities and Exchange Commission.
5.7 Fairness Opinions. Cameron and Mercury shall each have received
an opinion from Robert A. Ehlers, CPA, A Professional Corporation, dated as of
September 19, 1996, in form reasonably satisfactory to the recipient, to the
effect that the terms of the Reorganization Transactions are fair to its
shareholders from a financial point of view, and such opinion shall not have
been withdrawn.
5.8 Refinancing. A commitment to refinance the debt of CTC
Financial, Inc., a subsidiary of CTC, shall have been issued and shall be to
the effect described in Schedule 5.8.
5.9 Tax and Benefits Sharing. The parties shall have entered into an
agreement or agreements satisfactory to them containing provisions for the
sharing of tax and employee benefits liabilities following consummation of the
transactions contemplated by this Agreement.
5.10 Restriction Agreements. Each shareholder of Cameron shall have
(i) entered into an agreement with Mercury not to sell or otherwise transfer,
for a period of two years after the Reorganization Date, shares of Newco
distributed to such shareholder in the Spin-Off or shares of Mercury issued to
such shareholder pursuant to the Joint Agreement (or in any reclassification,
stock split or stock dividend with respect to any such shares) unless Mercury
and Newco are first provided with an opinion of qualified tax counsel,
satisfactory to each of them, to the effect that such sale or transfer will not
jeopardize the tax-free nature of the Reorganization Transactions, and (ii)
represented to Cameron and Mercury, if deemed necessary by either of them with
respect to any exemption from registration relied upon by either of them in
connection with Reorganization Transactions, that such shareholder (a) will
acquire such shares of Mercury and Newco for investment and not for
distribution in violation of federal or state securities laws, and (b) will not
offer, sell, transfer or encumber such shares in violation of federal or state
securities
-8-
<PAGE> 9
laws; and each shareholder shall have made such further representations as
shall be necessary or desirable in connection with any such exemption from
registration.
SECTION 6.
ALLOCATION OF ASSETS, OBLIGATIONS AND LIABILITIES;
INDEMNIFICATION
6.1 Survival of Representations and Warranties. The representations
and warranties of the parties shall survive the Reorganization Transactions and
Optional Transactions to the extent (and, except as may otherwise be provided
in Section 8.3, only to the extent) they are relevant to the indemnification
and adjustment provisions of this Section 6 and Section 7.
6.2 Allocation of Obligations and Liabilities. Following the
Reorganization Date, the liabilities and obligations of each party as of the
completion of the Reorganization Transactions on the Reorganization Date,
direct or indirect, fixed or contingent, known or unknown, will be discharged
as follows: (a) those reflected in the June 30 Balance Sheet of a party or that
arise in accordance with such party's contracts referred to in Section 3.9
shall be discharged by that party (or its successor by merger in the event it
is merged into another party pursuant to the Reorganization Transactions or
Optional Transactions), except that the liabilities and obligations of Cameron
shall be assumed and discharged by Newco as and to the extent provided in the
Asset Transfer Agreement (for which assumption and discharge CTC and ETC bind
themselves in solido with Newco); and (b) all other liabilities and obligations
existing as of the completion of the Reorganization Transactions on the
Reorganization Date, including those that were unknown or contingent or
otherwise were not reflected on the June 30 Balance Sheet and do not arise in
accordance with the contracts of a party referred to in Section 3.9 shall be
discharged in accordance with the following principles:
(i) Any such obligation or liability that pertains exclusively
to the wireline telephone business ("Wireline Business") is intended, as among
the parties hereto, to be borne by Newco or its then subsidiaries.
(ii) Any such obligation or liability that pertains exclusively
to the wireless communications business ("Wireless Business") is intended, as
among the parties hereto, to be borne by Mercury or its then subsidiaries.
(iii) Any such obligation or liability that pertains both to
the Wireline Business and the Wireless Business is to be borne as provided in
Section 6.2(i) to the extent it pertains to the Wireline Business and as
provided in Section 6.2(ii) to the extent it pertains to the Wireless Business.
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<PAGE> 10
(iv) If it cannot be readily determined whether such an
obligation or liability pertains to the Wireline Business or the Wireless
Business, then the following assumptions will apply: (i) obligations and
liabilities of Cameron, CTC, and ETC pertain to the Wireline Business; and (ii)
obligations and liabilities of MCTC, MCK, Mercury, and Miss One pertain to the
Wireless Business.
(v) Notwithstanding the foregoing, (a) any obligation or
liability of Cameron to indemnify its officers and directors against, and pay
their expenses in connection with, claims made by or against them in their
capacities as such for acts taken in such capacities through the consummation
of the Reorganization Transactions shall be borne by Newco; and (b) any
obligation or liability that pertains to the offer or sale of any security in
connection with the Reorganization Transactions or to the Joint Information
Statement shall be borne as follows: (1) if the obligation or liability arises
from the failure to register any security or to register any transaction
pertaining to a security, such obligation or liability shall be borne by Newco
if the security is common stock of Newco or the transaction involves the common
stock of Newco (such as, without limitation, the Spin-Off), or by Mercury if
the security is common stock of Mercury or the transaction involves the common
stock of Mercury, unless such failure to register arises solely because of a
misstatement or omission in disclosure, in which event any obligation or
liability therefrom shall be borne as set forth in the following clause (2);
and (2) if the obligation or liability arises from a misstatement or omission
of material fact then it shall be borne by Newco to the extent the misstatement
or omission related to Newco or to Cameron, or by Mercury to the extent the
misstatement or omission related to Mercury. Disclosures relating to the
business and affairs of Mercury on a pro forma basis as if the Reorganization
Transactions had been consummated will for the foregoing purpose be deemed to
relate to Cameron to the extent they involve the business and affairs of Newco,
Cameron, CTC, ETC, and/or MCTC, and to Mercury otherwise.
6.3 Indemnification.
(a) Subsequent to the consummation of the Reorganization
Transactions, obligations and liabilities will be allocated, as among the
parties hereto, as provided in Section 6.2. If, following the Reorganization
Date, a third party attempts to compel any party (or its successor) to bear any
obligation or liability other than in accordance with Section 6.2, then such
party shall, following the Reorganization Date, be indemnified by Newco (to the
extent it or its subsidiaries is to bear the obligation or liability in
accordance with Section 6.2) or by Mercury (to the extent it or its
subsidiaries is to bear the obligation or liability in accordance with Section
6.2). Such indemnification will include undertaking the defense of the
indemnified party.
(b) A party entitled to indemnification pursuant to Section
6.3(a) ("indemnified party") will give prompt notice of the existence of any
matter or claims as to which indemnification is provided to the party obligated
to provide indemnification ("indemnifying
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<PAGE> 11
party"), but the failure to give or any delay in giving such notice shall not
prejudice the claim for indemnification except to the extent the indemnifying
party is actually prejudiced in connection with such indemnification by such
failure or delay. The indemnifying party shall defend against such claim
through counsel selected by it (and at its expense), and the indemnified party
may participate in the defense through counsel of its choosing (and at its
expense unless the indemnifying party fails to provide, or to continue
providing, such defense). The indemnified party shall not seek indemnification
for any settlement effected without the consent of the indemnifying party
unless such consent is withheld wholly without a reasonable basis.
(c) Each party hereto (an "indemnifying party") shall
indemnify each other party hereto (an "indemnified party") for all losses,
costs and expenses (including reasonable attorney's fees and expenses) incurred
by the indemnified party by reason of any breach by the indemnifying party of
any covenant that is to be performed by the indemnifying party subsequent to
the consummation of the Reorganization Transactions.
6.4 Allocation of Assets. The parties intend their assets, including
(without limitation) any contingent or unknown assets, to be allocated in a
manner comparable to that provided in Section 6.3, mutatis mutandis.
6.5 Licenses. If by reason of the Reorganization Transactions or
Optional Transactions a party is or would be deprived of the use of any asset
of another party of which it had use prior to the Reorganization Transactions
or Optional Transactions and which remains necessary to its intended business
following such Transactions, then the party entitled to such asset following
the Reorganization Transactions shall, upon request from such deprived party,
license or otherwise make available to the deprived party the use of such asset
on substantially comparable terms as existed prior to the Reorganization
Transactions and Optional Transactions but only to the extent such use remains
necessary to the intended business of the deprived party following the
Reorganization Transactions.
SECTION 7.
ADJUSTMENTS
7.1 Exclusive Remedy. An adjustment in accordance with this Section
7 will, following the consummation of the Reorganization Transactions, be the
exclusive remedy of a party by reason of the breach of any other party or any
of its representations or warranties in this Agreement.
7.2 Adjustment of Exchange Ratio. The ratio by which shares of
Cameron are exchanged into shares of Mercury pursuant to the Joint Agreement
("Exchange Ratio") has been set by the Boards of Directors of Cameron and
Mercury based in part on the correctness in all
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<PAGE> 12
material respects of all of the representations and warranties of the parties
set forth in this Agreement. If it becomes apparent to the Board of Directors
of Mercury that any of such representations and warranties has been breached in
any material respect then such Board may (but shall not be required to)
determine to adjust the Exchange Ratio in accordance with this Section 7,
provided that no adjustment will be made unless it changes the Exchange Ratio
by more than five percent.
7.3 Adjustment. If the Board of Directors of Mercury determines to
make an adjustment, the Exchange Ratio shall be adjusted to that ratio which,
in the opinion of the Board of Directors, based on such financial advice as it
may deem relevant to consider (the expense of which shall be borne by Mercury),
would have been fair to the shareholders of Mercury and the shareholders of
Cameron had all incorrectnesses, both positive and negative, that became known
in such representations and warranties been known as of the Reorganization
Date, but otherwise not taking into account any events or transactions
following the Reorganization Date. The adjustment to the Exchange Ratio so
determined, if any, shall be made by the issuance of an appropriate number of
additional shares of Mercury to the persons who held the shares of Cameron or
Mercury, as the case may be, immediately prior to the consummation of the
Reorganization Transactions. The adjustment shall be calculated as if all of
the shares of Mercury common stock outstanding immediately following the
Reorganization Date (including those issuable to shareholders of Cameron
pursuant to the Joint Agreement), or any shares into which such shares may have
by then been reclassified, were still outstanding on the payment date for such
adjustment, but any holder entitled to receive the adjustment who has by such
payment date converted any such shares or reclassified shares into shares of
any other class of Mercury shall have his adjustment reduced by the proportion
of his shares that have been so converted. If on the payment date for the
adjustment there is outstanding any class of Mercury common stock other than
the class in which the adjustment is being made, then (i) a reverse stock split
will be effected in the class of Mercury common stock in which the adjustment
is being made and/or (ii) a stock split will be effected or a stock dividend
paid with respect to the shares of each other then outstanding class of Mercury
common stock, so that the proportionate equity represented by the shares of
each such other class will not be reduced by the issuance of additional shares
in connection with any adjustment made pursuant to this Section.
7.4 Limitation Date; Restriction on Issuance of Shares. No
adjustment pursuant to Section 7 shall be made after the second anniversary of
the Reorganization Date. Until such anniversary no additional shares shall be
issued of the same class held by the shareholders of Mercury immediately
following the Reorganization Transactions except pursuant to this Section 7 or
in accordance with any stock split or stock dividend and, if Mercury wishes to
issue additional shares not permitted by this prohibition, it shall create an
additional class or classes for that purpose (and in that event shall
reclassify the class held by the shareholders of Mercury immediately following
the Reorganization Transactions into a separately designated class which shall
be governed by the restrictions of this Section 7.4).
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<PAGE> 13
SECTION 8.
TERMINATION
8.1 Termination. Notwithstanding any other provision of this
Agreement or the Ancillary Agreements and notwithstanding the approval of this
Agreement and the Ancillary Agreements by the shareholders of the parties, as
applicable, this Agreement and the Ancillary Agreements may be terminated and
the Reorganization Transactions abandoned at any time prior to the consummation
of the Asset Transfer Agreement:
(a) By mutual consent of the Boards of Directors of Mercury
and Cameron;
(b) By the Board of Directors of a party in the event of a
material breach by any other party of any representation, warranty, covenant or
agreement of such other party contained herein which would result in the
failure to satisfy the closing condition set forth in Section 5.2 of this
Agreement;
(c) By the Board of Directors of any party in the event that
the Reorganization Transactions shall not have been consummated by October 31,
1996;
(d) By the Board of Directors of any party in the event (i)
any approval of any governmental or other regulatory authority required for
consummation of the Reorganization Transactions shall have been denied by such
authority, or (ii) the shareholders of Mercury or Cameron fail to have approved
this Agreement and the Reorganization Transactions, as applicable, and the
consummation of the transactions contemplated hereby and thereby, as
applicable, to the extent required by law and by the provisions of any
governing instruments; or
(e) By the Board of Directors of a party in the event that any
of the conditions precedent to the obligation of such party to consummate the
Reorganization Transactions cannot be satisfied or fulfilled on or before
October 31, 1996 (other than by reason of a breach by the party seeking to
terminate).
8.2 Effect of Termination. In the event of the termination of this
Agreement and the Ancillary Agreements pursuant to Section 8.1 of this
Agreement, this Agreement and the Ancillary Agreements shall become void and
have no effect and the parties will be relieved of all obligations and
liabilities under this Agreement and the Ancillary Agreements, except that (i)
the provisions of the last sentence of Section 4.6 and the provisions of
Section 10 of this Agreement shall survive any such termination and
abandonment, (ii) a termination pursuant to Section 8.1(b), 8.1(c) or 8.1(e) of
this Agreement shall not relieve a breaching party from liability for any
breach
-13-
<PAGE> 14
giving rise to such termination, and (iii) the parties shall remain obligated
under, and liable for any breach of, any of the provisions of this Agreement
that survive its termination.
8.3 Survival of Representations, Warranties and Covenants. The
respective representations, warranties, obligations, covenants and agreements
of the parties shall not survive the Reorganization Transactions except for (i)
this Section 8.3, Section 1.2 (which shall survive for 90 days following the
Reorganization Date), Section 2.3, Section 4.7, Section 6, Section 7, and
Section 9 of this Agreement, and (ii) the obligations, covenants and agreements
set forth in the Ancillary Agreements; provided that no such representations,
warranties, obligations, covenants or agreements shall be deemed to be
terminated or extinguished so as to deprive any party (or any director, officer
or controlling person thereof) of any defense in law or equity which otherwise
would be available against the claims of any person, including, without
limitation, any shareholder or former shareholder of any party, the aforesaid
representations, warranties, obligations, covenants, and agreements being
material inducements to consummation by the parties of the transactions
contemplated hereby.
SECTION 9.
MISCELLANEOUS
9.1 Expenses. Except pursuant to Section 6.3 or Section 8.2 of this
Agreement, each of the parties shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial or
other consultants, appraisers, accountants and counsel except that expenses of
the financial advisors identified in Section 5.7 shall be borne by Cameron and
Mercury if the Reorganization Transactions are not consummated, or by Mercury
if such Transactions are consummated.
9.2 Brokers and Finders. Each of the parties represents and warrants
that neither it nor any of its officers, directors, or employees has employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with this Agreement or the
transactions contemplated hereby. In the event of a claim by any broker or
finder based upon its representing or being retained by or allegedly
representing or being retained by any party, such party agrees to indemnify and
hold the other parties harmless of and from such claim.
9.3 Entire Agreement. Except as otherwise expressly provided herein,
this Agreement and the Ancillary Agreements contain the entire agreement among
the parties with respect to the transactions contemplated hereunder and
thereunder, and such agreements supersede all prior arrangements or
understanding with respect thereto, written or oral. There are no
representations or warranties of the parties except as expressly set forth
herein, all others being expressly disclaimed. The terms and conditions of
this Agreement and the Ancillary Agreements shall
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<PAGE> 15
inure to the benefit of and be binding upon the parties and their respective
successors. Nothing in this Agreement or the Ancillary Agreements, expressed
or implied, is intended to confer upon any party, other than the parties or
their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the Ancillary Agreements except for the
warranty and representation of Mercury in Section 2.3, which shall inure to the
benefit of the shareholders of Cameron, and except for the right of
shareholders of Cameron to receive the merger consideration under the Joint
Agreement.
9.4 Amendments. To the extent permitted by law, this Agreement and
the Ancillary Agreements may be amended by a subsequent writing signed by each
of the parties upon the approval of the Boards of Directors of such parties,
either before or after shareholders of the parties have approved this
Agreement; provided, however, that the provisions of this Agreement and the
Joint Agreement relating to the manner or basis in which shares of Cameron
common stock will be exchanged for Mercury common stock shall not be amended
without the requisite approval of the holders of the issued and outstanding
shares of Cameron and Mercury entitled to vote thereon. The parties may,
without approval of their respective Boards of Directors, make such technical
changes to this Agreement or the Ancillary Agreements, not inconsistent with
the purposes hereof and thereof, as may be required to effect or facilitate any
governmental approval or acceptance of the Reorganization Transactions or
Optional Transactions or of this Agreement or the Ancillary Agreements or to
effect or facilitate any filing or recording required for the consummation of
any of the transactions contemplated hereby or thereby, or for any other
purpose.
9.5 Waivers. Each party shall, as to such party's rights hereunder,
have the right (i) to waive any default in the performance of any term of this
Agreement or any Ancillary Agreement by any other party, (ii) to waive or
extend the time for the compliance or fulfillment by any other party of any and
all of its obligations under this Agreement or any Ancillary Agreement, and
(iii) to waive any or all of the conditions precedent to the obligations of
such party under this Agreement or any Ancillary Agreement.
9.6 No Assignment. None of the parties may assign any of its rights
or obligations under this Agreement or the Ancillary Agreements to any other
persons, and any such purported assignment shall be deemed null and void.
9.7 Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission or by registered or certified mail, postage pre-paid,
to the chief executive officer of each party at the address indicated and shall
be deemed to have been delivered as of the date so delivered:
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<PAGE> 16
If to Mercury, MCTC, MCK, or Miss One, to it at:
CM Tower, Suite 1495
One Lakeshore Drive
Lake Charles, LA 70629
(Attention: Chief Executive Officer)
If to Cameron, Newco, CTC or ETC, to it at:
101 E. Thomas Street
Sulphur, LA 70663
(Attention: Chief Executive Officer)
9.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Louisiana without regard to the
conflict of laws principles thereof.
9.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute one and the same instrument.
9.10 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
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<PAGE> 17
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf and attested by officers thereunto duly authorized all
as of the day and year first above written.
CAMERON COMMUNICATIONS
CORPORATION
ATTEST:
By:
-------------------------------------
- -------------------------------
Secretary
MERCURY, INC.
ATTEST:
By:
-------------------------------------
- -------------------------------
Secretary
MERCURY CELLULAR TELEPHONE
COMPANY
ATTEST:
By:
-------------------------------------
- -------------------------------
Secretary
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<PAGE> 18
MERCURY CELLULAR OF KANSAS, INC.
ATTEST:
By:
-------------------------------------
- -------------------------------
Secretary
MISSISSIPPI ONE CELLULAR TELEPHONE
COMPANY
ATTEST:
By:
-------------------------------------
- -------------------------------
Secretary
CCC HOLDING COMPANY
ATTEST:
By:
-------------------------------------
- -------------------------------
Secretary
CAMERON TELEPHONE COMPANY
ATTEST:
By:
-------------------------------------
- -------------------------------
Secretary
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<PAGE> 19
ELIZABETH TELEPHONE COMPANY
ATTEST:
By:
-------------------------------------
- -------------------------------
Secretary
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<PAGE> 1
Exhibit 2.2
JOINT AGREEMENT OF MERGER
OF
CAMERON COMMUNICATIONS CORPORATION
WITH AND INTO
MERCURY, INC.
This Joint Agreement of Merger (this "Joint Agreement") is dated as of
the 19th day of September, 1996, between Cameron Communications Corporation, a
Louisiana corporation ("Cameron"), and Mercury, Inc., a Louisiana corporation
("Mercury"), and is entered into pursuant to the provisions of Sections 111 et
seq. of the Louisiana Business Corporation Law ("LBCL").
WHEREAS, the respective Boards of Directors of Mercury and Cameron
(collectively, the "Merging Corporations") deem it advisable that Cameron be
merged with and into Mercury (the "Merger"), as provided in this Joint
Agreement; and
WHEREAS, the respective Boards of Directors of the Merging
Corporations wish to enter into this Joint Agreement and submit it to the
shareholders of Mercury and to the shareholders of Cameron for approval in the
manner required by law and, subject to such approval and to such other
approvals as may be required, to effect the Merger, all in accordance with the
provisions of this Joint Agreement.
NOW THEREFORE, in consideration of the mutual benefits to be derived
from this Joint Agreement and the Merger, the parties hereto agree as follows:
1. THE MERGER
In accordance with the applicable provisions of the LBCL, Cameron
shall be merged with and into Mercury; the separate existence of Cameron shall
cease; and Mercury shall be the corporation surviving the Merger (the
"Surviving Corporation").
2. EFFECTIVENESS OF THE MERGER
2.1 Effective Time of the Merger. The Merger shall become
effective at the time at which this Joint Agreement, having been executed and
acknowledged in the manner required by law, is filed in the office of the
Secretary of State of Louisiana. The date and time at which the Merger becomes
effective are herein referred to as the "Effective Time".
2.2 Effect of the Merger. At the Effective Time, (i) the separate
existence of Cameron shall cease and Cameron shall be merged with and into
Mercury; (ii) Mercury shall continue to possess all of the rights, privileges
and franchises possessed by it and shall, at the Effective Time, become vested
with and possess all rights, privileges and franchises possessed by Cameron;
(iii) Mercury shall be responsible for all of the liabilities and obligations
of Cameron in the same manner as if Mercury had itself incurred such
liabilities or obligations, and the Merger shall not affect or impair the
rights of the creditors or of any persons dealing with the Merging
Corporations; (iv) the Merger will not of itself cause a change, alteration or
amendment to the Articles of Incorporation or
<PAGE> 2
the By-Laws of Mercury except as otherwise provided in Section 2.3; (v) the
Merger will not of itself affect the tenure in office of any officer or
director of Mercury and no such person will succeed to such positions solely by
virtue of the Merger; and (vi) the Merger shall, from and after the Effective
Time, have all the effects provided by applicable Louisiana law.
2.3 Amendment to Articles of Incorporation. At the Effective Time
the Articles of Incorporation of Mercury shall be amended by adding to Article
VI thereof the following sentence:
"The Corporation shall when applicable issue and transfer
fractional shares, which shall in each case be calculated to
the nearest one millionth of a share (that is, to the sixth
decimal place); and the holder of a certificate that
represents or includes a fractional share shall have all
rights of a shareholder with respect thereto, including
(without limitation) voting rights."
2.4 Additional Actions. If, at any time after the Effective Time,
Mercury shall consider or be advised that any further assignments or assurances
in law or any other acts are necessary or desirable (a) to vest, perfect or
confirm, of record or otherwise, in Mercury, title to or the possession of any
property or right of Cameron acquired or to be acquired by reason of, or as a
result of, the Merger, or (b) otherwise to carry out the purposes of this Joint
Agreement, Cameron and its proper officers and directors shall be deemed to
have granted to Mercury an irrevocable power of attorney to execute and deliver
all such proper deeds, assignments and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of such
property or rights in Mercury and otherwise to carry out the purposes of this
Joint Agreement; and the proper officers and directors of Mercury are fully
authorized in the name of Cameron to take any and all such action.
3. METHOD OF CARRYING MERGER INTO EFFECT
This Joint Agreement shall be submitted to the shareholders of Mercury
and to the shareholders of Cameron for their respective approvals. If such
approvals are given, then the fact of such approval shall be certified hereon
by the Secretary of Mercury and by the Secretary of Cameron. This Joint
Agreement, so approved and certified, shall, as soon as is practicable, be
signed and acknowledged by the President or Vice President of each of the
Merging Corporations. As soon as may be practicable thereafter, this Joint
Agreement, so certified, signed and acknowledged, shall be delivered to the
Secretary of State of Louisiana for filing in the manner required by law and
shall be effective at the Effective Time; and thereafter, as soon as
practicable, a copy of the Certificate of Merger issued by the Secretary of
State of Louisiana, and certified by him to be a true copy, shall be filed for
record in the Office of the Recorder of Mortgages of the parishes in which the
Merging Corporations have their respective registered offices and in the Office
of the Recorder of Conveyances of each parish in which Cameron owns immovable
property.
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<PAGE> 3
4. CONVERSION OF SHARES
4.1 Conversion of Mercury Shares; Fractional Shares. Except for
shares as to which dissenters' rights have been perfected and not withdrawn or
otherwise forfeited under Section 131 of the LBCL, at the Effective Time, by
reason of the Merger, each issued and outstanding share of the Common Stock, no
par value, of Cameron ("Cameron Common Stock") shall be converted into the
right to receive from Mercury two and one hundred ninety two thousand one
hundred eight one-millionths (2.192108) shares of the Common Stock, par value
$50.00 per share, of Mercury ("Mercury Common Stock") (the "Merger
Consideration"). Shares of Cameron Common Stock that are held by Cameron shall
not be considered to be outstanding and shall be canceled (and not converted)
by virtue of the Merger at the Effective Time. In exchanging Mercury Common
Stock for Cameron Common Stock, Mercury shall issue fractional shares when
applicable, which shares shall be issued to the nearest one millionth of a
share (that is, to the sixth decimal place).
4.2 Exchange of Certificates. After the Effective Time, each
holder of an outstanding certificate or certificates theretofore representing
shares of Cameron Common Stock (other than shares as to which dissenters'
rights have been perfected and not withdrawn or otherwise forfeited under
Section 131 of the LBCL), upon surrender thereof to Mercury, shall be entitled
to receive the Merger Consideration into which such shares have been converted
as provided in Section 4.1. Until so surrendered, each outstanding certificate
shall be deemed for all purposes to represent only a right to receive the
Merger Consideration. Whether or not a stock certificate representing Cameron
Common Stock is surrendered, from and after the Effective Time such certificate
shall under no circumstances evidence, represent or otherwise constitute any
stock or interest in Cameron or any person, firm or corporation other than the
Merger Consideration.
4.3 Lost Certificates. If any shareholder cannot locate his
certificate(s) representing shares of Cameron Common Stock, a new certificate
will be issued by Cameron to replace the lost certificate(s) upon execution by
the shareholder of an affidavit certifying that his certificate(s) cannot be
located.
4.4 Shares of Mercury. The shares of capital stock of Mercury
outstanding immediately prior to the Effective Time shall not be changed or
converted by virtue of the Merger.
4.5 Certificate Legends. Certificates representing shares of
Mercury Common Stock issued as Merger Consideration shall contain the legends
required by the "Plan" (as defined in Section 5.1).
4.6 Adjustments. The Merger Consideration may be adjusted in
accordance with the adjustment provisions of Section 7 of the Plan.
5. MISCELLANEOUS
5.1 Termination. Prior to the Effective Time this Joint Agreement
may be terminated, and the Merger abandoned, as set forth in the related
Agreement and Plan of Reorganization among
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<PAGE> 4
Mercury, Cameron and others (the "Plan"), a copy of which may be inspected at
the registered office of the Surviving Corporation in the State of Louisiana.
5.2 Headings. The descriptive headings of the sections of this
Joint Agreement are inserted for convenience only and do not constitute a part
hereof for any other purpose.
5.3 Modifications, Amendments and Waivers. At any time prior to
the Effective Time (notwithstanding any shareholder approval that may have
already been given), the parties hereto may, to the extent permitted by the
LBCL, modify, amend or supplement any term or provision of this Joint
Agreement.
5.4 Governing Law. This Joint Agreement shall be governed by the
laws of the State of Louisiana (regardless of the laws that might be applicable
under principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect and performance.
IN WITNESS WHEREOF, this Joint Agreement has been executed by a
majority of the directors of each of the Merging Corporations, as of the day
and year first above written.
FOR THE BOARD OF DIRECTORS
OF MERCURY, INC.
_____________________________________ ____________________________________
_____________________________________ ____________________________________
____________________________________
FOR THE BOARD OF DIRECTORS
OF CAMERON COMMUNICATION CORPORATION
_____________________________________ ____________________________________
_____________________________________ ____________________________________
____________________________________
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<PAGE> 5
CERTIFICATE OF SECRETARY OF
MERCURY, INC.
I hereby certify that I am the duly elected Secretary of Mercury,
Inc., a Louisiana corporation, presently serving in such capacity and that
the foregoing Agreement was duly approved, without alteration or amendment, by
the shareholders of Mercury, Inc. in the manner required by the Louisiana
Business Corporation Law.
Certificate dated October __, 1996.
___________________________________
Thomas G. Henning, Secretary
CERTIFICATE OF SECRETARY OF
CAMERON COMMUNICATIONS CORPORATION
I hereby certify that I am the duly elected Secretary of Cameron
Communications Corporation, a Louisiana corporation, presently serving in such
capacity and that the foregoing Agreement was duly approved, without alteration
or amendment, by the shareholders of Cameron Communications Corporation in the
manner required by the Louisiana Business Corporation Law.
Certificate dated October __, 1996.
___________________________________
Lena B. Henning, Secretary
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<PAGE> 6
EXECUTION BY CORPORATIONS
Considering the approval of this Agreement by the respective
shareholders of Mercury, Inc. and Cameron Communications Corporation, as
certified above, this Agreement is executed by such corporations acting through
their respective Presidents, this _____ day of October, 1996.
MERCURY, INC.
By:___________________________________
William L. Henning, Jr., President
Attest:
___________________________________
Thomas G. Henning, Secretary
CAMERON COMMUNICATIONS
CORPORATION
By:___________________________________
William L. Henning, Sr., President and
Chief Executive Officer
Attest:
___________________________________
Lena B. Henning, Secretary
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<PAGE> 7
ACKNOWLEDGMENT AS TO
MERCURY, INC.
STATE OF LOUISIANA
PARISH OF CALCASIEU
BEFORE ME, the undersigned authority, personally came and appeared
William L. Henning, Jr. who, being duly sworn, declared and acknowledged before
me that he is the President of Mercury, Inc. and that in such capacity he was
duly authorized to and did execute the foregoing Agreement on behalf of such
corporation, for the purposes therein expressed and as his and such
corporation's free act and deed.
___________________________________
William L. Henning, Jr., Appearer
Sworn to and subscribed before me
this _____ day of October, 1996.
___________________________________
Notary Public
-7-
<PAGE> 8
ACKNOWLEDGMENT AS TO
CAMERON COMMUNICATIONS CORPORATION
STATE OF LOUISIANA
PARISH OF CALCASIEU
BEFORE ME, the undersigned authority, personally came and appeared
William L. Henning, Sr. who, being duly sworn, declared and acknowledged before
me that he is the President and Chief Executive Officer of Cameron
Communications Corporation and that in such capacity he was duly authorized to
and did execute the foregoing Agreement on behalf of such corporation, for the
purposes therein expressed and as his and such corporation's free act and deed.
___________________________________
William L. Henning, Sr., Appearer
Sworn to and subscribed before me
this _____ day of October ___, 1996.
___________________________________
Notary Public
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<PAGE> 1
EXHIBIT 3.1
DRAFT OF 9-30-96
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
US UNWIRED INC.
* * *
ARTICLE I
NAME; DURATION
The name of the Corporation is:
US UNWIRED INC.
Its duration is perpetual.
ARTICLE II
PURPOSE
The purpose of the Corporation is to engage in any lawful activity for
which corporations may be formed under the Louisiana Business Corporation Law
("LBCL").
ARTICLE III
CAPITAL STOCK: GENERAL PROVISIONS
A. Authorized Stock. The Corporation has the authority to issue two
hundred million shares of capital stock, of which one hundred million are
shares of Class A Common Stock, par value $.01 per share, sixty million are
shares of Class B Common Stock, par value $.01 per share, and forty million are
shares of preferred stock having no par value.
B. Common Stock. Except as otherwise expressly provided in these
Articles or as may be required by the LBCL notwithstanding the provisions of
these Articles, the Class A Common Stock and Class B Common Stock have
equivalent rights.
C. Preferred Stock. The preferred stock may be issued from time to
time in one or more series. The Board of Directors has authority to amend the
Articles from time to time to fix the preferences, limitations and relative
rights of any series of preferred stock, and to establish, and fix variations
in relative rights as between or among, series of preferred stock. The
preferences, limitations, and relative rights so established may be amended
from time to time by
<PAGE> 2
the Board of Directors, subject only to any approval of the holders of any
series of preferred stock that may be required by these Articles or by the LBCL
notwithstanding the provisions of these Articles.
D. Voting Rights.
(1) Preferred stock shall have such voting rights as are
required by the LBCL and such as may be conferred by these Articles.
(2) Except as otherwise provided by these Articles or as may
be required by the LBCL notwithstanding the provisions of these Articles, the
Class A Common Stock and Class B Common Stock shall vote together as a single
class in the election of Directors and with respect to any other matter for
which shareholder action or approval is required by these Articles or by the
LBCL notwithstanding the provisions of these Articles, even if action or
approval of the Class A or Class B Common Stock voting on such matter as a
separate class is also required. Whether voting together as a single class or
voting by class, as the case may be, the Class A Common Stock shall have one
vote per share, and the Class B Common Stock shall have ten votes per share.
E. Issuance of Class B Shares. Shares of Class B Common Stock shall
initially be issued pursuant to the reclassification described in Article
IV(C). Additional shares of Class B Common Stock shall not be issued unless
(i) there are simultaneously issued that number of shares of Class A Common
Stock as shall be necessary to maintain, immediately following such issuance,
the same proportionate equity ownership by the two classes as existed
immediately prior to such issuance, or (ii) such shares are issued in
connection with a stock split, stock dividend or other reclassification that
complies with Article III(H) or the exception thereto, or (iii) holders of the
Class A Common Stock, voting as a separate class, and the Class B Common Stock,
voting as a separate class, shall have approved such issuance.
F. Redemption of Disqualified Holders.
(1) Except as may otherwise be expressly provided in these
Articles with respect to any series of preferred stock, the Corporation may at
any time redeem shares of its capital stock from any Disqualified Holder or
Holders to the extent that the ownership thereof (i) would constitute a
violation of Section 310 of the Communications Act of 1934, as such Act has
been and may be further amended, or any similar or successor federal law or
regulation (a "Violation"), or (ii) would prevent the Corporation or any
subsidiary from holding or materially delay it or any subsidiary in obtaining
any governmental license or franchise necessary to conduct any material portion
of the Corporation's Business, or materially increase the Corporation's or any
subsidiary's cost of obtaining or operating under any such license or franchise
(a "Prevention").
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<PAGE> 3
(2) The terms and conditions of any such redemption shall be
as follows:
(i) The number of shares to be redeemed shall be (a)
the minimum number required, in the opinion of the Board of Directors, to
remove the Violation or Prevention, as the case may be, plus (b) in the
discretion of the Board of Directors, any number of additional shares up to 15%
of the number calculated pursuant to clause (a).
(ii) The redemption price shall be the Fair Market Value
of the Redeemed Shares;
(iii) The redemption price shall be paid in cash,
Redemption Securities, or any combination thereof, as determined by the Board
of Directors;
(iv) The shares to be redeemed shall be selected in such
manner as shall be determined by the Board of Directors, which may include
selection first of the most recently purchased shares thereof, selection by
lot, or selection in any other manner determined by the Board of Directors;
(v) at least 20 days' written notice of the Redemption
Date shall be given to the record holders of the shares selected to be
redeemed; provided, however, that only 10 days' written notice of the
Redemption Date shall be given to record holders if the cash or Redemption
Securities necessary to effect the redemption shall have been deposited in
trust for the benefit of such record holders and subject to immediate
withdrawal by them on and after the Redemption Date upon surrender of the stock
certificates for their shares to be redeemed; and
(vi) from and after the Redemption Date, any and all
rights of whatever nature (including without limitation any rights to vote or
participate in dividends declared on stock of the same class or series as such
shares) with respect to the shares selected for redemption shall cease and
terminate and such Disqualified Holders thenceforth shall be entitled only to
receive the cash or Redemption Securities payable upon redemption.
The Board of Directors may impose other terms and conditions not
inconsistent with the foregoing.
(3) For purposes of this Article III(F):
(i) "Business" means the wireless communications
business including (but without limitation) cellular, paging and personal
communications service. The foregoing description does not limit the
generality of Article II.
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<PAGE> 4
(ii) "Disqualified Holder" shall mean any holder of
capital stock of the Corporation whose holding of such stock, either
individually or when taken together with the holding of capital stock of the
Corporation by any other holder or holders would, in the opinion of the Board
of Directors, be a Violation or a Prevention.
(iii) "Fair Market Value" of a share of the Corporation's
stock of any class or series shall mean the average closing price for such a
share on its principal trading market for each of the ten trading days ending
on the day preceding the day on which notice of redemption shall be given;
provided, however, that if shares of stock of such class or series are not
traded on any securities exchange registered under the Securities Exchange Act
of 1934 and are not quoted in the Nasdaq National Market, "Fair Market Value"
shall be the fair market value as of such day as determined by the Board of
Directors in good faith. Notwithstanding the foregoing, shares of Class B
Common Stock shall be deemed to have the same "Fair Market Value" as an
equivalent number of shares of Class A Common Stock.
(iv) "Redemption Date" shall mean the date fixed by the
Board of Directors for the redemption of shares pursuant to this Article
III(F).
(v) "Redemption Securities" shall mean any debt or
equity securities of the Corporation, any of its subsidiaries or affiliates or
any other corporation, or any combination thereof, having such terms and
conditions as shall be approved by the Board of Directors and which, together
with any cash to be paid as part of the redemption price, in the opinion of any
nationally recognized investment banking firm selected by the Board of
Directors (which may be a firm which provides other investment banking,
brokerage or other services to the Corporation), has a value, at the time
notice of redemption is given, at least equal to the redemption price required
to be paid.
(4) The Corporation may assign in whole or in part its
redemption rights under this Article III(F) to any third party, in whose hands
such rights shall become an option to purchase the shares on the same terms and
conditions as the Corporation's right of redemption.
(5) Notices of redemption, as well as notices pursuant to
Article IV(A), shall be deemed to have been given at the time deposited in the
United States mail, certified or registered with return receipt requested,
properly addressed and postage prepaid. Time periods that run from such
notices shall commence on the first day after notice is given.
G. Restoration. Shares of Class A or Class B Common Stock that have
converted into the other Class shall be restored to authorized but unissued
shares.
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<PAGE> 5
H. Reclassifications. No split, reverse split, stock dividend or
other reclassification of the Class A Common Stock shall be effected unless a
simultaneous and equivalent split, reverse split, stock dividend, or other
reclassification of the Class B Common Stock is effected, and vice versa,
except in either case for a stock split, reverse stock split and/or stock
dividend that is effected in accordance with Section 7 of the Agreement and
Plan of Reorganization dated as of September 19, 1996 (the "Plan"), among the
Corporation and other corporate parties, for the purpose of maintaining,
immediately following any issuance of additional shares of Class B Common Stock
pursuant to the adjustment provisions of Section 7 of the Plan, the same
proportionate equity ownership by the Class A Common Stock and Class B Common
Stock as existed immediately prior to such issuance of additional shares of
Class B Common Stock.
I. Dividends. No stock dividend on the Common Stock may be paid in
any shares other than shares of the class to which the stock dividend pertains.
Subject to the preceding sentence, any dividends declared, whether in cash,
shares or other property, shall be paid equally to the holders of Class A
Common Stock and Class B Common Stock, on a share-for-share basis, and in the
same property.
J. No Preemptive Rights. Shareholders shall not have any preemptive
rights.
ARTICLE IV
CAPITAL STOCK:
CLASS B COMMON STOCK SPECIAL PROVISIONS
A. Qualified Holders. Class B Common Stock may be held only by the
following holders (each of which is a "Qualified Holder"):
(i) Persons and entities who receive Class B Common Stock (a)
in connection with the reclassification referred to in Article IV(C), or (b) as
a distribution from any such entity (each such person or entity is hereinafter
referred to as a "Founder"),
(ii) Any natural person who is a descendent (including by
adoption) of a Founder;
(iii) Any trustee or other fiduciary, but only if and so long as
the sole beneficial owners of the shares are one or more Qualified Holders;
(iv) Any corporation that is not a Founder, if the entire
capital stock thereof is owned by any one or more Qualified Holders; and
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<PAGE> 6
(v) Any partnership or limited liability company that is not a
Founder, whose sole partners or owners are one or more Qualified Holders.
If a Qualified Holder ceases to be such (as would, for example, a
corporation that is not a Founder some of whose stock is transferred by a
Qualified Holder to a non-Qualified Holder) then the shares of Class B Common
Stock owned by the former Qualified Holder shall be offered to the remaining
Qualified Holders according to the procedures of Article IV(B), except that the
"option period" described therein shall not terminate until forty-five days
after written notice of the cessation has been given by the former Qualified
Holder or any other Qualified Holder to the Corporation and further except that
the "market price per share" shall be the lesser of that existing at the time
of the cessation or that existing at the time of such written notice. Any such
shares not purchased by the remaining Qualified Holders shall be automatically
converted into Class A Common Stock on a share-for-share basis. A Qualified
Holder who is a natural person does not cease to be a Qualified Holder by
reason of such person's death, but the transfer of such deceased person's Class
B Common Stock is subject to the restrictions of Article IV(B).
B. Transfer Restrictions.
(1) No sale, assignment, exchange, transfer, donation, or
other disposition of Class B Common Stock shall be made except (a) to a
Qualified Holder or Holders, (b) pursuant to any merger, consolidation, share
exchange, or disposition of all or substantially all of the Corporation's
assets that is approved in the manner provided in Article X(A), or (c) in
accordance with the offer and conversion procedures of this Article IV(B). Any
transfer in violation of the preceding sentence shall be void and the
Corporation shall be under no obligation to transfer such shares on its books,
pay dividends to, or otherwise regard the holder thereof as a shareholder.
Each certificate representing shares of Class B Common Stock shall bear a
legend making reference to this Article IV(B).
(2) If any shareholder desires to sell, assign, exchange,
transfer, donate, or otherwise dispose of shares of Class B Common Stock
otherwise than to a Qualified Holder or Holders ("Offered Shares"), he shall
first give written notice to the Corporation, which, upon receipt of such
notice, shall promptly send a copy to all Qualified Holders of Class B Common
Stock. For a period of forty-five days ("Option Period") after the Corporation
sends such notice, such other Qualified Holders ("Optionees") shall have an
option to purchase all or any portion of the Offered Shares at the "market
value per share" (defined below). If the total number of shares subscribed for
by the Optionees exceeds the number of Offered Shares, the excess shall be
allocated among the Optionees in proportion to their respective subscriptions.
If the total number of shares subscribed for by the Optionees is less than the
number of Offered Shares, then for 10 days following the Option Period the
Corporation shall have the option to purchase all or
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<PAGE> 7
any portion of the unpurchased shares on the same terms the Optionees could
have purchased them.
(3) For purposes of this Article IV(B), the "market value per
share" shall mean the Fair Market Value (as defined in Article III(F)(3)(iii)
without regard to the proviso therein, except that the first day of the Option
Period shall be used in lieu of the Redemption Date) per share, or, if Fair
Market Value cannot be so determined, then "market value per share" shall be
the book value per share as of the month-end immediately preceding the first
day of the Option Period, as determined by the Corporation's independent
accountants.
(4) Acceptance of an option to purchase the Offered Shares
shall be made as provided in the By-Laws, and the date, time and mechanics of
the closing shall be as therein provided.
(5) Any of the Offered Shares not purchased by the Optionees
or by the Corporation (other than any not purchased due to any title defect or
fault of or attributable to the holder) may be converted by the holder to Class
A Common Stock, and such holder may for a period of 90 days following the
expiration of the Option Period sell, assign, exchange, transfer, donate or
otherwise dispose of such converted shares (but not the shares of Class B
Common Stock) in the public market (subject to Article IV(B)(7)) or otherwise,
but if disposed of otherwise than in the public market then the price may not
exceed the price at which the shares were offered to the Optionees. Any of
such converted shares that have not been sold, assigned, exchanged,
transferred, donated or otherwise disposed of as permitted by Article IV(B)
shall, at the expiration of the 90-day period referred to above, automatically
reconvert, on a share-for-share basis, into shares of Class B Common Stock.
(6) This Article IV(B) shall not apply to any bona fide pledge
of shares to secure an obligation of the holder. If such a holder subsequently
defaults on such obligation, the creditor, before enforcing any of its rights
with respect to such shares, shall follow the same procedure as the holder
would have been required to follow to sell the shares and shall be permitted to
sell the shares only as and to the same extent the shareholder would be
permitted to do so under this Article IV(B).
(7) Shares of Class A Common Stock that are issued upon
conversion of Class B Common Stock pursuant to this Article IV may not be sold
by the holder in the public market if such sale would cause the number of such
shares that have been sold in the public market by such holder and such
holder's affiliates (and any other holder(s) acting in concert with them)
during the three- month period ending on the date of such sale to exceed one
quarter of one percent of the total number of shares of Class A Common Stock
outstanding on such date, unless holders of at least a majority of the Class B
Common Stock have consented to such sale or such
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<PAGE> 8
sale is pursuant to a public offering on a firm underwriting basis. In making
this calculation, appropriate adjustments shall be made for all stock splits
and stock dividends.
C. Reclassification. The shares (including fractional shares) of
the Corporation's common stock, par value $50.00 per share ("Old Common
Stock"), outstanding on the effective date of these Amended and Restated
Articles of Incorporation are reclassified on such effective date into shares
of Class B Common Stock at the rate of _______ shares of Class B Common Stock
for each full share of Old Common Stock and a proportionate number of shares of
Class B Common Stock for each fractional share of Old Common Stock. Following
such reclassification the Corporation shall not issue fractional shares and any
fraction of a share of Class B Common Stock to which a holder of Old Common
Stock would otherwise have been entitled shall be cancelled without payment to
such holder.
ARTICLE V
DIRECTORS
A. Number. The number of Directors constituting the full Board of
Directors shall be the greater of (a) six; (b) the number set forth in the
By-Laws of the Corporation from time to time (but no decrease in such number
shall shorten the term of an incumbent director); and (c) the number that is
two times (i) one, plus (ii) the number of Directors which preferred stock is
entitled to elect ("Preferred Directors").
B. Quorum. A quorum of Directors shall consist of a majority of the
number of Directors constituting the full Board of Directors.
C. Proxies. Any Director who is absent from a meeting of the board
or any committee thereof may be represented by any other Director, who may cast
the vote of the absent director according to the written instructions, general
or special, of the absent Director.
D. Classification. The Board of Directors shall be divided, with
respect to the time during which they shall hold office, into three classes as
nearly equal in number as possible, with the initial term of office of the
Class I directors expiring at the annual meeting of shareholders to be held in
1997, of the Class II directors expiring at the next succeeding annual meeting
of shareholders, and of the Class III directors expiring at the second
succeeding annual meeting, with all such directors to hold office until their
successors are elected and qualified. Any increase or decrease in the number
of directors shall be apportioned by the Board of Directors so that all classes
of directors shall be as nearly equal as possible. At each annual meeting of
shareholders, directors chosen to succeed those whose terms then expire shall
be elected to hold office for a term expiring at the annual meeting of
shareholders held in the third year following the year of their election and
until their successors are duly elected and qualified.
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<PAGE> 9
E. Vacancies. Any vacancy on the Board of Directors (including any
vacancy resulting from an increase in the authorized number of Directors, from
the removal of a Director or from a failure of the shareholders to elect the
full number of authorized Directors) may be filled as follows: if the vacant
position is that of a Preferred Director, the vacancy may be filled as provided
elsewhere in these Articles or, if not so provided, then by vote of a majority
of the remaining Preferred Directors even though not constituting a quorum of
the full Board of Directors. If the vacant position is other than that of a
Preferred Director, the vacancy may be filled by vote of a majority of the
remaining Directors even if not constituting a quorum of the full Board of
Directors, or, if such remaining Directors have not theretofore acted, by the
holders of Common Stock.
F. Removal. A Director may be removed at any time, with or without
cause, but only by the vote of a majority of the shares that would be entitled
to elect the successor to the removed director.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
A. Limitation of Liability. No director or officer of the
Corporation shall be liable to the Corporation or to its shareholders for
monetary damages for breach of his or her fiduciary duty as a director or
officer, provided that the foregoing provision shall not eliminate or limit the
liability of a director of officer for (1) any breach of the director's or
officer's duty of loyalty to the Corporation or its shareholders; (2) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (3) liability for unlawful distributions of the
Corporation's assets to, or redemption or repurchase of the Corporation's
shares from, shareholders of the Corporation, under and to the extent provided
in LBCL Section 92(D); or (4) any transaction from which the director or
officer derived an improper personal benefit.
B. Authorization of Further Actions. The Board of Directors may (1)
cause the Corporation to enter into contracts with its directors and officers
providing for the limitation of liability set forth in this Article to the full
extent permitted by law, (2) adopt By-Laws or resolutions, or cause the
Corporation to enter into contracts, providing for indemnification of directors
and officers and other persons (including, without limitation, directors and
officers of the Corporation's direct and indirect subsidiaries) to the full
extent permitted by law, and (3) cause the Corporation to exercise the powers
set forth in LBCL Section 83(F), notwithstanding that some or all of the
members of the Board of Directors acting with respect to the foregoing may be
parties to such contracts or beneficiaries of such By-Laws or resolutions or
the exercise of such powers.
C. Subsidiaries. The Board of Directors may cause the Corporation
to approve for its direct and indirect subsidiaries limitation of liability and
indemnification provisions
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<PAGE> 10
comparable to the foregoing, notwithstanding that some or all of the directors
of the Corporation are also directors or officers of such subsidiaries.
D. Amendment of Article VI. Any amendment or repeal of this Article
shall not adversely affect any elimination or limitation of liability or any
right to indemnification under this Article with respect to any action or
inaction occurring prior to the time of such amendment or repeal.
ARTICLE VII
MEETINGS OF SHAREHOLDERS
A. Special Meetings. Special meetings of shareholders, for any
purpose or purposes, may be called in any manner set forth in the By-Laws. In
addition, at any time, upon the written request of any shareholder or group of
shareholders holding in the aggregate at least (i) 60% of the total voting
power of any series or class, the Secretary of the Corporation shall call a
special meeting of shareholders of such series or class, or (ii) 60% of the
total voting power of the Corporation, the Secretary of the Corporation shall
call a special meeting of all shareholders of the Corporation. Any such
special meeting shall be held at the registered office of the Corporation at
such time as the Secretary may fix, not less than 15 nor more than 60 days
after the receipt of said request, and if the Secretary shall neglect or refuse
to fix such time or to give notice of the meeting, the shareholder or
shareholders making the request may do so. Such requests must state the
specific purpose or purposes of the proposed special meeting, and the business
to be conducted thereat shall be limited to such purpose or purposes. Except
as set forth in this Article VII, shareholders of the Corporation shall not
have the right to call or have called special meetings of the shareholders.
B. Written Consents. Whenever by any provision of law, these
Articles, or the Corporation's By-Laws, the affirmative vote of holders of
Class B Common Stock, voting as a separate class, is required to authorize or
constitute corporate action, the consent in writing to such corporate action
signed by holders holding that proportion of the total votes of the Class B
Common Stock on the question which is required by these Articles or by law,
whichever requirement is higher, shall be sufficient, without necessity for a
meeting of holders of the Class B Common Stock. [PERMIT WRITTEN CONSENT BY
REQUIRED PROPORTION WHEN CLASS A AND B VOTE TOGETHER AS A SINGLE CLASS?]
