<PAGE>
As filed with the Securities and Exchange Commission on December 28, 1999
Registration No. 333-99271
333-99271-01
333-99271-02
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
Amendment No. 1
to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
US Unwired Inc.*
(Exact name of registrant as specified in its charter)
Louisiana 4812 72-1457316
(State or other (Primary standard industrial (IRS employer
jurisdiction classification code number)identification number)
of incorporation or
organization)
One Lakeshore Drive, Suite 1900
Lake Charles, Louisiana 70629
(800) 673-2200
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------
Thomas G. Henning
General Counsel and Secretary
US Unwired Inc.
One Lakeshore Drive, Suite 1900
Lake Charles, Louisiana 70629
(318) 436-9000
(Name, address, including zip code,
and telephone number, including area code, of agent for service)
Copies to:
Anthony J. Correro, III
Louis Y. Fishman
Correro Fishman Haygood Phelps
Walmsley & Casteix, L.L.P.
201 St. Charles Avenue, 46th Floor
New Orleans, Louisiana 70170-4600
(504) 586-5252
---------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this registration statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
The Registrants hereby amend this registration statement on such date or
dates as may be necessary to delay its effective date until the registrants
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 the registration statement
shall become effective on such date as the SEC, acting pursuant to said
Section 8(a), may determine.
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* Some of the subsidiaries of US Unwired Inc. will guarantee the securities
being registered hereby and are therefore registrants also. Information about
these additional registrants appears on the following page.
<PAGE>
ADDITIONAL REGISTRANTS
Louisiana Unwired, LLC
(Exact name of registrant as specified in its charter)
Louisiana 4812 72-1407430
(State or other (Primary standard industrial (IRS employer
jurisdiction classification code number) identification number)
of incorporation or
organization)
One Lakeshore Drive, Suite 1900
Lake Charles, Louisiana 70629
(800) 673-2200
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------------
Thomas G. Henning
General Counsel and Secretary
US Unwired Inc.
One Lakeshore Drive, Suite 1900
Lake Charles, Louisiana 70629
(318) 436-9000
(Name, address, including zip code,
and telephone number, including area code, of agent for service)
Copies to:
Anthony J. Correro, III Louis Y. Fishman
Correro Fishman Haygood Phelps
Walmsley & Casteix, L.L.P.
201 St. Charles Avenue, 46th Floor
New Orleans, Louisiana 70170-4600
(504) 586-5252
----------------
Unwired Telecom Corp.
(Exact name of registrant as specified in its charter)
Louisiana 4812 72-0647424
(State or other (Primary standard industrial (IRS employer
jurisdiction classification code number) identification number)
of incorporation or
organization)
One Lakeshore Drive, Suite 1900
Lake Charles, Louisiana 70629
(800) 673-2200
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------------
Thomas G. Henning
General Counsel and Secretary
US Unwired Inc.
One Lakeshore Drive, Suite 1900
Lake Charles, Louisiana 70629
(318) 436-9000
(Name, address, including zip code,
and telephone number, including area code, of agent for service)
Copies to:
Anthony J. Correro, III Louis Y. Fishman
Correro Fishman Haygood Phelps
Walmsley & Casteix, L.L.P.
201 St. Charles Avenue, 46th Floor
New Orleans, Louisiana 70170-4600
(504) 586-5252
----------------
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 28, 1999
PROSPECTUS
[US Unwired Logo]
Offer to Exchange
13 3/8% Series B Senior Subordinated Discount Notes due 2009
for all
13 3/8% Series A Senior Subordinated Discount Notes due 2009
($400,000,000 principal amount outstanding)
The exchange offer expires at 5:00 p.m., New York City time, , 2000,
unless we extend it.
We do not intend to list the new notes on any national securities exchange,
and we do not expect there to be a public market for the new notes.
The exchange of outstanding old notes for new notes should not be a taxable
event for United States income tax purposes.
You should carefully consider the risk factors beginning on page 6.
----------------
Neither the SEC nor any state securities commission has approved or
disapproved of these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary......................................................... 1
Risk Factors............................................................... 6
Risks Related to Forward-Looking Statements.............................. 6
You should be aware that actual results or outcome may be different
from those stated in any forward-looking statements included in this
prospectus............................................................ 6
Risks Related to the Exchange Offer...................................... 6
If you do not exchange your old notes, they may be difficult to
resell................................................................ 6
We do not expect an active trading market to develop for the Notes..... 7
Risks Related to US Unwired.............................................. 7
Our substantial indebtedness could prevent us from fulfilling our
obligations under the Notes........................................... 7
We will require a significant amount of cash to repay our indebtedness,
but our ability to generate cash depends on many factors beyond our
control............................................................... 7
Your right to receive payments on the notes is junior to our and our
guarantor subsidiaries' existing indebtedness and possibly all of our
and our guarantor subsidiaries' future borrowings..................... 8
The assets of our subsidiaries that do not guarantee the notes may not
be available to satisfy our obligations under the notes............... 8
If we need additional financing that we cannot obtain, we may have to
change our network construction plan.................................. 8
We may be unable to implement a major communications network timely or
successfully.......................................................... 9
Our success depends on our relationship with Sprint PCS and its
success............................................................... 9
Our relationship with Sprint or its successor may be adversely affected
by the proposed merger of Sprint and MCI WorldCom..................... 10
Our competitors may have more resources or other advantages that may
make it difficult for us to compete effectively....................... 10
Changes in technology could adversely affect us........................ 10
If the Sprint PCS network does not expand nationwide, we may not be
able to provide our customers with the traveling services they
demand................................................................ 11
[Year 2000 issues could cause interruption or failure of our computer
systems].............................................................. 11
Our service area is threatened by bad weather, including hurricanes,
which could cause interruptions in service............................ 11
Risks Related to the Industry............................................ 11
We are subject to broad and evolving government regulation............. 11
The future prospects of the PCS industry remain uncertain.............. 12
More subscribers decide to disconnect their service in the PCS industry
than in the cellular industry......................................... 12
Radio frequency emissions may pose health concerns..................... 12
Risks Related to the Notes............................................... 13
We may not be able to satisfy our obligations owed to you if change of
control events occur.................................................. 13
Federal and state statutes allow courts, under specific circumstances,
to void or modify the notes and the guarantees of the notes........... 13
You may face tax and bankruptcy law concerns........................... 13
We cannot assure the accuracy of the industry data in this prospectus..
About the Exchange Offer................................................... 15
How We Will Use the Proceeds of Our Financings............................. 25
Our Capitalization......................................................... 26
Some of Our Historical Consolidated Financial Information.................. 27
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 29
The Wireless Communications Industry....................................... 43
About Our Business......................................................... 46
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Our Sprint PCS Agreements................................................... 65
Our Management.............................................................. 73
Certain Relationships and Related Transactions.............................. 78
Securities Ownership of Certain Beneficial Owners and Management............ 81
Certain Indebtedness........................................................ 83
Our Obligations and Your Rights Under the Notes............................. 85
Description of the New Notes................................................ 86
Registration Rights Agreement............................................... 108
Book-Entry, Delivery and Form............................................... 110
Description of Our Capital Stock............................................ 114
Certain U.S. Federal Tax Considerations..................................... 117
Plan of Distribution........................................................ 122
Legal Matters............................................................... 123
Available Information....................................................... 123
Experts..................................................................... 123
Index to Financial Statements............................................... F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
You should not make an investment decision based only on summary
information. We therefore urge you to read carefully all of this prospectus.
Who We Are And What We Do
We are US Unwired Inc. and its subsidiaries. We provide wireless
communications service, local and long distance telephone service and internet
service in parts of Louisiana and Texas. Our wireless communications services
include:
. PCS telephone service in parts of Louisiana and Texas. PCS a is personal
communications system for providing wireless telephone service in
competition with the older, more established cellular telephone service.
. cellular telephone and paging service in southwest Louisiana.
We have agreed to be an affiliate of Sprint PCS, which is creating a network
to offer PCS service nationwide. We plan to expand our PCS service area to
other parts of Louisiana and Texas and new parts of Alabama, Arkansas, Florida,
Mississippi, Oklahoma and Tennessee. When we finish this expansion, our PCS
network will cover an area with a total population of approximately 9.9 million
people. We plan to complete our expansion by June 2001.
We will market our PCS service in our expanded service area under the
Sprint(R) and Sprint PCS(R) brand names and logos. We expect to be the only
provider of Sprint PCS products and services in our service area.
Summary Information About the Exchange Offer
Background of Our
Exchange Offer.......
On October 29, 1999 we sold in a private offering
our 13 3/8% Series A senior subordinated discount
notes due 2009. At that time we agreed to make this
exchange offer to you by March 27, 2000, and to
complete it by April 26, 2000. If we fail to do
that we will owe you penalties.
The Exchange Offer........
We are offering to exchange the old or existing
notes for an equal amount of our new notes, which
are our 13 3/8% Series B senior subordinated
discount notes due 2009.
Terms of Our New Notes.... Our new notes are identical to our old notes
except:
. We have registered with the SEC our issuance of
the new notes. For that reason the new notes will
be free from transfer restrictions that apply to
the old notes.
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. Our old notes require us to file SEC
registrations and to pay certain penalties for
delay. Our new notes do not have these
provisions.
Transfer of Our New We believe that you may freely transfer new notes
Notes................ that you receive in the exchange offer if:
. you acquire the new notes in the ordinary course
of your business,
. you are not participating in a public
distribution of the new notes, and
. you are not our affiliate, which means a person
who has or shares the power to control us.
We will require you to make these representations
to us if you wish to participate in the exchange
offer.
If you are a broker-dealer that receives new notes
for your own account in exchange for old notes that
you acquired in your market-making or other trading
activities, you must acknowledge that you will
deliver a prospectus meeting the requirements of
the Securities Act when you resell the new notes.
You may use this prospectus to meet those
requirements. You should read the section entitled
"Plan of Distribution."
Expiration Date and The exchange offer expires on , 2000, at 5:00
Time................. p.m., New York City time, unless we extend it.
Conditions to the
Exchange Offer...........
The exchange offer is subject only to the following
conditions:
. the exchange offer must comply with applicable
laws or any applicable interpretation of the
staff of the SEC; and
. we must not be involved in or threatened with a
judicial or administrative proceeding that would
prevent us from proceeding with the exchange
offer.
Procedures for Tendering
Old Notes...........
If you wish to participate in this exchange offer,
you must on or before the expiration time:
. complete, sign and date the enclosed letter of
transmittal according to the instructions
contained in this prospectus and in the letter of
transmittal; and
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. deliver to our exchange agent the letter of
transmittal, the old notes, and any other
document that is required by the instructions in
the letter of transmittal.
If you hold old notes through DTC and wish to
participate in the exchange offer, you must comply
with DTC's automated tender offer program
procedures.
Withdrawal Rights.........
You may withdraw old notes that you tender by
delivering a notice of withdrawal to the exchange
agent at any time before the exchange offer
expires.
Acceptance of Old Notes
and Delivery of New
Notes...............
We will accept for exchange any old notes that are
properly tendered before the exchange offer
expires.
U.S. Federal Income Tax
Considerations...........
Generally, your exchange of old notes for new notes
in the exchange offer should not be a taxable event
for U.S. federal income tax purposes.
Use of Proceeds...........
We will not receive any proceeds from the exchange
of old notes for new notes in the exchange offer.
Exchange Agent............
State Street Bank and Trust Company is the exchange
agent for the exchange offer.
Summary Information About the New Notes
Securities Offered........
Up to $400,000,000 million in total principal
amount of 13 3/8% Series B senior subordinated
discount notes due 2009.
Issuer.................... US Unwired Inc.
Maturity.................. November 1, 2009
Interest and Increase in We sold the old notes at a discounted price. The
Value................ new notes will increase (or accrete) in value over
the original discounted price of the old notes at a
rate of 13 3/8% per year until November 1, 2004,
compounded twice per year. On November 1, 2004, the
accreted value of the notes will equal the
principal amount. Interest will begin to accrue on
that date, and we will pay interest on May 1 and
November 1 of each year, beginning on May 1, 2005.
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Subsidiary Guarantees.....
Two of our subsidiaries, LA Unwired and Unwired
Telecom, will guarantee our obligations under the
new notes. These subsidiary guarantees will be
subordinate in right of payment to all existing and
future senior indebtedness of the subsidiary
guarantors.
Ranking...................
The new notes will be our general unsecured
obligations. The new notes will rank junior to all
of our existing and future senior indebtedness.
Optional Redemption.......
We may choose to buy back all or any portion of the
new notes at any time after October 31, 2004 at the
prices set forth in this prospectus, plus any
accrued and unpaid interest and any penalties we
may owe.
In addition, at any time prior to November 1, 2002,
we may buy back up to 35% of the total principal
amount of the notes with cash proceeds from our
sales of our common stock. In that case, we will
pay you $1,137.50 for each $1,000 of accreted value
of the notes, plus any penalties we may owe.
Change in Control.........
If the Henning family that controls us loses that
control, you may require us to repurchase all or
any part of your notes for:
. $1,010 per $1,000 of accreted value of the notes,
plus any penalties we may owe, if the repurchase
is before November 1, 2004, or
. $1,010 per $1,000 of principal amount of the
notes, plus accrued interest and any penalties we
may owe, if the repurchase is on or after
November 1, 2004.
A change of control may be a default under our
senior indebtedness. If this occurs, we may not be
able to repurchase the notes.
Certain Covenants.........
The indenture limits our ability to:
. pay dividends, redeem capital stock and make
other restricted payments or investments;
. incur additional indebtedness or issue preferred
equity interests;
4
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. create any subordinated debt that is senior to
the new notes or old notes;
. merge, consolidate or sell all or substantially
all of our assets;
. create liens on assets; and
. enter into transactions with affiliates or
related persons.
*****
We are located at One Lakeshore Drive, Suite 1900, Lake Charles, Louisiana
70629. Our phone number is (800) 673-2200, and our website is
www.usunwired.com.
5
<PAGE>
RISK FACTORS
You should carefully consider the following factors and other information in
this prospectus in connection with the exchange offer.
Risks Related to Forward-Looking Statements
You should be aware that actual results or outcomes may be different from those
stated in any forward-looking statements included in this prospectus.
This prospectus includes forward-looking statements. Forward-looking
statements are statements about our current and future business strategy,
operations, capabilities and construction plan and schedule, as well as
financial projections, plans and objectives of management, expected actions of
third parties and other matters. They often include the words "believes,"
"belief," "expects," "plans," "anticipates," "intends," "projects" or similar
words. Forward-looking statements speak only as of the date made. They involve
known and unknown risks and other factors that could cause our actual results
to be materially different from our historical results or from any future
results expressed or implied by any forward-looking statements. Some of the
factors that could cause this difference are:
. the availability at acceptable terms of sufficient funds to pay for our
business plan,
. competition,
. changes in labor, equipment and capital costs,
. any inability to obtain required regulatory approvals,
. changes in technology,
. any inability to comply with the indenture that governs the notes or
with our credit agreements,
. changes in management,
. any inability to attract and retain qualified employees,
. future acquisitions, and
. general economic and business conditions.
You should not rely too heavily on any forward-looking statement. We have no
obligation to update or revise publicly any forward-looking statement based on
new information, future events or otherwise. Even though we believe that the
expectations underlying the forward-looking statements are reasonable, we
cannot assure you that these expectations will prove to be correct.
Risks Related to the Exchange Offer
If you do not exchange your old notes, they may be difficult to resell.
We issued the old notes in transactions that were not registered with the
SEC. For that reason, they are subject to transfer restrictions. If you do not
exchange your old notes, these restrictions will
6
<PAGE>
continue to apply. Even if you are permitted to transfer your old notes, it
probably will be more difficult to find a buyer for old notes at the same price
that a person would pay for new notes because the new notes do not have
transfer restrictions. After the exchange offer is over, we will have no
further requirement to exchange old notes for new notes.
We do not expect an active trading market to develop for the notes.
We do not intend to apply for listing of the old notes or the new notes on
any securities exchange or for quotation on any automated dealer quotation
system. Future trading prices of the new notes will depend on many factors
including:
. the overall market for securities like the notes,
. changes in our financial performance or prospects, and
. changes in the prospects for companies in our industry generally.
Risks Related to US Unwired
Our substantial indebtedness could prevent us from fulfilling our obligations
under the notes.
We have a substantial amount of debt. On December 31, 1999, we had
outstanding debt of:
. approximately $ million in principal amount of the notes; and
. approximately $ million of debt guaranteed by US Unwired. This
represents our share of the indebtedness of Meretel (assuming completion
of the Meretel transaction described in the section entitled
"Management's Discussion and Analysis of Financial Condition and Results
of Operations").
We may incur additional debt in the future. The indenture governing the old
notes and new notes will permit us to incur additional debt, but there are
limitations. Our credit facilities provide for total borrowings of up to $130.0
million.
Because of our substantial debt:
. we will use most of our cash flow from operations to repay our debt. This
will reduce the cash that is available for other purposes.
. we may not have enough cash to repay our debt.
. we may not be able to borrow more money or get additional financing.
. an increase in interest rates could increase our interest expense.
. most of our assets are encumbered with liens.
. we may not be able to adjust to changing market conditions or
competition.
We will require a significant amount of cash to repay our indebtedness, but our
ability to generate cash depends on many factors beyond our control.
Our ability to repay our debt, including the notes, depends on our future
operating performance. Our performance depends on general economic and
competitive conditions and on financial, business
7
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and other factors, many of which we cannot control. We will use a substantial
portion of our cash flow from operations to repay our borrowings and interest
under our credit facilities. In addition, beginning in 2005, we must pay
interest on the notes. We cannot assure you that we will have enough cash flow
from operations or future borrowings under our credit facilities to repay our
indebtedness or for our other liquidity needs.
As a holding company, we depend on dividends from our subsidiaries to meet
our debt obligations. The indenture governing the old notes and new notes may
allow our subsidiaries to enter into future loan agreements which restrict or
prohibit them from paying dividends. State law may also limit the amount of the
dividends that our subsidiaries are permitted to pay.
Your right to receive payments on the notes is junior to our and our guarantor
subsidiaries' existing indebtedness and possibly all of our and our guarantor
subsidiaries' future borrowings.
If a bankruptcy or similar proceeding occurs relating to us or the
guarantors, our assets will be available to holders of the old notes and new
notes only after all of our outstanding senior debt has been paid. As a result,
there may not be enough assets remaining to make payments on the old notes and
new notes or the guarantees. In addition, all payments on the old notes and new
notes and the guarantees will be blocked if we fail to pay our senior debt.
The assets of our subsidiaries that do not guarantee the notes may not be
available to satisfy our obligations under the notes.
Our subsidiaries that are designated as unrestricted subsidiaries and LEC
Unwired will not guarantee the notes. If a bankruptcy, liquidation or
reorganization of any of the non-guarantor subsidiaries should occur, their
creditors will generally be entitled to payment of their claims from the assets
of those subsidiaries before any assets are made available for distribution to
us. On December 31, 1999, the notes were effectively junior to $ million of
indebtedness and liabilities of these non-guarantor subsidiaries, and these
subsidiaries were permitted to borrow another approximately $ million.
If we need additional financing that we cannot obtain, we may have to change
our network construction plan.
We will make significant capital expenditures to complete our PCS network.
Actual expenditures may differ significantly from our estimates. We would have
to obtain additional financing if:
. any of our sources of capital is unavailable or insufficient;
. we significantly depart from our business plan;
. we experience unexpected delays or cost overruns in the construction of
our network, including changes to the schedule or scope of our network
buildout;
. changes in technology or governmental regulations create unanticipated
costs; or
8
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. we acquire additional licenses or Sprint PCS grants us more service areas
to build out and manage.
We cannot predict whether any additional financing will be available or on
what terms. If we need additional financing that we cannot obtain, we will have
to change our plans for the remainder of our network.
We may be unable to implement a major communications network timely or
successfully.
We must lease or acquire rights to use locations for our PCS equipment and
our PCS network. This may require us to obtain zoning variances or governmental
approvals. If we are unable to obtain or use these locations, we may need to
alter the design of our network. This could prevent us from completing
construction of our network in a timely manner or at all.
There is considerable demand for the communications equipment that we need
to construct our network, and manufacturers of this equipment could have
substantial backlogs of orders. Competitors who purchase large quantities of
communications equipment may receive priority in the delivery of this
equipment. If we cannot get this equipment, we may fail to construct our
network timely. This could limit our ability to compete effectively, or we
could lose our licenses or breach our agreements with Sprint PCS.
Our success depends on our relationship with Sprint PCS and its success.
Our agreements with Sprint PCS and our right to use its brand name and logo
are central to our business plan. You should be aware that:
. If we lose our rights to use the Sprint PCS(R) brand name and logo and
related rights, or if any of our agreements with Sprint PCS is
terminated, our operations would be impaired.
. These agreements may be terminated if we do not construct and operate our
network in accordance with Sprint PCS's requirements, if any of Sprint
PCS's FCC licenses is lost or jeopardized, or if we become insolvent.
. We will use our relationship with Sprint PCS to obtain, at favorable
prices, the equipment for the construction and operation of our network.
Any disruption in our relationship with Sprint PCS could make it much
more difficult to obtain this equipment.
. Sprint PCS imposes strict requirements on the construction of our
network. If we do not meet these requirements, we could lose the right to
be the sole provider of Sprint PCS products and services in our service
area.
. If Sprint PCS has a significant disruption to its system, fails to
develop its system, or suffers a weakening of its brand name, our
operations and profitability would likely be impaired.
If our management agreements with Sprint PCS are terminated or breached, we
may be required to sell our PCS assets to Sprint PCS or Sprint PCS may be
required to assign to us some of their licensed spectrum. In either case, we
may not have sufficient funds to satisfy the notes.
9
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Our relationship with Sprint or its successor may be adversely affected by the
proposed merger of Sprint and MCI WorldCom.
Sprint and MCI WorldCom announced on October 5, 1999 that they have agreed
to merge to form a new company called WorldCom. The merger is subject to
various conditions, including the approvals of the shareholders of both
companies, the FCC, the Justice Department and various state governmental
bodies and foreign antitrust authorities. Until the merger actually occurs, we
will not know what effect it will have on Sprint's business. Any negative
impact on Sprint could have a negative effect on us as a Sprint PCS affiliate.
We do not have any reason to believe that the merger would have a negative
effect on Sprint.
Our competitors may have more resources or other advantages that may make it
difficult for us to compete effectively.
Competition in the wireless communications services industry is intense. If
we are unable to compete successfully, our business and operations will be
impaired. We may be at a disadvantage compared to our competitors who:
. have substantially greater financial, technological, marketing and sales
and distribution resources than we do;
. entered the wireless communications services market before we did;
. market other competitive services, like local dial tone, long distance
and internet, together with their wireless communications services;
. have more established networks, marketing programs and brand names;
. offer coverage in areas not served by our PCS network or offer lower
rates for placing and receiving calls outside of their own networks.
We expect that some of the existing cellular providers will continue to
upgrade their systems to provide digital wireless communication services that
compete with Sprint PCS. Providers of traditional landline telephone services,
energy companies, utility companies and cable operators may expand their
services to offer competitive wired or wireless communications services. We
compete also with companies that use other communications technologies and
paging and dispatch companies.
Changes in technology could adversely affect us.
PCS providers in the United States use one of three technological standards.
Even though the three standards share basic characteristics, they are not
compatible or interchangeable with each other. We and Sprint PCS use the
standard known as CDMA. If another standard becomes preferred in the industry,
we may be at a competitive disadvantage. If Sprint PCS changes its standard, we
will need to change ours as well, which will be costly and time consuming. If
we cannot change our standard, we may not be able to compete with other
systems.
Our agreement with Sprint PCS prohibits us from upgrading our cellular
network from an analog network to a digital network like the Sprint PCS network
without Sprint PCS's approval. If cellular
10
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equipment manufacturers stop making analog cellular equipment and we cannot buy
used analog cellular equipment on the open market, it could impair our ability
to service our existing cellular subscribers and attract new ones.
If the Sprint PCS network does not expand nationwide, we may not be able to
provide our customers with the services they demand.
Sprint PCS intends to cover a significant portion of the population of the
United States, Puerto Rico and the U.S. Virgin Islands with its PCS system, but
it has not yet completed the buildout of its planned network. If one of our
customers travels in an area where a Sprint PCS system is not yet operational,
the customer will need a telephone handset that can make calls on both CDMA-
systems and non-CDMA-systems. Generally, these handsets are more costly.
Moreover, the Sprint PCS network does not allow for calls to be transferred
without interruption between the Sprint PCS network and another wireless
network. This means that a customer must end a call in progress and initiate a
new call when entering an area not served by the Sprint PCS network. The
quality of the service provided by another network may not be equal to that of
the Sprint PCS network, and our customers may not be able to use some of the
advanced features of our network. This could result in customer dissatisfaction
and loss of customers.
[Year 2000 issues could cause interruption or failure of our computer systems.
We use a significant number of computer systems and software programs in our
operations, including in support of our PCS network equipment and for various
administrative functions. Many computers and computer software may not be able
to identify 00 as the year 2000. This error could result in miscalculations or
system errors.
We did not experience any noticeable problems on January 1, 2000 or
thereafter. We cannot be sure that third parties with whom we conduct business
will be Year 2000 compliant.]
Our service area is threatened by bad weather, including hurricanes, which
could cause interruptions in service.
Much of our service area is on or near the Gulf of Mexico and could be
damaged by bad weather like hurricanes and excessive rain. Even though we
believe our insurance coverage is adequate, we may face service interruptions
for indefinite periods if a major hurricane strikes one or more of our Gulf
Coast service areas.
Risks Related to the Industry
We are subject to broad and evolving government regulation.
. Our business must comply with the rules and regulations of the FCC, the
FAA and state and local regulatory agencies.
. New regulations may require us to modify our business plan or
operations. This could increase our operating costs.
. The loss of any of our FCC licenses, or any of Sprint PCS's FCC licenses
for our service area, would impair our business and operating results.
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. We may need to acquire additional licenses, which may require approval
of regulatory authorities. These regulatory authorities may not grant
approval in a timely manner, if at all.
. All PCS licenses, including our own licenses and Sprint PCS's licenses,
are subject to the FCC's buildout regulations. These regulations require
license holders to offer specified levels of service to the population
in their service areas within set time periods. Even though we have
developed a buildout plan that meets these requirements, we may be
unable to meet our buildout schedule. If Sprint PCS or we do not meet
these requirements, the FCC could take back the portions of our service
area that are not being served, impose fines, or even revoke the related
licenses.
. The FCC imposes limitations on the foreign ownership of license holders.
If foreign ownership is too great, the FCC may revoke our PCS licenses
or require an ownership restructuring. We believe that we comply with
these limitations.
. The FCC imposes additional requirements on holders of its F-block
licenses. If we do not meet these requirements, the FCC could fine us,
revoke our licenses or require us to restructure our ownership. We
expect to maintain our qualifications to hold our F-block licenses.
The future prospects of the PCS industry remain uncertain.
PCS systems have not operated in the United States for very long, and we
cannot assure you that the operation of these systems in our markets will
become profitable. In addition, we cannot estimate how much demand there will
be for PCS in our markets or how much competitive pricing pressure there will
be. As a result, the future prospects of the PCS industry, including our
prospects, remain uncertain.
More subscribers decide to disconnect their service in the PCS industry than in
the cellular industry.
The PCS industry has experienced a higher rate of subscribers who disconnect
their service than the cellular industry. This rate, or churn, of PCS
subscribers may be the result of limited network coverage, unreliable
performance of calls, costs, customer care or other competitive factors.
We plan to keep our PCS subscriber churn down by expanding network coverage,
improving network reliability, marketing affordable plans and enhancing
customer care. We cannot assure you that these strategies will be successful. A
high rate of PCS subscriber churn could harm our competitive position and the
results of operations of our PCS services.
Radio frequency emissions may pose health concerns.
Media reports have suggested that some radio frequency emissions from
wireless telephone handsets may be linked to various health concerns, including
cancer, and may interfere with some electronic medical devices, including
hearing aids and pacemakers. These concerns may discourage the use of these
handsets or expose us to potential litigation.
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We cannot assure the accuracy of the industry data in this prospectus.
The industry data presented in this prospectus comes from outside sources.
Even though we believe that this industry data is reasonable and reliable, we
cannot assure you that the industry data is accurate.
Risks Related to the Notes
We may not be able to satisfy our obligations owed to you if change of control
events occur.
If the persons who control us lose this control, we must offer to buy back
all outstanding old and new notes. We cannot assure you that we will have
sufficient funds at the time of a change of control to perform this obligation
or that restrictions in our credit facilities will allow us to do so.
Federal and state statutes allow courts, under specific circumstances, to void
or modify the guarantees of the notes.
Federal bankruptcy law and similar state laws permit courts to cancel
guarantees or to subordinate claims under guarantees to claims of other
creditors of the guarantor. This can result if the guarantor:
. received less than reasonably equivalent value or fair consideration for
the guarantee;
. was insolvent or became insolvent because of the guarantee;
. was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
. intended to incur debts beyond its ability to pay these debts as they
mature.
In addition, any payment on the guarantee by that guarantor could be voided
and required to be returned to the guarantor or to a fund for the benefit of
the creditors of the guarantor.
Based on historical financial information, recent operating history and
other factors, we believe that each guarantor, after giving effect to its
guarantee of the notes:
. will not be insolvent,
. will not have unreasonably small capital for its business, and
. will be able to pay its debts as they mature.
We cannot assure you, however, what standard a court would apply in making
these determinations or that a court would agree with us.
You may face tax and bankruptcy law concerns.
We issued the old notes at a substantial discount from their principal
amount at maturity. Although cash interest will not accrue on the notes before
November 1, 2004 and we will not pay interest on the notes before May 1, 2005,
original issue discount will accrue from the issue date of the old notes to
November 1, 2004. Original issue discount is the difference between the total
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principal amount at maturity and the issue price of the old notes. If you hold
notes, you will be required to include amounts in gross income for United
States federal income tax purposes before you receive the cash payments
relating to this income. The total amount that you must include equals the
difference between the stated redemption price at maturity, including stated
interest, and the issue price of the old notes.
If we file for bankruptcy, your claim as a holder of notes may be limited to
an amount equal to the sum of the initial offering price and that portion of
the original issue discount that is not deemed to constitute unmeasured
interest under federal bankruptcy law. Any original issue discount that was not
earned by the date of the bankruptcy filing could constitute unmeasured
interest. If the IRS uses a different method of calculating amortization of
original issue discount, you may realize taxable gain or loss when your claim
in bankruptcy is paid, should that occur.
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ABOUT THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
We sold the old notes on October 29, 1999, to Donaldson, Lufkin & Jenrette
Securities Corporation, First Union Securities, Inc. and BNY Capital Markets,
Inc. As a condition to the sale, we entered into a registration rights
agreement with these initial purchasers, which requires us to:
. file a registration statement relating to an offer to exchange the old
notes for new notes;
. use our commercially reasonable efforts to have the registration
statement become effective under the Securities Act; and
. use reasonably commercial efforts to issue the new notes as soon as
practicable, but not later than 30 business days, after the effectiveness
of the registration statement.
If we fail to satisfy our registration and exchange obligations under the
registration rights agreement, we must pay liquidated damages of $.05 per week
for each $1,000 principal amount of old notes. These liquidated damages
increase by $.05 per week for each $1,000 principal amount of old notes, up to
a maximum amount of $.50 per week, for each 90-day period during which we fail
to satisfy our registration obligations or the new notes are not issued.
We have filed a copy of the registration rights agreement as an exhibit to
the registration statement of which this prospectus is a part.
We are not making this exchange offer to, and we will not accept tenders for
exchange from, holders of old notes in any jurisdiction where the exchange
offer or the acceptance of old notes would violate the securities or blue sky
laws of that jurisdiction.
Resale of the New Notes
Under existing interpretations of the staff of the SEC stated in several no-
action letters to third parties, the new notes should be freely transferable
after the exchange offer without further registration under the Securities Act.
If you are a broker-dealer who purchased old notes from us (like the initial
purchasers of the old notes) that you intend to resell under Rule 144A or any
other available exemption under the Securities Act, you:
. cannot rely on these interpretations of the staff of the SEC,
. cannot tender your old notes in the exchange offer, and
. must comply with the registration and prospectus delivery requirements of
the Securities Act for any sale or transfer of the old notes unless you
rely on an exemption from these requirements.
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If you are our affiliate or you intend to participate in a public
distribution of the new notes, these limitations apply to you also. If you own
old notes, however, you should not be our affiliate or a person who intends to
participate in a distribution of the new notes because you have represented to
us, as a condition to purchasing old notes, that you are not our affiliate and
that you do not intend to participate in a distribution of the new notes.
If you are eligible and wish to participate in this exchange offer, you must
make the following representations in the letter of transmittal that was sent
to you with this prospectus. If you hold old notes through DTC and wish to
participate in the exchange offer, you must agree to be bound by the letter of
transmittal. By executing or becoming bound by the letter of transmittal, you
will represent that:
. you are not our affiliate,
. you acquired the new notes in the ordinary course of your business, and
. you are not participating, and do not intend to participate, in a
distribution of the new notes.
Any broker-dealer participating in the exchange offer who acquired old notes
for its own account as a result of market-making or other trading activities
must deliver a prospectus meeting the requirements of the Securities Act before
reselling any new notes. The letter of transmittal states that a broker-dealer
that acknowledges that it will, and does, deliver a prospectus meeting the
requirements of the Securities Act will not be deemed to have admitted that it
is an "underwriter" within the meaning of the Securities Act. These broker-
dealers may use this prospectus for a resale of the new notes. If this applies
to you, you should read the section entitled "Plan of Distribution."
We do not intend to seek our own no-action letter. We cannot assure you that
the staff of the SEC would make a similar determination about the new notes as
it has in these no-action letters to third parties.
After the exchange offer expires, holders of old notes will not have any
further registration rights. This means that old notes that are not exchanged
will continue to be subject to restrictions on transfer. In some limited
circumstances, however, the registration rights agreement may require us to
file a registration statement to permit resales of the old notes. If you do not
exchange your old notes in the exchange offer, you may be subject to the risks
described in "Risk Factors--Risks Related to the Exchange Offer."
The transfer restrictions and registration rights relating to the old notes
do not apply to the new notes because we will issue the new notes in a
transaction registered under the Securities Act.
Terms of the Exchange Offer; Period for Tendering Old Notes
This prospectus and the accompanying letter of transmittal contain the terms
and conditions of the exchange offer. We will accept for exchange old notes
which are properly tendered before expiration of the exchange offer, unless you
have withdrawn them as permitted below. The following is some information about
the terms of the exchange offer:
. our acceptance of the old notes that you tender will constitute a binding
agreement between you and us as described in this prospectus and in the
accompanying letter of transmittal.
. The new notes are identical to the old notes except that:
. the new notes will be issued in a transaction registered under the
Securities Act;
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. the new notes will not be subject to transfer restrictions; and
. the new notes will not have provisions for the payment of liquidated
damages.
. the new notes will evidence the same debt as the old notes. The indenture
that governs the old notes will govern the new notes.
. you may tender some or all of your old notes in denominations of $1,000
principal amount or any integral multiple of $1,000. For each $1,000
principal amount of old notes properly tendered, we will issue $1,000
principal amount of new notes.
. the new notes, like the old notes, will increase in value at a rate of 13
3/8% per year until November 1, 2004, compounded twice per year. At that
time, interest will begin to accrue, and we will pay interest on May 1
and November 1 of each year, beginning on May 1, 2005. We will not pay
any additional interest, and no additional accretion will occur, on old
notes tendered and accepted for exchange.
. as of the date of this prospectus, we had issued $400,000,000 in total
principal amount of the old notes. The exchange offer is not conditioned
on any minimum principal amount of old notes being tendered.
. the exchange offer expires at 5:00 p.m., New York City time, on ,
2000, unless we, in our sole discretion, extend it. The term "expiration
date" means , 2000, or the latest time and date of an extension.
. if we extend the exchange offer, we will give oral or written notice of
the extension to the exchange agent. We will notify the holders as
described below. During an extension, all old notes previously tendered
will remain subject to the exchange offer and may be accepted for
exchange by us.
. we will give prompt oral or written notice to holders of old notes of any
extension, amendment, termination or non-acceptance. If we extend the
expiration date, we will issue a press release or other public
announcement no later than 9:00 a.m., New York City time, on the business
day after the previously scheduled expiration date. Without limiting the
manner in which we may choose to make any public announcement, we will
have no obligation to publish, advertise or otherwise communicate any
public announcement other than by issuing a release to the Dow Jones News
Service.
. we may amend or terminate the exchange offer, and not accept for exchange
any old notes that we have not yet accepted, if any of the conditions
under the heading "--Certain Conditions to the Exchange Offer" occurs.
. holders and beneficial owners of old notes have no appraisal or
dissenters' rights in connection with the exchange offer.
. old notes which are not tendered for exchange, or are tendered but not
accepted, will remain outstanding and be entitled to the benefits of the
indenture, but they will not be entitled to any further registration or
exchange rights under the registration rights agreement.
. any old notes not accepted for exchange for any reason will be returned
without expense to the tendering holder as soon as possible after the
exchange offer is over.
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. we intend to conduct the exchange offer as required by the Exchange Act
and the SEC's rules governing unlawful tender practices. This requires us
to:
. keep the exchange offer open for at least 20 business days;
. give 10 days notice of any change in the terms of the exchange offer;
and
. issue a press release if we extend the exchange offer.
Neither we nor our Board of Directors makes any recommendation to holders or
beneficial owners of old notes whether to tender all or any portion of their
old notes in the exchange offer. Moreover, we have not authorized any person to
make any recommendation of this type. You must make your own decision whether
and what amount to tender in the exchange offer after reading this prospectus
and the letter of transmittal and consulting with your advisors, if any, based
on your own financial position and requirements.
Important Rules Concerning the Exchange Offer
You should note that:
. we will determine all questions of validity, form, eligibility and
acceptance of old notes tendered for exchange, including time of receipt,
in our sole discretion. This determination shall be final and binding.
. we reserve the absolute right to reject any old notes not properly
tendered or not to accept any old notes if we or our lawyers believe that
acceptance would be unlawful.
. we reserve the absolute right to waive any defects or irregularities or
conditions of the exchange offer as to any old notes either before or
after the expiration date. This includes the right to waive the
ineligibility of any holder who seeks to tender old notes in the exchange
offer. Unless we agree to waive any defect or irregularity, it must be
cured within a reasonable period of time that we shall determine.
. our interpretation of the terms and conditions of the exchange offer as
to any old notes either before or after the expiration date, including
the letter of transmittal and its instructions, shall be final and
binding on all parties.
. neither we, the exchange agent nor any other person shall be required to
give notice of any defect or irregularity with respect to any tender of
old notes for exchange, nor shall any of us be liable for not giving this
notification.
Procedures for Tendering Old Notes
What to submit and how.
If you wish to tender your old notes for exchange in the exchange offer, you
must:
. deliver a properly completed and signed letter of transmittal, and all
other documents required by the letter of transmittal, to the exchange
agent at one of the addresses under the heading "--Exchange Agent" before
the expiration of the exchange offer, or
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. comply with DTC's automated tender offer program procedures, which are
described below;
AND
. the exchange agent must receive your old notes with the letter of
transmittal, or
. the exchange agent must receive, before the expiration of the exchange
offer, a timely book-entry confirmation of old notes into the exchange
agent's account at DTC based on the procedure for book-entry transfer
described below, or
. you must comply with the guaranteed delivery procedures described
below.
The method of delivery of old notes, letters of transmittal and all other
required documents is at your election and risk. If delivery is by mail, we
recommend that you use registered mail, properly insured, with return receipt
requested. In all cases, you should allow sufficient time for timely delivery.
You should not send any letters of transmittal or old notes to us.
If you wish to tender your old notes but they are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee, you should
contact the registered holder and instruct it to tender on your behalf. If you
are the registered holder of old notes owned by another person, you should
contact the owner and take instructions from the owner about participating in
the exchange offer.
How to sign your letter of transmittal and other documents.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed unless the old notes are tendered:
. by a registered holder of the old notes who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal, or
. for the account of an eligible guarantor institution within the meaning
of Rule 17Ad-15 under the Exchange Act.
If signatures are required to be guaranteed, the guarantees must be by:
. a member of or participant in the Securities Transfer Agents Medallion
Program or the New York Stock Exchange Medallion Signature Program,
. a member of a national securities exchange or the National Association of
Securities Dealers, Inc.,
. a commercial bank or trust company having an office or correspondent in
the United States, or
. an eligible guarantor institution within the meaning or Rule 17Ad-15 of
the Exchange Act.
If old notes tendered for exchange are registered in the name of a person
other than the person signing the letter of transmittal, they must be endorsed,
or accompanied by a written instrument of transfer or exchange satisfactory to
us in our sole discretion and signed by the registered holder with the
signature guaranteed by an eligible guarantor institution.
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If the letter of transmittal is signed by a person other than the registered
holder of old notes, they must be endorsed or accompanied by appropriate powers
of attorney, in either case signed exactly as the name of the registered holder
appears on the old notes.
If the letter of transmittal or any old notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, these persons should so indicate when signing. Unless we waive this
requirement, they should submit proper evidence satisfactory to us of their
authority to act.
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's automated tender offer
program to tender. These participants may, instead of physically completing and
signing the letter of transmittal and delivering it to the exchange agent,
transmit their acceptance of the exchange offer electronically by causing DTC
to transfer the old notes to the exchange agent. DTC will then send an agent's
message to the exchange agent. An agent's message forms part of the book-entry
confirmation that:
. DTC has received an express acknowledgment from a participant in its
automated tender offer program that is tendering old notes that are the
subject of the book-entry confirmation;
. the participant has agreed to be bound by the terms of the letter of
transmittal or, in the case of an agent's message relating to guaranteed
delivery, that the participant has agreed to be bound by the applicable
notice of guaranteed delivery; and
. the agreement may be enforced against the participant.
Acceptance of Old Notes for Exchange; Delivery of New Notes
Promptly after the expiration date, we will accept all properly tendered old
notes and will issue the new notes if none of the events described in "--
Certain Conditions to the Exchange Offer" has occured. We will be deemed to
have accepted properly tendered old notes for exchange when we given oral or
written notice of acceptance to the exchange agent.
We will issue new notes in exchange for accepted old notes only after the
exchange agent timely receives:
. old notes, or a book-entry confirmation that the old notes have been
transferred into the exchange agent's account at DTC, and
. a properly completed and duly executed letter of transmittal and all
other required documents, or a properly transmitted agent's message.
If we do not accept any tendered old notes for any reason or if you submit
certificates representing old notes in a greater principal amount than you wish
to exchange, we will return your unaccepted or non-exchanged old notes. If you
tendered these old notes by book-entry transfer into the exchange agent's
account at DTC, your account at DTC will be credited with the non-exchanged old
notes. In either case, there will be no cost to you, and this will be done as
soon as possible after the exchange offer is over.
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Book-Entry Transfer
The exchange agent will make a request to establish an account in its name
at DTC with respect to the old notes for purposes of the exchange offer
promptly after the date of this prospectus. Any participant in DTC's systems
may make book-entry delivery of old notes by causing DTC to transfer old notes
into the exchange agent's account in accordance with DTC's automated tender
offer program procedures for transfer. Holders of old notes who are unable to
deliver confirmation of the book-entry tender of their old notes into the
exchange agent's account at DTC or all other documents required by the letter
of transmittal to the exchange agent before the exchange offer expires must
tender old notes according to the guaranteed delivery procedures described
below. Delivery of documents to DTC does not constitute delivery to the
exchange agent.
Guaranteed Delivery Procedures
If you wish to tender old notes but:
. they are not immediately available,
. you cannot deliver your old notes or the letter of transmittal or other
required documents to the exchange agent before the exchange offer
expires, or
. you cannot comply with the procedure for book-entry transfer before the
exchange offer expires,
then, you may tender your old notes if:
. the tender is made through an eligible guarantor institution;
. before expiration of the exchange offer, the exchange agent receives from
the eligible guarantor institution a properly completed and duly executed
notice of guaranteed delivery, by facsimile transmission, mail or hand
delivery, or a properly transmitted agent's message and notice of
guaranteed delivery. Any notice of guaranteed delivery must state:
. the name and address of the holder of old notes,
. the amount of old notes tendered,
. that the tender is being made by guaranteed delivery, and
. that within five New York Stock Exchange trading days after the date
that the notice of guaranteed delivery was signed, the old notes or a
book-entry confirmation, together with the letter of transmittal and
any other documents required by the letter of transmittal, will be
deposited by the eligible guarantor institution with the exchange
agent; and
. the exchange agent receives the old notes, or a book-entry confirmation,
together with the letter of transmittal and all other documents required
by the letter of transmittal, within five New York Stock Exchange trading
days after the date that the notice of guaranteed delivery was signed.
Withdrawal Rights
You may withdraw your tender of old notes at any time before expiration of
the exchange offer. For a withdrawal to be effective:
. the exchange agent must receive a written notice of withdrawal at one of
the addresses listed under the heading "--Exchange Agent," or
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. you must comply with DTC's automated tender offer program system.
Any notice of withdrawal must specify:
. the name of the person who tendered the old notes to be withdrawn,
. the old notes to be withdrawn, including the principal amount of such old
notes,
. if certificates for old notes have been delivered, the name in which the
old notes are registered, if different from that of the person
withdrawing,
. if certificates for old notes have been delivered or otherwise identified
to the exchange agent, the serial numbers of the particular certificates
to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an eligible guarantor institution, unless the withdrawing
holder is an eligible guarantor institution, and
. if old notes have been tendered by book-entry transfer, the name and
number of the account at DTC to be credited with the withdrawn old notes.
In this case, the notice of withdrawal must otherwise comply with DTC's
procedures.
We will determine all questions of validity, form and eligibility, including
time of receipt, of notices of withdrawal. Our determination shall be final and
binding on all parties. We will deem any properly withdrawn old notes not to
have been validly tendered for exchange in the exchange offer. If you have
properly withdrawn old notes and wish to re-tender them, you may do so at any
time before the exchange offer expires by following one of the procedures
described under the heading "--Procedures for Tendering Old Notes."
Certain Conditions to the Exchange Offer
Despite any other provisions of the exchange offer, we will not be required
to accept old notes for exchange or issue new notes, and we may terminate or
amend the exchange offer, if at any time before acceptance of old notes or
issuance of new notes:
. the exchange offer would violate applicable law or any applicable
interpretation of the staff of the SEC, or
. there is or has been threatened any judicial or administrative proceeding
that would prevent us from continuing with the exchange offer.
These conditions are for our benefit only, and we may assert them regardless
of the circumstances giving rise to them. If we fail to exercise the rights
described above, we shall not be deemed to have waived these rights. These
rights shall continue, and we may assert any of them at any one or more times.
In addition, we will not accept old notes or issue new notes if there is or
has been threatened a stop order involving the exchange offer or the
qualification of the indenture under the Trust Indenture Act of 1939.
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Exchange Agent
We have appointed State Street Bank and Trust Company as the exchange agent
for the exchange offer. You should send all executed letters of transmittal and
you should direct all questions and requests for help and all requests for
copies of this prospectus, the letter of transmittal and notices of guaranteed
delivery to the exchange agent at one of the following addresses:
By Overnight Courier or Hand By Registered or Certified
Delivery: Mail:
State Street Bank and Trust Company State Street Bank and Trust
Corporate Trust Department Company
2 Avenue de Lafayette Corporate Trust Department
Corporate Trust Window, Fifth Floor P.O. Box 778
Boston, Massachusetts 02111-1724 Boston, Massachusetts 02102-
Attn: Kellie Mullen 0078
Attn: Kellie Mullen
By Facsimilie Transmission:
Telephone: (617) 664-5587
Facsimile: (617) 662-1452
Attn: Kellie Mullen
Delivery to an address or location that is not shown above is not valid
delivery.
Fees and Expenses
We are contacting you by mail about the exchange offer. We may make
additional offers by telegraph, telephone, fax or in person by our officers,
regular employees and affiliates. We will not pay our officers, employees or
affiliates to do this.
We will not pay brokers, dealers or others who seek acceptances of the
exchange offer. We will, however, pay all costs required by the registration
rights agreement, including:
. all registration and filing fees and expenses,
. all costs to comply with securities laws,
. all printing expenses, and
. the fees and expenses of our lawyers and accountants.
In addition, we have agreed to reimburse the initial purchasers of the old
notes and others who are participating in the "Plan of Distribution," as a
group, for the fees and expenses of one lawyer.
Transfer Taxes
We will pay any transfer taxes that apply to the exchange of old notes in
the exchange offer, unless:
. you instruct us to register new notes in the name of a person other than
the registered holder;
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. you ask us to return old notes not tendered or accepted for exchange to a
person other than the registered holder; or
. the tendered old notes are registered in the name of a person other than
the person who signed the letter of transmittal.
In any of these cases, you will be required to pay any transfer taxes that
apply.
Accounting Treatment
We will record the new notes at the same carrying value as the old notes,
which is the total principal amount shown in our accounting records on the date
of the exchange. We will not recognize gain or loss for accounting purposes
because of the exchange offer. We will record the expenses of the exchange
offer over the term of the new notes.
U.S. Federal Tax Considerations
The economic terms of the new notes and the old notes are identical. Your
exchange of old notes for new notes in the exchange offer should not be taxable
for U.S. federal income tax purposes:
. you should not recognize taxable gain or loss when you exchange your old
notes for new notes;
. you will be deemed to have held your new notes for as long as you held
your old notes; and
. you will have the same tax basis in your new notes as you had in your old
notes.
You should read the section entitled "Certain U.S. Federal Tax
Considerations" before deciding to exchange your old notes for new notes.
Participation in the Exchange Offer; Untendered Notes
Participation in the exchange offer is voluntary. We urge you to consult
your financial and tax advisors before making your decision.
When we exchange all properly tendered old notes in this exchange offer, we
will have satisfied an obligation of the registration rights agreement. If you
do not tender your old notes in the exchange offer, you will still hold old
notes. You will have no further registration rights for your old notes, and
there will be restrictions on the transfer of your old notes. You should read
the risk factors under the heading "Risks Related to the Exchange Offer" when
deciding to exchange your old notes.
We may in the future seek to acquire untendered old notes in the open
market, through privately negotiated transactions or subsequent exchange offers
or otherwise. We intend to comply with applicable law in doing so. We do not
have any present plan to acquire any old notes that are not tendered in the
exchange offer or to file a registration statement to permit resales of these
notes. In some instances, however, the registration right agreement may require
us to file a registration statement to permit resales of the untendered old
notes.
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HOW WE WILL USE THE PROCEEDS OF OUR FINANCINGS
We received approximately $378.5 million from our financings after we
deducted the discount payable to the initial purchasers of the old notes and
the estimated costs to sell the old notes. Our financings included the sale of
the old notes, our sale of $50.0 million of preferred stock and our new $130.0
million credit facilities. We intend to use this $378.5 million and our $17.0
million of cash:
. to build out our PCS operations and cover anticipated operating losses,
which we believe will cost approximately $294.7 million, and
. for other general corporate purposes.
. We used some of the proceeds to repay $95.4 million of our credit
facilities at US Unwired and LA Unwired, which would have matured on
varying dates between June 30, 2005 and September 30, 2007, and which
bore interest at our option at floating rates tied to the London
Interbank Offering Rate, the U.S. Treasury Securities rate or the prime
rate.
We will not receive any cash from the issuance of the new notes. Instead, we
will receive old notes in the same principal amount as the new notes issued. We
will retire and cancel the old notes surrendered in the exchange offer, and
they cannot be reissued. Issuance of the new notes will not change our amount
of outstanding debt.
25
<PAGE>
OUR CAPITALIZATION
The table below shows as of September 30, 1999, (1) the actual cash and
capitalization of US Unwired and (2) the cash and capitalization of US Unwired
assuming that we had sold the old notes and the preferred stock on September
30, 1999. You should read this table with our consolidated financial statements
and related notes, which are included in this prospectus.
<TABLE>
<CAPTION>
As of September
30, 1999
-----------------
As
Actual Adjusted
-------- --------
(In thousands)
<S> <C> <C>
Cash and cash equivalents.................................... $ 16,966 $170,123
======== ========
Debt, including current maturities:
New US Unwired Senior Credit Facilities.................... $ -- $ --
Existing US Unwired Senior Credit Facilities............... 28,500 --
Existing LA Unwired Senior Credit Facilities............... 66,890 --
Notes...................................................... -- 209,224
Other debt(/1/)............................................ 9,844 9,844
-------- --------
Total debt............................................... 105,234 219,068
-------- --------
Mandatory redeemable convertible preferred stock............. -- 50,000
--------
Stockholders' equity:
Common stock............................................... 113 113
Additional paid-in capital................................. 1,835 1,835
Retained earnings.......................................... 41,129 39,653
-------- --------
Total stockholders' equity............................... 43,077 41,601
-------- --------
Total capitalization..................................... $148,311 $310,669
======== ========
</TABLE>
- --------
(/1/) Of the balance shown, $9.3 million comprises non-recourse obligations to
US Unwired.
26
<PAGE>
SOME OF OUR HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The table below shows some of our historical financial information based on
our audited consolidated financial statements for each of the five years in the
period ended December 31, 1998 and our unaudited consolidated financial
statements for the nine-month periods ended September 30, 1998 and 1999. You
should read this information with our consolidated financial statements and the
related notes and the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations," all of which are included in
this prospectus.
You should keep in mind the following points as you read this information:
. in July 1998, we sold all of our cellular assets related to our
Mississippi, Alabama and Kansas markets, including our majority interest
in Mississippi 34 Cellular Corporation;
. in August 1998, we ended our practice of reselling the PCS service of
Meretel when we sold our wholesale PCS subscribers to Meretel; and
. the results for LA Unwired and LEC Unwired are consolidated with those of
US Unwired for the nine months ended September 30, 1999 due to US
Unwired's increased equity ownership in both companies in the first nine
months of 1999, but results are presented on the equity method for the
nine months ended September 30, 1998.
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended September 30,
------------------------------------------------- ----------------------
1994 1995 1996 1997 1998(/1/)(/2/) 1998 1999(/3/)
------- ------- -------- -------- -------------- --------- ------------
Statement of Operations
Data: (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues.......... $22,553 $39,252 $ 61,893 $ 74,668 $71,711 $ 58,923 $ 45,561
Net income (loss)....... 1,750 2,603 3,854 (1,509) 28,921 33,013 (9,773)
Other Financial Data:
Ratio of earnings to
fixed charges(/4/)..... 4.5 2.0 1.9 -- 8.8 N/A --
<CAPTION>
At December 31, At September 30,
------------------------------------------------- ----------------------
1994 1995 1996 1997 1998(/2/) 1998 1999
------- ------- -------- -------- -------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data: (In thousands)
Total assets............ $35,640 $78,754 $132,328 $142,133 $89,914 $ 110,421 $ 167,701
Long-term debt,
including current
maturities............. 13,686 52,051 95,901 100,066 29,067 29,079 105,234
</TABLE>
- --------
(1) In July 1998, in anticipation of the Sprint PCS buildout, US Unwired sold
all of its cellular assets related to its Mississippi, Alabama and Kansas
markets, along with its majority ownership interest in Mississippi 34
Cellular Corporation, for $161.5 million. This transaction resulted in a
gain of approximately $57.4 million which is included in net income (loss).
(2) In June 1998, Meretel returned its PCS licenses to the FCC in exchange for
cancellation of Meretel's debt and interest owed to the FCC. Meretel
returned its PCS licenses so it could manage Sprint PCS's licenses in
Meretel's service areas. This transaction resulted in a loss of $3.5
million, and our partnership share of that loss, which is approximately
$850,000, is included in net income (loss).
27
<PAGE>
(3) In the first nine months of 1999, US Unwired made a series of capital
contributions to LA Unwired and LEC Unwired, which increased its ownership
percentage in LA Unwired to 71% and in LEC Unwired to 53%. As a result, the
operating results for the nine months ended September 30, 1999 include the
operations of LA Unwired and LEC Unwired on a consolidated basis.
(4) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent income before income taxes, plus the equity in loss of
affiliates, plus fixed charges. Earnings are reduced by the equity in loss
of affiliates related to Meretel because US Unwired guarantees a portion of
Meretel's debt. Fixed charges consist of interest expense on all
indebtedness plus the interest portion of rental expense, which US Unwired
estimates to be representative of an interest factor, and amortization of
debt issuance costs. Earnings were insufficient to cover fixed charges by
approximately $2.0 million for the year ended December 31, 1997, and by
approximately $23.7 million for the nine months ended September 30, 1999.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read this section with our consolidated financial statements and
the related notes in this prospectus. This section contains forward-looking
statements. You should read the risk factor about forward-looking statements.
Overview
We provide wireless communications service, local and long distance
telephone service and internet service in parts of Louisiana and Texas. Our
wireless communications services include:
. PCS telephone service in parts of Louisiana and Texas, and
. cellular telephone and paging service in southwest Louisiana.
Through our affiliation with Sprint PCS, we have agreed to expand our PCS
service area to other parts of Louisiana and Texas and to new areas in Alabama,
Arkansas, Florida, Mississippi, Oklahoma and Tennessee. When we finish this
expansion, our PCS network will cover an area with a total population of
approximately 9.9 million people. We expect to complete our expansion by June
2001.
We will market our PCS service in our expanded service area under the
Sprint(R) and Sprint PCS(R) brand names and logos. We will be the only provider
of Sprint PCS products and services in our service area.
Sprint and MCI WorldCom announced on October 5, 1999 that they have agreed
to merge to form a new company called WorldCom. The merger is subject to
various conditions, including the approvals of the shareholders of both
companies, the Federal Communications Commission, the Justice Department and
various state government bodies and foreign antitrust authorities. Until the
merger actually occurs, we will not know what effect it will have on Sprint's
business. Any negative impact on Sprint could have a negative impact on us as a
Sprint PCS affiliate.
We currently offer PCS service in nine markets covering an aggregate
population of 3.0 million (assuming completion of the Meretel transaction
described below). These markets are Beaumont, Longview-Marshall, Texarkana and
Tyler, Texas, and Alexandria, Houma, Lake Charles, Monroe and Shreveport,
Louisiana. As of September 30, 1999, we had approximately 33,000 subscribers
within these nine markets (assuming completion of the Meretel transaction
described below). This phase of our buildout represents 218 constructed and co-
located towers. In addition, we have begun radio frequency design, network
design and cell site engineering in the remaining markets to be built out. We
expect to complete network construction of our markets and be providing PCS
service (with 55% to 75% population coverage in a majority of our markets) to a
licensed population of approximately 3.4 million by December 1999, to a
licensed population of approximately 8.4 million by December 2000 and to our
entire service area licensed population of approximately 9.9 million by June
2001. Thereafter, we will continue buildout coverage as needed.
Beginning in 1987, we acquired 14 cellular rural markets and one cellular
metropolitan market in Louisiana, Mississippi, Alabama and Kansas. In July
1998, we sold our cellular markets in Mississippi, Alabama and Kansas for
$161.5 million. We kept the Lake Charles, Louisiana cellular
29
<PAGE>
market, which had approximately 61,000 cellular subscribers and 24,000 paging
subscribers as of September 30, 1999.
In 1995, US Unwired formed Meretel Communications Limited Partnership, a
Louisiana partnership in commendum, to bid for, develop and operate PCS
licenses in specified markets. In the original partnership agreement,
Meretel's general partner, Wireless Management Corporation, owned 2%; US
Unwired, Fort Bend Telephone Company, and EATELCORP, Inc. each owned 24 1/3%;
XIT Leasing, Inc. owned 5%; and Meretel Wireless, Inc. owned 20%. The FCC
awarded Meretel the PCS licenses for the Baton Rouge, Lafayette and Hammond,
Louisiana and Beaumont and Lufkin, Texas markets. US Unwired and EATEL jointly
managed Meretel through the completion of the buildout of the Beaumont,
Lafayette and Baton Rouge markets in November 1997. After completing buildout
of the first three markets, Meretel sold wholesale wireless minutes to US
Unwired and EATEL, both of which resold the minutes to the general public.
On June 8, 1998, Meretel returned its five PCS licenses to the FCC and
agreed to manage Sprint PCS's spectrum in those five markets. On August 1,
1998, we sold our wholesale PCS subscriber base in the Beaumont, Lafayette and
Baton Rouge markets to Meretel, so Meretel could operate as a retailer of PCS
services. At the same time, US Unwired agreed to manage Meretel's retail
operations, including sales, customer care and back end services. EATEL
continued to buy wholesale wireless minutes from Meretel.
The owners of Meretel have agreed to restructure the partnership. Under the
new agreement:
. Meretel will transfer ownership of the Beaumont-Port Arthur and Lufkin-
Nacogdoches markets to Texas Unwired, a general partnership of which US
Unwired owns 80% and is the managing partner;
. we will transfer to Meretel the Biloxi, Mississippi market;
. EATEL will sell its wholesale PCS subscriber base to Meretel; and
. Meretel will continue to manage the Lafayette, Hammond, Baton Rouge and
Biloxi markets for Sprint PCS.
After the transactions are completed, we will retain an approximately 13.5%
interest in Meretel. We are terminating our present management agreement with
Meretel.
As of September 30, 1999, we owned 71% of LA Unwired. Since September 30,
1999, we have continued to make capital contributions to LA Unwired, and we
plan to make additional contributions from our financings to increase our
ownership of LA Unwired to 95%.
We recently changed our corporate structure. US Unwired used to be our
operating cellular company, and LA Unwired and LEC Unwired were its
subsidiaries. In September 1999, we formed a holding company named US Unwired,
and all of the stockholders of old US Unwired became stockholders of the new
holding company. We did this by exchanging all of the issued and outstanding
capital stock of old US Unwired, the operating cellular company, for an equal
number of shares of new US Unwired, the holding company. Old US Unwired was
renamed Unwired Telecom and became a wholly owned subsidiary of new US
Unwired. Unwired Telecom is in the process of making a stock dividend to US
Unwired of all of its ownership interest in each of LA Unwired and LEC
Unwired. This will make LA Unwired and LEC Unwired subsidiaries of the holding
company.
30
<PAGE>
Results of Operations
Nine months ended September 30, 1999 compared to nine months ended September
30, 1998.
You should keep in mind the following points when reading these results:
. in July 1998, we sold all of our cellular assets related to our
Mississippi, Alabama and Kansas markets and our majority interest in
Mississippi 34 Cellular Corporation. Accordingly, the results for the
nine months ended September 30, 1998 include the operating results of the
sold assets, but the results for the nine months ended September 30, 1999
do not;
. in August 1998, we ended our practice of reselling Meretel's PCS service
when we sold our wholesale PCS subscribers to Meretel. Thus, the results
for the nine months ended September 30, 1998 include PCS reseller
activity, but the results for the nine months ended September 30, 1999 do
not; and
. results for LA Unwired and LEC Unwired are consolidated with those of US
Unwired for the nine months ended September 30, 1999 due to US Unwired's
increased equity ownership in both companies in the first nine months of
1999, but results are presented on the equity method for the nine months
ended September 30, 1998.
We had approximately 60,500 cellular subscribers at September 30, 1999 as
compared to approximately 62,800 at September 30, 1998. Our Louisiana cellular
market had 2,300 fewer subscribers at September 30, 1999 as compared to
September 30, 1998. In addition to our cellular operations, we had
approximately 23,400 PCS subscribers at September 30, 1999 and approximately
600 at September 30, 1998. We launched our PCS operations in September 1998.
Revenues
<TABLE>
<CAPTION>
Nine Months
Ended
September 30,
---------------
1998 1999
------- -------
(In thousands)
<S> <C> <C>
Subscriber revenues....................................... $39,920 $32,671
Roaming revenues.......................................... 10,210 7,553
Merchandise sales......................................... 3,463 3,670
Other revenues............................................ 5,330 1,667
------- -------
Total revenues.......................................... $58,923 $45,561
</TABLE>
Subscriber revenues were $32.7 million for the nine months ended September
30, 1999 as compared to $39.9 million for the nine months ended September 30,
1998. This decrease of $7.2 million was primarily the result of our 1998 sale
of selected cellular markets, which had generated subscriber revenues of $13.5
million for the nine months ended September 30, 1998, and the loss of
subscriber revenues related to the conclusion of our PCS reseller activity of
$2.1 million. Additionally, subscriber revenue relating to our Louisiana
cellular properties decreased $1.7 million. Offsetting the decreased subscriber
revenues from our Louisiana cellular properties, the sale of the cellular
properties and the conclusion of PCS reseller activity was the consolidation of
LA Unwired, which generated $6.5 million in subscriber revenues, and LEC
Unwired, which generated $3.6 million in subscriber revenues.
31
<PAGE>
Roaming revenues were $7.6 million for the nine months ended September 30,
1999 as compared to $10.2 million for the nine months ended September 30, 1998.
This decrease of $2.6 million was primarily the result of our 1998 sale of
selected cellular markets, which had generated roaming revenues of $5.3 million
for the nine months ended September 30, 1998. This decrease was offset by the
consolidation of LA Unwired roaming revenues of $2.4 million for the nine
months ended September 30, 1999 and an increase in roaming revenues in our
Louisiana cellular markets of $291,000.
Merchandise sales were $3.7 million for the nine months ended September 30,
1999 as compared to $3.5 million for the nine months ended September 30, 1998.
This increase of $200,000 primarily resulted from the consolidation of LA
Unwired's merchandise sales, which totaled $2.7 million for the nine months
ended September 30, 1999. Offsetting the increase from the consolidation of LA
Unwired's merchandise sales was the conclusion of our PCS reseller activity,
which had generated merchandise sales of $1.6 million for the nine months ended
September 30, 1998, and the sale of selected cellular markets, which had
generated merchandise sales of $500,000 for the nine months ended September 30,
1998. We incurred also a decrease of $400,000 in merchandise sales relating to
our Louisiana cellular properties for the nine months ended September 30, 1999.
Other revenues were $1.7 million for the nine months ended September 30,
1999 as compared to $5.3 million for the nine months ended September 30, 1998.
This decrease of $3.6 million was primarily the result of the conclusion of our
PCS reseller activity, which had generated $2.2 million of other revenues for
the nine months ended September 30, 1998. The majority of other revenues from
our PCS reseller activities in 1998 reflected marketing subsidies paid to US
Unwired by our affiliate, Meretel. The remaining decrease primarily relates to
management fees charged to LA Unwired and LEC Unwired for the nine months ended
September 30, 1998 for which similar management fees for the nine months ended
September 30, 1999 were eliminated in consolidation.
Operating Expenses
Cost of service was $15.8 million for the nine months ended September 30,
1999 as compared to $15.2 million for the nine months ended September 30, 1998.
The increase in cost of service of $600,000 was primarily a result of the
consolidation of LA Unwired and LEC Unwired. Cost of service for the nine
months ended September 30, 1999 was $6.0 million for LA Unwired and $2.5
million for LEC Unwired. This increase was offset by our 1998 sale of selected
cellular markets, the conclusion of our PCS reseller activity and a decrease of
$0.3 million in cost of service in our Louisiana cellular markets. Cost of
service for the nine months ended September 30, 1998 was $6.2 million for the
selected cellular markets sold and $1.5 million for our PCS reseller activity.
Merchandise cost of sales was $7.6 million for the nine months ended
September 30, 1999 as compared to $9.1 million for the nine months ended
September 30, 1998, representing a decrease of $1.5 million. The decrease in
merchandise cost of sales was primarily a result of our 1998 sale of selected
cellular markets and the conclusion of our PCS reseller activity. Merchandise
cost of sales for the nine months ended September 30, 1998 was $4.2 million for
our PCS reseller activities and $1.5 million for the selected cellular markets
sold. Also, merchandise cost of sales related to our Louisiana cellular markets
decreased $1.4 million. This decrease was offset primarily by the
32
<PAGE>
consolidation of the merchandise cost of sales for LA Unwired of $5.6 million
for the nine months ended September 30, 1999.
General and administrative costs were $16.1 million for the nine months
ended September 30, 1999 as compared to $12.4 million for the nine months ended
September 30, 1998. This increase of $3.7 million was primarily the result of
the consolidation of LEC Unwired, which reported total general and
administrative expenses of $3.1 million for the nine months ended September 30,
1999, and LA Unwired, which reported general and administrative expenses of
$2.3 million for the nine months ended September 30, 1999. Additionally,
corporate general and administrative costs increased by $2.3 million. This
increase was offset by our 1998 sale of selected cellular markets and
conclusion of our PCS reseller activity. General and administrative costs for
the nine months ended September 30, 1998 were $2.4 million for the selected
cellular markets sold and $1.6 million for our PCS reseller activities.
Sales and marketing expenses were $9.5 million for the nine months ended
September 30, 1999 as compared to $9.3 million for the nine months ended
September 30, 1998. The increase in sales and marketing expenses of $200,000
was primarily the result of the consolidation of the sales and marketing
expenses of $4.5 million for LA Unwired and $1.7 million for LEC Unwired for
the nine months ended September 30, 1999 and an increase of $800,000 in our
Louisiana cellular markets. This increase was offset by our 1998 sale of
selected cellular markets and the conclusion of our PCS reseller activity.
Sales and marketing expenses for the nine months ended September 30, 1998 were
$3.2 million for the selected cellular markets sold and $3.6 million for our
PCS reseller activities.
Depreciation and amortization was $14.9 million for the nine months ended
September 30, 1999 as compared to $8.1 million for the nine months ended
September 30, 1998, representing an increase of $6.8 million. This increase was
primarily the result of LA Unwired and LEC Unwired being consolidated for the
nine months ended September 30, 1999 and an increase in our Louisiana cellular
markets of $1.5 million. Depreciation and amortization for the nine months
ended September 30, 1999 was $9.1 million for LA Unwired and $1.4 million for
LEC Unwired. This increase was offset by the depreciation and amortization for
the nine months ended September 30, 1998 for the selected cellular markets sold
of $5.2 million.
Operating Income/(Loss)
Total operating loss was $18.2 million for the nine months ended September
30, 1999 as compared to operating income of $4.9 million for the nine months
ended September 30, 1998. This decrease of $23.1 million was primarily the
result of the reduction of income associated with our 1998 sale of selected
cellular markets of $800,000; losses of $15.9 million associated with the
start-up of LA Unwired; losses of $5.1 million associated with the start-up of
LEC Unwired; and a decrease in operating income of $6.3 million related to our
Louisiana cellular markets. These decreases were offset by the conclusion of
our PCS reseller activity which resulted in operating losses of $5.0 million
for the nine months ended September 30, 1998.
33
<PAGE>
Other Income/(Expense)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30,
----------------
1998 1999
------- -------
(In thousands)
<S> <C> <C>
Interest expense...................................... $(5,484) $(5,691)
Interest income....................................... 780 1,396
Gain on sale of markets............................... 57,364 --
Gain on sale of PCS reseller customer base to
affiliate............................................ 2,285 --
------- -------
Total other income/(expense).......................... $54,945 $(4,295)
</TABLE>
Interest expense was $5.7 million for the nine months ended September 30,
1999 as compared to $5.5 million for the nine months ended September 30, 1998.