C. Quorum. A majority of the total votes of any class of Common
Stock or any series of preferred stock shall constitute a quorum with respect
to any matter requiring a vote of such class or series. A majority of the
total votes of any classes and/or series entitled to vote together as if a
single class shall constitute a quorum with respect to any matter requiring a
vote of any such classes and/or series voting as if a single class.
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ARTICLE VIII
REVERSION
Cash, property or share dividends, shares issuable to shareholders in
connection with a reclassification of stock, and the redemption price of
redeemed shares, that are not claimed by the shareholders entitled thereto
within one year after the dividend or redemption price became payable or the
shares became issuable, despite reasonable efforts by the Corporation to pay
the dividend or redemption price or deliver the certificates for the shares to
such shareholders within such time, shall, at the expiration of such time,
revert in full ownership to the Corporation, and the Corporation's obligation
to pay such dividend or redemption price or issue such shares, as the case may
be, shall thereupon cease; provided, however, that the Board of Directors may,
at any time, for any reason satisfactory to it, but need not, authorize (1)
payment of the amount of any cash or property dividend or redemption price or
(2) issuance of any shares, ownership of which has reverted to the Corporation
pursuant to this Article, to the person or entity who or which would be
entitled thereto had such reversion not occurred.
ARTICLE IX
BY-LAWS
A. Adoption, Amendment and Repeal. By-Laws of the Corporation may
be adopted, amended or repealed by the Board of Directors, subject to any power
granted by the LBCL to shareholders to change or repeal any By-Laws so adopted
or amended, which power (if granted by the LBCL) may only be exercised at any
annual or special meeting of shareholders, the notice of which expressly states
that the proposed change or repeal is to be considered at the meeting.
B. New Matters. Any purported amendment to the By-Laws which would
add thereto a matter not covered in the By-Laws prior to such purported
amendment shall be deemed to constitute the adoption of a By-Law provision and
not an amendment to the By-Laws.
ARTICLE X
VOTE ON CERTAIN TRANSACTIONS AND AMENDMENTS TO
ARTICLES OF INCORPORATION
A. Vote Required for Shareholder Action. If the Board of Directors
has in advance approved and/or recommended any proposal presented to the
shareholders, including but not limited to a proposal to approve a merger,
consolidation, share exchange, disposition of all or substantially all of the
Corporation's assets, dissolution or any amendment to these Articles of
Incorporation, by the affirmative vote of three-fourths of the number of
Directors constituting the full Board of Directors, then, in addition to any
other vote required by these Articles or by the LBCL notwithstanding the
provisions of these Articles, the affirmative vote of holders of at least a
majority of the voting power present, with all classes and series voting
together as if a single
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<PAGE> 12
class, shall be required to approve such proposal. Otherwise, the affirmative
vote of holders of at least 66 2/3% of the total voting power, with all classes
and series voting together as if a single class, shall be required to
constitute shareholder approval of such proposal, in addition to any other vote
required by these Articles or by the LBCL notwithstanding the provisions of
these Articles. If a special vote of any class or series of shares is required
under Section 31(C) of the LBCL (or any successor provisions) [OR ARTICLE X(C)]
to amend the Articles of Incorporation, the requisite vote shall be the
affirmative vote of holders of at least a majority of the voting power present
of such class or series.
B. Business Combinations and Control Share Acquisitions. The
provisions of LBCL Sections 132 through 134 (as the same may hereafter be
amended) shall not apply to the Corporation . [NOTE: SPECIAL VOTE REQUIRED TO
ADOPT THIS PROVISION -- SEE 134E(1)(B).] The provisions of LBCL Sections 135
through 140.2 (as the same may hereafter be amended) shall not apply to control
share acquisitions of shares of the Corporation.
[C. AMENDMENT OF CERTAIN PROVISIONS. ANY AMENDMENT TO THE PROVISIONS
OF ARTICLE III(D)(2), ARTICLE III(E), ARTICLE III(H), ARTICLE III(I), OR THIS
ARTICLE X(C) SHALL REQUIRE, IN ADDITION TO THE VOTE REQUIRED BY ARTICLE X(A),
THE APPROVAL BY HOLDERS OF CLASS A COMMON STOCK.]
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EXHIBIT 3.2
ADOPTED
--------------
BY-LAWS
OF
US UNWIRED INC.
----
SECTION 1
OFFICES
1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall
be located at _________________________, Lake Charles, Louisiana _________.
1.2 ADDITIONAL OFFICES. The Corporation may have such offices at
such other places as the Board of Directors may from time to time determine or
the business of the Corporation may require.
SECTION 2
SHAREHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS. Unless otherwise required by law or these By-
Laws, all meetings of the shareholders shall be held at the principal office of
the Corporation or at such other place, within or without the State of
Louisiana, as may be designated by the Board of Directors.
2.2 ANNUAL MEETINGS; NOTICE THEREOF. An annual meeting of the
shareholders shall be held each year on the date and at the time as the Board
of Directors shall designate, for the purpose of electing directors and for the
transaction of such other business as may be properly brought before the
meeting. If no annual shareholders' meeting is held for a period of eighteen
months, any shareholder may call such meeting to be held at the registered
office of the Corporation as shown on the records of the Secretary of State of
the State of Louisiana.
2.3 SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes, may be called by the Board of Directors, the Chairman of
the Board, or the President. At any time, upon the written request of any
shareholder or group of shareholders holding in the aggregate at least a
majority of the total voting power, the Secretary shall call a special meeting
of shareholders to be held at the registered office of the Corporation at such
time as the Secretary may fix, not less than 15 nor more than 60 days after the
receipt of said request, and if the Secretary shall neglect or refuse to fix
such time or to give notice of the meeting, the shareholder
<PAGE> 2
or shareholders making the request may do so. Such request must state the
specific purpose or purposes of the proposed special meeting and the business
to be conducted thereat shall be limited to such purpose or purposes.
2.4 NOTICE OF MEETINGS. Except as otherwise provided by law, the
authorized person or persons calling a shareholders' meeting shall cause
written notice of the time, place and purpose of the meeting to be given to all
shareholders entitled to vote at such meeting, at least 10 days and not more
than 60 days prior to the day fixed for the meeting. Notice of the annual
meeting need not state the purpose or purposes thereof, unless action is to be
taken at the meeting as to which notice is required by law or the By-Laws.
Notice of a special meeting shall state the purpose or purposes thereof, and
the business conducted at any special meeting shall be limited to the purpose
or purposes stated in the notice.
2.5 LIST OF SHAREHOLDERS. At every meeting of shareholders, a list
of shareholders entitled to vote, arranged alphabetically and certified by the
Secretary or by the agent of the Corporation having charge of transfers of
shares, showing the number and class of shares held by each such shareholder on
the record date for the meeting and confirming the number of votes per share as
to which each such shareholder is entitled, shall be produced on the request of
any shareholder.
2.6 QUORUM. At all meetings of shareholders, the holders of a
majority of the total voting power shall constitute a quorum, provided,
however, that this subjection shall not have the effect of reducing the vote
required to approve any matter that may be established by law, the Articles of
Incorporation or these By- Laws.
2.7 VOTING. When a quorum is present at any shareholders' meeting,
the vote of the holders of a majority of that portion of the voting power that
is present in person or represented by proxy, voting together as a single
class, shall decide any question brought before such meeting, unless the
resolution of the question requires, by express provision of law or the
Articles of Incorporation or by these By-Laws, a different vote or one or more
separate votes by the holders of a class or series of capital stock, in which
case such express provision shall apply and control the decision of such
question. Directors shall be elected by plurality vote.
2.8 PROXIES. At any meeting of the shareholders, every shareholder
having the right to vote shall be entitled to vote in person, or by proxy
appointed by an instrument in writing executed by such shareholder and bearing
a date not more than eleven months prior to said meeting, unless said
instrument provides for a longer period, but in no case will an outstanding
proxy be valid for longer than three years from the date of its execution,
provided, however, that in no event may a proxy be voted at a meeting called
pursuant to La. R.S. 12:138 unless it is executed and dated by the shareholder
within 30 days of the date of such meeting. The person appointed as a proxy
need not be a shareholder of the Corporation.
2.9 ADJOURNMENTS. Adjournments of any annual or special meeting of
shareholders may be taken without new notice being given unless a new record
date is fixed for the adjourned
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meeting, but any meeting at which directors are to be elected shall be
adjourned only from day to day until such directors shall have been elected.
2.10 WITHDRAWAL. If a quorum is present or represented at a duly
organized shareholders' meeting, such meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave
less than a quorum as fixed in Section 2.6 of these By-Laws, or the refusal of
any shareholders to vote.
2.11 LACK OF QUORUM. If a meeting cannot be organized because a
quorum has not attended, those present may adjourn the meeting to such time and
place as they may determine, subject, however, to the provisions of Section 2.9
hereof. In the case of any meeting called for the election of directors, those
who attend the second of such adjourned meetings, although less than a quorum
as fixed in Section 2.6 hereof, shall nevertheless be deemed to constitute a
quorum for the purpose of electing directors.
SECTION 3
DIRECTORS
3.1 NUMBER. All of the corporate powers shall be vested in, and the
business and affairs of the Corporation shall be managed by a Board of
Directors. Except as otherwise fixed by or pursuant to Article III of the
Articles of Incorporation (as it may be duly amended from time to time)
relating to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
additional directors by class vote, the Board of Directors shall consist of
SEVEN natural persons, provided that, if after proxy materials for any meeting
of shareholders at which directors are to be elected are mailed to shareholders
any person or person named therein to be nominated at the direction of the
Board of Directors becomes unable or unwilling to serve, the foregoing number
of authorized directors shall be automatically reduced by a number equal to the
number of such persons unless the Board of Directors selects an additional
nominee or nominees to replace such persons. No director need be a
shareholder. The Secretary shall have the power to certify at any time as to
the number of directors authorized and as to the class to which each director
has been elected or assigned.
3.2 POWERS. The Board may exercise all such powers of the
Corporation and do all such lawful acts and things which are not by law, the
Articles of Incorporation or these By-Laws directed or required to be done by
the shareholders.
3.3 CLASSES. The Board of Directors shall be divided, with respect
to the time during which they shall hold office, into three classes as nearly
equal in number as possible, with the initial term of office of Class I
directors expiring at the annual meeting of shareholders to be held in 1997, of
Class II directors expiring at the next succeeding annual meeting of
shareholders and of Class III directors expiring at the second succeeding
annual meeting of shareholders, with all such directors to hold office until
their successors are elected and qualified. Any increase or decrease in the
number of directors shall be apportioned by the Board of Directors so that all
classes of directors shall be as nearly equal in number as possible. At each
annual meeting of
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shareholders, directors chosen to succeed those whose terms then expire shall
be elected to hold office for a term expiring at the annual meeting of
shareholders held in the third year following the year of their election and
until successors are duly elected and qualified.
3.4 GENERAL ELECTION. At each annual meeting of shareholders,
directors shall be elected to succeed those directors whose terms then expire.
No decrease in the number of directors constituting the Board of Directors
shall shorten the term of any incumbent director.
3.5 VACANCIES. Except as otherwise provided in the Articles of
Incorporation or these By-Laws, (a) the office of a director shall become
vacant if he dies, resigns or is duly removed from office and (b) the Board of
Directors may declare vacant the office of a director if he (i) is interdicted
or adjudicated an incompetent, (ii) is adjudicated a bankrupt, (iii) in the
sole opinion of the Board of Directors becomes incapacitated by illness or
other infirmity so that he is unable to perform his duties for a period of six
months or longer, or (iv) ceases at any time to have the qualifications
required by law, the Articles of Incorporation or these By-Laws.
3.6 FILLING VACANCIES. Except as otherwise provided in the Articles
of Incorporation or Section 3.8 of these By-Laws, any vacancy on the Board
(including any vacancy resulting from an increase in the authorized number of
directors or from failure of the shareholders to elect the full number of
authorized directors) may, notwithstanding any resulting absence of a quorum of
directors, be filled by a majority vote of the Board of Directors remaining in
office, provided that the shareholders shall have the right, at any special
meeting called for such purpose prior to any such action by the Board, to fill
the vacancy. A director elected pursuant to this section shall serve until the
next shareholders' meeting held for the election of directors of the class to
which he shall have been appointed and until his successor is elected and
qualified.
3.7 NOTICE OF SHAREHOLDER NOMINEES. Except as otherwise provided in
Section 3.8 of these By-Laws, only persons who are nominated in accordance with
the procedures set forth in this section shall be eligible as directors.
Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of shareholders by or at the direction of
the Board of Directors or by any shareholder of record of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this section. Such nominations, other than
those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To
be timely, a shareholder's notice must be delivered or mailed and received at
the principal office of the Corporation not less than 45 days nor more than 90
days prior to the meeting, provided, however, that in the event that less than
55 days notice or prior public disclosure of the date of the meeting is given
or made to shareholders, notice by the shareholder to be timely must be
received no later than the close of business on the tenth day following the day
on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such shareholder's notice shall set forth or include the
following:
a. as to each person whom the shareholder proposes to
nominate for election or re-election as a director (i) the name, age,
business address and residential address of such person, (ii) the
principal occupation or employment of such person, (iii) the class and
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number of shares of capital stock of the Corporation of which such
person is the beneficial owner (as defined in Rule 13d-3 promulgated
under the Securities Exchange Act of 1934), (iv) such person's written
consent to being named in the proxy statement as a nominee and to serve
as a director if elected and (v) any other information relating to such
person that would be required to be disclosed in solicitations of
proxies for election of directors, or would be otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act
of 1934; and
b. as to the shareholder of record giving the notice, (i) the
name and address of such shareholder and (b) the class and number of
shares of capital stock of the Corporation of which such shareholder is
the beneficial owner (as defined in Rule 13d-3 promulgated under the
Securities Exchange Act of 1934). If requested in writing by the
Secretary of the Corporation at least 15 days in advance of the meeting,
such shareholder shall disclose to the Secretary, within 10 days of such
request, whether such person is the sole beneficial owner of the shares
held of record by him, and, if not, the name and address of each other
person known by the shareholder of record to claim or have a beneficial
interest in such shares.
At the request of the Board of Directors, any person nominated by or at the
direction of the Board of Directors for election as a director shall furnish to
the Secretary of the Corporation that information required to be set forth in a
shareholder's notice of nomination which pertains to the nominee. If a
shareholder seeks to nominate one or more persons as directors, the Secretary
shall appoint two inspectors, who shall not be affiliated with the Corporation,
to determine whether the shareholder has complied with this section. If the
inspectors shall determine that the shareholder has not complied with this
section, the defective nomination shall be disregarded and the inspectors shall
direct the Chairman of the meeting to declare at the meeting that such
nomination was not made in accordance with the procedures prescribed by the
Articles of Incorporation and these By-Laws.
3.8 DIRECTORS ELECTED BY PREFERRED SHAREHOLDERS. Notwithstanding
anything in these By-Laws to the contrary, whenever the holders of any one or
more classes or series of stock having a preference over the Common Stock as to
dividends or upon liquidation shall have the right, voting separately as a
class, to elect one or more directors of the Corporation, the provisions of the
Articles of Incorporation (as they may be duly amended from time to time fixing
the rights and preferences of such preferred stock shall govern with respect to
the nomination, election term, removal, vacancies or other related matters with
respect to such directors.
3.9 COMPENSATION OF DIRECTORS. Directors shall receive such
compensation for their services, in their capacity as directors, as may be
fixed by resolution of the Board of Directors, provided, however, that nothing
herein contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
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SECTION 4
MEETINGS OF THE BOARD
4.1 PLACE OF MEETINGS. The meetings of the Board of Directors may be
held at such place within or without the State of Louisiana as a majority of
the directors may from time to time appoint.
4.2 INITIAL MEETINGS. The first meeting of each newly elected Board
shall be held immediately following the annual shareholders' meeting at which
the Board or any class thereof, is elected and at the same place as the annual
meeting, and no notice of such first meeting shall be necessary for the newly
elected directors in order legally to constitute the meeting.
4.3 REGULAR MEETINGS; NOTICE. Regular meetings of the Board may be
held at such times as the Board may from time to time determine. Notice of
regular meetings of the Board of Directors shall be required, but no special
form of notice or time of notice shall be necessary.
4.4 SPECIAL MEETINGS; NOTICE. Special meetings of the Board may be
called by the Chairman of the Board or the President on reasonable notice given
to each director, either personally or by telephone, mail, telex, telecopy or
any other comparable form of facsimile communication. Special meetings shall
be called by the Secretary in like manner and on like notice on the written
request of a majority of the directors and if the officer fails or refuses, or
is unable within 24 hours to call a meeting when requested, then the directors
making the request may call the meeting on two days' written notice given to
each director. The notice of a special meeting of directors need not state its
purpose or purposes. But if the notice states a purpose or purposes and does
not state a further purpose to consider such other business as may properly
come before the meeting, the business to be conducted at the special meeting
shall be limited to the purpose or purposes stated in the notice.
4.5 WAIVER OF NOTICE. Directors present at any regular or special
meeting shall be deemed to have received, or to have waived, due notice
thereof, provided that a director who participates in a meeting by telephone
(as permitted by Section 4.9 hereof) shall not be deemed to have received or
waived due notice if, at the beginning of the meeting, he objects to the
transaction of any business because the meeting is not lawfully called.
4.6 QUORUM. A majority of the Board shall be necessary to constitute
a quorum for the transaction of business, and except as otherwise provided by
law, the Articles of Incorporation or these By-Laws, the acts of a majority of
the directors present at a duly called meeting at which a quorum is present
shall be the acts of the Board. If a quorum is not present at any meeting of
the Board of Directors, the directors present may adjourn the meeting from time
to time without notice other than announcement at the meeting until a quorum is
present.
4.7 WITHDRAWAL. If a quorum was present when the meeting convened,
the directors present may continue to do business, taking action by vote of a
majority of a quorum as fixed in
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Section 4.6 hereof, until adjournment, notwithstanding the withdrawal of enough
directors to leave less than a quorum as fixed in Section 4.6 hereof or the
refusal of any director present to vote.
4.8 ACTION BY CONSENT. Any action that may be taken at a meeting of
the Board, or any committee thereof, may be taken by a consent in writing
signed by all of the directors or by all members of the committee, as the case
may be, and filed with the records of proceedings of the Board or committee.
4.9 MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS. Members of the
Board may participate at and be present at any meeting of the Board or any
committee thereof by means of conference telephone or similar communications
equipment if all persons participating in such meeting can hear and communicate
with each other.
SECTION 5
COMMITTEES OF THE BOARD
5.1 GENERAL. The Board may designate one or more committees, each
committee to consist of two or more of the directors of the Corporation (and
one or more directors may be named as alternate members to replace any absent
or disqualified regular members), which, to the extent provided by resolution
of the Board or these By-Laws, shall have and may exercise the powers of the
Board in the management of the business and affairs of the Corporation, and may
have power to authorize the seal of the Corporation to be affixed to documents,
but no such committee shall have power or authority to amend the Articles of
Incorporation, adopt an agreement of merger, consolidation or share exchange,
recommend to the shareholders the sale, lease or exchange of all or
substantially all of the Corporation's assets, recommend to the shareholders a
dissolution of the Corporation or a revocation of dissolution, remove or
indemnify directors, or amend these By-Laws; and unless the resolution
expressly so provides, no such committee shall have the power of authority to
declare a dividend or authorize the issuance of stock. Such committee or
committees shall have such name or names as may be stated in these By-Laws, or
as may be determined, from time to time by the Board. Any vacancy occurring
in any such committee shall be filled by the Board, but the President may
designate another director to serve on the committee pending action by the
Board. Each such committee shall hold office during the term of the Board.
5.2 COMPENSATION COMMITTEE. The Board shall establish and maintain a
Compensation Committee consisting of [THREE] or more directors, each of whom
(i) shall be a "disinterested person" under Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended, and shall not have been, during
the one-year period prior to serving as a member of such committee, granted or
awarded equity securities of the Corporation pursuant to any benefit plan of
the Corporation or any of its affiliates and (ii) shall meet any further
qualifications designated by the Board. The Compensation Committee shall
perform such services as may be designated by the Board.
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5.3 AUDIT COMMITTEE. The Board shall establish an Audit Committee
consisting of at least three directors, a majority of whom are not officers or
employees of the Corporation or any of its affiliates. The Audit Committee
shall (i) serve as a focal point for communications between the Corporation's
directors, management, independent accountants and internal auditing personnel,
as their duties relate to financial accounting, reporting and controls, (ii)
assist the Board of Directors in fulfilling its fiduciary responsibilities as
to accounting policies and reporting practices of the Corporation and all
subsidiaries and the sufficiency of auditing practices with respect thereto, in
part, by reviewing the scope of audit coverage, including consideration of the
Corporation's accounting practices and procedures and system of internal
accounting controls and reporting to the Board with respect thereto, (iii)
operate as the Board's principal agent in ensuring the independence of the
Corporation's independent accountants, the integrity of management and the
adequacy of disclosure to shareholders, and (iv) perform such other services as
may be designated by the Board.
SECTION 6
REMOVAL OF BOARD MEMBER
The shareholders, by vote of a majority of the shares that would be
entitled to elect the successor to the removed director, may remove from office
any one or more of the directors, notwithstanding that his or their terms of
office may not have expired, and may at such meeting elect one or more
successors, as the case may be, for the unexpired term.
SECTION 7
NOTICES
7.1 FORM OF DELIVERY. Whenever under the provisions of law, the
Articles of Incorporation or these By-Laws notice is required to be given to
any shareholder or director, it shall not be construed to mean personal notice
unless otherwise specifically provided in the Articles of Incorporation or
these By-Laws, but such notice may be given by mail, addressed to such
shareholder or director at his address as it appears on the records of the
Corporation, with postage thereon prepaid, or in such other manner as may be
specified in these By-Laws. Notices given by mail shall be deemed to have been
given at the time they are deposited in the United States mail, and all other
notices shall be deemed to have been given upon receipt.
7.2 WAIVER. Whenever any notice is required to be given by law, the
Articles of Incorporation or these By-Laws, a waiver thereof in writing signed
by the person or persons entitled to said notice, whether before or after the
time stated therein, shall be deemed equivalent thereto. In addition, notice
shall be deemed to have been given to, or waived by, any shareholder or
director who attends a meeting of shareholders or directors in person, or is
represented at such meeting by proxy, without protesting at the commencement of
the meeting the transaction of any business because the meeting is not lawfully
called or convened.
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SECTION 8
OFFICERS
8.1 DESIGNATIONS. The officers of the Corporation shall be elected
by the directors and shall be the Chairman of the Board, President, Secretary
and Treasurer. The Board of Directors may appoint a Chief Executive Officer,
one or more Vice Presidents and such other officers as it shall deem necessary,
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board.
More than one office maybe may be held by one person, provided that no person
holding more than one office may sign, in more than one capacity, any
certificate or other instrument required by law to be signed by two officers.
8.2 TERM OF OFFICE. The officers of the Corporation shall hold
office at the pleasure of the Board of Directors. Except as otherwise provided
in the resolution of the Board of Directors electing any officer, each officer
shall hold office until the first meeting of the Board of Directors after the
annual meeting of shareholders next succeeding his or her election and until
his or her successor is elected and qualified or until his or her earlier
resignation or removal. Any officer may resign at any time upon written notice
to the Board, Chairman of the Board, President or Secretary of the Corporation.
Such resignation shall take effect at the time specified therein and acceptance
of such resignation shall not be necessary to make it effective. The Board may
remove any officer with or without cause at any time. Any such removal shall
be without prejudice to the contractual rights of such officers, if any, with
the Corporation, but the election of an officer shall not in and of itself
create contractual rights. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise may be filled for the
unexpired portion of the term by the Board at any regular or special meeting.
8.3 THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at meetings of the Board of Directors and the shareholders and perform
such other duties as may be designated by the Board of Directors or these
By-Laws. He shall be an ex-officio member of all committees of the Board of
Directors, except that he shall be a full member entitled to all the rights and
privileges appertaining thereto with respect to committees on which he is named
a full member.
8.4 THE PRESIDENT. The President shall, subject to the powers of the
Chairman of the Board, shall have general and active management of the business
of the Corporation, shall, unless otherwise provided by the Board, be the chief
executive and chief operating officer of the Corporation, shall supervise the
daily operations of the business of the Corporation and shall ensure that all
orders, policies and resolutions of the Board are carried out.
8.5 THE VICE PRESIDENTS. The Vice-Presidents (if any) shall perform
such duties as the President or the Board of Directors shall prescribe.
8.6 THE SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders and record all votes
and the minutes of all proceedings in a
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book to be kept for that purpose. He shall give, or cause to be given, notice
of all meetings of the shareholders and regular and special meetings of the
Board, and shall perform such other duties as may be prescribed by the Board or
President. He shall keep in safe custody the seal of the Corporation, if any,
and affix the same to any instrument requiring it.
8.7 THE TREASURER. The Treasurer shall have the custody of the
corporate funds and shall keep or cause to be kept full and accurate accounts
of receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall keep a proper accounting of all receipts and disbursements
and shall disburse the funds of the Corporation only for proper corporate
purposes or as may be ordered by the Board and shall render to the President
and the Board at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as Treasurer and of the
financial condition and results of operations of the Corporation.
SECTION 9
STOCK
9.1 CERTIFICATES. Every holder of stock in the Corporation shall be
entitled to have a certificate signed by the President or a Vice President and
the Secretary or an Assistant Secretary evidencing the number and class (and
series, if any) of shares owned by him, containing such information as required
by law and bearing the seal of the Corporation. If any stock certificate is
manually signed by a transfer agent or registrar other than the Corporation
itself or an employee of the Corporation, the signature of any such officer may
be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been place upon a certificate shall
have ceased to be an officer, transfer agent or registrar of the Corporation
before such certificate is issued, it may be issued by the Corporation with the
same effect as if such person or entity were an officer, transfer agent or
registrar of the Corporation on the date of issue.
9.2 MISSING CERTIFICATES. The President or any Vice President may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the Corporation's receipt of an
affidavit of that fact from the person claiming the certificate of stock to be
lost, stolen or destroyed. As a condition precedent to the issuance of a new
certificate or certificates, the officers of the Corporation shall, unless
dispensed with by the President, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to (i) give
the Corporation a bond or (ii) enter into a written indemnity agreement, in
each case in an amount appropriate to indemnify the Corporation against any
claim that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
9.3 TRANSFERS. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a
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new certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
SECTION 10
DETERMINATION OF SHAREHOLDERS
10.1 RECORD DATE. For the purpose of determining shareholders
entitled to notice of and to vote at a meeting, or to receive a dividend, or to
receive or exercise subscription or other rights, or to participate in a
reclassification of stock, or in order to make a determination of shareholders
for any other proper purpose, the Board of Directors may fix in advance a
record date for determination of shareholders for such purpose, such date to be
not more than 60 days and, if fixed for the purpose of determining shareholders
entitled to notice of and to vote at a meeting, not less than 10 days, prior to
the date on which the action requiring the determination of shareholders is to
be taken.
10.2 REGISTERED SHAREHOLDERS. Except as otherwise provided by law,
the Corporation and its directors, officers and agents may recognize and treat
a person registered on its records as the owner of shares, as the owner in fact
thereof for all purposes, and as the person exclusively entitled to have and to
exercise all rights and privileges incident to the ownership of such shares,
and the Corporation's rights under this section shall not be affected by any
actual or constructive notice which the Corporation, or any of its directors,
officers or agents, may have to the contrary.
SECTION 11
INDEMNIFICATION
11.1 DEFINITIONS. As used in this section the following terms shall
have the meanings set forth below:
(a) "Board" - the Board of Directors of the Corporation.
(b) "Claim" - any threatened, pending or completed claim, action,
suit, or proceeding, whether civil, criminal, administrative or investigative
and whether made judicially or extra-judicially, or any separate issue or
matter therein, as the context requires.
(c) "Determining Body" - (i) those members of the Board who are not
named as parties to the Claim for which indemnification is being sought
("Impartial Directors") if there are at least three Impartial Directors, (ii) a
committee of at least three Impartial Directors appointed by the Board
(regardless whether the members of the Board of Directors voting on such
appointment are Impartial Directors) or (iii) if there are fewer than three
Impartial Directors or if the Board of Directors or the committee appointed
pursuant to clause (ii) of this paragraph so directs (regardless whether the
members thereof are Impartial Directors), independent legal counsel, which may
be the regular outside counsel of the Corporation.
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(d) "Disbursing Officer" - the President of the Corporation or, if
the President is a party to the Claim for which indemnification is being
sought, any officer not a party to such Claim who is designated by the
President to be the Disbursing Officer with respect to indemnification requests
related to the Claim, which designations shall be made promptly after receipt
of the initial request for indemnification with respect to such Claim.
(e) "Expenses" - any expenses or costs (including, without
limitation, attorney's fees, judgments, punitive or exemplary damages, fines
and amounts paid in settlement).
(f) "Indemnitee" - each person who is or was a director or officer of
the Corporation.
11.2 INDEMNITY.
(a) To the extent such Expenses exceed the amounts reimbursed or paid
pursuant to policies of liability insurance maintained by the Corporation, the
Corporation shall indemnify each Indemnitee against any Expenses actually and
reasonably incurred by him (as they are incurred) in connection with any Claim
either against him or as to which he is involved solely as a witness or person
required to give evidence, by reason of his position (i) as director or officer
of the Corporation, (ii) as a director or officer of any subsidiary of the
Corporation or as a fiduciary with respect to any employee benefit plan of the
Corporation, or (iii) as a director, officer, partner, employee or agent of
another Corporation, partnership, joint venture, trust or other for-profit or
not- for-profit entity or enterprise, if such position is or was held at the
request of the Corporation, whether relating to service in such position before
or after the effective date of this Section , if he (i) is successful in his
defense of the Claim on the merits or otherwise or (ii) has been found by the
Determining Body (acting in good faith) to have met the Standard of Conduct
(defined below); provided that (A) the amount otherwise payable by the
Corporation may be reduced by the Determining Body to such amount as it deems
proper if it determines that the Claim involved the receipt of a personal
benefit by Indemnitee, and (B) no indemnification shall be made in respect of
any Claim as to which Indemnitee shall have been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to be liable
for willful or intentional misconduct in the performance of his duty to the
Corporation or to have obtained an improper personal benefit, unless, and only
to the extent that, a court shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such Expenses as
the court deems proper.
(b) The Standard of Conduct is met when the conduct by an Indemnitee
with respect to which a Claim is asserted was conduct that was in good faith
and that he reasonably believed to be in, or not opposed to, the best interest
of the Corporation, and, in the case of a criminal action or proceeding, that
he had no reasonable cause to believe was unlawful. The termination of any
Claim by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
Indemnitee did not meet the Standard of Conduct.
(c) Promptly upon becoming aware of the existence of any Claim as to
which he may be indemnified hereunder, Indemnitee shall notify the President of
the Corporation of the Claim
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and whether he intends to seek indemnification hereunder. If such notice
indicates that Indemnitee does so intend, the President shall promptly advise
the Board thereof and notify the Board that the establishment of the
Determining Body with respect to the Claim will be a matter presented at the
next regularly scheduled meeting of the Board. After the Determining Body has
been established the President shall inform the Indemnitee thereof and
Indemnitee shall immediately provide the Determining Body with all facts
relevant to the Claim known to him. Within 60 days of the receipt of such
information, together with such additional information as the Determining Body
may request of Indemnitee, the Determining Body shall determine, and shall
advise Indemnitee of its determination, whether Indemnitee has met the Standard
of Conduct.
(d) During such 60-day period, Indemnitee shall promptly inform the
Determining Body upon his becoming aware of any relevant facts not theretofore
provided by him to the Determining Body, unless the Determining Body has
obtained such facts by other means.
(e) In the case of any Claim not involving a proposed, threatened or
pending criminal proceeding,
(i) if Indemnitee has, in the good faith judgment of the
Determining Body, met the Standard of Conduct, the Corporation may, in its sole
discretion after notice to Indemnitee, assume all responsibility for the
defense of the Claim, and, in any event, the Corporation and the Indemnitee
each shall keep the other informed as to the progress of the defense, including
prompt disclosure of any proposals for settlement; provided that if the
Corporation is a party to the Claim and Indemnitee reasonably determines that
there is a conflict between the positions of the Corporation and Indemnitee
with respect to the Claim, then Indemnitee shall be entitled to conduct his
defense, with counsel of his choice; and provided further that Indemnitee shall
in any event be entitled at his expense to employ counsel chosen by him to
participate in the defense of the Claim; and
(ii) the Corporation shall fairly consider any proposals by
Indemnitee for settlement of the Claim. If the Corporation (A) proposes a
settlement acceptable to the person asserting the Claim, or (B) believes a
settlement proposed by the person asserting the Claim should be accepted, it
shall inform Indemnitee of the terms thereof and shall fix a reasonable date by
which Indemnitee shall respond. If Indemnitee agrees to such terms, he shall
execute such documents as shall be necessary to effect the settlement. If he
does not agree he may proceed with the defense of the Claim in any manner he
chooses, but if he is not successful on the merits or otherwise, the
Corporation's obligation to indemnify him for any Expenses incurred following
his disagreement shall be limited to the lesser of (A) the total Expenses
incurred by him following his decision not to agree to such proposed settlement
or (B) the amount the Corporation would have paid pursuant to the terms of the
proposed settlement. If, however, the proposed settlement would impose upon
indemnitee any requirement to act or refrain from acting that would materially
interfere with the conduct of his affairs, Indemnitee may refuse such
settlement and proceed with the defense of the Claim, if he so desires, at the
Corporation's expense without regard to the limitations imposed by the
preceding sentence. In no event, however, shall the Corporation be obligated
to indemnify Indemnitee for any amount paid in a settlement that the
Corporation has not approved.
- 13 -
<PAGE> 14
(f) In the case of a Claim involving a proposed, threatened or
pending criminal proceeding, Indemnitee shall be entitled to conduct the
defense of the Claim, and to make all decisions with respect thereto, with
counsel of his choice, provide, however, that the Corporation shall not be
obligated to indemnify Indemnitee for an amount paid in settlement that the
Corporation has not approved.
(g) After notifying the Corporation of the existence of a Claim,
Indemnitee may from time to time request the Corporation to pay the Expenses
(other than judgments, fines, penalties or amounts paid in settlement) that he
incurs in pursuing a defense of the Claim prior to the time that the
Determining Body determines whether the Standard of Conduct has been met. If
the Disbursing Officer believes the amount requested to be reasonable, he shall
pay to Indemnitee the amount requested (regardless of Indemnitee's apparent
ability to repay such amount) upon receipt of an undertaking by or on behalf of
Indemnitee to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation under the circumstances. If
the Disbursing Officer does not believe such amount to be reasonable, the
Corporation shall pay the amount deemed by him to be reasonable and Indemnitee
may apply directly to the Determining Body for the remainder of the amount
requested.
(h) After the Determining Body has determined that the Standard of
Conduct was met, for so long as and to the extent that the Corporation is
required to indemnify Indemnitee under this Agreement, the provisions of
Paragraph (g) shall continue to apply with respect to Expenses incurred after
such time except that (i) no undertaking shall be required of Indemnitee and
(ii) the Disbursing Officer shall pay to Indemnitee such amount of any fines,
penalties or judgments against him which have become final as the Corporation
is obligated to indemnify him.
(i) Any determination by the Corporation with respect to settlements
of a Claim shall be made by the Determining Body.
(j) The Corporation and Indemnitee shall keep confidential, to the
extent permitted by law and their fiduciary obligations, all facts and
determinations provided or made pursuant to or arising out of the operation of
this Section, and the Corporation and Indemnitee shall instruct its or his
agents and employees to do likewise.
11.3 ENFORCEMENT.
(a) The rights provided by this Section shall be enforceable by
Indemnitee in any court of competent jurisdiction.
(b) If Indemnitee seeks a judicial adjudication of his rights under
this Section, Indemnitee shall be entitled to recover from the Corporation, and
shall be indemnified by the Corporation against any and all Expenses actually
and reasonably incurred by him in connection with such proceeding but only if
he prevails therein. If it shall be determined that Indemnitee is entitled to
receive part but not all of the relief sought, then the Indemnitee shall be
entitled to be reimbursed for all Expenses incurred by him in connection with
such judicial adjudication if the amount to which he is determined to be
entitled exceeds 50% of the amount of his claim.
- 14 -
<PAGE> 15
Otherwise, the Expenses incurred by Indemnitee in connection with such judicial
adjudication shall be appropriately prorated.
(c) In any judicial proceeding described in this subsection, the
Corporation shall bear the burden of proving that Indemnitee is not entitled to
any Expenses sought with respect to any Claim.
11.4 SAVING CLAUSE.
If any provision of this Section is determined by a court having
jurisdiction over the matter to require the Corporation to do or refrain from
doing any act that is in violation of applicable law, the court shall be
empowered to modify or reform such provision so that, as modified or reformed,
such provision provides the maximum indemnification permitted by law, and such
provision, as so modified or reformed, and the balance of this Section, shall
be applied in accordance with their terms. Without limiting the generality of
the foregoing, if any portion of this Section shall be invalidated on any
ground, the Corporation shall nevertheless indemnify an Indemnitee to the full
extent permitted by any applicable portion of this Section that shall not have
been invalidated and to the full extent permitted by law with respect to that
portion that has been invalidated.
11.5 NON-EXCLUSIVITY.
(a) The indemnification and advancement of Expenses provided by or
granted pursuant to this Section shall not be deemed exclusive of any other
rights to which Indemnitee is or may become entitled under any statute, article
of incorporation, by-law, authorization of shareholders or directors,
agreement, or otherwise.
(b) It is the intent of the Corporation by this Section to indemnify
and hold harmless Indemnitee to the fullest extent permitted by law, so that if
applicable law would permit the Corporation to provide broader indemnification
rights than are currently permitted, the Corporation shall indemnify and hold
harmless Indemnitee to the fullest extent permitted by applicable law
notwithstanding that the other terms of this Section would provide for lesser
indemnification.
11.6 SUCCESSORS AND ASSIGNS. This Section shall be binding upon the
Corporation, its successors and assigns, and shall inure to the benefit of the
Indemnitee's heirs, personal representatives, and assigns and to the benefit of
the Corporation, its successors and assigns.
11.7 INDEMNIFICATION OF OTHER PERSONS. The Corporation may indemnify
any person not covered by Sections 11.1 through 11.6 to the extent provided in
a resolution of the Board or a separate section of these By-Laws.
SECTION 12
AMENDMENTS
- 15 -
<PAGE> 16
12.1 ADOPTION OF BY-LAWS; AMENDMENTS THEREOF. By-Laws of the
Corporation may be adopted only by a majority vote of the Board of Directors.
By-Laws may be amended or repealed only by (i) a two-thirds vote of the Board
of Directors, or (ii) the affirmative vote of the holders of at least
two-thirds of the total voting power, voting together as a single class, that
is present or represented at any regular or special meeting of shareholders,
the notice of which expressly states that the proposed amendment or repeal is
to be considered at the meeting.
12.2 NEW BY-LAWS; AMENDMENTS. Any purported amendment to these
By-Laws which would add hereto a matter not expressly covered herein prior to
such purported amendment shall be deemed to constitute the adoption of a By-law
provision and not an amendment to the By-Laws.
SECTION 13
MISCELLANEOUS
13.1 DIVIDENDS. Except as otherwise provided by law or the Articles
of Incorporation, dividends upon the stock of the Corporation may be declared
by the Board of Directors at any regular or special meeting. Dividends may be
paid in cash, property, or in shares of stock, subject to the limitations
specified in the Articles of Incorporation.
13.2 VOTING OF SHARES OWNED BY CORPORATION. Unless otherwise directed
by the Board, any shares of capital stock issued by a wholly-owned subsidiary
of the Corporation may be voted by the President of the Corporation at any
shareholders' meeting of the subsidiary (or in connection with any written
consent in lieu thereof).
13.3 CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate. Signatures
of the authorized signatories may be by facsimile.
13.4 FISCAL YEAR. The Board of Directors may adopt for and on behalf
of the Corporation a fiscal or a calendar year.
13.5 SEAL. The Board of Directors may adopt a corporate seal, which
shall have inscribed thereon the name of the Corporation. The seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced
or otherwise. Failure to affix the seal shall not, however, affect the validity
of any instrument.
13.6 GENDER. All pronouns and variations thereof used in these
By-Laws shall be deemed to refer to the masculine, feminine or neuter gender,
singular or plural, as the identity of the person, persons, entity or entities
referred to may require.
- 16 -
<PAGE> 1
EXHIBIT 4.22
LOAN NO. T0310
LOAN NO. T0347
COBANK, ACB
FIRST AMENDMENT TO LIMITED RECOURSE CONTINUING GUARANTY
STATE OF LOUISIANA )
)
PARISH OF CALCASIEU )
STATE OF GEORGIA )
)
COUNTY OF COBB )
BEFORE the respective undersigned Notaries Public, and in the presence
of the respective undersigned competent witnesses, personally came and appeared
the parties listed below, who, after being duly sworn, did state:
THIS FIRST AMENDMENT TO LIMITED RECOURSE CONTINUING GUARANTY (this
"First Amendment") is made as of July 1, 1996 by and between WILLIAM HENNING,
SR. ("Mr. Henning") and COBANK, ACB ("CoBank"), and amends that certain Limited
Recourse Continuing Guaranty, dated as of May 15, 1996, made by Mr. Henning for
the benefit of CoBank (the "Continuing Guaranty").
R E C I T A L S:
WHEREAS, Mr. Henning owns 8.46% of the capital stock of Mercury, Inc.
("Mercury"), and Mercury owns 100% of the capital stock of Mississippi One
Cellular Telephone Company ("Mississippi One"); and
WHEREAS, CoBank and CTC Financial, Inc. (the "Borrower"), have entered
into that certain Amended and Restated Loan Agreement, dated as of May 15,
1996, as amended by that certain First Amendment to Amended and Restated Loan
Agreement, dated as of even date herewith (as the same may be amended,
modified, supplemented, extended or restated from time to time, the
"Mississippi One Loan Agreement"), providing for a loan of up to $32,400,000
(the "Mississippi One Loan"), and CoBank and the Borrower have entered into
that certain Loan Agreement, dated as of May 15, 1996 (as the same may be
amended, modified, supplemented, extended or restated from time to time, the
"Mercury Loan Agreement"; the Mississippi One Loan Agreement and the Mercury
Loan Agreement, collectively, the "Loan Agreements"), providing for a loan of
up to $5,000,000 (the "Mercury Loan"; the Mississippi One Loan and the Mercury
Loan, collectively, the "Loans"); and
<PAGE> 2
First Amendment to Continuing Guaranty/Mr. Henning
Loan No. T0310
Loan No. T0347
WHEREAS, the proceeds of the Loans have been or will be reloaned by the
Borrower to Mississippi One, or to Mercury for investment into Mississippi One,
for the purposes set forth in the Loan Agreements; and
WHEREAS, as an inducement to CoBank to enter into the Loan Agreements
and to make the Loans, Mr. Henning has agreed to amend the continuing Guaranty
as herein provided;
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, Mr. Henning and CoBank hereby agree as follows:
1. Section 2 of the Continuing Guaranty is hereby amended and
restated to read in its entirety as follows:
"SECTION 1. OBLIGATIONS. "Obligations" shall mean (a) the
principal, interest and other amounts becoming due and payable, whether
by acceleration or otherwise, under that certain Second Amended and
Restated Promissory Note, dated July 1, 1996, made by the Borrower to
the order of CoBank in the original principal face amount of $32,400,000
(such Promissory Note and all amendments, modifications, extensions,
renewals and replacements thereof, the "CTC One Note"); (b) the
principal, interest and other amounts becoming due and payable, whether
by acceleration or otherwise, under that certain Promissory Note, dated
May 15, 1996, made by the Borrower to the order of CoBank in the
original principal face amount of $5,000,000 (such Promissory Note and
all amendments, modifications, extensions, renewals and replacements
thereof, the "CTC Two Note"); (c) the principal, interest and other
amounts becoming due and payable, whether by acceleration or otherwise,
under that certain Second Amended and Restated Promissory Note, dated
July 1, 1996, made by Mississippi One to the order of the Borrower,
assigned to CoBank, in the original principal face amount of $32,400,000
(such Promissory Note and all amendments, modifications, extensions,
renewals and replacements thereof, the "Mississippi One Note"); (d) the
principal, interest and other amounts becoming due and payable, whether
by acceleration or otherwise, under that certain Promissory Note, dated
of even date herewith, made by Mercury to the order of the Borrower,
assigned to CoBank, in the original principal face amount of $5,000,000
(such Promissory Note and all amendments, modifications, extensions,
renewals and replacements thereof, the "Mercury Note"; the CTC One Note,
the CTC Two Note, the Mississippi One Note and the Mercury Note,
collectively, the "Notes"); (e) all other payments or performances to be
made by the Borrower and Mississippi One under the other Loan Documents
to which either is a party; and (f) all other indebtedness and
-2-
<PAGE> 3
First Amendment to Continuing Guaranty/Mr. Henning
Loan No. T0310
Loan No. T0347
liabilities of the Borrower, Mercury and Mississippi One to CoBank of
every kind and description whatsoever, whether now existing or hereafter
arising, fixed or contingent, as primary obligor or as guarantor or
surety, acquired directly or by assignment or otherwise, liquidated or
unliquidated, regardless of how they arise or by what agreement or
instrument they may be evidenced, including, without limitation, all
loans, advances and other extensions of credit and all covenants,
agreements, and provisions contained in all loan and other agreements
between the parties."
2. The Loan Documents, any Loan Document or Loans, when used in the
Guaranty, shall mean the Loan Documents, a Loan Document or Loans,
respectively, as defined in the Loan Agreements.
3. The "Loan Agreements" or "Mississippi One Loan Agreement," when
used in the Guaranty, shall mean the "Loan Agreements" or "Mississippi One Loan
Agreement," respectively, as defined in this First Amendment.
4. Section 6(D) of the Guaranty is hereby amended so as to strike
the phrase "(as defined in the Loan Agreement)" and substitute the phrase "(as
defined in the Mississippi One Loan Agreement)."
5. All references in the Guaranty to "this Guaranty" shall hereafter
be to the Guaranty as amended by this First Amendment.
6. After giving effect to the amendments to and restatement of the
Guaranty set forth in this First Amendment, the representations and warranties
of the Debtor set forth in the Guaranty are true and correct as of the date
hereof as if made on the date hereof.
7. It is the intention of the parties hereto that this First
Amendment shall not constitute a novation and shall in no way adversely affect
or impair (i) the validity of the "Loan Documents" (as defined in the Loan
Agreements) or (ii) the validity or priority of the security interest created
by the Guaranty, it being the intention of the parties hereto merely to amend
and restate the Guaranty as expressly set forth herein. To the extent not
inconsistent herewith, all of the terms and conditions of the Guaranty shall
remain in full force and effect and are hereby ratified and confirmed by the
Debtor.
8. This First Amendment may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original and shall be binding
upon all parties and their respective permitted successors and assigns, and all
of which taken together shall constitute one and the same agreement.
-3-
<PAGE> 4
First Amendment to Continuing Guaranty/Mr. Henning
Loan No. T0310
Loan No. T0347
9. This First Amendment shall be governed by and construed in
accordance with the laws of the State of Louisiana, without reference to choice
of law doctrine.
[Signatures on next page]
-4-
<PAGE> 5
First Amendment to Continuing Guaranty/Mr. Henning
Loan No. T0310
Loan No. T0347
THUS DONE AND SIGNED in several counterparts at the places and on the
dates indicated below and in the presence of the respective undersigned
Notaries Public and the respective undersigned witnesses indicated below, by
the duly authorized officers of the respective parishes, after a due reading of
the whole.
At Lake Charles, Louisiana, on July 1, 1996.
/s/ WILLIAM HENNING, SR. (SEAL)
-----------------------------
William Henning, Sr.
Witness to all signatures:
/s/ SHEILA KING
- -----------------------------
Witness
/s/ CAROLYN NUNEZ
- -----------------------------
Witness
- -----------------------------
Notary Public
My commission expires:
[NOTARIAL SEAL]
(Signatures continued on next page)
-5-
<PAGE> 6
First Amendment to Continuing Guaranty/Mr. Henning
Loan No. T0310
Loan No. T0347
At Atlanta, Georgia on July 2, 1996.
COBANK, ACB
By: /s/ MARY KAY DEERING
----------------------------
Name: Mary Kay Deering
-------------------------
Title: Vice President
-------------------------
Witness to all signatures:
/s/ SHAWNE KEENAN
- -------------------------------------
Witness
/s/ [ILLEGIBLE]
- -------------------------------------
Witness
/s/ MARIANNE R. HOWELL
- -------------------------------------
Notary Public
My commission expires: April 25, 1999
---------------
[NOTARIAL SEAL]
-6-
<PAGE> 1
EXHIBIT 4.55
CTC
LOAN NO. T0362
PROMISSORY NOTE
CTC FINANCIAL, INC.
LAKE CHARLES, LOUISIANA
$18,000,000 DATED: APRIL 20, 1995
FOR VALUE RECEIVED, CTC FINANCIAL, INC. (the "Borrower"), promises to
pay to the order of COBANK, ACB (the "Payee"), at the times and in the manner
set forth in that certain Loan Agreement, dated as of even date herewith, and
numbered T0362, by and between the Borrower and the Payee (as that agreement
may be amended, supplemented, extended or restated from time to time, the "Loan
Agreement"), the principal sum of EIGHTEEN MILLION DOLLARS ($18,000,000) or
such lesser amount as may be advanced hereunder, together with interest on the
unpaid principal balance hereof at the rate or rates provided for in the Loan
Agreement.
This Note is given for one or more advances to be made by the Payee to
the Borrower pursuant to the Loan Agreement, all of the terms and provisions of
which are incorporated herein by reference. Advances, accrued interest and
payments shall be posted by the Payee upon an appropriate accounting record,
which record (and all computer printouts thereof) shall constitute prima facie
evidence of the outstanding principal and interest on the advances.
The Borrower hereby waives presentment for payment, demand, protest,
and notice of dishonor and nonpayment of this Note, and all defenses on the
ground of delay or of any extension of time for the payment hereof which may be
hereafter given by the holder or holders hereof to it or to anyone who has
assumed the payment of this Note, and it is specifically agreed that the
obligations of the Borrower shall not be in anywise affected or altered to the
prejudice of the holder or holders hereof by reason of the assumption of
payment of the same by any other person or entity.
Should this Note be placed in the hands of an attorney for collection
or the services of any attorney become necessary in connection with enforcing
its provisions, the Borrower agrees to pay reasonable attorneys' fees, together
with all costs and expenses incident thereto, to the extent allowed by law.
Except to the extent governed by applicable federal law, this Note shall be
governed by and construed in accordance with the laws of the State of Louisiana
without reference to choice of law doctrine.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed,
attested and delivered under seal by its duly authorized officers as of the
date first shown above.
CTC FINANCIAL, INC.
By:
------------------------------------
[CORPORATE SEAL] Name: William L. Henning, Jr.