Our outstanding debt was $105.2 million at September 30, 1999 as compared to
$29.1 million at September 30, 1998. The increase in debt of $76.1 million was
largely the result of the inclusion of existing debt of $66.9 million relating
to LA Unwired and $9.3 million relating to LEC Unwired. Interest income was
$1.4 million for the nine months ended September 30, 1999 as compared to
$800,000 for the nine months ended September 30, 1998. This increase of
$600,000 was the result of our investment of a portion of the proceeds from our
1998 sale of selected cellular markets into interest bearing accounts.
Gain on sale of markets totaled $57.4 million for the nine months ended
September 30, 1998. This was attributable to our 1998 sale of selected cellular
markets. Gross proceeds allocated to us from the sale totaled $161.5 million.
The gain on the sale of PCS reseller customer base to affiliate totaled $2.3
million for the nine months ended September 30, 1998. This was the result of
our conclusion of PCS reseller activity in August 1998 and our sale of certain
PCS subscribers to Meretel.
Minority interest in losses of subsidiaries
Minority interest in losses from subsidiaries was $8.8 million for the nine
months ended September 30, 1999 as compared to $0 for the nine months ended
September 30, 1998. The increase in minority interest in losses of subsidiaries
results from the consolidation of LA Unwired and LEC Unwired for the nine
months ended September 30, 1999 and represents the portion of the losses from
LA Unwired and LEC Unwired allocable to minority shareholders of these
subsidiaries.
Equity in losses of affiliates
Equity in losses from affiliates was $800,000 for the nine months ended
September 30, 1999 as compared to $6.6 million for the nine months ended
September 30, 1998. The decrease in the equity in loss of affiliates is
primarily due to the consolidation of LA Unwired and LEC Unwired for the nine
months ended September 30, 1999 versus reporting the operating results for
these companies under the equity method of accounting for the nine months ended
September 30, 1998.
Net Income/(Loss)
Net loss was $9.8 million for the nine months ended September 30, 1999 as
compared to net income of $33.0 million for the nine months ended September 30,
1998. This decrease in net income of $42.8 million was primarily the result of
the gain from the sale of the selected cellular markets in 1998.
34
<PAGE>
EBITDA
Earnings before interest, taxes, depreciation and amortization, or EBITDA,
was $(3.4) million for the nine months ended September 30, 1999 as compared to
$12.9 million for the nine months ended September 30, 1998. The decrease of
$16.3 million was primarily the result of the consolidation of LA Unwired and
LEC Unwired, which resulted in a reduction of $10.5 million, the decrease of
EBITDA resulting from the sale of the selected cellular markets of $6.2
million; and the decrease in EBITDA of $4.5 million related to our Louisiana
cellular markets offset by the conclusion of the PCS reseller activity which
resulted in an increase of $4.9 million in EBITDA.
EBITDA consists of operating income before depreciation and amortization.
Although EBITDA is not calculated in accordance with generally accepted
accounting principles, we believe that EBITDA is widely used as a measure of
operating performance. Nevertheless, EBITDA should not be considered in
isolation or as a substitute for operating income, cash flows from operating
activities, or any other measure for determining our operating performance or
liquidity that is calculated in accordance with generally accepted accounting
principles. EBITDA is not necessarily indicative of amounts that may be
available for reinvestment in our business or other discretionary uses. In
addition, all companies do not calculate EBITDA in the same manner; therefore,
this measure may not be comparable to similarly titled measures reported by
other companies.
1998 compared to 1997.
You should keep in mind the following points when reading these results:
. the 1997 financial information includes 12 months of operating results
from the assets related to our selected cellular markets that we sold in
July 1998, and the 1998 financial information reflects only six months of
operations for those assets along with the gain from the sale of those
assets; and
. the 1998 financial information includes the results of seven months of
PCS reseller activity, and the 1997 financial information includes the
results of only three months of PCS reseller activity.
Revenues
<TABLE>
<CAPTION>
Twelve Months
Ended
December 31,
---------------
1997 1998
------- -------
(In thousands)
<S> <C> <C>
Subscriber revenues....................................... $53,255 $48,723
Roaming revenues.......................................... 16,079 11,914
Merchandise sales......................................... 2,685 3,915
Other revenues............................................ 2,649 7,159
------- -------
Total revenues............................................ $74,668 $71,711
</TABLE>
Subscriber revenues were $48.7 million for 1998 as compared to $53.3 million
for 1997. The primary reason for this decrease of $4.6 million was our 1998
sale of selected cellular markets. Subscriber revenues for the selected
cellular markets in 1997 was $24.2 million as compared to $13.7 million in
1998, resulting in a decrease of $10.5 million. Offsetting the reduction in
revenues from
35
<PAGE>
the sale of selected cellular markets was the increase in subscriber revenues
from our Louisiana cellular markets of $4.0 million and $1.9 million from our
PCS reseller activity.
Roaming revenues were $11.9 million for 1998 as compared to $16.1 million
for 1997. This decrease of $4.2 million was primarily a result of our 1998 sale
of selected cellular markets. Roaming revenues for the selected cellular
markets sold were $10.2 in 1997 million as compared to $5.6 million for 1998,
resulting in a decrease of $4.6 million. Our Louisiana cellular markets had
roaming revenues of $6.3 million for 1998 as compared to $5.8 million for 1997,
representing an increase of $500,000.
Merchandise sales were $3.9 million for 1998 as compared to $2.7 million for
1997. This increase of $1.2 million was primarily the result of an increase of
11,000 in gross additional subscribers from PCS reseller activity resulting in
an increase of $1.2 million in merchandise sales.
Other revenues were $7.2 million for 1998 as compared to $2.6 million for
1997. This increase of $4.6 million was primarily the result of an increase in
management fee revenue of $3.1 million and incentive revenue of $1.0 million
from Meretel for our gross additions of 2,900 PCS reseller subscribers.
Operating Expenses
Cost of service was $18.6 million for 1998 as compared to $20.1 million for
1997. This decrease of $1.5 million was mainly attributable to our 1998 sale of
selected cellular markets, which generated cost of service of $6.7 million for
1998 as compared to $9.7 million for 1997, resulting in a decrease of $3.0
million. An increase of $1.3 million in PCS reseller cost of service and an
increase of $200,000 in our Louisiana cellular markets' cost of service offset
this decrease.
Merchandise cost of sales was $10.8 million for 1998 as compared to $8.9
million for 1997. This increase of $1.9 million was primarily the result of our
gross additional subscribers of 11,000 from our PCS reseller activity,
resulting in an increase of $3.3 million in merchandise cost of sales. We
incurred an additional increase of $400,000 in merchandise cost of sales
relating to our Louisiana cellular markets. This increase was offset by a
decrease of $1.8 million related to our 1998 sale of selected cellular markets.
General and administrative expenses were $17.2 million for 1998 as compared
to $12.7 million for 1997. This increase of $4.5 was attributable to additional
employee costs, despite our having sold the selected cellular markets, as the
majority of our employees were redeployed to manage the expansion of our PCS
activity through LA Unwired and Meretel and to establish our data and CLEC
activities through LEC Unwired. US Unwired manages these subsidiaries, employs
the majority of personnel for these operations and charges a management fee to
these subsidiaries for these management services.
Sales and marketing expenses were $10.9 million for 1998 as compared to
$10.9 million for 1997.
Depreciation and amortization was $9.8 million for 1998 as compared to $12.5
million for 1997. This decrease of $2.7 million was primarily the result of our
1998 sale of depreciable assets related
36
<PAGE>
to the selected cellular markets. Depreciation and amortization for the
selected cellular markets was $9.8 million in 1997 as compared to $5.6 million
in 1998, resulting in a decrease of $4.2 million. An increase of $1.5 million
in depreciation and amortization of our Louisiana cellular markets offset this
decrease.
Operating Income
Operating income was $4.5 million for 1998 as compared to $9.6 million for
1997. The decrease of $5.1 million was primarily the result of an increase in
losses resulting from our PCS reseller activity of $4.4 million and $4.0
million related to our 1998 sale of selected cellular markets. These decreases
were offset by an increase of $3.3 million in operating income related to our
Louisiana cellular markets.
Other Income/Expense
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
--------------------
1997 1998
--------- ---------
(In thousands)
<S> <C> <C>
Interest expense.................................. $ (8,580) $ (6,157)
Interest income................................... 1,690 1,778
Other costs....................................... (1,082) --
Losses on sale of assets.......................... -- (114)
Gain on sale of markets........................... -- 57,364
Gain on sale of PCS reseller customer base to
affiliate........................................ -- 2,285
--------- ---------
Total other income/(expense)...................... $ (7,972) $ 55,156
</TABLE>
Interest expense was $6.2 million for 1998 as compared to $8.6 million for
1997. This decrease of $2.4 million was the result of our application of a
portion of the proceeds from our 1998 sale of selected cellular markets to our
outstanding debt obligations. Total long-term debt decreased from $100.1
million at December 31, 1997 to $29.1 million at December 31, 1998.
Interest income was $1.8 million for 1998 as compared to $1.7 million for
1997. Interest income for 1998 was primarily generated from our investment of
proceeds from our 1998 sale of selected cellular markets in interest bearing
accounts.
Other costs totaled $1.1 million in 1997 for US Unwired's preparation for an
initial public offering that was canceled due to unfavorable market conditions.
Gain on sale of markets totaled $57.4 million for 1998. This was
attributable to our 1998 sale of selected cellular markets. Gross proceeds
allocated to us from the sale totaled $161.5 million.
The gain on the sale of PCS reseller customer base to affiliate totaled $2.3
million for 1998. This was the result of our conclusion of PCS reseller
activity in August 1998 and our sale of certain PCS subscribers to Meretel.
Minority interest in losses of subsidiaries
Minority interest in losses of subsidiaries was $0 for 1998 as compared to
$134,000 for 1997. The 1997 amount relates to the portion of the losses from
Mississippi 34 Cellular Corporation
37
<PAGE>
allocable to the minority shareholders of that corporation. No minority
interest in subsidiary is reflected in 1998 due to the sale of Mississippi 34
Cellular Corporation in July 1998.
Equity in losses of affiliates
Equity in losses of affiliates was $13.0 million for 1998 as compared to
$3.1 million for 1997 resulting in an increase of $9.9 million. US Unwired's
proportionate share of Meretel's losses increased from $3.5 million for 1997 to
$7.2 million for 1998. In their first year of operations in 1998, LA Unwired
contributed losses of $4.7 million, and LEC Unwired contributed losses of $1.2
million. Neither LA Unwired nor LEC Unwired reported any losses in 1997 due to
their commencement of operations in 1998.
Net Income/(Loss)
Net income was $28.9 million for 1998 as compared to a net loss of $1.5
million for 1997. This significant increase of $30.4 million was largely the
result of a one-time gain of $57.4 million from our 1998 sale of selected
cellular markets. This increase was offset by an increase in income tax
expenses of $17.6 million primarily resulting from the gain on sale of selected
cellular markets.
EBITDA
EBITDA was $14.3 million for 1998 as compared to $22.0 million for 1997.
This decrease of $7.7 million was primarily the result of losses of $8.1
million related to our 1998 sale of selected cellular markets and of $4.4
million related to our PCS reseller activity. An increase in EBITDA of $4.8
million related to our Louisiana cellular markets offset the decrease.
1997 compared to 1996.
Revenues
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
-------------------
1996 1997
--------- ---------
(In thousands)
<S> <C> <C>
Subscriber revenues................................... $ 45,572 $ 53,255
Roaming revenues...................................... 13,727 16,079
Merchandise sales..................................... 1,885 2,685
Other revenues........................................ 709 2,649
--------- ---------
Total revenues........................................ $ 61,893 $ 74,668
</TABLE>
Subscriber revenues were $53.3 million for 1997 as compared to $45.6 million
for 1996. This increase of $7.7 million was primarily the result of
approximately 22,400 net additions in our cellular markets.
Roaming revenues were $16.1 million for 1997 as compared to $13.7 million
for 1996. This increase of $2.4 million was primarily the result of our 1996
purchase of the Alabama cellular market. The Alabama market had $2.4 million of
roaming revenues for the partial year of 1996.
38
<PAGE>
Merchandise sales were $2.7 million for 1997 as compared to $1.9 million for
1996. This increase of $800,000 was attributable to an increase in 1997 in
gross additional cellular subscribers of 6,400 and gross additional PCS
reseller subscribers of 2,900.
Other revenues were $2.6 million for 1997 as compared to $709,000 for 1996.
This increase of $1.9 million was primarily the result of management fees
charged to Meretel in 1997 of $1.1 million and a commission paid to US Unwired
from Meretel of $1.2 million for the gross additions of 2,900 PCS reseller
subscribers.
Operating Expenses
Cost of service was $20.1 million for 1997 as compared to $16.5 million for
1996. This increase of $3.6 million was primarily the result of 22,400 net
additions in our cellular markets. Our purchase of the Alabama cellular markets
in 1996 accounted for $1.4 million of the increase in cost of service.
Merchandise cost of sales was $8.9 million for 1997 as compared to $5.4
million for 1996. This increase of $3.5 million was the result of an increase
of 6,400 in gross additional cellular subscribers and 2,900 in gross additional
PCS reseller subscribers.
General and administrative expenses were $12.7 million for 1997 as compared
to $10.6 million for 1996. This increase of $2.1 million was primarily due to
the growth of the subscriber base through the addition of the Alabama cellular
markets and our PCS reseller activity.
Sales and marketing expenses were $10.9 million for 1997 as compared to $8.1
million for 1996, representing an increase of $2.8 million. The purchase of the
Alabama markets accounted for $809,000, and the PCS reseller activity accounted
for $1.0 million of the increase. The remaining increase of $1.0 million was
attributable to our other cellular markets.
Depreciation and amortization expenses were $12.5 million for 1997 as
compared to $9.2 million for 1996, representing an increase of $3.3 million.
The purchase of the Alabama markets accounted for $1.4 million of the increase,
and $1.9 million of the increase was related to our Kansas, Mississippi and
Louisiana cellular markets.
Operating Income
Operating income was $9.6 million for 1997 as compared to $12.2 million for
1996. This decrease of $2.6 million was the result of increased depreciation
and amortization expenses and increased losses from our PCS reseller
activities.
Other Income/(Expense)
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
--------------------
1996 1997
--------- ---------
(In thousands)
<S> <C> <C>
Interest expense................................... $ (6,539) $ (8,580)
Interest income.................................... 317 1,690
Other cost......................................... -- (1,082)
Loss on sale of assets............................. (9) --
--------- ---------
Total other income/(expense)....................... $ (6,231) $ (7,972)
</TABLE>
39
<PAGE>
Interest expense was $8.6 million for 1997 as compared to $6.5 million for
1996. This increase of $2.1 million was primarily the result of our incurring
additional debt of $43 million to purchase the Alabama cellular markets.
Interest income was $1.7 million for 1997 as compared to $317,000 for 1996.
The increase primarily resulted from an increase in patronage dividends as a
result of the increased borrowings.
Minority interest in losses of subsidiaries
Minority interest in losses of subsidiary was $134,000 for 1997 as compared
to $308,000 for 1996. This decrease of $174,000 is attributable to the portion
of the losses from Mississippi 34 Cellular Corporation allocable to the
minority shareholders of that corporation.
Equity in income/(losses) of affiliate
Equity in income/(losses) of affiliate was $(3.1) million for 1997 as
compared to income of $35,000 for 1996. The increase in losses of $3.1 million
was primarily the result of US Unwired's proportionate share of losses by
Meretel increasing from $38,000 for 1996 to $3.5 million for 1997.
Net Income/(Loss)
Net loss was $1.5 million for 1997 as compared to net income of $3.9 million
for 1996. This decrease of $5.4 million was the result of increased
depreciation and amortization, resulting primarily from the acquisition of the
Alabama cellular markets and increased interest expense.
EBITDA
EBITDA was $22.0 million for 1997 as compared to $21.3 million for 1996.
This increase of $0.7 million resulted primarily from our 1996 purchase of the
Alabama cellular market and internal cellular subscriber growth.
Liquidity and Capital Resources
We need approximately $294.7 million to build out our PCS network and to
market and distribute our products and services. We expect to cover 55% to 75%
of the population in a majority of markets in our service area by June 2001. We
plan to use this $294.7 million for capital requirements, including capital
expenditures, working capital, debt service requirements and anticipated
operating losses for the period from July 1999 through December 2001. We will
use this capital also for switches, base stations, towers and antennae, radio
frequency engineering, cell site acquisition and construction and microwave
relocation. The actual amounts required to build out our PCS network may vary
materially from these estimates. We may need more capital if we have unforeseen
delays, cost overruns, unanticipated expenses, regulatory expenses, engineering
design changes and other technological risks.
In the past, we have paid our working capital requirements, acquisitions,
capital expenditures and debt service through bank financing and retained
earnings from operations and the one-time gain from our 1998 sale of selected
cellular markets.
40
<PAGE>
We have $130.0 million available under our new credit facility for the
buildout of our PCS network and anticipated operating losses.
When we issued the old notes, we issued $50 million of series A preferred
stock. The preferred stock is convertible into 13.8% of our common stock,
assuming that all persons who currently have the right to buy common equity
actually buy it. The holders of the preferred stock have dividend, conversion,
registration and voting rights.
We believe that the proceeds from our financings and internally generated
cash will be enough to build out our network as planned, cover anticipated
operating losses and meet our debt service requirements through December 2001.
On September 30, 1999, US Unwired had $28.5 million outstanding under a
credit facility dated August 15, 1997. This credit facility matures on
June 30, 2005.
On September 30, 1999, LA Unwired had $66.9 million outstanding under a
credit facility dated June 23, 1999. This credit facility provides for an
$80.0 million reducing revolving credit facility, which matures on September
30, 2007, and a $50.0 million delay draw term loan, which matures on September
30, 2007.
On September 30, 1999, LEC Unwired had $9.3 million outstanding under two
senior credit facilities dated July 22, 1998. The first credit facility is a
$15.0 million senior facility with a three year drawdown period and five year
amortization. The second facility is a $3.0 million subordinated facility with
a three year drawdown period and five year amortization. Both facilities
mature on July 1, 2006.
As of September 30, 1999, we could borrow an additional $15.6 million under
our credit facilities.
Net cash used in operating activities totaled $14.7 million for 1998,
consisting primarily of net income of $28.9 million, adjustments for
depreciation and amortization of $9.8 million, deferred tax expense of $4.6
million, equity in loss of affiliates of $13.0 million, gain on sale of assets
of $59.5 million and changes in operating assets and liabilities of $(11.9)
million. Net cash provided by operating activities for 1997 totaled $12.0
million and for 1996 totaled $10.6 million.
Net cash provided by investing activities totaled $113.2 million for 1998.
Net cash provided by investing activities consisted primarily of the $154.9
million in proceeds that we received from our 1998 sale of selected cellular
markets. Netted against these cash proceeds were property and equipment
purchases totaling $20.6 million, investments in unconsolidated affiliates of
$15.4 million and an additional investment in Mississippi 34 Cellular
Corporation of $6.5 million prior to its sale in 1998. Net cash used in
investing activities totaled $17.6 million for 1997 and $52.5 million for
1996.
Net cash used in financing activities totaled $71.0 million for 1998. The
net cash used in financing activities resulted from principal payments of
$100.7 million on long-term debt from a portion of the proceeds of our 1998
sale of selected cellular markets and additional borrowings of $29.7 million.
Net cash provided by financing activities totaled $3.9 million for 1997 and
$43.4 million for 1996.
41
<PAGE>
Seasonality
Like the wireless communications industry in general, our subscribers
increase in the fourth quarter. This increases our losses on merchandise sales
and our sales and marketing expenses. We generally have the most use and
revenue per subscriber in the summer. We expect these trends to continue.
[Impact of Year 2000 Issue on Our Operations and Financial Condition
We use a significant number of computer systems and software programs in our
operations, including in support of our PCS network equipment and for various
administrative functions. Many computers and computer software may not be able
to identify 00 as the year 2000. This error could result in miscalculations or
system errors.
We did not experience any noticeable problems on January 1, 2000 or
thereafter. We cannot be sure that third parties with whom we conduct business
will be Year 2000 compliant.]
Quantitative and Qualitative Disclosure about Market Risk
We are not exposed to fluctuations in currency exchange rates, as all of our
services are invoiced in U.S. dollars. We are exposed to the impact of interest
rate changes on our short-term cash investments, consisting of U.S. Treasury
obligations and other investments in respect of institutions with the highest
credit ratings, all of which have maturities of three months or less. These
short-term investments carry a degree of interest rate risk. We believe that
the impact of a 1% increase or decline in current average investment rates
would not have a material impact on our investment income.
We use interest rate swaps to protect against, or hedge, changes in interest
rates on our credit facilities. These transactions meet the requirements for
hedge accounting, including designation and correlation. We manage interest
rate swaps as required by our policies and procedures. We do not enter into
these transactions for trading purposes. We account for resulting gains or
losses, measured by quoted market prices, as part of the transactions being
hedged, except that we expense losses that we do not expect to recover. We
calculate these gains or losses as the difference between the interest expense
per the amount hedged using the fixed rate and using a floating rate over the
term of the swap agreement. Considering the amount of outstanding indebtedness
at December 31, 1998, a 1% change in interest rates would cause a change in
interest expense of approximately $291,000 for the year ended December 31,
1998.
Inflation
We believe that inflation has not impaired, and will not impair, our results
of operations.
42
<PAGE>
THE WIRELESS COMMUNICATIONS INDUSTRY
Wireless communications systems use radio frequencies to transmit voice and
data. These systems are:
. one-way radio applications, like paging or beeper services, and
. two-way radio applications, like cellular, PCS, enhanced specialized
mobile radio networks and two-way paging.
The FCC has licensed each application and allocated to each application a
distinct radio frequency block.
Cellular and PCS are the major two-way applications licensed by the FCC.
Most subscribers today use cellular service as their wireless voice
communications service. Cellular systems are mostly analog-based systems, but
digital technology has been introduced in most metropolitan markets. Analog-
based systems send signals that resemble the input signal. In digital systems,
the input signal is coded into a binary form before the signal is transmitted.
In 1993, the FCC allocated the 1900 MHz frequency block of the radio
spectrum for a new wireless personal communications service known as PCS. PCS
differs from traditional analog cellular telephone service because it operates
at a higher frequency and uses only advanced digital technology. Many cellular
systems now use digital technology, but all continue to offer analog service as
well. Digital systems convert voice or data signals into a stream of digits
that permit a single radio channel to carry multiple simultaneous
transmissions. Digital systems also have greater frequency reuse than analog
systems resulting in greater capacity than analog systems. This enhanced
capacity, along with enhancements in digital protocols, allows digital-based
wireless technologies (whether using PCS or cellular frequencies) to offer new
and enhanced services and more robust data transmission like greater clarity,
better security, facsimile, electronic mail and connection to notebook
computers with computer/data networks.
Cellular service was first introduced in the United States in 1983. The
Cellular Telecommunications Industry Association, or CTIA, reports that there
were 76.3 million wireless subscribers in the United States as of June 30,
1999. This amount represents an overall wireless penetration rate of 29.3%.
This means that 29.3% of the United States population at that time were
wireless subscribers.
The following table shows some statistics for the domestic wireless
telephone industry as a whole:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Total service revenues (in
billions).................... $ 10.9 $ 14.2 $ 19.1 $ 23.6 $ 27.5 $ 33.1
Ending wireless subscribers
(in millions)................ 16.0 24.1 33.8 44.0 55.3 69.2
Subscriber growth............. 45.1% 50.8% 40.0% 30.4% 25.6% 25.1%
Average monthly revenue per
subscriber(/1/).............. $67.13 $59.08 $54.91 $50.61 $46.11 $44.35
Average monthly revenue per
subscriber(/2/).............. $58.74 $51.48 $47.59 $44.66 $41.12 $39.66
Ending penetration............ 6.2% 9.2% 12.8% 16.5% 20.6% 25.5%
</TABLE>
- --------
Source: Cellular Telecommunications Industry Association; U.S. Census Bureau.
(1) Including roaming revenues.
(2) Excluding roaming revenues.
43
<PAGE>
Paul Kagan Associates, Inc., an independent media and telecommunications
association, estimates that the number of wireless users will increase to
approximately 151 million by 2002 and 198 million by 2005. Paul Kagan expects
that 34% of total users in 2002 and 43% in 2005 will be PCS users. Only 10% of
total users at the end of 1998 were PCS users. Paul Kagan estimates that total
wireless industry penetration will grow to 53% in 2002 and 68% in 2005.
We believe that the predicted growth in the consumer market for wireless
telecommunications will come from:
.declines in costs of service,
.increased functional versatility,
. increased awareness of the benefits associated of PCS service,
. rapid growth of notebook computers and personal digital assistants, and
. software programs for electronic mail, faxes and database searching.
We believe that our markets are well positioned to benefit from the growth
predicted for the wireless industry as forecast by the CTIA. We believe that
our markets and other markets similar to ours will experience the fastest
growth in subscribers because we currently have relatively low wireless
penetration.
The following chart illustrates the annual growth in wireless subscribers
and total industry revenues during the periods indicated:
[Chart appears here]
44
<PAGE>
Wireless communications systems, whether PCS or cellular, are divided into
multiple geographic areas, known as cells. Each cell contains a transmitter, a
receiver and signaling equipment, together referred to as the cell site. The
cell site is connected by microwave or landline telephone lines to a switch
that uses computers to control the operation of the cellular or PCS
communications system for the entire service area. The system controls the
transfer of calls from cell to cell as a subscriber's wireless telephone
handset travels, coordinates calls to and from wireless telephone handsets,
allocates calls among the cells within the system and connects calls to the
local landline telephone system or to a long distance carrier. Wireless
communications providers establish interconnection agreements with local
exchange carriers and interexchange carriers to integrate their systems with
the existing landline communications system. Because the signal strength of a
transmission between a wireless telephone handset and a cell site declines as
the handset moves away from the cell site, the switching office and the cell
site monitor the signal strength of calls in progress. When the signal strength
of a call declines to a predetermined level, the switching office may "hand
off" the call to another cell site where the signal strength is stronger.
Wireless digital signal transmission uses various forms of frequency
management technology, or air interface protocols. The FCC does not require a
universal air interface protocol for PCS systems. PCS systems operate under one
of three protocols: CDMA, TDMA and GSM. TDMA and GSM are both time division
multiple access systems but are incompatible with each other and with CDMA.
CDMA is a code division multiple access system and is incompatible with both
GSM and TDMA. Accordingly, a subscriber of a CDMA-system cannot use a CDMA
handset when traveling in an area not served by CDMA-based PCS operators,
unless the subscriber has a dual band/dual-mode handset that permits the
subscriber to use the analog cellular system in that area. The same limitation
applies to users of TDMA or GSM systems.
45
<PAGE>
ABOUT OUR BUSINESS
General
We provide wireless communications service, local and long distance
telephone service and internet service in parts of Louisiana and Texas. Our
wireless communications services include:
. PCS telephone service in parts of Louisiana and Texas, and
. cellular telephone and paging service in southwest Louisiana.
Through our affiliation with Sprint PCS, we have agreed to expand our PCS
service area to other parts of Louisiana and Texas and to new areas in Alabama,
Arkansas, Florida, Mississippi, Oklahoma and Tennessee. When we finish this
expansion, our PCS network will cover an area with a total population of
approximately 9.9 million people. We expect to complete our expansion by June
2001.
We will market our PCS service in our expanded service area under the
Sprint(R) and Sprint PCS(R) brand names and logos. We will be the only provider
of Sprint PCS products and services in our service area.
Sprint and MCI WorldCom announced on October 5, 1999 that they have agreed
to merge to form a new company called WorldCom. The merger is subject to
various conditions, including the approvals of the shareholders of both
companies, the Federal Communications Commission, the Justice Department,
various state government bodies and foreign antitrust authorities. Until the
merger actually occurs, we will not know what effect it will have on Sprint's
business. Any negative impact on Sprint could have a negative impact on us as a
Sprint PCS affiliate.
Cellular and Paging Services
We provide cellular and paging service in Lake Charles, Leesville, Jennings,
Sulphur and Cameron, Louisiana through our subsidiary, Unwired Telecom Corp. At
September 30, 1999, we had approximately 61,000 cellular subscribers and
approximately 24,000 paging subscribers. Our Louisiana cellular and paging
business had $39.8 million in revenues for the 12 months ended September 30,
1999.
CLEC Services
We are building a CLEC company through our subsidiary, LEC Unwired, LLC.
CLEC refers to the business of providing local telephone and data services in
competition with the current local service provider. Our CLEC company will
offer digital subscriber lines, internet, data, local telephone service, long
distance and web hosting services. We plan to be the first or second to offer
these services to business and residential customers in second or third tier
markets in selected states along the Gulf Coast.
LEC Unwired's network consists of circuit-based switches to offer digital
subscriber line and internet services. Additionally, LEC Unwired is sharing
tower space, or co-locating, with the current local exchange service provider
and using elements of that provider's network to service our customers. We have
completed seven physical co-locations and 13 are in process.
46
<PAGE>
LEC Unwired currently offers local service in three markets and dedicated
dial-up service in seven markets. LEC Unwired's experienced professionals,
facilities and operational support systems should help it grow rapidly. LEC
Unwired is a Cisco Powered Network Partner(R) with Cisco Systems, Inc. and is
actively working with Cisco to launch internet related service throughout the
region.
LEC Unwired began commercial operations in March 1998. LEC Unwired reported
revenues of approximately $570,000 for the year ended December 31, 1998 and
approximately $3.6 million for the nine months ended September 30, 1999. We
market our CLEC services under the name US Unwired.
We are considering strategic alternatives for LEC Unwired, which could
include selling our interest in LEC Unwired. If we do not sell our interest, we
may need permission from holders of our notes to permit LEC Unwired to obtain
additional financing from selling preferred stock or incurring debt that we
guarantee. As of September 30, 1999, we owned 53% of LEC Unwired, and our
affiliate, Cameron Communications Corporation, owned 47% of LEC Unwired.
Sprint PCS
Sprint Corporation is a diversified telecommunications service provider of
long distance service, local service, wireless telephone products and services,
product distribution and directory publishing activities and other
telecommunication activities, investments and alliances. Sprint PCS, a group of
subsidiaries of Sprint, operates the only 100% digital, 100% PCS wireless
network in the United States and holds PCS licenses to provide this service
nationwide. The Sprint PCS network uses CDMA technology.
Through an affiliate, Sprint launched the first commercial PCS service in
the United States in November 1995. Since then, the number of Sprint PCS
subscribers has grown to nearly 4.7 million as of September 30, 1999:
. In the fourth quarter of 1998, Sprint PCS added approximately 836,000 new
subscribers. This was the largest single quarter of customer growth ever
recorded by a wireless provider in the United States.
. In the first three quarters of 1999, Sprint PCS added approximately 2.1
million new subscribers, including 20,000 in Hawaii acquired from PrimeCo
Personal Communications.
. As of September 30, 1999, Sprint PCS, together with its affiliated
companies, operated PCS systems within the United States and its
territories covering approximately 180 million people in more than 280
metropolitan markets.
47
<PAGE>
The chart below illustrates Sprint PCS's subscriber growth from the
beginning of 1997 to the end of the third quarter of 1999.
[Graph appears here]
Sprint PCS currently provides nationwide service through:
. operation of its own digital network;
. strategic affiliations with other companies, primarily in and around
smaller metropolitan areas;
. placing and receiving calls on analog cellular networks of other
providers using dual-band/dual-mode handsets; and
. placing and receiving calls on digital PCS networks of other CDMA-based
providers.
Sprint PCS has a strategy to expand its PCS network through agreements with
independent wireless companies, like US Unwired, to construct and manage the
Sprint PCS markets and to market Sprint PCS services. Through these
affiliations, Sprint PCS services will be available in key cities next to
current and future Sprint PCS markets. For example, our service area connects
to Sprint PCS's markets in Houston, Dallas, Little Rock, New Orleans, Memphis,
Tallahassee and Birmingham.
Our Affiliation with Sprint PCS
Under our agreements with Sprint PCS, we market Sprint PCS products and
services in our service area using licenses that Sprint PCS acquired from the
FCC in 1994 and 1996. We will be the only provider of Sprint PCS products and
services in our service area. Some key points about these agreements are:
. each agreement lasts 50 years with an initial period of 20 years and
three automatic, successive 10-year renewal periods;
48
<PAGE>
. each agreement requires revenue sharing of 8% to Sprint PCS and 92% to US
Unwired, except that US Unwired retains 100% of revenues from non-US
Unwired Sprint PCS customers traveling in our service area, extraordinary
income and equipment sales; and
. if we or Sprint PCS terminates or breaches the agreements, we may be
required to sell our PCS business and network to Sprint PCS or to
purchase the Sprint PCS licenses from Sprint PCS.
We believe that our service area is important to Sprint PCS's plan to have a
PCS network with nationwide coverage. To date, Sprint PCS has made considerable
investments in the licenses covering our service area. We estimate that Sprint
PCS paid over $100 million to acquire the PCS licenses in our service area and
to prepare the licensed markets for service.
Benefits of Our Affiliation with Sprint PCS
Our relationship with Sprint PCS provides us with many operational and
business advantages, including:
Exclusive access to Sprint PCS products and services. We are the only
provider of Sprint PCS products and services in our service area. We have the
right to provide these products and services under the Sprint(R) and Sprint
PCS(R) brand names.
Strong brand recognition and national advertising support. We expect to
benefit from the strength and reputation of the Sprint(R) and Sprint PCS(R)
brands. In our local markets, we use the Sprint(R) and Sprint PCS(R) brands and
logos without having to pay for this right. We benefit from Sprint PCS's
national advertising campaigns and developed marketing programs at no
additional cost.
Sprint PCS "Free and Clear" one-rate pricing plans. We offer our customers
the same free long distance, free traveling on the Sprint PCS network and other
promotional campaigns, like telephone handsets and accessories, that Sprint PCS
offers to all of its customers throughout the United States.
Established distribution channels. We have access to all national
distribution channels that Sprint PCS uses. These channels include:
. major national third party retailers like Radio Shack, Office Depot,
Circuit City, Dillard's, Sam's Wholesale Club, Office Max and Best Buy;
. Sprint PCS's national inbound telemarketing sales program;
. Sprint PCS's Business-to-Business and national accounts sales programs;
and
. Sprint PCS's electronic commerce sales platform.
Nationwide coverage. We operate our PCS network as part of the Sprint PCS
network. This allows our customers to place calls in any Sprint PCS service
area throughout the United States without charges for traveling on Sprint PCS's
network or, under certain pricing plans, for long distance.
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Exclusive traveling partner to Sprint PCS. We are the only provider of PCS
services to non-US Unwired Sprint PCS customers in our service area. We benefit
from the increased traffic from other Sprint PCS customers who travel in our
service area.
Sprint PCS engineering and network design. In markets where we use spectrum
owned by Sprint PCS, Sprint PCS provides the engineering services for microwave
clearance and handles all of the design, planning and relocation of any radio
cell sites.
Economies of scale of a nationwide network. We can buy network and
subscriber equipment under Sprint PCS's contracts that provide for volume
discounts. These discounts will reduce the overall capital required to build
our PCS network and will lower our cost of subscriber equipment.
Reduced startup costs. We estimate that Sprint PCS spent over $100 million
to purchase a substantial portion of the licenses covering our service area and
for microwave clearing. As a Sprint PCS affiliate, we did not have to acquire
most of the licenses in our service area. This reduced our start-up costs.
Availability of technology and service advances developed by Sprint
PCS. Sprint PCS's extensive research and development effort produces ongoing
benefits through both new technological products as well as enhanced service
features. We have immediate access to any developments produced by Sprint PCS
for its nationwide PCS network.
Our Competitive Strengths
Our own competitive strengths including the following:
Extensive territorial reach. Our service area covers a population of
approximately 9.9 million. This is a significant percentage of the population
in the Gulf States region (which includes Louisiana, Mississippi, Alabama,
eastern Texas, and the Florida panhandle), southern Tennessee, southern
Arkansas and southern Oklahoma. Our service area has characteristics that are
favorable to wireless communications, including:
. extensive highway miles and commuter zones;
. high commuter activity;
. concentration of major industries;
. major regional tourist destinations; and
. a large number of higher education institutions.
Existing corporate infrastructure. We have employees to handle billing,
customer care, accounting, treasury and legal services in our markets where we
currently offer PCS service and in most of our new markets. We believe that
providing these functions ourselves is more cost-effective than having third
parties provide them. In a limited number of markets, however, Sprint PCS will
provide us on a contract basis with selected back office functions like billing
and customer care.
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Cash flow from cellular and paging operations. Our cellular and paging
operations provide a significant source of funding for the buildout of our PCS
network. Our internally-generated cash flow reduces our need to acquire capital
from outside sources for our business plan.
Significant number of owned licenses. In addition to the Sprint PCS licenses
that we manage, we own:
. thirteen 10 MHz PCS licenses and three 25 MHz cellular licenses within
our service area, and
. nine 10 MHz PCS licenses outside our service area.
The combination of the Sprint PCS licenses and our licenses gives us access
to 40 MHz of bandwidth in many of our markets. We believe that this positions
us well for the possible future introduction of wireless internet and data
transmission service.
High-quality customer care. We are committed to building strong customer
relationships by providing high-quality customer care. We serve our customers
from our state-of-the-art call center facility in Lake Charles, Louisiana. Our
customers can contact our customer care representatives from any of our
handsets without charge. Additionally, we are staffing each of our retail
outlets with full-time customer care representatives to deal directly with the
customers concerning billing and service issues. Our web-based services allow
customers to check billing and manage their accounts on line.
Our Business Strategy
We plan to be the leading provider of PCS service in each market in our
service area. We intend to do this by offering high-capacity, high-quality,
advanced communications on our PCS wireless network. We believe the following
elements of our business strategy will distinguish our wireless service from
those of our competitors and will enable us to compete successfully in the
wireless communications marketplace:
Leverage relationship with Sprint PCS. We intend to capitalize on the
benefits of our relationship with Sprint PCS. These benefits include:
. strong brand recognition and national marketing campaigns;
. exclusive Sprint PCS traveling partner;
. access to Sprint PCS products and services;
. availability of Sprint PCS "Free and Clear" one-rate pricing plans;
. nationwide coverage;
. established direct and indirect distribution channels;
. volume-driven vendor discounts;
. access to Sprint PCS engineering and network design;
. reduced startup costs;
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. long-term management agreement; and
. availability of technology and service advances developed by Sprint PCS.
Execute integrated marketing plan. Our marketing approach leverages Sprint
PCS's nationwide presence and brand name. We emphasize the improved quality,
enhanced features and favorable pricing of Sprint PCS service. In addition, we
use the clout of the Sprint PCS organization through its:
. household name recognition;
. dynamic national advertising campaigns;
. reputation for providing high-end quality product and service;
. organized national accounts sales force;
. e-commerce website; and
. pre-negotiated contracts with national retail chain outlets.
On the local level, we provide:
. multi-media marketing efforts, including point-of-sale, print, television
and radio campaigns for our own co-branded US Unwired(R) and Sprint
PCS(R) retail outlets;
. approximately 270 independent agent representatives; and
. direct mail efforts and a website, www.usunwired.com.
Execute high-quality buildout plan. We are constructing a state-of-the-art,
high quality 100% PCS network using 100% digital technology.
. Our network design allows our system to handle higher traffic demand than
cellular operators. This allows us to offer lower per-minute rates.
. Our network design enables us to service expensive, difficult to reach
locations and coverage gaps within our wireless network.
. We will maintain low construction costs for our network by planning to
co-locate on existing towers as our primary strategy and developing our
radio frequency design around this strategy.
Our Service Area
Our Sprint PCS service area covers 38 contiguous markets spanning over
153,000 square miles with a population of approximately 9.9 million. Our
service area is the largest in the United States by measure of population for
all of the territories assigned to Sprint PCS affiliates.
Our service area covers eastern Texas, southern Oklahoma, southern Arkansas,
significant portions of Louisiana, Alabama and Mississippi, the Florida
panhandle and southern Tennessee. It is next to Sprint PCS's recently launched
markets of Houston, Dallas, Little Rock, New Orleans, Birmingham, Tallahassee
and Memphis. Our network buildout will link these existing Sprint PCS
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markets. We will be the only provider of Sprint PCS products and services in
the markets connecting these major cities.
We believe that our service area has many regional characteristics that are
favorable for wireless communication, including the following:
Extensive highway miles and commuter zones. Our service area includes high
traffic corridors traversed by major interstate highways. Overall, our service
area covers 4,509 total highway miles; 2,073 are interstate.
High commuter activity. We have high commuter activity. Over 24% of the
average commute time is greater than 30 minutes.
Concentration of major industries. The Gulf States region is home to many
large businesses in the oil and gas, gaming and agriculture industries. These
businesses are very important to the region and provide the majority of
business travelers who visit our service area.
Major regional tourist destinations. According to major tourist publication
guides, the Gulf Coast region is a major tourist and vacation destination. The
Gulf Coast beaches in Mississippi, Alabama and Florida draw millions of
visitors annually. Our service area has many historical sites, and the numerous
casino gaming establishments in our service area are major travel destinations.
The Mississippi casino market alone is the largest casino market in the
United States between Las Vegas and Atlantic City.
Large number of higher education institutions. There are 86 colleges and
universities in and around our service area, including the University of
Alabama, the University of Southern Mississippi, Mississippi State University
and Louisiana State University. Over 415,000 students attend these
institutions.
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The following table shows some key information about our PCS markets
(population in thousands):
<TABLE>
<CAPTION>
Basic Total Expected Sprint Spectrum Total
Trading Market % Population Online Spectrum (Owned Spectrum
Market(/1/) Area # Population(/1/) Owned(/2/) Owned Date (Managed MHz) MHz) (MHz)
----------- ------- ---------- ---------- ---------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anniston, AL..................... 17 164.0 100% 164.0 Mar-00 30 -- 30
Chilton Area Counties, AL(/3/)(/4/).. 459 242.5 100 242.5 Dec-00 30 -- 30
Decatur, AL...................... 108 142.8 100 142.8 Dec-00 30 -- 30
Florence, AL..................... 146 183.5 100 183.5 Dec-00 30 -- 30
Gadsen, AL....................... 158 183.5 100 183.5 Dec-00 30 -- 30
Huntsville, AL................... 198 496.4 100 496.4 Dec-00 30 -- 30
Mobile, AL....................... 302 653.9 100 653.9 Jun-00 30 -- 30
Montgomery, AL................... 305 475.3 100 475.3 Mar-00 30 -- 30
Selma, AL........................ 415 74.1 100 74.1 Sep-00 30 -- 30
Tuscaloosa, AL................... 450 253.1 100 253.1 Sep-00 30 10 40
El Dorado, AR.................... 125 103.1 100 103.1 Jun-01 30 10 40
Hot Springs, AR.................. 193 133.4 100 133.4 Jun-00 30 -- 30
Nevada Area Counties, AR(/3/)(/5/).. 257 57.1 100 57.1 Jun-00 30 -- 30
Pine Bluff, AR................... 348 147.5 100 147.5 Jun-01 30 10 40
Fort Walton Beach, FL............ 154 216.5 100 216.5 Sep-00 30 -- 30
Jackson Area County, FL(/3/)..... 439 50.5 100 50.5 Mar-00 10 -- 10
Panama City, FL.................. 340 202.6 100 202.6 Sep-00 10 -- 10
Pensacola, FL.................... 343 414.2 100 414.2 Jun-00 30 -- 30
Alexandria, LA................... 9 264.8 100 264.8 Online 30 10 40
Houma, LA........................ 195 271.8 100 271.8 Online 30 -- 30
Lake Charles, LA................. 238 278.5 100 278.5 Online 10 10 20
Monroe, LA....................... 304 330.7 100 330.7 Online 30 10 40
Shreveport, LA................... 419 592.7 100 592.7 Online 30 10 40
Columbus, MS..................... 94 171.0 100 171.0 Jun-01 10 10 20
Greenville, MS................... 175 210.5 100 210.5 Jun-01 10 -- 10
Grenada Area Counties, MS(/3/)(/6/). 290 62.1 100 62.1 Mar-01 10 -- 10
Hattiesburg, MS.................. 186 181.0 100 181.0 Dec-00 30 -- 30
Jackson, MS...................... 210 657.8 100 657.8 Sep-00 10 -- 10
Laurel, MS....................... 246 81.3 100 81.3 Jun-01 30 -- 30
McComb, MS....................... 269 110.1 100 110.1 Jun-01 30 -- 30
Meridian, MS..................... 292 205.9 100 205.9 Jun-01 10 -- 10
Natchez, MS...................... 315 71.8 100 71.8 Jun-01 10 10 20
Tupelo, MS....................... 449 312.5 100 312.5 Mar-01 10 10 20
Vicksburg, MS.................... 455 61.7 100 61.7 Jun-01 10 -- 10
Maury Area Counties,
TN(/3/)(/7/).................... 314 101.0 100 101.0 Dec-00 30 -- 30
Longview, TX..................... 260 317.8 100 317.8 Online 30 10 40
Paris, TX........................ 341 92.6 100 92.6 Jun-01 30 10 40
Texarkana, TX.................... 443 265.8 100 265.8 Online 30 10 40
Tyler, TX........................ 452 303.9 100 303.9 Online 30 -- 30
Beaumont, TX..................... 34 459.1 80 367.3 Online 10 -- 10
Lufkin, TX....................... 265 157.5 80 126.0 Dec-99 10 -- 10
-------- -------
Subtotal....................... 9,755.9 9,632.6
Minority Interests:
Baton Rouge, LA................. 32 676.1 14 94.7 Online 30 -- 30
Hammond, LA..................... 180 106.3 14 14.9 Dec-99 30 -- 30
Lafayette, LA................... 236 532.1 14 74.5 Online 30 -- 30
Biloxi, MS...................... 42 399.0 14 55.9 Dec-99 30 -- 30
-------- -------
Subtotal....................... 1,713.5 240.0
Total........................ 11,469.4 9,872.6
======== =======
</TABLE>
- --------
(1) Source: Paul Kagan Associates, Inc., 1999 PCS Atlas and Databook.
(2) Our 100% ownership represents 95% ownership by LA Unwired and 5% ownership
by our affiliate, Cameron Communications Corporation.
(3) County based information.
(4) Includes Chilton, Cullman, Talladega, Coosa and Tallapoosa Counties.
(5) Includes Nevada, Clark, Dallas, and Grant Counties.
(6) Includes Grenada, Yalobusha, Tallahatchie and Montgomery Counties.
(7) Includes Maury and Giles Counties.
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The following table shows some information about our cellular markets
(population in thousands):
<TABLE>
<CAPTION>
Metropolitan Total Spectrum
or Rural Market % Population Online (Owned
Market Service Area # Population (1) Owned Owned Date MHz)
------ -------------- -------------- ----- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Beauregard, LA.......... RSA 5 B-1 147.0 100% 147.0 Online 25
De Soto, LA............. RSA 3 B-1 54.0 100% 54.0 Online 25
Lake Charles, LA........ MSA 197 179.9 100% 179.9 Online 25
Chambers, TX............ RSA 21 23.3 25% 5.8 Online 25
----- -----
Total................... 404.2 386.7
===== =====
</TABLE>
- --------
(/1/Source:)Paul Kagan Associates, Inc., Cellular Telephone Atlas 1998.
Network Buildout Plan
As of September 30, 1999, we were providing PCS service in the following
nine markets covering a total population of approximately 3.0 million:
Alexandria, Houma, Lake Charles, Monroe and Shreveport, Louisiana and Beaumont,
Longview-Marshall, Texarkana and Tyler, Texas. When we complete our network
buildout, we expect to cover 55% to 75% of the population in a majority of
markets in our service area.
We expect that the combined proceeds of our financings will be sufficient to
provide the $294.7 million required for our network buildout plan and for
anticipated operating losses from July 1999 through December 2001. We plan to
complete construction of our network and be providing PCS service to a licensed
population of approximately 3.4 million by December 1999, to a licensed
population of approximately 8.4 million by December 2000, and to our entire
service area, covering a licensed population of approximately 9.9 million, by
June 2001.
We are focusing our network construction first on the concentrated
population and business centers of the major metropolitan areas in our service
area and the adjoining interstate highways. We will then build out the smaller
markets surrounding the existing built out areas and will continue to build out
interstate and state highways. We intend to launch PCS service only after we
complete a significant portion of the planned buildout for a given major city.
Before we launch service, we will perform extensive field testing to ensure
comprehensive and reliable coverage within a particular market. We are
providing the overall project and construction management of the design, site
acquisition, installation and testing of our PCS system.
Initial radio frequency design. Lucent Technologies, Inc. and the
engineering firm of 3Ngineering, L.L.C. are performing the initial radio
frequency design for our network. Lucent or 3Ngineering determines the required
number of cell sites to operate our network and identifies the general
geographic areas for proposed cell site locations. We have completed the
initial radio frequency design for all of our markets that are expected to be
completed by December 2000 and for 30% of our markets that are expected to be
completed by June 2001.
Site identification, acquisition and construction. Either we or Faulk and
Foster identifies and acquires the sites where we will locate the towers,
antennae and other equipment to operate our PCS system. After a general
geographic area is identified, Faulk and Foster, or we, identify two potential
tower sites within that area location and evaluate them based on various
engineering criteria and economic desirability.
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We obtain cell sites in three ways: (1) co-location, (2) construction of a
tower by an independent build-to-suit company, or (3) construction of a tower
by us. We prefer to co-locate with another wireless company by leasing space on
an existing tower or building. When we co-locate, we generally have lower
construction costs and it is likely that any zoning difficulties have been
resolved. We believe that we need approximately 833 cell sites to achieve 65%
to 75% coverage of the population in our service area. We expect to co-locate
approximately 40% of our cell sites, hire tower construction companies to build
10% and construct 50% ourselves.
Microwave relocation. Fixed microwave operators used to use the frequencies
that are now allocated for PCS licenses. The FCC has established procedures for
PCS licensees to relocate these existing microwave paths, generally at the PCS
licensee's expense. We have relocated all microwave paths for the PCS licenses
that we own. Sprint PCS is helping us relocate the microwave paths for the PCS
licenses that they own. They are analyzing these relocations as we continue the
buildout of our network. We expect to spend less than $20.0 million for
relocation. We plan to complete the microwave relocation for the Sprint PCS
licenses before our targeted buildout completion date.
Switching centers. Our service area will have five switching centers located
in our four markets of Shreveport and Lake Charles, Louisiana, Jackson,
Mississippi and Montgomery, Alabama. We have leased and constructed the
Shreveport location. We expect to lease and construct the other locations in
time to launch the markets that we expect to complete by June 2001. Each
switching center will serve several purposes, including routing calls, managing
call handoff, managing access to landlines and providing access to voice mail.
Interconnection. We will connect our digital PCS network to the landline
telephone system through interconnection agreements with local exchange
carriers. Before entering the Sprint PCS agreements, we entered into
interconnection agreements with BellSouth. Through our agreements with Sprint
PCS, we will benefit from the interconnection agreements that Sprint PCS
negotiates.
Long distance and back haul. We have a long distance agreement with our
affiliate, Cameron Communications Corporation, for preferred rates for long
distance services. We can also buy long distance services from Sprint PCS at
favorable rates.
Network communications equipment. Lucent Technologies, Inc. and Nortel
Networks will supply the radio base stations, switches and other related PCS
transmission equipment, software and services necessary for our markets that
are expected to be built out by December 2000 and some of our markets that are
expected to be completed by June 2001. Lucent and Nortel are helping us install
and test this transmission equipment. We are still deciding who will provide
these products and services for our remaining markets that are expected to be
completed by June 2001.
Network monitoring systems. Our network operations center in Lake Charles,
Louisiana will provide around-the-clock monitoring and maintenance of our
entire network, including:
. the constant monitoring for blocked or dropped calls, call clarity and
signs of tampering, cloning or fraud,
. the recording of network traffic, and
. the overseeing of customer usage, data collected at switch facilities
and billing.
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Services and Features
We offer Sprint PCS products and services in our service area. Our products
and services are designed to mirror those of Sprint PCS and to become part of
the Sprint PCS nationwide network. Our PCS network has significant advantages
over competing digital networks.
Improved quality and technology. We expect an increase in PCS customers as
the quality of digital wireless networks continues to approach that of wireline
systems. We believe that PCS providers will be first to be able to offer mass
market wireless applications in competition with switched and direct access
local telecommunications services.
100% digital wireless mobility. Our PCS network is part of the largest 100%
digital, 100% PCS network in the nation. We offer customers in our service area
enhanced voice clarity, advanced features and simple, affordable Sprint PCS
"Free and Clear" pricing plans. These plans include long distance and wireless
airtime minutes that can be used on the Sprint PCS network at no additional
charge. Our basic wireless service includes voice mail, caller identification,
enhanced call waiting, three-way conferencing, call forwarding, distinctive
ringing and call blocking.
Nationwide service. Sprint PCS customers can use Sprint PCS services in our
service area and throughout the Sprint PCS nationwide network. Dual-band/dual-
mode telephone handsets allow customers to make calls on analog networks where
CDMA coverage is not available.
Caller identification, voicemail, message waiting indicator, short
messaging, paging. Caller identification lets users to choose which calls to
accept and which to send to voicemail. This feature increases the customer's
willingness to leave the phone on for incoming calls. Digital voicemail is
available at a very cost effective rate and allows for fewer missed calls.
Digital handset displays with message waiting indicators eliminate the need to
"dial-in" to check voicemail and deliver short messages similar to e-mail or
alpha-numeric paging.
Advanced handsets. Our dual-band/dual-mode telephone handsets allow
customers to make and receive calls on both PCS and cellular systems using both
digital and analog technology. These advanced handsets allow calls to continue
without interruption on cellular networks where PCS service is not offered.
They can be equipped for a variety of enhanced features and applications.
Extended battery life. Our digital handsets can operate in sleep mode while
powered on but not in use. This improves efficiency and extends battery life by
an estimated five to six times of that of analog handsets. We expect that this
feature will increase usage, especially for incoming calls, as the phone can be
left on for longer periods.
Improved voice quality. Our technology offers significantly improved voice
quality, more powerful error correction, less susceptibility to call fading and
enhanced interference rejection. All of these things result in fewer dropped
calls.
Voice privacy. We use technology that provides for greater privacy and fraud
protection.
We believe that new features and services will be developed on the Sprint
PCS nationwide network to take advantage of CDMA technology. Sprint PCS
conducts ongoing research and development to produce innovative services that
give it a competitive advantage. We offer a portfolio of products and services
developed by Sprint PCS to accommodate the growth in, and the unique
requirements of, high speed data traffic. We plan to provide, when available, a
number of
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applications for wireless data services including facsimile, internet access
and point-of-sale terminal connections.
Marketing Strategy
We use a two-tiered marketing approach that:
. leverages Sprint PCS's nationwide presence, brand name and proven
strategies; and
. capitalizes on our regional focus, our history of providing
communications services and our ability to respond quickly and creatively
to changing customer needs.
Use of Sprint PCS's brand name and marketing. We benefit from our
relationship with Sprint PCS. This includes:
. exclusive use of the Sprint(R) and Sprint PCS(R) logos in our service
area,
. nationwide coverage,
. favorable vendor contracts,
. long-term traveling arrangements with set pricing, including US Unwired
being the only provider of PCS service for non-US Unwired Sprint PCS
customers traveling in our service area,
. access to Sprint PCS's technological developments,
. use of Sprint PCS's national marketing plan, and
. an expansive home calling area.
Pricing. We use the Sprint PCS pricing strategy. This offers customers in
our service area simplified, customer-friendly service plans with preferred
options and features. Under our agreements with Sprint PCS, we offer Sprint
PCS's consumer pricing plans, including the "Free and Clear" price plans. These
plans typically offer service features such as voicemail, enhanced caller
identification, call waiting, three-way calling and low per-minute rates. The
greater capacity of our and Sprint PCS's technology allows us to offer lower
per-minute rates.
Sprint PCS's "Free and Clear" price plans offer simple and affordable rate
plans for the consumer and business customer. These plans include large numbers
of base minutes which can be used anywhere on the Sprint PCS network and free
long distance calling from anywhere on Sprint PCS's nationwide network. All of
Sprint PCS's current national plans:
. include minutes in any Sprint PCS market (with no traveling charges);
. have many features and generally require no annual contracts and contain
no hidden charges;
. offer a wide selection of phones; and
. provide the first incoming minute free.
Advertising. We use the Sprint PCS name and reputation to attract customers
more efficiently than competitors with low brand awareness. Sprint PCS has
launched a national advertising campaign to promote its products, and we
benefit from this national advertising in our service area at no additional
cost to us. Sprint PCS also runs numerous promotional campaigns which provide
customers with benefits such as additional features at the same rate or free
ancillary services. We purchase promotional materials related to these programs
from Sprint PCS at their cost.
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In addition, Sprint PCS sponsors many national, regional and local events.
These sponsorships provide Sprint PCS with brand name and product recognition
in high profile events, provide a forum for sales and promotional activities
and enhance our promotional efforts in our service area.
Prepaid Subscribers. US Unwired is a leading proponent of prepaid products
in the wireless industry. Industry experts believe that 70% of all new wireless
activations will be prepay by 2002. We have a system that permits us to track
minutes of use, replenish minutes and extinguish minutes not used within 30
days.
Our prepaid services include a pre-packaged wireless handset, marketed under
the brand name Chatpak,(TM) that is pre-activated and includes a pre-set number
of minutes. We acquired most of the market for prepaid services by simplifying
the phone activation process and allowing the subscriber to control pre-set
spending limits. A key component of any prepaid product is the carrier's
ability to encourage the subscriber to purchase minutes. We have implemented
three key strategies designed to promote high levels of prepaid usage: handset
pricing, airtime replenishment and dedicated customer care.
We believe that the handsets should be priced at a level that encourages the
subscriber to think of the handset as a reusable asset and not an impulse
purchase. We do not subsidize the phone sales to prepay subscribers to the same
extent as we do for sales to post-pay subscribers. We price prepaid minutes at
effectively the same rates as our post-pay plans.
The subscriber may recharge the handset at hundreds of US Unwired's
convenient locations, including our stores, indirect retailers and vending
machines located in high traffic areas. Other options include inbound telesales
with credit card purchases of airtime through our customer care department or
our computerized interactive voice response unit. The dedicated customer care
team contacts each prepaid subscriber within 30 days following the purchase of
the handset to welcome the subscriber and to validate the subscriber's
knowledge of the handset and how to replenish airtime.
Finally, we have focused our efforts on retaining subscribers. We receive
weekly and monthly reports of prepay usage. These reports allow us to focus on
subscribers who show less than normal usage patterns.
Regional focus and customer care. Our regional focus enables us to
supplement Sprint PCS's marketing strategies with our own strategies tailored
to each of our specific markets. This includes attracting local businesses to
enhance our distribution and drawing on our management team's local experience.
Our large local sales force executes our marketing strategy through our retail
stores and kiosks. Our outside sales force targets business sales.
Additionally, we are staffing our retail outlets with full-time customer care
representatives to communicate directly with the customers concerning billing
and service issues.
We direct our media and promotional efforts at the community level by
advertising Sprint PCS's products and services through television, radio, print
advertisements, outdoor advertising, billing inserts and promotional displays
in our retail stores. We market our products and services under the name US
Unwired along with the Sprint(R) and Sprint PCS(R) logos. Also, we sponsor
local and regional events. In addition, Sprint PCS's existing agreements with
national retailers provide us with access to over 250 national retail locations
in our service area.
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We offer the business user cost-saving features like:
. home regional roaming rates,
. free long distance throughout the contiguous United States,
. voicemail, and
. reduced rates for incoming calls.
In addition, we offer shared minute pools to businesses and families who have
multiple users who share the base plan of minutes.
We are committed to building strong customer relationships by providing
customer care that exceeds expectations. Our customers can contact our customer
care representatives from any of our handsets at no charge. Our web-based
services allow customers to check billing or otherwise manage their accounts on
line.
Bundling. We offer our wireless communications services with our other
communications services, including discounted long distance services, internet
access and CLEC services.
Sales and Distribution
We target a broad range of consumer and business markets through a sales and
distribution plan. We use traditional cellular channels, like our retail
stores, mass merchandisers and other national retail outlets, independent
agents and an outside sales force. We also use lower-cost methods like direct
marketing and a corporate website.
Retail stores. We have 14 retail stores and six kiosks and plan to open
between 30 and 40 additional retail stores. Our retail stores are located in
the principal retail districts in each market. Kiosks, which are located in
Walmart stores, maximize our retail presence in some of our markets and take
advantage of high traffic areas. We use our stores and kiosks for much of the
distribution and sale of our handsets and services. Sales representatives in
these stores and kiosks receive in-depth training which allows them to explain
PCS service in an informed manner. We believe that these representatives will
foster effective and enduring customer relationships.
Independent agents. We have a network of over 270 independent agents which
create additional opportunities for local distribution. Most of these
businesses are family-owned consumer electronics dealers and wireless
telecommunication retailers.
Mass merchandisers and outlets. We target customers through our mass market
retail outlets. We are negotiating distribution agreements based on Sprint
PCS's arrangements with national and regional mass merchandisers and consumer
electronic retailers, including Radio Shack, Office Depot, Circuit City,
Dillard's, Sam's Wholesale Club, Office Max and Best Buy. There are over 250
national retail outlet locations where our customers can purchase our services.
These distributors are chosen based upon their ability to target customers in
our service area. We support their dedication of valuable floor space to
wireless communications products through a local team of retail merchandisers,
attention-grabbing materials and consumer appeal.
Outside sales force. We participate in Sprint PCS's national accounts
program, which targets Fortune 1000 companies. Under this program, when a
Sprint PCS representative reaches an
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agreement with the corporate headquarters of a Fortune 1000 company, we service
the offices of that corporation that are located within our service area. We
generate additional subscribers through Sprint PCS's Business to Business
Accounts Teams, which call on businesses of all sizes below the Fortune 1000
tier. In addition, our own outside corporate sales force targets businesses
that are not covered by Sprint PCS's national accounts program or its Business
to Business Account Teams.
Inbound telemarketing. Sprint PCS provides inbound telemarketing sales when
customers call from our service area. We expect to use the national Sprint PCS
(800) 480-4PCS number campaigns that generate call-in leads. These leads are
then handled by a US Unwired retail outlet.
Electronic commerce. Sprint PCS launched an internet site in December 1998
which contains information on Sprint PCS products and services. A visitor to
Sprint PCS's internet site who is interested in purchasing a handset for postal
zip codes in our service area is referred to our toll free customer care
telephone number for assistance. Customers in our service area who purchase
products and services over the Sprint PCS internet site become customers of our
PCS network.
Direct marketing and website. In addition to Sprint PCS's efforts, we use
direct marketing efforts through direct mail and our own website. We are
developing these less expensive and more innovative sales channels to
complement the retail presence within our service area as the buildout
continues. Our website, www.usunwired.com, provides current information about
us, our markets and our product offerings and includes an online store. Our
web-based services allow customers to check billing or otherwise manage their
accounts on line.
Competition
We will compete in our service area with the current cellular providers and
new PCS providers. The cellular providers in our service area serve different
geographic segments of our service area, but no one cellular carrier provides
complete coverage throughout our service area. Some of these cellular providers
offer a digital product also, but it typically covers only a small segment of
our service area.
Of our PCS competitors, only PrimeCo, TeleCorp PCS, Inc., Tritel PCS, Inc.
and Alltel Corp. will provide service comparable to ours in our service area.
PrimeCo uses CDMA technology and is licensed to offer PCS services in all of
our Louisiana and Texas markets but has not indicated any intention to buildout
a network in these markets. We expect TeleCorp to be a competitive PCS provider
in our Monroe, Louisiana market and in our Arkansas markets. Tritel will
compete with us in our Mississippi and Alabama markets. TeleCorp and Tritel
both employ TDMA technology and are members of the AT&T wireless network.
Alltel is a current PCS provider in several of our markets.
Our ability to compete effectively with other PCS providers will depend on:
. the continued success of CDMA technology in providing better call quality
and clarity than analog cellular systems,
. our competitive pricing with various options suiting individual
subscriber's calling needs, and
. the continued expansion and improvement of the Sprint PCS network,
customer care system and telephone handset options.
We will compete also with paging, ESMR and dispatch companies in our
markets. Potential users of PCS systems may satisfy their communications needs
with other current and developing
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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, we expect to face increased competition from companies using
other communications technologies like satellite-based telecommunications and
wireless cable systems. Other new technologies may be developed in the future.
We do not currently face competition from resellers on our facilities. A
reseller buys blocks of wireless telephone numbers and capacity from a licensed
carrier and resells service through its own distribution network to the public
but does not hold FCC licenses or own facilities. Thus, a reseller is both a
customer of a wireless licensee's services and also a competitor of that and
other licensees. We expect to continue to be subject to the FCC rule that
requires cellular and PCS licensees to permit resale of carrier service.
Over the past several years the FCC has auctioned and will continue to
auction large amounts of wireless spectrum that could be used to compete with
PCS services. Based upon increased competition, we anticipate that market
prices for two-way wireless services generally will decline in the future. We
will compete to attract and retain subscribers principally on the basis of
services and features, the size and location of our service areas, network
coverage and reliability, customer care and pricing. Our ability to compete
successfully will also depend, in part, on our ability to anticipate and
respond to various competitive factors affecting the industry, including new
services that may be introduced, changes in consumer preferences, demographic
trends, economic conditions and discount pricing strategies by competitors.
Government Regulation
The FCC and other state and local regulatory agencies regulate our PCS and
cellular systems and our CLEC operations.
Licensing of PCS systems. A broadband PCS system operates under a service
area license granted by the FCC for a particular market. These licenses operate
on one of six frequency blocks allocated for broadband PCS service. Narrowband
PCS is for non-voice applications such as paging and data service and is
separately licensed. The FCC awards all PCS licenses by auction.
We hold some F-block PCS licenses. We had to qualify as a "designated
entity" to get them from the FCC. Our "designated entity" status may limit our
ability to accept additional equity investments in the future.
All PCS licenses have a 10-year term and must be renewed at the end of this
term. The FCC generally will renew a PCS license if the licensee provided
substantial service during the past license term and substantially complied
with applicable law. The FCC may revoke a license for serious violations of FCC
rules. All PCS licensees must satisfy coverage requirements. Licensees that
fail to meet the coverage requirements may lose the service area that is not
covered, or the license.
For up to five years after a PCS license is granted, a PCS licensee must
share spectrum with existing licensees that operate fixed microwave systems
within its license area. To operate our PCS systems efficiently and with
adequate population coverage, we must relocate many of these existing
licensees. The FCC has adopted a transition plan to relocate microwave
operators and a cost sharing plan for relocation that benefits more than one
PCS licensee. These plans expire on April 4, 2005.
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The FCC regulates PCS resale practices also.
Licensing of cellular telephone systems. The FCC awards licenses for
cellular telephone systems by auction. Cellular licenses generally last for 10
years and may be renewed for periods of up to 10 years. The FCC may revoke a
license for serious violations of FCC rules. The FCC may deny renewal if it
determines that the grant of an application would not serve the public
interest. In addition, at the renewal time, other parties may file competing
applications for the license.
The FCC regulates cellular service resale practices and the terms under
which ancillary services may be provided through cellular facilities.
We use landline facilities to connect cell sites and to link them to the
main switching office. The FCC separately licenses and regulates these
landlines.
Other regulatory requirements. The FCC imposes additional regulatory
requirements on all commercial mobile radio service, or CMRS, operators, which
include PCS and cellular systems as well as some specialized mobile radio
systems. These requirements may change. Some of the current requirements
include:
. Resale. Most CMRS operators, including us, may not restrict the resale
of their services so that resellers may use the facilities of the CMRS
operator to introduce a competitive service.
. Roaming. CMRS carriers must provide service to all subscribers of a
compatible CMRS service in another geographic region.
. Number portability. CMRS carriers must allow their customers to take
their phone numbers with them if they change to a competitive service
and must be able to deliver calls to carried numbers.
. Enhanced 911. CMRS carriers must transmit 911 calls from any qualified
handset without credit check or validation, must provide 911 service to
individuals with speech or hearing disabilities, and must provide the
approximate location of the 911 caller.
. Wiretaps. CMRS carriers must provide law enforcement personnel with
technical assistance for wiretaps on the CMRS network.
. Calling party pays. The FCC may permit CMRS operators to charge the
party making the call.
. Customer information. The FCC limits a CMRS carrier's use of information
about customers that comes from the customer's billing records and is
useful for marketing. A federal court recently struck down this
limitation.
. Interconnection. All telecommunications carriers, including CMRS
carriers, must interconnect directly or indirectly with other
telecommunications carriers.
. Universal service and other fees. The FCC imposes large universal
service support fees on telecommunications carriers, including CMRS
carriers. The FCC imposes smaller fees for telecommunications relay
service, number portability and the cost of FCC regulation.
. Spectrum cap. There are limitations on a person's ownership in licenses
for more than 45 MHz of PCS, cellular and some specialized mobile radio
services in metropolitan statistical areas and 55 MHz in rural service
areas where there is significant overlap in any geographic area.
Significant overlap means that at least ten percent of the population of
the PCS
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licensed service area is within the cellular and/or SMR service area(s).
We believe that we are in compliance with these limits.
Transfers and assignments of PCS and cellular licenses. The FCC must approve
the assignment or transfer of control of a license for a PCS or cellular
system. In addition, the FCC requires licensees who transfer control of a PCS
license within the first three years of their license term to disclose the
total consideration received for the transfer. FCC approval is not required for
the sale of an interest that does not transfer control of a license. Any
acquisition or sale of PCS or cellular interests may also require the prior
approval of the Federal Trade Commission, the Department of Justice and state
or local regulatory authorities.
Foreign ownership. The Communications Act of 1934 limits the non-U.S.
ownership of licensees. If foreign ownership exceeds the permitted level, the
FCC may revoke the PCS licenses or require an ownership restructuring. We
believe that we comply with these limitations.
Intellectual Property
The Sprint(R) and Sprint PCS(R) brand names and logos are registered service
marks owned by Sprint. We have license agreements with Sprint that allow us to
use, without payment and only in our service area, the Sprint design logo and
"diamond" symbol and other Sprint service marks, like the phrases "The Clear
Alternative to Cellular" and "Clear Across the Nation." We can use some of
Sprint's licensed marks on some wireless telephone handsets. The license
agreements have many restrictions on our use of their licensed marks. We are
the only person entitled to market Sprint PCS products and services in our
service area, except for the Sprint PCS national marketing programs.
Employees
As of September 30, 1999, we had approximately 580 employees. Our employees
are not represented by a union. A recent employee survey conducted by an
independent third party reported a high level of job satisfaction for over 90%
of the employees surveyed.
Properties
We lease space for our switches in Lake Charles and Shreveport, Louisiana,
and for our corporate operations, network operators and customer care and data
center in Lake Charles, Louisiana. We own two store sites, and we lease seven
store sites in Louisiana and five in Texas. We own 96 cell sites in Louisiana,
and we lease an additional 39 cellular, PCS, paging and microwave sites in
Louisiana. In Texas and parts of Arkansas, we own 69 sites and lease 48.