Title: President
Attest:
--------------------------------
Name: Thomas G. Henning
Title: Secretary
<PAGE> 1
EXHIBIT 4.69
DRAFT DATED: 12/9/96
LOAN NO. T0364
COBANK, ACB
FIRST AMENDMENT AND SUPPLEMENT TO
LOAN AGREEMENT
THIS FIRST AMENDMENT AND SUPPLEMENT TO LOAN AGREEMENT (this "First
Amendment") is made and entered into as of December 15, 1996, by and between
COBANK, ACB ("CoBank") and MERCURY CELLULAR OF KANSAS, INC. (the "Borrower"),
and amends that certain Loan Agreement, dated as of April 20, 1995, between
CoBank and the Borrower (the "Original Loan Agreement"), and is joined in and
consented to by MERCURY CELLULAR TELEPHONE COMPANY ("MCTC").
SECTION 1. Terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Original Loan Agreement.
SECTION 2. Section 4(B) of the Original Loan Agreement is
hereby amended and supplemented by deleting in its entirety the third paragraph
of such Section and substituting in lieu thereof the following paragraph:
"The term "Total Leverage Ratio" shall mean the ratio of
Indebtedness to Operating Cash Flow (as such terms are hereinafter
defined). The term "Indebtedness" shall mean (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase
price of property or services other than accounts payable arising in
connection with the purchase of inventory on terms customary in the
trade, (iii) obligations, whether or not assumed, secured by liens or
payable out of the proceeds or production from property now or
hereafter owned or acquired, (iv) obligations which are evidenced by
notes, acceptances or other instruments, (v) capitalized agreements,
(vi) fixed rate hedging obligations that are due (after giving effect
to any period of grace or notice requirement applicable thereto) and
remain unpaid, and (vii) fixed payment obligations under guarantees
that are due and remain unpaid; provided, however, that the term
"Indebtedness" shall not include any obligations now or hereafter (a)
incurred by the Borrower or (b) assumed by the Borrower from CTC
Financial, Inc. ("CTC") pursuant to that certain Assignment,
Assumption and Agreement Regarding Amendments to Loan Documents, dated
as of December 15, 1996, among the Borrower, CTC, CoBank and certain
other parties identified therein (the "Assumption Agreement"), and in
either event the proceeds of which have been or are to be received
from CoBank and advanced to affiliated entities of the Borrower
(collectively, the "Pass- Through Obligations"). The term "Operating
Cash Flow" shall mean the sum of (a) pre-tax income or deficit, as the
case may be, after payment of all management fees
<PAGE> 2
First Amendment to Loan Agreement/Mercury Cellular of Kansas
Loan No. T0364
(excluding extraordinary gains and the write up of any asset, and any
investment income or loss), (b) total interest expense (including
non-cash interest, but excluding interest expense on Pass-Through
Obligations), (c) depreciation and amortization expense, and (d)
management fees accruing during the applicable period but unpaid.
Operating Cash Flow shall be measured for the then most recently
completed four fiscal quarters, adjusted to give effect to any
acquisition, sale or other disposition of any operation or business
(or any portion thereof) during the period of calculation as if such
acquisition, sale or other disposition occurred on the first day of
such period of calculation. All calculations necessary for the
determination of the Total Leverage Ratio shall be made in accordance
with generally accepted accounting principles ("GAAP") consistently
applied for the Borrower alone, without taking into account the
financial results or assets and liabilities of any affiliated entity.
SECTION 3. Section 14(E) of the Original Loan Agreement is
hereby amended and supplemented by deleting such Section in its entirety and
substituting in lieu thereof the following Section:
"(E) LOANS AND INVESTMENTS. After the date hereof,
make any loan or advance to, invest in, purchase or make any
commitment to purchase any commercial paper, stock, bonds, notes, or
other securities of any person or entity (each, whether made directly
or indirectly, an "Investment") in an amount in excess of $100,000 as
to any single Investment or in excess of $1,000,000 as to all
Investments existing at any time, other than (i) securities or
deposits issued, guaranteed or fully insured as to payment by the
United States of America or any agency thereof, (ii) stock or other
securities of CoBank, (iii) commercial paper, stocks, bonds, notes or
other securities of institutions whose senior unsecured debt
obligations are rated by a nationally recognized rating organization
in any of its three highest rating categories or any equivalent
successor rating categories, (iv) mutual funds that have a four star
rating by Morningstar Mutual Funds, 225 West Wacker Drive, Chicago,
Illinois 60606, or an equivalent rating by a nationally recognized
rating organization, or (v) any advances to its affiliated entities of
loan proceeds received from CoBank as contemplated by the Assumption
Agreement or any other loan agreement entered into between CoBank and
the Borrower."
SECTION 4. Section 15(E) of the Original Loan Agreement is
hereby amended and supplemented by deleting such Section in its entirety and
substituting in lieu thereof the following Section:
"(E) CROSS-DEFAULT. The occurrence of any breach,
default, event of default, or event which with the giving of notice or
lapse of time, or both, could
-2-
<PAGE> 3
First Amendment to Loan Agreement/Mercury Cellular of Kansas
Loan No. T0364
become a default or event of default under (i) any Loan Document other
than this Agreement, or (ii) the terms of any agreement (other than
the Loan Documents) between the Borrower or MCTC and CoBank,
including, without limitation, any loan agreement and promissory note
assumed by the Borrower from CTC pursuant to the Assumption Agreement
and any guaranty, other loan agreement, security agreement, pledge
agreement, mortgage, deed to secure debt, or deed of trust.
SECTION 5. All references in the Original Loan Agreement and the
other Loan Documents to "this Agreement" or the "Loan Agreement" shall
hereafter be to the Original Loan Agreement as amended by this First Amendment.
SECTION 6. This First Amendment shall not constitute a novation of
the promissory note or any of the other documents or agreements executed or
delivered in connection with the loan pursuant to the Original Loan Agreement
or any of the other Loan Documents.
SECTION 7. MCTC hereby consents to the amendments to the Original
Loan Agreement as set forth in this First Amendment.
SECTION 8. This First Amendment may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original and shall be binding
upon all parties and their respective permitted successors and assigns, and all
of which taken together shall constitute one and the same agreement.
SECTION 9. Except to the extent governed by applicable federal law,
this First Amendment shall be governed by and construed in accordance with the
laws of the State of Kansas, without reference to choice of law doctrine.
[Signatures on next page]
-3-
<PAGE> 4
First Amendment to Loan Agreement/Mercury Cellular of Kansas
Loan No. T0364
IN WITNESS WHEREOF, the Borrower has caused this First Amendment to be
executed and attested under seal and delivered, and CoBank has caused this
First Amendment to be executed and delivered, each by its duly authorized
officers, as of the date first shown above.
MERCURY CELLULAR OF KANSAS, INC.
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Attest:
---------------------------
Name:
---------------------
Title:
--------------------
[CORPORATE SEAL]
MERCURY CELLULAR TELEPHONE COMPANY
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Attest:
---------------------------
Name:
---------------------
Title:
--------------------
[CORPORATE SEAL]
COBANK, ACB
By:
-------------------------------
Name:
-------------------------
Title:
------------------------
-4-
<PAGE> 1
EXHIBIT 4.70
LOAN NO. T0347
COBANK, ACB
AGREEMENT REGARDING AMENDMENTS
TO LOAN DOCUMENTS
STATE OF LOUISIANA )
)
PARISH OF CALCASIEU )
STATE OF GEORGIA )
)
COBB COUNTY )
BEFORE the respective Notaries Public, and in the presence of the
respective undersigned competent witnesses, personally came and appeared the
parties listed below, who, after being duly sworn, did state:
THIS AGREEMENT REGARDING AMENDMENTS TO LOAN DOCUMENTS (this "Amendment
Agreement") is made and entered into as of November 15, 1996, by and among CTC
FINANCIAL, INC. (the "Borrower"), MERCURY, INC. ("Mercury"), MISSISSIPPI ONE
CELLULAR COMPANY ("Mississippi One"), WILLIAM L. HENNING, SR. ("Mr. Henning")
and COBANK, ACB ("CoBank").
R E C I T A L S
WHEREAS, CoBank and the Borrower have entered into that certain Loan
Agreement, dated as of May 15, 1996 (as the same may be amended, modified,
supplemented, extended or restated from time to time, the "Loan Agreement"),
providing for a loan in the principal amount not to exceed $5,000,000 (the
"Loan"); and
WHEREAS, the proceeds of the Loan have been or will be reloaned by the
Borrower to Mercury for the purposes set forth in the Loan Agreement; and
<PAGE> 2
Amendment Agreement/CTC Financial
Loan No. T0347
WHEREAS, as an inducement to CoBank to enter into the Loan Agreement
and make the Loan, Mercury has made that certain Continuing Guaranty, dated as
of May 15, 1996, for the benefit of CoBank, as amended by that certain First
Amendment and Supplement to Continuing Guaranty, dated as of July 1, 1996 (as
the same may be further amended, modified, supplemented, extended or restated
from time to time, the "Mercury Guaranty"), which guarantees, among other
things, the Borrower's obligations with respect to the Loan; and
WHEREAS, as an additional inducement to CoBank to enter into the Loan
Agreement and make the Loan, Mississippi One has made that certain Amended and
Restated Continuing Guaranty, dated as of May 15, 1996, for the benefit of
CoBank, as later amended by that certain First Amendment and Supplement to
Amended and Restated Continuing Guaranty, dated as of July 1, 1996 (as the same
may be further amended, modified, supplemented, extended or restated from time
to time, the "Mississippi One Guaranty"), which guarantees, among other things,
the Borrower's obligations with respect to the Loan; and
WHEREAS, as an additional inducement to CoBank to enter into the Loan
Agreement and make the Loan, Mr. Henning has made that certain Limited Recourse
Continuing Guaranty, dated as of May 15, 1996, for the benefit of CoBank, as
amended by that certain First Amendment and Supplement to Limited Recourse
Continuing Guaranty, dated as of July 1, 1996 (as the same may be further
amended, modified, supplemented, extended or restated from time to time, the
"Henning Guaranty"), which guarantees, among other things, the Borrower's
obligations with respect to the Loan; and
WHEREAS, each of Mississippi One and Mercury have entered into certain
security documents identified in the Loan Agreement to secure, among other
things, their respective obligations under the Mississippi One Guaranty and
Mercury Guaranty; and
NOW, THEREFORE, in consideration of the foregoing and the agreements
set forth in this Amendment Agreement, the Borrower, Mercury, Mississippi One,
Mr. Henning and CoBank agree as follows:
1. DEFINITIONS. Capitalized terms used herein not otherwise
defined herein shall have the meaning ascribed to them in the Loan Agreement.
2. THE LOAN. Section 1 of the Loan Agreement is hereby amended
and supplemented by deleting such Section in its entirety and substituting in
lieu thereof the following Section:
2
<PAGE> 3
Amendment Agreement/CTC Financial
Loan No. T0347
"SECTION 1. THE LOAN. On the terms and conditions set forth in
this Agreement, and subject to Section 11, CoBank agrees to make a
loan (the "Loan") to the Borrower, by means of one or more advances,
in an aggregate principal amount not to exceed $5,000,000, during the
period commencing on the date hereof and ending on but not including
the earlier date (the "Termination Date") of (i) March 31, 1997, (ii)
the effective date of the merger (the "Merger") of Mercury, Inc.
("Mercury") and Mercury Cellular Telephone Company ("MCTC"), or (iii)
such later date as CoBank in its sole discretion may authorize in
writing. Under the Loan, amounts borrowed and later repaid or prepaid
may not be reborrowed."
3. PURPOSE AND USE OF PROCEEDS. Section 3 of the Loan Agreement
is hereby amended and supplemented by deleting such Section in its entirety and
substituting in lieu thereof the following Section:
"SECTION 2. The proceeds of the Loan shall be reloaned by the
Borrower to Mercury to be applied by Mercury solely to invest in
Mississippi One Cellular Telephone Company ("Mississippi One") and be
applied by Mississippi One solely (a) to finance the acquisition of
the assets of West Alabama Cellular Telephone Company, Inc. ("West
Alabama") pursuant to the terms of that certain Asset Purchase
Agreement, dated as of March 4, 1996, by and between Mississippi One
and West Alabama (the "Acquisition Agreement"), related acquisition
costs, (b) for Mississippi One's capital expenditures and working
capital needs, (c) to repay the Cameron Debt (as defined in Section
11(A)(10) and (d) to pay the costs and fees associated with closing
the Loan. The Borrower agrees that the proceeds of the Loan shall be
used only for the purposes set forth in this Section 2."
4. INTEREST RATE. The first sentence of Section 4(A) of the Loan
Agreement is hereby amended and supplemented by deleting such sentence in its
entirety and substituting in lieu thereof the following sentence:
"The unpaid principal balance of the Loan shall accrue interest at a
variable annual interest rate (the "Variable Rate") equal at all times
to the sum of the National Variable Rate (as hereinafter defined)
minus one-quarter of one percent (0.25%)."
5. OTHER REFERENCES. All references in the Loan Agreement to
"this Agreement" shall hereafter be to the Loan Agreement as amended by this
Amendment Agreement. Further, all references in the Mercury Guaranty, the
Mississippi One Guaranty, the Henning
3
<PAGE> 4
Amendment Agreement/CTC Financial
Loan No. T0347
Guaranty, and the other Loan Documents to the Loan Agreement shall hereafter to
be to the Loan Agreement as amended by this Amendment Agreement.
6. GUARANTOR CONSENTS. Mercury, Mississippi One and Mr. Henning
hereby expressly consent to the amendments set forth in this Amendment
Agreement and confirm that the Mercury Guaranty, the Mississippi One Guaranty
and the Henning Guaranty and the other Loan Documents to which each is a party
remain in full force and effect and guaranty and secure the obligations of the
Borrower under the Loan Agreement and with respect to the Loan.
7. NOVATION. This Amendment Agreement shall not constitute a
novation of any of the indebtedness, promissory notes or other documents or
agreements executed or delivered in connection with the Loan Agreement or the
Loan, including any of the Loan Documents. Except as expressly provided in
this Amendment Agreement, the Loan Agreement, the Mercury Guaranty, the
Mississippi One Guaranty, the Henning Guaranty and the other Loan Documents
remain in full force and effect.
8. COUNTERPARTS. This Amendment Agreement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original and
shall be binding upon all parties and their respective permitted successors and
assigns, and all of which taken together shall constitute one and the same
agreement.
9. GOVERNING LAW. Except to the extent governed by applicable
federal law, this Amendment Agreement shall be governed by and construed in
accordance with the laws of the State of Louisiana, without reference to choice
of law doctrine.
(Signatures on following page.)
4
<PAGE> 5
Amendment Agreement/CTC Financial
Loan No. T0347
THUS DONE AND SIGNED in several counterparts at the places and on the
dates indicated below, and in the presence of the respective undersigned
Notaries Public and the respective undersigned witnesses indicated below, by
duly authorized officers of the respective parties, after a due reading of the
whole.
At Lake Charles, Louisiana, on November __, 1996.
CTC FINANCIAL, INC.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
------------------------------
Name:
------------------------
Title:
-----------------------
[CORPORATE SEAL]
Witnesses to all signatures:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
-----------
[NOTARIAL SEAL]
(Signatures continued on next page.)
5
<PAGE> 6
Amendment Agreement/CTC Financial
Loan No. T0347
(Signatures continued from previous page.)
At Lake Charles, Louisiana on November __, 1996.
MERCURY, INC.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
------------------------------
Name:
------------------------
Title:
-----------------------
[CORPORATE SEAL]
Witnesses to all signatures:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
-----------
[NOTARIAL SEAL]
(Signatures continued on next page.)
6
<PAGE> 7
Amendment Agreement/CTC Financial
Loan No. T0347
(Signatures continued from previous page.)
At Lake Charles, Louisiana on November __, 1996.
MISSISSIPPI ONE CELLULAR
TELEPHONE COMPANY
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
------------------------------
Name:
------------------------
Title:
-----------------------
[CORPORATE SEAL]
Witnesses to all signatures:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
-----------
[NOTARIAL SEAL]
(Signatures continued on next page.)
7
<PAGE> 8
Amendment Agreement/CTC Financial
Loan No. T0347
(Signatures continued from previous page.)
At Lake Charles, Louisiana on November __, 1996.
By: (SEAL)
---------------------------------
William L. Henning, Sr.
Witnesses to all signatures:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
-----------
[NOTARIAL SEAL]
(Signatures continued on next page.)
8
<PAGE> 9
Amendment Agreement/CTC Financial
Loan No. T0347
(Signatures continued from previous page.)
At Atlanta, Georgia, on November __, 1996.
COBANK, ACB
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
Witnesses to signature:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
-----------
[NOTARIAL SEAL]
9
<PAGE> 1
EXHIBIT 4.71
DRAFT DATED: 12/9/96
LOAN NO. T0310
LOAN NO. T0347
LOAN NO. T0388
LOAN NO. T0362
LOAN NO. S0441
COBANK, ACB
ASSIGNMENT, ASSUMPTION AND AGREEMENT REGARDING
AMENDMENTS TO LOAN DOCUMENTS
STATE OF LOUISIANA )
)
PARISH OF CALCASIEU )
STATE OF GEORGIA )
)
COUNTY OF COBB )
BEFORE the respective undersigned Notaries Public, and in the presence
of the respective undersigned competent witnesses, personally came and appeared
the parties listed below, who, after being duly sworn, did state:
THIS ASSIGNMENT, ASSUMPTION AND AGREEMENT REGARDING AMENDMENTS TO LOAN
DOCUMENTS (this "Agreement") is made and entered into as of December 15, 1996,
by and among COBANK, ACB ("CoBank"), MERCURY CELLULAR OF KANSAS, INC. ("MCK"),
CTC FINANCIAL, INC. ("CTC"), MERCURY CELLULAR TELEPHONE COMPANY ("MCTC"),
MISSISSIPPI ONE CELLULAR TELEPHONE COMPANY ("Mississippi One"), MERCURY, INC.
("Mercury") and WILLIAM L. HENNING, SR. ("Mr. Henning").
R E C I T A L S
WHEREAS, CoBank and CTC have entered into that certain Loan Agreement,
dated as of April 20, 1995 (as the same may be amended, supplemented, extended
or restated from time to time, the "First Loan Agreement"), providing for a
loan of up to $18,000,000 (the "First Loan"); into that certain Amended and
Restated Loan Agreement, dated as of May 15, 1996, as amended
<PAGE> 2
Assignment, Assumption and Agreement
Regarding Amendments to Loan Documents
Loan No. T0310
Loan No. T0347
Loan No. T0388
Loan No. T0362
Loan No. S0441
by that certain First Amendment and Supplement to Loan Agreement, dated as of
July 1, 1996 (as the same may be further amended, supplemented, extended or
restated from time to time, the "Second Loan Agreement"), providing for a loan
of up to $32,400,000 (the"Second Loan"); into that certain Loan Agreement,
dated as of May 15, 1996, as amended by that certain Agreement Regarding
Amendments to Loan Documents, dated as of November 15, 1996 (as the same may be
further amended, supplemented, extended or restated from time to time, the
"Third Loan Agreement"), providing for a loan of up to $5,000,000 (the "Third
Loan"); into that certain Loan Agreement, dated as of July 1, 1996 (as the same
may be amended, supplemented, extended or restated from time to time, the
"Fourth Loan Agreement"), providing for a loan of up to $13,000,000 (the
"Fourth Loan"); and into that certain Loan Agreement, dated as of November 25,
1996 (as the same may be amended, supplemented, extended or restated from time
to time, the "Fifth Loan Agreement"; the First Loan Agreement, the Second Loan
Agreement, the Third Loan Agreement, the Fourth Loan Agreement and the Fifth
Loan Agreement, collectively, the "Loan Agreements"), providing for a loan of
up to $4,000,000 (the "Fifth Loan"; the First Loan, the Second Loan, the Third
Loan, the Fourth Loan and the Fifth Loan, collectively, the "Loans"); and
WHEREAS, proceeds of the First Loan have been reloaned by CTC to MCTC
for the purposes set forth in the First Loan Agreement, proceeds of the Second
Loan have been reloaned by CTC to Mississippi One for the purposes set forth in
the Second Loan Agreement, proceeds of the Third Loan have been reloaned by CTC
to Mercury the purposes set forth in the Third Loan Agreement, proceeds of the
Fourth Loan have been reloaned by CTC to MCTC for the purposes set forth in the
Fourth Loan Agreement, and proceeds of the Fifth Loan have been reloaned by CTC
to MCTC for the purposes set forth in the Fifth Loan Agreement; and
WHEREAS, as an inducement to CoBank to enter into the First Loan
Agreement, the Fourth Loan Agreement and the Fifth Loan Agreement and make the
First Loan, the Fourth Loan and the Fifth Loan, MCTC has made that certain
Continuing Guaranty, dated as of April 20, 1995, as amended by that certain
First Amendment and Supplement to Continuing Guaranty, dated as of July 1,
1996, and as further amended by that certain Second Amendment and Supplement to
Continuing Guaranty, dated as of November 25, 1996, for the benefit of CoBank
(as the same may be further amended, modified, supplemented, extended or
restated from time to time, the "MCTC Guaranty"), which guarantees, among other
things, CTC's obligations with respect to the First Loan, the Fourth Loan and
the Fifth Loan; and
-2-
<PAGE> 3
Assignment, Assumption and Agreement
Regarding Amendments to Loan Documents
Loan No. T0310
Loan No. T0347
Loan No. T0388
Loan No. T0362
Loan No. S0441
WHEREAS, as an additional inducement to CoBank to enter into the First
Loan Agreement and the Fourth Loan Agreement and make the First Loan and the
Fourth Loan, Cameron Communications Company ("CCC") has made that certain
Limited Recourse Continuing Guaranty, dated as of April 20, 1995, as amended by
that certain First Amendment and Supplement to Limited Recourse Guaranty, dated
as of July 1, 1996, for the benefit of CoBank, which has been assumed by
Mercury pursuant to that certain Assumption Agreement, dated as of October 31,
1996, made by Mercury for the benefit of CoBank (as the same may be further
amended, modified, supplemented, extended or restated from time to time, the
"CCC Guaranty"), which on the limited basis provided therein guarantees, among
other things, CTC's obligations with respect to the First Loan and the Fourth
Loan; and
WHEREAS, as an additional inducement to CoBank to enter into the First
Loan Agreement and Fourth Loan Agreement and make the First Loan and the Fourth
Loan, Mercury has made that certain Limited Recourse Continuing Guaranty, dated
as of April 20, 1995, as amended by that certain First Amendment and Supplement
to Limited Recourse Guaranty, dated as of July 1, 1996, for the benefit of
CoBank (as the same may be further amended, modified, supplemented, extended or
restated from time to time, the "Mercury Guaranty"), which on the limited basis
provided therein guarantees, among other things, CTC's obligations with respect
to the First Loan and the Fourth Loan; and
WHEREAS, as an inducement to CoBank to enter into the Second Loan
Agreement and the Third Loan Agreement and make the Second Loan and the Third
Loan, Mississippi One has made that certain Amended and Restated Continuing
Guaranty, dated as of May 15, 1996, as amended by that certain First Amendment
and Supplement to Amended and Restated Guaranty, dated as of July 1, 1996, for
the benefit of CoBank (as the same may the further amended, modified,
supplemented, extended or restated from time to time, the "Mississippi One
Guaranty"), which guarantees, among other things, CTC's obligations with
respect to the Second Loan and the Third Loan; and
WHEREAS, as an additional inducement to CoBank to enter into the
Second Loan Agreement and the Third Loan Agreement and make the Second Loan and
the Third Loan, Mercury has made that certain Continuing Guaranty, dated as of
May 15, 1996, as amended by that certain First Amendment and Supplement to
Continuing Guaranty, dated as of July 1, 1996, for the benefit of CoBank (as
the same may be further amended, modified, supplemented,
-3-
<PAGE> 4
Assignment, Assumption and Agreement
Regarding Amendments to Loan Documents
Loan No. T0310
Loan No. T0347
Loan No. T0388
Loan No. T0362
Loan No. S0441
extended or restated from time to time, the "Mercury Second Guaranty"), which
guarantees, among other things, CTC's obligations with respect to the Second
Loan and the Third Loan; and
WHEREAS, as an additional inducement to CoBank to enter into the
Second Loan Agreement and the Third Loan Agreement and make the Second Loan and
the Third Loan, Mr. Henning has made that certain Limited Recourse Continuing
Guaranty, dated as of May 15, 1996, as amended by that certain First Amendment
and Supplement to Limited Recourse Continuing Guaranty, dated as of July 1,
1996, for the benefit of CoBank (as the same may be further amended, modified,
supplemented, extended or restated from time to time, the "Henning Guaranty"),
which on the limited basis provided therein guarantees, among other things,
CTC's obligations with respect to the Second Loan and the Third Loan; and
WHEREAS, CTC wishes to assign, and MCK wishes to assume, all rights
and obligations of CTC with respect to the Loans;
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, the parties hereto agree as follows:
SECTION 1. CTC hereby assigns and transfers to MCK, and MCK hereby
expressly assumes, all rights and obligations of CTC under and with respect to
CoBank Loan Numbers T0362, T0310, T0347, T0388 and S0441, including, without
limitation, all rights and obligations of CTC under the documents, instruments
and agreements listed on Schedule 1 hereto (the "CTC Documents"). MCK
expressly acknowledges, confirms, agrees to and assumes all of the obligations
of CTC under and pursuant to the CTC Documents. Notwithstanding any other
provision of this Agreement or the CTC Documents to the contrary, in any action
brought to enforce any obligation of MCK under the CTC Documents, the judgment
or decree shall be enforceable only as to the CTC Documents and any
specifically identified property in which CoBank shall have, now or in the
future, a security interest to secure such obligations, including, without
limitation, the CTC Documents and the investments and other equities which MCK
may now own or hereafter acquire or be allocated in CoBank, and against MCK
only to the extent of its interest in such pledged property (and not against
any other assets of MCK) and MCK shall not be liable to CoBank under the CTC
Documents beyond its interest in such property; provided, however, that nothing
contained herein shall limit or relieve MCK from liability for, or recourse in
connection with, failing to comply with the terms, covenants, conditions and
provisions of the CTC Documents, other than for the payment of the principal
and interest due
-4-
<PAGE> 5
Assignment, Assumption and Agreement
Regarding Amendments to Loan Documents
Loan No. T0310
Loan No. T0347
Loan No. T0388
Loan No. T0362
Loan No. S0441
under CTC Documents. This limitation on recourse shall not in any way affect
the full and unconditional obligations of MCTC, Mercury, Mississippi One or Mr.
Henning under the MCTC Guaranty, the CCC Guaranty, the Mercury Guaranty, the
Mississippi One Guaranty, the Mercury Second Guaranty, the Henning Guaranty or
any other of the CTC Documents or other "Loan Documents" (as defined in each of
the Loan Agreements) to which each is a party.
SECTION 2. It is the intention of MCK and the other parties
hereto that the CTC Documents shall remain in full force and effect, and hereby
ratifies, confirms and remakes the same, including, without limitation, MCK
regrants the security interests provided for in the CTC Documents.
SECTION 3. For so long as (i) amounts are outstanding under that
certain Loan Agreement, dated as of April 20, 1995, as amended by that certain
First Amendment and Supplement to Loan Agreement, dated as of even date
herewith, by and between CoBank and MCK, as such agreement may be further
amended, modified, supplemented, extended or restated from time to time (such
agreement, as it may be amended, modified, supplemented, extended or restated
from time to time, the "MCK Loan Agreement"), and (ii) there exists no breach,
default, event of default or event which with the giving of notice or passage
of time, or both, would constitute an event of default, under the MCK Loan
Agreement, then the covenants set forth in Sections 12 and 13 of each of the
Loan Agreements shall be replaced by the covenants set forth in Sections 13 and
14 of the MCK Loan Agreement. Upon the payment in full of the amounts
outstanding under the MCK Loan Agreement or during the continuance of any
breach, default, event of default or event which with the giving of notice or
passage of time, or both, would constitute an event of default, under the MCK
Loan Agreement, the original covenants set forth in Sections 12 and 13 of each
of the Loan Agreements shall apply and not those set forth in Sections 13 and
14 of the MCK Loan Agreement.
SECTION 4. All references in the Loan Agreements, the CTC Documents
or any of the other Loan Documents to any of the Loan Agreements shall
hereafter be to each such Loan Agreement as amended by this Agreement.
Further, all references in the MCTC Guaranty, the CCC Guaranty, the Mercury
Guaranty, the Mississippi One Guaranty, the Mercury Second Guaranty, the
Henning Guaranty, the CTC Documents and the other Loan Documents to "CTC" or
"the Borrower" shall hereafter be to MCK.
SECTION 5. Each of MCTC, Mercury, Mississippi One and Mr. Henning
hereby
-5-
<PAGE> 6
Assignment, Assumption and Agreement
Regarding Amendments to Loan Documents
Loan No. T0310
Loan No. T0347
Loan No. T0388
Loan No. T0362
Loan No. S0441
expressly consent to the assignment, assumption and amendments set forth in
this Agreement and confirm that the MCTC Guaranty, the CCC Guaranty, the
Mercury Guaranty, the Mississippi One Guaranty, the Mercury Second Guaranty,
the Henning Guaranty, the CTC Documents and the other Loan Documents to which
each is a party remain in full force and effect and guaranty and secure the
obligations of MCK under each of the Loan Agreements and with respect to each
of the Loans.
SECTION 6. Each of CTC, MCK, MCTC, Mississippi One, Mercury and Mr.
Henning agrees that if at any time any further actions are necessary or
desirable in the reasonable opinion of CoBank to evidence or effect the
assumption and agreements contemplated by this Agreement, or otherwise carry
out the purposes and provisions of this Agreement, including, without
limitation, the execution, delivery, filing and recordation of amendments to
any of the Loan Documents, each of such parties shall take such action and
execute, deliver, file and record such instruments or other documents.
SECTION 7. This Agreement shall not constitute a novation of the
promissory notes or any of the other Loan Documents executed in connection with
the Loans, or of any of the indebtedness evidenced thereby.
SECTION 8. This Agreement may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original and shall be binding
upon all parties and their respective permitted successors and assigns, and all
of which taken together shall constitute one and the same agreement.
SECTION 9. Except to the extent governed by applicable federal law,
this Agreement shall be governed by and construed in accordance with the laws
of the State of Louisiana, without reference to choice of law doctrine.
(Signatures on following page.)
-6-
<PAGE> 7
Assignment, Assumption and Agreement
Regarding Amendments to Loan Documents
Loan No. T0310
Loan No. T0347
Loan No. T0388
Loan No. T0362
Loan No. S0441
THUS DONE AND SIGNED in several counterparts at the places and on the
dates indicated below, and in the presence of the respective undersigned
Notaries Public and the respective undersigned witnesses indicated below, by
duly authorized officers of the respective parties, after a due reading of the
whole.
At Lake Charles, Louisiana on December __, 1996.
MERCURY CELLULAR OF KANSAS, INC.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
------------------------------
Name:
------------------------
Title:
-----------------------
[CORPORATE SEAL]
Witnesses to all signatures:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
---------------------
[NOTARIAL SEAL]
(Signatures continued on next page.)
-7-
<PAGE> 8
Assignment, Assumption and Agreement
Regarding Amendments to Loan Documents
Loan No. T0310
Loan No. T0347
Loan No. T0388
Loan No. T0362
Loan No. S0441
(Signatures continued from previous page.)
At Lake Charles, Louisiana on December __, 1996 .
MERCURY CELLULAR TELEPHONE COMPANY
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
------------------------------
Name:
------------------------
Title:
-----------------------
[CORPORATE SEAL]
Witnesses to all signatures:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
---------------------
[NOTARIAL SEAL]
(Signatures continued on next page.)
-8-
<PAGE> 9
Assignment, Assumption and Agreement
Regarding Amendments to Loan Documents
Loan No. T0310
Loan No. T0347
Loan No. T0388
Loan No. T0362
Loan No. S0441
(Signatures continued from previous page.)
At Lake Charles, Louisiana on December __, 1996.
MERCURY, INC.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
------------------------------
Name:
------------------------
Title:
-----------------------
[CORPORATE SEAL]
Witnesses to all signatures:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
---------------------
[NOTARIAL SEAL]
(Signatures continued on next page.)
-9-
<PAGE> 10
Assignment, Assumption and Agreement
Regarding Amendments to Loan Documents
Loan No. T0310
Loan No. T0347
Loan No. T0388
Loan No. T0362
Loan No. S0441
(Signatures continued from previous page.)
At Lake Charles, Louisiana on December __, 1996.
CTC FINANCIAL, INC.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
------------------------------
Name:
------------------------
Title:
-----------------------
[CORPORATE SEAL]
Witnesses to all signatures:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
---------------------
[NOTARIAL SEAL]
(Signatures continued on next page.)
-10-
<PAGE> 11
Assignment, Assumption and Agreement
Regarding Amendments to Loan Documents
Loan No. T0310
Loan No. T0347
Loan No. T0388
Loan No. T0362
Loan No. S0441
(Signatures continued from previous page.)
At Lake Charles, Louisiana on December __, 1996.
MISSISSIPPI ONE CELLULAR
TELEPHONE COMPANY
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
------------------------------
Name:
------------------------
Title:
-----------------------
[CORPORATE SEAL]
Witnesses to all signatures:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
---------------------
[NOTARIAL SEAL]
(Signatures continued on next page.)
-11-
<PAGE> 12
Assignment, Assumption and Agreement
Regarding Amendments to Loan Documents
Loan No. T0310
Loan No. T0347
Loan No. T0388
Loan No. T0362
Loan No. S0441
(Signatures continued from previous page.)
At Lake Charles, Louisiana on December __, 1996.
By: (SEAL)
---------------------------------
William L. Henning, Sr.
Witnesses to all signatures:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
---------------------
[NOTARIAL SEAL]
(Signatures continued on next page.)
-12-
<PAGE> 13
Assignment, Assumption and Agreement
Regarding Amendments to Loan Documents
Loan No. T0310
Loan No. T0347
Loan No. T0388
Loan No. T0362
Loan No. S0441
(Signatures continued from previous page.)
At Atlanta, Georgia, on December __, 1996.
COBANK, ACB
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
Witnesses to signature:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
---------------------
[NOTARIAL SEAL]
-13-
<PAGE> 1
EXHIBIT 4.72
LOAN NO. S0441
COBANK, ACB
PROMISSORY NOTE
MERCURY CELLULAR TELEPHONE COMPANY
LAKE CHARLES, LOUISIANA
$4,000,000 DATED: NOVEMBER 25, 1996
FOR VALUE RECEIVED, MERCURY CELLULAR TELEPHONE COMPANY ("MCTC"),
hereby promises to pay to the order of CTC FINANCIAL, INC. ("Finance"; Finance
or any subsequent holder of this Amended and Restated Promissory Note, the
"Holder") the principal amount of FOUR MILLION DOLLARS ($4,000,000), or so much
as may have been advanced under that certain Promissory Note, dated of even
date herewith, made by Finance to the order of CoBank, ACB ("CoBank"), in the
principal face amount of $4,000,000 (including any amendment, modification,
supplement, extension, or restatement thereof, the "Finance Note"), and that
certain Loan Agreement, dated as of even date herewith, and numbered Loan No.
S0441, by and between Finance and CoBank (including any amendment,
modification, supplement, extension, or restatement thereof, the "Loan
Agreement"), and reloaned by Finance to MCTC, together with interest as
hereinafter provided from the date hereof until paid in full, plus amounts
equal to all other costs, fees, expenses, premiums, surcharges and all other
amounts due under or in connection with the Finance Note and the Loan
Agreement. For purposes of this Promissory Note, the "Finance Loan" shall mean
the amounts borrowed by Finance from CoBank pursuant to the Loan Agreement and
evidenced by the Finance Note, and the "Loan" shall mean the amounts of the
Finance Loan reloaned by Finance to MCTC and evidenced by this Promissory Note.
1. INTEREST. The aggregate amount of interest accruing under
this Note shall at all times equal the aggregate amount of interest accruing
under the Finance Note. Accordingly, interest on the principal balance
outstanding hereunder shall accrue as follows:
(a) As to a principal amount equal to the portion of the
Finance Loan, if any, from time to time accruing interest at the Variable Rate
(as defined in the Loan Agreement), at a rate equal to the Variable Rate
applicable from time to time under the Loan Agreement; and
(b) As to a principal amount equal to each portion of the
Finance Loan, if any, from time to time accruing interest pursuant to the
Quoted Rate option as provided for in Section 4(A)(2) of the Loan Agreement, at
a fixed rate equal to the fixed rate so accruing on each such portion.
<PAGE> 2
Promissory Note/MCTC
Loan No. S0441
2. REPAYMENT OF PRINCIPAL; INTEREST AND OTHER AMOUNTS PAYABLE.
This Note evidences MCTC's obligations with respect to the Loan. MCTC shall
pay to the Holder an amount equal to the aggregate principal amount of the
Loan, together with accrued interest thereon, plus all other costs, fees,
expenses, premiums, surcharges and all other amounts due under or in connection
with the Finance Note and the Loan Agreement, in such amounts and at such times
as shall be sufficient to make, when and as due, all payments required under
the Finance Note and the Loan Agreement with respect to the Finance Loan,
interest thereon, and such other amounts due thereunder. Advances, accrued
interest and payments under the Finance Note and the Loan Agreement shall be
posted by CoBank upon an appropriate accounting record, which record (and all
computer printouts thereof) shall constitute prima facie evidence of the
outstanding principal and interest under the Finance Note and the Loan
Agreement. So long as CoBank shall be the Holder hereof, payments received by
CoBank pursuant to this Note shall be deemed to constitute payments made
pursuant to the Finance Note.
3. MANNER AND PLACE OF PAYMENT. Payments of all amounts due
hereunder are to be made at such location as the Holder may designate in
writing in accordance with Paragraph 10 hereof, in lawful money of the United
States of America.
4. LOAN DOCUMENTS. This Note is executed pursuant to the terms
of the Loan Agreement. This Note, the Finance Note and the Loan Agreement and
any other agreements, documents or instruments securing the indebtedness or
evidencing or relating to the transactions contemplated in the Loan Agreement
shall sometimes herein be collectively called the "Loan Documents."
5. COST OF COLLECTION. In the event this Note or any amount due
hereunder is not paid promptly when due, MCTC shall pay the reasonable fees and
all other costs and expenses of any attorneys at law who may be employed to
recover the amount overdue, or to protect the interest of the Holder, or to
enforce any Loan Document or to compromise or take other action in regard
hereto or thereto.
6. WAIVER. MCTC hereby waives any right to consent to any
modification, amendment, supplement, extension, or restatement of the Finance
Note, the Loan Agreement or any of the other Loan Documents; waives presentment
for payment, demand, protest and notice of dishonor and nonpayment; and agrees
that the payment hereof or of the Finance Note and the Loan Agreement may be
extended one or more times without notice. MCTC hereby waives all defenses on
the ground of delay or of any extension of time for the payment hereof which
may be hereafter given by the Holder hereof to it or to anyone who has assumed
the payment of this Note, and it is specifically agreed that the obligations of
MCTC shall not be in
-2-
<PAGE> 3
Promissory Note/MCTC
Loan No. S0441
anywise affected or altered to the prejudice of the Holder hereof by reason of
the assumption of payment of the same by any other person or entity.
7. PARTIES BOUND. As used herein, the terms "MCTC" and the
"Holder" shall be deemed to include their respective successors and assigns.
8. MISCELLANEOUS. The Holder shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies,
and no waiver of any kind shall be valid, unless in writing and signed by the
Holder. All rights and remedies of the Holder under the terms of this Note and
under any statutes or rules of law shall be cumulative and may be exercised
successively or concurrently. Any provision of this Note which may be
unenforceable or invalid under any law shall be ineffective to the extent of
such unenforceability or invalidity without affecting the enforceability or
validity of any other provision hereof. Except to the extent governed by
applicable federal law, this Note shall be governed by and construed in
accordance with the laws of the State of Louisiana, without reference to choice
of law doctrine.
9. CONSENT TO JURISDICTION. To the maximum extent permitted by
law, MCTC agrees that any legal action or proceeding with respect to this Note
may be brought in the courts of the State of Louisiana or the United States of
America for the Western District of Louisiana, all as the Holder may elect. By
execution of this Note, MCTC hereby irrevocably submits to each such
jurisdiction, expressly waiving any objection it may have to the laying of
venue by reason of its present or future domicile. Nothing contained herein
shall affect the right of the Holder to commence legal proceedings or otherwise
proceed against MCTC in any other jurisdiction or to serve process in any
manner permitted or required by law.
10. NOTICES. All notices herein authorized or required to be
given to MCTC or the Holder shall be given and delivery may be effected in the
manner set forth in the Loan Agreement to the addresses set forth below or to
such other address as the parties may designate from time to time in accordance
with this paragraph:
MCTC: Mercury Cellular Holder: CoBank, ACB
Telephone Company 200 Galleria Parkway
P.O. Box 3709 Suite 1900
Lake Charles, Louisiana 70602 Atlanta, Georgia 30339
Attn: Dusty Dumas; Attn: Rural Utility Banking
cc: Thomas G. Henning Fax No.: (770) 618-3202
Fax No.: (318) 439-0769
(Signatures follow on next page.)
-3-
<PAGE> 4
Promissory Note/MCTC
Loan No. S0441
WHEREFOR, MCTC has caused this Note to be executed, attested, sealed
and delivered by its duly authorized officers on the day and year first written
above.
MERCURY CELLULAR
TELEPHONE COMPANY
By:
---------------------------------
Name:
-----------------------------
Title:
----------------------------
Attest:
-----------------------------
Name:
-----------------------------
Title:
----------------------------
[CORPORATE SEAL]
(Signatures continued on next page.)
-4-
<PAGE> 5
Promissory Note/MCTC
Loan No. S0441
FOR VALUE RECEIVED, CTC FINANCIAL, INC. ("Finance") hereby assigns to COBANK,
ACB ("CoBank") all of its interest in this Note to secure the prompt payment
and performance of the Obligations (as hereinafter defined). As used herein,
the term "Obligations" shall mean (i) the principal, interest and any other
charges provided for in the Finance Note (as defined in this Note) and the Loan
Agreement (as defined in this Note); (ii) all payments or performances under
any other agreements, instruments and documents now or hereafter evidencing or
relating to the transactions contemplated in the Loan Agreement; and (iii) all
indebtedness, obligations and liabilities of Finance to CoBank of every kind,
character and description whatsoever, direct or indirect, absolute or
contingent, due or to become due, now existing or hereinafter incurred,
contracted or arising, joint or several, liquidated or unliquidated, regardless
of how they arise or by what agreement or instrument they may be evidenced or
whether they are evidenced by any agreement or instrument, or whether incurred
as maker, drawer, endorser, surety, guarantor or otherwise.
WHEREFOR, Finance has caused this assignment to be executed and
delivered as of November 25, 1996.
CTC FINANCIAL, INC.
By:
---------------------------------
Name:
-----------------------------
Title:
----------------------------
Attest:
-----------------------------
Name:
-----------------------------
Title:
----------------------------
[CORPORATE SEAL]
-5-
<PAGE> 1
EXHIBIT 4.73
LOAN NO. T0362
LOAN NO. T0388
LOAN NO. S0441
SECOND AMENDMENT AND SUPPLEMENT TO
CONTINUING GUARANTY
STATE OF LOUISIANA )
)
PARISH OF CALCASIEU )
STATE OF GEORGIA )
)
COUNTY OF COBB )
BEFORE ME, the respective undersigned Notaries Public, and in the
presence of the undersigned competent witnesses, personally came and appeared
the party listed below, who, after being duly sworn, did state:
THIS SECOND AMENDMENT AND SUPPLEMENT TO CONTINUING GUARANTY (this
"Second Amendment"), dated as of November 25, 1996, is by and between MERCURY
CELLULAR TELEPHONE COMPANY ("MCTC") and COBANK, ACB ("CoBank"), and amends and
supplements that certain Continuing Guaranty, dated as of April 20, 1995, made
by MCTC for the benefit of CoBank (the "Original Guaranty"), as previously
amended by that certain First Amendment and Supplement to Continuing Guaranty,
dated as of July 1, 1996 (the "First Amendment"; the Original Guaranty, as
amended by the First Amendment, the "Guaranty").
R E C I T A L S:
WHEREAS, CoBank and CTC Financial, Inc. (the "Borrower") have entered
into that certain Loan Agreement, dated as of April 20, 1995 (as the same may
be amended, supplemented, extended or restated from time to time, the "First
Loan Agreement"), providing for a loan of up to $18,000,000 (the "First Loan"),
into that certain Loan Agreement, dated as of July 1, 1996 (as the same may be
amended, supplemented, extended or restated from time to time, the "Second Loan
Agreement"), providing for a loan of up to $13,000,000 (the "Second Loan"), and
into that certain Loan Agreement, dated as of even date herewith (as the same
may be amended, supplemented, extended or restated from time to time, the
"Third Loan Agreement"; the First Loan Agreement, the Second Loan Agreement and
the Third Loan Agreement, collectively, the "Loan Agreements"), providing for a
loan of up to $4,000,000
<PAGE> 2
Second Amendment and Supplement to Continuing Guaranty/MCTC
Loan No. T0362
Loan No. T0388
Loan No. S0441
(the "Third Loan"; the First Loan, the Second Loan and the Third Loan,
collectively, the "Loans"); and
WHEREAS, the proceeds of the Loans will be reloaned by the Borrower to
MCTC for the purposes set forth in the Loan Agreements; and
WHEREAS, as an inducement to CoBank to enter into the First Loan
Agreement and to make the First Loan, MCTC entered into the Original Guaranty;
and
WHEREAS, as an inducement to CoBank to enter into the Second Loan
Agreement and make the Second Loan, MCTC entered into the First Amendment; and
WHEREAS, as an inducement to CoBank to enter into the Third Loan
Agreement and to make the Third Loan, MCTC has agreed to amend the Guaranty as
herein provided;
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, MCTC and CoBank hereby agree as follows:
SECTION 1. Capitalized terms used in this Second Amendment, unless
otherwise defined herein, shall have the meanings assigned to them in the
Guaranty.
SECTION 2. Section 2 of the Guaranty is hereby amended and
supplemented by deleting Section 2 in its entirety and substituting in lieu
thereof the following Section:
"SECTION 2. OBLIGATIONS. "Obligations" shall mean (a) the principal,
interest and other amounts becoming due and payable, whether by
acceleration or otherwise, under that certain Promissory Note, dated
April 20, 1995, made by the Borrower to the order of CoBank, in the
original face principal amount of $18,000,000 (as the same may be
amended, extended, renewed or replaced from time to time, the "First
Note"); (b) the principal, interest and other amounts becoming due and
payable, whether by acceleration or otherwise, under that certain
Promissory Note, dated July 1, 1996, made by Borrower to the order of
CoBank, in the original face principal amount of $13,000,000 (as the
same may be amended, extended, renewed or replaced from time to time,
the "Second Note"); (c) the principal, interest and other amounts
becoming due and payable, whether by acceleration or otherwise, under
that certain Promissory Note, dated November 25, 1996, made by the
Borrower to the order of CoBank, in the original face principal amount
of $4,000,000 (as the same may be amended, extended, renewed or
replaced from time to time, the "Third Note"; the First Note, the
Second
2
<PAGE> 3
Second Amendment and Supplement to Continuing Guaranty/MCTC
Loan No. T0362
Loan No. T0388
Loan No. S0441
Note and the Third Note, collectively, the "Notes"); and (d) all other
payments or performances to be made by the Borrower under the other
Loan Documents to which it is a party."
SECTION 3. Section 4(H) of the Guaranty is hereby amended and
supplemented by deleting such Section in its entirety and substituting in lieu
thereof the following Section:
"(H) FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE; ETC. The
audited financial statements of MCTC for the fiscal year ended
December 31, 1995, and the unaudited financial statements for the
six-month period ended June 30, 1996, submitted to CoBank in
connection with the Loans, fairly and fully present in all material
respects the financial condition of MCTC and the results of MCTC's
operations for the periods covered thereby and were prepared in
accordance with GAAP consistently applied and any system of accounts
to which MCTC is subject. Since December 31, 1995, there has occurred
no event which has had or could have a Material Adverse Effect on
MCTC. All budgets, projections, feasibility studies, and other
documentation submitted to CoBank in connection with the Loans were
based upon assumptions that were reasonable and realistic at the time
submitted and, as of the date hereof, no fact has come to light, and
no event or transaction has occurred, which would cause any assumption
made therein not to be reasonable or realistic."
SECTION 4. All references to the "Loan Agreements," "Notes" and
"Loans" in the Guaranty shall be to the "Loan Agreements," "Notes" and "Loans",
respectively, as defined in this Second Amendment.
SECTION 5. All references to the "Loan Documents" or a "Loan
Document" in the Guaranty shall be to the "Loan Documents" as defined in the
Loan Agreements (as amended).
SECTION 6. All references to this "Guaranty" in the Guaranty shall be
to the Guaranty as amended by this Second Amendment.
SECTION 7. After giving effect to the amendments to and restatement
of the Guaranty set forth in this Second Amendment, the representations and
warranties of MCTC set forth in the Guaranty are true and correct as of the
date hereof as if made on the date hereof.
SECTION 8. It is the intention of the parties hereto that this Second
Amendment shall not constitute a novation and shall in no way adversely affect
or impair the validity of the "Loan Documents" (as defined in the Loan
Agreements, as amended), it being the intention of
3
<PAGE> 4
Second Amendment and Supplement to Continuing Guaranty/MCTC
Loan No. T0362
Loan No. T0388
Loan No. S0441
the parties hereto merely to amend the Guaranty as expressly set forth herein.
To the extent not inconsistent herewith, all of the terms and conditions of the
Guaranty shall remain in full force and effect and are hereby ratified and
confirmed by MCTC.
SECTION 9. This Second Amendment may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original and shall be binding
upon all parties and their respective permitted successors and assigns, and all
of which taken together shall constitute one and the same agreement.
SECTION 10. This Second Amendment shall be governed by and construed
in accordance with the laws of the State of Louisiana, without reference to
choice of law doctrine.
(Signatures follow on next page.)
4
<PAGE> 5
Second Amendment and Supplement to Continuing Guaranty/MCTC
Loan No. T0362
Loan No. T0388
Loan No. S0441
THUS DONE AND SIGNED, at the place and on the date indicated below,
and in the presence of the undersigned Notary Public and the respective
undersigned witnesses indicated below, by duly authorized officers of MCTC,
after a due reading of the whole.
At Lake Charles, Louisiana, on ___________________, 1996.
MERCURY CELLULAR TELEPHONE COMPANY
By:
---------------------------------
Name:
-------------------------------
Title: President
Attest:
------------------------------
Name:
--------------------------------
Title: Secretary
[CORPORATE SEAL]
Witnesses to all signatures:
- ------------------------------------------
Witness
- ------------------------------------------
Witness
- ------------------------------------------
Notary Public
My commission expires: ___________
[NOTARIAL SEAL]
(Signatures continued on next page.)
5
<PAGE> 6
Second Amendment and Supplement to Continuing Guaranty/MCTC
Loan No. T0362
Loan No. T0388
Loan No. S0441
(Signatures continued from previous page.)
At Atlanta, Georgia, on ______________, 1996.
COBANK, ACB
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
Witnesses to signature:
- ------------------------------------------
Witness
- ------------------------------------------
Witness
- ------------------------------------------
Notary Public
My commission expires: ___________
[NOTARIAL SEAL]
6
<PAGE> 1
EXHIBIT 4.74
LOAN NO. S0441
COBANK, ACB
LOAN AGREEMENT
STATE OF LOUISIANA )
)
PARISH OF CALCASIEU )
STATE OF GEORGIA )
)
COUNTY OF COBB )
BEFORE the respective undersigned Notaries Public, and in the presence
of the respective undersigned competent witnesses, personally came and appeared
the parties listed below, who, after being duly sworn, did state:
THIS LOAN AGREEMENT (this "Agreement") is made and entered into as of
November 25, 1996, by and between COBANK, ACB ("CoBank") and CTC FINANCIAL,
INC., a Louisiana corporation (the "Borrower").
SECTION 1. THE LOAN. On the terms and conditions set forth in
this Agreement, and subject to Section 11, CoBank agrees to make a loan (the
"Loan") to the Borrower, by means of one or more advances, in an aggregate
principal amount not to exceed $4,000,000, during the period commencing on the
date hereof and ending on but not including the earlier date (the "Termination
Date") of (i) November 24, 1997 or (ii) such later date as CoBank in its sole
discretion may authorize in writing. Under the Loan, amounts borrowed and
later repaid or prepaid may not be reborrowed.
SECTION 2. PURPOSES AND USE OF PROCEEDS. The proceeds of the
Loan shall be reloaned by the Borrower to Mercury Cellular Telephone Company
("MCTC") to be applied by MCTC (a) in an amount not to exceed $1,000,000, for
reloan to Mississippi One Cellular Telephone Company ("Mississippi One"), an
affiliate of MCTC, for the repayment by Mississippi One of its outstanding
indebtedness to Cameron Telephone Company, (b) for MCTC's capital expenditures
and working capital needs and (c) to pay the costs and fees associated with
closing the Loan. The Borrower agrees that the proceeds of the Loan shall be
used only for the purposes set forth in this Section 2.
SECTION 3. AVAILABILITY. Subject to Section 11, advances under
the Loan will be made on any day on which CoBank is open for business (a
"Business Day"), except any day
<PAGE> 2
Loan Agreement/CTC Financial
Loan No. S0441
on which Federal Reserve Banks are closed, within one Business Day of receipt
by CoBank of a written or telephonic request of an authorized employee of the
Borrower. Unless otherwise agreed, the Loan will be made available by wire
transfer of immediately available funds to such account or accounts as the
Borrower may designate from time to time on forms supplied by CoBank.
SECTION 4. INTEREST AND FEES.
(A) RATE OPTIONS; ETC. The unpaid principal balance of
the Loan shall accrue interest at the rate or rates to be determined or
selected by the Borrower in accordance with this Subsection (A).
(1) VARIABLE RATE OPTION. As to any portion
of the unpaid principal balance of the Loan (any such portion, and any portion
selected pursuant to Subsection (A)(2), a "Portion" of the Loan) not bearing
interest at a fixed rate pursuant to Subsection (A)(2), interest shall accrue
at a variable annual interest rate (the "Variable Rate") equal at all times to
the National Variable Rate (as hereinafter defined) less 0.25%. The term
"National Variable Rate" shall mean the rate of interest established by CoBank
from time to time as its National Variable Rate. The National Variable Rate is
intended by CoBank to be a reference rate, and CoBank may charge other
borrowers rates at, above, or below that rate. Any change in the National
Variable Rate shall take effect on the date established by CoBank as the
effective date of such change, and CoBank shall notify the Borrower promptly
after any such change.
(2) QUOTED RATE. As to any Portion of the
Loan selected by the Borrower, interest shall accrue at a fixed annual interest
rate (a "Quoted Rate") equal to the rate quoted by CoBank, in its sole and
absolute discretion, on the date any Portion of the Loan is to be so fixed for
the interest period selected by the Borrower for such Portion. Each Portion so
fixed for any separate interest period must be in a minimum amount of $100,000
and Portions may be fixed for interest periods ranging from five (5) days to
the stated Termination Date; provided, however, that interest periods may
expire only on a Business Day.
(B) SELECTION AND CHANGE OF RATES. The Borrower shall
select the initial interest rate or rates at the time it gives CoBank a request
for an advance pursuant to Section 3. The Borrower may, on any Business Day,
elect to have a Quoted Rate apply to any Portion of the Loan then accruing
interest at the Variable Rate. With respect to any Portion of the Loan
accruing interest pursuant to a Quoted Rate, the Borrower may, subject to
Subsection (A)(2), on the last day of the interest period for such Portion,
elect to fix the interest rate accruing on such Portion for another interest
period pursuant to the Quoted Rate option. In the absence of any such
election, interest shall automatically accrue on such Portion
-2-
<PAGE> 3
Loan Agreement/CTC Financial
Loan No. S0441
at the Variable Rate. From time to time, the Borrower may elect on a Business
Day and upon payment of the Surcharge (as defined in, and calculated pursuant
to, Section 6) to convert all, but not part, of any Portion of the Loan
accruing interest pursuant to the Quoted Rate option to accrue interest at the
Variable Rate or pursuant to another Quoted Rate(s) as provided in Subsection
(A)(2). Except for the initial selection, all interest rate selections
provided for herein shall be made by telephonic or written request of an
authorized employee of the Borrower by 12:00 noon, Eastern time, on the
relevant day.
(C) ACCRUAL OF INTEREST. Interest shall accrue pursuant
to the Quoted Rate option from and including the first day of the applicable
interest period to but excluding the last day of the applicable interest
period. If the Borrower elects to refix the interest rate on any Portion of
the Loan pursuant to Subsection (A)(2), the first day of the new interest
period shall be the last day of the preceding interest period. In the absence
of any such election, interest shall accrue on such Portion at the Variable
Rate from and including the last day of such interest period. If the Borrower
elects to convert from the Quoted Rate option to the Variable Rate option upon
payment of the Surcharge as provided in Subsection (B), interest at the
applicable Quoted Rate shall accrue through the day before such conversion and
either (i) the first day of any new interest period shall be the date of such
conversion, or (ii) interest at the Variable Rate shall accrue on the Portion
of the Loan so converted from and including the date of conversion.
(D) PAYMENT AND CALCULATION. Interest shall be payable
monthly in arrears by the 20th day of the following month, upon any prepayment
and at maturity, and shall be calculated on the actual number of days during
the prior month the Loan is outstanding on the basis of a year consisting of
360 days. In calculating accrued interest, the date the Loan is made shall be
included and the date any principal amount of the Loan is repaid or prepaid
shall be excluded as to such amount.
(E) DEFAULT RATE. If prior to maturity the Borrower
fails to make any payment or investment required to be made under the terms of
this Agreement (including this Section 4) or the Note (as defined in Section
7), then, at CoBank's option in each instance, such payment or investment shall
accrue interest at 4% per annum in excess of the Variable Rate. After
maturity, whether by reason of acceleration or otherwise, the unpaid principal
balance of the Loan shall automatically accrue interest at 4% per annum in
excess of the Variable Rate. All interest provided for in this Subsection (E)
shall be payable on demand and shall be calculated from and including the date
such payment was due to but excluding the date paid on the basis of a year
consisting of 360 days.
(F) ORIGINATION FEE. The Borrower shall pay to CoBank a
non-refundable loan origination fee for the Loan in the amount of $20,000.
-3-
<PAGE> 4
Loan Agreement/CTC Financial
Loan No. S0441
SECTION 5. PRINCIPAL REPAYMENT AND MATURITY. The unpaid
principal balance of the Loan shall be repaid in full on the Termination Date.
SECTION 6. PREPAYMENT. The Borrower may, on one Business Day's
prior written notice, (i) prepay in full or in part any Portion of the Loan
accruing interest at the Variable Rate, and (ii) prepay in full (but not in
part) any Portion of the Loan accruing interest pursuant to a Quoted Rate. For
purposes of calculating the surcharge provided in this Section 6, conversion of
a Portion of the Loan accruing interest pursuant to a Quoted Rate to a
different Quoted Rate(s) pursuant to Section 4(B) shall be deemed a prepayment
in full of that Portion of the Loan. Notwithstanding the foregoing, upon any
prepayment of any Portion of the Loan accruing interest pursuant to a Quoted
Rate, and as a condition to any voluntary prepayment, the Borrower shall pay to
CoBank, on the date of such prepayment, a surcharge (the "Surcharge")
determined and calculated as follows:
(A) Determine the difference between: (i) CoBank's cost
of funds (determined in accordance with its standard methodology) on the date
the interest rate was fixed to fund the Portion of the Loan being prepaid;
minus (ii) CoBank's cost of funds (determined in accordance with such
methodology) on the date of prepayment to fund a new loan with a maturity equal
to the remainder of the selected interest period of the Portion of the Loan
being prepaid. If such difference is negative, then no Surcharge is payable.
(B) If such difference is positive, divide the result
determined in Subsection (A) by 12.
(C) For each month or part thereof during which the
Portion of the Loan being prepaid was scheduled to have been outstanding,
multiply the amount determined in Subsection (B) by that part of the Portion of
the Loan being prepaid that was scheduled to have been outstanding during such
month (such that there is a monthly calculation for each month during which the
Portion of the Loan being prepaid was scheduled to have been outstanding).
(D) Determine the present value of each monthly
calculation made under Subsection (C) based upon the scheduled time that
interest on the Portion of the Loan being prepaid would have been payable and a
discount rate equal to the rate set forth in Subsection (A)(ii).
(E) Add all of the calculations made under Subsection
(D). The result shall be the Surcharge.
SECTION 7. NOTE. The Borrower's obligation to repay the Loan
shall be evidenced by promissory note in form and content acceptable to CoBank
(as the same may be amended, modified, supplemented, extended or restated from
time to time and any promissory note that
-4-
<PAGE> 5
Loan Agreement/CTC Financial
Loan No. S0441
may be issued from time to time in substitution, renewal, extension,
replacement or exchange therefor, the "Note").
SECTION 8. MANNER AND TIME OF PAYMENT. If any date on which
payment is due hereunder is not a Business Day, the payment shall be made on
the next succeeding Business Day. The Borrower shall make each payment under
this Agreement and under the Note by wire transfer of immediately available
funds or by check. Wire transfers shall be made to the Federal Reserve Bank of
Kansas City for advice to and credit of CoBank, Federal Reserve Bank account
number 3070-8875-4 (or to such other account as CoBank may designate by notice)
with sufficient information to identify the source and application of such
funds. The Borrower shall give CoBank telephonic notice no later than 12:00
noon, Eastern time, of its intent to pay by wire transfer. Wire transfers
received after 3:00 p.m., Eastern time, shall be credited on the next Business
Day. Checks shall be mailed or delivered to CoBank at Department 167, Denver,
Colorado 80291-0167 (or to such other address as CoBank may designate by
notice). Credit for payment by check will not be given until the next Business
Day after receipt of the check or the actual receipt of immediately available
funds, whichever is later.
SECTION 9. CAPITALIZATION. The Borrower agrees to purchase such
equity in CoBank as CoBank may from time to time require in accordance with its
bylaws and capital plan; provided, however, that CoBank may not require the
Borrower to purchase equity in CoBank in an amount greater than 13% of the
portion of CoBank's five-year average risk-adjusted asset base attributable to
loans made by CoBank to the Borrower. In connection with the foregoing, the
Borrower hereby acknowledges receipt, prior to the execution of this Agreement,
of CoBank's bylaws, a written description of the terms and conditions under
which the equity is issued, CoBank's Loan-Based Capital Plan, CoBank's most
recent annual report, and if more recent than CoBank's latest annual report,
its latest quarterly report. The Borrower hereby consents and agrees that the
amount of any distributions with respect to its patronage with CoBank that are
made in qualified written notices of allocation (as defined in 26 U.S.C.
Section 1388) and that are received by the Borrower from CoBank, will be taken
into account by the Borrower at the stated dollar amounts whether the
distribution is evidenced by a Participation Certificate or other form of
written notice that such distribution has been made and recorded in the name of
the Borrower on the records of CoBank. All such investments and all other
equities which the Borrower may now own or hereafter acquire or be allocated in
CoBank shall be subject to a statutory first lien in favor of CoBank.
SECTION 10. SECURITY. The Loan and the Note are secured by an
assignment by the Borrower to CoBank of that certain Promissory Note, dated of
even date herewith, made by MCTC to the order of the Borrower, in the original
principal face amount of $4,000,000 (as the same may be amended, modified,
supplemented, extended or restated from time to time
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Loan Agreement/CTC Financial
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and any promissory note or notes that may be issued from time to time in
substitution, renewal, extension, replacement or exchange therefor, the "MCTC
Note").
The Loan and the Note are guaranteed by that certain Continuing
Guaranty, dated as of April 20, 1995, made by MCTC for the benefit of CoBank,
as amended by that certain First Amendment and Supplement to Continuing
Guaranty, dated as of July 1, 1996, and as amended by that certain Second
Amendment and Supplement to Continuing Guaranty, dated as of even date herewith
(as so amended and as the same hereafter may be amended, supplemented, extended
or restated from time to time, the "MCTC Guaranty").
SECTION 11. CONDITIONS PRECEDENT.
(A) INITIAL ADVANCE. CoBank's obligation to make the
initial advance under the Loan is subject to satisfaction of each of the
following conditions precedent on or before the date of such advance:
(1) LOAN DOCUMENTS. That CoBank receive duly
executed originals of this Agreement, the Note, the MCTC Note, duly
assigned to CoBank, the MCTC Guaranty and all other instruments and
documents contemplated hereby or thereby (collectively, the "Loan
Documents").
(2) AUTHORIZATION. That CoBank receive copies
of all corporate documents and proceedings of the Borrower and MCTC
authorizing the execution, delivery, and performance of the Loan
Documents to which each is a party, certified by appropriate officers
of such entities.
(3) APPROVALS. That CoBank receive evidence
satisfactory to it that all federal and state consents and approvals
(including, without limitation, all regulatory approvals) which are
necessary for, or required as a condition of, the validity and
enforceability of the Loan Documents.
(4) OPINIONS OF COUNSEL. That CoBank receive
opinions of counsel for the Borrower, Mississippi One and MCTC (who
shall be acceptable to CoBank) in form and content acceptable to all
parties.
(5) FEES AND EXPENSES. That the Borrower pay
the origination fee set forth in Section 4(F) with respect to the Loan
and the costs and expenses required by Section 20 to be paid by the
Borrower.
(6) PERMITS. That CoBank receive evidence
satisfactory to it that the Borrower and MCTC possesses all necessary
operating permits, authorizations,
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Loan Agreement/CTC Financial
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approvals, and the like which are material to the conduct of the
Borrower's and MCTC's business or which may otherwise be required by
law.
(7) INSURANCE. That CoBank receive evidence
of insurance by the Borrower and MCTC in such amounts and covering
such risks as are usually carried by companies in the same or similar
business.
(8) SUBORDINATED DEBT. That MCTC subordinate
all indebtedness of Mississippi One to MCTC (the "Mercury Cellular
Debt") in right of payment and in all other respects, to any
indebtedness of Mississippi One to CoBank including the loan made to
the Borrower by CoBank in the aggregate amount of $32,400,000, for
reloan to Mississippi One, which subordination shall provide that no
interest or principal payments may be made on the Mercury Cellular
Debt without the consent of CoBank.
(9) NO MATERIAL ADVERSE CHANGE. That from
December 31, 1995, to the date of such advance, there shall not have
occurred any event which has had or could have a Material Adverse
Effect (as hereinafter defined) on the Borrower or MCTC. For purposes
of this Agreement, the term "Material Adverse Effect" when used with
reference to any entity shall mean a material adverse effect on the
condition, financial or otherwise, operations, properties or business
of such entity or person or on the ability of such entity or person to
perform its or his obligations under the Loan Documents to which it is
a party.
(10) NO INJUNCTION. That no court or other
government body or public authority shall have issued an order which
shall then be in effect restraining or prohibiting the completion of
the transactions contemplated hereby.
(11) OTHER DOCUMENTS. That CoBank receive such
other documents, instruments, certificates and opinions of counsel as
CoBank or its counsel may reasonably request.
(B) ALL ADVANCES. CoBank's obligation to make each
advance hereunder, including the initial advance, is subject to the
satisfaction of each of the following conditions precedent on or before the
date of such advance:
(1) EVENT OF DEFAULT. That no Event of
Default (as that term is defined in Section 15) exists, and that there
has occurred no event which with the passage of time or the giving of
notice, or both, could become an Event of Default (each such event, a
"Default").
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(2) REPRESENTATIONS AND WARRANTIES. That the
representations and warranties of (a) the Borrower contained in this
Agreement and any other Loan Document to which it is a party and (b)
MCTC contained in the MCTC Guaranty and any other Loan Document to
which it is a party be true and correct in all material respects on
and as of the date of such advance, as though made on and as of the
date of such advance.
(3) OFFICER'S CERTIFICATE. That CoBank
receive, if it so requests, a certificate from appropriate officers of
the Borrower and MCTC as to the continuing truth and accuracy of the
representations and warranties of the Borrower and MCTC under the Loan
Documents to which each is a party and the satisfaction of each of the
conditions applicable to the making of the such advance.
SECTION 12. REPRESENTATIONS AND WARRANTIES. To induce CoBank to make
the Loan hereunder, and recognizing that CoBank is relying hereon, the Borrower
represents and warrants, on and as of the date hereof and on and as of the date
of each advance under the Loan, as follows:
(A) ORGANIZATION; POWERS; ETC. The Borrower (i) is duly
organized, validly existing, and in good standing under the laws of its state
of incorporation; (ii) is duly qualified to do business and is in good standing
in each jurisdiction in which the character of its properties or the nature of
its business requires such qualification; (iii) has all requisite corporate and
legal power to own and operate its assets and to carry on its business and to
enter into and perform its obligations under the Loan Documents to which it is
a party; (iv) has duly and lawfully obtained and maintained all licenses,
certificates, permits, authorizations, approvals, and the like which are
necessary in the conduct of its business or which may be otherwise required by
law; and (v) is eligible to borrow from CoBank.
(B) DUE AUTHORIZATION; NO VIOLATIONS; ETC. The
execution and delivery by the Borrower of, and the performance by the Borrower
of its obligations under, the Loan Documents to which it is a party have been
duly authorized by all requisite corporate action and do not and will not (i)
violate any provision of any law, rule or regulation, any judgment, order or
ruling of any court or governmental agency applicable to it, its articles of
incorporation or bylaws, or any agreement, indenture, mortgage, or other
instrument to which the Borrower is a party or by which the Borrower or its
property is bound, or (ii) be in conflict with, result in a breach of, or
constitute with the giving of notice or lapse of time, or both, a default under
any such agreement, indenture, mortgage, or other instrument. All actions on
the part of the shareholders of the Borrower necessary in connection with the
execution and delivery by the Borrower, and the performance by the Borrower of
its obligations under, the Loan Documents to which it is a party have been
taken and remain in full force and effect as of the date hereof.
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(C) GOVERNMENTAL APPROVAL. No consent, permission,
authorization, order, or license of any governmental authority is necessary in
connection with the execution, delivery, performance, or enforcement of the
Loan Documents to which the Borrower is a party or to the creation and
perfection of the liens and security interests granted thereby, except such as
have been obtained and are in full force and effect.
(D) BINDING AGREEMENT. Each of the Loan Documents to
which it is a party is, or when executed and delivered will be, the legal,
valid, and binding obligation of the Borrower, enforceable against the Borrower
in accordance with its terms, subject only to limitations on enforceability
imposed by (i) applicable bankruptcy, insolvency, reorganization, moratorium,
or similar laws affecting creditors' rights generally, and (ii) general
equitable principles.
(E) COMPLIANCE WITH LAWS. The Borrower is in compliance
in all material respects with all federal, state, and local laws, rules,
regulations, ordinances, codes, and orders (collectively, "Laws"), the failure
to comply with which could have a Material Adverse Effect on the Borrower.
(F) ENVIRONMENTAL COMPLIANCE. Without limiting the
provisions of Subsection (E) above, all property owned or leased by the
Borrower and all operations conducted by it are in compliance in all material
respects with all Laws relating to environmental protection, the failure to
comply with which could have a Material Adverse Effect on the Borrower.
(G) LITIGATION. There are no pending legal,
arbitration, or governmental actions or proceedings to which the Borrower is a
party or to which its property is subject which could have a Material Adverse
Effect on the Borrower, and to the best of the Borrower's knowledge, no such
actions or proceedings are threatened or contemplated.
(H) PRINCIPAL PLACE OF BUSINESS; RECORDS. The principal
place of business and chief executive office of the Borrower and the place
where the records required by Section 13(G) are kept is at the address of the
Borrower shown in Section 19.
(I) EMPLOYEE BENEFIT PLANS. To the extent applicable,
the Borrower is in compliance in all material respects with the applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and published interpretations thereunder.
(J) TAXES. The Borrower has filed or caused to be filed
all federal, state and local tax returns that are required to be filed, and has
paid all taxes as shown on said returns or on any assessment received by the
Borrower, to the extent that such taxes have
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Loan Agreement/CTC Financial
Loan No. S0441
become due, unless such taxes are being contested by the Borrower, in good
faith and by appropriate proceedings and then only to the extent adequate
reserves have been set aside on the Borrower's books therefor.
(K) INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING
COMPANY ACT. The Borrower is not an "investment company" as that term is
defined in, and is not otherwise subject to regulation under, the Investment
Company Act of 1940, as amended. The Borrower is not a "holding company" as
that term is defined in, and is not otherwise subject to regulation under, the
Public Utility Holding Company Act of 1935, as amended.
(L) USE OF PROCEEDS. The funds to be borrowed hereunder
will be used only as contemplated hereby. No part of such funds will be used
to purchase any "margin securities" or otherwise in violation of the
regulations of the Federal Reserve System.
(M) BUSINESS. The Borrower's sole business activity
and operation is to borrow from CoBank and reloan proceeds of such borrowings
to affiliated entities.
SECTION 13. AFFIRMATIVE COVENANTS. Unless otherwise agreed to
in writing by CoBank, while this Agreement is in effect the Borrower agrees to:
(A) CORPORATE EXISTENCE. Preserve and keep in full
force and effect its corporate existence and good standing in the jurisdiction
of its incorporation, and its qualification to transact business and good
standing in all places in which the character of its properties or the nature
of its business requires such qualification.
(B) COMPLIANCE WITH LAWS AND AGREEMENTS. Comply in all
material respects with (i) all Laws, the failure to comply with which could
have a Material Adverse Effect on the Borrower, and (ii) all agreements,
indentures, mortgages, and other instruments to which it is a party or by which
it or any of its property is bound.
(C) COMPLIANCE WITH ENVIRONMENTAL LAWS. Without
limiting the provisions of Subsection (B) above, comply in all material
respects with, and cause all persons occupying or present on any properties
owned or leased by it to so comply with, all Laws relating to environmental
protection, the failure to comply with which could have a Material Adverse
Effect on the Borrower.
(D) LICENSES; PERMITS; ETC. Duly and lawfully obtain
and maintain in full force and effect all licenses, certificates, permits,
authorizations, approvals, and the like which are material to the conduct of
its business or which may be required by Law.
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Loan Agreement/CTC Financial
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(E) INSURANCE. Maintain insurance with insurance
companies or associations acceptable to CoBank in such amounts and covering
such risks as are usually carried by companies engaged in the same or similar
business and similarly situated, and make such increases in the type or amount
of coverage as CoBank may request. All such policies insuring any collateral
provided for in any Loan Document shall provide for loss payable clauses or
endorsements in form and content acceptable to CoBank. At the request of
CoBank, all policies (or such other proof of compliance with this Subsection
(E) as may be satisfactory) shall be delivered to CoBank.
(F) PROPERTY MAINTENANCE. Maintain and preserve at all
times its property, and each and every part and parcel thereof, in good repair,
working order and condition, ordinary wear and tear excepted, and in compliance
with all applicable laws, regulations and orders.
(G) BOOKS AND RECORDS. Keep adequate records and books
of account in accordance with generally accepted accounting principles ("GAAP")
consistently applied and any system of accounts to which the Borrower is
subject.
(H) INSPECTION. Permit CoBank or its agents, during
normal business hours or at such other times as the parties may agree, to
examine its properties, books, and records, and to discuss its affairs,
finances, operations, and accounts with its officers, directors, employees, and
independent certified public accountants.
(I) REPORTS AND NOTICES. Furnish to CoBank:
(1) ANNUAL FINANCIAL STATEMENTS. As soon as
available, but in no event later than 120 days after the end of each
fiscal year of MCTC occurring during the term hereof, annual
consolidated and consolidating financial statements of MCTC prepared
in accordance with GAAP consistently applied and any system of
accounts to which MCTC is subject. Each of such financial statements
shall: (i) be audited by independent certified public accountants
selected by MCTC and acceptable to CoBank; (ii) be accompanied by a
report of such accountants containing an opinion acceptable to CoBank;
(iii) be prepared in reasonable detail; and (iv) include a balance
sheet, a statement of income, a statement of retained earnings, a
statement of cash flows, and all notes and schedules relating thereto.
(2) MONTHLY AND YEAR-TO-DATE FINANCIAL
STATEMENTS. As soon as available but in no event later than 60 days
after the end of each of the first three fiscal quarters of each
fiscal year of MCTC occurring during the term hereof, unaudited
monthly (for the three months immediately preceding such fiscal
quarter end) and year-to-date financial statements of MCTC prepared in
accordance with GAAP
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Loan Agreement/CTC Financial
Loan No. S0441
consistently applied and any system of accounts to which MCTC is
subject (except for the omission of footnotes and for the effect of
normal year-end audit adjustments). Each of such financial statements
shall: (i) be prepared in reasonable detail; and (ii) include a
balance sheet, a statement of income for such months and period
year-to-date, a statement of cash flows, and such other months
statements as CoBank may specifically request, which statements shall
include any and all supplements thereto.
(3) FINANCIAL FORECAST. As soon as available,
but in no event later than 30 days after the first day of each fiscal
year of MCTC occurring during the term hereof, a one-year financial
forecast for MCTC which shall include, without limitation, a statement
of income, a balance sheet, a statement of sources and uses of funds,
capital expenditure projections and such other information as CoBank
shall reasonably require.
(4) NOTICE OF DEFAULT. Promptly after
becoming aware thereof, notice of (a) the occurrence of any Default or
Event of Default hereunder or under any other Loan Document, and (b)
the occurrence of any breach, default, event of default, or other
event which with the giving of notice or lapse of time, or both, could
become a breach, default, or event of default under any agreement,
indenture, mortgage, or other instrument (other than the Loan
Documents) to which the Borrower is a party or by which the Borrower
or any of its property is bound or affected if the effect of such
breach, default, event of default, or other event is to accelerate, or
to permit the acceleration of, the maturity of any indebtedness under
such agreement, indenture, mortgage, or other instrument; provided,
however, that the failure to give such notice shall not affect the
right and power of CoBank to exercise any and all of the remedies
specified herein.
(5) NOTICE OF NON-ENVIRONMENTAL LITIGATION.
Promptly after the commencement thereof, notice of the commencement of
all actions, suits, or proceedings before any court, arbitrator, or
governmental department, commission, board, bureau, agency, or
instrumentality affecting the Borrower which could have a Material
Adverse Effect on the Borrower.
(6) NOTICE OF ENVIRONMENTAL LITIGATION.
Without limiting the provisions of Paragraph (5) above, promptly after
receipt or becoming aware thereof, notice of the receipt of all
pleadings, orders, complaints, indictments, or other communications
alleging a condition that may require the Borrower to undertake or to
contribute to a cleanup or other response under Laws relating to
environmental protection, or which seeks penalties, damages,
injunctive relief, or criminal sanctions related to alleged violations
of such Laws, or which claims personal injury or property
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Loan Agreement/CTC Financial
Loan No. S0441
damage to any person as a result of environmental factors or
conditions or which could have a Material Adverse Effect on the
Borrower.
(7) REGULATORY AND OTHER NOTICES. Promptly
after filing, receipt or becoming aware thereof, copies of any filings
or communications sent to or notices and other communications received
by the Borrower from any governmental authority, including, without
limitation, the Louisiana Public Service Commission (the "LPSC"), the
Federal Communications Commission (the "FCC"), and the Securities and
Exchange Commission (the "SEC"), relating to any noncompliance by the
Borrower with any Law or with respect to any matter or proceeding the
effect of which could have a Material Adverse Effect on the Borrower
or MCTC.
(8) MATERIAL ADVERSE CHANGE. Prompt notice of
any matter which has had or could have a Material Adverse Effect on
the Borrower or MCTC.
(9) COMPLIANCE CERTIFICATES. Concurrently
with each statement required to be furnished pursuant to Paragraph (1)
and (2) above, a certificate in the form attached hereto as Exhibit A
executed by the chief accounting officer of MCTC.
(10) ERISA REPORTABLE EVENTS. Within 10 days
after the Borrower becomes aware of the occurrence of any Reportable
Event (as defined in Section 4043 of ERISA) with respect to the
Borrower, a statement describing such Reportable Event and the actions
proposed to be taken in response to such Reportable Event.
(11) OTHER INFORMATION. Such other information
regarding the condition, financial or otherwise, or operations of the
Borrower as CoBank may, from time to time, reasonably request.
SECTION 14. NEGATIVE COVENANTS. Unless otherwise agreed to in
writing by CoBank, while this Agreement is in effect, the Borrower shall not:
(A) BORROWINGS. Create, incur, assume, or allow to
exist, directly or indirectly, any indebtedness or liability for borrowed
money, for the deferred purchase price of property or services, or for the
lease of real or personal property which lease is required to be capitalized
under GAAP or which is treated as an operating lease under regulations
applicable to it but which otherwise would be required to be capitalized under
GAAP (a "Capital Lease"), except for obligations to CoBank.
(B) LIENS. Create, incur, assume, or allow to exist any
mortgage, deed of trust, deed to secure debt, pledge, lien (including the lien
of an attachment, judgment, or exe-
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Loan No. S0441
cution), security interest, or other encumbrance of any kind upon any of its
property, real or personal, except in favor of CoBank.
(C) MERGERS; ACQUISITIONS; ETC. Merge or consolidate
with any other entity or acquire all or substantially all of the assets of any
person or entity, or form or create any subsidiary, or commence operations
under any other name, organization, or entity, including any joint venture.
(D) TRANSFER OF ASSETS. Sell, transfer, lease, enter
into any contract for the sale, transfer or lease of, or otherwise dispose of,
any of its assets.
(E) LOANS AND INVESTMENTS. After the date hereof, make
any loan or advance to, invest in, purchase or make any commitment to purchase
any stock, bonds, notes or other securities of any person or entity other than
stock or other securities of CoBank and the advances to its affiliated entities
of loan proceeds received from CoBank as contemplated by this Agreement or any
other loan agreement entered into between CoBank and the Borrower.
(F) GUARANTEES. Guarantee, assume or otherwise become
obligated or liable with respect to the indebtedness or other obligations of
any person or entity.
(G) CHANGE IN BUSINESS. Engage in any business activity
or operation different from or unrelated to the Borrower's current business
activities or operations, as described in Section 12(M).
(H) DISPOSITION OF LICENSES. Sell, assign, transfer, or
otherwise dispose of, or attempt to dispose of, in any way, any registrations,
licenses, franchises, grants, permits, or other governmental approvals.
SECTION 15. EVENTS OF DEFAULT. Each of the following shall
constitute an "Event of Default" hereunder:
(A) PAYMENT DEFAULT. The failure by the Borrower to
make any payment or investment required to be made hereunder, under the Note,
or under any other Loan Document when due.
(B) REPRESENTATIONS AND WARRANTIES. Any representation
or warranty made by the Borrower or MCTC herein or in any other Loan Document,
or any factual statement made in any certificate delivered in connection with
the Loan, shall prove to have been false or misleading in any material respect
on or as of the date made.
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(C) CERTAIN AFFIRMATIVE COVENANTS. The failure by the
Borrower to perform or comply with any covenant set forth in Section 13 (other
than Sections 13(A) and 13(I)(4), (5), (6), (7), (8) and (10)), and such
failure continues for 30 days after written notice thereof shall have been
delivered by CoBank to the Borrower.
(D) OTHER COVENANTS AND AGREEMENTS. The failure by the
Borrower to perform or comply with any other covenant or agreement contained
herein, including, without limitation, any covenant excluded under Subsection
(C) above.
(E) CROSS-DEFAULT. The occurrence of any (i) breach,
default, event of default, or event which with the giving of notice or lapse of
time, or both, could become a default or event of default under, or (ii)
failure on the part of the Borrower or MCTC to observe, keep or perform any
covenant or agreement contained in (a) any Loan Document other than this
Agreement, (b) that certain Loan Agreement, dated as of April 20, 1995, by and
between the Borrower and CoBank, providing for a loan of up to $18,000,000, (c)
that certain Amended and Restated Loan Agreement, dated as of May 15, 1996, as
amended by that certain First Amendment and Supplement to Amended and Restated
Loan Agreement, dated as of July 1, 1996, each by and between the Borrower and
CoBank, providing for a loan of up to $32,400,000, (d) that certain Loan
Agreement, dated as of May 15, 1996, by and between the Borrower and CoBank,
providing for a loan of up to $5,000,000, (e) that certain Loan Agreement,
dated as of July 1, 1996, by and between the Borrower and CoBank, providing for
a loan of up to $13,000,000, or (f) the terms of any other agreement (other
than the Loan Documents) between the Borrower, MCTC, Mississippi One or
Mercury, Inc. and CoBank, including, without limitation, any guaranty, loan
agreement, security agreement, pledge agreement, mortgage, deed to secure debt,
or deed of trust.
(F) OTHER INDEBTEDNESS. The occurrence of any breach,
default, event of default, or event which with the giving of notice or lapse of
time, or both, could become a default or event of default under any agreement,
indenture, mortgage, or other instrument by which the Borrower or MCTC or any
of their respective property is bound or affected (other than the Loan
Documents) if the effect of such breach, default, event of default, or event is
to accelerate, or to permit the acceleration of, the maturity of any
indebtedness under such agreement, indenture, mortgage, or other instrument.
(G) JUDGMENTS. Any judgment, decree or order for the
payment of money shall be rendered against the Borrower or judgments, decrees,
or orders for the payment of money in an aggregate amount in excess of $75,000
shall be rendered against MCTC and either (i) enforcement proceedings shall
have been commenced; or (ii) such judgments, decrees, and orders shall continue
unsatisfied and in effect for a period of 45 consecutive days without being
vacated, discharged, satisfied, or stayed pending appeal.
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(H) INSOLVENCY, ETC. The Borrower or MCTC (i) shall
become insolvent or shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they come due; or (ii) shall
suspend its business operations or a material part thereof or make an
assignment for the benefit of creditors; or (iii) shall apply for, consent to,
or acquiesce in the appointment of a trustee, receiver, or other custodian for
it or any of its property or, in the absence of such application, consent, or
acquiescence, a trustee, receiver, or other custodian is so appointed; or (iv)
shall commence with respect to it or have commenced against it any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution, or liquidation law or statute of any jurisdiction.
(I) ELIGIBILITY. The failure by the Borrower to
maintain its eligibility to borrow from CoBank.
(J) BINDING OBLIGATIONS. Any of the MCTC Note and the
MCTC Guaranty shall fail for any reason to be the valid and binding obligations
of MCTC or MCTC shall in any way contest or dispute the validity and binding
effect of the MCTC Note or the MCTC Guaranty.
SECTION 16. REMEDIES UPON EVENT OF DEFAULT.
(A) AUTOMATIC ACCELERATION. Upon the occurrence of an
Event of Default under Section 15(H), the entire unpaid principal balance of
the Note, all accrued interest thereon, and all other amounts payable under
this Agreement, the Note, and all other agreements between CoBank and the
Borrower shall become immediately due and payable without protest, presentment,
demand, or further notice of any kind, all of which are hereby expressly waived
by the Borrower.
(B) ACCELERATION; ETC. Upon the occurrence of an Event
of Default other than under Section 15(H), upon notice to the Borrower, CoBank
may declare the entire unpaid principal balance of the Note, all accrued
interest thereon, and all other amounts payable under this Agreement and all
other agreements between CoBank and the Borrower, to be immediately due and
payable. Upon such a declaration, the unpaid principal balance of the Note and
all such other amounts shall become immediately due and payable, without
protest, presentment, demand, or further notice of any kind, all of which are
hereby expressly waived by the Borrower.
(C) ENFORCEMENT. Upon the occurrence of an Event of
Default, CoBank may proceed to protect, exercise, and enforce such rights and
remedies as may be provided by agreement or under law including, without
limitation, the rights and remedies provided for in the Note and any of the
other Loan Documents. Each and every one of such rights and remedies shall be
cumulative and may be exercised from time to time, and no failure on the
-16-
<PAGE> 17
Loan Agreement/CTC Financial
Loan No. S0441
part of CoBank to exercise, and no delay in exercising, any right or remedy
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right or remedy preclude any other or future exercise thereof, or the
exercise of any other right. In addition, CoBank may hold and/or set off and
apply against the Borrower's indebtedness any and all cash, accounts,
securities, or other property in CoBank's possession or under its control.
(D) APPLICATION OF PAYMENTS. After acceleration of the
Loan, all amounts received by CoBank shall be applied to the amounts owing
hereunder, under the Note, and the other Loan Documents in whatever order and
manner as CoBank shall elect.
(E) REGULATORY APPROVALS. Upon any action by CoBank to
commence the exercise of remedies hereunder, the Borrower hereby undertakes and
agrees to cooperate and join with CoBank in any application to the LPSC, the
FCC, the SEC or any other regulatory body, administrative agency, court or
other forum (any such entity, a "Governmental Authority") with respect thereto
and to provide such assistance in connection therewith as CoBank may request,
including, without limitation, the preparation of filings and appearances of
officers and employees of the Borrower before such Governmental Authority, in
each case in support of any such application made by CoBank, and the Borrower
shall not, directly or indirectly, oppose any such action by CoBank before any
such Governmental Authority.
SECTION 17. COMPLETE AGREEMENT; AMENDMENT. This Agreement, the
Note, and the other Loan Documents are intended by the parties to be a complete
and final expression of their agreement. No amendment, modification, or waiver
of any provision hereof or thereof, nor any consent to any departure of the
Borrower herefrom or therefrom, shall be effective unless approved by CoBank
and contained in a writing signed by or on behalf of CoBank, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 18. APPLICABLE LAW. Except to the extent governed by
applicable federal law, this Agreement shall be governed by and construed in
accordance with the laws of the State of Louisiana, without reference to choice
of law doctrine.
SECTION 19. NOTICES. All notices hereunder shall be in writing
and shall be deemed to be duly given upon delivery, if delivered by "Express
Mail," overnight courier, messenger or other form of hand delivery or sent by
telegram or facsimile transmission, or 3 days after mailing if sent by
certified or registered mail, to the parties at the following addresses (or
such other address for a party as shall be specified by like notice):
-17-
<PAGE> 18
Loan Agreement/CTC Financial
Loan No. S0441
If to CoBank, as follows: If to the Borrower, as follows:
CoBank, ACB CTC Financial, Inc.
200 Galleria Parkway P.O. Box 3709
Suite 1900 Lake Charles, Louisiana 70602
Atlanta, Georgia 30339 Attn: Dusty Dumas;
Attn: Rural Utility Banking Group cc: Thomas G. Henning
Fax No.: (770) 618-3202 Fax No.: (318) 439-0769
SECTION 20. COSTS AND EXPENSES. The Borrower shall reimburse
CoBank on demand for all reasonable out-of-pocket costs and expenses incurred
by CoBank in connection with the origination, negotiation, preparation and
administration of this Agreement and all other Loan Documents, and the
preservation and enforcement of CoBank's rights and remedies hereunder and
thereunder, including, without limitation: all (a) costs and expenses
(including intangible and other taxes and any recording fees or expenses)
incurred by CoBank to obtain, perfect, maintain, determine the priority of, or
release any security contemplated hereunder; (b) fees and expenses of any
outside counsel retained by CoBank to assist CoBank with respect to any matter
contemplated by this Section or to review this Agreement and all other Loan
Documents and advise CoBank as to its rights and remedies hereunder or
thereunder; (c) fees and expenses of any outside counsel retained by CoBank to
represent it in any litigation involving the parties to any of the Loan
Documents, including but not limited to, bankruptcy, receivership, or similar
proceedings; and (d) fees, costs and expenses incurred in connection with
obtaining surveys and appraisals, if any, required under this Agreement or any
other Loan Document.
SECTION 21. EFFECTIVENESS; SEVERABILITY. This Agreement
shall continue in effect until all indebtedness and obligations of the Borrower
hereunder and under all other Loan Documents shall have been fully and finally
repaid. Any provision of the Loan Documents which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof.
SECTION 22. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the Borrower and CoBank and their
respective successors and assigns, except that the Borrower may not assign or
transfer its rights or obligations hereunder without the prior written consent
of CoBank. Without the consent of, but with notice to, the Borrower, CoBank
may (a) sell participations to one or more banks or other entities in all or a
portion of its rights and obligations under this Agreement, or (b) assign to
one or more banks or other entities all or a portion of its rights and
obligations under this Agreement.
-18-
<PAGE> 19
Loan Agreement/CTC Financial
Loan No. S0441
SECTION 23. CONSENT TO JURISDICTION. To the maximum extent
permitted by law, the Borrower agrees that any legal action or proceeding with
respect to this Agreement or any of the other Loan Documents may be brought in
the courts of the State of Louisiana or of the United States of America for the
Western District of Louisiana, all as CoBank may elect. By execution of this
Agreement, the Borrower hereby irrevocably submits to each such jurisdiction,
expressly waiving any objection it may have to the laying of venue by reason of
its present or future domicile. Nothing contained herein shall affect the
right of CoBank to commence legal proceedings or otherwise proceed against the
Borrower in any other jurisdiction or to serve process in any manner permitted
or required by law.
SECTION 24. OBLIGATIONS ABSOLUTE. The obligation of the
Borrower to make all payments required to be made under this Agreement shall be
independent of any action by the LPSC or the FCC with respect to rates and/or
disallowance of debt.
SECTION 25. COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original and
shall be binding upon all parties and their respective permitted successors and
assigns, and all of which taken together shall constitute one and the same
agreement.
SECTION 26. DEFINED TERMS. For convenience of reference, set
forth below opposite each defined term used in this Agreement is the location
in this Agreement of the definition of such term:
Defined Term Location
------------ --------
Agreement Introductory Paragraph
Borrower Introductory Paragraph
Business Day Section 3
Capital Lease Section 14(A)
CoBank Introductory Paragraph
Default Section 11(B)(1)
Event of Default Section 15
FCC Section 13(I)(7)
GAAP Section 13(G)
Governmental Authority Section 16(E)
Laws Section 12(E)
LPSC Section 13(I)(7)
Loan Section 1
Loan Documents Section 11(A)(1)
Material Adverse Effect Section 11(A)(9)
-19-
<PAGE> 20
MCTC Section 2
MCTC Guaranty Section 10
MCTC Note Section 10
Mercury Cellular Debt Section 11(A)(8)
Mississippi One Section 2
Note Section 7
Quoted Rate Section 4(A)(2)
SEC Section 13(I)(7)
Surcharge Section 6
Termination Date Section 1
Variable Rate Section 4(A)(1)
(Signatures follow on the next page.)
-20-
<PAGE> 21
Loan Agreement/CTC Financial
Loan No. S0441
THUS DONE AND SIGNED in several counterparts at the places and on the
dates indicated below, and in the presence of the respective undersigned
Notaries Public and the respective undersigned witnesses indicated below, by
duly authorized officers of the respective parties, after a due reading of the
whole.
At Lake Charles, Louisiana, on ________________ ___, 1996.
CTC FINANCIAL, INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
Attest:
-----------------------------
Name:
-----------------------
Title:
----------------------
[CORPORATE SEAL]
Witnesses to both signatures:
- --------------------------------
Witness
- --------------------------------
Witness
- --------------------------------
Notary Public
My commission expires:
---------
[NOTARIAL SEAL]
(Signatures continued on next page.)
-21-
<PAGE> 22
Loan Agreement/CTC Financial
Loan No. S0441
(Signatures continued from previous page.)
At Atlanta, Georgia, on _____________ ___, 1996.
COBANK, ACB
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
Witnesses to signature:
- ----------------------------------------
Witness
- ----------------------------------------
Witness
- ----------------------------------------
Notary Public
My commission expires:
-----------------
[NOTARIAL SEAL]
-22-
<PAGE> 1
EXHIBIT 4.75
LOAN NO. T0310
LOAN NO. T0347
LOAN NO. S0441
COBANK, ACB
FIRST AMENDMENT AND SUPPLEMENT TO
ACT OF SUBORDINATION
BEFORE, the respective undersigned Notaries Public, and in the
presence of the respective witnesses hereinafter named and undersigned,
personally came and appeared the parties listed below, who, after being duly
sworn, did state:
THIS FIRST AMENDMENT AND SUPPLEMENT TO ACT OF SUBORDINATION (this
"First Amendment") is made and entered into as of November 25, 1996 by and
among MERCURY CELLULAR TELEPHONE COMPANY ("MCTC"), MISSISSIPPI ONE CELLULAR
TELEPHONE COMPANY ("Mississippi One"), and COBANK, ACB, formerly known as the
National Bank for Cooperatives ("CoBank"), and amends that certain Act of
Subordination, dated as of July 1, 1996, by MCTC and Mississippi One in favor
of CoBank (the "Act of Subordination").
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, MCTC, Mississippi One and CoBank hereby agree as follows:
1. Section 1 of the Act of Subordination is hereby amended and
restated to read in its entirety as follows:
"SECTION 1. SUBORDINATION OF DEBT. MCTC and
Mississippi One agree that all obligations of Mississippi One
to MCTC, whether direct or indirect, absolute or contingent,
secured or unsecured, due or to become due, now existing or
hereafter arising, including, without limitation, (i) that
certain Note, dated July 1, 1996, drawn by Mississippi One to
the order of MCTC, in the face principal amount of $13,000,000
and (ii) that certain Note, dated November 25, 1996, drawn by
Mississippi One to the order of MCTC, representing amounts
loaned by CoBank under S0441 and reloaned to Mississippi One
(all such obligations, collectively, the "Subordinated Debt"),
are and shall be subordinate in payment and right of payment
to the prior payment in full of all obligations of Mississippi
One to CoBank, whether direct or indirect, absolute or
contingent, secured or unsecured, due or to become due, now
existing or hereafter arising, principal, interest (accruing
both before and after any default by, or insolvency or
bankruptcy of, Mississippi One) or other cost or charge,
including, without limitation, all obligations hereafter
arising
<PAGE> 2
First Amendment to Act of
Subordination/MCTC
Loan No. T0310
Loan No. T0347
Loan No. S0441
under that certain First Amended and Restated Continuing
Guaranty, dated as of May 15, 1996, as amended by that certain
First Amendment and Supplement to Amended and Restated
Continuing Guaranty, dated as of July 1, 1996 (as so amended
and as the same may be amended, modified, supplemented,
extended or restated from time to time, the "Mississippi One
Guaranty"), made by Mississippi One for the benefit of CoBank
(all such obligations, collectively, the "CoBank Debt"). For
purposes of this Agreement, the CoBank Debt shall not be
deemed to have been paid in full until all loan agreements
between CoBank and Mississippi One or any affiliate of
Mississippi One if, with respect to such affiliate,
Mississippi One has guaranteed the affiliate's obligations
under such loan agreements, including, without limitation,
that certain Amended and Restated Loan Agreement, dated as of
May 15, 1996, as amended by that certain First Amendment and
Supplement to Loan Agreement, dated as of July 1, 1996,
providing for a loan of up to $32,400,000, and that certain
Loan Agreement, dated as of May 15, 1996, providing for a loan
of up to $5,000,000, all by and between CoBank and CTC
Financial, Inc. (the foregoing loan agreements, collectively,
the "Loan Agreements"), shall have been terminated and CoBank
shall have received irrevocable payment of the CoBank Debt in
immediately available funds or in another manner satisfactory
to CoBank. MCTC agrees not to ask, demand, sue for, take or
receive from Mississippi One, directly or indirectly, in cash
or other property or by set-off or in any other manner,
payment of or collateral for the payment of all or any of the
Subordinated Debt unless or until the CoBank Debt shall be
paid in full and, without the prior written consent of CoBank,
will not exercise any remedies available to it, whether by
agreement, law or equity or otherwise, in respect to the
nonpayment of the Subordinated Debt, including, without
limitation, the acceleration of the Subordinated Debt."
2. Section 9 of the Act of Subordination is hereby amended and
restated to read in its entirety as follows:
"SECTION 9. SUBORDINATED DEBT LEGEND. Mississippi
One and MCTC will cause each instrument evidencing
Subordinated Debt to be endorsed with the following legend:
"The indebtedness evidenced by this instrument is
subordinated to the prior payment in full of the
"CoBank
-2-
<PAGE> 3
First Amendment to Act of
Subordination/MCTC
Loan No. T0310
Loan No. T0347
Loan No. S0441
Debt" (as defined in the Act of Subordination
hereinafter referred to) pursuant to, and to the
extent provided in that certain Act of Subordination,
dated as of July 1, 1996, as amended by that certain
First Amendment and Supplement to Act of
Subordination, dated as of November 25, 1996, by the
maker hereof and payee named herein in favor of
CoBank, ACB."
In the case of any Subordinated Debt which is not evidenced by
an instrument, upon CoBank's request, Mississippi One and MCTC
shall cause such Subordinated Debt to be evidenced by an
appropriate instrument or instruments endorsed with the above
legend."
3. It is the intention of the parties hereto that this First
Amendment shall not constitute a novation, it being the intention of the
parties hereto merely to amend the Act of Subordination as expressly set forth
herein. To the extent not inconsistent herewith, all of the terms and
conditions of the Act of Subordination shall remain in full force and effect
and are hereby ratified and confirmed by MCTC, Mississippi One and CoBank.
4. This First Amendment may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original and shall be binding
upon all parties and their respective permitted successors and assigns, and all
of which taken together shall constitute one and the same agreement.
5. This First Amendment shall be governed by and construed in
accordance with the laws of the State of Louisiana, without reference to choice
of law doctrine.
[Signatures follow on next page]
-3-
<PAGE> 4
First Amendment to Act of
Subordination/MCTC
Loan No. T0310
Loan No. T0347
Loan No. S0441
THUS DONE AND SIGNED in several counterparts at the places and on the
dates indicated below, and in the presence of the respective undersigned
Notaries Public and the respective undersigned witnesses indicated below, by
duly authorized officers of the respective parties, after a due reading of the
whole.
At Lake Charles, Louisiana, on ____________, 1996.
MERCURY CELLULAR TELEPHONE COMPANY
By:
--------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Attest:
----------------------------------------
Name:
---------------------------------
Title:
--------------------------------
[CORPORATE SEAL]
Witnesses to all signatures:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
--------------------
[NOTARIAL SEAL]
[Signatures continued on next page]
-4-
<PAGE> 5
First Amendment to Act of
Subordination/MCTC
Loan No. T0310
Loan No. T0347
Loan No. S0441
[Signatures continued from previous page]
At Lake Charles, Louisiana, on ____________, 1996.
MISSISSIPPI ONE CELLULAR TELEPHONE
COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
Witnesses to signature:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
--------------------
[NOTARIAL SEAL]
[Signatures continued on next page]
-5-
<PAGE> 6
First Amendment to Act of
Subordination/MCTC
Loan No. T0310
Loan No. T0347
Loan No. S0441
[Signatures continued from previous page]
At Atlanta, Georgia, on ___________, 1996.