We are negotiating the purchase of an 11-story, 115,300 square foot office
building in downtown Lake Charles for our corporate headquarters. We expect to
pay approximately $2.7 million for the building. Even though we are in the
initial stages of evaluating the project, we expect to spend amounts at least
equal to the purchase price over several years to upgrade and renovate the
facility.
Legal Proceedings
We are from time to time involved in litigation that we believe ordinarily
accompanies the communications business. We do not believe that any of our
pending or threatened litigation will materially impair our business.
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OUR SPRINT PCS AGREEMENTS
Overview of Our Sprint PCS Agreements
We will have three management agreements with Sprint PCS. Under the first
agreement dated June 8, 1998, LA Unwired will manage the Sprint PCS services in
the service areas listed below. We own the PCS licenses for the Alexandria,
Lake Charles, Monroe and Shreveport, Louisiana and Longview-Marshall, Paris and
Texarkana, Texas service areas.
El Dorado-Magnolia-Camden, Arkansas Shreveport, Louisiana
Pine Bluff, Arkansas Longview-Marshall, Texas
Alexandria, Louisiana Paris, Texas
Houma-Thibodaux, Louisiana Texarkana, Texas
Lake Charles, Louisiana Tyler, Texas
Monroe, Louisiana
The second agreement dated February 8, 1999 gives LA Unwired the right to
manage Sprint PCS services in the following service areas:
Anniston, Alabama Pensacola, Florida
Birmingham, Alabama (Chilton, Tallahassee, Florida (Jackson county
Cullman, Talladega, Coosa and only)
Tallapoosa counties only) Columbus, Mississippi
Decatur, Alabama Greenville, Mississippi
Florence, Alabama Hattiesburg, Mississippi
Gadsen, Alabama Jackson, Mississippi
Huntsville, Alabama Laurel, Mississippi
Mobile, Alabama McComb, Mississippi
Montgomery, Alabama Memphis, Mississippi (Grenada,
Selma, Alabama Montgomery, Tallahatchie and
Tuscaloosa, Alabama Yalobusha counties only)
Hot Springs, Arkansas Meridian, Mississippi
Little Rock, Arkansas (Clark, Natchez, Mississippi
Dallas, Grant and Nevada counties Tupelo, Mississippi
only) Vicksburg, Mississippi
Fort Walton Beach, Florida Nashville, Tennessee (Maury and Giles
Panama City, Florida counties only)
We will enter a third agreement as part of the Meretel transaction described
in the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Under this agreement, Texas Unwired, a
Louisiana general partnership, will manage Sprint PCS services in Beaumont-Port
Arthur and Lufkin-Nacogdoches, Texas.
We currently offer PCS service in Alexandria, Lake Charles, Monroe and
Shreveport, Louisiana, and Beaumont-Port Arthur, Longview-Marshall and Tyler,
Texas.
Sprint PCS owns the PCS licenses for all of the service areas covered by the
Sprint management agreements (other than the Alexandria, Lake Charles, Monroe
and Shreveport, Louisiana and
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Longview-Marshall, Paris and Texarkana, Texas service area licenses, which we
own). Sprint PCS gives us the right to use their licenses in the management
agreements.
The Sprint management agreements require us to:
. construct and manage the service areas in the manner described in the
Sprint management agreements,
. distribute Sprint PCS products and services and establish distribution
areas in the service areas,
. conduct advertising and promotion activities in the service areas, and
. manage the customer base of Sprint PCS that has an area code and prefix
assigned to the service areas covered by the agreements.
Sprint PCS can access the network that we build for Sprint PCS. Sprint PCS
pays us a management fee to use our service area for sales and marketing and to
manage the service areas covered by Sprint PCS's licenses. In areas where we
use our own licenses, we pay Sprint a fee to be a Sprint PCS affiliate.
Each Sprint management requires us to follow program requirements that are
used throughout the nationwide Sprint PCS network. We must continue to follow
these program requirements if Sprint PCS changes them. The program requirements
involve:
. management of the service area,
. our participation in Sprint PCS distribution programs on a national and
regional basis,
. cost sharing and auditing in connection with distribution programs,
. handset logistics and distribution,
. retail store guidelines,
. participation in Sprint PCS national account programs,
. establishment of integrated networks with Sprint PCS in each area
serviced by us,
. roaming and inter-service area programs,
. adherence to Sprint technical program requirements,
. customer service matters,
. invoice presentation,
. billing cycles,
. management of fraud and receivables, and
. disaster contingencies.
We also have trademark and service mark license agreements with Sprint
Communications Company, L.P. and trademark and service mark license agreements
with Sprint Spectrum L.P. We
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plan to enter into a services agreement for Sprint to provide us on a contract
basis with selected back office functions such as billing and customer care for
a limited number of our markets.
The Management Agreements
Under our management agreements with Sprint PCS, we have agreed to:
. construct and manage a network in our service area in compliance with our
and Sprint PCS's PCS licenses and the management agreement,
. distribute Sprint PCS products and services,
. use Sprint PCS's and our own distribution channels in our service area,
. conduct advertising and promotion activities in our service area, and
. manage that portion of Sprint PCS's customer base assigned to our service
area.
Sprint PCS will supervise our PCS network operations and has unconditional
access to our PCS network.
Exclusivity. We are the only person who is entitled to manage or operate a
PCS network for Sprint PCS in our service area. Sprint PCS is prohibited from
owning, operating, building or managing another wireless mobility
communications network in our service area while our management agreements are
in place. Sprint PCS may make national sales to companies in our service area
and, as permitted by the FCC, may resell Sprint PCS products and services in
our service area.
Expansion. If Sprint PCS decides to expand our service area, it must give us
written notice. We then have 90 days to decide whether to buildout the proposed
area. If we do not, Sprint PCS may buildout the proposed area or permit another
third party to do so.
Network buildout. The management agreements describe our Sprint PCS
affiliation and the required network buildout plan. We have agreed to cover a
specified percentage of the population at coverage levels ranging from 55% to
75% within each of the 38 markets which make up our service area by specified
dates ending on June 2001.
Products and services. The management agreements identify the products and
services that we may offer in our service area. These services include Sprint
PCS consumer and business products and services. We are allowed to sell non-
Sprint PCS wireless products and services if they do not cause distribution
channel conflicts or consumer confusion with Sprint PCS's products and
services. We may cross-sell services like internet access, handsets, and
prepaid phone cards with Sprint, Sprint PCS and other Sprint PCS affiliates. If
we decide to use third parties to provide these services, we must give Sprint
PCS an opportunity to provide the services on the same terms and conditions. We
cannot offer wireless local loop services specifically designed for the
competitive local exchange market in areas where Sprint owns the local exchange
carrier unless we either name Sprint's local exchange carrier as the only
distributor or get approval from Sprint PCS.
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We participate in the Sprint PCS sales programs for national sales to
customers and handle national accounts located in our service area. We have a
long distance agreement with our affiliate, Cameron Communications Corporation,
for preferred long distance rates. We can also buy long distance services from
Sprint PCS at favorable rates.
Service pricing, traveling and fees. We must offer national and regional
Sprint PCS pricing plans, including Sprint PCS's "Free and Clear" plans. We can
set our own local price plans for Sprint PCS products and services offered only
in our service area, but we must get Sprint PCS's approval.
Our management agreements require revenue sharing of 8% to Sprint PCS and
92% to US Unwired, except for amounts collected with respect to taxes. We keep
100% of revenues, however, from:
.non-US Unwired Sprint PCS customers traveling in our service area,
.sales of handsets and accessories, and
.proceeds from sales not in the ordinary course of business.
Although many Sprint PCS subscribers will purchase a pricing plan that
allows traveling anywhere on the Sprint PCS network without additional charges,
we earn revenues from every minute that we carry a non-Sprint PCS subscriber's
call on our PCS network. This is called roaming. We earn revenues from Sprint
PCS for Sprint PCS's or its affiliates' subscribers traveling in our service
area. Similarly, we pay for every minute that our own subscribers use the
Sprint PCS nationwide network outside our service area. Sprint PCS's third
party roaming agreements set the rate for roaming onto a non-Sprint PCS
provider's network.
Advertising and promotions. Sprint PCS is responsible for all national
advertising and promotion of Sprint PCS products and services. We are
responsible for advertising and promotion in our service area. Sprint PCS's
service area includes the urban markets around our service area. Sprint PCS
will pay for advertising in these markets. Given the proximity of those markets
to ours, we expect considerable overlap from Sprint PCS's advertising in
surrounding urban markets.
Program requirements. We will comply with Sprint PCS's program requirements
for technical standards, customer service standards, national and regional
distribution, national accounts programs and traveling and inter-service area
services. Sprint PCS can adjust the program requirements from time to time. We
can appeal Sprint PCS's adjustments, but this could cause an unreasonable
increase in cost to us if the adjustment:
. costs more than 5% of the sum of our equity plus our outstanding long
term debt, or
. increases our operating expenses by more than 10% on a net present value
basis.
If Sprint PCS denies our appeal and we do not follow the program adjustment,
Sprint PCS has the termination rights described below.
Non-competition. We may not offer Sprint PCS products and services outside
our service area without the prior written approval of Sprint PCS. Within our
service area, we may offer, market or promote telecommunications products and
services only under the Sprint PCS brands, our own brand or brands of our
related parties. We may offer other products and services approved under the
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management agreements, but we may not use a brand of a significant competitor
of Sprint PCS or its related parties for those products and services.
Inability to use non-Sprint PCS brand. We may not sell Sprint PCS products
and services on a non-branded, "private label" basis or under any name other
than the Sprint PCS brand. There are exceptions for sales to resellers and in
the trademark and service mark license agreements.
Termination of management agreements. Each management agreement lasts for 50
years with an initial period of 20 years and three automatic, successive 10-
year renewal periods. The management agreements can be terminated for:
. the termination of Sprint PCS's PCS licenses,
. a breach of the management agreement that is not corrected,
. the bankruptcy of a party to the management agreement,
. the management agreement not complying with any applicable law in any
material respect,
. the termination of either of the trademark and service mark license
agreements, or
. our failure to obtain the financing necessary for the buildout of our PCS
network and for our working capital needs.
Sprint PCS agreed that the issuance of the old notes and the preferred stock
investment by The 1818 Fund would meet the financing requirements of the
management agreements.
If a management agreement is terminated or not renewed, we and Sprint PCS
have specified rights. If we can terminate the management agreement because of
something that Sprint PCS did or did not do, generally we may:
. require Sprint PCS to purchase all of our operating assets used in our
PCS network for at least 80% of our entire business value, which is
described below;
. if Sprint PCS is the licensee for 20 MHz or more of the spectrum on the
date we terminate the management agreement, require Sprint PCS to assign
to us, subject to governmental approval, up to 10 MHz of licensed
spectrum for an amount equal to the greater of:
. the original cost to Sprint PCS of the license plus any microwave
relocation costs paid by Sprint PCS, or
. 9% of our entire business value; or
. sue Sprint PCS for damages instead of terminating the management
agreement.
If Sprint PCS can terminate the management agreement because of something
that we did or did not do, generally Sprint PCS may:
. require us to sell our PCS operating assets to Sprint PCS for an amount
equal to 72% of our entire business value;
. require us to purchase, subject to governmental approval, the licensed
spectrum for the greater of:
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. the original cost to Sprint PCS of the license plus any microwave
relocation costs paid by Sprint PCS or
. 10% of our entire business value;
. take any action to correct our breach of the management agreement. This
may include taking responsibility for, and operating, our PCS network; or
. sue us for damages instead of terminating the management agreement.
Non-renewal of management agreements. If Sprint PCS gives us timely notice
that it does not intend to renew the management agreement, we may:
. require Sprint PCS to purchase all of our operating assets used in our
PCS network for 80% of our entire business value; or
. if Sprint PCS is the licensee for 20 MHz or more of the spectrum on the
date we terminate the management agreement, require Sprint PCS to assign
to us, subject to governmental approval, up to 10 MHz of licensed
spectrum for the greater of:
. the original cost to Sprint PCS of the license plus any microwave
relocation costs paid by Sprint PCS, or
. 10% of our entire business value.
If we give Sprint PCS timely notice that we do not intend to renew the
management agreement, or if we both give notice of non-renewal, or if the
management agreement can be terminated because it does not comply with legal or
regulatory requirements, Sprint PCS may:
. purchase all of our operating assets for 80% of our entire business
value; or
. require us to purchase, subject to governmental approval, the licensed
spectrum for the greater of:
. the original cost to Sprint PCS of the license plus any microwave
relocation costs paid by Sprint PCS, or
. 10% of our entire business value.
If the entire business value must be determined, we and Sprint PCS will each
select one independent appraiser and the two appraisers will select a third
appraiser. The three appraisers will determine the entire business value on a
going concern basis using the following assumptions:
. the entire business value is based on the price a willing buyer would pay
a willing seller for the entire on-going business;
. the then-current customary means of valuing a wireless telecommunications
business will be used;
. the business is conducted under the Sprint and Sprint PCS brands and the
Sprint PCS agreements;
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. we own the spectrum and frequencies presently owned by Sprint PCS and
subject to the Sprint PCS agreements; and
. the valuation will not include any value for the business not directly
related to the Sprint PCS products and services.
If the management agreement is terminated or not renewed, we may be
obligated to allow Sprint PCS customers to travel at favorable prices in the
service areas where we own the licenses and to allow Sprint PCS to sell some of
our products there.
If the management agreement ends for any reason other than a loss of the
licenses or regulatory considerations, and if Sprint PCS does not transfer the
disaggregated licenses to us, then Sprint PCS must buy our PCS operating assets
except those for the Shreveport, Alexandria and Monroe service areas.
The Trademark and Service Mark License Agreements
We are permitted to use the Sprint and Sprint PCS brand names, "diamond"
symbol and other trademarks and service marks like "The Clear Alternative to
Cellular" and "Clear Across the Nation" on Sprint PCS products and services. We
do not pay to use these names and marks, but we cannot transfer the right to
use them. We believe that the Sprint and Sprint PCS brand names and symbols
enjoy a very high degree of awareness and provide us an immediate benefit in
the market place. To use the licensed marks, we must follow quality standards
determined by Sprint and Sprint PCS. We cannot use the licensed marks in a
manner that would reflect adversely on the image of quality symbolized by the
licensed marks. We will notify Sprint and Sprint PCS promptly if we know of any
violation of any of the licensed marks within our service area and will help
Sprint and Sprint PCS enforce their rights. We have agreed with Sprint and
Sprint PCS to repay each other for losses caused by a significant violation of
the trademark license agreements. In addition, we will repay Sprint and Sprint
PCS for any loss suffered from our use of the licensed marks or sale of any
Sprint or Sprint PCS products and services, unless the losses are from our use
of the licensed marks in compliance with certain guidelines.
Sprint and Sprint PCS can terminate the trademark and service mark license
agreements if we file for bankruptcy or significantly violate the agreement, or
if our management agreement is terminated. We can terminate the trademark and
service mark license agreements if Sprint or Sprint PCS abandons the licensed
marks or files for bankruptcy, or if the management agreement is terminated.
Consent and Agreement for the Benefit of our Senior Lenders
Sprint PCS has a consent and agreement, or lender consent, with the lenders
under our credit facilities. We will acknowledge this lender consent. The
lender consent modifies Sprint PCS's rights and remedies under our Sprint PCS
management agreements for the benefit of the lenders and vendor guarantor under
our credit facilities and any refinancing of it.
The lender consent generally provides for:
. Sprint PCS's consent to the pledge of the stock of our subsidiaries and a
security interest in all of our assets, including the Sprint PCS
management agreements;
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. Sprint PCS not to end our management agreements until our senior
financing is satisfied under the lender consent;
. a prohibition on competing Sprint PCS networks in our service area;
. Sprint PCS to maintain 10 MHz of PCS spectrum in all our markets;
. redirection of payments from Sprint PCS to our lenders under specified
circumstances;
. Sprint PCS and our lenders to provide to each other notices of default;
. the appointment of a temporary replacement manager, including Sprint PCS,
to operate our PCS network under the Sprint PCS management agreements if
our lenders accelerate our repayment of our financing or if there is a
reason to end the Sprint PCS management agreements;
. our lenders or Sprint PCS to assign the Sprint PCS agreements and sell
our assets or stock to a qualified purchaser other than a major
competitor of Sprint PCS or Sprint;
. us to buy spectrum from Sprint PCS and sell our assets or stock to any
qualified purchaser;
. Sprint PCS to buy our assets or our debt; and
. the vendor guarantor to have a claim on assets following the payment of
the guarantee.
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OUR MANAGEMENT
Executive Officers and Directors
These persons are our directors and executive officers:
<TABLE>
<CAPTION>
Name(1) Age Office
------- --- ------
<S> <C> <C>
William L. Henning,
Jr 46 Chairman, Chief Executive Officer and Director
Robert W. Piper 41 President, Chief Operating Officer and Director
Jerry E. Vaughn 54 Chief Financial Officer
Thomas G. Henning 40 Secretary, General Counsel and Director
William L. Henning, Sr. 76 Director
John A. Henning 44 Director
Lawrence C. Tucker(/1/) 56 Director
Jack J. Blanchard 39 Vice President of Marketing
Don A. Matz 41 Vice President of Information Technologies
Brenda S. McElveen 53 Vice President of Administration
Paul J. Clifton 45 Vice President of Research and Development
</TABLE>
- --------
(1) The 1818 Fund designated Mr. Tucker as a director. The 1818 Fund may
designate one other individual to become a member of our board of
directors, but it has not yet done so.
William L. Henning, Jr. presently serves as a director and Chief Executive
Officer of US Unwired. He has held these positions since 1988. Before 1988, he
was the General Manager of US Unwired. He has been involved in the senior
management of Cameron Telephone Company and US Unwired since 1976. He has also
served as Chairman, President and Vice President of US Unwired. He was as
President of Mercury Information Technologies, Inc., which has owned and
operated a cable television franchise, a voice mail service and an internet
access service, for over five years. From 1991 to 1998, he served as a director
of First National Bank of Lake Charles.
Robert W. Piper has been the President and Chief Operating Officer of all of
our wireless businesses, including US Unwired, since 1995. He served as Chief
Financial Officer of US Unwired from 1994 to 1995 and as Vice President and
General Manager of US Unwired's long distance operations from 1987 to 1990 and
of our wireless business (including US Unwired) from 1987 until 1994. He joined
US Unwired in 1985 as comptroller. He served on the Board of Directors of the
Cellular Telecommunications Industry Association from 1992 to 1994 and from
1998 to 1999.
Jerry E. Vaughn has served as Chief Financial Officer of US Unwired since
June 7, 1999. He has over 20 years of diversified financial management
experience and focused the last 11 of these years in the telecommunications
industry. From 1994 until he joined US Unwired, Mr. Vaughn was President of
NTFC Capital Corporation, a subsidiary of GE Capital. Before that, he was
Treasurer of Northern Telecom Finance Corporation and Vice President of Mellon
Bank Corporation.
Thomas G. Henning, has been General Counsel of US Unwired and Cameron
Telephone Company since 1994. He is responsible for general corporate,
regulatory and other legal matters. Before becoming General Counsel, Mr.
Henning was a partner with the law firm of Stockwell, Sievert, Viccellio,
Clements and Shaddock. He remains of counsel to this firm. He has been an
officer and director of US Unwired since 1988.
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William L. Henning, Sr. has been a US Unwired director since its
incorporation in 1967. He practiced law for ten years after law school and has
been involved in the telecommunications industry for over 45 years. He was an
executive officer and director of Cameron Telephone Company for over 40 years.
He has also served as director of the National Rural Telecom Association since
1973. He was President of the Louisiana Telephone Association in 1955. He
served as a director of the West Calcasieu Port, Harbor and Terminal District
from 1964 to 1978, of the Calcasieu Parish Industrial Development Board from
1972 to 1986, of the United States Telephone Association from 1982 to 1988 and
of Calcasieu Marine National Bank from 1985 to 1996. He was a commissioner of
the Chenault Industrial Airpark Authority from 1986 to 1988.
John A. Henning has served as an officer and director of US Unwired and as a
director of Cameron State Bank since 1988. He served as President of the entity
that operated the Louisiana cellular cluster from 1987 to 1995. He was a
director of the Louisiana Telephone Association from 1984 to 1995 and its
President from 1993 to 1995.
Lawrence C. Tucker has been a General Partner of Brown Brothers Harriman &
Co. since 1979 and currently serves as a member of the Steering Committee of
the firm's partnership. He co-founded and has supervisory responsibility for
BBH & Co.'s private equity funds, which are known as The 1818 Funds and which
have raised capital commitments of $1.5 billion. He is a director of MCI
WorldCom, Inc., the MCI WorldCom Venture Fund, National Healthcare Corporation,
Riverwood Holdings, Inc., VAALCO Energy Inc., World Access, Inc. and National
Equipment Services, Inc.
Jack J. Blanchard has served as Vice President of Marketing for US Unwired
since January 1998. Before that, he served for at least five years as Sales
Manager and Director of Sales and Marketing. He is responsible for all
marketing and public relations efforts for cellular, PCS, paging, internet and
landline services. He had a leadership role in naming and developing our very
successful wireless prepaid program "Chat Pak." He has been instrumental in our
winning numerous advertising campaign awards such as CLIO's Best Overall
Campaign at the "One Awards" and first place in the television division at the
1998 Cellular Telecommunications Industry Association's EMA awards.
Don A. Matz has served as Vice President of Information Systems since
October 26, 1998. He is responsible for US Unwired's management information
system and support. Before joining US Unwired in 1998, he was employed for 18
years with Century Telephone Enterprises, Inc., a national telecommunications
company engaged in wireline and wireless activities. With Century Telephone, he
held various positions within Information Systems, the last seven years of
which were in director-level positions in Applications Development, Systems and
Networks, and Research and Development.
Brenda S. McElveen presently serves as Vice President of Administration of
US Unwired and is responsible for customer care, credit collections, customer
retention and employee training for cellular, paging, PCS, CLEC and internet
services. She joined US Unwired in 1984 as Office Manager.
Paul J. Clifton has served as Vice President of Research and Development
since 1998. From 1994 to 1998, he was Vice President for Engineering and
Technical Services. From 1988 to 1994, he
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served US Unwired in various capacities such as manager of network systems and
traffic manager. He was first hired by Cameron Telephone Company in 1980 and
began to work for US Unwired in 1988. In those capacities between 1980 and
1994, he was responsible for design and implementation of projects associated
with the operation of cellular, paging, voicemail, central office, personal
computer, cable television and long distance operations.
William L. Henning, Jr., Thomas G. Henning and John A. Henning are brothers.
William L. Henning, Sr. is their father.
Board of Directors
Our board of directors is divided into three classes. Each class serves for
three years. The terms of each class are staggered. The Class I directors are
John A. Henning and Thomas G. Henning, and their terms expire in 2001. The
Class II directors are William L. Henning, Sr. and Robert Piper, and their
terms expire in 2002. The Class III directors are William L. Henning, Jr. and
Lawrence C. Tucker, and their terms expire in 2000. The 1818 Fund designated
Mr. Tucker as a director. The 1818 Fund is entitled to designate one other
individual to become a member of our board of directors, but it has not yet
done so. This member's term will expire in 2000.
We do not have a compensation committee. Instead, our board of directors
performs these functions. William L. Henning, Jr., Thomas G. Henning and Robert
Piper, who are some of our executive officers and directors, participate in
deliberations of our board of directors about executive officer compensation.
Under our by-laws, the board of directors may establish an executive
committee. If established, the committee 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 delegated to other committees. Every member of the
executive committee must approve the sale of any shares of capital stock or the
incurrence of any indebtedness, except for trade indebtedness incurred in the
ordinary course of our business and indebtedness not in excess of $1.0 million.
No Employment Agreements
We do not have employment agreements with any of our officers or employees.
Each may terminate his employment, or we may terminate his employment, at will.
Employees who started within the last five years have agreed to some
restrictions on competing with us after the person is no longer our employee.
Director Compensation
We do not pay our directors fees for service in their capacity as directors.
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Executive Compensation
The following table shows what some of our executive officers earned in
1996, 1997 and 1998.
<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....... 1996 $ 45,750 $142,200 $ 45,000 $ --
Chairman & Chief Executive
Officer 1997 $102,750 $ 25,075 -- --
1998 $135,000 -- -- $950,000(/2/)
Robert W. Piper.............. 1996 $ 71,032 2,120 $ 45,000 $ --
President & Chief Operating
Officer 1997 $ 87,951 $ 10,000 -- --
1998 $105,750 $ 25,000 -- $500,000(/2/)
</TABLE>
- --------
(1) Does not include compensation from our affiliates, Cameron Communications
Corporation and Unibill, Inc.
(2) Consideration from third parties for non-competition agreements in
connection with the 1998 sale of selected cellular markets.
1999 Equity Incentive Plan
We have adopted the US Unwired Inc. 1999 Equity Incentive Plan. Under the
plan, we may grant stock options and other equity-based awards to our
directors, officers, selected employees and consultants. Our board of
directors administers the plan.
The board may grant stock options, stock appreciation rights and other
equity-based awards to eligible persons. These awards may not relate to more
than 2,300,000 shares of class A common stock. We may reissue shares subject
to awards that are not exercised or paid. We do not count awards paid in cash
against the number of shares that we may issue under the plan.
We may satisfy awards with either authorized but unissued class A common
stock or class A common stock held as treasury shares. The board may grant one
or more types of awards in any combination to a particular participant in a
particular year. Unless our board of directors terminates it earlier, the plan
will remain in effect until all awards have been satisfied in stock or in cash
or terminated and there are no more restrictions on stock issued under the
plan. Except when we award stock as additional payment for services to us, we
will confirm each award and sign an agreement with the participant.
We may make the following types of awards or grants under the plan:
Stock options. Stock options may be incentive stock options that qualify
under of Section 422 of the Internal Revenue Code or nonqualified stock
options. The board will set the exercise price and other terms of options.
A person who has been granted a stock option, or an optionee, may pay the
exercise price for an option in shares of class A common stock valued at their
then fair market value if the optionee has held the shares for at least six
months. The board may permit the optionee to pay in shares of class A common
stock that have been held for less time, or in any other manner.
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We may not grant incentive options after September 30, 2009. If the optionee
does not exercise these options, they expire no later than 10 years after the
date of grant. We may not grant incentive options to any participant in the
plan who, at the time of the grant, would own (as determined by the Internal
Revenue Code) more than 10% of the total combined voting power of all classes
of our stock or of any of our subsidiaries.
Stock appreciation rights and limited stock appreciation rights. A stock
appreciation right is a right to receive, without payment to us, a number of
shares of stock, cash or both, as determined by a formula. A limited stock
appreciation right is a right to receive, without payment to us, cash in amount
determined by a formula if there is a change in the persons who control us. We
may grant stock appreciation rights with all or any part of a stock option or
independently. If a participant exercises a stock appreciation right, he is
entitled to receive, for each share of class A common stock relating to the
exercised stock appreciation right, 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 stock appreciation right. The board sets the terms of stock appreciation
rights. If a participant exercises a limited stock appreciation right, he is
entitled to receive a cash payment, for each share of class A common stock
relating to the exercised limited stock appreciation right, equal to excess of
the defined change of control value over the grant price of the limited stock
appreciation right.
Other stock-based awards. The board may make other awards based on shares of
class A common stock. These awards may depend on our performance or the
performance. The board 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 of the awards.
We will adjust the number of shares of class A common stock available or
issued under the plan if there is any recapitalization, reclassification, stock
dividend, stock split, combination of stock or other similar change in class A
common stock. If there is an adjustment, the board will make appropriate
adjustments to the purchase price of any option, the performance objectives of
any award and the stock issuable pursuant to any award so that participants
will have the same relative rights before and after the adjustment.
If there is a change in the persons who control us, all outstanding options
that we have granted, including incentive options, stock appreciation rights
and limited stock appreciation rights, will become fully exercisable, all
restrictions on any award will lapse, and all performance criteria and other
conditions relating to the payment of awards will be deemed achieved or waived
by us without further action.
Our board may change or terminate the plan at any time. Tax or regulatory
laws may require our stockholders to approve some changes.
The plan is not subject to ERISA and is not qualified under Section 401(a)
of the Internal Revenue Code.
We have granted an aggregate of 1,090,000 options under our plan. This
amount includes 229,100 options to William L. Henning, Jr., 115,200 options to
Robert W. Piper and 24,000 options to Jerry E. Vaughn.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Tax Free Restructuring
In 1996, our affiliate, Cameron Communications Corporation, changed its
structure. It separated its wireless communications interests from its landline
telephone business and combined its wireless communications interests with
those of US Unwired. The following transactions occurred on October 31, 1996:
. Cameron transferred to its wholly owned subsidiary, CCC Holding, all of
its assets and liabilities except its 96% interest in Mercury Cellular
Telephone Company;
. Cameron distributed to its stockholders all of the shares of CCC Holding;
. Cameron was merged into US Unwired, and the stockholders of Cameron
exchanged their shares of Cameron for shares of US Unwired common stock.
Those US Unwired shares and all other then outstanding shares of US
Unwired common stock were reclassified as US Unwired class B common
stock; and
. CCC Holding was renamed Cameron Communications Corporation.
In the restructuring, Cameron agreed to be responsible for all obligations
and liabilities of the landline communications business. US Unwired agreed to
be responsible for those relating to the wireless communications business.
Cameron agreed to be responsible for liabilities of a corporate nature, like
indemnification of officers and directors and securities law liabilities
relating to the issuance of securities in the restructuring, if the liability
is attributable to Cameron as it existed before the restructuring. Otherwise,
US Unwired is responsible.
Corporate Restructuring
We recently changed our corporate structure. US Unwired used to be our
operating cellular company, and LA Unwired and LEC Unwired were its
subsidiaries. In September 1999, we formed a holding company named US Unwired,
and all of the stockholders of old US Unwired became stockholders of the new
holding company. We did this by exchanging all of the issued and outstanding
capital stock of old US Unwired, the operating cellular company, for an equal
number of shares of new US Unwired, the holding company. Old US Unwired was
renamed Unwired Telecom and became a wholly owned subsidiary of new US Unwired.
Unwired Telecom is in the process of making a stock dividend to US Unwired of
all of its ownership interest in LA Unwired and LEC Unwired. This will make LA
Unwired and LEC Unwired subsidiaries of the holding company.
Our affiliate Command Connect used to hold some of our FCC licenses and owed
$2.3 million to the FCC for those licenses. US Unwired and Cameron equally own
Command Connect. As of December 17, 1999, Command Connect transferred its PCS
licenses and related FCC debt to LA Unwired. As of December 15, 1999, Command
Connect transferred its LMDS licenses to LEC Unwired. We plan to liquidate
Command Connect.
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Affiliate Transactions
General. Before the tax restructuring described above, US Unwired, Cameron
and their subsidiaries had agreements with one another and with other companies
under common control. We describe some of those agreements below. Other
agreements include sharing of costs, services and salary expenses and sales of
assets between companies.
Bill processing procedures. Under agreements made in 1997 and 1998, Unibill,
Inc., a wholly owned subsidiary of Cameron, provides bill processing and
related services for us and Meretel. We believe that the terms of these
agreements are no less favorable to us than would be available from
unaffiliated third persons. For these services, Unibill received approximately
$1.6 million in 1996, $2.7 million in 1997, $2.9 million in 1998 and $2.0
million for the nine months ended September 30, 1999.
Property leases. In March 1998, US Unwired agreed to lease office, equipment
and warehouse space from Unibill for 60 months. We believe that the terms of
this lease are no less favorable to us than would be available from
unaffiliated third persons. US Unwired paid Unibill $173,500 in 1998 and
$219,300 for the nine months ended September 30, 1999 to lease these
properties.
System management and construction services. On January 1, 1998, US Unwired
agreed to provide Meretel with construction and management services for its
systems. These services include reviewing and modifying system design,
obtaining governmental and regulatory approvals, preparing control point, base
station and business office sites, purchasing and installing switching and base
station equipment, negotiating interconnection to the local exchange switched
telephone network, and generally managing the operations of the system. In
return for these services, Meretel pays US Unwired a management fee of $94,500
per month and reimburses it for all of its expenses. As part of the Meretel
transaction described in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations," we will no longer
provide these services. Meretel paid US Unwired approximately $624,000 in 1996,
$1.4 million in 1997, $4.5 million in 1998 and $1.5 million for the nine months
ended September 30, 1999 for these services and expense reimbursements. In
1997, Meretel agreed to pay US Unwired a commission for each customer activated
for Meretel. Meretel paid US Unwired commissions of approximately $1.2 million
in 1997 and $1.9 million in 1998.
Long distance services. US Unwired purchases long distance service from
Cameron and resells that service to US Unwired's customers. US Unwired pays
rates for this service that are comparable to rates at similar volumes charged
by Cameron to other customers. These rates are competitive with rates that US
Unwired would expect to pay for similar service from an unaffiliated third
party. US Unwired paid Cameron approximately $803,000 in 1996, $951,000 in
1997, $764,000 in 1998 and $794,600 for the nine months ended September 30,
1999 for long distance services.
Flight services. US Unwired uses, for a rate of $2.75 per air mile, a
Mitsubishi Diamond 1A aircraft owned and operated by Cameron. US Unwired paid
Cameron approximately $88,700 in 1996, $93,800 in 1997, $84,500 in 1998 and
$42,300 for the nine months ended September 30, 1999, for these flight
services. These rates are comparable to what US Unwired would be required to
pay to an unaffiliated third party for similar services.
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Management and other services. In 1999, LEC Unwired began providing US
Unwired with voicemail services which US Unwired uses and also resells to its
cellular and digital subscribers. LEC agreed also to provide technical support
to Cameron for $2,600 per month. We believe that the terms of these
arrangements are no less favorable to US Unwired than would be expected in
comparable arrangements with unaffiliated third persons.
On September 30, 1998, US Unwired purchased from Maas.net all of its
internet assets for approximately $620,000. This amount represented the then
current outstanding liabilities of Maas.net. Maas.net is a limited liability
company owned 63% by MIT. MIT owns 20% of Wireless Management Corporation,
which is the general partner of Meretel. Two of our directors and one of our
officers own interests in MIT, and the chairman of our board of directors owns
27% of MIT.
Internet services. Effective October 1, 1998, US Unwired began providing to
Cameron and its affiliates internet services for resale to their customers.
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SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table shows as of October 30, 1999 the beneficial ownership of
the capital stock of US Unwired by (a) each of our directors and officers
listed in the summary compensation table, (b) all directors and officers as a
group and (c) each person known to us to be the beneficial owner of 5% or more
of any class of our voting securities. Except as otherwise indicated, the
address for each stockholder is c/o US Unwired Inc., One Lakeshore Drive, Suite
1900, Lake Charles, Louisiana 70629.
<TABLE>
<CAPTION>
Series A Preferred
Stock Class B Common Stock(/1/)
----------------------- ----------------------------------------------
Percentage of
Percentage Percentage Class as
Name of Beneficial Owner Shares of Class Shares of Class converted(/9/)
- ------------------------ ------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
William L. Henning,
Sr..................... -- -- 4,602,983(/2/) 40.9% 35.1%
William L. Henning,
Jr..................... -- -- 1,043,178(/3/)(/4/) 9.3 7.9
John A. Henning......... -- -- 990,716(/4/)(/5/) 8.8 7.5
Thomas G. Henning....... -- -- 1,357,740(/6/) 12.1 10.3
Thomas D. Henning....... -- -- 779,596 6.9 5.9
Robert W. Piper......... -- -- 33,286(/7/) 0.3 0.3
Lawrence C. Tucker...... 500,000(/8/) 100% 1,883,239(/8/)(/9/) -- 14.3
The 1818 Fund III,
L.P.................... 500,000 100 1,883,239(/9/) -- 14.3
All officers and
directors as a group
(11 persons total, 7
with ownership
interests)............. 500,000(/8/) 100 10,690,738 78.3 81.3
</TABLE>
- --------
(/1/) A sused 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. Any security that any person named above has the
right to acquire within 60 days is deemed to be outstanding for purposes
of calculating the ownership percentage of any other person.