COBANK, ACB
By:
------------------------------------
Name:
------------------------------
Title:
-----------------------------
Witnesses to signature:
- -------------------------------------------
Witness
- -------------------------------------------
Witness
- -------------------------------------------
Notary Public
My commission expires:
--------------------
[NOTARIAL SEAL]
-6-
<PAGE> 1
EXHIBIT 4.76
LOAN NO. S0441
COBANK, ACB
PROMISSORY NOTE
CTC FINANCIAL, INC.
LAKE CHARLES, LOUISIANA
$4,000,000 DATED: NOVEMBER 25, 1996
FOR VALUE RECEIVED, CTC FINANCIAL, INC. (the "Borrower"), promises to
pay to the order of COBANK, ACB (the "Payee"), at the times and in the manner
set forth in that certain Loan Agreement, dated as of even date herewith, and
numbered Loan No. S0441, by and between the Borrower and the Payee, and as that
agreement may be amended, modified, supplemented, extended or restated from
time to time (the "Loan Agreement"), the principal sum of FOUR MILLION DOLLARS
($4,000,000) or such lesser amount as may be advanced hereunder, together with
interest on the unpaid principal balance hereof at the rate or rates provided
for in the Loan Agreement.
This Note is given for one or more advances to be made by the Payee to
the Borrower pursuant to the Loan Agreement, all of the terms and provisions of
which are hereby incorporated by reference. Advances, accrued interest and
payments shall be posted by the Payee upon an appropriate accounting record,
which record (and all computer printouts thereof) shall constitute prima facie
evidence of the outstanding principal and interest on the advances. The total
of such advances may exceed the face amount of this note but the unpaid
principal balance shall not at any time exceed such face amount. Any amount of
the principal hereof which is not paid when due, whether at stated maturity, by
acceleration or otherwise, shall bear interest from the date when due until
said principal amount is paid in full, payable on demand, at a rate per annum
set forth in the Loan Agreement.
The Borrower hereby waives presentment for payment, demand, protest,
and notice of dishonor and nonpayment of this Note, and all defenses on the
ground of delay or of any extension of time for the payment hereof which may be
hereafter given by the holder or holders hereof to it or to anyone who has
assumed the payment of this Note, and it is specifically agreed that the
obligations of the Borrower shall not be in anywise affected or altered to the
prejudice of the holder or holders hereof by reason of the assumption of
payment of the same by any other person or entity.
Should this Note be placed in the hands of an attorney for collection
or the services of any attorney become necessary in connection with enforcing
its provisions, the Borrower agrees to pay reasonable attorneys' fees, together
with all costs and expenses incident thereto, to the extent allowed by law.
Except to the extent governed by applicable federal law, this Note shall be
governed by and construed in accordance with the laws of the State of
Louisiana, without reference to choice of law doctrine.
<PAGE> 2
Promissory Note/CTC Financial
Loan No. S0441
IN WITNESS WHEREOF, the Borrower has caused this Promissory Note to be
executed, attested, sealed and delivered by its duly authorized officers as of
the date first shown above.
CTC FINANCIAL, INC.
By:
---------------------------------
[CORPORATE SEAL] Name:
----------------------------
Title:
---------------------------
Attest:
-----------------------------
Name:
------------------------
Title:
-----------------------
-2-
<PAGE> 1
EXHIBIT 4.77
LOAN NO. T0362
LOAN NO. T0388
COBANK, ACB
ASSUMPTION AGREEMENT
STATE OF LOUISIANA )
)
PARISH OF CALCASIEU )
BEFORE the respective undersigned Notary Public, and in the presence of
the undersigned competent witnesses, personally came and appeared the party
listed below, who, after being duly sworn, did state:
THIS ASSUMPTION AGREEMENT (this "Assumption") is made and entered into
as of October 31, 1996, by MERCURY, INC., a Louisiana corporation ("Mercury"),
for the benefit of COBANK, ACB ("CoBank").
R E C I T A L S
WHEREAS, Cameron Communications Corporation (the "Pledgor") owns 96% of
the capital stock of Mercury Cellular Telephone Company ("MCTC"); and
WHEREAS, CoBank and CTC Financial, Inc. (the "Borrower") have entered
into that certain Loan Agreement, dated as of April 20, 1995 (as the same may
be amended, supplemented, extended or restated from time to time, the "First
Loan Agreement"), providing for a loan of up to $18,000,000 (the "First Loan"),
and into that certain Loan Agreement, dated as of July 1, 1996 (the "Second
Loan Agreement"; the First Loan Agreement and the Second Loan Agreement,
collectively, the "Loan Agreements"), providing for a loan of up to $13,000,000
(the "Second Loan"; the First Loan and the Second Loan, collectively, the
"Loans"); and
WHEREAS, the proceeds of the First Loan have been reloaned by the
Borrower to MCTC for the purposes set forth in the First Loan Agreement and the
proceeds of the Second Loan have been reloaned by the Borrower to MCTC for the
purposes set forth in the Second Loan Agreement; and
WHEREAS, as an inducement to CoBank to execute the Loan Agreements and
to make the Loans, the Pledgor has made that certain Limited Recourse
Continuing Guaranty, dated as of April 20, 1995, as amended by that certain
First Amendment and Supplement to Limited Recourse
<PAGE> 2
Assumption Agreement
Loan No. T0362
Loan No. T0388
Continuing Guaranty, dated as of July 1, 1995 (as so amended and as the same
may hereafter be amended, supplemented, extended or restated from time to time,
the "CCC Limited Recourse Guaranty"), for the benefit of CoBank; and
WHEREAS, to secure the Pledgor's obligations to CoBank under the CCC
Limited Recourse Guaranty and the "Obligations" (as therein defined), the
Pledgor pledged to CoBank certain collateral on the terms and conditions set
forth in that certain Pledge Agreement, dated as of April 20, 1995, by and
between the Pledgor and CoBank, as amended by that certain First Amendment and
Supplement to Pledge Agreement, dated as of July 1, 1996 (as so amended and as
the same may hereafter be amended, supplemented, extended or restated from time
to time, the "CCC Pledge Agreement"); and
WHEREAS, effective as of the date hereof, the Pledgor has merged with
and into Mercury, with Mercury as the surviving entity; and
WHEREAS, Mercury wishes to acknowledge and confirm as its own the
obligations of the Pledgor to CoBank set forth in the CCC Limited Recourse
Guaranty and the CCC Pledge Agreement;
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, Mercury agrees as follows:
SECTION 1. Mercury hereby expressly acknowledges, confirms, agrees to
and assumes all of the obligations, covenants and other agreements of the
Pledgor to and for the benefit of CoBank as set forth in the CCC Limited
Recourse Guaranty and the CCC Pledge Agreement, and expressly confirms, makes
and remakes the pledge provided for in the CCC Pledge Agreement. Mercury
further agrees that all references in the CCC Limited Recourse Guaranty and the
CCC Pledge Agreement to "CCC" or to the "Pledgor" shall be to Mercury, all as
if Mercury were a party to such agreements and the pledge and other obligations
thereunder.
SECTION 2. Mercury hereby remakes, as the date of this Assumption, the
representations and warranties of the Pledgor set forth in the CCC Pledge
Agreement and the CCC Limited Recourse Guaranty.
SECTION 3. It is the intention of Mercury that the CCC Pledge Agreement
and the CCC Limited Recourse Guaranty shall remain in full force and effect,
and hereby fully ratifies and confirms the same.
-2-
<PAGE> 3
Assumption Agreement
Loan No. T0362
Loan No. T0388
SECTION 4. This Assumption shall be governed by and construed in
accordance with the laws of the State of Louisiana, without reference the
choice of law doctrine.
THUS DONE AND SIGNED as of October 31, 1996, in the city of Lake
Charles, State of Louisiana, before me, a Notary Public, after a due reading of
the whole.
MERCURY, INC.
By:
-----------------------------------------
Name:
-----------------------------------
Title: President
Attest:
-------------------------------------
Name:
----------------------------------
Title: Secretary
[CORPORATE SEAL]
Witnesses to all signatures:
- -----------------------------------
Witness
- -----------------------------------
Witness
- -----------------------------------
Notary Public
My commission expires:
------------
[NOTARIAL SEAL]
-3-
<PAGE> 1
EXHIBIT 10.1
BTA MANAGEMENT AND
CONSTRUCTION SERVICES AGREEMENT
THIS Agreement ("Agreement") dated as of July 1, 1996, is made by and
between MERCURY, INC., a Louisiana corporation ("MI"), and MERETEL
COMMUNICATIONS, LIMITED PARTNERSHIP, a Louisiana partnership in commendum
("MC").
WITNESSETH
WHEREAS, MC won the Block C auction held by the Federal Communications
Commission (the "FCC") to construct a personal communications service ("PCS")
system operating on Frequency Block C (the "System") to nerve various basic
trading areas ("BTAs") specified by the FCC including the following: BTA #034 -
Beaumont, BTA #236 - Lafayette parishes, and BTA #265 - Lufkin (the
"Territory").
WHEREAS, MC desires to enter into an agreement for the construction,
management and operation of the System in the Territory, at all times subject
to oversight, review, supervision and control by MC;
WHEREAS, MI has the necessary experience, resources and expertise
pertinent to PCS system to provide the services contemplated by this Agreement
for the construction, management and operation of the System and the provision
by the System of quality PCS service to the public; and
WHEREAS, all of the foregoing and all of the agreements between the
parties herein shall be subject to FCC and other regulatory approvals, if any,
as required by law.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed as follows:
ARTICLE I.
DEFINITIONS
1.1 Initial Construction - Construction as proposed by MC's
equipment vendor/consultant to meet the first phase of the buildout of the
System as submitted by MC.
1.2 System Design - The RF and network plan of implementation as
submitted by MC.
1.3 Additional Construction - Construction as submitted by MC to
provide additional or fill-in coverage or capacity after the first phase of the
buildout of the System.
1.4 Operating License - Authority to operate the System as granted
by the FCC.
1
<PAGE> 2
CONSTRUCTION SERVICE
1.5 GENERAL
(a) Subject to MC's oversight and control, MI shall manage and
supervise: (i) the Initial Construction of the System in the
Territory in accordance with the System Design; and (ii) such
Additional Construction as may be necessary to expand the
System in the Territory to satisfy the requirement of the
FCC's rules and to meet demand in the Territory in accordance
with the System Design. MI shall use its best efforts to
devote such time and resources to construction of the System
in the Territory as may reasonably be necessary for completion
of construction of the Initial System within eighteen (18)
months after grant of the Operating License ("Initial
Construction Completion Date") by the FCC.
1.6 DESIGN DEVELOPMENT AND SYSTEM CONSTRUCTION. MI, subject to
MC's supervision, shall be responsible for the competent, business like and
timely management and supervision of all activities integral to the
construction of the System in the Territory, including, but not limited to, the
following:
(i) review of the System Design proposed by MC, and, if MI
recommends modifying the System Design, developing for MC's
consideration and approval a new System Design, including, but
not limited to, development of a cell configuration,
formulation of a frequency plan, analysis of propagation
characteristics, projection of the probable volume and
location of demand, allocation of system capacity, and
selection of control point, base station, and business office
sites;
(ii) negotiation as agent for MC of such leases, options and
contracts and the securing of such third party consents and
agreements, including the entering into as agent for MC of
such purchase agreements, leases or contracts, as may be
necessary to permit the full use of the control point, base
station, and business office sites selected;
(iii) secure as agent for MC such zoning or other necessary
governmental approvals as may be required to permit the use of
the control point, base station, and business office sites
selected and acquired;
(iv) if requested by MC, preparation of proposed modifications to
the Operating License for MC's review, prior approval and
execution and, as agent for MC, securing FCC approval of any
FCC applications for such modifications to be filed by MC, and
securing as agent for MC such Federal Aviation Administration
("FAA") approvals as may be required for tower and antenna
placements and heights;
2
<PAGE> 3
(v) preparation of control point, base station, and business
office sites, including construction and/or modifications of
radio towers and buildings, if needed, to house switching and
base station equipment, construction and/or improvement of
access roads, and installations of such security facilities as
may be necessary to meet FCC, vendor and/or sound business
requirements.
(vi) installation of switching and base station equipment and such
other facilities as may be necessary or appropriate for the
operation of such equipment and the System in the Territory
or, to the extent appropriate to or required by the System
Design, the negotiation and execution, as agent for MC, and
subject to MC's prior approval, of such agreements as are
necessary to obtain use of the joint or shared switching
facilities of any other existing or planned PCS systems,
provided that such planned system will become operational by
such date as to allow the timely commencement of operations of
the System; and
(vii) if requested by MC, the preparation and filing of any
applications necessary to obtain the Operating License from the
FCC for the Territory.
(viii) coordinate with other contractors providing similar services
to MC for other BTAs included in the System but outside the
Territory.
1.7 INTERCONNECTION. MC may direct and in such event MI shall be
responsible for negotiating, as agent for MC, with such local exchange
telephone company or companies as MI may deem appropriate, the terms and
conditions by which the System in the Territory will be interconnected to the
local exchange switched telephone network and/or to the facilities of one or
more interexchange common carriers, and shall supervise and manage such
interconnections.
ARTICLE II.
MANAGEMENT AND OPERATION
2.1 GENERAL. Subject to MC's oversight and control, MI shall
manage and supervise the daily operations of the System in the Territory. To
this end, MI shall provide (i) administrative, customer service, accounting,
insurance, purchasing, clerical and such other general services as may be
necessary to the administration of the System in the Territory; and (ii)
marketing, sales, advertising and such other promotional services as may be
necessary in the marketing of the System in the Territory; (iii) the
development and implementation of mechanisms for collecting the amounts billed
by the System in the Territory which are not properly paid; (iv) the process of
verifying potential customer credit and defining deposit amounts when required;
(v) the establishment of bank accounts as may be necessary to the operation of
the System in the Territory; and (vi) technical operations, engineering, and
maintenance of the System in the Territory. MI shall devote its best efforts to
operate and manage the System in the Territory properly and efficiently. MI,
subject to MC's supervision,
3
<PAGE> 4
shall be responsible for such additional activities integral to the operation
of the System in the Territory as follows:
(i) the hiring of personnel to manage and operate the System and
to market the services of the System in the Territory;
(ii) the entering into, as agent for MC of such agreements as may
be necessary for the provision of services, supplies, office
or other types of space, utilities, insurance, and the like in
the Territory;
(iii) the development and implementation of promotional programs in
the Territory, including but not limited to the negotiation,
as agent for MC of resale arrangements;
(iv) the preparation of proposals for expansion of the System in
the Territory or for such other capital improvements as may be
necessary to comply with FCC rules or to meet market demand;
(v) the entering into of such agreement with other PCS system
operators, including but not limited to roaming and shared
facilities agreements, as may be appropriate or advisable to
the operation of the System in the Territory,
2.2 INSURANCE. If requested by MC during the term of this
Agreement, MI shall procure and maintain, at MC's expense, property damage and
liability insurance on the System with such coverage as are necessary to
protect the System in the Territory, workmen's compensation insurance and
fidelity bond coverage. Insurance will afford protection in an amount set forth
by MC.
ARTICLE III
BUDGETS AND EXPENDITURES
3.1 GENERAL. In developing budgets, MI and MC shall endeavor to
assure that the System in the Territory shall be of sufficient size and provide
a service of sufficient quality to meet the demands of the Territory and to
provide a viable competitive services to serve the Territory. However, the
System in the Territory shall be constructed and operated as cost-effectively
as possible.
3.2 CONSTRUCTION BUDGET. A budget for the construction of the
System (the "Construction Budget") shall be prepared by MI and submitted to MC
for approval within thirty (30) days from the date when MC selects an equipment
vendor. Thereafter, an annual Construction Budget shall be submitted to MC for
approval by December 1 of each year for the immediate succeeding calendar year.
MI shall provide MC with weekly reports on the status of
4
<PAGE> 5
construction and a comparison of actual expenditures versus amounts budgeted
for the categories set out in the Construction Budget.
3.3 OPERATIONS BUDGET. MI shall submit to MC an annual operations
budget ("Operations Budget") by December 1 of each year for the immediately
succeeding calendar year which shall itemize the projected expenditures and the
anticipated net profit or loss (as determined in accordance with generally
accepted accounting principles) of the System in the Territory. Such Operations
Budget shall form the basis on which expenditures for the System in the
Territory shall be made.
ARTICLE IV.
AUTHORITY
4.1 LIMITATIONS. In addition to those matters elsewhere listed in
this Agreement for which MC's written prior approval is required, MI shall not
have authority, without prior written approval by MC, to undertake any of the
following actions in the name of or on behalf of MC:
(i) sell, wade or surrender the Operating License or attempt to
modify the Operating License;
(ii) modify the Construction Budget or Operations Budget;
(iii) enter into any joint venture, partnership or other agreement
dealing with the System;
(iv) grant a security interest in or hypothecate any of the assets
of the System;
(v) incur any debts not in the ordinary course of business;
(vi) settle any legal action or litigation in the name of MC or the
System or brought by or against MC or the System.
Except as otherwise expressly provided for in this Agreement, MI shall
have authority without prior approval of MC to undertake, and may undertake,
any and all other actions necessary or advisable to construct, manage and
operate the System in the Territory which are not prohibited by law or
regulation, including the authority to act as agent for and on behalf of MC in
entering into contractual arrangements and before federal, state and local
governmental authorities.
5
<PAGE> 6
ARTICLE V.
PERSONNEL
5.1 EMPLOYEES. Subject to MC's supervision, MI may employ and
shall be responsible for recruiting, hiring, training, promotion and
terminating any employees it deems necessary and appropriate to the
construction, management and operation of the System, but shall be subject to
the Construction Budget and Operations Budget.
5.2 MI AND MC EMPLOYEES. MI may elect to rely upon its own
employees, and upon its subsidiaries and affiliates and their employees for the
performance of services in constructing, managing, and operating the system to
the extent, in its discretion, it deems necessary or advisable. Should MI use
its own personnel or its subsidiaries' or affiliates' employees to perform
services for the System, such services shall not be charged to MC separately
and apart from the Management Fees provided for in Section 6.2 of this
Agreement.
5.3 INDEPENDENT CONTRACTORS. MI may, in its discretion, engage
independent contractors to perform any service to be provided by MI hereunder
under its Management Fee in its construction, management and operation of the
System in the Territory. MI shall be responsible for selecting and contracting
on behalf of MC or the System with any such Independent Contractors, but such
expense shall be subject to the Construction Budget, Operations Budget, and
Management Fee.
ARTICLE VI.
REIMBURSEMENT AND COMPENSATION
6.1 REIMBURSEMENT. MC shall reimburse MI for all expenses
reasonably incurred in the performance of its responsibilities under this
Agreement ("Reimbursable Expenses"), including but not limited to, capital
costs expended to comply with the Construction Budget and the costs and
expenditures of any independent contractors engaged by MI on MC's behalf in
fulfilling its construction, operating, or other responsibilities hereunder.
However, before any independent contractor is engaged by MI on behalf of MC
which expense will not be covered by the Management Fee, such engagement of the
independent contractor shall first have to be approved by MC.
6.2 MANAGEMENT FEE. MC shall pay MI a management fee ("Management
Fee") for the performance of its responsibilities under this Agreement. The
Management Fee shall be payable in advance at the beginning of each month and
shall equal $90,000. This fee is subject to change annually by MC based on
operational analysis. All cost of services of MI in providing management,
supervisory and operational functions, with the exception of travel, lodging,
long distance, postage and shipping expenses related to MC, shall be included
in the Management Fee and shall not be separately charged to MC. Salaries of
employees of MI located in the MC market and working full-time for MC will not
be included in the Management Fee.
6
<PAGE> 7
6.3 STATEMENTS. MI shall each provide MC, within fifteen (15) days
after the close of each month during the term of this Agreement, a monthly
invoice, supported by documentation satisfactory to MC, setting forth in
reasonable detail all expenses incurred by MI under this Agreement during that
month, including all of MI's Reimbursable Expenses (the "Monthly Invoice"). MC
shall remit payment of each Monthly Invoice within ten (10) days of the date it
receives such statement.
6.4 REASONABLENESS. All Reimbursable Expenses and Management Fees
charged under this Agreement shall be no less favorable than those that MC
could obtain from unrelated third parties.
ARTICLE VII.
ACCOUNTING AND REPORTS
7.1 BOOKS AND RECORDS. MI shall keep or cause to be kept accounts
and complete books and records with respect to the aspects of the construction,
management and operation of the System in the Territory for which it is
responsible, in accordance with generally accepted accounting principles
consistently applied, showing all costs, expenditures, assets, and liabilities,
and all other records necessary or convenient for recording the financial
aspects of the construction, management and operation of the System in the
Territory pursuant to this Agreement.
7.2 MONTHLY FINANCIAL STATEMENT. Within twenty (20) days after the
end of each month and within thirty (30) days after the end of each fiscal
year, MI shall prepare or cause to be prepared and transmit to MC unaudited
financial statements for the just ended month or year, which shall include a
balance sheet, an income statement and such other information as MC reasonably
requires (the "Monthly and Annual Statements", respectively). The Monthly
Statements must be received in the MC office no later than 30 days after the
end of each month. The Monthly and Annual Financial Statements shall further
provide reconciliations between the Construction Budget or Operations Budget,
as applicable, and actual costs and revenues for the period covered by the
statements and, in the case of the Monthly Statements, for the Year to date. MI
shall also provide at MC's request any and all such additional statements or
reports as may be necessary for MC's oversight and control of the construction
and operation in the Territory.
7.3 ACCESS TO BOOKS AND RECORDS. MC shall have at all reasonable
times during normal business hours access to and the right to photocopy the
books and records maintained by MI pursuant to Section 7.1 of this Agreement,
which books, records and information shall be kept at the principal offices of
MI, as applicable.
7
<PAGE> 8
ARTICLE VIII.
TERM
8.1 TERMINATION. This Agreement shall continue for one year from
the date hereof unless terminated as follows:
(a) If MI does not meet the Construction Budget or
Operating Budget for 90 consecutive days, then MI is
automatically placed on probation. If MI does not meet the
Construction Budget or Operating Budget for another 90
consecutive days, MC, at its discretion, may terminate this
Agreement.
8.2 TERMINATION DUTIES. After receipt of written notice of
termination, but prior to the effective date of such termination, MI shall
continue to perform under this Agreement unless specifically instructed to
discontinue such performance. In any event, even if so instructed, MI will
nonetheless be entitled to reimbursement of Reimbursable Expenses and payment
of Management Fees, if payable pursuant to Section 6.2 hereof, for the period
ending on the effective date of termination. Fifteen (15) days prior to the
effective date of expiration or termination of this Agreement, MI shall
relinquish to MC or its designees possession and control of all property of the
System, including but not limited to, all documents, data and records
pertaining to the System. MI and MC shall commit to use their best efforts to
assure a smooth transition in the event of termination.
ARTICLE IX.
MISCELLANEOUS
9.1 CHOICE OF LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Louisiana.
9.2 OWNERSHIP OF SYSTEM. Despite the fact that MI may make a
payment on any capital equipment or advance a payment for any capital equipment
on behalf of MC, MI hereby acknowledges that all capital equipment purchased on
behalf of and in furtherance of the System is the property of MC.
9.3 NOTICES. All notices and other communications relating to this
Agreement shall be in writing and delivered by hand, by certified mail, postage
paid, return receipt requested, by confirmed facsimile transmission or by
overnight delivery service as follows:
Mercury, Inc. One Lakeshore Drive, Suite 1495
Lake Charles, LA 70629
Meretel Communications, L.P. 913 South Burnside Avenue
Gonzales, LA 70737
8
<PAGE> 9
9.4 SEVERABILITY. Should any provision of this Agreement be
illegal, invalid, or unenforceable, under present or future laws effective
during the term hereof, the remainder of this Agreement shall not be affected
thereby; and in lieu of each provision there shall be substituted a clause as
similar in terms to such invalid provision as may be possible and be legal,
valid and enforceable. However, should any law, governmental regulation, or
judicial interpretation thereof, come into force, which shall prevent the
exercise of any substantial right hereunder, the party whose right is so
affected may terminate this Lease 90 days after written notice of termination
to the other party.
9.3 ASSIGNMENT. MI or MC shall not assign or transfer this
Agreement in whole or in part, without the prior written consent of MI or MC
which shall not be unreasonably withheld.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized officers to be effective as of July 1, 1996.
MERCURY, INC.
By:
------------------------------------
THOMAS G. HENNING, SECRETARY
MERETEL COMMUNICATIONS,
LIMITED PARTNERSHIP
BY WIRELESS MANAGEMENT CORPORATION,
ITS GENERAL PARTNER
By:
------------------------------------
ARTHUR C. SCANLAN, CHAIRMAN
9
<PAGE> 1
EXHIBIT 10.2
ARTICLES OF PARTNERSHIP COMMENDAM
OF
MERETEL COMMUNICATIONS LIMITED PARTNERSHIP
A LOUISIANA PARTNERSHIP IN COMMENDAM
<PAGE> 2
TABLE OF CONTENTS
(Not a Part of this Agreement)
Section 1 Name; Place of Business; Agents for Service of
Process; Tax Identification Number . . . . . . . . . 1
Section 2 Definition of Terms . . . . . . . . . . . . . . . . 1
Section 3 Business and Purpose . . . . . . . . . . . . . . . . 4
Section 4 Term . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5 Contributions by and Capital Accounts of General
Partner . . . . . . . . . . . . . . . . . . . . . . 4
Section 6 Contributions by and Capital Accounts of Limited
Partners; Deferred Capital Contributions by All
Partners . . . . . . . . . . . . . . . . . . . . . . 5
Section 7 Status of Limited Partners . . . . . . . . . . . . . 5
Section 8 Computation of Units . . . . . . . . . . . . . . . . 5
Section 9 Compensation to General Partner and Managers . . . . 6
Section 10 Apportionment and Allocation of Income, Loss,
Credits and Distributions . . . . . . . . . . . . . 6
Section 11 Restrictions on Transfer of Units . . . . . . . . 13
Section 12 Mandatory Sale of Units . . . . . . . . . . . . . 14
Section 13 Books, Records, Accounting and Reports . . . . . . 15
Section 14 Rights, Authority, Powers, Responsibilities and
Duties of General Partner . . . . . . . . . . . . 16
Section 15 Restrictions, Rights, Powers and Voting Rights
of the Limited Partners . . . . . . . . . . . . . 22
Section 16 Withdrawal, Expulsion, Bankruptcy or Dissolution
of the General Partner and Transfer of the General
Partner's Interest . . . . . . . . . . . . . . . . 23
i
<PAGE> 3
Section 17 Certain Transactions . . . . . . . . . . . . . . . 25
Section 18 Termination and Dissolution of the Partnership . . 25
Section 19 Special Power of Attorney . . . . . . . . . . . . 26
Section 20 Indemnification . . . . . . . . . . . . . . . . . 28
Section 21 Miscellaneous . . . . . . . . . . . . . . . . . . 28
ii
<PAGE> 4
ARTICLES OF PARTNERSHIP IN COMMENDAM
OF
MERETEL COMMUNICATIONS LIMITED PARTNERSHIP
These Articles of Partnership in Commendam (the "Agreement") made and
entered into as of July 26, 1995, by and among WIRELESS MANAGEMENT CORPORATION,
a Louisiana corporation (the "General Partner"), as the general partner, and
EATELCORP, INC., a Louisiana corporation ("EATEL"), MERCURY CELLULAR TELEPHONE
COMPANY, a Louisiana corporation ("Mercury"), FORT BEND TELEPHONE COMPANY, a
Texas corporation ("Fort Bend"), and MERETEL WIRELESS, INC., a Louisiana
corporation ("Meretel"), (each, a "Limited Partner" and collectively, the
"Limited Partners"), as the limited partners, all of which do hereby form a
partnership in commendam (the "Partnership") pursuant to the provisions of
Articles 2839, et seq., of the Revised Civil Code of Louisiana, as amended, on
the following terms and conditions:
Section 1. NAME; PLACE OF BUSINESS; AGENTS FOR SERVICE OF PROCESS;
TAX IDENTIFICATION NUMBER. The name of the Partnership is Meretel
Communications Limited Partnership and its principal place of business is One
Lakeshore Drive, CM Tower, Suite 1495, Lee Charles, LA 70629, or such other
place or places in the State of Louisiana as the General Partner may hereafter
determine. Thomas G. Henning and Arthur G. Scanlan, II, are designated as
agents for service of process having the following addresses: Thomas G.
Henning, One Lakeshore Drive, CM Tower, Suite 1495, Lee Charles, LA 70629;
Arthur G. Scanlan, II, 913 S. Burnside Avenue, Gonzales, LA 70737-4258. The
tax identification number of the Partnership has not yet been obtained.
Section 2. DEFINITIONS OF TERMS. The following terms used in this
Agreement shall (unless otherwise expressly provided herein or unless the
context otherwise requires) have the following respective meanings. The
singular shall include the plural and the masculine gender shall include the
feminine and neuter, and vice versa, as the context requires. Unless otherwise
stated, all references to Sections shall refer to Sections of this Agreement.
"Affiliate" of an entity shall mean: (i) any officer, partner,
director or controlling shareholder of such entity; (ii) any person,
corporation, partnership, trust or other entity controlling, controlled by or
under common control with an entity or any person described in (i) above; (iii)
any officer, director, trustee or general partner of any person described in
(ii) above; and (iv) any person who is a member, other than as a limited
partner, with any person described in (i) and (ii) above in a relationship of a
joint venture, general partnership or similar form of unincorporated business
association. For purposes of this definition, the term "control" shall also
mean the control or ownership of 10% or more of the beneficial interest in the
person referred to.
"Agreement" shall mean these Articles of Partnership in
Commendam, as the same may be amended or restated from time to time. Words such
as "herein", "hereinafter",
<PAGE> 5
"hereof", "hereto", "hereby", and "hereunder", when used with reference to this
Agreement, refer to this Agreement as a whole, unless the context otherwise
requires.
"BTA" shall mean the basic trading area for a related License.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or corresponding provisions of subsequent revenue laws.
"D/E Status" shall mean a designated entity status under the
FCC Rules as a small business and a business owned by women.
"Deferred Capital Contribution" shall mean the deferred
capital contribution which each Partner is unconditionally obligated to pay to
the Partnership as set forth in this Agreement.
"Distribution" shall refer to any cash, tax credits (including
Investment Tax Credits), as adjusted, other property allocated to or
distributed to the Limited Partners and the General Partner arising from their
respective interests in the Partnership, but shall not include payments to the
General Partner or any Affiliates under the provisions of Section 9 of this
Agreement.
"FCC" shall mean the Federal Communications Commission, an
agency of the United States, or any successor agency.
"FCC Auction" shall mean the auction to be conducted by the
FCC, presently contemplated to commence in 1995, for the Licenses.
"FCC Rules" shall mean the rules established by the FCC for
qualification, bidding and award of the Licenses at the FCC Auction.
"General Partner" shall refer to Wireless Management
Corporation, a Louisiana corporation, or to any other person or entity which
succeeds it in such capacity, including any Successor General Partner.
"Gross Revenues" shall mean all revenues from investments by
the Partnership and from the operation of the System, prior to the incurrence
or payment of any expenses or costs, but shall not include revenues from sale,
financing, refinancing or other disposition of the System.
"Information Statement" shall mean the Confidential
Information Statement of the Partnership dated July 25, 1995.
"Investment Tax Credits" or "Credits" shall mean investment
tax credit as defined under Section 38 of the Code.
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<PAGE> 6
"Licenses" shall mean the C band licenses for broadband
personal communications service in the related BTAs offered at the FCC Auction.
"Limited Partners" shall refer to EATEL, Mercury, Fort Bend
and Meretel and any other persons who are admitted to the Partnership as
Limited Partners, or additional or substituted Limited Partners, including the
Limited Partners, and, where applicable, shall include assignees of record.
Reference to a "Limited Partner" shall refer to any one of them but shall not
refer to the General Partner except to the extent that it owns an interest in
the Partnership as a Limited Partner.
"Management Agreement" shall mean any agreement between the
Partnership and a Manager pursuant to which the Manager will perform certain
functions relating to the management of the Partnership.
"Management Fee" shall refer to the fee to be paid by the
Partnership to a Manager under the provisions of the related Management
Agreement.
"Manager" shall mean any person, firm or entity which is a
party to a Management Agreement, including without limitation the General
Partner and Affiliates of the General Partner.
"Net Income" or "Net Loss" shall mean the taxable income (plus
any income of the Partnership which is exempt from federal income tax) or
taxable loss (including any expenditures of the Partnership which are not
deductible in computing its taxable income and not properly changeable to
capital account) of the Partnership.
"Partners" shall mean the Limited Partners and the General
Partner.
"Partnership" shall refer to the partnership in commendam
created under this Agreement.
"Successor General Partner" shall mean an individual or entity
chosen by EATEL, Mercury and Fort Bend to purchase the interest formerly held
by the General Partner pursuant to Section 16.5 and to become the General
Partner.
"System" shall refer to the personal communications service
system serving the BTAs for which the Partnership obtains Licenses pursuant to
the FCC Auction.
"Unit" means an ownership interest of a Partner in the
Partnership entitling the holder thereof to an interest in the Net Income, Net
Loss, Credits and Distributions of the Partnership pursuant to Section 10,
adjusted for adjustments in the capital accounts of the Partners with respect
to Distributions on dissolution of the Partnership; and each Unit shall
represent a capital contribution (initial or deferred) in the Partnership by a
Partner equal to $1,000.00.
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<PAGE> 7
Section 3. BUSINESS AND PURPOSE.
3.1 The business and purpose of the Partnership is to bid
at the FCC Auction on the Licenses for the BTAs as set forth in the Information
Statement and, if the successful bidder for all or such portion of such BTAs as
the General Partner deems appropriate, to acquire the Licenses for such BTAs
and develop and operate the System, to engage in other related activities in
and around the geographic areas of the System and to conduct such other
businesses which are incidental or necessary to the foregoing.
3.2 The Partnership, acting and appearing by and through
the General Partner, is authorized and empowered to negotiate with any
potential lender or lenders and lessor or lessors to the Partnership (or to any
other partnership of which the Partnership is a general partner) and to enter
into agreements on behalf of itself (or on behalf of any such other
partnership) for loans, other financings and leases on such terms and
conditions as the General Partner in its sole discretion may deem fit and
proper and to execute, pledge and deliver to such lender or lenders and lessor
or lessors promissory notes, loan agreements and leases evidencing such
indebtedness and other obligations incurred or to be incurred from time to time
by the Partnership (or by any such other partnership), and to mortgage, assign,
grant security interests and pledge as security for any such indebtedness and
other obligations all of the real and personal, immovable and movable, tangible
and intangible, and corporeal and incorporeal property of every character and
wherever situated, now owned or hereafter acquired by the Partnership (or by
any such other partnership), as security for the payment of such indebtedness
and other obligations and promissory notes or notes, loan agreements and leases
and to execute and deliver from time to time to such lender or lenders and
lessor and lessors in connection therewith such loan agreements, mortgages,
pledges, assignments, leases, security agreements, other security instruments
and certificates, agreements and other instruments containing all such terms
and conditions as the General Partner in its sole discretion may deem fit and
proper, including without limitation, provision for a confession of judgment,
rights to executory process and other usual Louisiana security clauses, and to
take all such other and further action and do such things, and make or deliver
such instruments or documents, as the General Partner may deem necessary or
desirable in order to accomplish the transaction contemplated by said
agreements for loans or leases, by or on behalf of the General Partner, the
execution thereof or taking of or doing the same to be deemed conclusive
evidence of such determination and of approval thereof by the Partnership (or
by any such other partnership).
Section 4. TERM. The term of the Partnership shall continue
until the 31st day of December, 2015, unless earlier terminated in accordance
with the provisions of this Agreement.
Section 5. CONTRIBUTIONS BY AND CAPITAL ACCOUNTS OF GENERAL
PARTNER.
5.1 Wireless Management Corporation, as the General
Partner, has initially contributed to the Partnership the amount of $8,000.00.
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<PAGE> 8
5.2 A separate capital account shall be maintained for
the General Partner pursuant to Section 10 hereof.
5.3 In the event that, immediately prior to the
dissolution of the Partnership referred to in Section 18, the General Partner
shall have a deficiency in its capital account as determined in accordance with
tax accounting principles, then the General Partner shall contribute in cash to
the capital of the Partnership an amount equal to the lesser of (a) the
deficiency in the General Partner's capital account or (b) the excess of 2% of
the capital contributions of the Limited Partners over the capital previously
contributed by the General Partner.
Section 6. CONTRIBUTIONS BY AND CAPITAL ACCOUNTS OF LIMITED
PARTNERS: DEFERRED CAPITAL CONTRIBUTIONS BY ALL PARTNERS.
6.1 Each Limited partner has initially contributed the
sum set opposite its name below.
<TABLE>
<CAPTION>
Initial Capital
Limited Partner Contribution
--------------- ---------------
<S> <C>
EATEL $ 97,333 .00
Mercury $ 97,334 .00
Fort Bend $ 97,333 .00
Meretel $100,000 .00
------------
Total $392,000 .00
</TABLE>
6.2 A separate capital account shall be maintained for
each Limited Partner, pursuant to Section 10 hereof.
6.3 Partners shall not be obligated to make any Deferred
Capital Contributions except to the extent as may be provided in a written
amendment to this Agreement executed by all Partners.
Section 7. STATUS OF LIMITED PARTNERS. The Limited Partners
shall not, unless otherwise agreed by them, be bound by, or be personally
liable for, the expenses, liabilities or obligations of the Partnership.
Section 8. COMPUTATION OF UNITS. The total number of Units
outstanding on any date shall equal the dollar amount of total capital
contributions (initial and deferred) made by the Partners on or prior to such
date divided by $1,000.00. Deferred Capital Contributions paid on or prior to
such date shall be included for purposes of computing the number of Units;
unpaid Deferred Capital Contributions shall not be included for such purposes.
The total number of
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<PAGE> 9
Units attributable to a Partner on any date shall equal the total capital
contributions (initial and deferred) made by such Partner on or prior to such
date divided by $1,000.00.
Section 9. COMPENSATION TO GENERAL PARTNER AND MANAGERS.
9.1 The General Partner. The General Partner shall
receive no special compensation for its services as General Partner, but shall
be entitled to reimbursement from the Partnership for its expenses incurred on
behalf of the Partnership, including without limitation its expenses incurred
in the formation of the Partnership, and shall be entitled to share in
Partnership Net Income, Net Loss, Distributions and Credits as provided in
Section 10 of this Agreement.
9.2 Managers.
9.2.1 Management Fee. Each Manager shall be entitled
to receive the Management Fee from the Partnership as set forth in the
Management Agreement to which it is a party.
Section 10. APPORTIONMENT AND ALLOCATION OF INCOME, LOSS,
CREDITS AND DISTRIBUTIONS.
10.1 Apportionment of Net Income. Net Loss, Credits and
Distributions. Except as provided in Section 10.2, that portion of Net Income,
Net Loss and Distributions of the Partnership allocated to the Limited Partners
as a group shall be apportioned among the Limited Partners in the ratio in
which the number of Units owned by each of them on the first day of each
calendar month bears to the total number of Units owned by all of them as of
that date, without regard to capital accounts (except with respect to
Distributions on dissolution of the Partnership) or the number of days during
such month in which a person was a Limited Partner. Notwithstanding the
foregoing, the General Partner may, in its discretion, apportion such items
more frequently than monthly. In the case of a proposed assignment of Units,
the assignment shall be effective, and the assignee shall be deemed to be the
owner of such Units, from and after the "effective date" of the assignment of
such Units as defined in Section 11.2, with the assignee being entitled to
allocations of Net Income and Net Loss and Distributions only with respect to
the period commencing with the effective date of the assignment.
That portion of the basis of property eligible for
Investment Tax Credits allocated to Limited Partners shall be apportioned among
the Limited Partners in the ratio in which the number of Units owned by each of
them on the date such property is placed in service by the Partnership bears to
the total number of Units owned by all Limited Partners as of that date,
without regard to capital accounts or the number of days during which a person
was a Limited Partner.
10.2 Allocations Causing Negative Capital Accounts.
Notwithstanding Section 10.1, if the capital accounts of all Limited Partners
are not equal on a per Unit basis and if any
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allocation of Net Loss to a Limited Partner would reduce such Limited Partner's
capital account balance below zero or would increase the negative balance in
such Limited Partner's capital account at a time when another Limited Partner
has a positive capital account balance, to the extent such allocation would
cause the sum of the negative capital account balances of all Limited Partners
and the General Partner having negative capital accounts (determined after
taking into account all prior Distributions and all prior allocations of Net
Income, Net Loss and the basis of property qualifying for any Investment Tax
Credit) to exceed the Partnership's "minimum gain," as determined at the close
of the period in respect of which the Net Loss is to be allocated, such excess
shall instead be allocated pro rata to Limited Partners having positive capital
account balances in proportion to their respective positive capital account
balances until such capital account balances are reduced to zero; provided,
however, that in no event shall there be a reallocation of any item of income,
gain, loss or deduction allocated among the Limited Partners pursuant to this
Agreement for prior years.
Notwithstanding any other provision of this Section
10, if any allocation of Net Loss would cause the negative capital account
balances of all Partners having negative capital accounts (determined after
taking into account all distributions and all tax allocations theretofore made)
to exceed the Partnership's minimum gain determined at the close of the period
in respect of which such Net Loss is to be allocated, then to the extent that
any such allocation would cause the capital account balance of any Limited
Partner to be negative (or would increase the negative balance of a Limited
Partner's capital account) at a time when no other Limited Partner has a
positive capital account balance, such Net Loss shall instead be allocated to
the General Partner.
For purposes of determining a capital account balance
of a Partner under this Section 10.2, Distributions made prior to or
contemporaneous with any allocation of Net Income or Net Loss to a Partner
shall be reflected in such Partner's capital account prior to making such
allocation to such Partner. The term "minimum gain" shall have the meaning
ascribed to such term under Treasury Regulations as proposed, reproposed or
adopted (as the case may be) under Code Section 704 (currently, the excess of
the outstanding principal balance of Partnership indebtedness over the adjusted
basis of the assets securing such indebtedness). For purposes of this Section
10.2, the capital account balance of each Partner shall be reduced for:
(x) allocations of Net Loss (or items
thereof) which, as of the end of each Partnership year, are reasonably expected
to be allocated to such Partner pursuant to Code Section 704(e)(2), Code
Section 706(d) and Treas. Reg. Section 1.751-1(b)(2)(ii), and
(y) Distributions that, as of the end of
such year, reasonably are expected to be made to such Partner to the extent
they exceed offsetting increases to such Partner's capital account that
reasonably are expected to occur during (or prior to) the Partnership taxable
years in which such Distributions reasonably are expected to be made.
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For purposes of deterring the amount of expected
Distributions and expected capital account increases described in (y) above: (A)
the rule set forth in Treas. Reg. Section 1.704-1(b)(2)(iii)(c) concerning the
presumed value of Partnership property shall apply, and (B) gross income or Net
Income allocated to a Partner pursuant to Section 10.5 hereof shall be taken
into account. For purposes of this Section 10.2 and Section 10.5, a Partner's
capital account shall be increased to the extent that such Partner is obligated
to fund deficits in such Partner's capital account upon liquidation of the
Partnership (or is treated as obligated to so restore such deficits pursuant to
Treas. Reg. Section 1.704-1(b)(2)(ii)(c)).
10.3 Reserved.
10.4 Other Allocations. Net Income, Net Loss and the
basis of property qualifying for Investment Tax Credits shall be allocated in
the manner hereinafter provided.
Except as otherwise provided in Sections 11.4.1,
10.4.2 and 10.4.6, Net Income (other than Net Income arising from the
occurrence of a sale or disposition of all or substantially all of the
Partnership's property), Net Loss and Distributions shall be allocated to the
extent of and in proportion to the amounts to be distributed pursuant to
Section 10.7 hereof. Any expenditures of the Partnership which are neither
deductible nor properly chargeable to its capital account under Code Section
705(a)(2)(B), or which are treated as such expenditures under Treas. Reg.
Section 1.704-1(b)(2)(iv)(i), shall be allocated as follows: (a) to the extent
such expenditures represent selling commissions which constitute syndication
expenditures under Code Section 709 and which are paid by the Partnership, such
expenditures shall be allocated to the Units in respect of which such
commissions were paid, and (b) the balance of such expenditures shall be
allocated among the Limited Partners on a per Unit basis.
10.4.1 Allocation of Book Items. In cases where Partnership
property is, under Treas. Reg. Section 1.704-1(b)(2)(iv), properly reflected in
the capital accounts of the Partners at a fair market value that differs from
the adjusted basis of such property (such difference is hereinafter referred to
as the "Book Disparity"), then depreciation, amortization and gain or loss as
computed for book purposes with respect to such property ("Book Depreciation,"
"Book Amortization," "Book Gain," and "Book Loss," respectively) will be
greater or less than the depreciation, amortization or gain or loss as computed
for tax purposes. The General Partner shall adopt, pursuant to Treas. Reg.
Section 1.704-1(b)(2)(iv)(g), a reasonable method of computing Book
Depreciation and Book Amortization. Such Book Depreciation and Book
Amortization shall be allocated among the Partners and reflected in the
Partners' capital accounts under Section 10.14(c) hereof, in a manner so as to
eliminate to the extent possible, the Book Disparity.
10.4.2 Mandatory Allocations. Notwithstanding any other
provision of this Section 10, any allocation of Net Income, Net Loss or
depreciation for tax purposes which is required to be allocated among the
Partners to take into account the disparity between the fair market value of a
Partnership asset and its adjusted basis (e.g., allocations under Code
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Section 704(c) for contributed property) shall be allocated among the Partners
in accordance with the requirements of the Code and the regulations promulgated
thereunder.
10.5 Two Percent Interest of General Partner. In no event shall the
General Partner's interest in items of Partnership income, gain, loss,
deduction or credit be less than two percent of each such item at all time
during the existence of the Partnership. For this purpose, Units, if any, held
by the General Partner as a Limited Partner shall not be taken into account.
10.6 Capital Account Deficiency and Qualified Income Offset. This
Section 10.5 shall apply only if at the close of any Partnership taxable year
(a) the aggregate negative capital account balances of all Partners having
negative capital account balances (whether caused by Distributions or by
allocations of Net Loss, Book Depreciation, Book Amortization, Book Loss or
items thereof) ("Negative Balances") exceeds (b) minimum gain, if any, as
defined in Section 10.2 (the excess of clause (a) over clause (b) hereinafter
is referred to as "Capital Account Deficiency"). Notwithstanding the
provisions of Sections 11.4.1 and 11.4.2 hereof, an amount of Net Income
arising from a sale or disposition of all or substantially all of the
Partnership's property equal to the Capital Account Deficiency shall first be
allocated to each Partner having a Negative Balance in the proportion in which
such Partner's Negative Balance bears to the aggregate Negative Balance of all
Partners ("Negative Balance Ratio"). In the event that the foregoing allocation
would be insufficient to eliminate the Capital Account Deficiency, an amount of
gross income (as defined in Section 61 of the Code) of the Partnership
necessary to eliminate the Capital Account Deficiency shall be allocated to
each Partner with a Negative Balance in proportion to such Partner's Negative
Balance Ratio. Any allocation under this Section 10.6 shall, to the extent
possible, be made at a time no later than the time at which the Capital Account
Deficiency arises; provided, however, that in no event shall there be a
reallocation of any item of income, gain, loss, or deduction allocated among
the Partners for prior years pursuant to this Agreement.
10.6.1 Termination Rules. In connection with a sale or
disposition of all or substantially all of the Partnership's property, Net
Income shall be allocated as follows:
(a) first, to Partners having negative capital
account balances in proportion to and to the extent of their respective
negative capital account balances;
(b) then, 98% to the Limited Partners and 2% to
the General Partner until the capital account balance of each (determined after
making the allocation described in Section 10.5.1(a) but before distributing
the proceeds from such sale) shall equal an amount equal to the capital
contributions (initial and deferred) previously made by the Partners less
previous Distributions in payment of such capital contributions. In the event
the Net Income to be allocated to Limited Partners pursuant to this Section
10.6.1(b) shall be insufficient to bring the capital account balance of each to
whom such allocation is required to said balance, then such Net Income shall be
allocated first to Limited Partners having the smallest capital accounts per
Unit so as to equalize, to the extent possible, the capital accounts per Unit
of all Limited Partners.
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10.6.2 Income Characterization. Such portion of the Net
Income allocated pursuant to this Section 10.6 which is treated as ordinary
income attributable to the recapture of depreciation shall, to the extent
possible, be allocated among the Partners in the proportion which (i) the
amount of depreciation previously allocated to each Partner relating to the
property which is the subject of the sale or disposition bears to (ii) the
total of such depreciation allocated to all Partners. This Section 10.6.2
shall not alter the amount of allocations among the Partners pursuant to
Section 11.4, but merely the character of gain so allocated. For purposes of
determining the amount of depreciation previously allocated to a Limited
Partner, the depreciation previously allocated to any prior owner of such
Limited Partner's Units shall be deemed to have been allocated to such Limited
Partner.
10.7 Distributions of Cash. Cash from operations of the Partnership
and cash from a sale or disposition of all or substantially all of the
Partnership property, to the extent distributable hereunder, shall be
distributed as soon as is practicable to the Partners in proportion to the
Units attributable to each. Notwithstanding the foregoing, if any Partner
advances any funds or makes any other payment to or on behalf of the
Partnership, not required in this Agreement, to cover operating or capital
expenses of the Partnership which cannot be paid out of the Partnership's
operating revenues, any advance or payment shall be deemed a loan to the
Partnership by the Partner, bearing interest from the date the advance or
payment was made until the loan is repaid at the prime rate of First National
Bank of Commerce, New Orleans, Louisiana, plus one (1) percentage point per
annum, as determined on the date of such advance or payment; and all
distributions of cash shall first be distributed to the Partners making the
loans until the loans have been repaid, together with interest. If
distributions are insufficient to repay all loans as provided above, the funds
available shall first be applied to repay the oldest loan and, if any funds
remain available, the funds shall be applied in a similar manner to remaining
loans in accordance with the order of the dates on which they were made;
however, as to loans made on the same date, each loan shall be repaid pro rata
in the proportion that the loan bears to the total loans made on that date.
10.8 Allocation and Apportionment of Recaptured Depreciation,
Amortization or Credit. That portion of (a) the Net Income allocated and
apportioned pursuant to Section 10.6.1 which is treated as ordinary income
attributable to the recapture of depreciation (including amortization), or (b)
Credits allocated pursuant to these Sections which are recaptured,
respectively, shall be allocated among the Partners in the proportion which (i)
the amount of depreciation (including amortization) or Credit, respectively,
previously allocated to each Partner (including transferor Partners) relating
to the System which is the subject of the sale or disposition bears to (ii) the
total of such depreciation (including amortization) or Credit, respectively,
allocated to all Partners.
10.9 Reallocation of General Partner's Interest. The General
Partner has the right to allocate additional Net Income, Net Loss, Credits or
Distributions to any Limited Partner provided such amounts are only from the
General Partner's portion of any such allocations from the Partnership.
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10.10 Limitations. The Partnership may be restricted from making
Distributions under the terms of leases, loan agreements, notes, mortgages or
other types of debt obligations which it may issue or assume in conjunction
with borrowed funds or leased property, and Distributions may also be
restricted or suspended in circumstances when the General Partner determines,
in its absolute discretion, that such action is in the best interest of the
Partnership. No Partner may receive a Distribution form the Partnership to the
extent that, after giving effect to the Distribution, all liabilities of the
Partnership, other than liabilities to Partners on account of their Partnership
interests, exceed the fair market value of the Partnership's assets.
10.11 Consent to Methods. The methods hereinabove set forth by
which Distributions and allocations of Net Income, Net Loss and Credits are
made and apportioned are hereby expressly consented to by each Partner as an
express condition to becoming a Partner.
10.12 Distributions Subject to Expenses. All Distributions are
subject to the payment of Partnership expenses and to the establishment of
reserves for working capital, maintenance, repair, operation, expansion, loan
amortization and interest payments, replacement of the System and for any other
reason the General Partner determines to be in the best interests of the
Partnership.
10.13 Deductions of General Partner. To the extent that the
Partnership shall be entitled to any deduction for federal income tax purposes
as a result of any interest in Net Income, Net Loss and Distributions granted
to the General Partner, such deduction shall be allocated for Federal income
tax purposes to the General Partner.
10.14 Capital Accounts. (a) A separate capital account shall be
maintained for each Partner. Each Partner's capital account shall be increased
by (1) the amount of money contributed by such Partner to the capital of the
Partnership (including the amount of any Partnership liabilities that are
assumed by such Partner, within the meaning of Treas. Reg. Section
1.704-1(b)(2)(iv)(c)); (2) such Partner's share of Partnership Net Income; and
(3) such Partner's share of the increase in the basis of the Partnership's
property, if any, arising out of the recapture of Investment Tax Credit. Each
Partner's capital account shall be decreased by (i) the amount of money
distributed to such Partner by the Partnership (including the amount of such
Partner's individual liabilities that are assumed by the Partnership, within
the meaning of Treas. Reg. Section 1.704-1(b)(2)(iv)(c); (ii) such Partner's
share of the decrease in basis of the Partnership's property under Code Section
50(c) (formerly Section 48(q)) arising from the allowance of Investment Tax
Credit; and (iv) such Partner's share of expenditures of the Partnership which
are neither deductible nor properly chargeable to capital accounts under Code
Section 705(a)(2)(B) or are treated as such expenditures under Treas. Reg.
Section 1.704-1(b)(2)(iv)(j).
(b) a Partner who has more than one interest in the
Partnership shall have a single capital account that reflects all such
interests, regardless of the class of interests owned by such Partner (e.g.,
general or limited) and regardless of the time or manner in which such
interests were acquired.
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(c) In the event that property (other than cash)
is contributed (or deemed contributed pursuant to the applicable provisions of
the Code) by a Partner to the Partnership, the computation of capital accounts,
as set forth in this Section 10.14, shall be adjusted as follows:
(i) the contributing Partner's capital
account shall be increased by the fair market value of the
property contributed to the Partnership by such Partner (net
of liabilities secured by such contributed property that the
Partnership is considered to assume or take subject to under
Code Section 752); and
(ii) as required by Treas. Reg. Sections
1.704-1(b)(2)(iv)(g) and 1.704-1(b)(4)(i), if any Partner's
capital account reflects a fair market value of property which
differs from such property's adjusted basis, each Partner's
capital account shall be adjusted to take account of the
amount of Book Gain, Book Loss (other than Book Loss
attributable to expenditures of the Partnership described in
Section 10.14(a)(iv)), Book Depreciation and Book Amortization
allocated to such Partner pursuant to Section 10.4.2 hereof
and shall not take into account the Net Income and Net Loss
allocated to such Partner pursuant to this Section 10.
(d) In the event that property is distributed (or
deemed distributed pursuant to the applicable provisions of the Code) by the
Partnership to a Partner, the following special rules shall apply:
(i) the capital accounts of the Partner
first shall be adjusted (as provided in Treas. Reg. Section
1.704-1(b)(2)(iv)(e)) to reflect the manner in which the
unrealized income, gain, loss and deduction inherent in such
property (that has not already been reflected in the Partner's
capital account) would be allocated to such Partner if there
were a taxable disposition of such property for its fair
market value on the date of distribution; and
(ii) the capital account of the Partner
who is receiving the distribution of property from the
Partnership shall be charged with the fair market value of the
property at the time of distribution (net of liabilities
secured by such property that such Partner is considered to
assume or take subject to under Code Section 752).
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(e) The foregoing provisions are intended to
satisfy the capital account maintenance requirements of Treas. Reg. Section
1.704-1(b)(2)(iv) and such provisions shall be modified to the extent required
thereby or any successor provision thereto.
10.15 Reliance on Advice of Accountants and Attorneys. The
General Partner shall have no liability to the Limited Partners or the
Partnership if it relies upon the written opinion of tax counsel or accountants
retained by the Partnership with respect to all matters (including disputes)
relating to computations and determinations required to be made under this
Section 10 or other provisions of this Agreement.
Section 11. RESTRICTIONS ON TRANSFER OF UNITS.
11.1 A Limited Partner may not transfer his Units or any
part thereof except as permitted in this Agreement, and any act in violation of
this Section shall not be binding upon or recognized by the Partnership
regardless of whether the General Partner shall have knowledge thereof.
11.2 No transfer by a Limited Partner of all or part of
his Units shall be effective nor shall any proposed transferee of all or any
part of a Limited Partner's Units be entitled to receive Distributions from the
Partnership applicable to the Units acquired by reason of such transfer or be
admitted to the Partnership as a Limited Partner, unless:
11.2.1 the transferor has executed and delivered to
the General Partner an assignment in form satisfactory to the General Partner;
11.2.2 the written consent of the General Partner
and of the Limited Partners holding no less than 50.1% of the total Units
(excluding the Units proposed to be transferred for purposes of computing such
percentage) to such transfer has been obtained, which consent may be withheld
in the complete discretion of the General Partner;
11.2.3 the transferee executes and delivers to the
General Partner an undertaking of the transferee to be bound by all the terms
and provisions of this Agreement and such other instruments as may be required
by law, and where the transferee is to be admitted as a Limited Partner, a
counterpart of this Agreement;
11.2.4 the transferee executes and delivers to the
General Partner a confirmation that the proposed transferee is acquiring the
Units for his own account, for investment only, and not with a view toward the
resale or distribution thereof;
11.2.5 if requested by the General Partner, either
the transferor or transferee executes and delivers to the General Partner an
undertaking to pay all reasonable expenses incurred by the Partnership in
connection with the transfer, including, but not limited to, the cost of
preparing and filing such amendments to this Agreement as may be required by
law; and
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11.2.6 if requested by the General Partner, an
opinion of counsel for the transferee satisfactory in form and substance to the
General Partner shall be delivered to the General Partner to the effect that
such Units may be sold or transferred in compliance with applicable state and
federal statutes.
A transferee shall be entitled to allocations and to
receive Distributions from the Partnership attributable to the Units acquired
from and after the effective date of the transfer of such Units to him;
provided, however, the Partnership and the General Partner shall be entitled to
treat the transferor of such Units as the absolute owner thereof in all
respects and shall incur no liability for allocations of Net Income, Net Loss,
Credits or Distributions or transmittal of reports and notices required to be
given to Limited Partners hereunder which are made in good faith to the
transferor until such time as all the foregoing conditions have been complied
with and the effective date of the transfer has passed. The "effective date" of
such transfer and the date on which a transferee shall be deemed a Limited
Partner shall be the first day of the first calendar month following completion
of the requirements set forth in this Section.
11.3 Notwithstanding the provisions of Section 11.2, any
Limited Partner may, without obtaining the General Partner's consent, transfer
all or any part of his Units by will or intestacy. In no event shall a transfer
by will or intestacy be deemed effective to entitle the transferee to be
admitted as a Limited Partner unless and until all the conditions of Section
11.2, other than Section 11.2.1, are complied with.
11.4 Notwithstanding any other provision of this
Agreement, no transfer of a Unit may be made in any 12-month period if such
transfer when added to all other transfers of Units which have already taken
place in such period would represent 49% or more of the total interest in the
Partnership capital and profits (as determined on the dates of the respective
transfers of interest).
11.5 Each Limited Partner hereby indemnifies the
Partnership and each Partner against any and all loss, damage or expense
(including, without limitation, tax liabilities or loss of tax benefits)
arising, directly or indirectly, as a result of any transfer or purported
transfer by such Limited Partner in violation of any provision contained in
this Section 11.
11.6 The Units have not, nor will be, registered under
federal or state securities laws. The Units may not be offered for sale, sold,
pledged, or otherwise transferred unless so registered, or unless an exemption
from registration exists. The availability of any exemption from registration
must be established by an opinion of counsel, whose opinion must be satisfactory
to the General Partner.
Section 12. MANDATORY SALE OF UNITS. The Units of a Limited Partner
shall be deemed offered for sale to a person designated by the General Partner
upon the happening of any of the following events at a time when there remains
unpaid any portion of the Deferred Capital Contribution to be made by such
Limited Partner:
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(i) a petition in bankruptcy having been filed
against such Limited Partner and not discharged within 90 days
from the date of such filing; or
(ii) a receiver having been appointed to manage
such Limited Partner's property; or
(iii) a creditor of such Limited Partner having
attached his respective Unit, and such attachment not having
been discharged or vacated within 90 days from the date it
became effective.
The General Partner shall have 90 days after notification to
or actual knowledge by such General Partner of the occurrence of any of the
foregoing within which to designate such a purchaser and transmit written
notice thereof to such Limited Partner. If the General Partner does not make
such designation within 90 day, as aforesaid, the offer shall be deemed
withdrawn. The purchase price for such interest shall be its appraised value as
determined by an independent appraiser selected by the General Partner, and
paid for by the selling Limited Partner.
The purchaser shall tender to the selling Limited Partner the
purchase price, in cash, within ten days after such determination, except that
to the extent that there remains unpaid at the time of purchase any portion of
the Deferred Capital Contribution by the selling Limited Partner, the purchase
price shall first be applied to reduce or, if sufficient, to pay in full such
Deferred Capital Contribution, whether or not due and payable. Upon tender of
payment of the purchase price to the General Partner on behalf of the selling
Limited Partner, his Units shall be deemed transferred to the aforesaid
purchaser. The aforesaid purchaser shall be admitted as a Limited Partner upon
satisfaction of the conditions of Section 11.
Section 13. BOOKS, RECORDS, ACCOUNTING AND REPORTS.
13.1 The Partnership's books and records, this Agreement
and all amendments thereto, and any other records or instruments required by
applicable law shall be maintained at the principal office of the Partnership
in the State of Louisiana or such other place as the General Partner may
determine and shall be open to inspection and examination by the Partners or
their duly authorized representatives at all reasonable times. Upon written
request, a Partner, at his expense, will be provided with a copy of the most
recent listing of Partners' names, in alphabetical order, addresses, capital
contributions and Units attributable to each.
13.1.1 Each Partner is entitled to all information
under the circumstances and subject to the conditions stated in this Agreement.
The Partners agree, however, that the General or Limited Partners holding at
least 40% of the Units may determine, due to contractual obligations, business
concerns, or other considerations, that certain information regarding the
business, affairs, property, and financial condition of the Partnership
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shall be kept confidential and not provided to some or all other Limited
Partners, and that it is not just or reasonable for those Partners or assignees
or representatives thereof to examine or copy that information.
13.1.2 The Partners acknowledge that they may
receive information regarding the Partnership in the nature of trade secrets or
that otherwise is confidential, the release of which may be damaging to the
Partnership or persons with which it does business. Each Partner shall hold in
strict confidence any information it receives regarding the Partnership that is
identified as being confidential (and if that information is provided in
writing, that is so marked) and may not disclose it to any person other than
another Partner, except for disclosures (1) compelled by law (but the Partner
must notify the General Partner, promptly of any request for that information,
before disclosing it, if practicable), (2) to advisers or representatives of
the Partner or assignees of the Partner, but only if they have agreed to be
bound by the provisions of this Section, or (3) of information that Partner
also has received from a source independent of the Partnership that the Partner
reasonably believes obtained that information without breach of any obligation
of confidentiality. The Partners acknowledge that breach of the provisions of
this Section may cause irreparable injury to the Partnership for which monetary
damages are inadequate, difficult to compute, or both. Accordingly, the
Partners agree that the provisions of this Section may be enforced by specific
performance.
13.2 The General Partner shall have prepared and
distributed, at Partnership expense, monthly and annual financial statements.
The annual financial statements shall include a balance sheet, statement of
income or loss, partners' equity and changes in financial position) prepared in
accordance with generally accepted accounting principles on a basis
consistently applied (except as may be noted therein). For the purposes of the
Partnership's federal income tax returns, profits and losses shall be
determined in a manner consistent with the federal income tax accounting
methods employed by the Partnership as may be necessary to ensure that the
allocations of such profits and losses and corresponding items of income, gain,
loss, deduction and credit provided for in this Agreement are deemed to have
"substantial economic effect" as that term is used in Section 704(b)(2) of the
Code.
13.3 The General Partner shall have prepared at least
annually, at Partnership expense, Partnership information necessary in the
preparation of the Partners' federal income tax returns which shall be sent to
each Partner not later than 90 days after the close of each taxable year of the
Partnership.
13.4 The General Partner, at Partnership expense, shall
cause income tax returns for the Partnership to be prepared and timely filed
with the appropriate authorities.
Section 14. RIGHTS, AUTHORITY, POWERS. RESPONSIBILITIES AND
DUTIES OF GENERAL PARTNER.
14.1 The conduct of the Partnership's business shall be
controlled solely and exclusively by the General Partner in accordance with
this Agreement. The General Partner
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shall have all authority, rights and powers conferred by law, and those
required or appropriate to the management of the Partnership business which, by
way of illustration but not by way of limitation, shall, subject only to the
provisions of Section 14.4, include the right, authority and power on behalf
of, and at the expense of, the Partnership:
14.1.1 to complete and file applications with the
FCC and to bid on the Licenses at the FCC Auction for the BTAs set forth in the
Information Statement;
14.1.2 to acquire, develop, hold, sell, leases and
dispose of the System, interests therein or appurtenances thereto, as well as
personal or mixed property connected therewith, including the purchase, lease,
development, improvement, maintenance, exchange, trade or sale of such System
at such price, rental or amount, for cash, securities (in compliance with
appropriate securities regulations) or other property and upon such terms as
the General Partner, in its sole discretion, deems to be in the best interests
of the Partnership;
14.1.3 to borrow money, to enter into loan
agreements, to enter into leases and, if security is required therefor, to
mortgage or subject the System to any security device (including borrowings and
security devices that extend beyond the term of the Partnership), to obtain
replacements of any mortgage or other security device and to prepay, in whole or
in part, refinance, increase, modify, consolidate or extend any mortgage or
other security device, all of the foregoing on such terms and in such amounts
as the General Partner, in its sole discretion, deems to be in the best
interests of the Partnership;
14.1.4 to place record title to or the right to use
Partnership assets in the name or names of a nominee or nominees, trustee or
trustees for any purpose convenient or beneficial to the Partnership;
14.1.5 to acquire and enter into any contract of
insurance which the General Partner deems necessary or appropriate for the
protection of the Partnership and the General Partner, for the conservation of
Partnership assets or for any purpose convenient or beneficial to the
Partnership;
14.1.6 to employ or otherwise retain persons in the
operation and management of the business of the Partnership including, but not
limited to, Managers, on-site supervisory managing agents, insurance brokers,
personal communications service system brokers and loan brokers, on such terms
and for such compensation as the General Partner shall determine;
14.1.7 to prepare or cause to be prepared reports,
statements and other relevant information for distribution to Limited Partners;
14.1.8 to open accounts and deposit and maintain
funds in the name of the Partnership in banks, savings and loan associations,
and other financial institutions, including any with Affiliates of the General
Partner;
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14.1.9 to cause the Partnership to make or revoke
any of the elections permitted under the Code;
14.1.10 to select as its accounting year a calendar
year or such fiscal year as approved by the Internal Revenue Service;
14.1.11 to determine the appropriate accounting
method or methods to be used by the Partnership;
14.1.12 to require in all Partnership obligations
that the General Partner shall not have any liability thereon but that the
person or entity contracting with the Partnership is to look solely to the
Partnership and its assets for satisfaction and in the event that any such
obligations have personal liability, the General Partner may require their
satisfaction prior to contracts without such liability;
14.1.13 to execute, acknowledge and deliver any and
all instruments to effectuate the foregoing and to take all such action in
connection therewith as the General Partner shall deem necessary or
appropriate;
14.1.14 if, pursuant to federal income tax laws, the
Partnership is to be treated as an association taxable as a corporation, the
General Partner may, in its discretion, and in compliance with applicable
federal and state law, take all necessary action to reformulate the structure
of the Partnership to enable it to be treated as a pass-through entity for
federal income tax purposes;
14.1.15 to invest Partnership funds and reserves
temporarily in short-term, highly liquid investments where there is appropriate
safety of principal, including in bank accounts and money markets funds; and
14.1.16 to allow the Partnership to borrow money from
a General Partner, a Limited Partner or the Affiliates thereof, at any time and
from time to time, and in connection therewith to pay interest and other
financing charges or fees which shall not exceed such party's cost of
borrowing.
14.2. In addition to any amendments otherwise authorized
herein, this Agreement may be amended from time to time by the General Partner,
without the consent of any of the Limited Partners:
14.2.1 to add to the representations, duties or
obligations of the General Partner or its Affiliates herein, for the benefit of
the Limited Partners;
14.2.2 to cure any ambiguity, to correct or
supplement any provision herein which may be inconsistent with any other
provision herein, or to make any other
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provisions with respect to matters or questions arising under this Agreement
which will not be inconsistent with the provisions of this Agreement;
14.2.3 to delete or add any provision of this
Agreement required to be so deleted or added by a state "Blue Sky" commissioner
or similar such official, which addition or deletion is deemed by such
commission or official to be for the benefit of protection of the Limited
Partners;
14.2.4 to amend the provisions of Section 10 or any
other provisions of this Agreement if in the opinion of special tax counsel
(with respect to tax matters) or counsel (with respect to all matters) to the
Partnership and the General Partner, such modification is necessary to (i)
cause the allocations and Distributions contained in Section 10 to have
substantial economic effect in accordance with the most recently proposed or
final regulations relating to Section 704 of the Code or any other statutory
provision or regulation relating to such allocations or (ii) cause the
periodic allocations to be respected, such as on a monthly or semi-monthly
basis, under Section 706 of the Code or any other statute or provision or
regulation relating to such periodic allocations, or (iii) cause the provisions
of this Agreement to comply with any applicable federal legislation enacted
after the date of this Agreement.
14.3 Except as otherwise provided in this Agreement or by
applicable law, the General Partner shall have all the rights and powers and
shall be subject to all the restrictions and liabilities of a partner in a
partnership without limited partners.
14.4 The General Partner shall not have the authority to:
14.4.1 alter the primary purpose of the Partnership
as set forth in Section 3;
14.4.2 use Partnership funds to redeem or repurchase
Units of the Partnership;
14.4.3 do any act in contravention of this Agreement
or which would make it impossible to carry on the ordinary business of the
Partnership;
14.4.4 confess a judgment against the Partnership in
connection with any threatened or pending legal action;
14.4.5 subject to the provisions of Section 16.5,
admit a person as a General Partner except with the consent of the Limited
Partners as provided for in this Agreement;
14.4.6 commingle the Partnership funds with those of
any other person or entity except that the use of a zero balance or clearing
account shall not constitute a commingling of Partnership funds.
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14.5 The General Partner shall have no personal liability
for the repayment of the initial capital contribution or deferred capital
contribution of any Limited Partner.
14.6 The General Partner shall at all times conduct its
affairs and the affairs of the Partnership and all of its Affiliates in such a
manner that neither the Partnership nor any Partner nor any Affiliate of any
Partner will have any liability under any mortgage on or lease of the Systems,
unless, in the opinion of the General Partner, it would be in the best
interests of the Limited Partners, and, in the case of any such liability on
the part of the Limited Partners, each Limited Partner wishing to have such
liability executes a separate agreement agreeing to and assuming any such
liability. The General Partner shall use its best efforts, in the conduct of
the Partnership's business to put all suppliers and other persons with whom the
Partnership does business on notice that the Limited Partners are not liable
for the Partnership obligations. The General Partner shall use its best efforts
to include in all agreements to which the Partnership is a party a statement to
the effect that the Partnership is a partnership in commendam organized under
the laws of the State of Louisiana. The General partner shall not be liable to
the Limited Partners for any failure to give such notice to suppliers or other
persons or any failure to include such statement in any such agreements.
14.7 The General Partner is hereby designated as the "Tax
Matters Partner" in accordance with Section 6231(a)(7) of the Code and, in
connection therewith and in addition to all other powers given therein, shall
have all other powers needed to fully perform hereunder, including, without
limitation, the power to retain, at Partnership expense, all attorneys and
accountants of its choice and the right to settle any audits without the
consent of the Limited Partners. The designation made in this Section is hereby
consented to by each Partner as an express condition to becoming a Partner.
The Partnership hereby indemnifies the General Partner from and against any
damages or losses (including attorney's fees) arising out of or incurred in
connection with any action taken or omitted to be take by it in carrying out
its responsibilities as Tax Matters Partner.
14.8 The General Partner shall have the authority to enter
into any transaction on behalf of the Partnership despite the fact that another
party to the transaction may be a Partner or an Affiliate of a Partner;
provided the terms of the transaction are no less favorable than those the
Partnership could obtain from unrelated third parties.
14.8.1 It is expressly understood that each Partner
is entitled to invest his personal assets for his own account and is entitled
to conduct his personal affairs and investments without regard to whether they
constitute a Partnership "opportunity."
14.8.2 (a) Except as provided in Section
14.8.2(b), a Partner may engage in or possess an interest in any other business
or venture of any nature and description, independently or with others,
including ones in competition with the Partnership, with no obligation to offer
to the Partnership or any other Partner the right to participate. Neither the
Partnership nor its Partners shall have by virtue of this Agreement any right
in any independent venture or its income or profits.
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(b) Each Partner agrees it shall
not, and agrees that it shall cause its Affiliates not to,: (i) participate,
directly or indirectly, in the FCC Auction in competition with the Partnership;
and (ii) possess an ownership, revenue sharing or similar participating
interest greater than 1% in, engage in or provide managerial or marketing
services to any other wireless communications business or venture that competes
with (A) the Partnership in the geographical area in which the Partnership
engages or intends to engage in business as set forth in the Information
Statement or (B) any existing wireless communications business(es) or
venture(s) of any other Partner or Affiliate(s) thereof in the geographical
area(s) in which such other Partner or Affiliate(s) thereof is presently
engaged in such business(es) or venture(s). For purposes of this Section
14.8.2(b), "wireless communications" shall mean symmetrical two-way voice and
data wireless communications, i.e., broadband personal communications services,
cellular communications services, specialized mobile radio communications
services and enhanced mobile radio communications services. Each Partner has
identified in writing to each other Partner the existing wireless
communications business(es) and venture(s) of such Partner and/or its
Affiliates(s) and the geographical area(s) in which each is presently engaged.
Each Partner shall be responsible for assuring compliance by its Affiliates
with the restrictions on competition of this Section 14.8.2(b). The
restrictions on competition by the Partners and their respective Affiliates
pursuant to this Section 14.8.2(b) shall (y) not apply to any present or future
non-wireless communications businesses or ventures of a Partner or any
Affiliate thereof, e.g., wireline communications, and (z) shall be applicable
to each Partner while such Partner continues as a partner of the Partnership
and for a two (2) year period thereafter. Notwithstanding the foregoing
provisions of this Section 14.8.2(b), should any Partner or any Affiliate
thereof merge with or be merged into, consolidate with, exchange shares with,
purchase or otherwise acquire from or be purchased or otherwise acquired by
another entity and, as a consequence thereof, the restrictions of this Section
14.8.2(b) are violated, the Partner, Affiliate, surviving entity or purchasing
entity, as the case may be, shall have twelve (12) months alter the
consummation of such transaction within which to dispose of the wireless
communications business or venture that is causing such violation and shall not
be deemed to have violated the restrictions of this Section 14.8.2(b) unless it
has failed to complete such disposal within such twelve (12) month period.
14.9 Any person dealing with the Partnership, other than a
Partner, may rely on the authority of the General Partner in taking any action
in the name of the Partnership without inquiry into the provisions of this
Agreement. Any document executed by the General Partner shall be deemed to be
the action of the Partnership as to any third parties. No purchaser, lessee,
transferee or obligor will have any obligation to see to the application of
payments made to the General Partner.
14.9.1 Any person dealing with the Partnership or
the General Partner may rely upon a certificate signed by the General Partner
as to: (a) the identity of the Partners; (b) any conditions precedent to acts
by the Partnership; (c) the persons who are authorized to execute any documents
and bind the Partnership; and (d) any other matter involving the Partnership or
any Partner.
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15. RESTRICTIONS, RIGHTS, POWERS AND VOTING RIGHTS OF THE LIMITED
PARTNERS.
15.1 The Limited Partners shall take no part in or
interfere in any manner with the control, conduct or operation of the
Partnership and shall have no right or authority to act for or bind the
Partnership.
15.2 In addition to their written consent required by
Section 11.2.2, the Limited Partners shall have the right, without the consent
of the General Partner, by affirmative vote of the holders of no less than 85%
of the total outstanding Units, to take only the following actions affecting
the basic structure of the Partnership:
15.2.1 removal of a General Partner with cause;
15.2.2 termination and dissolution of the
Partnership pursuant to Section 18.1.2 if such vote is solicited;
15.2.3 subject to the provisions of Section 14.2
which sets forth situations where the consent of Limited Partners is not
required, amendment of this Agreement;
15.2.4 the extension of the term of the Partnership;
and
15.2.5 the admission of a General Partner (subject
to the provisions of Sections 16.5 and 16.6 and applicable law).
15.3 In any such vote, each Limited Partner shall be
entitled to cast one vote for each Unit which it owns and the procedures set
forth in Section 15.5 of this Agreement shall be applicable.
15.4 The General Partner may at any time call a meeting of
the Limited Partners or a vote without a meeting of the Limited Partners on
matters on which they are entitled to vote and shall call for such meeting or
vote following receipt of a written request therefor from Limited Partners
holding twenty (20%) percent or more of the total outstanding Units. Within ten
(10) days after receipt of such written request, the General Partner shall
notify all Limited Partners of record as to the time and place of the
Partnership meeting, if called, and the general nature of the business to be
transacted or, if no such meeting has been called, of the matter or matters to
be voted upon and the date upon which the votes will be counted. Any
Partnership meeting or the date upon which such votes without a meeting will be
counted (regardless of whether the General Partner has called for such meeting
or vote upon the request of Limited Partners or has initiated such event
without such request) shall be no less than fifteen (15) nor more than sixty
(60) days following mailing of the notice thereof by the General partner. All
expenses of the voting and such notification shall be borne by the Partnership.
15.5 A Limited Partner which is entitled to vote shall be
entitled to cast one vote for each Unit which he owns: (i) if at a meeting,
then in person, by written proxy or by a
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signed writing directing the manner in which it desires that its vote be cast,
which writing must be received by the General Partner prior to such meeting, or
(ii) if without a meeting, then by a signed writing directing the manner in
which it desires that its vote be cast, which writing must be received by the
General Partner prior to the date upon which the votes of Limited Partners are
to be counted. Only the votes of Limited Partners of record on the record date,
whether at a meeting or otherwise, shall be counted. The General Partner shall
not be entitled to vote, to the extent it owns Units.
15.6 No Partner shall have the right or power to: (i)
withdraw (except for the General Partner as provided in Section 16.1) or reduce
its contribution (initial or deferred) to the capital of the Partnership except
as a result of the dissolution of the Partnership or as otherwise provided by
law, (ii) bring an action for partition against the Partnership, (iii) cause
the termination or dissolution of the Partnership by court decree or otherwise,
except as set forth in this Agreement and except as provided by applicable law
or (iv) demand or receive property other than cash in return for its
contribution. No Partner shall have priority over any other Partner either as
to the return of contributions of capital or as to Net Income, Net Loss,
Credits or Distributions (except as provided in Section 10 of this Agreement).
Other than upon termination and dissolution of the Partnership as provided in
this Agreement, there has been no time agreed upon when the contribution of each
Partner (initial or deferred) may be returned.
15.7 A Limited Partner will breach this Agreement if he
(1) attempts to withdraw from the Partnership, (2) interferes in the management
of the Partnership affairs, (3) engages in conduct which could result in the
Partnership losing its tax status as a partnership, (4) engages in conduct that
tends to bring the Partnership into disrepute, (5) owns a Partnership interest
that becomes subject to a charging order, attachment, garnishment, or similar
legal proceedings, (6) breaches any confidentiality provisions of this
Agreement, or (7) fails to meet any commitment to the Partnership. A Limited
Partner who is in breach of this Agreement shall be liable to the Partnership
for damages caused by the breach. The Partnership may offset for the damages
against any Distributions or return of capital to the Limited Partner who has
breached this Agreement.
15.7.1 No Limited Partner shall have the right or
power to cause the dissolution and winding up of the Partnership by court
decree or otherwise.
16. WITHDRAWAL, EXPULSION, BANKRUPTCY OR DISSOLUTION OF THE
GENERAL PARTNER AND TRANSFER OF THE GENERAL PARTNER'S INTEREST.
16.1 The General Partner may voluntarily withdraw from the
Partnership or may be expelled from the Partnership with cause, both, only by
the affirmative vote of the Partners holding of no less than 85% of the
outstanding Units. Written notice of expulsion of the General Partner shall be
served either by certified or by registered mail, return receipt requested, or
by personal service. Such notice shall set forth the date upon which the
expulsion is to become effective.
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16.2 Upon the withdrawal, expulsion, adjudication of
bankruptcy, insolvency, dissolution or other cessation to exist of the General
Partner, the entire interest of the terminated General Partner in the
Partnership, including its interest in the Net Income, Net Loss, Credits and
Distributions of the Partnership, shall be purchased by the Partnership for a
purchase price determined according to the provisions of Section 16.3.
16.3 The terminated General Partner shall receive from the
Partnership the fair market value of its interest in the Partnership,
determined by agreement between the terminated General Partner and the
Partnership or, if they cannot agree, by arbitration in accordance with the
then current rules of the American Arbitration Association. For this purpose,
the fair market value of the interest of the terminated General Partner shall
be deemed to be the amount the terminated General Partner would receive upon
dissolution and termination of the Partnership under Section 18.1 assuming
such dissolution or termination occurred on the date of the dissolving event
and assuming the assets of the Partnership were sold for their then fair market
value without compulsion of the Partnership to sell such assets. Payment shall
be made by a promissory note bearing simple interest at the prime rate of First
National Bank of Commerce, New Orleans, Louisiana, plus one (1) percentage
point per annum, as determined on the date of the dissolving event pursuant to
Section 18.1, on the unpaid principal amount of the promissory note, with
principal and all unpaid accrued interest payable only from all cash from sales
or refinancing; provided, however, that if the terminated General Partner
requests, to the extent required, the sale and payment shall be made on terms
and conditions that will allow such sale to qualify for the installment method
as provided in the Code.
16.4 Should a new General Partner be elected under Section
15.2, such new General Partner shall purchase from the Partnership, within 60
days of its election, the interest which the Partnership purchased from the
terminated General Partner. For such interest the acquiring General Partner
shall pay the amount determined pursuant to Section 16.3 to be the fair market
value of such interest. Payment shall be made by a promissory note bearing
simple interest at the prime rate of First National Bank of Commerce, New
Orleans, Louisiana, Bank, plus one (1) percentage point per annum, as
determined on the date of the dissolving event pursuant to Section 18.1, on
the unpaid principal amount of the promissory note secured by assignment by the
acquiring General Partner to the Partnership of the future Distributions by the
Partnership to the acquiring General Partner, which principal amount together
with accrued interest shall be payable out of Distributions received by the
acquiring General Partner from the Partnership and shall become due and payable
in full by the acquiring General Partner at such times as the Partnership is
finally wound up and liquidated.
16.5 If a new General Partner is not elected under Section
15.2 within 60 days after any event described in Section 16.2, EATEL, Mercury
and Fort Bend, acting unanimously, may select a Successor General Partner to
purchase the interest of the terminated General Partner from the Partnership on
the same terms and conditions. The provisions of this Section 16.5 are hereby
expressly consented to by each Limited Partner as an express condition to
becoming a Limited Partner.
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16.6 In the event that the Successor General Partner shall
become the General Partner, it shall have the right to appoint a successor
General Partner and thereafter resign as the General Partner, provided that
prior to and after such resignation becoming effective the Partnership will be
treated as a partnership for federal income tax purposes. Any successor
General Partner appointed pursuant to this Section shall be entitled to
withdraw in the same manner and is otherwise bound by the provisions of this
Agreement. The provisions of this Section are hereby expressly consented to by
each Limited Partner as an express condition to becoming a Limited Partner.
16.7 Except as provided in this Agreement, the General
Partner's interest in the Partnership shall not be assignable without the
affirmative vote of the Limited Partners owning no less than 50.1% of the
outstanding Units, except in connection with any merger, consolidation or sale
as provided in Section 16.8. Any entity to which the entire interest of the
General Partner in the Partnership is assigned in compliance with this Section
16.7 shall be substituted by the General Partner in its stead as the General
Partner of the Partnership by the filing of appropriate amendments to this
Agreement.
16.8 Nothing in this Agreement shall be deemed to prevent
the merger or reorganization of Wireless Management Corporation into or with
any other entity or the transfer of all the partnership interests of Wireless
Management Corporation and the assumption of the rights and duties of the
General Partner by the surviving entity by operation of law or otherwise.
17. CERTAIN TRANSACTIONS. Except to the extent prohibited by
Section 14.8.2(b) or by rules and regulations of the FCC, the General Partner,
any Limited Partner, any Affiliates of the General Partner, any shareholder,
officer, director, partner or employee thereof, any transferee or assignee
thereof or any person owning a legal or beneficial interest therein may engage
in or possess an interest in any other business or venture of every nature and
description, independently, or with others, including, but not limited to the
ownership, leasing, financing, operation, sale, management and brokerage of
personal communications service systems or any other participation in the
personal communications service industry or in partnerships similar to the
Partnership. Neither the General Partner nor its Affiliates shall be obligated
to present to the Partnership any particular investment opportunity, regardless
of whether such opportunity is of such character that the Partnership could
take it if such opportunity were presented to the Partnership; and the General
Partner and each of its Affiliates shall each have the right to take for its
own account (individually or otherwise) or to recommend to others any such
investment opportunity.
18. TERMINATION AND DISSOLUTION OF THE PARTNERSHIP.
18.1 The Partnership shall be terminated and dissolved
upon the earliest to occur of the following:
18.1.1 the withdrawal, expulsion, adjudication of
bankruptcy or insolvency of the General Partner or the dissolution or other
cessation to exist as a legal entity
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of the General Partner unless the Successor General Partner within 90 days of
the date of such event elects to continue the business of the Partnership or
the Limited Partners within 60 days of the date of such event elect a successor
General Partner pursuant to Section 15.2;
18.1.2 a vote of the holders of not less than 85% of
the outstanding Units in favor of dissolution and termination of the
Partnership;
18.1.3 the expiration of the term of the
Partnership;
18.1.4 the disposition of all interest in the System
and other assets of the Partnership (other than cash);
18.1.5 entry of a decree for judicial dissolution;
or
18.1.6 failure of the Partnership to acquire any
Licenses at the FCC Auction.
18.2 Upon a dissolution and termination of the Partnership
for any reason, the General Partner shall take full account of the Partnership
assets and liabilities, shall liquidate the assets as promptly as is consistent
with obtaining the fair market value thereof, and shall apply and distribute
the proceeds therefrom in the following order:
18.2.1 to the payment of creditors of the
Partnership, including Affiliates, but excluding secured creditors whose
obligations will be assumed or otherwise transferred on the liquidation of
Partnership assets;
18.2.2 to the repayment of any outstanding loans
made by the General Partner or its Affiliates to the Partnership; and
18.2.3 to the General Partner and Limited Partner,
in proportion to and to the extent of the Units attributable to each, with
appropriate adjustments thereto for their respective capital accounts.
19. SPECIAL POWER OF ATTORNEY
19.1 By executing this Agreement, each Limited Partner is
hereby granting to the General Partner a special power of attorney irrevocably
making, constituting and appointing the General Partner as the attorney-in-fact
for such Limited Partner, with power and authority to act in its name and on
his behalf to execute, acknowledge and swear to in the execution,
acknowledgement and filing of documents, which shall include, by way of
illustration but not of limitation, the following:
19.1.1 this Agreement, any separate certificates of
limited partnership, as well as any amendments to the foregoing which, under
the laws of the State of Louisiana or
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the laws of any other state, are required to be filed or which the General
Partner deems advisable to file;
19.1.2 any other instrument or document which may be
required to be filed by the Partnership under the laws of the federal
government, any state or of any governmental agency, or which the General
Partner deems advisable to file; and
19.1.3 any instrument or document which may be
required to effect the continuation of the Partnership, the admission of an
acquiring General Partner or Successor General Partner, or the admission of an
additional or substituted Limited Partner or the dissolution and termination of
the Partnership (provided such continuation, admission or dissolution and
termination are in accordance with the terms of this Agreement) or to reflect
any reductions in the amount of contributions of Partners.
19.2 The special power of attorney being granted hereby by
each Limited Partner:
19.2.1 is a special power of attorney coupled with
an interest, is irrevocable, shall survive the death of legal incapacity of the
granting Limited Partner and is limited to those matters therein set forth;
19.2.2 may be exercised by the General Partner
acting alone for each Limited Partner by a facsimile signature of the General
Partner or by one of its duly authorized agents, or by listing all of the
Limited Partners executing any instrument with a signature of the General
Partner or one of its duly authorized agents acting as its attorney in fact;
and
19.2.3 shall survive an assignment by a Limited
Partner of all or any portion of his interests except that, where the assignee
of the Units owned by a Limited Partner has been approved by the General
Partner for admission to the Partnership as a substituted Limited Partner, the
special power of attorney shall survive such assignment for the sole purpose of
enabling the General Partner to execute, acknowledge, and file any instrument
or document necessary to effect such substitution.
19.3 Each Limited Partner is aware that the terms of this
Agreement require the Successor General Partner to become the General Partner
and permit the Successor General Partner to appoint a successor General
Partner, subject to the conditions set forth in Sections 16.5 and 16.6 of the
Agreement, without the vote or consent to such action by the Limited Partners.
Each Limited Partner agrees that each special attorney specified in Section
19.1, with full power of substitution, is hereby authorized and empowered to
execute, acknowledge, make, swear to, verify, deliver, record, file and/or
publish, for and on behalf of such Limited Partner, any and all instruments and
documents which may be necessary or appropriate to allow the Successor General
Partner to become the General Partner and to permit the appointment of the
Successor General Partner to be lawfully made or action lawfully taken or
omitted. Each Limited Partner has executed this special power of attorney and
each Limited Partner will rely
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on the effectiveness of such powers with a view to the orderly administration
of the Partnership's affairs.
Section 20. INDEMNIFICATION.
20.1 The General Partner and its Affiliates shall not be
liable to each other, the Partnership and the Limited Partners for, and the
Partnership, its receiver or its trustee shall defend and indemnify, save
harmless and pay all judgments and claims against the General Partner and its
Affiliates from any liability, loss or damage; provided that, if such
liability, loss or claim arises out of any action or inaction of the General
Partner, the General Partner must have determined, in good faith, that such
course of conduct was in the best interests of the Partnership and did not
constitute proven fraud, gross negligence, breach of fiduciary duty or
misconduct by the General Partner and, provided further, that any such
indemnification shall be recoverable from the assets of the Partnership. All
judgments against the Partnership and the General Partner, wherein the General
Partner is entitled to indemnification, must first be satisfied from
Partnership assets before the General Partner is responsible for these
obligations.
20.2 Notwithstanding the foregoing Section 20.1, neither
the General Partner nor any of its Affiliates shall be indemnified from any
liability, loss or damage incurred by them in connection with (i) any claim or
settlement involving allegations that the Securities Act of 1933 was violated
by the General Partner or by any such other person or entity unless: (a) the
General Partner or any other persons or entities seeking indemnification are
successful in defending such action or (b) such indemnification is specifically
approved by a court of law which shall have been advised as to the current
position of the Securities and Exchange Commission regarding indemnification
for violations of securities law or (ii) any liability imposed by law,
including liability for fraud, bad faith or negligence.
Section 21. MISCELLANEOUS.
21.1 This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement, binding on all
of the parties hereto, notwithstanding that all of the parties are not
signatory to the original or the same counterpart.
21.2 The terms and provisions of this Agreement shall be
binding upon and shall inure to the benefit of the successors and assigns of
the respective Partners.
21.3 In the event any sentence or Section of this
Agreement is declared by a court of competent jurisdiction to be void, such
sentence or sections shall be deemed severed from the remainder of the
Agreement and the balance of the Agreement shall remain in effect.
21.4 All notices under this Agreement shall be in writing
and shall be given to the Partners entitled thereto by personal service or by
mail, posted to the address maintained by the Partnership for such person or at
such other address as he may specify in writing.
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21.5 Section titles or captions contained in this
Agreement are inserted only as a matter of convenience and for reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Agreement nor the intent of any provision hereof.
21.6 Whenever required by context hereof, the singular
shall include the plural and vice versa; the masculine gender shall include the
feminine and neuter genders and vice versa; and the word "person" shall include
a corporation, partnership, firm or other form of association.
21.7 The name and municipal address of the General Partner
and Limited Partners are as follows:
General Partner: Wireless Management Corporation
913 S. Burnside Avenue
Gonzales, Louisiana 70737-4258
Limited Partners: EATELCORP, Inc.
913 S. Burnside Avenue
Gonzales, Louisiana 70737-4258
Mercury Cellular Telephone Company
One Lakeshore Drive
CM Tower, Suite 1495
Lake Charles, Louisiana 70629
Fort Bend Telephone Company
2012 Avenue G
Rosenberg, Texas 77471
Meretel Wireless, Inc.
913 S. Burnside Avenue
Gonzales, Louisiana 70737-4258
21.8 Notwithstanding the place where this Agreement may be
executed by any of the parties hereto the parties expressly agree that all the
terms and provisions hereof shall be
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<PAGE> 33
construed under the internal laws of the State of Louisiana (and not the laws
pertaining to conflicts or choice of law).
21.9 In the event the business of the Partnership is
carried on or conducted in states in addition to the State of Louisiana, then
the parties agree that this Partnership shall exist to the extent required by
law under the laws of each state in which business is actually conducted by the
Partnership, and they severally agree to execute such other and further
documents as may be required or requested in order that the General Partner
legally may qualify this Partnership in such states. The power of attorney
granted to the General Partner by each Limited Partner in Section 19 shall
constitute the authority of the General Partner to perform the ministerial duty
of qualifying this Partnership under the laws of any state in which it is
necessary to file documents or instruments of qualification. A Partnership
office or principal place of business in any state may be designated from time
to time by the General Partner.
-30-
<PAGE> 34
GENERAL PARTNER:
WIRELESS MANAGEMENT CORPORATION
By: /s/ ARTHUR G. SCANLAN, II
----------------------------------------------
Name: Arthur G. Scanlan, II
----------------------------------------
Title: Chairman
---------------------------------------
LIMITED PARTNERS:
EATELCORP, INC.
By: /s/ ARTHUR G. SCANLAN, II
----------------------------------------------
Arthur G. Scanlan, II
Chief Executive Officer and Treasurer
MERCURY CELLULAR TELEPHONE COMPANY
By: /s/ ROBERT PIPER
----------------------------------------------
Name: Robert Piper
----------------------------------------
Title: President
---------------------------------------
FORT BEND TELEPHONE COMPANY
By: /s/ JOHN F. CALLENDER
----------------------------------------------
Name: John F. Callender
----------------------------------------
Title: President & CEO
---------------------------------------
MERETEL WIRELESS, INC.
By: /s/ ARTHUR G. SCANLAN, II
----------------------------------------------
Name: Arthur G. Scanlan, II
----------------------------------------
Title: Chief Executive Officer and Treasurer
---------------------------------------
-31-
<PAGE> 35
FIRST AMENDMENT TO ARTICLES OF
PARTNERSHIP IN COMMENDAM OF
MERETEL COMMUNICATIONS LIMITED PARTNERSHIP,
A LOUISIANA PARTNERSHIP IN COMMENDAM
THIS FIRST AMENDMENT made and entered into as of July 26, 1995 (the
"First Amendment"), by and among WIRELESS MANAGEMENT CORPORATION, a Louisiana
corporation (the "General Partner"), as the general partner, and EATELCORP,
INC., a Louisiana corporation ("EATEL"), MERCURY CELLULAR TELEPHONE COMPANY, a
Louisiana corporation ("Mercury"), FORT BEND TELEPHONE COMPANY, a Texas
corporation ("Fort Bend"), and MERETEL WIRELESS, INC. ("Meretel"), a Louisiana
corporation, (each, a "Limited Partner" and collectively, the "Limited
Partners"), to the Articles of Partnership in Commendam of Meretel
Communications Limited Partnership made and entered into as of June 12, 1995
(the "Agreement") by and among the General Partner and Limited Partners
provides as follows:
1. Section 5.1 of the Agreement is hereby amended and restated to
read in its entirety as follows:
"Wireless Management Corporation, as the General Partner, has
initially contributed to the Partnership the amount of $240,000.00. If
the Partnership is the successful bidder for one or more Licenses at
the FCC Auction, the General Partner agrees to pay Deferred Capital
Contributions in the maximum amount of up to and including $560,000.00
to the Partnership, such payments to be made as provided in Section
6.3 of the Agreement."
2. Section 6.1 of the Agreement is hereby amended and restated to
read in its entirety as follows:
"6.1 Each Limited Partner has initially contributed the
sum set opposite its name below. EATEL, Mercury and Fort Bend have
made their respective initial contributions in cash. Meretel has made
its initial contribution by a demand promissory note payable to the
Partnership. If the Partnership is the successful bidder for one or
more Licenses at the FCC Auction, each Limited Partner agrees to pay
Deferred Capital Contributions in the maximum amount of up to and
including the amount set opposite its name below, such payments to be
made as provided in Section 6.3 of the Agreement.
<TABLE>
<CAPTION>
Initial Capital Maximum Deferred
Limited Partner Contribution Capital Contribution
--------------- --------------- --------------------
<S> <C> <C>
EATEL $ 2,920,000.00 $ 6,813,333.33
Mercury 2,920,000.00 6,813,333.34
Fort Bend 2,920,000.00 6,813,333.33
Meretel 3,000,000.00 7,000,000.00
-------------- --------------
Total $11,760,000.00 $27,440,000.00
</TABLE>
<PAGE> 36
3. Section 6.3 of the Agreement is hereby amended and restated to
read in its entirety as follows:
"6.3 Upon completion of the FCC Auction, and after giving
consideration to the Licenses for which the Partnership was the
successful bidder, the General Partner shall determine from time to
time the amount of Deferred Capital Contributions to be made by the
Partners, up to and including the maximum amount to be made by each
Partner as set forth in Sections 5.1 and 6.1 above. The respective
Deferred Capital Contributions to be paid by each Partner at the time
or times that the General Partner shall request payment of Deferred
Capital Contributions shall be equal to the product of the total
Deferred Capital Contributions to be paid by all Partners at such time
times a fraction of which the numerator is the initial capital
contribution of such Partner and the denominator is the total initial
capital contributions by all Partners. Upon making a determination of
the Deferred Capital Contributions to be made by all Partners at any
time, the General Partner shall provide written notice thereof to all
Partners which notice shall specify the date on which the payment of
the respective Deferred Capital Contributions by each Partner
(determined in the manner set forth in the preceding sentence) is due,
such date to be no less than sixty (60) days after the giving of such
notice if any Partner's Deferred Capital Contribution is $1,000,000.00
or less and no less than ninety (90) days after the giving of such
notice if any Partner's Deferred Capital Contribution is greater than
$1,000,000.00."
4. Section 15.7 of the Agreement is hereby amended by adding the
following provisions after the last sentence thereof:
"Notwithstanding the foregoing provisions of this Section 15.7, should
a Partner default in the payment of any Deferred Capital Contribution
required to be made by such Partner hereunder, and such default
continues for thirty (30) days after written notice thereof is
received by such Partner from the General Partner, then, at the
election of the General Partner, the defaulting Partner's entire
ownership interest in the Partnership and all rights of such Partner
relating thereto shall be deemed automatically forfeited in their
entirety. Alternatively, the General Partner may seek to enforce the
rights of the Partnership to receive payment of such Deferred Capital
Contribution. In connection with any such default, the defaulting
Partner shall be responsible for all attorney fees and costs incurred
by the General Partner in enforcing the rights of the Partnership with
respect thereto."
5. As amended by this First Amendment, the Agreement shall remain
in full force and effect by and among the General Partner and the Limited
Partners.
6. Capitalized terms used herein shall have the meanings ascribed
to them in the Agreement unless otherwise expressly defined herein.
-2-
<PAGE> 37
7. This First Amendment may be executed in several counterparts and
all so executed shall constitute one First Amendment, binding on all of
the parties hereto, notwithstanding that all of the parties are not signatory
to the original or the same counterpart.
-3-
<PAGE> 38
WHEREFORE, the General Partner and the Limited Partners have executed
this First Amendment to be effective as of the date first set forth hereinabove.
GENERAL PARTNER:
WIRELESS MANAGEMENT CORPORATION
By: /s/ ARTHUR G. SCANLAN, II
----------------------------------------------
Name: Arthur G. Scanlan, II
----------------------------------------
Title: Chairman
---------------------------------------
LIMITED PARTNERS:
EATELCORP, INC.
By: /s/ ARTHUR G. SCANLAN, II
----------------------------------------------
Arthur G. Scanlan, II
Chief Executive Officer and Treasurer
MERCURY CELLULAR TELEPHONE COMPANY
By: /s/ ROBERT PIPER
----------------------------------------------
Name: Robert Piper
----------------------------------------
Title: President
---------------------------------------
FORT BEND TELEPHONE COMPANY
By: /s/ JOHN F. CALLENDER
----------------------------------------------
Name: John F. Callender
----------------------------------------
Title: President & CEO
---------------------------------------
MERETEL WIRELESS, INC.
By: /s/ ARTHUR G. SCANLAN, II
----------------------------------------------
Name: Arthur G. Scanlan, II
----------------------------------------
Title: Chief Executive Officer and Treasurer
---------------------------------------
-4-
<PAGE> 1
EXHIBIT 10.5
RSA MANAGEMENT AND
CONSTRUCTION SERVICES AGREEMENT
THIS Agreement ("Agreement") dated as of June 1, 1994, is made by and
among MERCURY, INC., a Louisiana corporation ("MLA") and MISSISSIPPI-34
CELLULAR CORPORATION, a Mississippi corporation ("MS-34").
WITNESSETH
WHEREAS, MS-34 has been granted authority (the "Construction Permit") by
the Federal Communications Commission (the "FCC") to construct a cellular
communications system operating on Frequency Block A to serve the Mississippi
4-Yalobusha, RSA #496 (the "MS-4 System");
WHEREAS, MS-34 has been granted authority (the "Operating License") by
the FCC to operate a cellular communications system on Frequency Block A to
serve the Mississippi 3-Bolivar, RSA #495 (the "MS-3 System") (the MS-4 System
and MS-3 System are sometimes referred to herein collectively as the "System");
WHEREAS, MS-34 desires to enter into an agreement for the construction,
management and operation of the System, at all times subject to oversight,
review, supervision and control by MS-34;
WHEREAS, MLA has developed extensive experience, resources and expertise
pertinent to cellular system construction, management and operation and the
provision of quality cellular service to the public; and
WHEREAS, all of the foregoing and all of the agreements between the
parties herein shall be subject to FCC and other regulatory approvals, if any,
as required by law.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed as follows:
ARTICLE I.