(/2/) Includes9,228 shares held by William L. Henning, Sr. as custodian under
the Uniform Gifts to Minors Act for the benefit of the minor children of
Thomas G. Henning, of which shares William L. Henning. Sr. disclaims
beneficial ownership. The remainder includes the community property
interest of Mrs. William L. Henning, Sr. Also includes William L. Henning,
Sr.'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/) Excludes7,228 shares held by Thomas G. Henning as custodian under the
Uniform Gifts to Minors Act for the benefit of the minor children of
William L. Henning, Jr.
(/4/) Excludes 116,501 shares held in each of two trusts for the benefit of the
minor children of William J. 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.
(/5/) Excludes 9,760 shares held by Thomas G. Henning as custodian under the
Uniform Gifts to Minors Act for the benefit of the minor children of John
A. Henning.
(/6/) Includes an aggregate of 16,988 shares held by Thomas G. Henning as
custodian under the Uniform Gifts to Minors Act for the benefit of the
minor children of John A. Henning and William L. Henning, Jr. (see Notes
(3) and (5) above), of all of which shares Thomas G. Henning disclaims
beneficial ownership.
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Excludes 9,228 shares held by William L. Henning, Sr. as custodian under
the Uniform Gifts to Minors Act for the benefit of the minor children of
Thomas G. Henning (see Note (2) above). Includes 233,002 shares held by
Thomas G. Henning as trustee for the minor children of William L. Henning,
Jr. and John A. Henning (see Note (4) above), and 116,501 shares held by
Thomas G. Henning as trustee for his own minor children, of all of which
shares he disclaims beneficial ownership. Also includes Thomas G. 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.
(/7/)Includes the community property interest of Dr. Eileen Piper, the spouse
of Robert W. Piper.
(/8/)Mr. Tucker, a general partner of Brown Brothers Harriman & Co., which is
the general partner of The 1818 Fund, may be deemed to be the beneficial
owner of shares held of record by The 1818 Fund due to his role as a co-
manager of The 1818 Fund. Mr. Tucker disclaims beneficial ownership of
the shares beneficially owned by The 1818 Fund, except to the extent of
his pecuniary interest therein. The 1818 Fund designated Mr. Tucker as a
director. The 1818 Fund is entitled to designate one other individual to
become a member of our board of directors, but it has not yet done so.
(/9/)Assumes that The 1818 Fund has converted all of its shares of Series A
preferred stock.
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CERTAIN INDEBTEDNESS
Senior Credit Facilities
Under a credit agreement dated as of October 1, 1999, US Unwired entered
into senior credit facilities for $130.0 million. The senior credit facilities
provide for an $80.0 million reducing revolving credit facility, which matures
on September 30, 2007, and a $50.0 million delay draw term loan, which matures
on September 30, 2007.
The reducing revolver will be permanently reduced in quarterly installments
beginning on June 30, 2000, in amounts which vary between $1.3 million and $6.0
million. The term loan will be amortized in quarterly installments beginning on
June 30, 2003. These quarterly amounts range between $1.3 million and $3.7
million.
Interest on all loans made under the senior credit facilities bear interest
at variable rates tied to the prime rate, the federal funds rate or the London
Interbank Offering Rate.
The senior credit facilities require US Unwired to pay an annual commitment
fee of 1.5% of the unused commitment under the senior credit facilities when
the unused portion is greater than or equal to 66.67% of the total amount of
the senior credit facilities, reducing to 1.25% when the unused portion is less
than 66.67% but equal to or greater than 50% of the total amount of the senior
credit facilities, and reducing to 1.00% when the unused portion is less than
50% of the total amount of the senior credit facilities.
All of US Unwired's obligations under the senior credit facilities are
guaranteed by:
. a fully secured guarantee from each of LA Unwired and Unwired Telecom,
and
. an unsecured partial guarantee from Lucent Technologies, Inc. in the
amount of up to $43.3 million available for principal, together with one-
third of accrued interest and other applicable fees (but excluding
prepayment premiums). If US Unwired (including the subsidiary guarantors
and Texas Unwired) demonstrates a defined total leverage ratio (including
subordinated indebtedness) of less than 6:1 for four consecutive
quarters, Lucent will be released from its guarantee.
The senior credit facilities are secured by:
. a first priority security interest in all tangible and intangible assets
of US Unwired (other than the corporate headquarters building), LA
Unwired and Unwired Telecom (including the owned PCS licenses, to the
extent legally permitted);
. a pledge by US Unwired and Cameron of 100% of the ownership interests in
LA Unwired, a pledge by US Unwired of its ownership interest in Unwired
Telecom and a pledge by LA Unwired of its ownership interest in Texas
Unwired; and
. an assignment by LA Unwired of all Sprint PCS agreements and any network
contract (including software rights).
The agreement governing the senior credit facilities contains covenants
customary for facilities similar to the senior credit facilities, including
covenants that restrict the incurrence of indebtedness, liens or contingent
obligations, mergers and acquisitions, asset sales, investments, transactions
with
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affiliates other than at arm's length, management fees, dividends and
distributions, and covenants that require compliance with various financial
requirements, maintenance of existence, records, properties and insurance,
certain conduction of business, compliance with laws, reporting of regulatory,
litigation and other matters, rights of inspection and Year 2000 preparation,
in each case by US Unwired, LA Unwired, Unwired Telecom and Texas Unwired.
Other terms of the agreement include annual mandatory prepayments beginning
after December 31, 2002 of 50% of excess cash flow and limitations on a change
in control of US Unwired.
We will use borrowings under the senior credit facilities for working
capital requirements and capital expenditures for LA Unwired.
Other Credit
LEC Unwired loan agreements and US Unwired undertaking. On July 22, 1998,
LEC Unwired entered into a loan agreement for $15.0 million and a subordinated
loan agreement for $3.0 million with certain lenders. Under these agreements,
no more than two loans may be made to LEC Unwired in any calendar month. Each
loan must be of a minimum principal amount of $500,000. All loans made under
either of these agreements are represented by notes stated to mature on July 1,
2006. All loans made under the $15.0 million agreement bear interest at
variable rates tied to the defined Commercial Paper Rate, London Interbank
Offering Rate or U.S. Treasury securities rate, and all loans made under the
$3.0 million agreement bear interest at the U.S. Treasury securities rate plus
the defined applicable margin. Both loan agreements contain customary covenants
for similar facilities. Loans made under these agreements are available for LEC
Unwired to build, own and operate its competitive local exchange carrier
systems and for other costs.
As required by these loan agreements, US Unwired agreed on March 31, 1999 to
contribute cash of not more than $4.5 million to LEC Unwired if LEC Unwired
does not meet specified financial requirements in the loan agreements. These
include projected EBITDA and revenue requirements, specified ratio requirements
and minimum cash availability requirements. The amount of cash that US Unwired
must provide depends on the requirement that LEC Unwired has failed to meet.
Meretel credit agreement and US Unwired guarantee. On May 16, 1997, Meretel
entered into a credit agreement for a $57.0 million reducing revolving senior
credit facility which matures on July 1, 2007.
All loans made under the senior credit facility bear interest at variable
rates tied to the prime rate, the London Interbank Offering Rate or the U.S.
Treasury Rate. The credit agreement contains customary covenants for similar
facilities. Meretel uses these borrowings to construct its network and for
working capital.
As required by the credit agreement, US Unwired entered into a primary
guaranty agreement on May 16, 1997. The primary guarantors are the owners of
Meretel. The primary guarantors guarantee $19.0 million of Meretel's senior
credit facility. US Unwired's proportionate share of the guarantee is based on
its ownership percentage, which is currently 13.5% or approximately $2.6
million.
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OUR OBLIGATIONS AND YOUR RIGHTS UNDER THE NOTES
Our obligations and your rights under the notes are governed by:
. the notes.
. an agreement, called the indenture, that was signed on October 29, 1999,
by us, by the subsidiaries that guaranteed the notes, and by the trustee,
which is State Street Bank and Trust Company.
. a federal law that is known as the Trust Indenture Act and that supplies
some of the content of indentures like the indenture.
. another agreement, called the registration rights agreement, that was
signed on October 29, 1999, by us, by the subsidiaries that have
guaranteed the notes, and by the securities firms that purchased the old
notes from us for the purpose of reselling them.
The owners of the old notes own them through a method of ownership that is
called book-entry ownership. Under this method of ownership, Depositary Trust
Company, or DTC, is the registered owner of one or more notes, called global
notes, that represent ownership interests in the notes by participants in DTC
or in Euroclear or Cedel, which provide similar services for their users. DTC
enters on its books the interests of these participants in the notes. The
participants who are the book-entry owners do not hold certificates for the
notes and are not registered on our records as owners. The Brussels office of
Morgan Guaranty Trust Company of New York operates Euroclear. Cedel Bank,
societe anonyme operates Cedel.
We expect that all of the new notes will be owned through book-entry
ownership as well. As described in the section on book-entry ownership, you can
under certain circumstances own your notes through the traditional method of
having a certificate for the notes registered in your name on our records.
Book-entry ownership is represented by one or more global notes, and they are
registered in the name of DTC's nominee, which is Cede and Co.
The three sections that follow this one have the following purposes:
. the first one briefly describes our obligations and your rights under the
notes and the indenture. See "Description of the New Notes."
. the second one briefly describes our obligations and your rights under
the registration rights agreement. See "Registration Rights Agreement."
. the third one briefly describes your rights under the book-entry form of
ownership. See "Book-Entry, Delivery and Form."
The brief descriptions that follow do not restate the complete terms of the
notes, the indenture or the registration rights agreement. We urge that you
read the notes, the indenture and the registration rights agreement because
they, and not these descriptions, govern your rights as owners of the notes.
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DESCRIPTION OF THE NEW NOTES
We issued the old notes under the indenture, and we will issue the new notes
under the indenture. Your rights and our obligations include those stated in
the notes and in the indenture and those made part of the indenture by its
references to the Trust Indenture Act.
In this section, the pronoun "we" or "us" means US Unwired Inc. and not
other members of its corporate family.
Principal, Maturity and Interest
We will issue new notes that have a total face amount equal to the face
amount of the old notes that are exchanged. Like the old notes, the new notes
will have a minimum face amount of $1,000 and will be issued in multiples of
$1,000.
We offered the old notes at a substantial discount from their total face
amount of $400 million. We received gross proceeds of approximately $209.2
million from their sale. We will be required to pay the full face amount of the
notes on November 1, 2009. Interest on the notes will not begin to accrue until
November 1, 2004. Prior to that time, in lieu of interest, the notes will
increase in value. This increase is called accretion. The beginning value is
the price for which the old note was sold. This price was about $523 per $1,000
of face amount of the notes. Each note will increase in value daily, compounded
on each May 1 and November 1, at the rate of 13 3/8% per year from October 29,
1999, which was the date we issued the old notes.
The value of the notes on November 1, 2004 will be equal to the face amount
of the notes. On that date, the notes will stop increasing in value, but they
will begin to accrue interest at the rate of 13 3/8% per year. We will be
required to pay all of the accrued interest beginning May 1, 2005, and on each
November 1 and May 1 thereafter. We will be required to pay interest at the
rate of 14 3/8% per year on any overdue payments. The record dates for the
payment of interest will be April 15, for payments becoming due May 1, and
October 15, for payments becoming due November 1.
Methods of Receiving Payments on the Notes
If a registered holder of notes has given wire transfer instructions to us,
we will pay all amounts due in accordance with those instructions. We will make
all other payments on notes at the office or agency of the paying agent in
Manhattan unless we decide to pay interest by mailing checks to the registered
holders.
Paying Agent and Registrar for the Notes
We must appoint a paying agent to which the notes may be presented for
payment, and a registrar where notes may be presented for registration,
transfer or exchange. The trustee will initially act as paying agent and
registrar. We may change the paying agent or registrar without prior notice to
the holders, and we or our subsidiaries may act as paying agent or registrar.
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Transfer and Exchange of Notes
Holders may transfer or exchange notes in accordance with the indenture.
The registrar may require a holder to furnish appropriate endorsements and
transfer documents and we may require a holder to pay any taxes and fees
required by law or permitted by the indenture. We are not required to transfer
or exchange any note that has been selected for redemption. Also, we are not
required to transfer or exchange any note for a period of 15 days before a
selection of notes to be redeemed.
The registered holder of a note will be treated as the owner of it for all
purposes, except for some purposes of the exchange offer, as discussed
elsewhere in this prospectus.
Subsidiary Guarantees and Security for the Notes
Two of our subsidiaries, LA Unwired, LLC and Unwired Telecom, will be
guarantors of the notes. Our future restricted subsidiaries will be guarantors
also. A guarantor will be liable for the entire amount due under the notes and
the indenture. The obligations of each guarantor will be limited as necessary
to prevent the guarantee from constituting a fraudulent conveyance under
applicable law.
A guarantor may not sell substantially all of its assets to, or consolidate
or merge with another person, other than us or another guarantor, unless:
. immediately after giving effect to that transaction, no default exists;
and
. either:
. the acquiring person assumes all the obligations of the guarantor to
note holders, or
. the net proceeds of the transactions are applied in accordance with
the asset sale provisions of the indenture that are described below.
A guarantor will be released:
. following any transactions of the type described above in which it is
acquired, if
the net proceeds of that transaction are applied in accordance with the
asset sale provisions of the indenture, or
. if we properly designate any restricted subsidiary that is a guarantor
as an unrestricted subsidiary.
The notes are secured by:
. a pledge of LA Unwired's 80% partnership interest in the Texas Unwired
general partnership, and
. a pledge of any notes payable to LA Unwired by Texas Unwired.
LA Unwired has entered into a pledge agreement defining the terms of these
pledges. Under this agreement, these pledges secure all of the obligations of
LA Unwired under the credit agreement and all obligations of LA Unwired to
holders of the notes. The credit agreement is an agreement under which we and
our subsidiaries have obtained $130 million in credit from banks for which
CoBank, ACB acts as administrative agent.
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The security interest that secures the notes is junior to the security
interest that secures the lenders under our credit agreement. The agent under
the credit agreement is entitled to control virtually all decisions relating to
the exercise of remedies under the pledge agreement. As a result, the holders
of notes will not be able to force a sale of collateral or otherwise exercise
many of the remedies available to a secured creditor without the concurrence of
the agent under the credit agreement. So long as no event of default exists
under the credit agreement or the indenture, and subject to certain terms and
conditions, LA Unwired is entitled to receive all cash dividends, interest and
other payments made upon its interest in Texas Unwired and to exercise any
voting rights. The pledges will be released if the partnership interests in
Texas Unwired are sold and the net proceeds from that sale are applied in
accordance with the assets sales provisions of the indenture, as described
below.
Subordination and Ranking
Our new notes:
. will be our general unsecured obligations,
. will be subordinated in right of payment to all of our existing and
future senior debt, which includes most of our indebtedness other than
taxes and trade payables,
. will be equal in right of payment with any of our future senior
subordinated indebtedness, and
. will be unconditionally guaranteed by our subsidiary guarantors.
The guarantees:
. are unsecured obligations of the guarantors, except for the limited
security provided by the pledge agreement,
. are subordinated in right of payment to all existing and future senior
debt of the guarantors, which includes most of their indebtedness other
than taxes and trade payables, and
. are equal in right of payment with any future senior subordinated
indebtedness of the guarantor.
Our senior debt:
. includes our debt under our credit agreement with banks,
. includes our debt under other similar agreements that provide for us to
obtain revolving credit loans, term loans, receivables financing, letter
of credit and other debt financing from banks or other financial
institutions, or to issue our commercial paper to them,
. does not include our obligations for taxes,
. does not include our trade payables, and
. does not include any debt that the indenture prohibits us to incur.
The subordination provisions mean that the holders of senior debt will be
entitled to receive payment in full of all obligations due them before the
holders of notes will be entitled to receive any payment on the notes or the
guarantees:
. in a liquidation or dissolution proceeding,
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. in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding,
. in an assignment for the benefit of creditors, or
. in any other marshaling of assets and liabilities.
In addition, until the senior debt is paid in full, any payment or
distribution to which holders of notes would be entitled will be made to
holders of senior debt.
We may not make any payment on the notes, and a guarantor may not make any
payment on its guarantee, if we or the bank lenders under our credit agreement
give the trustee under the indenture a payment blockage notice. We or those
lenders are permitted to give that notice at any time we have failed to live up
to our obligations under the credit agreement. If our credit agreement has been
paid off and we have other borrowings of more than $25 million that we treat as
designated senior debt, then the holders of that debt may give a payment
blockage notice if we fail to meet our obligations under it.
We must resume payments on the notes following a payment blockage notice
only:
. in the case of a payment default, when it is cured or waived (and, if
applicable, any acceleration is rescinded), and
. in case of a nonpayment default, the earlier of the date when it is
cured or waived or 179 days after the payment blockage notice, unless
the maturity of any designated senior debt has been accelerated.
No new payment blockage notice may be delivered unless and until:
. 360 days have elapsed since the delivery of the prior payment blockage
notice, and
. all scheduled payments that have come due on the notes have been paid in
full in cash.
Despite the provisions described above that prohibit payments to holders of
notes under the circumstances described, we and our guarantors could still make
those payments by delivering equity interests such as our capital stock or
capital stock of a guarantor, or by delivering debt that is subordinated at
least to the same extent as the notes.
If the trustee or any holder of notes receives a prohibited payment on the
notes and actually knew that the payment was prohibited, the trustee or holder
must hold the payment in trust for the benefit of the holders of senior debt
and deliver it to them on request.
We must promptly notify holders of senior debt if payment of the notes is
accelerated because of a default. We and the guarantors may not make any
payment on the notes or the guarantees until five business days after the
holders of the senior debt receive the notice. Thereafter, we and the
guarantors may make payments on the notes only if the subordination provisions
of the indenture permit payment at the time.
The subordination provisions described above may cause holders of the notes
to recover nothing at all, or to recover less than holders of senior debt.
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Optional Redemption
Prior to November 1, 2002, we may on any one or more occasions redeem up to
35% of the original total principal amount of notes with the net cash proceeds
of one or more public offerings of our stock. The redemption price is $1,137.50
for each $1,000 of accreted value of notes redeemed, plus any penalties we may
owe on the notes under the provisions of the registration rights agreement. We
will not be permitted to make these redemptions unless:
. at least 65% of the original total principal amount of the notes remains
outstanding after the redemption, and
. the redemption occurs within 45 days after we receive the money from the
public offering.
We are not otherwise permitted to redeem notes prior to November 1, 2004.
After November 1, 2004, we may redeem all or part of the notes by giving
notice between 30 and 60 days before the redemption. The redemption price will
be the amount shown in the table plus any penalties we owe under the
registration rights agreement.
<TABLE>
<CAPTION>
Redemption price per $1,000
Year beginning of principal amount
-------------- ---------------------------
<S> <C>
November 1, 2004.............................. $1,066.88
November 1, 2005.............................. 1,044.58
November 1, 2006.............................. 1,022.29
November 1, 2007 and thereafter............... 1,000.00
</TABLE>
No Mandatory Redemption or Sinking Fund Payments
We are not required to make mandatory redemption or sinking fund payments on
the notes.
Selection and Notice
If we redeem less than all of the notes the trustee will select notes for
redemption as follows:
. if the notes are listed, in compliance with the requirements of the
principal national securities exchange on which they are listed, or
. if the notes are not listed, on a pro rata basis, by lot or any other
method the trustee considers fair and appropriate.
We must pay the redemption price on the redemption date that we choose. On
that date interest and accretion will stop accruing on notes called for
redemption.
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Repurchase at the Option of Holders
Repurchase if a Change of Control Occurs
Within ten days following any change of control, we must mail a notice to
each holder of notes describing the change of control and offering to
repurchase notes on a specified date within 30 to 60 days after we mail that
notice. The repurchase price will be:
. $1,010 per $1,000 of accreted value of the notes, plus any penalties we
may owe, if the repurchase occurs before November 1, 2004, or
. $1,010 per $1,000 of principal amount of the notes, plus any accrued
interest or penalties we may owe, if the purchase occurs on or after
November 1, 2004.
In repurchasing notes, we will comply with applicable securities laws and
regulations even if they conflict with the indenture. That compliance will not
cause us to be in default under any conflicting provisions of the indenture. We
will not be required to repurchase notes if:
. the law does not permit us to purchase them
. they have not been properly tendered by the repurchase date
Within 90 days following a change of control, we must either repay all of
our senior debt or obtain consents from the holders of senior debt permitting
us to repurchase the notes. We must publicly announce the results of the change
of control repurchase offer as soon as possible after the repurchase occurs.
Except for these change of control provisions, we are not required to
repurchase notes if a takeover, recapitalization or similar transaction occurs.
We will not be required to make a change of control offer if a third party
makes and consummates the offer on the same terms required of us.
A change of control will occur if:
. we sell substantially all of our and our restricted subsidiaries'
assets, except a sale to William Henning, Sr. or members of his
immediate family or various entities of which any of these persons own
at least an 80% controlling interest,
. we adopt a plan for our liquidation or dissolution,
. anyone other than the person, family and entities mentioned above
becomes the beneficial owner of more than 35% of the voting power of our
stock, or
. a majority of our board of directors no longer consists of continuing
directors. A continuing director is a director who was serving on
October 29, 1999, or who was nominated to serve as a director by a
majority of the continuing directors at the time. Changes in directors
elected by particular investors, such as holders of our preferred stock,
are ignored for purposes of determining continuing directors.
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Repurchase if Asset Sales Occur
We will not permit any asset sales of our assets or assets of any of our
restricted subsidiaries unless:
. we or the restricted subsidiary receives consideration at the time of
the asset sale at least equal to the fair market value of the assets or
equity interests issued or sold, as determined by our board of directors
and certified to the trustee by one of our officers, and
. at least 75% of the consideration is cash or cash equivalents. For
purposes of this provision, the following are considered to be cash:
. any liabilities of us or any restricted subsidiary that are assumed
by the transferee by an agreement that releases us or the restricted
subsidiary from further liability other than contingent liabilities
and liabilities that are subordinate to the notes, and
. cash that we or our restricted subsidiary receives from immediately
converting into cash any securities, notes or other obligations that
we or our restricted subsidiary receives from the asset sale.
An asset sale is:
. the sale of equity interests in any of our subsidiaries, except a sale
to us or any subsidiary in which we own at least 90% of the equity, and
. a sale, lease or other transfer of any assets except the following:
. the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business,
. dispositions of cash or cash equivalents,
. transactions involving assets that have a fair market value of less
than $1 million,
. transfers of assets to us or any subsidiary, other than LEC Unwired,
in which we own at least 90% of the equity, and
. restricted payments and permitted investments that are permitted
under the restricted payment covenant that we describe below.
Within 360 days after we receive net proceeds from an asset sale, we may
apply them as follows:
. to repay senior debt and, if the senior debt repaid is revolving credit
indebtedness, to correspondingly reduce the amount the lenders have
committed to lend us,
. to acquire all or substantially all of the assets of, or a majority of
the voting stock of, a permitted business, which means a business that
is like our current business or any other business that is primarily
involved in the ownership, design, construction, development,
acquisition, installation, management or provision of wireless
communications systems,
. to make a capital expenditure, or
. to acquire other long-term assets to be used in a permitted business.
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Pending our use of net proceeds for these purposes, we may temporarily
reduce revolving credit borrowings or otherwise invest them in any manner that
is permitted by the indenture.
Any net proceeds from asset sales that we do not apply or invest as provided
above will be excess proceeds. When the amount of excess proceeds is greater
than $10 million, we will make an offer to all holders of notes to purchase or
redeem the maximum amount of notes that may be purchased with the excess
proceeds. The offer price will be:
. the accreted value of the notes, plus any penalties we may owe, if the
repurchase occurs before November 1, 2004, or
. the principal amount of the notes, plus any accrued interest or
penalties we may owe, if the repurchase occurs on or after November 1,
2004.
If any excess proceeds remain after consummation of the offer, we may use
them for any purpose permitted by the indenture. We are required to include in
the offer the holders of any indebtedness that ranks equally with the notes and
contains similar provisions about excess proceeds. In that case, the trustee
under the indenture will select on a pro rata basis the notes and other
indebtedness to be purchased. Upon completion of each offer, the amount of
excess proceeds is reset at zero. In making these offers, we will comply with
applicable securities laws and regulations even if they conflict with the
indenture. That compliance will not cause us to be in default under any
conflicting provisions of the indenture.
Our credit agreement prohibits us from purchasing notes, and also provides
that certain change of control or asset sale events would constitute a default.
Our future agreements relating to senior debt may contain similar restrictions
and provisions. If a change of control or asset sale occurs at a time when we
are prohibited from purchasing notes, we could ask our senior lenders to allow
us to purchase notes, or we could attempt to refinance the borrowings that
contain the prohibition. If we do not succeed we will remain prohibited from
purchasing notes. In that case, our failure to purchase tendered notes would
constitute an event of default under the indenture which would, in turn,
constitute a default under our senior debt. If that occurs the subordination
provisions in the indenture would likely restrict us from making payments to
the holders of notes.
Certain Covenants
Restrictions on Indebtedness and Issuance of Stock
The indenture restricts our indebtedness. Indebtedness means any
indebtedness that would appear as a liability on a balance sheet, including:
. indebtedness for borrowed money,
. indebtedness under bonds, notes, debentures or letters of credit,
. indebtedness under bankers' acceptances,
. indebtedness represented by capital lease obligations,
. indebtedness representing the unpaid purchase price of property except
for accrued expenses or trade payables, and
. indebtedness under hedging obligations, which means interest rate swap
agreements, interest rate cap agreements, interest rate collar
agreements and other arrangements designed to protect against
fluctuations in interest rates.
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Unless we meet specified conditions that are described in the following
paragraph, we may not:
. have any indebtedness other than permitted indebtedness that is
described in a following paragraph,
. permit our subsidiaries to have any indebtedness other than permitted
indebtedness,
. issue any disqualified stock, which means stock whose holder can force
us to repurchase it sooner than 91 days after the notes come due, except
certain repurchases that follow a change of control or an asset sale,
and
. permit our restricted subsidiaries to issue preferred stock.
We may do any of the foregoing if thereafter:
. no default would exist in the notes, and
. our annualized operating cash flow ratio would be six during the years
1999 through 2005, or seven thereafter. We calculate this ratio by
dividing:
. four times the operating cash flow of us and our restricted
subsidiaries for the latest fiscal quarter, into
. the consolidated indebtedness of us and our restricted subsidiaries
except LEC Unwired, and then
. making certain technical adjustments.
The following are permitted debt:
. our revolving credit indebtedness and letters of credit under the credit
agreement in an aggregate principal amount not to exceed $150 million
less the aggregate amount of all net proceeds of asset sales that we
apply to repay indebtedness under the credit agreement and to
correspondingly reduce the lenders' commitment to lend;
. permitted acquisition indebtedness of us and the guarantors, which means
indebtedness incurred in our or a restricted subsidiary's acquisition of
a permitted business if:
. our annualized operating cash flow ratio does not increase from the
acquisition.
. our consolidated indebtedness, divided by the net pops of us and our
restricted subsidiaries, does not exceed $50. Net pops of a person
means the population of a licensed area multiplied by the person's
percentage interest in the entity that is licensed in that area.
. our consolidated indebtedness, divided by our net pops does not
increase as a result of the acquisition;
. existing indebtedness of us and our restricted subsidiaries;
. indebtedness represented by the notes and the related guarantees;
. indebtedness represented by capital lease obligations, mortgage
financings or purchase money obligations incurred for the purpose of
financing the purchase, construction or
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improvement of property, plant or equipment used in our business or the
business of the guarantor, in an aggregate principal amount not to
exceed $5 million at any time outstanding;
. permitted refinancing indebtedness of us and the guarantors used to
refund, refinance or replace indebtedness that the indenture permits
either because it meets the annualized cash flow ratio test or because
it is existing indebtedness or indebtedness under the notes and
guarantees;
. intercompany indebtedness between or among us and the guarantors, but:
. if we or any guarantor is the obligor, the indebtedness must be
unsecured and expressly subordinated to the notes, in our case, or
the guarantee, in the case of a guarantor, and
. the following will be considered to be indebtedness incurred by us or
a guarantor that was not permitted by this clause: (i) any subsequent
issuance or transfer of equity interests that results in any of that
indebtedness being held by a person other than us or a guarantor and
(ii) any sale or other transfer of that indebtedness to a person
other than us or a guarantor;
. additional indebtedness whose total principal amount at any time does
not exceed $50 million;
. hedging obligations that are incurred by us or a guarantor for the
purpose of fixing or hedging interest rate risk with respect to any
floating rate indebtedness that the indenture permits;
. the guarantee by us or any of the guarantors of indebtedness that the
indenture permits;
. the accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any indebtedness in the form of
additional indebtedness with the same terms, and the payment of
dividends on disqualified stock in the form of additional shares of the
same class of disqualified stock; and
. non-recourse debt of LEC Unwired or our unrestricted subsidiaries, but
if any of that indebtedness ceases to be non-recourse debt we will be
considered to have incurred indebtedness that was not permitted by this
clause. Non-recourse debt means indebtedness that meets these
conditions:
. neither we nor any guarantor is the lender,
. neither we nor any guarantor has any direct or indirect liability for
it, and
. neither we nor any guarantor provides credit support of any kind for
it.
When we incur indebtedness we are entitled to assign it to any applicable
category of permitted debt if it is not incurred in reliance on the annualized
operating cash flow ratio described above.
Restricted Payments
We will be considered to have made a restricted payment if we or our
restricted subsidiaries:
. declare or pay any dividend or make any other payment or distribution on
account of the equity interests of us or any restricted subsidiary other
than stock dividends;
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. acquire for value any equity interests of us or any direct or indirect
parent of us;
. pay or acquire or retire for value any indebtedness that is subordinated
to the notes or the guarantees, except a payment of interest or
principal at the stated maturity of that indebtedness; or
. make any restricted investment, which means any investment other than
the following permitted investments:
. any investment in a restricted subsidiary of which we own at least
90%, except LEC Unwired,
. any investment in cash equivalents,
. any investment by us or a restricted subsidiary in any person that
becomes a 90% owned restricted subsidiary as a result of the
investment, or that we or a 90% owned restricted subsidiary acquires
as a result of the investment,
. any investment in securities, notes or other obligations received as
consideration for an asset sale, if we immediately convert them to
cash,
. any investment in assets that we acquire by issuing our equity
interests other than disqualified stock,
. any investment in hedging obligations, which means interest rate
swap agreements, interest rate cap agreements, interest rate collar
agreements and similar arrangements that are designed to protect
against interest rate fluctuations, and
. our contribution of the customer base of our Beaumont-Port Authur
and Lufkin-Nacagdoches markets to Texas Unwired and our loan to it
of up to $20 million.
We are permitted to make a restricted payment if immediately following the
restricted payment:
. no default exists,
. the indenture permits us to incur at least $1.00 of additional
indebtedness that is not permitted debt, and
. the restricted payment plus all other restricted payments made after the
date of the indenture is less than the sum of all of the following:
. the amount determined by subtracting (x) two times our aggregate
consolidated interest expense for the period from December 31, 2002
to the last day of the last full fiscal quarter prior to the date of
the proposed restricted payment from (y) our operating cash flow for
same period. Consolidated interest expense means interest that is
expensed or capitalized by us and our restricted subsidiaries except
LEC Unwired; charges related to bankers' acceptances, letters of
credit and hedging obligations; and dividends on preferred stock of
LEC Unwired or unrestricted subsidiaries. Operating cash flow is
consolidated net income of us and our restricted subsidiaries except
LEC Unwired, as adjusted to exclude extraordinary and nonrecurring
items, pooled income of acquired businesses, and income of any
subsidiary which is not permitted to pay dividends, and then further
adjusted by:
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. adding back consolidated interest expense that reduced the
consolidated net income of us and our restricted subsidiaries,
. adding back our taxes that reduced the consolidated net income,
. adding back our depreciation, amortization and other non-cash
expenses that reduced the consolidated net income,
. adding back taxes and non-cash expenses of our restricted
subsidiaries that reduced the consolidated net income, but only
to the extent the subsidiary is permitted to pay us a dividend
under legal and contractual restrictions that apply to it, and
. subtracting cash payments by us or our restricted subsidiaries
that relate to non-cash items that increased consolidated net
income.
. the aggregate net cash proceeds received by us since the date of the
indenture as a contribution to our equity capital or from our sale
of our equity interests other than disqualified stock, or from our
sale of our convertible or exchangeable disqualified stock or our
convertible or exchangeable debt securities that have been converted
into or exchanged for equity interests (other than equity interests,
disqualified stock or debt securities sold to our subsidiaries and
other than proceeds that are used by us to purchase, retire or
defease subordinated indebtedness or equity interests of us or a
guarantor or our equity interests).
. 50% of any dividends received by us or a wholly owned restricted
subsidiary after the date of the indenture from LEC Unwired or an
unrestricted subsidiary, to the extent that such dividends were not
otherwise included in our consolidated net income for such period.
. if any unrestricted subsidiary is redesignated as a restricted
subsidiary, the fair market value of our investment in that
subsidiary as of the date of the redesignation or the date on which
the subsidiary was originally designated as an unrestricted
subsidiary, whichever is the lesser.
So long as no default exists or would be caused, the preceding provisions
will not prohibit:
. the payment of any dividend within 60 days after it is declared, if on
the date of declaration the payment would have been permitted by the
indenture;
. our use of the net cash proceeds from our sale of our equity interests
other than disqualified stock to purchase, retire or defease at or about
the same time subordinated indebtedness or equity interests of us or a
guarantor or our equity interests;
. the use of net cash proceeds from permitted refinancing indebtedness to
purchase or defease subordinated indebtedness of us or any restricted
subsidiary;
. the payment of any dividend by a restricted subsidiary to the holders of
its common equity interests;
. our use of $2 million per fiscal year plus unused amounts from prior
years to purchase or retire equity interests of us or any restricted
subsidiary held by any member of our or any
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restricted subsidiaries' management pursuant to any management equity
subscription agreement or stock option agreement in effect as of the
date of the indenture; and
. other payments not to exceed a total of $10 million.
The amount of all restricted payments except cash is the fair market value
on the date of the restricted payment of the assets or securities proposed to
be transferred or issued pursuant to the restricted payment. The fair market
value will be determined by our board of directors based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if the fair market value exceeds $5 million. Not later than
the date of making any restricted payment, we must deliver to the trustee a
certificate stating that the restricted payment is permitted and setting forth
the basis upon which the required calculations were computed, together with a
copy of any fairness opinion or appraisal required by the indenture.
No Senior Subordinated Debt
We may not incur or guarantee any indebtedness that is junior in right of
payment to any of our senior debt and senior in right of payment to the notes.
No guarantor will incur or guarantee any indebtedness that is junior in right
of payment to the senior debt of that guarantor and senior in right of payment
to its guarantee.