CONSTRUCTION SERVICE
1.1 GENERAL.
(a) Subject to MS-34's oversight and control, MLA shall manage and
supervise: (i) the Initial Construction of the MS-34 System in
accordance with the MS-34 System Design; and (ii) such Additional
Construction as may be
1
<PAGE> 2
necessary to expand the System to satisfy the requirement of the
FCC's rules and to meet demand in the RSA in accordance with the
System Design. MLA shall use its best efforts to devote such time
and resources to construction of the MS-34 System as may
reasonably be necessary for completion of construction of the
Initial System within eighteen (18) months after grant of the
Construction Permit ("Initial Construction Completion Date").
1.2 DESIGN DEVELOPMENT AND SYSTEM CONSTRUCTION. MLA shall be
responsible for the competent, businesslike and timely management and
supervision of all activities integral to the construction of the System,
including, but not limited to, the following:
(i) reviewing the System Design proposed in the Applications, and, if
MLA recommends modifying the System Design, developing for
MS-34's consideration and approval a new System Design,
including, but not limited to, development of a cell
configuration, formulation of a frequency plan, analysis of
propagation characteristics, projection of the probable volume
and location of demand, allocation of system capacity, and
selection of control point, base station, and business office
sites;
(ii) negotiation as agent for MS-34 of such leases, options and
contracts and the securing of such third party consents and
agreements, including the entering into as agent for MS-34 of
such purchase agreements, leases or contracts, as may be
necessary to permit the full use of the control point, base
station, and business office sites selected;
(iii) securing as agent for MS-34 such zoning or other necessary
governmental approvals as may be required to permit the use of
the control point, base station, and business office sites
selected and acquired;
(iv) preparing proposed modifications to the Construction Permit and
Operating License for MS-34's review, prior approval and
execution and, as agent for MS-34, securing FCC approval of any
FCC applications for such modifications filed by MS-34, and
securing as agent for MS-34 such FAA approvals as may be required
for tower and antenna placements and heights;
(v) preparation of control point, base station, and business office
sites, including construction and/or modifications of radio
towers and buildings, if needed, to house switching and base
station equipment, construction and/or improvement of access
roads, and installations of such security facilities as may be
necessary to meet FCC, vendor and/or sound business requirements.
2
<PAGE> 3
(vi) installation of switching and base station equipment and such
other facilities as my be necessary or appropriate for the
operation of such equipment and the System or, to the extent
appropriate to or required by the System Design, the negotiation
and execution, as agent for MS-34, and subject to MS-34's prior
approval, of such agreements as are necessary to obtain use of
the joint or shared switching facilities of any other existing or
planned cellular systems, provided that such planned system will
become operational by such date as to allow the timely
commencement of operations of the System; and
(vii) the preparation and filing of any applications necessary to
obtain the Operating License from the FCC.
1.3 EQUIPMENT ACQUISITION. MLA shall be responsible for recommending
an equipment vendor and, upon approval by MS-34 of such vendor and the terms
and conditions of any vendor contract, acquire as agent for MS-34 such
switching, base station and ancillary equipment as may be necessary or
appropriate to the operation of the System in accordance with the System
Design.
1.4 INTERCONNECTION. MS-34 may direct and MLA shall be responsible
for negotiating, as agent for MS-34, with such local exchange telephone company
or companies as MLA may deem appropriate, the terms and conditions by which the
System will be interconnected to the local exchange switched telephone network
and/or to the facilities of one or more interexchange common carriers, and
shall supervise and manage such interconnections.
ARTICLE II.
MANAGEMENT AND OPERATION
2.1 GENERAL. Subject to MS-34's oversight and control, MLA shall
manage and supervise the dally operations of the System. To this end, MLA
shall provide (i) administrative, customer service, accounting, insurance,
purchasing, clerical and such other general services as may be necessary to the
administration of the System; (ii) marketing, sales, advertising and such other
promotional services as may be necessary in the marketing of the System; (iii)
the development and implementation of mechanisms for collecting the amounts
billed by the System which are not properly paid; (iv) the process of verifying
potential customer credit and defining deposit amounts when required; (v) the
establishment of bank accounts as may be necessary to the operation of the
System; and (vi) technical operations, engineering, and maintenance. MLA shall
devote its best effort to operate and manage the System properly and
efficiently. MLA shall be responsible for such additional activities integral
to the operation of the System as follows:
3
<PAGE> 4
(i) subject to supervision by MS-34, the hiring of personnel to
manage and operate the System and to market the services of the
System;
(ii) the entering into, as agent for MS-34 of such agreements as may
be necessary for the provision of services, supplies, office or
other types of space, utilities, insurance, and the like;
(iii) the development and implementation of promotional programs,
including but not limited to the negotiation, as agent for MS-34
of resale arrangements;
(iv) the preparation of proposals for expansion of the System or for
such other capital improvements as may be necessary to comply
with FCC rules or to meet market demand;
(v) the entering into of such agreement with other cellular system
operators, including but not limited to roaming and shared
facilities agreements, as may be appropriate or advisable to the
operation of the System.
2.2 INSURANCE. During the term of this Agreement, MLA shall procure
and maintain, at MS-34's expense, property damage and liability insurance on
the System with such coverage as are necessary to protect the System, workmen's
compensation insurance and fidelity bond coverage. Insurance will afford
protection in an amount agreed upon by the Parties.
ARTICLE III.
BUDGETS AND EXPENDITURES
3.1 GENERAL. In developing budgets, the Parties shall endeavor to
assure that the System shall be of sufficient size and provide a service of
sufficient quality to meet the demands of the RSA and to provide a viable
competitive alternative to the wireline system serving or authorized to serve
the RSA. However, the System shall be constructed and operated as
cost-effectively as possible.
3.2 CONSTRUCTION BUDGET. A budget for the construction of the System
(the "Construction Budget") shall be prepared by MLA and submitted to MS-34 for
approval within thirty (30) days from the Effective Date. MLA shall provide
MS-34 with weekly reports on the status of construction and a comparison of
expenditures versus amounts budgeted for the categories set out in the
Construction Budget.
4
<PAGE> 5
3.3 OPERATIONS BUDGET. MLA shall submit to MS-34 an annual
operations budget ("Operations Budget") by December I of each year for the
immediately succeeding calendar year which shall itemize the projected
expenditures and the anticipated net profit (as determined in accordance with
generally accepted accounting principles) of the System. Such Operations
Budget shall form the basis on which expenditures for the System shall be made.
ARTICLE IV.
AUTHORITY
4.1 LIMITATIONS. In addition to those matters elsewhere listed in
this Agreement for which MS-34's prior approval is required, MLA shall not have
authority, without prior approval by MS-34, to undertake any of the following
actions:
(i) sell, trade or surrender the Construction Permit or Operating
License or attempt to modify the Construction Permit or Operating
License;
(ii) modify the Construction Budget or Operations Budget;
(iii) enter into any joint venture, partnership or other agreement
dealing with the System;
(iv) grant a security interest in or hypothecate any of the assets of
the System except such security interest as may reasonably be
deemed necessary in the ordinary course of business;
(v) incur any debts not in the ordinary course of business;
(vi) settle any legal action or litigation in the name of MS-34 or the
System or brought by or against MS-34 or the System.
MLA shall have authority with prior approval of MS-34 to undertake, and
may undertake, any and all other action necessary or advisable to construct,
manage and operate the System which are not prohibited by law or regulation,
including the authority to act as agent for and on behalf of MS-34 in entering
into contractual arrangement and before federal, state and local governmental
authorities.
5
<PAGE> 6
ARTICLE V.
PERSONNEL
5.1 EMPLOYEES. Subject to MS-34's supervision, MLA may employ and
shall be responsible for recruiting, hiring, training, promotion and
terminating any employees it deems necessary and appropriate to the
construction, management and operation of the System, but shall be subject to
the Construction Budget and Operations Budget.
5.2 MMS AND MLA EMPLOYEES. MLA may elect to rely upon its own
employees for the performance of services in constructing and operating the
system to the extent, in their discretion, they deem necessary or advisable.
Should MLA use its own personnel to perform services for the System, such
services shall not be charged to the System separately and apart from the
Management Fees provided for in Section 6.2 of this Agreement.
5.3 INDEPENDENT CONTRACTORS. MLA may, at its discretion, engage
Independent Contractors to perform any service necessary to construction,
management and operation of the System. MLA shall be responsible for selecting
and contracting on behalf of MS-34 or the System with any such Independent
Contractors, but shall be subject to the Construction Budget and Operations
Budget.
ARTICLE VI.
COMPENSATION
6.1 REIMBURSEMENT. MS-34 shall reimburse MLA for all expenses
reasonable incurred in the performance of its responsibilities under this
Agreement ("Reimbursable Expenses"), including but not limited to, capital
costs and the costs and expenditures of any Independent Contractors employed by
MLA on MS-34's behalf in fulfilling its construction, operating, or other
responsibilities hereunder.
6.2 MANAGEMENT FEE. MS-34 shall pay MLA a management fee ("Management
Fee") for the performance of their responsibilities under this Agreement. The
Management Fee shall be payable in advance at the beginning of each month and
shall not be less than $17,000 and not more than $21,000 per month based on the
actual resources required to perform the responsibilities previously defined.
All cost of services of MLA in providing management, supervisory and
operational functions, with the exception of travel, lodging, long distance,
postage and shipping expenses related to MS-34, shall be included in the
Management Fee and shall not be separately charged to MS-34. Salaries of
employees located in the MS-34 market will not be included in the Management
Fee.
6
<PAGE> 7
6.3 STATEMENTS. MLA shall each provide to MS-34, within Fifteen (15)
days after the close of each month during the term of this Agreement, a monthly
invoice, supported by documentation satisfactory to MS-34, setting forth in
reasonable detail all expenses incurred by MLA on behalf of the System during
that month, including all of MLA's Reimbursable Expenses (the "Monthly
Invoice"). MS-34 shall remit payment of each Monthly Invoice within ten (10)
days of the date it receives such statement.
ARTICLE VII.
ACCOUNTING AND REPORTS
7. 1 BOOKS AND RECORDS. MLA shall each keep or cause to be kept
accounts and complete books and records with respect to the aspects of the
construction, management and operation of the System for which it is
responsible, in accordance with generally accepted accounting principles
consistently applied, showing all costs, expenditures, assets, and liabilities,
and all other records necessary or convenient for recording the financial
aspects of the construction, management and operation of the System.
7.2 MONTHLY FINANCIAL STATEMENT. Within twenty (20) days after the
end of each month and within thirty (30) days after the end of each fiscal
year, MLA shall prepare or cause to be prepared and transmit to MS-34 unaudited
financial statements, which all include a balance sheet, an income statement
and such other information as MS-34 reasonably requires (the "Monthly and
Annual Statements", respectively). The Monthly and Annual Financial Statements
shall further provide reconciliations between the Construction Budget or
Operations Budget, as applicable, and actual costs and revenues for the period
covered by the statements and, in the case of the Monthly Statements, for the
Year to date. MLA shall also provide at MS-34's request any and all such
additional statements or reports as may be necessary for MS-34's oversight and
control of System construction and operation.
7.3 ACCESS TO BOOKS AND RECORDS. MS-34 shall have at all reasonable
times during normal business hours access to and the right to photocopy the
books and records maintained by MLA pursuant to Section 7.1 of this Agreement,
which books, records and information shall be kept at the principal offices of
MLA, as applicable.
7
<PAGE> 8
ARTICLE III.
TERM
8.1 TERMINATION. This Agreement shall continue for one (1) year
(ending May 31, 1995), unless terminated as follows:
(a) Any Party may terminate this agreement on thirty (30) days prior
written notice to the other Parties.
8.2 TERMINATION DUTIES. After receipt of written notice of
termination, but prior to the effective date of such termination, MLA shall
continue to perform under this Agreement unless specifically instructed to
discontinue such performance. In any event, even if so instructed, MLA will
nonetheless be entitled to reimbursement of Reimbursable Expenses and payment
of Management Fees, if payable pursuant to Section 6.2 hereof, for the period
ending on the effective date of termination. Fifteen (15) days prior to the
effective date of expiration or termination of this Agreement, MLA shall
relinquish to MS-34 or its designers possession and control of all property of
the System, including but not limited to, all documents, data and records
pertaining to the System. MLA and MS-34 shall commit to use their best efforts
to assure a smooth transition in the event of termination.
ARTICLE IX.
MISCELLANEOUS
9.1 CHOICE OF LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Mississippi.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized officers on the dates indicated below to be effective
as of ______________________.
MISSISSIPPI-34
CELLULAR CORPORATION MERCURY, INC.
By: /s/ WIRT YERGER, III By: /s/ ROBERT PIPER
------------------------- --------------------------
Wirt Yerger, III Robert Piper
Director Senior Vice President/CFO
+ David Bailey's Oral Consent
8
<PAGE> 1
EXHIBIT 10.6
RSA MANAGEMENT AND
CONSTRUCTION SERVICES AGREEMENT
THIS Agreement ("Agreement") dated as of 5-1-96, is made by and
among MERCURY, INC., a Louisiana corporation ("MLA") and MISSISSIPPI-1
TELEPHONE COMPANY, a Mississippi corporation ("MTC").
WITNESSETH
WHEREAS, MTC has been granted authority (the "Construction Permit") by
the Federal Communications Commission (the "FCC") to construct a cellular
communications system operating on Frequency Block A to serve the Mississippi
1-Tunica, RSA 493 (the "MS-1 System");
WHEREAS, MTC has been granted authority (the "Operating License") by the
FCC to operate a cellular communications system on Frequency Block A to serve
the Mississippi 1-Tunica, RSA 493 (the "MS-1 System").
WHEREAS, MTC desires to enter into an agreement for the construction,
management and operation of the System, at all times subject to oversight,
review, supervision and control by MTC;
WHEREAS, MLA has developed extensive experience, resources and expertise
pertinent to cellular system construction, management and operation and the
provision of quality cellular service to the public; and
WHEREAS, all of the foregoing and all of the agreements between the
parties herein shall be subject to FCC and other regulatory approvals, if any,
as required by law.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed as follows:
ARTICLE I.
Construction Service
1.1 GENERAL
(a) Subject to MTC's oversight and control, MLA shall manage and
supervise: (i) the Initial Construction of the MTC System in
accordance with the MTC System Design; and (ii) such Additional
Construction as may be necessary to expand the System to satisfy
the requirement of the FCC's rules and to meet
<PAGE> 2
demand in the RSA in accordance with the System Design. MLA shall
use its best efforts to devote such time and resources to
construction of the MTC System as may reasonably be necessary for
completion of construction of the Initial System within eighteen
(18) months after grant of the Construction Permit ("Initial
Construction Completion Date").
1.2 DESIGN DEVELOPMENT AND SYSTEM CONSTRUCTION. MLA shall be
responsible for the competent, businesslike and timely management and
supervision of all activities integral to the construction of the System,
including, but not limited to, the following:
(i) reviewing the System Design proposed in the Applications, and, if
MLA recommends modifying the System Design, developing for MTC's
consideration and approval a new System Design, including, but
not limited to, development of a cell configuration, formulation
of a frequency plan, analysis of propagation characteristics,
projection of the probable volume and location of demand,
allocation of system capacity, and selection of control point,
base station, and business office sites;
(ii) negotiation as agent for MTC of such leases, options and
contracts and the securing of such third party consents and
agreements, including the entering into as agent for MTC of such
purchase agreements, leases or contracts, as may be necessary to
permit the full use of the control point, base station, and
business office sites selected;
(iii) securing as agent for MTC such zoning or other necessary
governmental approvals as may be required to permit the use of
the control point, base station, and business office sites
selected and acquired;
(iv) preparing proposed modifications to the Construction Permit and
Operating License for MTC's review, prior approval and execution
and, as agent for MTC, securing FCC approval of any FCC
applications for such modifications filed by MTC, and securing as
agent for MTC such FAA approvals as may be required for tower and
antenna placements and heights;
(v) preparation of control point, base station, and business office
sites, including construction and/or modifications of radio
towers and buildings, if needed, to house switching and base
station equipment, construction and/or improvement of access
roads, and installations of such security facilities as may be
necessary to meet FCC, vendor and/or sound business requirements.
(vi) installation of switching and base station equipment and such
other facilities as may be necessary or appropriate for the
operation of such equipment and
<PAGE> 3
the System or, to the extent appropriate to or required by the
System Design, the negotiation and execution, as agent for MTC,
and subject to MTC's prior approval, of such agreements as are
necessary' to obtain use of the joint or shared switching
facilities of any other existing or planned cellular systems,
provided that such planned system will become operational by such
date as to allow the timely commencement of operations of the
System; and
(vii) the preparation and filing of any applications necessary to
obtain the Operating License from the FCC.
1.3 EQUIPMENT ACQUISITION. MLA shall be responsible for recommending
an equipment vendor and, upon approval by MTC of such vendor and the terms and
conditions of any vendor contract, acquire as agent for MTC such switching,
base station and ancillary equipment as may be necessary or appropriate to the
operation of the System in accordance with the System Design.
1.4 INTERCONNECTION. MTC may direct and MLA shall be responsible for
negotiating, as agent for MTC, with such local exchange telephone company or
companies as MLA may deem appropriate, the terms and conditions by which the
System will be interconnected to the local exchange switched telephone network
and/or to the facilities of one or more interexchange common carriers, and
shall supervise and manage such interconnections.
ARTICLE II.
MANAGEMENT AND OPERATION
2.1 GENERAL. Subject to MTC's oversight and control, MLA shall manage
and supervise the daily operations of the System. To this end, MLA shall
provide (i) administrative, customer service, accounting, insurance,
purchasing, clerical and such other general services as may be necessary to the
administration of the System; (ii) marketing, sales, advertising and such other
promotional services as may be necessary in the marketing of the System; (iii)
the development and implementation of mechanisms for collecting the amounts
billed by the System which are not properly paid; (iv) the process of verifYing
potential customer credit and defining deposit amounts when required; (v) the
establishment of bank accounts as may be necessary to the operation of the
System; and (vi) technical operations, engineering, and maintenance. MLA shall
devote its best effort to operate and manage the System properly and
efficiently. MLA shall be responsible for such additional activities integral
to the operation of the System as follows:
(i) subject to supervision by MTC, the hiring of personnel to manage
and operate the System and to market the services of the System;
<PAGE> 4
(ii) the entering into, as agent for MTC of such agreements as may be
necessary for the provision of services, supplies, office or
other types of space, utilities, insurance, and the like;
(iii) the development and implementation of promotional programs,
including but not limited to the negotiation, as agent for MTC of
resale arrangements;
(iv) the preparation of proposals for expansion of the System or for
such other capital improvements as may be necessary to comply
with FCC rules or to meet market demand;
(v) the entering into of such agreement with other cellular system
operators, including but not limited to roaming and shared
facilities agreements, as may be appropriate or advisable to the
operation of the System.
2.2 INSURANCE. During the term of this Agreement, MLA shall procure
and maintain, at MTC's expense, property damage and liability insurance on the
System with such coverage as are necessary to protect the System, workmen's
compensation insurance and fidelity bond coverage. Insurance will afford
protection in an amount agreed upon by the Parties.
ARTICLE III.
BUDGETS AND EXPENDITURES
3.1 GENERAL. In developing budgets, the Parties shall endeavor to
assure that the System shall be of sufficient size and provide a service of
sufficient quality to meet the demands of the RSA and to provide a viable
competitive alternative to the wireline system serving or authorized to serve
the RSA. However, the System shall be constructed and operated as
cost-effectively as possible.
3.2 CONSTRUCTION BUDGET. A budget for the construction of the System
(the "Construction Budget") shall be prepared by MLA and submitted to MTC for
approval within thirty (30) days from the Effective Date. MLA shall provide MTC
with weekly reports on the status of construction and a comparison of
expenditures versus amounts budgeted for the categories set out in the
Construction Budget.
3.3 OPERATIONS BUDGET. MLA shall submit to MTC an annual operations
budget ("Operations Budget") by December 1 of each year for the immediately
succeeding calendar year which shall itemize the projected expenditures and the
anticipated net profit
<PAGE> 5
(as determined in accordance with generally accepted accounting principles) of
the System. Such Operations Budget shall form the basis on which expenditures
for the System shall be made.
ARTICLE IV.
AUTHORITY
4.1 LIMITATIONS. In addition to those matters elsewhere listed in
this Agreement for which MTC's prior approval is required, MLA shall not have
authority, without prior approval by MTC, to undertake any of the following
actions:
(i) sell, trade or surrender the Construction Permit or Operating
License or attempt to modify the Construction Permit or Operating
License;
(ii) modify the Construction Budget or Operations Budget;
(iii) enter into any joint venture, partnership or other agreement
dealing with the System;
(iv) grant a security interest in or hypothecate any of the assets of
the System except such security interest as may reasonably be
deemed necessary in the ordinary course of business;
(v) incur any debts not in the ordinary course of business;
(vi) settle any legal action or litigation in the name of MTC or the
System or brought by or against MTC or the System.
MLA shall have authority with prior approval of MTC to undertake, and
may undertake, any and all other action necessary or advisable to construct,
manage and operate the System which are not prohibited by law or regulation,
including the authority to act as agent for and on behalf of MTC in entering
into contractual arrangement and before federal, state and local governmental
authorities.
ARTICLE V.
PERSONNEL
5.1 EMPLOYEES. Subject to MTC's supervision, MLA may employ and shall
be responsible for recruiting, hiring, training, promotion and terminating any
employees it
<PAGE> 6
deems necessary and appropriate to the construction, management and operation
of the System, but shall be subject to the Construction Budget and Operations
Budget.
5.2 MMS AND MLA EMPLOYEES. MLA may elect to rely upon its own
employees for the performance of services in constructing and operating the
system to the extent, in their discretion, they deem necessary or advisable.
Should MLA use its own personnel to perform services for the System, such
services shall not be charged to the System separately and apart from the
Management Fees provided for in Section 6.2 of this Agreement.
5.3 INDEPENDENT CONTRACTORS. MLA may, at its discretion, engage
Independent Contractors to perform any service necessary to construction,
management and operation of the System. MLA shall be responsible for selecting
and contracting on behalf of MTC or the System with any such Independent
Contractors, but shall be subject to the Construction Budget and Operations
Budget.
ARTICLE VI.
COMPENSATION
6.1 REIMBURSEMENT. MTC shall reimburse MLA for all expenses
reasonable incurred in the performance of its responsibilities under this
Agreement ("Reimbursable Expenses"), including but not limited to, capital
costs and the costs and expenditures of any Independent Contractors employed by
MLA on MTC's behalf in fulfilling its construction, operating, or other
responsibilities hereunder.
6.2 MANAGEMENT FEE. MTC shall pay MLA a management fee ("Management
Fee") for the performance of their responsibilities under this Agreement. The
Management Fee shall be payable in advance at the beginning of each month and
shall equal $15,000. This fee is subject to change quarterly based on
operational analysis. All cost of services of MLA in providing management,
supervisory and operational functions, with the exception of travel, lodging,
long distance, postage and shipping expenses related to MTC, shall be included
in the Management Fee and shall not be separately charged to MTC. Salaries of
employees located in the MTC market will not be included in the Management Fee.
6.3 STATEMENTS. MLA shall each provide to MTC, within fifteen (15)
days after the close of each month during the term of this Agreement, a monthly
invoice, supported by documentation satisfactory to MTC, setting forth in
reasonable detail all expenses incurred by MLA on behalf of the System during
that month, including all of MLA's Reimbursable Expenses (the "Monthly
Invoice"). MTC shall remit payment of each Monthly Invoice within ten (10)
days of the date it receives such statement.
<PAGE> 7
ARTICLE VII.
ACCOUNTING AND REPORTS
7.1 BOOKS AND RECORDS. MLA shall each keep or cause to be kept
accounts and complete books and records with respect to the aspects of the
construction, management and operation of the System for which it is
responsible, in accordance with generally accepted accounting principles
consistently applied, showing all costs, expenditures, assets, and liabilities,
and all other records necessary or convenient for recording the financial
aspects of the construction, management and operation of the System.
7.2 MONTHLY FINANCIAL STATEMENT. Within twenty (20) days after the
end of each month and within thirty (30) days after the end of each fiscal
year, MLA shall prepare or cause to be prepared and transmit to MTC unaudited
financial statements, which all include a balance sheet, an income statement
and such other information as MTC reasonably requires (the "Monthly and Annual
Statements", respectively). The Monthly and Annual Financial Statements shall
further provide reconciliations between the Construction Budget or Operations
Budget, as applicable, and actual costs and revenues for the period covered by
the statements and, in the case of the Monthly Statements, for the Year to
date. MLA shall also provide at MTC's request any and all such additional
statements or reports as may be necessary for MTC's oversight and control of
System construction and operation.
7.3 ACCESS TO BOOKS AND RECORDS. MTC shall have at all reasonable
times during normal business hours access to and the right to photocopy the
books and records maintained by MLA pursuant to Section 7.1 of this Agreement,
which books, records and information shall be kept at the principal offices of
MLA, as applicable.
ARTICLE VIII.
TERM
8.1 TERMINATION. This Agreement shall continue for one (1) year,
unless terminated as follows:
(a) Any Party may terminate this agreement on thirty (30) days prior
written notice to the other Parties.
8.2 TERMINATION DUTIES. After receipt of written notice of
termination, but prior to the effective date of such termination, MLA shall
continue to perform under this Agreement unless specifically instructed to
discontinue such performance. In any event, even if so instructed, MLA will
nonetheless be entitled to reimbursement of Reimbursable Expenses and payment
of Management Fees, if payable pursuant to Section 6.2 hereof, for
<PAGE> 8
the period ending on the effective date of termination. Fifteen (15) days prior
to the effective date of expiration or termination of this Agreement, MLA shall
relinquish to MTC or its designers possession and control of all property of
the System, including but not limited to, all documents, data and records
pertaining to the System. MLA and MTC shall commit to use their best efforts to
assure a smooth transition in the event of termination.
ARTICLE IX.
MISCELLANEOUS
9.1 CHOICE OF LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Mississippi.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized officers on the dates indicated below to be
effective as of 5-1-96.
MERCURY, INC.
By: /s/ THOMAS G. HENNING
-----------------------
It's: Secretary
-----------------------
MISSISSIPPI 1 TELEPHONE COMPANY
By: /s/ MIKE CLARK
-----------------------
It's: Vice President
-----------------------
<PAGE> 1
EXHIBIT 10.7
RSA MANAGEMENT AND
CONSTRUCTION SERVICES AGREEMENT
THIS Agreement ("Agreement") dated as of 5-1-96, is made by and among
MERCURY, INC., a Louisiana corporation ("MLA") and MERCURY CELLULAR TELEPHONE
COMPANY, a Louisiana corporation ("MCELL").
WITNESSETH
WHEREAS, MCELL has been granted authority (the "Construction Permit") by
the Federal Communications Commission (the "FCC") to construct a cellular
communications system operating on Frequency Block B to serve the Mercury
Cellular Telephone Company Lake Charles MSA #197 and Louisiana RSA #456B1 and
#458B1 (the "MCELL System");
WHEREAS, MCELL has been granted authority (the "Operating License") by
the FCC to Operate a cellular communications system on Frequency Block B to
serve the Mercury Cellular Telephone Company Lake Charles MSA #197 and
Louisiana RSA #456B1 and #458B1 (the "MCELL System").
WHEREAS, MCELL desires to enter into an agreement for the construction,
management and operation of the System, at all times subject to oversight,
review, supervision and control by MCELL;
WHEREAS, MLA has developed extensive experience, resources and expertise
pertinent to cellular system construction, management and operation and the
provision of quality cellular service to the public; and
WHEREAS, all of the foregoing and all of the agreements between the
parties herein shall be subject to FCC and other regulatory approvals, if any,
as required by law.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed as follows:
ARTICLE I.
CONSTRUCTION SERVICE
1.1 GENERAL.
(a) Subject to MCELL's oversight and control, MLA shall manage and
supervise: (i) the Initial Construction of the MCELL System in
accordance with the MCELL System Design; and (ii) such Additional
Construction as may be necessary to expand the System to satisfy
the requirement of the FCC's rules and to meet demand in the MSA
and RSA in accordance with the System Design. MLA shall use its
best efforts to devote such time and resources to construction of
the
<PAGE> 2
MCELL System as may reasonably be necessary for completion of
construction of the Initial System within eighteen (18) months
after grant of the Construction Permit ("Initial Construction
Completion Date").
1.2 DESIGN DEVELOPMENT AND SYSTEM CONSTRUCTION. MLA shall be
responsible for the competent, businesslike and timely management and
supervision of all activities integral to the construction of the System,
including, but not limited to, the following:
(i) reviewing the System Design proposed in the Applications, and, if
MLA recommends modifying the System Design, developing for
MCELL's consideration and approval a new System Design,
including, but not limited to, development of a cell
configuration, formulation of a frequency plan, analysis of
propagation characteristics, projection of the probable volume
and location of demand, allocation of system capacity, and
selection of control point, base station, and business office
sites;
(ii) negotiation as agent for MCELL of such leases, options and
contracts and the securing of such third party consents and
agreements, including the entering into as agent for MCELL of
such purchase agreements, leases or contracts, as may be
necessary to permit the full use of the control point, base
station, and business office sites selected;
(iii) securing as agent for MCELL such zoning or other necessary
governmental approvals as may be required to permit the use of
the control point, base station, and business office sites
selected and acquired;
(iv) preparing proposed modifications to the Construction Permit and
Operating License for MCELL's review, prior approval and
execution and, as agent for MCELL, securing FCC approval of any
FCC applications for such modifications filed by MCELL, and
securing as agent for MCELL such FAA approvals as may be required
for tower and antenna placements and heights;
(v) preparation of control point, base station, and business office
sites, including construction and/or modifications of radio
towers and buildings, if needed, to house switching and base
station equipment, construction and/or improvement of access
roads, and installations of such security facilities as may be
necessary to meet FCC, vendor and/or sound business requirements.
(vi) installation of switching and base station equipment and such
other facilities as may be necessary or appropriate for the
operation of such equipment and the System or, to the extent
appropriate to or required by the System Design, the negotiation
and execution, as agent for MCELL, and subject to MCELL's prior
approval, of such agreements as are necessary to obtain use of
the joint or shared switching facilities of any other existing or
planned cellular systems, provided that such planned system will
become operational by such date as to allow the timely
commencement of operations of the System; and
<PAGE> 3
(vii) the preparation and filing of any applications necessary to
obtain the Operating License from the FCC.
1.3 EQUIPMENT ACQUISITION. MLA shall be responsible for recommending
an equipment vendor and, upon approval by MCELL of such vendor and the terms
and conditions of any vendor contract, acquire as agent for MCELL such
switching, base station and ancillary equipment as may be necessary or
appropriate to the operation of the System in accordance with the System
Design.
1.4 INTERCONNECTION. MCELL may direct and MLA shall be responsible
for negotiating, as agent for MCELL, with such local exchange telephone company
or companies as MLA may deem appropriate, the terms and conditions by which the
System will be interconnected to the local exchange switched telephone network
and/or to the facilities of one or more interexchange common carriers, and
shall Supervise and manage such interconnections.
ARTICLE II.
MANAGEMENT AND OPERATION
2.1 GENERAL. Subject to MCELL's oversight and control, MLA shall
manage and supervise the daily operations of the System. To this end, MLA shall
provide (i) administrative, customer service, accounting, insurance,
purchasing, clerical and such other general services as may be necessary to the
administration of the System; (ii) marketing, sales, advertising and such other
promotional services as may be necessary in the marketing of the System; (iii)
the development and implementation of mechanisms for collecting the amounts
billed by the System which are not properly paid; (iv) the process of verifying
potential customer credit and defining deposit amounts when required; (v) the
establishment of bank accounts as may be necessary to the operation of the
System; and (vi) technical operations, engineering, and maintenance. MLA shall
devote its best effort to operate and manage the System properly and
efficiently. MLA shall be responsible for such additional activities integral
to the operation of the System as follows:
(i) subject to supervision by MCELL, the hiring of personnel to
manage and operate the System and to market the services of the
System;
(ii) the entering into, as agent for MCELL of such agreements as may
be necessary for the provision of services, supplies, office or
other types of space, utilities, insurance, and the like;
(iii) the development and implementation of promotional programs,
including but not limited to the negotiation, as agent for MCELL
of resale arrangements;
(iv) the preparation of proposals for expansion of the System or for
such other capital improvements as may be necessary to comply
with FCC rules or to meet market demand;
<PAGE> 4
(v) the entering into of such agreement with other cellular system
operators, including but not limited to roaming and shared
facilities agreements, as may be appropriate or advisable to the
operation of the System.
2.2 INSURANCE. During the term of this Agreement, MLA shall procure
and maintain, at MCELL's expense, property damage and liability insurance on
the System with such coverage as are necessary to protect the System, workmen's
compensation insurance and fidelity bond coverage. Insurance will afford
protection in an amount agreed upon by the Parties.
ARTICLE III.
BUDGETS AND EXPENDITURES
3.1 GENERAL. In developing budgets, the Parties shall endeavor to
assure that the System shall be of sufficient size and provide a service of
sufficient quality to meet the demands of the MSA and RSA and to provide a
viable competitive alternative to the wireline system serving or authorized to
serve the MSA and RSA. However, the System shall be constructed and operated as
cost-effectively as possible.
3.2 CONSTRUCTION BUDGETS. A budget for the construction of the System
(the "Construction Budget") shall be prepared by MLA and submitted to MCELL for
approval within thirty (30) days from the Effective Date. MLA shall provide
MCELL with weekly reports on the status of construction and a comparison of
expenditures versus amounts budgeted for the categories set out in the
Construction Budget.
3.3 OPERATIONS BUDGET. MLA shall submit to MCELL an annual operations
budget ("Operations Budget") by December 1 of each year for the immediately
succeeding calendar year which shall itemize the projected expenditures and the
anticipated net profit (as determined in accordance with generally accepted
accounting principles) of the System. Such Operations Budget shall form the
basis on which expenditures for the System shall be made.
ARTICLE IV.
AUTHORITY
4.1 LIMITATIONS. In addition to those matters elsewhere listed in
this Agreement for which MCELL's prior approval is required, MLA shall not have
authority, without prior approval by MCELL, to undertake any of the following
actions:
(i) sell, trade or surrender the Construction Permit or Operating
License or attempt to modify the Construction Permit or Operating
License;
(ii) modify the Construction Budget or Operations Budget;
(iii) enter into any joint venture, partnership or other agreement
dealing with the System;
<PAGE> 5
(iv) grant a security interest in or hypothecate any of the assets of
the System except such security interest as may reasonably be
deemed necessary in the ordinary course of business;
(v) incur any debts not in the ordinary course of business;
(vi) settle any legal action or litigation in the name of MCELL or the
System or brought by or against MCELL or the System.
MLA shall have authority with prior approval of MCELL to undertake, and
may undertake, any and all other action necessary or advisable to construct,
manage and operate the System which are not prohibited by law or regulation,
including the authority to act as agent for and on behalf of MCELL in entering
into contractual arrangement and before federal, state and local governmental
authorities.
ARTICLE V.
PERSONNEL
5.1 EMPLOYEES. Subject to MCELL's supervision, MLA may employ and
shall be responsible for recruiting, hiring, training, promotion and
terminating any employees it deems necessary and appropriate to the
construction, management and operation of the System, but shall be subject to
the Construction Budget and Operations Budget.
5.2 MMS AND MLA EMPLOYEES. MLA may elect to rely upon its own
employees for the performance of services in constructing and operating the
system to the extent, in their discretion, they deem necessary or advisable.
Should MLA use its own personnel to perform services for the System, such
services shall not be charged to the System separately and apart from the
Management Fees provided for in Section 6.2 of this Agreement.
5.3 INDEPENDENT CONTRACTORS. MLA may, at its discretion, engage
Independent Contractors to perform any service necessary to construction,
management and operation of the System. MLA shall be responsible for selecting
and contracting on behalf of MCELL or the System with any such Independent
Contractors, but shall be subject to the Construction Budget and Operations
Budget.
ARTICLE VI.
COMPENSATION
6.1 REIMBURSEMENT. MCELL shall reimburse MLA for all expenses
reasonable incurred in the performance of its responsibilities under this
Agreement ("Reimbursable Expenses"), including but not limited to, capital
costs and the costs and expenditures of any Independent Contractors employed by
MLA on MCELL's behalf in fulfilling its construction, operating, or other
responsibilities hereunder.
<PAGE> 6
6.2 MANAGEMENT FEE. MCELL shall pay MLA a management fee ("Management
Fee") for the performance of their responsibilities under this Agreement. The
Management Fee shall be payable in advance at the beginning of each month and
shall equal $216,000. This fee is subject to change quarterly based on
operational analysis. All cost of services of MLA in providing management,
supervisory and operational functions, with the exception of travel, lodging,
long distance, postage and shipping expenses related to MCELL, shall be
included in the Management Fee and shall not be separately charged to MCELL.
Salaries of employees located in the MCELL market will not be included in the
Management Fee.
6.3 STATEMENTS. MLA shall each provide to MCELL, within fifteen (15)
days after the close of each month during the term of this Agreement, a monthly
invoice, supported by documentation satisfactory to MCELL, setting forth in
reasonable detail all expenses incurred by MLA on behalf of the System during
that month, including all of MLA's Reimbursable Expenses (the "Monthly
Invoice"). MCELL shall remit payment of each Monthly Invoice within ten (10)
days of the date it receives such statement.
ARTICLE VII.
ACCOUNTING AND REPORTS
7.1 BOOKS AND RECORDS. MLA shall each keep or cause to be kept
accounts and complete books and records with respect to the aspects of the
construction, management and operation of the System for which it is
responsible, in accordance with generally accepted accounting principles
consistently applied, showing all costs, expenditures, assets, and liabilities,
and all other records necessary or convenient for recording the financial
aspects of the construction, management and operation of the system.
7.2 MONTHLY FINANCIAL STATEMENT. Within twenty (20) days after the
end of each month and within thirty (30) days after the end of each fiscal
year, MLA shall prepare or cause to be prepared and transmit to MCELL unaudited
financial statements, which all include a balance sheet, an income statement
and such other information as MCELL reasonably requires (the "Monthly and
Annual Statements", respectively). The Monthly and Annual Financial Statements
shall further provide reconciliations between the Construction Budget or
Operations Budget, as applicable, and actual costs and revenues for the period
covered by the statements and, in the case of the Monthly Statements, for the
Year to date. MLA shall also provide at MCELL's request any and all such
additional statements or reports as may be necessary for MCELL's oversight and
control of System construction and operation.
7.3 ACCESS TO BOOKS AND RECORDS. MCELL shall have at all reasonable
times during normal business hours access to and the right to photocopy the
books and records maintained by MLA pursuant to Section 7. l of this Agreement,
which books, records and information shall be kept at the principal offices of
MLA, as applicable.
<PAGE> 7
ARTICLE VIII.
TERM
8.1 TERMINATION. This Agreement shall continue for one (1) year,
unless terminated as follows:
(a) Any Party may terminate this agreement on thirty (30) days prior
written notice to the other Parties.
8.2 TERMINATION DUTIES. After receipt of written notice of
termination, but prior to the effective date of such termination, MLA shall
continue to perform under this Agreement unless specifically instructed to
discontinue such performance. In any event, even if so instructed, MLA will
nonetheless be entitled to reimbursement of Reimbursable Expenses and payment
of Management Fees, if payable pursuant to Section 6.2 hereof, for the period
ending on the effective date of termination. Fifteen (15) days prior to the
effective date of expiration or termination of this Agreement, MLA shall
relinquish to MCELL or its designers possession and control of all property of
the System, including but not limited to, all documents, data and records
pertaining to the System. MLA and MCELL shall commit to use their best efforts
to assure a smooth transition in the event of termination.
ARTICLE IX.
MISCELLANEOUS
9.1 CHOICE OF LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Louisiana.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized officers on the dates indicated below to be
effective as of 5-1-96.
MERCURY, INC.
By: /s/ [ILLEGIBLE]
-------------------------------------
It's: Secretary
-----------------------------------
MERCURY CELLULAR TELEPHONE COMPANY
By: /s/ MIKE CLARK
-------------------------------------
It's: Vice President
-----------------------------------
<PAGE> 8
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized officers on the dates indicated below to be
effective as of 5-1-96.
MERCURY, INC.
By: /s/ [ILLEGIBLE]
-------------------------------------
It's: Secretary
-----------------------------------
MERCURY CELLULAR OF KANSAS, INC.
By: /s/ MIKE CLARK
-------------------------------------
It's: Vice President
-----------------------------------
<PAGE> 1
EXHIBIT 10.8
RSA MANAGEMENT AND
CONSTRUCTION SERVICES AGREEMENT
THIS Agreement ("Agreement") dated as of 5-1-96, is made by and among
MERCURY, INC., a Louisiana Corporation ("MLA") and MERCURY CELLULAR OF KANSAS,
INC., a Louisiana Corporation ("MCK").
WITNESSETH
WHEREAS, MCK has been granted authority (the "Operating License") by the
FCC to operate a cellular communications system on Frequency Block A to serve
the Western Kansas RSA #1, 2, 6, 7, 11, 12, 13 and Oklahoma RSA - 1 (the "MCK
System").
WHEREAS, MCK desires to enter into an agreement for the construction,
management and operation of the System, at all times subject to oversight,
review, supervision and control by MCK;
WHEREAS, MLA has developed extensive experience, resources and expertise
pertinent to cellular system construction, management and operation and the
provision of quality cellular service to the public; and
WHEREAS, all of the foregoing and all of the agreements between the
parties herein shall be subject to FCC and other regulatory approvals, if any,
as required by law.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed as follows:
ARTICLE I.
CONSTRUCTION SERVICE
1.1 GENERAL.
(a) Subject to MCK's oversight and control, MLA shall manage and
supervise: such Additional Construction as may be necessary to
expand the System to satisfy the requirement of the FCC's rules
and to meet demand in the RSA in accordance with the System
Design.
1.2 DESIGN DEVELOPMENT AND SYSTEM CONSTRUCTION. MLA shall be
responsible for the competent, businesslike and timely management and
supervision of all activities integral to the construction of the System,
including, but not limited to, the following:
<PAGE> 2
(i) reviewing the System Design proposed in the Applications, and, if
MLA recommends modifying the System Design, developing for MCK's
consideration and approval a new System Design, including, but
not limited to, development of a cell configuration, formulation
of a frequency plan, analysis of propagation characteristics,
projection of the probable volume and location of demand,
allocation of system capacity, and selection of control point,
base station, and business office sites;
(ii) negotiation as agent for MCK of such leases, options and
contracts and the securing of such third party consents and
agreements, including the entering into as agent for MCK of such
purchase agreements, leases or contracts, as may be necessary to
permit the full use of the control point, base station, and
business office sites selected;
(iii) securing as agent for MCK such zoning or other necessary
governmental approvals as may be required to permit the use of
the control point, base station, and business office sites
selected and acquired;
(iv) preparing proposed modifications to the Construction Permit and
Operating License for MCK's review, prior approval and execution
and, as agent for MCK, securing FCC approval of any FCC
applications for such modifications filed by MCK, and securing as
agent for MCK such FAA approvals as may be required for tower and
antenna placements and heights;
(v) preparation of control point, base station, and business office
sites, including construction and/or modifications of radio
towers and buildings, if needed, to house switching and base
station equipment, construction and/or improvement of access
roads, and installations of such security facilities as may be
necessary to meet FCC, vendor and/or sound business requirements.
(vi) installation of switching and base station equipment and such
other facilities as may be necessary or appropriate for the
operation of such equipment and the System or, to the extent
appropriate to or required by the System Design, the negotiation
and execution, as agent for MCK, and subject to MCK's prior
approval, of such agreements as are necessary to obtain use of
the joint or shared switching facilities of any other existing or
planned cellular systems, provided that such planned system will
become operational by such date as to allow the timely
commencement of operations of the System; and
(vii) the preparation and filing of any applications necessary to
obtain the Operating License from the FCC.
<PAGE> 3
1.3 EQUIPMENT ACQUISITION. MLA shall be responsible for recommending
an equipment vendor and, upon approval by MCK of such vendor and the terms and
conditions of any vendor contract, acquire as agent for MCK such switching,
base station and ancillary equipment as may be necessary or appropriate to the
operation of the System in accordance with the System Design.
1.4 INTERCONNECTION. MCK may direct and MLA shall be responsible for
negotiating, as agent for MCK, with such local exchange telephone company or
companies as MLA may deem appropriate, the terms and conditions by which the
System will be interconnected to the local exchange switched telephone network
and/or to the facilities of one or more interexchange common carriers, and
shall supervise and manage such interconnections.
ARTICLE II.
MANAGEMENT AND OPERATION
2.1 GENERAL. Subject to MCK's oversight and control, MLA shall manage
and supervise the daily operations of the System. To this end, MLA shall
provide (i) administrative, customer service, accounting, insurance,
purchasing, clerical and such other general services as may be necessary to the
administration of the System; (ii) marketing, sales, advertising and such other
promotional services as may be necessary in the marketing of the System; (iii)
the development and implementation of mechanisms for collecting the amounts
billed by the System which are not properly paid; (iv) the process of verifying
potential customer credit and defining deposit amounts when required; (v) the
establishment of bank accounts as may be necessary to the operation of the
System; and (vi) technical operations, engineering, and maintenance. MLA shall
devote its best effort to operate and manage the System properly and
efficiently. MLA shall be responsible for such additional activities integral
to the operation of the System as follows:
(i) subject to supervision by MCK, the hiring of personnel to manage
and operate the System and to market the services of the System;
(ii) the entering into, as agent for MCK of such agreements as may be
necessary for the provision of services, supplies, office or
other types of space, utilities, insurance, and the like;
(iii) the development and implementation of promotional programs,
including but not limited to the negotiation, as agent for MCK of
resale arrangements;
(iv) the preparation of proposals for expansion of the System or for
such other capital improvements as may be necessary to comply
with FCC rules or to meet market demand;
<PAGE> 4
(v) the entering into of such agreement with other cellular system
operators, including but not limited to roaming and shared
facilities agreements, as may be appropriate or advisable to the
operation of the System.
2.2 INSURANCE. During the term of this Agreement, MLA shall procure
and maintain, at MCK's expense, property damage and liability insurance on the
System with such coverage as are necessary to protect the System, workmen's
compensation insurance and fidelity bond coverage. Insurance will afford
protection in an amount agreed upon by the Parties.
ARTICLE III.
BUDGETS AND EXPENDITURES
3.1 GENERAL. In developing budgets, the Parties shall endeavor to
assure that the System shall be of sufficient size and provide a service of
sufficient quality to meet the demands of the RSA and to provide a viable
competitive alternative to the wireline system serving or authorized to serve
the RSA. However, the System shall be constructed and operated as cost-
effectively as possible.
3.2 CONSTRUCTION BUDGET. A budget for the construction of the System
(the "Construction Budget") shall be prepared by MLA and submitted to MCK for
approval within thirty (30) days from the Effective Date. MLA shall provide MCK
with weekly reports on the status of construction and a comparison of
expenditures versus amounts budgeted for the categories set out in the
Construction Budget.
3.3 OPERATIONS BUDGET. MLA shall submit to MCK an annual operations
budget ("Operations Budget") by December 1 of each year for the immediately
succeeding calendar year which shall itemize the projected expenditures and the
anticipated net profit (as determined in accordance with generally accepted
accounting principles) of the System. Such Operations Budget shall form the
basis on which expenditures for the System shall be made.
ARTICLE IV.
AUTHORITY
4.1 LIMITATIONS. In addition to those matters elsewhere listed in
this Agreement for which MCK's prior approval is required, MLA shall not have
authority, without prior approval by MCK, to undertake any of the following
actions:
<PAGE> 5
(i) sell, trade or surrender the Operating License or attempt to
modify the Operating License;
(ii) modify the Construction Budget or Operations Budget;
(iii) enter into any joint venture, partnership or other agreement
dealing with the System;
(iv) grant a security interest in or hypothecate any of the assets of
the System except such security interest as may reasonably be
deemed necessary in the ordinary course of business;
(v) incur any debts not in the ordinary course of business;
(vi) settle any legal action or litigation in the name of MCK or the
System or brought by or against MCK or the System.
MLA shall have authority with prior approval of MCK to undertake, and
may undertake, any and all other action necessary or advisable to construct,
manage and operate the System which are not prohibited by law or regulation,
including the authority to act as agent for and on behalf of MCK in entering
into contractual arrangement and before federal, state and local governmental
authorities.
ARTICLE V.
PERSONNEL
5.1 EMPLOYEES. Subject to MCK's supervision, MLA may employ and shall
be responsible for recruiting, hiring, training, promotion and terminating any
employees it deems necessary and appropriate to the construction, management
and operation of the System, but shall be subject to the Construction Budget
and Operations Budget.
5.2 MCK AND MLA EMPLOYEES. MLA may elect to rely upon its own
employees for the performance of services in constructing and operating the
system to the extent, in their discretion, they deem necessary or advisable.
Should MLA use its own personnel to perform services for the System, such
services shall not be charged to the System separately and apart from the
Management Fees provided for in Section 6.2 of this Agreement.
5.3 INDEPENDENT CONTRACTORS. MLA may, at its discretion, engage
Independent Contractors to perform any service necessary to construction,
management and operation of the System. MLA shall be responsible for selecting
and contracting on behalf
<PAGE> 6
of MCK or the System with any such Independent Contractors, but shall be
subject to the Construction Budget and Operations Budget.
ARTICLE VI.
COMPENSATION
6.1 REIMBURSEMENT. MCK shall reimburse MLA for all expenses
reasonable incurred in the performance of its responsibilities under this
Agreement ("Reimbursable Expenses"), including but not limited to, capital
costs and the costs and expenditures of any Independent Contractors employed by
MLA on MCK's behalf in fulfilling its construction, operating, or other
responsibilities hereunder.
6.2 MANAGEMENT FEE. MCK shall pay MLA a management fee ("Management
Fee") for the performance of their responsibilities under this Agreement. The
Management Fee shall be payable in advance at the beginning of each month and
shall equal $42,000. This fee is subject to change quarterly based on
operational analysis. All cost of services of MLA in providing management,
supervisory and operational functions, with the exception of travel, lodging,
long distance, postage and shipping expenses related to MCK, shall be included
in the Management Fee and shall not be separately charged to MCK. Salaries of
employees located in the MCK market will not be included in the Management Fee.
6.3 STATEMENTS. MLA shall each provide to MCK, within fifteen (15)
days after the close of each month during the term of this Agreement, a monthly
invoice, supported by documentation satisfactory to MCK, setting forth in
reasonable detail all expenses incurred by MLA on behalf of the System during
that month, including all of MLA's Reimbursable Expenses (the "Monthly
Invoice"). MCK shall remit payment of each Monthly Invoice within ten (10) days
of the date it receives such statement.
ARTICLE VII.
ACCOUNTING AND REPORTS
7.1 BOOKS AND RECORDS. MLA shall each keep or cause to be kept
accounts and complete books and records with respect to the aspects of the
construction, management and operation of the System for which it is
responsible, in accordance with generally accepted accounting principles
consistently applied, showing all costs, expenditures, assets, and liabilities,
and all other records necessary or convenient for recording the financial
aspects of the construction, management and operation of the System.
<PAGE> 7
7.2 MONTHLY FINANCIAL STATEMENT. Within twenty (20) days after the
end of each month and within thirty (30) days after the end of each fiscal
year, MLA shall prepare or cause to be prepared and transmit to MCK unaudited
financial statements, which all include a balance sheet, an income statement
and such other information as MCK reasonably requires (the "Monthly and Annual
Statements", respectively). The Monthly and Annual Financial Statements shall
further provide reconciliations between the Construction Budget or Operations
Budget, as applicable, and actual costs and revenues for the period covered by
the statements and, in the case of the Monthly Statements, for the Year to
date. MLA shall also provide at MCK's request any and all such additional
statements or reports as may be necessary for MCK's oversight and control of
System construction and operation.
7.3 ACCESS TO BOOKS AND RECORDS. MCK shall have at all reasonable
times during normal business hours access to and the right to photocopy the
books and records maintained by MLA pursuant to Section 7. I of this Agreement,
which books, records and information shall be kept at the principal offices of
MLA, as applicable.
ARTICLE VIII.
TERM
8.1 TERMINATION. This Agreement shall continue for one (1) year,
unless terminated as follows:
(a) Any Party may terminate this agreement on thirty (30) days prior
written notice to the other Parties.
8.2 TERMINATION DUTIES. After receipt of written notice of
termination, but prior to the effective date of such termination, MLA shall
continue to perform under this Agreement unless specifically instructed to
discontinue such performance. In any event, even if so instructed, MLA will
nonetheless be entitled to reimbursement of Reimbursable Expenses and payment
of Management Fees, if payable pursuant to Section 6.2 hereof, for the period
ending on the effective date of termination. Fifteen (15) days prior to the
effective date of expiration or termination of this Agreement, MLA shall
relinquish to MCK or its designers possession and control of all property of
the System, including but not limited to, all documents, data and records
pertaining to the System. MLA and MCK shall commit to use their best efforts to
assure a smooth transition in the event of termination.
ARTICLE IX.
MISCELLANEOUS
9.1 CHOICE OF LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Louisiana.
<PAGE> 1
EXHIBIT 10.16
September 13, 1996
Mr. Robert Piper
Chief Operating Officer
Mercury, Inc.
P. O. Box 3709
Lake Charles, LA 70602
Dear Robert:
Subject: Commitment Letter
CoBank is pleased to issue its commitment (the "Commitment") to provide
Mercury, Inc. (the "Company") the credit facility (the "Facility") outlined
below.
TYPE OF FACILITY: A secured 8-year term loan.
AMOUNT: Not to exceed $88.0 million.
PURPOSE: To refinance CoBank loans T0388, T0362, T0310,
T0364 and T0347 and to refinance existing
indebtedness to Cameron Telephone Company and
Northern Telecom Finance Corporation.
AVAILABILITY: Beginning at the satisfaction of CoBank's
conditions precedent to the single loan advance
(the "Closing"), which shall occur on or before
October 31, 1996.
CONDITIONS
PRECEDENT: 1. Completion of merger of Mercury Cellular
Telephone Company, Mercury Cellular of Kansas,
Inc. and Mississippi One Cellular Telephone
Company directly or indirectly into Mercury,
Inc., evidenced by legal opinion satisfactory
to CoBank;
2. Receipt of IRS ruling with respect to such
mergers, satisfactory to CoBank;
<PAGE> 2
Mr. Robert Piper
September 13, 1996
Page 32
3. Transfer of all FCC and other licenses and
permits of Mercury Cellular Telephone Company,
Mercury Cellular of Kansas, Inc., and
Mississippi One Cellular Telephone Company to
Mercury, Inc., evidenced by legal opinions
satisfactory to CoBank;
4. Receipt of all PSC or other governmental
approvals necessary for the consummation of
the mergers and this loan, evidenced by legal
opinions satisfactory to CoBank;
5. Receipt of corporate authorizations of
Mercury, Inc. to enter into this facility and
legal opinions in form and content acceptable
to CoBank;
6. Receipt of evidence of insurance by Mercury,
Inc. acceptable to CoBank; and
7. Such other conditions precedent as CoBank
shall reasonably require.
REPAYMENT: Proceeds refinancing CoBank loans T0388, T0362,
T0310 and T0364 will amortize according to the
original amortization schedules. Proceeds
refinancing S0347 and indebtedness to Cameron
Telephone Company and Northern Telecom Finance
Corporation (the "New Advance") shall be due on the
date which is eight years from Closing.
INTEREST: The interest rates on the Facility will vary based
on the Company's financial leverage as described
below. Except as described below regarding
existing fixed portions, the Company may choose
from among the following interest rate options:
1. Variable Option means CoBank's National
Variable Rate (as defined by CoBank) in effect
from time to time, plus the applicable Margin.
2. LIBOR Option means the London Interbank
Offering Rate (LIBOR) in effect from time to
time, plus the applicable Margin at the time
the LIBOR Option is selected. LIBOR Rate
means the yield on a LIBOR instrument selected
by CoBank as having a maturity date similar to
the last day of the fixed rate period selected
by the Company. The Margin related to the
LIBOR Option will be adjusted from time to
time pursuant to this option for any basis
risk incurred by CoBank between issuance of
this letter and selection of this option, but
no such basis risk adjustment shall apply
retroactively to any amounts fixed prior to
the date of such adjustment.
<PAGE> 3
Mr. Robert Piper
September 13, 1996
Page 3
3. Quoted Fixed Rate Option means a rate to be
quoted at CoBank's sole and absolute
discretion.
Under the LIBOR Option and the Quoted Fixed Rate
Option, one or more tranches of at least $100,000
may be fixed at the Company's option. Under the
LIBOR Option amounts may be fixed for periods of
one, two, three and six months. Under the Quoted
Fixed Rate Option, amounts may be fixed for periods
ranging from five days to the life of the loan. A
pro rata portion of each amount so fixed shall
amortize and be repaid on each installment date
occurring during each fixed rate period. Interest
will be calculated on the basis of a year
consisting of 360 days and will be payable monthly
in arrears by the 20th day of following month.
Margin shall be determined in accordance with the
following:
<TABLE>
<CAPTION>
Total Leverage Ratio on the
last day of the immediately Margin on NVR Margin on
preceding calendar quarter: Option: LIBOR Option:
---------------------------------------------------------------
<S> <C> <C>
3.50x or greater 0.25% 1.75%
Less than 3.5x 0.00% 1.50%
</TABLE>
The Total Leverage Ratio, or the ratio of
Indebtedness to Annualized Operating Cash Flow,
shall be measured using the following definitions:
"Annualized Operating Cash Flow" shall mean
Operating Cash Flow multiplied by two.
"Operating Cash Flow" means the sum of the
Company's (i) pre-tax income, or deficit, as the
case may be (excluding extraordinary gains, the
write-up of any asset, and any investment income or
loss, specifically including income or loss from
the TX 21 Partnership, Mississippi-34 Cellular
Corporation, and Meretel Communications, L.P.),
(ii) total interest expense (including non-cash
interest), and (iii) depreciation and amortization
expense, all measured for the preceding two fiscal
quarters.
"Indebtedness" means the Company's (i) obligations
for borrowed money, (ii) obligations representing
the deferred purchase price of property or services
other than accounts payable arising in connection
with the purchase of inventory on terms customary
in the trade, (iii) obligations, whether or not
assumed, secured by liens or payable out of the
proceeds or production from property now or
hereafter owned or acquired by such
<PAGE> 4
Mr. Robert Piper
September 13, 1996
Page 4
person, (iv) obligations which are evidenced by
notes, acceptances, or other instruments, (v)
capitalized agreements, (vi) fixed rate hedging
obligations that are due and remain unpaid, and
(vii) fixed payment principal amounts under
guarantees whether or not due and payable.
The Total Leverage Ratio will be calculated as of
the end of each quarterly period. For purposes of
determining Total Leverage Ratio, Operating Cash
Flow will be adjusted to give effect to (i) any
acquisition during the period of calculation as if
such acquisition were acquired on the first day of
such period of calculation and (ii) any sale or
other disposition of any operation or asset during
the period of calculation, as if such operation or
asset were sold or disposed of on the first day of
such period of calculation.
At Closing, amounts fixed under CoBank loans T0388,
T0362, T0310 and T0364 will be transferred to the
Facility and will carry the following fixed
interest rates and periods:
T0362
<TABLE>
<CAPTION>
Advance Outstanding Maturity Current New
Number Amount Date Rate Rate
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
15219547000 3,606,520 12/31/97 8.42 8.52
15219547001 3,606,520 12/31/99 8.62 8.72
15219547002 3,606,520 12/31/00 8.67 8.77
15219547003 4,508,150 12/20/02 8.73 8.83
15219547004 901,630 12/31/96 8.26 8.36
</TABLE>
T0310
<TABLE>
<CAPTION>
Advance Outstanding Maturity Current New
Number Amount Date Rate Rate
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
15218041101 1,696,075 12/31/97 9.86 8.71
15218041102 500,000 12/31/97 10.11 8.96
15218041103 15,006,425 05/15/97 8.47 7.32
</TABLE>
<PAGE> 5
Mr. Robert Piper
September 13, 1996
Page 5
T0364
<TABLE>
<CAPTION>
Advance Outstanding Maturity Current New
Number Amount Date Rate Rate
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
15218547000 5,396,667 02/17/98 7.34 6.94
15218547001 2,899,920 12/31/99 9.12 8.72
15218547002 2,899,920 12/31/00 9.17 8.77
15218547003 3,472,569 12/20/02 9.23 8.83
15218547004 966,640 12/31/96 7.97 7.57
</TABLE>
For all other advances, the Margin applicable at
the Closing to the Variable Option will be 0.25%
and the Margin applicable to the LIBOR Option will
be 1.75%. For Variable rate advances and LIBOR
rate advances, the Margin will be adjusted (a)
upwards, if warranted by the Total Leverage Ratio,
beginning five days subsequent to the receipt of
quarterly financial statements and compliance
certificate showing a change is warranted (or, if
such information is not delivered prior to the
dates set forth thereforth then five days
subsequent to such required delivery date) and (b)
downwards, if warranted by the Total Leverage
Ratio, beginning five days after receipt of such
information and a request from the Company,
however, no such downward adjustment shall be made
prior to receipt of first quarter fiscal 1997
financial statements.
FEE: The Company shall pay CoBank an origination fee of
$50,000, $10,000 of which shall be payable upon
acceptance of the Commitment and shall be
nonrefundable, and the remainder of which shall be
paid at Closing.
PREPAYMENT: Advances under the Variable Rate may be prepaid in
whole or in part on any Business Day without
surcharge, prepayment expense or penalty. Any
fixed rate advance may be prepaid in full (but not
in part) prior to the end of the applicable fixed
interest period, subject to the condition that the
Company will be required to indemnify CoBank for
any funding loss or cost incurred by it resulting
from such prepayment, all in accordance with
CoBank's standard prepayment provisions.
Prepayments will be applied to the New Advance
until it is repaid in full prior to application to
any other advances.
CAPITALIZATION: The Facility will be capitalized in accordance with
CoBank's bylaws and its capital plan. As such it
will be eligible for patronage refunds.
<PAGE> 6
Mr. Robert Piper
September 13, 1996
Page 6
COLLATERAL: The Facility will be secured by a first lien on all
real and personal property, tangible and
intangible, of the Company now owned and hereafter
acquired (specifically including, but not limited
to the FCC licenses).
DOCUMENTATION: CoBank's Commitment is subject to the negotiation,
execution and delivery of loan and loan related
documentation (including exhibits, opinions, and
security documentation) to be in form and content
satisfactory to CoBank and its counsel in all
respects. Such documentation shall include
representations and warranties (including that no
material adverse change in the Company's business,
operations or financial condition from that
reflected in its audited financial statements dated
December 31, 1995 has occurred), conditions
precedent, covenants, events of default, remedies
of default, and other provisions that are customary
for credit facilities of the nature outlined
herein. Without limiting the foregoing, the
following financial covenants shall apply:
1. TOTAL LEVERAGE RATIO: For each quarter end,
beginning as of December 31, 1996, the Company
will maintain a Total Leverage Ratio of not in
excess of the ratios set forth below for such
periods:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing--6/30/97 4.5x
7/01/97--12/31/97 4.0x
01/01/98--maturity 3.5x
</TABLE>
2. DEBT SERVICE COVERAGE RATIO: For each quarter
end, beginning as of December 31, 1996, the
Company shall maintain a ratio of (i)
Operating Cash Flow minus income taxes to (ii)
scheduled principal plus interest on
Indebtedness for the immediately preceding two
fiscal quarters equal to or greater than
1.25:1.0.
3. FIXED CHARGE COVERAGE RATIO: For each quarter
end, beginning as of December 31, 1996, the
Company shall maintain a ratio of (i)
Annualized Operating Cash Flow to (ii) Fixed
Charges of at least 1.05:1.0. "Fixed Charges"
means the sum for the most recently completed
four quarters of (i) cash interest expense,
(ii) scheduled principal payments, (iii) cash
taxes, (iv) capital expenditures and (v)
dividends and other cash distributions.
<PAGE> 7
Mr. Robert Piper
September 13, 1996
Page 7
Without limiting the foregoing, the following
additional provisions shall be included:
1. NEGATIVE PLEDGES: No liens other than those
securing the Facility and no other
indebtedness or guarantees, unless approved by
CoBank.
2. INVESTMENTS: No investments other than those
disclosed on audited fiscal year 1995
financial statements for Mercury, Inc.,
Mercury Cellular Telephone Company, Mercury
Cellular of Kansas, Inc., and Mississippi One
Cellular Telephone Company except for
cumulative investments into the Meretel
Communications, L.P. of $10.0 million, unless
approved by CoBank.
3. FINANCIAL REPORTING: The Company shall
furnish (a) within 120 days after the close of
its fiscal years, audited financial statements
with consolidating exhibits in accordance with
generally accepted accounting principals
("GAAP"); (b) within 60 days after the close
of each fiscal quarter, unaudited financial
statements, a covenant compliance certificate
and reports (including key subscriber,
penetration, churn and operating statistics);
and (c) as soon as reasonably practical and in
any event 30 days after the first day of a
fiscal year, a one year financial forecast.
4. DISTRIBUTION LIMITATION: No dividends or
distributions will be permitted without the
approval of CoBank.
ASSIGNMENT: The Commitment and the proceeds thereof are not
assignable by the Company to any other person or
corporation without CoBank's prior written consent.
DUE DILIGENCE: The Company acknowledges that CoBank has not had an
opportunity to complete its business, credit and
legal due diligence. CoBank, in its sole
discretion, may determine whether any matters
disclosed by its further investigation are of such
a nature as to cause CoBank to decline to provide
the Facility, and the Company agrees that any such
determination on CoBank's part shall be binding and
conclusive on the Company.
MISCELLANEOUS: The provisions of the Commitment cannot be waived
or modified unless such waiver or modification is
in writing and signed by both the Company and
CoBank. The Commitment is for the benefit only of
the parties thereto, and no third party shall have
any interest therein or in the proceeds of the
credit facility.
<PAGE> 8
Mr. Robert Piper
September 13, 1996
Page 8
EXPIRATION OF
COMMITMENT: This Commitment shall expire and CoBank shall have
no further obligation to the Company hereunder if
Closing has not occurred on or before October 31,
1996.
COSTS AND
EXPENSES: By accepting this Commitment, the Company agrees to
pay or cause to be paid all out-of- pocket expenses
incurred by CoBank or incurred by the Company on
behalf of CoBank, in connection with the credit
facility contemplated hereby, including, without
limitation, all legal fees, to be limited to
$35,000 for CoBank's legal counsel (not including
associated out-of-pocket costs), and any
documentary stamp, intangible or recording tax or
fees, and all costs and expenses incurred in
connection with the creation and perfection of any
collateral securing the Facility, whether title
searches, title insurance, or otherwise. Such
expenses as may be incurred shall be paid
regardless of whether the Facility is extended or
not.
ACCEPTANCE OF
COMMITMENT: The Company must accept the Commitment by signing
this Commitment Letter and returning it to CoBank.
This Commitment shall become effective only upon
receipt by CoBank no later than September 18, 1996
of this letter signed by the Company and $10,000 of
the origination fee which shall be nonrefundable.
The description of the terms and conditions herein does not purport to
summarize all of the provisions to be contained in the definitive legal
documentation for the contemplated transaction. The Commitment is a commitment
to negotiate in good faith the particulars of the transactions contemplated
hereby (and is not a binding contract to lend) which is subject to the
Company's acceptance.
Sincerely,
COBANK, ACB
Mary Kay Deering
Vice President
<PAGE> 9
Mr. Robert Piper
September 13, 1996
Page 9
ACCEPTED AND AGREED TO:
MERCURY, INC.
By: ____________________________
Its: ___________________________
Date: __________________________
<PAGE> 1
[RTFC LETTERHEAD]
EXHIBIT 10.21
VIA FACSIMILE and U.S. MAIL
October 24, 1996
Mr. Robert W. Piper, President
Wireless Management Corporation
P.O. Box 3709
Lake Charles, LA 70602-3709
RE: Meretel Communications, L.P. ("Meretel")
$59,240,000 Senior Secured Credit Facility
Dear Mr. Piper:
Rural Telephone Finance Cooperative ("RTFC") is pleased to inform you that
Meretel's request for the above-referenced credit facility has been approved
subject to the receipt of a commitment fee in the amount of $118,480 and
additional origination fee of $148. The terms and conditions of the credit
facility are summarized in the attached Term Sheet.
RTFC's commitment to provide the credit facility is subject to our satisfactory
review of all credit and guarantee documentation, which we will prepare, and
all conditions precedent to closing being satisfied.
Please forward the $118,480 commitment fee, $148 additional origination fee,
and a copy of this letter countersigned by an authorized officer of Meretel to
RTFC. The commitment fee will be refunded in full on a pro-rata basis once the
credit facility has been advanced in full. In order to expedite this process,
please fax the countersigned letter to my attention and remit the fees by bank
wire transfer. The wire transfer order should read as follows:
$118,628 to First National Bank of Chicago, Chicago, IL (ABA#
071000013) for credit to RTFC Account #52-73587 in immediately
available funds by order of Meretel Communications, L.P.
This commitment shall become effective only upon Meretel's acceptance of the
attached Term Sheet, as evidenced by RTFC's receipt of a copy of this letter
duly signed by Meretel, and RTFC's receipt of the above fees no later than
October 31, 1996. If a countersigned copy of this letter and the fee are not
remitted to RTFC by October 31, 1996. RTFC's offer to provide the commitment
will be rescinded.
If you have any questions, please contact me at (703) 709-6791. We are pleased
to be of service to Meretel and its partners and look forward to working with
you and your staff to finalize the transaction.
Sincerely,
/s/ PATRICK RINN
Patrick Rinn
Associate Vice President
and Account Manager
ATTACHMENT REVIEWED AND ACCEPTED:
Meretel Communications, L.P.
By Wireless Management Corporation, its General Partner
By: /s/ ROBERT PIPER
--------------------------------------
Its: PRESIDENT
-------------------------------------
Date: 10-29-96
------------------------------------
<PAGE> 2
SUMMARY TERM SHEET
$59,240,000 SENIOR SECURED CREDIT FACILITY
MERETEL COMMUNICATIONS, L.P.
OCTOBER 24, 1996
(SUPERSEDES AND REPLACES SUMMARY TERM SHEET DATED SEPTEMBER 24, 1996)
BORROWER: Meretel Communications, L.P., Lake Charles, Louisiana
("Meretel" or "Borrower"), a Louisiana limited
partnership made up of one general partner, Wireless
Management Corporation, and the following five
limited partners (hereinafter each individually
referred to as "Partner" and collectively
"Partners"): Mercury, Inc. Eatelcorp, Inc.; Fort Bend
Wireless, Inc., a wholly-owned subsidiary of Fort
Bend Communication Companies, Inc., XIT Leasing,
Inc., an affiliate of Brazoria Telephone Company; and
Meretel Wireless, Inc., a wholly-owned subsidiary of
Eatelcorp, Inc. Wireless Management Corporation is
owned by: Mercury Information Technologies, Inc., an
affiliate of Mercury, Inc.; RBS Enterprises, Inc., a
wholly-owned subsidiary of Eatelcorp, Inc; and Fort
Bend Wireless Inc. For purposes of this summary Term
Sheet, on or prior to the closing, Mercury, Inc.
shall have completed its tax-free reorganization and
shall directly (or indirectly through wholly-owned
subsidiaries) own the assets which are currently
owned by Mercury, Inc., Mississippi 1 Cellular
Telephone Company, Mercury Cellular Telephone Company
and Mercury Cellular of Kansas, Inc.
LENDER: Rural Telephone Finance Cooperative ("RTFC" or
"Lender").
VENDOR: Lucent Technologies, Inc. ("Lucent" or "Vendor")
FACILITY TYPE/
AMOUNT A 10-year term loan (the "Loan") in the amount of
$59,240,000 which includes $2,962,000 to purchase
Lender subordinated capital certificates ("SCCs").
PURPOSES: To finance up to $45,000,000 of Lucent supplied PCS
equipment and engineering services, to finance up to
$11,278,000 of microwave relocation expenses,
non-Lucent related capital expenditures and working
capital, and to purchase up to $2,962,000 of Lender
SCCs.
AVAILABILITY: Upon the execution and satisfaction of requisite
terms and conditions of Loan Agreement but no later
than the fourth anniversary of the date of the Loan
Agreement ("Termination Date"); provided further,
however, that for the initial $42,000,000 advanced
under the Loan the ratio of the total Lender debt
outstanding to Borrower's cumulative contributed
Partner capital shall, at any one point in time, not
exceed 1.0.
REPAYMENT Beginning at the end of the first quarter ending
February, May, August and November following the Loan
Agreement Date, payments shall commence as follows:
(i) interest only for 4 years, followed by (ii)
principal payments due in equal quarterly
installments, plus accrued interest, based on the
following schedule:
<TABLE>
<CAPTION>
==================================================
Quarter Year Principal Paid per Qtr/Yr/
==================================================
<S> <C> <C>
17-20 5 2.50%/10.0%
21-24 6 3.75%/15.0%
25-28 7 3.75%/15.0%
29-32 8 5.00%/20.0%
33-36 9 5.00%/20.0%
37-40 10 5.00%/20.0%
==================================================
</TABLE>
PRIVILEGED AND CONFIDENTIAL
<PAGE> 3
Meretel Communications, L.P.
Term Sheet dated October 24, 1996
Page 2
INTEREST RATE: Floating Rate Option: Lender's standard monthly
quoted long-term variable rate plus 250 basis points
("Variable Rate").
Fixed Rate Options: Lender's standard daily quoted
fixed rate(s) plus 250 basis points ("Fixed Rate").
The total amount of Borrower's Fixed Rate debt may
not exceed 50% of the total Loan commitment to
Borrower, without the prior written consent of
Lender.
INTEREST RATE
CONVERSIONS: Borrower may convert a portion of the Loan which
bears interest at the Variable Rate to a Fixed Rate
(subject to the 50% limitation in the preceding
section) with no fee or premium.
SECURITY: As security for the Loan, Lender shall receive: (i) a
first priority lien on all present and future assets
and revenues of Borrower pursuant to a mortgage and
security agreement executed between Borrower and
Lender except, and to the extent permissible, a
second priority mortgage lien on the PCS licenses
which were awarded to Borrower in the C-block auction
and financed by the United States government; (ii) a
pledge of the individual partnership interests in
Borrower held by each of Borrower's Partners; and
(iii) an assignment of Borrower's contracts for
network provider services and all other material
operating contracts.
PRIMARY GUARANTEES: As credit support for the Loan, Lender shall receive
an irrevocable unsecured guaranty ("Primary
Guaranty") by each of Mercury, Inc., Eatelcorp, Inc.,
Fort Bend Communication Companies, Inc., XIT,
Leasing, Inc. and Brazoria Telephone Company
(hereinafter each individually referred to as
"Primary Guarantor" and collectively "Primary
Guarantors"), in form and substance satisfactory to
Lender, which in the aggregate total an amount equal
to the lesser of (i) $19,746,667 of principal plus
interest, fees and expenses due thereon or (ii) 1/3
of Borrower's outstanding indebtedness under the Loan
inclusive of principal, interest, fees and expenses
due thereon. The guarantees of Mercury, Inc.,
Eatelcorp, Inc. and Fort Bend Communication
Companies, Inc. will each be in an amount equal to
the lesser of (i) $6,160,285 of principal plus
interest, fees and expenses due thereon or (ii) 31.2%
of Borrower's outstanding indebtedness under the Loan
inclusive of principal, interest, fees and expenses
due thereon. XIT Leasing, Inc. and Brazoria Telephone
Company will be jointly and severally liable for an
amount equal to the lesser of (i) $1,265,812 of
principal plus interest, fees and expenses due
thereon or (ii) 6.4% of Borrower's outstanding
indebtedness under the Loan inclusive of principal,
interest, fees and expenses due thereon.
VENDOR GUARANTY: As additional credit support for the Loan, Lender
shall receive an irrevocable unsecured guaranty
("Vendor Guaranty") by Vendor, in form and substance
satisfactory to Lender, in an amount which is at
least equal to the lesser of (i) $19,746,667 of
principal plus interest and fees due thereon or (ii)
1/3 of Borrower's outstanding indebtedness under the
Loan inclusive of principal, interest and fees due
thereon.
CAPITALIZATION/
EQUITY FINANCING: On or prior to the date of the initial advance under
the Loan, Borrower's capitalization shall consist of
a minimum of $15,000,000 of contributed capital from
its partners. Borrower will also be required to
enter into separate equity subscription agreements
with Mercury, Inc., Eatelcorp, Inc., Fort Bend
Communication Companies, Inc. for the benefit of Fort
Bend Wireless, Inc., XIT Leasing, Inc. individually
and Brazoria Telephone Company for the benefit of XIT
Leasing, Inc. that provides for additional capital
contributions which in the aggregate total
$27,000,000 according to the following schedule:
$15,000,000 by December 31, 1997 and $12,000,000 by
December 31, 1998. In addition to other provisions
satisfactory to Lender, said
PRIVILEGED AND CONFIDENTIAL
<PAGE> 4
Meretal Communications, L.P.
Term Sheet dated October 24, 1996
Page 3
equity subscription agreements shall state that
Lender shall be a third party beneficiary with regard
to enforcing payments under the equity subscription
agreements. XIT Leasing, Inc. and Brazoria Telephone
Company will be jointly and severally liable for each
other's equity subscription obligation. All of
Borrower's equity instruments must have terms and
conditions satisfactory to Lender.
LENDER'S EQUITY
REQUIREMENT: Purchase of non-interest bearing, amortizing Lender
SCCs equal to 5% of the total Loan amount borrowed.
SCCs are amortized annually (through a cash payment),
beginning approximately one year after the SCCs are
paid in full, to maintain a 5% SCCs-to-outstanding
loan ratio. Borrower may purchase the SCCs using one
of the following two SCC purchase options:
Installment Plan Option: Borrower purchases the SCCs
in full with its general funds over 5 years in 20
equal quarterly installments. If Borrower elects
this option, the amount of the equity requirement
will be reduced to equal 5% of the total Loan amount
borrowed.
Borrowing Option: Borrower purchases the SCCs with
loan funds at the time of each advance.
PATRONAGE CAPITAL: Borrower will receive a share of Lender's net margins
in the form of patronage capital refunds. Patronage
capital will be allocated annually to Borrower based
on the percentage that the Borrower's interest
payments contributed to Lender's gross margins.
Patronage capital is currently paid in cash (retired)
in two different classes as detailed below:
Class One: 70% of the patronage capital allocation
is retired in cash shortly after the end of the year
in which it was allocated.
Class Two: 30% of the patronage capital allocation
is retired on Lender's Board-approved rotation cycle,
which is currently 15 years.
LENDER'S FEES: (i) Non-refundable origination fee of 2 basis points
or $11,848 upon the acceptance of this summary Term
Sheet and (ii) refundable commitment fee equal to 20
basis points of the Loan or $118,480 due at the time
Lender delivers a firm lending commitment to Borrower
(subject to Lender's satisfactory review of all
credit documentation).
The commitment fee (above item [ii] will be refunded
in full if for any reason final credit approval is
not granted by Lender, or, if final credit approval
is granted, on a pro rata basis once Lender loan
funds are advanced in full for the proposed projects.
Under all other circumstances, the commitment fee
will be retained by Lender.
Lender will not assess Borrower a document
preparation fee or unused facility fee.
PREPAYMENTS: Optional: Prepayments under the Loan will be
permitted at the option of Borrower in the Variable
Rate mode, subject to certain notice provisions of
Lender and receipt of a fee that is based on Lender's
administrative costs and capped at 50 basis points
times the amount of the prepayment. Optional
prepayments in the Fixed Rate mode will be permitted
subject to Lender's consent and provided Lender
receives a make-whole premium to cover any unwinding
costs associated with such fixed rate prepayment.
Optional prepayments will be applied in inverse order
of maturity.
PRIVILEGED AND CONFIDENTIAL
<PAGE> 5
Meretel Communications, L.P.
Term Sheet dated October 24, 1996
Page 4
Mandatory: Mandatory prepayments under the Loan will
be required annually within 120 days of the close of
Borrower's fiscal year in an amount equal to 50% of
Excess Cash Flow (defined as audited net cash flow
from operations less budgeted capital expenditures
less budgeted principal payable on all short and
long-term debt with budgeted figures coming from
Borrower's updated business plan for such next fiscal
year) beginning at Lender's option once Borrower's
audited fiscal year-end EBITDA is greater than zero.
Mandatory prepayments will be applied in inverse
order of maturity and not be subject to a fee or
premium as long as the amount being prepaid is in the
Variable Rate mode.
REPRESENTATIONS, WARRANTIES,
COVENANTS, EVENTS OF
DEFAULT, AND LENDER'S
RIGHTS AND REMEDIES: The credit and guarantee documentation shall contain,
among other items, representations, warranties,
covenants, events of default, and Lender's rights and
remedies customary for financings of this type
(including where appropriate representations,
warranties, events of default, and Lender's rights
and remedies in the Primary Guarantees).
FINANCIAL REPORTING
REQUIREMENTS: For Borrower: (i) an annual audit report including
financial statements prepared by independent
certified public accountants within 120 days of the
close of Borrower's fiscal year; (ii) quarterly
unaudited financial statements and reports (including
key subscriber, penetration, churn and operating
statistics) with comparisons to actual for the
current quarter and year-to-date within 60 days of
the close of Borrower's quarter; (iii) an annual
certificate of compliance within 120 days of each
December 31; (iv) an updated annual business plan
prior to the beginning of Borrower's fiscal year; and
(v) such other reports and information reasonably
requested by Lender.
For Primary Guarantors: (i) an annual audit report
including consolidated and consolidating financial
statements prepared by independent certified public
accountants within 120 days of the close of Primary
Guarantor's fiscal year;; (ii) an annual certificate
of compliance within 120 days of each December 31;
and (iii) such other reports and information
reasonably requested by Lender.
NEGATIVE COVENANTS: The credit documentation will include, without
limitation, the following negative covenants:
For Borrower: Borrower will be restricted, without
the prior written consent of Lender, from: (i)
declaring or paying dividends; (ii) purchasing,
redeeming or retiring its capital stock; (iii) paying
any management fees in excess of those stipulated in
the two BTA management and construction services
agreements dated August 1, 1996 between Mercury, Inc.
and Borrower and between Eatelcorp, Inc. and Borrower
or otherwise previously approved by Lender; and (iv)
incurring additional secured or unsecured
indebtedness, until Borrower meets a minimum
consolidated book Equity (or Net Worth) to Total
Assets ratio of 40% (the "Minimum Net Worth Test"),
except that Borrower may incur purchase money
indebtedness, incur unsecured trade indebtedness and
pay other liabilities that arise in the ordinary
course of business provided that in the aggregate the
total does not exceed 5% of Borrower's consolidated
Total Assets. Borrower will be restricted, without
the prior written consent of Lender, from: (1)
forming or acquiring any subsidiaries; (2) merging or
consolidating into or with another entity; (3)
liquidating its assets; (4) selling, partitioning or
leasing any of its PCS licenses or service area: (5)
selling, leasing or transferring any assets unless
the fair market value of such assets is less than
$250,000 individually and $1,000,000 in the aggregate
during the most recent 12-
PRIVILEGED AND CONFIDENTIAL
<PAGE> 6
Meretel Communications, L.P.
Term Sheet dated October 24, 1996
Page 5
month period; (6) engaging in any business other than
the telecommunications business; (7) terminating its
procurement agreement with Lucent; and (8) making any
investments in, making any loans to, guarantying or
otherwise becoming liable for any obligation of any
business or government entity, except that Borrower
may purchase: (a) securities or obligations issued by
the United States government or any agency or
instrumentality thereof; (b) securities or
obligations of institutions whose senior unsecured
debt obligations are rated by at least two nationally
recognized rating organizations in either of their
two highest categories; (c) investments incidental to
loans made by Lender; or (d) any deposit that is
fully insured by the United States government.
For Primary Guarantors: Primary Guarantor will be
restricted, without the prior written consent of
Lender, from: (i) declaring or paying dividends; (ii)
purchasing, redeeming or retiring its capital stock;
and (iii) paying any management fees in excess of
those previously approved by Lender, until Primary
Guarantor meets the Minimum Net Worth Test. Primary
Guarantor and its subsidiaries will be restricted,
without the prior written consent of Lender, from
incurring additional secured or unsecured
indebtedness until Primary Guarantor meets the
Minimum Net Worth Test, except that Primary Guarantor
and its subsidiaries may incur purchase money
indebtedness, incur unsecured trade indebtedness and
pay other liabilities that arise in the ordinary
course of business provided that in the aggregate the
total does not exceed 7.5% of Primary Guarantor's
consolidated Total Assets. Primary Guarantor and its
subsidiaries will be restricted, without the prior
written consent of Lender, from (1) merging or
consolidating into or with another entity; (2)
liquidating its assets; (3) selling, leasing or
transferring any assets unless the fair market value
of such asset is less than 1% of Primary Guarantor's
consolidated Total Assets and aggregate value of all
such assets sold, leased or transferred during the
most recent 12-month period is less than 5% of
Primary Guarantor's consolidated Total Assets, except
that Primary Guarantor and its subsidiaries may sell
securities issued by the United States government or
any agency or instrumentality thereof, or securities
or obligations of institutions whose senior unsecured
debt obligations are rated by at least two nationally
recognized rating organizations in either of its two
highest categories; and (4) making any investment in,
making any investment in, making any loans to,
guarantying or otherwise becoming liable for any
obligation of an business or government entity, if
the aggregate amount of such investments, loans and
guarantees exceed the greater of 10% of Primary
Guarantor's consolidated Total Property, Plant and
Equipment or 30% of its consolidated Equity (or Net
Worth), except that Primary Guarantor may guaranty
Borrower's obligations to Lender and Primary
Guarantor and its subsidiaries may purchase: (a)
securities or obligations issued by the United States
government or any agency or instrumentality thereof;
(b) securities or obligations of institutions whose
senior unsecured debt obligations are rated by at
least two nationally recognized rating organizations
in either of their two highest categories; (c)
investments incidental to loans made by Lender or
CoBank; (d) any deposit that is fully insured by the
United States government; (e) investments in money
market mutual funds not to exceed $2,500,000 for any
single such mutual fund investment and not to exceed
$5,000,000 for all such mutual fund investments; or
(f) partnership unites or other equity instruments of
Borrower.
FINANCIAL COVENANTS: The credit documentation will include, without
limitation, the following financial covenants which
were based on ratios and milestones adapted from
Borrower's business plan dated August 2, 1996:
EBITDA. Beginning on January 1, 1999, Borrower shall
achieve annual cash flow as measured by EBITDA (or
earnings before interest expense, income taxes,
depreciation and amortization) plus any partner
capital raised by Borrower over and above the per
annum amounts set forth in
PRIVILEGED AND CONFIDENTIAL
<PAGE> 7
Meretel Communications, L.P.
Term Sheet dated October 24, 1996
Page 6
the Loan documents equal to or greater than the
amounts established in the calendar years set forth
below as follows:
<TABLE>
<S> <C> <C> <C>
1998 None 2002 $18,800,000
1999 $6,200,000 2003 $20,000,000
2000 $11,800,000 2004 $23,700,000
2001 $16,100,000 2005 $22,500,000
</TABLE>
Covered POPs. Borrower shall build-out its PCS
network so as to achieve coverage percentages based
on the total number of population equivalent or POPs
covered by Borrower's FCC licensed or partitioned
area equal to or greater than the percentages
established as of the calendar year-end dates set
forth below as follows:
<TABLE>
<S> <C> <C> <C>
1998 47.0% 2002 71.0%
1999 58.0% 2003 75.0%
2000 63.0% 2004 79.0%
2001 68.0% 2005 81.0%
</TABLE>
Wireless Subscribers. Borrower shall have total
wireless subscribers equal to or greater than the
numbers established as of the calendar year-end dates
set forth below as follows:
<TABLE>
<S> <C> <C> <C>
1998 33,100 2002 89,500
1999 54,900 2003 90,300
2000 69,300 2004 106,500
2001 80,000 2005 106,500
</TABLE>
CONDITIONS OF CLOSING: Including, but not limited to: (i) Lender's review
and approval of Borrower's partnership agreement, BTA
management and construction services agreements with
Mercury, Inc. and Eatelcorp, Inc. procurement
agreement with Vendor, equity subscription
agreements, all agreements and other documents
evidencing Borrower's equity instruments, and all
credit documentation related to Borrower's C-block
license debt with the United States government or
agency thereof; (ii) Eatelcorp, Inc. and Fort Bend
Communications, Inc. becoming members or affiliates
of members of Lender; (iii) the execution and
delivery of definitive loan and security documents,
in form and content satisfactory to Lender, including
the required Loan Agreement mortgage, promissory
note, Partner pledge agreements, Primary Guarantees,
Vendor Guaranty and opinion(s) of counsel; (iv)
evidence of the uncontested award of all pertinent
PCS licenses and any other necessary regulatory
approvals; (v) evidence that CoBank has approval each
Primary Guarantor's execution and performance under
the Primary Guaranty; (vi) evidence of Mercury
Cellular Telephone Company's spin-off from Cameron
Communications Corporation and non-taxable merger of
Mercury Cellular Telephone Company, Mercury cellular
of Kansas, Inc. and Mississippi-34 Cellular
Corporation with and into Mercury, Inc. (vii) no
material adverse change or representation shall have
occurred or have been made by or on behalf of
Borrower, Primary Guarantors or Vendor with respect
to Borrower's, Primary Guarantor's or Vendor's
business, operations, financial position or the
financing transaction contemplated herein.
GOVERNING LAW: The Loan and all other credit documentation
(including the Primary Guarantees and Vendor
Guaranty) shall be governed by the laws of the
Commonwealth of Virginia, except to the extent that
the location of the collateral may require the
application of other law.
PRIVILEGED AND CONFIDENTIAL
<PAGE> 1
EXHIBIT 10.22
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into as of
the ______ day of _______, 1996, between Mercury, Inc. (the "Purchaser") and
each of the persons named on Exhibit "A" hereto (the "Sellers").
1. PURCHASE AND SALE. Subject to the satisfaction of the
conditions herein contained, Purchaser agrees to purchase from Sellers, and
each Seller agrees to sell to Purchaser, the number of shares of common stock
of Mississippi 34 Cellular Corporation set forth by such Seller's name on
Exhibit "A" hereto, for the price of $2,363.83 per share, payable in cash or
bank cashier's check, wired funds or Purchaser's certified check, at
Purchaser's election, at the closing herein provided.
2. CLOSING. The closing of the transactions contemplated hereby
shall take place at the offices of Purchaser, at Lake Charles, Louisiana at
10:00 AM CST, on a date mutually agreed upon by Purchaser and Sellers, after
all regulatory approvals of the transactions contemplated hereby have been
obtained and all other conditions hereof have been fulfilled, or, in the
absence of such agreement, on any date after such approvals as is specified in
a notice by Purchaser to Sellers given at least five (5) days prior to such
specified closing date, with copy to each Seller. At the closing Sellers shall
deliver to Purchaser duly endorsed certificates for the shares to be sold by
Sellers against delivery of the purchase price by Purchaser, and the Purchaser
shall pay for such shares.
3. REPRESENTATIONS AND WARRANTIES.
(a) Each Seller represents and warrants to Purchaser that he
has the capacity to enter into and consummate the transactions
contemplated hereby, that this Agreement is enforceable against him in
accordance with its terms, that the shares to be sold by him are owned
of record and beneficially by him, and that the delivery of the
certificates for the shares to Purchaser pursuant hereto will vest in
Purchaser good and valid title to such shares, free and clear of any
restrictions, liens, claims or encumbrances whatsoever except as set
forth in the Pledge Agreement (the "Pledge") between Sellers and AT&T
Finance Corporation ("AT&T") dated December 20, 1993.
(b) The Purchaser represents and warrants to each Seller that
he has the capacity to enter into and consummate the transactions
contemplated hereby and that this Agreement is enforceable against him
in accordance with its terms; and that he is acquiring the shares to be
acquired from Sellers with no view to the distribution thereof in
violation of the Securities Act of 1933.
(c) The Purchaser represents and warrants to each Seller, and
each Seller represents and warrants to Purchaser, that he has made such
investigation of the business and affairs of Mississippi 34 Cellular
Corporation as he considered
<PAGE> 2
appropriate, that he is not relying on the other party hereto to supply
him with any information concerning such business and affairs, and that
no such information, whether disclosed or undisclosed, would be
considered important to his decision to enter into and consummate this
Agreement, except as expressly stated herein.
4. COVENANTS.
(a) Upon delivery to him of this Agreement fully executed by
all Sellers, the Purchaser agrees to promptly file such applications
with regulatory authorities as are necessary predicates to the
satisfaction of the condition of Paragraph 5(b)(i).
(b) The Sellers agree to:
(i) cooperate with Purchaser in the filings
provided for in Paragraph 4(a);
(ii) and to furnish Purchaser with such
information as Purchaser may request in order to complete such
filings and to obtain any required regulatory approval; and
(iii) to take any action that may be required of
them to fulfill the conditions of Paragraph 5.
(c) Each party will not take any action or omit any action
that would make any representation or warranty by such party untrue as
of the closing date.
(d) On the closing date, if any Seller is a director and/or
an officer of Mississippi 34 Cellular Corporation or any of its
subsidiaries, he will, unless otherwise requested by Purchaser, resign
all such positions with Mississippi 34 Cellular Corporation and such
subsidiaries, effective on the consummation of the transactions
contemplated hereby.
(e) Upon the consent of the sale and purchase of its shares,
each party agrees that the Shareholder Agreement existing between the
shareholders of Mississippi 34 Cellular Corporation shall terminate
and be of no further force or effect.
5. CONDITIONS.
(a) The obligations of each party hereto are conditioned upon
the accuracy of the representations and warranties of the other party
on the closing date as if made on such date, and the compliance by
such party with his covenants on the closing date.
(b) The obligations of the Purchaser are also conditioned
upon:
<PAGE> 3
(i) prior regulatory approval of the transactions
contemplated hereby without imposing any conditions on
Purchaser other than those customary for transactions of this
sort;
(ii) delivery by each Seller of duly endorsed
certificates for the shares sold by him with the effect that
Purchaser shall have the full and unrestricted title to the
shares of Mississippi 34 Cellular Corporation to be purchased
subject only to the Pledge; and
(iii) the delivery to Purchaser on the closing date
by Sellers of not less than all of the shares of Mississippi
34 Cellular Corporation outstanding on the closing date that
are not owned by Purchaser, including in the computation of
shares outstanding any shares that Mississippi 34 Cellular
Corporation is committed to issue for any reason whatsoever,
whether or not the issuance is dependant on the occurrence of
any condition or contingency.
(iv) the successful consummation of an initial public
offering of shares of Mercury, Inc., the name of which may be
changed in the first quarter of 1997.
(v) the consent of AT&T shall have been obtained for
the sale of all of its shares and to the substitution in the
Pledge of certificates for such shares in the name of
Purchaser for the certificates in the names of Sellers.
(d) The obligations of each Seller are also conditioned upon
payment by the Purchaser of the purchase price for the shares to be
sold by each Seller.
6. TERMINATION. Either party may terminate this Agreement if on
the closing date the conditions to his obligations have not been met by the
closing date; provided that nothing herein contained shall relieve any party
from any liability for breach of this Agreement.
7. MISCELLANEOUS.
(a) This Agreement constitutes the entire understanding of
the parties with respect to the subject matter hereof, and all prior
negotiations, agreements and representations are merged herein. This
Agreement may not be modified except in writing signed by an
authorized representative of each party.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of Louisiana.
(c) Any notice required or permitted under this Agreement may
be mailed or delivered to the party to receive such notice, if to
Purchaser at P.O. Box 3709,
<PAGE> 4
Lake Charles, Louisiana 70602, and if to any Seller to address given
on Exhibit "A".
(d) This Agreement may be executed in multiple counterparts,
all of which, taken together, shall constitute the Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed effective as of the date set forth above, which shall be the date of
execution of this Agreement by the Purchaser.
MERCURY, INC. (Purchaser)
BY:s/ Thomas G. Henning
--------------------
THOMAS G. HENNING, Secretary
SELLERS:
<TABLE>
<S> <C>
s/David Bailey s/ Robert M. Mounger
-------------- --------------------
DAVID BAILEY ROBERT M. MOUNGER
s/ E.B. Martin, Jr. s/ James A. Murrell, III
------------------- ------------------------
E.B. MARTIN, JR. JAMES A. MURRELL, III
s/ William M. Mounger, II s/ William M. Yandell, II
------------------------- -------------------------
WILLIAM M. MOUNGER, II WILLIAM M. YANDELL, III
s/ Wirt A. Yerger, III
----------------------
WIRT A. YERGER, III
</TABLE>
<PAGE> 5
EXHIBIT "A"
<TABLE>
<CAPTION>
NAME SHARES % OF OUTSTANDING SHARES
<S> <C> <C>
David Bailey
807 Church Street
Port Gibson, MS 39150 2,500 25%
E.B. Martin, Jr.
c/o Young, Williams, Henderson
& Fuselier
P.O. Box 23059
Jackson, MS 39225-3059 180 1.8%
William M. Mounger, II
1410 Livingston Lane
Jackson, MS 39213-8003 571.2 5.712%
Robert G. Mounger
200 E. Capitol Street, Suite 1601
Jackson, MS 39201 326.4 3.264%
James A. Murrell, III
c/o Young, Williams, Henderson
& Fuselier
P.O. Box 23059
Jackson, MS 39225-3059 180 1.8%
William M. Yandall, III
6082 Wood Way Drive
Memphis, TN 38120 571.2 5.712%
Wirt A. Yerger, III
Cotton Communications
2600 Insurance Center Dr,
Suite A-200
Jackson, MS 39216 571.2 5.712%
----- ------
4,900 49%
</TABLE>
<PAGE> 1
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Nine Months
Fiscal Years Ended December 31, Ended September 30,
------------------------------------------------------------------ -------------------------
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Net income for the period............. $ 1,171,850 $ 1,758,652 $ 1,908,535 $ 1,749,688 $ 2,603,043 $ 2,318,556 $ 3,751,431
=============================================================================================
Weighted average common shares
outstanding......................... 10,867,210 10,867,210 10,867,210 11,042,302 11,175,762 11,173,211 11,183,428
Shares issued within one year of
initial public offering(1).......... 66,572 66,572 66,572 66,572 66,572 66,572 66,572
Weighted average common
shares outstanding.................. 10,933,782 10,933,782 10,933,782 11,108,874 11,242,334 11,239,783 11,250,000
=============================================================================================
Primary and fully-diluted earnings
per common share.................... $ 0.11 $ 0.16 $ 0.17 $ 0.16 $ 0.23 $ 0.21 $ 0.33
=============================================================================================
</TABLE>
- ---------
(1) In accordance with Staff Accounting Bulletin No. 83 all shares issued
within one year of the Company's initial public offering have been treated
as outstanding for all periods presented.
<PAGE> 1
When the transactions referred to in note 15 of the Notes to Consolidated
Financial Statements have been consummated, we will be in a position to render
the following report.
KPMG Peat Marwick LLP
December 18, 1996
EXHIBIT 23.1
INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULE AND CONSENT
The Board of Directors
US Unwired Inc.:
The audits referred to in our report dated December 13, 1996, except as to
note 15 which is as of , included the related financial statement
schedule for each of the years in the three-year period ended December 31, 1995,
included in the registration statement. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits. In our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
We consent to the use of our reports included herein and to the references
to our firm under the headings "Selected Consolidated Financial Data" and
"Experts" in the prospectus.
New Orleans, Louisiana
December , 1996
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Miscellco Communications, Inc.
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
New Orleans, Louisiana
December 18, 1996
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
West Alabama Cellular Telephone Company, Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
New Orleans, Louisiana
December 18, 1996
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Alabama 4 System
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
New Orleans, Louisiana
December 18, 1996
<PAGE> 1
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
US Unwired Inc.
We consent to the use in this Amendment No. 1 to the Registration Statement
of Mercury, Inc. on Form S-1 of our report dated March 3, 1994, appearing in the
Prospectus, which is part of the Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
SMITH, TURNER & REEVES, APA
December 18, 1996
Jackson, Mississippi
<PAGE> 1
EXHIBIT 23.6
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Alabama 4 System
We consent to the reference to our firm under the caption "Experts" and to
the use, in Amendment No. 1 to the Form S-1 Registration Statement to be filed
by Mercury, Inc. on or about December 18, 1996, for the registration of
2,750,000 shares of the Company's Class A Common Stock, of our report dated
December 16, 1995 relating to the financial statements of Dominion Cellular Inc.
(Alabama 4 System) for the years ended September 30, 1995, and 1994.
ELLIOT H. GOLDBERG, CPA, P.C.
Rockville Centre, New York
December 18, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MERCURY INC.
AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 DEC-31-1995
<CASH> 10,101,783 5,101,601
<SECURITIES> 0 0
<RECEIVABLES> 7,977,430 5,474,179
<ALLOWANCES> 0 0
<INVENTORY> 1,683,137 1,600,570
<CURRENT-ASSETS> 20,811,302 12,545,304
<PP&E> 26,407,022 20,911,272
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 130,933,463 78,753,851
<CURRENT-LIABILITIES> 17,777,471 7,633,200
<BONDS> 0 0
0 0
0 0
<COMMON> 112,500 111,834
<OTHER-SE> 25,222,158 21,291,393
<TOTAL-LIABILITY-AND-EQUITY> 130,933,463 78,753,851
<SALES> 1,286,595 1,403,425
<TOTAL-REVENUES> 43,858,934 39,251,594
<CGS> 3,376,837 3,372,820
<TOTAL-COSTS> 33,957,366 32,058,733
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,516,120 3,401,424
<INCOME-PRETAX> 5,599,400 4,095,553
<INCOME-TAX> 2,375,089 2,290,857
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,751,431 2,603,043
<EPS-PRIMARY> 0.33 0.23
<EPS-DILUTED> 0.33 0.23
</TABLE>