Liens
Neither we nor any restricted subsidiary may have liens, except for the
following permitted liens:
. liens securing debt facilities or commercial paper facilities with banks
or other institutional lenders that provide for revolving credit loans,
term loans, receivables financing or letters of credit;
. liens in favor of us or a guarantor, except with respect to intercompany
indebtedness;
. liens on property of a person existing at the time that person is merged
with or into or consolidated with us or any subsidiary if the liens
existed before we planned the merger or consolidation and do not extend
to any assets other than those of the person merged into or consolidated
with us or our subsidiary;
. liens on property existing at the time of the acquisition of the
property by us or a subsidiary if the liens existed before we planned
the acquisition;
. liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other similar obligations incurred in
the ordinary course of business;
. liens on property, plant and equipment that is purchased, constructed or
improved from the proceeds of up to $5 million of indebtedness secured
by the liens;
. liens existing on the date of the indenture;
. liens for taxes that are not delinquent or are being contested in good
faith;
. liens incurred in the ordinary course of business of us or any
subsidiary with respect to obligations that do not exceed $2 million at
any time;
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. liens securing non-recourse debt of LEC Unwired; and
. liens securing up to $7 million of indebtedness that finances the
construction or acquisition of a headquarters building and related real
estate rights and covers only the assets acquired with that
indebtedness.
Dividend and Other Payment Restrictions Affecting Subsidiaries
Except as described in the following paragraph, we may not permit any
guarantor to have any consensual restriction on the ability of the guarantor
to:
. pay dividends or make any other distributions on its equity interests to
us or any of our restricted subsidiaries,
. pay any indebtedness owed to us or any of our restricted subsidiaries,
. make loans or advances to us or any of our restricted subsidiaries, or
. transfer any of its properties or assets to us or any of our restricted
subsidiaries.
These prohibitions will not apply to restrictions existing under:
. existing indebtedness in effect on the date of the indenture and any
amendments, renewals, increases or refinancings that are no more
restrictive than those contained in that existing indebtedness;
. the indenture, the notes and the guarantees;
. applicable law;
. any instrument governing indebtedness or capital stock of a person
acquired by us or any of our restricted subsidiaries as in effect at the
time of the acquisition if the restriction is applicable only to that
person and the indenture permits the indebtedness creating the
restriction;
. customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
. purchase money obligations for property acquired in the ordinary course
of business that impose restrictions on the transfer of the acquired
property;
. any agreement for the sale or other disposition of a restricted
subsidiary that restricts distributions by that restricted subsidiary
pending its sale or other disposition;
. permitted refinancing indebtedness, if the restrictions are no more
restrictive, taken as a whole, than those contained in the agreements
governing the indebtedness being refinanced;
. permitted liens that limit the right of us or any of our restricted
subsidiaries to dispose of the assets subject to the permitted lien;
. provisions governing the disposition or distribution of assets or
property in joint venture agreements and other similar agreements
entered into in the ordinary course of business; and
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. restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business.
Designation of Restricted and Unrestricted Subsidiaries
At the present time, all of our subsidiaries are restricted subsidiaries
except Texas Unwired, which is an unrestricted subsidiary. Unrestricted
subsidiaries are not subject to many of the restrictive covenants in the
indenture. They will not be guarantors of the notes.
A subsidiary may be an unrestricted subsidiary if it meets all of these
conditions:
. it has no indebtedness except non-recourse debt.
. it has no contracts with us or any restricted subsidiary except those
that are on an arms length basis.
. it cannot require us or a restricted subsidiary to buy additional equity
interests in it or otherwise maintain its financial condition or
profits.
. it does not guarantee or support any indebtedness of our restricted
subsidiaries.
. it has at least one director and at least one executive officer who do
not also serve as a director or executive officer of us or any
restricted subsidiary.
If an unrestricted subsidiary fails to meet these tests it automatically
becomes a restricted subsidiary. Our board of directors may change a subsidiary
from an unrestricted subsidiary to a restricted subsidiary, but only if no
default under the notes would exist after the change. A default would occur if
the former unrestricted subsidiary had indebtedness that the indenture does not
permit a restricted subsidiary to have. The reason is that the former
unrestricted subsidiary is considered to have incurred all of its indebtedness
at the time it becomes a restricted subsidiary.
Our board of directors may designate any restricted subsidiary to be an
unrestricted subsidiary if that designation would not cause a default except
that US Unwired, Unwired Telecom and LA Unwired may not be unrestricted
subsidiaries. If a restricted subsidiary is designated as an unrestricted
subsidiary, the aggregate fair market value of all outstanding investments
owned by us and our restricted subsidiaries in the designated subsidiary will
be considered to be an investment made at the time of the designation and will
either reduce the amount available for restricted payments under the applicable
covenant or reduce the amount available for future investments under the
definition of permitted investments, as we shall determine. The designation
will only be permitted if the investment would be permitted at that time and if
the restricted subsidiary otherwise qualifies under the indenture to be an
unrestricted subsidiary. Our board of directors may redesignate any
unrestricted subsidiary to be a restricted subsidiary if the redesignation
would not cause a default under the notes.
Merger, Consolidation or Sale of Assets
We may not consolidate or merge with or into another person or sell or
otherwise dispose of all or substantially all of the properties or assets of us
and our restricted subsidiaries taken as a whole, unless:
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. the surviving entity or the person to which the sale or other
disposition is made is us or another U.S. corporation;
. that corporation, if it is not us, assumes all of our obligations under
the notes, the indenture and the registration rights agreement in
accordance with agreements that are reasonably satisfactory to the
trustee;
.that corporation, if it is not us:
. will have consolidated net worth immediately after the transaction
equal to or greater than our consolidated net worth immediately
before the transaction; and
. will, on the date of the transaction after giving effect to it and
to any related financing transactions as if they had occurred at the
beginning of our last full fiscal quarter, be permitted to incur at
least $1.00 of additional indebtedness under the annualized
operating cash flow test of the indebtedness covenant.
.immediately after the transaction no default exists.
The sale of our PCS business will be considered a sale of substantially all
of our and our subsidiaries' assets for the purposes of this covenant. In
addition, we, Unwired Telecom and LA Unwired may not lease all or substantially
all of our and their assets to any other person.
This covenant will not apply to a sale or other disposition of assets
between or among us and any of our wholly owned restricted subsidiaries.
Transactions with Affiliates
We and our restricted subsidiaries may not:
. make any payment to any affiliate,
. sell, lease, transfer or otherwise dispose of any properties or assets
to any affiliate,
. purchase any property or assets from any affiliate, or
. enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of,
any affiliate,
unless:
. the affiliate transaction is on terms that are no less favorable to us
or our restricted subsidiary than those that we or our restricted
subsidiary could have obtained in a comparable transaction with an
unrelated person; and
. we deliver to the trustee:
. for any affiliate transaction in excess of $1 million, a resolution
of our board of directors that the transaction complies with this
covenant and has been approved by a majority of the disinterested
members of our board of directors; and
. for any affiliate transaction in excess of $5 million, an opinion of
an accounting, appraisal or investment banking firm of national
standing that the transaction is financially fair to the holders of
the notes.
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The following are not subject to the provisions of the prior paragraph:
. any employment agreement entered into in the ordinary course of
business;
. transactions between or among us and our restricted subsidiaries;
. transactions with a person that is our affiliate only because we own an
equity interest in that person;
. payment of reasonable directors fees to persons who are our affiliates
only because they are directors;
. sales of equity interests (other than disqualified stock) to our
affiliates; and
. restricted payments that the indenture permits.
The following are affiliate transactions, but are not subject to the
requirement for a fairness opinion:
. transactions in which we or a restricted subsidiary leases, shares or
uses communication network facilities of our affiliate on terms that are
no less favorable to us or our restricted subsidiary than those
available from the affiliate to unaffiliated third parties;
. transactions in which we or a restricted subsidiary provides
telecommunication services, including billing and related back-office
support, to our affiliate, or vice versa, in the ordinary course of
business on terms that are no less favorable to us or our restricted
subsidiary than those with unaffiliated third parties; and
. any sales agency agreement under which an affiliate has the right to
market our products or services or those of our restricted subsidiaries.
Additional Subsidiary Guarantees
If we or any of our restricted subsidiaries acquires or creates another
restricted subsidiary, it must become a guarantor and a party to the indenture
within 10 business days.
Business Activities
We and our restricted subsidiaries will not engage in any business other
than permitted businesses, except other businesses that are not material to us
and our restricted subsidiaries as a whole.
Payments for Consent
We and our restricted subsidiaries will not pay any consideration to any
holder of notes for any consent, waiver or amendment of the terms of the
indenture or the notes unless we offer that consideration to all holders of the
notes that consent, waive or agree to amend by a deadline we will set.
Reports
Whether or not we must file these reports with the SEC, we will furnish
holders of notes, within the time periods specified in the SEC's rules:
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. all quarterly and annual financial information that would be required in
a filing with the SEC on Forms 10-Q and 10-K, including a "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the Form 10-K information only, a
report on our annual financial statements by our certified independent
accountants; and
. all information that would be required to be in current reports on Form
8-K.
The quarterly and annual financial information must present separately:
. the financial condition and results of operations of us and our
restricted subsidiaries, and
. the financial condition and results of operations of our unrestricted
subsidiaries.
In addition, following the consummation of this exchange offer, we will file
a copy of all of the information and reports referred to above with the SEC for
public availability within the time periods specified in the SEC's rules and
regulations. We will do this even if we are not required to make these filings,
unless the SEC will not accept our filings. We will make the same information
available to securities analysts and prospective investors upon request. In
addition, we will furnish to the holders of notes and to securities analysts
and prospective investors, upon their request, the information specified in
Rule 144A(d)(4) under the Securities Act.
Events of Default and Remedies
Each of the following is a default under the notes and indenture:
. our failure for 30 days to pay interest or penalties that are due, even
if the subordination provisions prevent us from paying;
. our failure to pay principal or premium when due, even if the
subordination provisions prevent us from paying;
. failure by us or any of our restricted subsidiaries to comply with:
. our agreement to repurchase notes if a change of control occurs,
. our agreement to repurchase notes from proceeds of asset sales,
. the indenture's restrictions on indebtedness, preferred stock,
mergers, consolidations and sales of assets, and restricted
payments;
. ""Certain Covenants--Restricted Payments,"
. failure by us or any of our subsidiaries to comply with any of our
other agreements in the indenture, if the failure continues for at
least 60 days after we are given notice by the trustee or holders of
at least 25% of the principal amount of the notes;
. we or any of our restricted subsidiaries defaults under present or
future agreements relating to $5 million or more of borrowed money,
if:
. the default results from a failure to pay principal, interest or
premium due, or
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. the lenders demand payment prior to the date the payment would
otherwise have been due;
. failure for 60 days by us or any of our restricted subsidiaries other
than LEC Unwired to pay final judgments totalling more than $5 million;
. a court finds that a guarantee is unenforceable, or a guarantor claims
that its guarantee is unenforceable;
. we fail to perform any of our obligations under the pledge agreement, or
a court finds that the pledge agreement is unenforceable; and
. certain events of bankruptcy or insolvency occur with respect to us or
any of our restricted subsidiaries other than LEC Unwired.
If a default occurs because of our bankruptcy or insolvency or the
bankruptcy or insolvency of one or more restricted subsidiaries that as a whole
are significant subsidiaries, all of the notes will become due and payable
immediately without further action or notice. If any other default exists, the
trustee or the holders of at least 25% of the principal amount of the notes may
declare all the notes to be due and payable immediately.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. In general, a holder may not act unless:
. holders of at least 25% of the principal amount of the notes request the
trustee to pursue a remedy for a default,
. holders provide any indemnity requested by the trustee against its
liability or expenses,
. the trustee fails to pursue the remedy for 60 days after the request is
made or, if it asks for indemnity, 60 days after the indemnity is
provided, and
. during the 60-day period the trustee is not given an inconsistent
direction by holders of a majority of the principal amount of the notes.
Holders of a majority of the principal amount of the notes may direct the
trustee in its exercise of any power that it has under the indenture, but the
trustee may refuse to take action if it concludes that the action is not in the
holders' interest or would expose the trustee to liability. The trustee is
permitted not to notify holders of a default, other than our failure to make a
payment due, if the trustee decides that withholding notice is in the holder's
interest.
The holders of a majority of the principal amount of the notes may waive any
existing default and its consequences under the indenture except a default in
payment. The waiver would apply to all holders.
Should we intentionally cause a default to avoid paying premium on the notes
or to avoid our inability to redeem any notes prior to November 1, 2004, we
must nevertheless pay the specified premium.
We are required to deliver to the trustee each year a statement regarding
our compliance with the indenture. If we become aware of any default, we must
deliver to the trustee a statement specifying the default.
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No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of us or any
guarantor will have any liability for any obligations of us or the guarantors
under the notes, the indenture, or the guarantees. Each holder of notes waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
We may at any time elect to have our obligations and the obligations of the
guarantors discharged. This discharge is called legal defeasance, and it
includes all obligations under the indenture and the notes except:
. the rights of holders to receive payments on the notes when due from the
trust that is referred to below;
. our obligations concerning temporary notes, registration and transfer of
notes, replacing mutilated, destroyed, lost or stolen notes and
maintaining an office or agency for payment;
. the rights, powers, trusts, duties and immunities of the trustee; and
. the defeasance provisions of the indenture.
We may at any time elect to have released the obligations of us and the
guarantors to comply with the covenants in the indenture that pertain to:
. restricted payments
. dividend and other payment restrictions affecting our subsidiaries
. indebtedness and preferred stock
. asset sales
. transactions with affiliates
. liens
. business activities
. our offer to repurchase notes if a change of control occurs
. the prohibition against senior subordinated debt
. designating restricted and unrestricted subsidiaries
. paying all holders for consents if we pay any of them
. additional guarantees
. certain requirements applicable to mergers, consolidations and sales of
substantially all of our assets
This type of defeasance is called covenant defeasance. If it occurs, our
failure to comply with the covenants listed above will no longer be a default.
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In order for us to elect either legal defeasance or covenant defeasance:
. we must deliver to the trustee, in trust, for the benefit of the holders
of the notes, cash or non-callable government securities in amounts that
are sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay everything due on the notes at
maturity or on the redemption date, and we must specify whether the
notes are being defeased to maturity or to a particular redemption date;
. in the case of legal defeasance, we must deliver to the trustee an
acceptable legal opinion, based on an IRS ruling or a change in tax law,
stating that the holders of the notes will not recognize income, gain or
loss for federal income tax purposes as a result of the legal defeasance
and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if the
legal defeasance had not occurred;
. in the case of covenant defeasance, we must deliver to the trustee an
acceptable legal opinion stating that the holders of the notes will not
recognize income, gain or loss for federal income tax purposes as a
result of the covenant defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if the covenant defeasance had not occurred;
. no default may exist on the date of the delivery to the trustee, other
than a default resulting from the borrowing of funds to make the
deposit; and no bankruptcy or insolvency default may exist at any time
during the period that ends on the 91st day after the delivery to the
trustee;
. the legal defeasance or covenant defeasance must not violate any of our
material agreements;
. we must deliver to the trustee a legal opinion stating that, if no
bankruptcy of us or any guarantor occurs between the date of our
delivery of funds to the trustee and the 91st day following that
delivery and if no holder is our "insider" under applicable bankruptcy
law, after that 91st day the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally;
. we must deliver to the trustee an officers' certificate stating that the
delivery of funds to the trustee was not made with the intent of
preferring the holders of notes over our other creditors or with the
intent of defeating, hindering, delaying or defrauding those creditors
or others; and
. We must deliver to the trustee an officers' certificate and a legal
opinion stating that we have complied with all of the above.
Amendment, Supplement and Waiver
Holders of a majority of the principal amount of the notes:
. may agree with us to amend the indenture,
. may waive any default, and
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. may waive any requirement of the indenture,
except that no amendment or waiver may do any of the following with respect
to notes held by a holder who does not consent:
. reduce the principal amount of notes required for an amendment or
waiver;
. reduce the principal of any note or change the maturity of any note or
alter the redemption provisions except the provisions relating to our
repurchase of notes if a change of control occurs or from net proceeds
of asset sales or excess proceeds;
. reduce the rate of interest or change the time for payment of interest,
. waive a default in the payment of principal, interest, or penalties on
the notes except a rescission of an acceleration of the notes by the
holders of a majority of the aggregate principal amount of the notes and
a waiver of the payment default that caused the acceleration;
. make any note payable in any other currency;
. make any change in the provisions of the indenture that relate to
waivers of past defaults or the rights of holders of notes to receive
payments on the notes;
. waive a redemption payment, other than a payment required because of our
repurchase of notes due to a change of control or from net proceeds of
asset sales or excess proceeds; or
. make any change in these amendment and waiver provisions.
Despite the above provisions, we, the guarantors and the trustee may amend
the indenture or the notes:
. to cure any ambiguity, defect or inconsistency;
. to provide for notes that are not represented by certificates in
addition to or in place of notes that are represented by certificates;
. to provide for the assumption of our obligations to holders of notes if
we merge or consolidate or sell substantially all of our assets;
. to make any change that would provide any additional rights or benefits
to the holders of notes or that does not adversely affect the legal
rights of any holder under the indenture; or
. to comply with requirements of the SEC for the qualification of the
indenture under the Trust Indenture Act.
Concerning the Trustee
State Street Bank and Trust Company, 225 Asylum Street, 23rd Floor,
Hartford, Connecticut 06103 (facsimile no. (860) 244-1889) is the trustee under
the indenture.
If the trustee becomes our creditor or the creditor of any guarantor, the
indenture limits its right to obtain payment of claims in certain cases, or to
benefit from certain property that it receives as security or otherwise. If the
trustee acquires any interest that conflicts with its duties to holders it must
eliminate the conflict within 90 days, apply to the SEC for permission to
continue, or resign.
Governing Law
New York law governs the indenture, the notes and the registration rights
agreement.
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REGISTRATION RIGHTS AGREEMENT
We, the initial purchasers in the private offering of the old notes, and
the guarantors entered into a registration rights agreement on October 29,
1999. In that agreement, we and the guarantors agreed to:
. file with the SEC by December 13, 1999, a registration statement
relating to the exchange offer, and
. use our commercially reasonable efforts to have the SEC declare our
registration statement effective by March 27, 2000.
After the SEC declares our registration statement effective, we will offer
the holders of old notes who are not prohibited by any law or policy of the
SEC from participating in the exchange offer the opportunity to exchange their
old notes for new notes. We and the guarantors will keep the exchange offer
open for at least 30 days after we mail notice of the exchange offer to the
holders of the old notes. We will use our commercially reasonable efforts to
consummate the exchange offer as promptly as we can and no later than April
26, 2000.
We and the guarantors will file with the SEC a shelf registration statement
to cover resales of old notes that are subject to transfer restrictions if:
. because of any change in law or applicable interpretations by the SEC
staff we are not permitted to make the exchange offer;
. we fail to exchange by April 26, 2000, any old notes validly tendered in
the exchange offer;
. any applicable law or interpretations do not permit any holder of old
notes to participate in the exchange offer;
. any holder of old notes that participates in the exchange offer does not
receive freely transferable new notes in exchange for tendered old
notes;
. we elect to file a shelf registration statement; or
. any of the initial purchasers that bought the old notes from us for the
purpose of reselling them requests within 20 business days of completion
of the exchange offer that we file a shelf registration with respect to
old notes held by it that are not eligible to be exchanged for new notes
in the exchange offer.
We and the guarantors will use our commercially reasonable efforts to have
the shelf registration statement declared effective by the SEC as promptly as
practicable and to keep the shelf registration statement effective until April
26, 2001 or until any earlier date when all notes covered by the shelf
registration statement have been sold or when the notes become eligible for
resale pursuant to Rule 144 under the Securities Act without volume
restrictions.
Any one of the following is considered a registration default:
. if the registration statement for the exchange offer is not filed with
the SEC on or before December 13, 1999;
. if the registration statement for the exchange offer is not declared
effective on or before March 27, 2000;
. if a shelf registration is not filed within 30 days after one is
requested or after we conclude that the exchange offer is not permitted
by applicable law;
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. if a shelf registration is not declared effective by March 27, 2000 or,
if later, 90 days after the deadline for filing it;
. if the exchange offer is not consummated by April 26, 2000; or
. if a registration statement that has been declared effective ceases to
be effective at any time that we and the guarantors are obligated to
maintain its effectiveness and we fail to make it effective again within
three business days.
If a registration default occurs, we and the guarantors will be obligated to
pay penalties, which are called liquidated damages, to each holder of notes who
is affected by the default. These penalties are paid for each week or portion
of a week during which one or more registration defaults exist. The amount of
the penalties per week is five cents for each $1,000 of principal amount of
notes whose transfer is restricted. This amount increases by an additional five
cents per week for each 90 days that a registration default continues, up to a
maximum penalty of 50 cents per week for each $1,000 of principal amount. All
accrued penalties will be paid to holders on semi-annual payment dates that
correspond to interest payment dates for the old notes. Following the cure of
all registration defaults, the accrual of penalties will cease.
The registration rights agreement also provides that we and the guarantors:
. will make available for a period of one year after the consummation of
the exchange offer a prospectus meeting the requirements of the
Securities Act to any broker-dealer for use in connection with resales
of new notes received by the broker-dealer in exchange for old notes
acquired by it in market-making or other trading activities;
. will pay all expenses of the exchange offer, including the expense of
one counsel for the holders of the old notes; and
. will indemnify holders of the old notes, including any broker-dealer,
against specified liabilities, including liabilities under the
Securities Act. A broker-dealer that delivers a prospectus to purchasers
in connection with resales will be subject to the civil liability
provisions under the Securities Act and will be bound by the provisions
of the registration rights agreement, including those relating to
indemnification rights and obligations.
To participate in the exchange offer, owners (including book-entry and other
beneficial owners) of the old notes will be required to make representations to
us that are contained in the letter of transmittal. Persons who are entitled to
have notes included in a shelf registration will be required to deliver
information for the shelf registration statement in order to have their notes
included and to benefit from penalties for registration defaults applicable to
the shelf registration statement. A holder who sells old notes under a shelf
registration statement generally will be:
. required to be named as a selling securityholder in the related
prospectus and to deliver a prospectus to purchasers;
. subject to the civil liability provisions under the Securities Act in
connection with those sales; and
. bound by the provisions of the registration rights agreement that are
applicable to that holder, including those relating to indemnification
obligations.
For so long as the old notes are outstanding, we will continue to provide to
holders of the old notes and to prospective purchasers of the old notes the
information required by Rule 144A(d)(4) under the Securities Act.
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BOOK-ENTRY, DELIVERY AND FORM
The new notes will initially be represented by one or more permanent global
notes in definitive, fully registered book-entry form. We will register these
global notes in the name of Cede & Co., which is a nominee of DTC. We will
deposit them with the trustee, as custodian for DTC. DTC will credit the
accounts of the persons who acquired the new notes or other accounts that these
persons specify at DTC or at organizations like Euroclear and Cedel.
The Euroclear System is a clearance and settlement system for international
securities and is operated by the Brussels office of Morgan Guaranty Trust
Company of New York. Cedel International clears and settles securities
transactions in the Eurobond market.
All interests in the global notes, including those held through Euroclear or
Cedel, may be subject to the procedures and requirements of DTC. Those
interests held by Euroclear or Cedel may also be subject to the procedures and
requirements of those systems.
The global notes may not be transferred except:
. by DTC to one of its nominees,
. by a nominee of DTC to DTC or to another nominee of DTC, or
. by DTC or its nominee to a successor of DTC or a nominee of the
successor.
Book-Entry Procedures for the Global Notes
We provide the descriptions of the operations and procedures of DTC,
Euroclear and Cedel as a matter of convenience. Each of these organizations
alone controls its own operations and procedures and may change them from time
to time. We take no responsibility for these operations or procedures. You
should contact these organizations or their participants directly to discuss
these matters.
DTC has advised us that it is:
. a limited purpose trust company organized under the laws of the State of
New York,
. a "banking organization" within the meaning of the New York Banking Law,
. a member of the Federal Reserve System,
. a "clearing corporation" within the meaning of the Uniform Commercial
Code, and
. a "clearing agency" registered under the Securities Exchange Act.
DTC holds securities for its participants. DTC assists in the clearance and
settlement of securities transactions between its participants by making
electronic book-entry changes to the accounts of its participants. This
eliminates the need for physical transfer and delivery of certificates.
DTC's participants include securities brokers and dealers, banks and trust
companies, clearing corporations and similar organizations. Banks, brokers,
dealers and trust companies that are not participants in DTC may use DTC's
system as indirect participants if they have a direct or indirect
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custodial relationship with a participant. Investors who are not participants
may beneficially own securities held by or on behalf of DTC only through
participants or indirect participants.
DTC has advised us that, using its procedures, it will:
. credit its participants' accounts with portions of the principal amount
of the global notes when we deposit the global notes, and
. show and transfer the ownership interests in the global notes only on or
through its records, if the interest is owned by a DTC participant, or
on or through the records of its participants and indirect participants,
if the interest is owned by a person who is not a DTC participant.
The laws of some states require some persons to hold physical certificates
for securities they own. This may limit your ability to transfer interests in
the global note to these persons. Without physical certificates, you may have
difficulty pledging or transferring your interest in the global notes to a
person who is not a DTC participant. This is because DTC can act only on behalf
of its participants, which in turn act on behalf of indirect participants and
others.
As long as DTC or its nominee is the registered owner of a global note, it
will be considered the only owner or holder of the new notes represented by the
global note. Except as provided below, owners of beneficial interests in the
global notes:
. will not have notes registered in their names,
. will not have physical certificates for the notes, and
. will not be considered holders of notes under the indenture.
We have appointed the trustee to be the paying agent for the global notes
that represent new notes. As paying agent, the trustee will pay the principal,
any premium and interest on the new notes to the person who is the registered
holder of the global note on the record date, or as directed by that person.
Under the terms of the indenture, we and the trustee may treat the persons in
whose names the new notes, including the global notes, are registered as the
owners for all purposes, including payment. Accordingly, neither we nor the
trustee, nor any of our agents, will have any responsibility or liability for
any payment to owners of beneficial interests in a global note. DTC's
participants and the indirect participants will be responsible for paying the
owners of beneficial interests in global notes. Neither we nor the trustee nor
any of our agents will have any responsibility or liability for:
. any aspect of the records of DTC or its participants or indirect
participants relating to beneficial interests in the global notes,
including payments made on account of these interests,
. maintaining, supervising or reviewing any records of DTC or its
participants or indirect participants relating to the beneficial
interests in the global notes, or
. any other matter relating to the actions and practices of DTC or its
direct participants or indirect participants.
Accordingly, each holder owning a beneficial interest in a global note must
rely on the procedures of DTC to exercise any rights of a holder of new notes
under the indenture or the global
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note. A holder that is not a participant or an indirect participant in DTC must
rely on the procedures of the DTC participant that holds the notes for the
holder to exercise these rights. We understand that it is customary for DTC to
authorize its participants to take the action that we request of the holders or
that an owner of beneficial interests in the global notes requests of DTC.
DTC's participants will then authorize holders owning through the participants
to take that action or will otherwise act upon the instruction of the holders.
DTC has advised us that, when it receives payment, it customarily credits
the accounts of the participants on the payment date based on their ownership
interests in the global notes as shown on DTC's records. DTC's participants and
indirect participants will be responsible for paying the beneficial owners of
notes. We, DTC or the trustee are not responsible for these payments. The
standing instructions and customary practices of the participants and indirect
participants apply to these payments. Neither we nor the trustee, nor any of
our agents, will be liable for any delay by DTC or its participants in
identifying the beneficial owners of the notes. We and the trustee may
conclusively rely on instructions from DTC or its nominee as the registered
owner of the notes for all purposes.
Participants in DTC who trade global notes among themselves will follow
DTC's procedures. These trades will settle in funds that are available on the
day of trade. Indirect participants who hold interests in the notes through
Euroclear or Cedel may trade global notes among themselves based on rules and
operating procedures of Euroclear or Cedel.
The nominee of each of Euroclear and Cedel may make cross-market transfers
between participants in DTC and indirect participants who hold interests in the
notes through Euroclear or Cedel. Any transfer restrictions that apply to the
notes also apply to these transfers. These transfers must comply with DTC's
rules on behalf of Euroclear or Cedel. These cross-market transactions require
the counterparty of Euroclear or Cedel to deliver to Euroclear or Cedel
instructions that follow the applicable system's rules and procedures within
that system's established deadlines. Euroclear or Cedel will then deliver
instructions to its depositary to make final settlement by delivering or
receiving interests in the global note in DTC and making or receiving payment
using applicable procedures for same-day fund settlement. Participants in
Euroclear and Cedel may not deliver instructions directly to the depositaries
for Euroclear or Cedel.
Because of time zone differences, DTC will credit the account of an indirect
participant, who holds interests in the notes through Euroclear or Cedel and
who buys an interest in a global note from a DTC participant, during the
European business day immediately following the settlement date of DTC in New
York. DTC will report the credit to Euroclear or Cedel on the day that it
credits the account. DTC will record these transactions in its accounting
records as of DTC's settlement date in New York, but Euroclear and Cedel
customers will not have access to the cash amount credited to their accounts
from these transactions until the European business day for Euroclear or Cedel
immediately following DTC's settlement date.
DTC has advised us that any action permitted to be taken by a holder of
notes will be taken only at the direction of one or more participants to whose
account DTC has credited interests in the global notes and only for that
portion of the total principal amount specified by the participants.
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Although DTC, Euroclear and Cedel have agreed to the procedures described
above, they are not required to perform these procedures. They may stop these
procedures at any time. Neither we nor the trustee, nor any of our agents, will
have any responsibility for the performance by DTC, Euroclear or Cedel or any
of the participants and indirect participants of their obligations under their
own rules and procedures.
Transfer of Interests in Global Notes for Certificated Notes
A global note may be exchanged for definitive notes in registered
certificated form if:
. we notify the trustee that DTC cannot continue as depositary or that DTC
is no longer a clearing agency registered under the Exchange Act, and we
do not appoint a successor within 120 days,
. we notify the trustee in writing that we want to issue certificated
notes, or
. other events described in the indenture occur.
In addition, the indenture permits an owner of a beneficial interest in a
global note representing new notes to exchange that interest for certificated
notes representing new notes. Any certificated note delivered in exchange for
any global note or beneficial interest in a global note will be registered in
the names and issued in the approved denominations requested by the holder
through DTC, its participants or its indirect participants.
Exchanges of Global Notes
Any beneficial interest in a global note that is transferred to a person who
becomes the owner of an interest in another global note will no longer be an
interest in the first global note but will be an interest in the other global
note. Any transfer restrictions and procedures that apply to beneficial
interests in the other global note will apply. DTC will make these transfers
and will reflect a decrease in the principal amount of the first global note
and a corresponding increase in the principal amount of the other global note.
Same Day Settlement And Payment
We are considered to have made payments on the notes if:
. the paying agent holds at 10:00 am eastern time on the due date money
that we deposit in immediately available funds, and
. we deposit enough money for payments of amounts due.
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DESCRIPTION OF OUR CAPITAL STOCK
In this section the pronoun "we" or "us" means US Unwired Inc. and not other
members of its corporate family.
Our capital stock consists of the following:
<TABLE>
<CAPTION>
Class or Series of Stock Shares Authorized Shares Outstanding No. of Holders
------------------------ ----------------- ------------------ --------------
<S> <C> <C> <C>
Class A common stock.... 100,000,000 0 0
Class B common stock.... 60,000,000 11,250,000 16
Series A preferred
stock.................. 500,000 500,000 1
Undesignated preferred
stock................... 39,500,000 0 0
</TABLE>
Our Common Stock
We have two classes of authorized common stock, class A and class B. The
class A common stock has one vote per share and the class B common stock has 10
votes per share. The two classes vote together in electing directors and
generally on all matters that require a vote of stockholders.
Our charter permits only qualified holders to own class B common shares. If
class B shares are transferred to other holders, the shares automatically
become an equal number of class A shares. Qualified holders are:
. our founders. These are:
. the original holders of our class B shares, and
. any person or entity that receives class B shares in a
distribution from an entity that is a founder to the persons
that hold its equity interests;
. any descendant of a founder;
. any spouse or widow(er) of a qualified holder;
. any trustee or other fiduciary if:
. the trust is a charitable lead or remainder trust or similar
entity created by a founder, or
. the beneficial owners are qualified holders;
. any corporation, partnership or limited liability company whose
equity interests are held only by qualified holders;
. tax-exempt organizations that are described in section 501(c)(3) of
the Internal Revenue Code;
. the 1818 Fund III, L.P. (which owns all of our series A preferred
stock) and its affiliates; and
. a person who ceases to be a qualified holder but is nevertheless
named a qualified holder by the remaining qualified holders.
Except for these voting and ownership differences, the class A shares and
class B shares have the same rights.
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Holders of common stock have no cumulative voting rights and no preemptive,
subscription or sinking fund rights. Subject to the preferences of our
preferred stock, holders of common stock are entitled to any dividends that may
be declared by our board of directors. If we liquidate or dissolve, holders of
our common stock are entitled to anything that is left after we have paid all
of our liabilities and the liquidation preference of our preferred stock.
Our Preferred Stock
Our charter allows our board of directors to issue our preferred stock in
different series and to establish by an amendment to our charter the dividend
rights and terms, conversion rights, voting rights, redemption rights and
terms, liquidation preferences and any other rights, preferences, privileges
and restrictions that apply to each series.
Series A preferred stock. When we issued the old notes, we issued 500,000
shares of our series A preferred stock to The 1818 Fund for $50 million. The
stated value of the series A preferred stock is $100 per share, which is also
the liquidation preference per share. We can use these proceeds for general
corporate purposes, including the buildout of our network.
The holders of our series A preferred stock have the following rights and
duties:
. they rank behind payments due the holders of the notes in case of
liquidation or bankruptcy or a similar event;
. they rank ahead of payment to all classes of common stock in case of
liquidation or bankruptcy or a similar event;
. they may convert the series A preferred stock into our class B common
stock at any time, at a price of $26.55 per share, unless The 1818 Fund
sells or transfers the series A preferred stock to a person that is not
controlled by them, in which case the series A preferred stock will be
convertible into our class A common stock;
. they are entitled to any dividends paid on our common stock, as if the
preferred had converted into common stock;
. they have the voting rights of our class B common stockholders, as if the
preferred had converted into common stock, unless The 1818 Fund sells or
transfers the series A preferred stock to a person that is not controlled
by them, in which case the transferee will have the voting rights of our
class A common stockholders;
. they are entitled to block us from taking specified actions, including
our issuance of additional preferred stock equal or senior to the series
A preferred stock as to dividends or liquidation, our issuance of any
preferred stock having an earlier mandatory or optional redemption date
than the series A preferred stock, amendments to our corporate documents
that may adversely affect the holders, and sales or mergers of us or our
significant subsidiaries;
. if The 1818 Fund holds 50% or more of our common stock issued or issuable
upon conversion of the series A preferred stock, it may elect two persons
to our board of directors; if The 1818 Fund holds less than 50% but more
than 25% of our common stock issued or
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issuable upon conversion of the series A preferred stock, it may elect
one person to our board of directors;
. the series A preferred stock has a mandatory redemption at its stated
value 91 days after the maturity of the notes;
. if we have not made an initial public offering of our common stock by
October 24, 2004, holders who represent 50% or more of the series A
preferred stock can require us to offer to purchase the series A
preferred stock at the undiscounted fair market value of the common stock
into which the preferred stock can be converted. If we are unable to do
this because of restrictions in our credit facilities or the indenture
governing the notes, the holders of the series A preferred stock will
receive compensatory warrants;
. we may force the holders of the series A preferred stock to convert their
series A preferred stock after an initial public offering of our common
stock, if the holders would receive an internal rate of return of at
least 20% per year based on the price of our common stock; and
. the holders of the series A preferred stock are entitled to customary
contractual covenants, including anti-dilution protections, dividend
protections, liquidation rights, registration rights, restrictions on
significant corporate events, acts and transactions, and customary events
of default.
Shareholder Agreement
On September 24, 1999, we entered into an agreement with the holders of our
class B common stock, including several members of the Henning family. The
agreement prevents us from adopting additional restrictions on our class B
common stock. It also gives piggyback registration rights to the stockholders
who have signed it. The registration rights terminate on September 24, 2005,
and the other provisions terminate on September 24, 2024, unless otherwise
extended by the terms of the agreement.
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CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
This general discussion of United States federal tax consequences applies to
you if you acquired old notes at original issue for cash and you exchange them
for new notes in exchange offer. This discussion only applies to you if you
purchased old notes in the private placement for an amount equal to the issue
price of the old notes and hold the new notes as a capital asset for
investment. A capital asset is defined in Section 1221 of the Internal Revenue
Code. If you did not purchase your old notes in the private placement for an
amount equal to the issue price of the old notes, you should ask your tax
advisor about the consequences of the exchange offer.
The Internal Revenue Code, Treasury Regulations, IRS rulings and
pronouncements and judicial decisions form the basis of this discussion. They
may change at any time, and the change may affect you. The discussion does not
discuss every aspect of U.S. federal income and estate taxation that may apply
to you. For example, special rules that are not discussed here may apply to you
if you are:
. a bank or a broker-dealer;
. an insurance company;
. a pension or other employee benefit plan;
. a tax exempt organization or entity;
. a U.S. expatriate;
. a trader in securities that elects mark-to-market accounting treatment;
. holding notes as a part of a hedging or conversion transaction or a
straddle;
. a hybrid entity or an owner of interests therein; or
. a holder whose functional currency is not the U.S. dollar.
In addition, this discussion does not cover any applicable U.S. state or
local or non-U.S. tax laws. We will not ask the IRS to make any ruling about
the tax consequences of the notes. We cannot assure you that the IRS will not
successfully challenge the tax consequences described below.
You should ask your tax advisor about the U.S. federal income and estate tax
considerations that may apply to the notes and about any state, local or non-
U.S. taxes.
U.S. Holders
If you are a U.S. holder, this section applies to you. Otherwise, the
section entitled "Non-U.S. Holders" applies to you.
You are a U.S. holder if you hold the notes and you are:
. a citizen or resident of the United States, including a resident alien
based on the "substantial presence" test of Section 7701(b) of the
Internal Revenue Code;
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. a corporation or partnership, or an entity treated as a partnership or
corporation for federal income tax purposes, created or organized in the
United States or under the laws of the United States or of any state or
the District of Columbia, unless, in the case of a partnership, Treasury
Regulations provide otherwise;
. an estate whose income is includible in gross income for U.S. federal
income tax purposes regardless of its source; or
. a trust whose administration is subject to the primary supervision of a
U.S. court and which has one or more U.S. persons who control all
substantial decisions of the trust. Any trust that existed on August 20,
1996, was treated as a U.S. person before that date and chooses to
continue to be treated as a U.S. person, is also a U.S. person.
Exchange of Notes. The exchange of old notes for new notes in the exchange
offer will not constitute a taxable event to the U.S. holders. This means that
U.S. holders who participate in the exchange offer will not have income, gain
or loss from the exchange. The new notes should be treated as a continuation of
the old notes. U.S. holders will have the same tax basis in the new notes as
they had in the old notes. The tax basis in a note is the amount the U.S.
holder paid for the note plus any original issue discount less any payments
received on the notes. U.S. holders will be deemed to have held the new notes
for as long as they held the old notes.
Original Issue Discount. We sold the old notes at a substantial discount
from their principal amount at maturity, but we will not pay any interest on
the notes until May 1, 2005. Because of this, the notes have original issue
discount, or OID, equal to the excess of the stated redemption price at
maturity over the issue price of the old notes. The "issue price" of the old
notes is the first price at which a substantial number of notes were sold,
without counting sales to underwriters, placement agents or wholesalers. The
stated redemption price at maturity is the sum of all payments to be made on
the notes other than "qualified stated interest." The term qualified stated
interest means, generally, stated interest that is unconditionally payable at
least once a year at a single fixed rate. Because we will not pay interest on
the notes before 2005, none of the interest paid will be qualified stated
interest. Accordingly, all payments on the notes will be treated as part of the
notes' stated redemption price at maturity.
U.S. holders of notes must, in general, include in income OID calculated on
a constant-yield accrual method before they receive some or all of the related
cash payments. The amount of OID includible in income by an initial U.S. holder
of notes is the sum of the "daily portions" of OID on the notes for each day
during the taxable year or part of the taxable year that the U.S. holder holds
such notes. This amount is referred to as "accrued OID." We determine the daily
portion by allocating to each day in any accrual period a pro rata portion of
the OID allocable to that accrual period. The U.S. holder may select any
accrual period for the notes and the accrual period may change over the term of
the notes, but each accrual period must be no longer than one year and each
scheduled payment must be made on the first or last day of an accrual period.
The amount of OID allocable to any accrual period is equal to:
. the product of the notes' adjusted issue price at the beginning of the
accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and properly adjusted for
the length of the accrual period) reduced by
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. the qualified stated interest allocable to the accrual period (which, in
the case of the notes, will be zero).
OID allocable to the final accrual period is the difference between the
amount payable at maturity of the note and adjusted issue price at the
beginning of the final accrual period. Special rules will apply calculating OID
for an initial short accrual period. The adjusted issue price of a note at the
beginning of any accrual period is equal to its issue price increased by the
accrued OID for each prior accrual period and reduced by any payments made on
the note on or before the first day of the accrual period.
Stated interest, when paid on the notes, will be treated first as a payment
of any accrued OID that has not been allocated to prior payments. This amount
will not be part of a U.S. holder's gross income. Any excess will be treated as
a payment of principal on the notes.
Sale, Retirement, or Other Taxable Disposition of Notes. Upon the sale,
retirement or other taxable disposition of a note, a U.S. holder will recognize
gain or loss equal to the difference between the sum of the cash and the fair
market value of any property received for the note and the U.S. holder's
adjusted tax basis in the note. A U.S. holder's tax basis in a note equals the
price paid for the note plus any OID included in the holder's income before
disposition of the note less any payments received on the note. This gain or
loss will be capital gain or loss. It will be long-term capital gain or loss if
the U.S. holder held the notes for more than one year.
Information Reporting; Backup Withholding. We are required to provide to
record holders of the notes, except for corporations and other holders not
subject to this requirement, and to the IRS, information about interest paid
and accrued OID on the notes.
Some U.S. holders may be subject to backup withholding at the rate of 31%
for interest and OID paid on the notes or on the proceeds from a disposition of
the notes. Generally, backup withholding applies only if:
. the payee fails to provide a correct taxpayer identification number to
the payor in the manner required or does not show that it qualifies for
an exemption;
. the IRS notifies the payor that the taxpayer identification number
provided by the payee is incorrect;
. the payee has previously failed to report properly the receipt of a
"reportable payment," and the IRS has notified the payor that withholding
is required; or
. the payee fails (in some circumstances) to provide a certified statement,
signed under penalties of perjury, that the taxpayer identification
number provided is correct and that backup withholding does not apply to
the holder.
Backup withholding is not an additional tax but, rather, a method of tax
collection. U.S. holders may credit amounts withheld under the backup
withholding rules against their actual tax liabilities if they provide the
required information to the IRS.
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Non-U.S. Holders
A "non-U.S. holder" is a person that is not classified for U.S. federal tax
purposes as a U.S. person as defined in "--U.S. Holders" above. Non-U.S.
holders should ask their tax advisors about the U.S. federal tax consequences
of holding the notes.
Interest and OID. In general, a non-U.S. holder will not be subject to U.S.
federal income tax or withholding tax for stated interest or OID received or
accrued on the notes by reason of the portfolio interest exemption if:
. the interest and OID is not effectively connected with the conduct of a
trade or business within the United States;
. the non-U.S. holder does not actually or constructively own 10% or more
of the total combined voting power of all classes of stock of US Unwired
entitled to vote;
. the non-U.S. holder is not a "controlled foreign corporation" (within the
meaning of the Internal Revenue Code) that is "related" to US Unwired
(within the meaning of the Internal Revenue Code) actually or
constructively through stock ownership; and
. the non-U.S. holder certifies, under penalties of perjury that it is not
a U.S. person and provides its name and address in an appropriate form
(currently IRS Form W-8) to us or our agent, or a financial institution
that holds the notes for a holder in the ordinary course of the
institution's business certifies on the holder's behalf that it has
received certification from the holder and gives a copy to us or our
agent.
If a non-U.S. holder is not qualified for an exemption under these rules,
interest and OID paid on the notes may be subject to withholding tax at the
rate of 30% (or any lower applicable treaty rate). The payment of interest and
OID that is effectively connected with a non-U.S. holder's trade or business
within the United States, however, would not be subject to a 30% withholding
tax if the non-U.S. holder provides us or our agent with an adequate
certification (currently IRS Form 4224). This interest and OID, however, would
be subject to U.S. federal income tax on a net basis at the rates applicable to
U.S. persons generally. In addition, a corporate non-U.S. holder may also be
subject to a 30% branch profits tax on interest and OID that is effectively
connected with its trade or business within the United States.
Gain on Disposition of Notes. Non-U.S. holders generally will not be subject
to U.S. federal income tax on gain recognized on a disposition of notes if:
. the gain is not effectively connected with its trade or business within
the United States; and
. for a non-U.S. holder who is an individual, the non-U.S. holder is not
present in the United States for 183 days or more in the taxable year of
disposition and meets other requirements.
Payments received on the disposition of a note by a non-U.S. holder whose
investment in the note is effectively connected with its trade or business
would be subject to U.S. federal income tax on a net basis at the rates
applicable to U.S. persons generally. In addition, if the non-U.S. holder is a
corporation whose investment in the note is effectively connected with its
trade or business within the United States, the payments may also be subject to
a 30% branch profits tax.
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Federal Estate Taxes. A note held by an individual that is a non-U.S. holder
at death generally will not be subject to U.S. federal estate tax because of
his death if:
. the individual does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of US Unwired
entitled to vote; and
. at the time of death, interest payments on the note would not have been
effectively connected with the individual's of a trade or business in the
United States.
Information Reporting; Backup Withholding. Under current U.S. federal income
tax law, a 31% backup withholding tax requirement applies to certain payments
of interest and OID on, and the proceeds of a sale, exchange or redemption of
the notes. We will, where required, report to holders of notes and the IRS the
amount of any payments on the notes and any amount of tax withheld from those
payments.
Generally, non-U.S. holders will not be subject to information reporting or
backup withholding if the non-U.S. holder certifies, under penalties of
perjury, that it is not a U.S. holder and provides its name and address as
described above.
Non-U.S. holders will not be subject to information reporting or backup
withholding on proceeds paid from the disposition of notes made by, to or
through the foreign office of a broker. If the broker is a U.S. person or a
U.S.-related person, however, information reporting (but not backup
withholding) would apply unless the broker has documentary evidence in its
records as to the non-U.S. holder's foreign status and has no actual knowledge
to the contrary, or the non-U.S holder certifies as to its non-U.S. status
under penalties of perjury or otherwise establishes an exemption. Non-U.S.
holders will be subject to information reporting and backup withholding at a
rate of 31% on proceeds paid from the disposition of notes made by, to or
through the U.S. office of a broker, unless the non-U.S. holder certifies as to
its non-U.S. status under penalty of perjury or otherwise establishes an
exemption.
Amounts withheld under the backup withholding rules do not constitute a
separate U.S. federal income tax. Rather, a non-U.S. holder may credit these
amounts against its U.S. federal income tax liability. The IRS will refund to
the non-U.S. holder any amounts withheld over the amount of the non-U.S.
holder's U.S. federal income tax liability if the holder provides the required
information to the IRS.
Non-U.S. holders should be aware that the Treasury Department has revised
its regulations on withholding and information reporting. In general, the
revised regulations do not significantly change the substantive requirements
but make some procedural changes and some clarifications. These regulations
apply to payments made after December 31, 2000, but there are some transition
rules. You should be aware that we do not discuss here the effect of these
revised regulations. You should ask your tax advisor about these revised
regulations.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account in exchange
for old notes acquired as a result of market-making or other trading activities
must acknowledge that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of the new notes. The SEC has
taken the position that a broker-dealer may use this prospectus, as it may be
changed from time to time, for these resales. A broker-dealer may not use this
prospectus for a resale of original sale old notes purchased from us in the
original sale of old notes.
We will not receive any proceeds from any sale of new notes by broker-
dealers. Broker-dealers may sell new notes received for their own account in
the exchange offer from time to time in one or more transactions in the over-
the-counter market, in negotiated transactions, through the writing of options
on the new notes or a combination of these methods of resale. It may sell them
at market prices prevailing at the time of resale, at prices related to those
prevailing market prices or at negotiated prices. A broker-dealer may resell
these notes directly to a purchaser or to or through brokers or dealers. That
broker or dealer may receive a payment from the reselling broker-dealer or the
purchaser for helping with the sale.
Any broker-dealer that resells new notes that were received by it for its
own account in the exchange offer, and any broker or dealer that participates
in a distribution of the new notes, may be an "underwriter" within the meaning
of the Securities Act. If so, any profit on any resale of new notes, and any
payments received by any person, may be considered underwriting compensation
under the Securities Act. The letter of transmittal states that a broker-dealer
that acknowledges that it will deliver, and delivers a prospectus will not be
deemed to have admitted that it is an "underwriter" within the meaning of the
Securities Act.
We will not make any payment to brokers, dealers or others who ask you to
participate in the exchange offer. We have agreed, however, to pay all costs to
comply with the registration rights agreement, including:
. all registration and filing fees and expenses,
. all costs to comply with securities laws,
. all printing expenses, and
. all costs of our lawyers and accountants.
In addition, we have agreed to reimburse the initial purchasers of the old
notes and holders who are following this "Plan of Distribution," as a group,
for the reasonable costs of not more than one lawyer. We have agreed to pay the
holders of the notes for losses specified in the registration rights agreement.
This includes some losses that may arise under the Securities Act.
There has been no public market for the old notes or the new notes prior to
the exchange offer. We do not intend to apply for listing of the new notes on
any securities exchange or for quotation through any automatic quotation
system. We cannot assure you that an active market for the new notes will
develop. If a market for the new notes does develop, future trading prices of
the new notes will depend on many factors, like prevailing interest rates, the
market for similar securities and our results of operations and financial
condition.
122
<PAGE>
LEGAL MATTERS
Correro Fishman Haygood Phelps Walmsley & Casteix, L.L.P. will pass on the
validity of the new notes for us. Thomas G. Henning, the general counsel of US
Unwired, and Lukas, Nace, Gutierrez & Sachs, Chartered, special regulatory
counsel, will pass on other matters for us. Mr. Henning is a director, officer
and principal shareholder of US Unwired.
AVAILABLE INFORMATION
We have filed with the SEC a registration statement on Form S-4 under the
Securities Act to register this exchange offer. This prospectus is a part of
that registration statement. The SEC does not require the prospectus to have
all of the information included in the registration statement or the exhibits
to the registration statement. You will find additional information about us
and the new notes in the registration statement. You may inspect and copy our
registration statement and related exhibits at the SEC's public reference rooms
located at its principal office, 450 Fifth Street, NW, Washington, DC 20549,
and at its regional offices at 7 World Trade Center, 13th Floor, New York, New
York 10048 and the Northwest Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Please call 1-800-SEC-0330 for further
information on the public reference rooms. The SEC also maintains a site on the
World Wide Web (http://www.sec.gov) that contains reports, proxy and
information statements and other information about companies that file
electronically with the SEC. Statements made in this prospectus about legal
documents may not necessarily be complete, and you should read the documents
which are filed as exhibits or schedules to the registration statement or
otherwise filed with the SEC.
The indenture governing the notes requires us to give the holders of the
notes (a) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on forms 10-Q and 10-K if we were
required to file such Forms, including "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and, for our annual information
only, a report on that information by our certified independent accountants,
and (b) all current reports that would be required to be filed with the SEC on
Form 8-K if we were required to file such reports, in each case, within the
time periods specified in the SEC's rules and regulations. When our
registration statement, is effective, we will file this information with the
SEC, as and to the extent provided by Section 15(d) of the Exchange Act. In
addition, we have agreed that, for so long as any notes remain outstanding, we
will furnish the holders of the notes and to securities analysts and
prospective investors, if they ask, the information required by Rule 144(d)(4)
under the Securities Act at any time that we are not subject to Section 13 or
15(d) of the Exchange Act.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of US Unwired Inc. as of December 31, 1998 and 1997, and
for the years then ended and the financial statements of Louisiana Unwired, LLC
as of December 31, 1998 and for the period from January 8, 1998 (inception)
through December 31, 1998, as set forth in their reports, and these financial
123
<PAGE>
statements are included in this prospectus and in the registration statement of
which this prospectus is a part in reliance on Ernst & Young LLP's reports,
given on their authority as experts in accounting and auditing.
KPMG LLP, independent certified public accountants, have audited the
consolidated statements of operations, stockholders' equity and cash flows of
US Unwired Inc. for the year ended December 31, 1996, as set forth in their
report, and these 1996 financial statements are included in this prospectus and
in the registration statement of which this prospectus is a part in reliance on
KPMG LLP's report, given on their authority as experts in accounting and
auditing.
124
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
US UNWIRED INC. AND SUBSIDIARIES
Reports of Independent Auditors.......................................... F-2
Consolidated Balance Sheets.............................................. F-4
Consolidated Statements of Operations.................................... F-5
Consolidated Statements of Stockholders' Equity.......................... F-6
Consolidated Statements of Cash Flows.................................... F-7
Notes to Consolidated Financial Statements............................... F-8
LOUISIANA UNWIRED, LLC
Report of Independent Auditors........................................... F-32
Balance Sheets........................................................... F-33
Statements of Operations................................................. F-34
Statements of Members' Equity............................................ F-35
Statements of Cash Flows................................................. F-36
Notes to Financial Statements............................................ F-37
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
US Unwired Inc.
We have audited the consolidated balance sheets of US Unwired Inc., as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our 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 consolidated financial position
of US Unwired Inc., at December 31, 1998 and 1997, and the consolidated results
of its operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Houston, Texas
April 9, 1999, except for Note 13
as to which the date is
November 8, 1999
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
US Unwired Inc.:
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of US Unwired Inc. and subsidiaries for
the year ended December 31, 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
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 consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and the
cash flows of US Unwired Inc. and subsidiaries for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
KPMG LLP
New Orleans, Louisiana
March 10, 1997
F-3
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
---------------- September 30,
1997 1998 1999
-------- ------- -------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 4,955 $32,475 $ 16,966
Subscriber receivables, net of allowance for
doubtful accounts of $763, $217 and $193..... 8,663 4,419 6,282
Other receivables............................. 417 27 570
Inventory..................................... 2,385 2,541 4,563
Deferred income taxes......................... 2,033 -- --
Prepaid expenses.............................. 2,226 5,855 12,561
Receivables from related parties.............. 592 5,460 4,238
Receivables from officers..................... 81 92 82
-------- ------- --------
Total current assets........................ 21,352 50,869 45,262
Restricted cash in escrow....................... -- 5,164 5,318
Investments in and advances to unconsolidated
affiliates..................................... 8,728 9,835 1,601
Property and equipment, net..................... 38,891 22,565 102,972
Cellular and PCS licenses, net of accumulated
amortization of $10,593, $-0- and $815......... 70,899 -- 7,224
Other assets.................................... 2,263 1,481 5,324
-------- ------- --------
Total assets................................ $142,133 $89,914 $167,701
======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $ 13,383 $ 2,972 $ 11,025
Accrued expenses.............................. 2,957 1,188 3,994
Current maturities of long term debt.......... 552 1,341 1,991
-------- ------- --------
Total current liabilities................... 16,892 5,501 17,010
Long term debt, net of current maturities....... 99,514 27,726 103,243
Deferred income taxes........................... 1,798 3,837 3,634
Minority interest............................... -- -- 737
Commitments and contingencies
Stockholders' 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 11,250,000 shares... 113 113 113
Additional paid-in capital.................... 1,835 1,835 1,835
Retained earnings............................. 21,981 50,902 41,129
-------- ------- --------
Total stockholders' equity.................. 23,929 52,850 43,077
-------- ------- --------
Total liabilities and stockholders'
equity................................... $142,133 $89,914 $167,701
======== ======= ========
</TABLE>
See accompanying notes to the financial statements.
F-4
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended December 31, September 30,
-------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- -------- ------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Service revenues:
Subscriber.................... $45,572 $53,255 $ 48,723 $39,920 $ 32,671
Roaming....................... 13,727 16,079 11,914 10,210 7,553
Merchandise sales............. 1,885 2,685 3,915 3,463 3,670
Management fees............... 624 1,376 4,455 3,304 1,499
Other revenue................. 85 1,273 2,704 2,026 168
------- ------- -------- ------- --------
Total revenues.............. 61,893 74,668 71,711 58,923 45,561
------- ------- -------- ------- --------
Operating expenses:
Cost of services.............. 16,513 20,111 18,586 15,245 15,787
Merchandise cost of sales..... 5,436 8,943 10,777 9,095 7,596
General and administrative.... 10,560 12,682 17,156 12,363 16,104
Sales and marketing........... 8,068 10,893 10,886 9,288 9,489
Depreciation and
amortization................. 9,153 12,478 9,831 8,065 14,833
------- ------- -------- ------- --------
Total operating expenses.... 49,730 65,107 67,236 54,056 63,809
------- ------- -------- ------- --------
Operating income (loss)......... 12,163 9,561 4,475 4,867 (18,248)
Other income (expense):
Interest expense.............. (6,539) (8,580) (6,157) (5,484) (5,691)
Interest income............... 317 1,690 1,778 780 1,396
Other expenses................ -- (1,082) -- -- --
Loss on sale of assets........ (9) -- (114) -- --
Gain on sale of certain
markets...................... -- -- 57,364 57,364 --
Gain on sale of PCS customer
base to affiliate............ -- -- 2,285 2,285 --
------- ------- -------- ------- --------
Total other income
(expense).................. (6,231) (7,972) 55,156 54,945 (4,295)
------- ------- -------- ------- --------
Income (loss) before income
taxes, extraordinary item,
minority interest, and equity
in income (losses) of
affiliates..................... 5,932 1,589 59,631 59,814 (22,543)
Income tax expense (benefit).... 2,421 95 17,726 20,155 (5,218)
------- ------- -------- ------- --------
Income (loss) before
extraordinary item, minority
interest and equity in income
(losses) of affiliates......... 3,511 1,494 41,905 39,659 (17,325)
Extraordinary item--
extinguishment of debt, net of
income tax..................... -- -- -- -- (477)
Minority interest in losses of
subsidiaries................... 308 134 -- -- 8,839
Equity in income (losses) of
affiliates..................... 35 (3,137) (12,984) (6,646) (810)
------- ------- -------- ------- --------
Net income (loss)............... $ 3,854 $(1,509) $ 28,921 $33,013 $ (9,773)
======= ======= ======== ======= ========
</TABLE>
See accompanying notes to the financial statements.
F-5
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Class Class
A B Additional
Preferred Common Common Paid-in Retained
Stock Stock Stock Capital Earnings Total
--------- ------ ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... -- -- $112 $1,656 $19,636 $21,404
Issuance of 66,574.14
shares of Class B
Common Stock........... -- -- 1 179 -- 180
Net income.............. -- -- -- -- 3,854 3,854
---- ---- ---- ------ ------- -------
Balance at December 31,
1996................... -- -- 113 1,835 23,490 25,438
Net loss................ -- -- -- -- (1,509) (1,509)
---- ---- ---- ------ ------- -------
Balance at December 31,
1997................... -- -- 113 1,835 21,981 23,929
Net income.............. -- -- -- -- 28,921 28,921
---- ---- ---- ------ ------- -------
Balance at December 31,
1998................... -- -- 113 1,835 50,902 52,850
Net loss (unaudited).... -- -- -- -- (9,773) (9,773)
---- ---- ---- ------ ------- -------
Balance at September 30,
1999 (unaudited)....... $-- $-- $113 $1,835 $41,129 $43,077
==== ==== ==== ====== ======= =======
</TABLE>
See accompanying notes to the financial statements.
F-6
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
-------------------------- -------------------
1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C>
-------------------------- -------------------
<CAPTION>
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss).............. $ 3,854 $(1,509) $ 28,921 $ 33,013 $ (9,773)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Extinguishment of debt........ -- -- -- -- 477
Depreciation and
amortization................. 9,153 12,478 9,831 8,065 14,833
Minority interest............. (308) (134) -- -- (8,839)
Provision for bad debts....... 1,876 3,521 744 -- (203)
Deferred tax expense
(benefit).................... 332 (83) 4,601 (2,082) --
Unearned revenue.............. 53 (136) (105) 224 (509)
(Gain) loss on sale of
assets....................... 9 -- (59,535) (59,649) --
Equity in loss (income) of
affiliates................... (35) 3,137 12,984 6,646 810
Non-cash compensation......... 180 -- -- -- 533
Interest income on restricted
cash in escrow............... -- -- (164) (81) (154)
Changes in operating assets
and liabilities, net of
acquisitions and disposals
Subscriber receivables........ (3,879) (4,123) (351) 455 (1,501)
Other receivables............. (397) (458) 1,623 1,509 (405)
Inventory..................... (1,576) 922 (1,082) (3,184) (1,673)
Prepaid expenses.............. (991) (1,095) (4,264) 5,427 (6,400)
Receivables from related
parties...................... -- -- (2,450) 558 1,636
Other assets.................. (851) (606) (298) (266) 336
Accounts payable.............. 1,031 2,333 (4,417) (9,027) 1,469
Accrued expenses.............. 2,113 (2,208) (704) (772) 1,734
Prepaid income taxes.......... -- -- -- -- --
------- ------- -------- --------- --------
Net cash provided by (used
in) operating activities.... 10,564 12,039 (14,666) (19,164) (7,629)
------- ------- -------- --------- --------
Cash flows from investing
activities:
Purchases of property and
equipment..................... (7,223) (12,559) (20,575) (13,257) (41,411)
Proceeds from sale of property
and equipment................. 611 -- -- -- --
Acquisition of Alabama 3....... (17,871) -- -- -- --
Acquisition of Alabama 4....... (27,776) -- -- -- --
Transfer to escrow............. 1,110 -- -- -- --
Distributions from
unconsolidated affiliates..... 2,302 -- 813 793 312
Investments in unconsolidated
affiliates.................... (3,643) (5,040) (15,416) (11,642) (2,642)
Net proceeds from sale of
certain markets............... -- -- 154,877 154,877 --
Purchase of licenses........... -- -- (6,514) (6,183) (1,564)
Cash acquired from
consolidation of previous
unconsolidated affiliates..... -- -- -- -- 3,035
------- ------- -------- --------- --------
Net cash provided by (used
in) investing activities.... (52,490) (17,599) 113,185 124,588 (42,270)
------- ------- -------- --------- --------
Cash flows from financing
activities:
Proceeds from long-term debt... 50,405 6,770 29,724 29,724 38,069
Principal payments on long-term
debt.......................... (6,555) (2,604) (100,723) (100,712) (33)
Debt issuance cost............. (452) (225) -- -- (3,646)
------- ------- -------- --------- --------
Net cash provided by (used in)
financing activities.......... 43,398 3,941 (70,999) (70,988) 34,390
------- ------- -------- --------- --------
Net increase (decrease) in cash
and cash equivalents.......... 1,472 (1,619) 27,520 34,436 (15,509)
Cash and cash equivalents at
beginning of year............. 5,102 6,574 4,955 4,955 32,475
======= ======= ======== ========= ========
Cash and cash equivalents at
end of year................... $ 6,574 $ 4,955 $ 32,475 $ 39,391 $ 16,966
======= ======= ======== ========= ========
Supplemental cash flow
disclosures:
Cash paid for interest......... $ 6,023 $ 9,410 $ 5,008 $ 4,116 $ 4,367
======= ======= ======== ========= ========
Cash paid for income taxes..... $ 2,869 $ 1,248 $ 17,488 $ 16,671 $ 778
======= ======= ======== ========= ========
Non-cash activities:
Property purchases in accounts
payable....................... $ -- $ 5,495 $ 974 $ 6,227 $ 7,362
======= ======= ======== ========= ========
Distribution receivable from
affiliate..................... $ -- $ -- $ 120 $ -- $ --
======= ======= ======== ========= ========
Contribution of assets to
affiliate..................... $ -- $ -- $ 506 $ -- $ --
======= ======= ======== ========= ========
</TABLE>
See accompanying notes to the financial statements.
F-7
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Description of Business and Summary of Significant Accounting Policies
(a) Description of Organization
US Unwired Inc. (the "Company") is principally engaged in the ownership and
operation of wireless communications systems in Southwest Louisiana and
Southeast Texas. At December 31, 1998, the Company owns and operates cellular
and paging communications systems in two Rural Service Areas ("RSA's") and one
Metropolitan Service Areas ("MSA's"). The Company was incorporated as Mercury,
Inc. in 1967 by the principal shareholders of Cameron Communications
Corporation ("Cameron") to provide complementary 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
stockholders. In 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 stockholders, 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 stockholders, resulting in the combination of all
wireless telecommunications businesses within the Company.
The combination of the wireless communications business represented 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 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 shares have been retroactively adjusted to
give effect to the issuance of Class B Common Stock described above.
(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 stockholders in excess of the minority interest in the
equity capital of the subsidiary are not eliminated in consolidation.
See Note 13 for additional information.
F-8
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(c) Cash Equivalents
The Company considers all highly liquid investments with original maturities
of three months or less when purchased to be cash equivalents.
(d) Inventory
Inventory consists of analog and digital telephones, pagers and related
accessories and is carried at cost. Cost is determined by the moving average
method, which approximates 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........................................................... 39
Leasehold improvements.............................................. 3 to 5
Cellular facilities and equipment................................... 5
Furniture and fixtures.............................................. 5 to 7
Vehicles............................................................ 5
</TABLE>
(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.
Other assets primarily 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. Accumulated amortization at December 31, 1997 and 1998 was $10,260,000
and $49,000, respectively.
(g) Impairment of Long-Lived Assets
The Company assesses long-lived assets for impairment under Statement of
Financial Accounting Standards ("SFAS") 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS 121
requires that long-lived assets and certain identifiable intangibles to be held
and used or disposed of by an entity be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. The Company periodically evaluates the recoverability of
the carrying amounts of its
F-9
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
licenses and property and equipment in each market, as well as the depreciation
and amortization periods based on estimated undiscounted future cash flows and
other factors to determine whether current events or circumstances warrant
reduction of the carrying amounts or acceleration of the related amortization
period.
(h) Investments in Unconsolidated Affiliates
The Company's investments in less than majority-owned affiliated companies
are accounted for using the equity method and equity in earnings are reported
as equity in income of affiliates.
(i) 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. Service
revenues include revenues for charges to subscribers for both access to and
usage of the Company's cellular and paging networks. These revenues are
recognized as they are earned by the Company. Revenues from the sales of
merchandise are recognized when the merchandise is provided to the customer.
(j) Advertising Costs
Advertising costs are charged to expenses as incurred. For the years ended
December 31, 1996, 1997 and 1998, approximately $1,626,000, $2,203,000 and
$3,658,000, respectively, of advertising costs were incurred.
(k) Commissions
Commissions are paid to sales agents for customer activations and are
expensed in the month the customer is activated within the cellular system.
(l) Income Taxes
The Company accounts for deferred income taxes using the asset and liability
method, under which deferred tax assets and liabilities are recognized for the
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.
(m) Stock Compensation Arrangements
The Company accounts for its stock compensation arrangements under the
provisions of APB 25, Accounting for Stock Issued to Employees.
F-10
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(n) 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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
(o) Concentrations of Credit Risk
Financial instruments which potentially expose the Company to concentrations
of credit risk 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.
(p) Reclassifications
Certain reclassifications have been made to the 1996 and 1997 financial
statements to conform to the 1998 presentation.
(q) Unaudited Interim Information
The financial information for the six months ended June 30, 1998 and 1999
has been prepared without audit. Certain information and footnote disclosures
normally included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted from
the unaudited interim financial information. In the opinion of management of
the Company, the unaudited interim financial information includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation. Results of operations for the interim periods are not
necessarily indicative of the results of operations for the respective full
years.
(2) Acquisitions and Dispositions of Markets
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 $17,900,000. 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
$27,800,000. 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 dates of the acquisitions. The Company recorded cellular licenses
acquired in these transactions in the amount of $39,900,000 which are being
amortized over a twenty-year period using the straight-line method.
Effective July 1, 1998, the Company sold substantially all of the assets
related to its Kansas, Mississippi and Alabama markets, as well as its majority
ownership interest in MS 34 for
F-11
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
approximately $161,500,000, subject to purchase price adjustments as defined in
the sale agreement. Approximately $5,000,000 was placed in escrow for two years
from closing date to settle any adjustments to the purchase price. The cash in
escrow and related interest income has been recorded as restricted cash in
escrow in the accompanying consolidated balance sheet.
In late 1997, the Company began marketing PCS, which is a new generation of
wireless communications offering customers advanced, secure, two-way digital
wireless services and applications. Effective August 1, 1998, the Company sold
certain PCS subscribers and related assets to Meretel for $4.3 million in cash
and $1.5 million in additional ownership interest in Meretel. In connection
with this transaction, a gain of approximately $2.3 million has been reflected
in the accompanying consolidated statement of operations.
On September 30, 1998, the Company acquired substantially all assets and
assumed certain liabilities of Maas.net, LLC, ("Maas.net"), a related party.
Maas.net is a provider of Internet access services. As consideration, the
Company assumed $620,000 of the indebtedness of Maas.net. On October 1, 1998,
the Company contributed these assets, with a fair value of $506,000, to LEC
Unwired, LLC (LEC Unwired), an unconsolidated affiliate.
See Note 13 for additional information.
(3) Property and Equipment
Major categories of property and equipment were as follows:
<TABLE>
<CAPTION>
December 31,
-------------- September 30,
1997 1998 1999
------ ------- -------------
(In thousands) (unaudited)
<S> <C> <C> <C>
Land.......................................... $ 779 $ 1,061 $ 1,061
Buildings..................................... 787 1,946 2,007
Leasehold Improvements........................ 271 961 1,373
Cellular facilities and equipment............. 49,233 34,680 117,586
Furniture and fixtures........................ 1,263 1,477 9,602
Vehicles...................................... 324 240 512
Construction in progress...................... 13,070 1,328 7,303
------ ------- --------
65,727 41,693 139,444
Less accumulated depreciation................. 2,683 19,128 36,472
------ ------- --------
$3,889 $22,565 $102,972
====== ======= ========
</TABLE>
The Company recorded depreciation expense of $5,513,000, $5,867,000 and
$6,444,000 during the years ended December 31, 1996, 1997 and 1998,
respectively.
F-12
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(4) Investments in Unconsolidated Affiliates:
Investments in unconsolidated affiliates consists of the following:
<TABLE>
<CAPTION>
December 31,
Percentage -------------- September 30,
Ownership 1997 1998 1999
---------- ------ ------- -------------
(In thousands) (unaudited)
<S> <C> <C> <C> <C>
Meretel......................... 24.33% $5,547 $(1,971) $(1,939)
Command Connect, LLC ("Command
Connect")...................... 50.00% 2,532 1,361 2,626
GTE Mobilnet of Texas RSA #21
Limited Partnership ("GTE
#21").......................... 25.00% 649 688 622
Louisiana Unwired, LLC ("LA
Unwired")...................... 50.00% -- 7,996 --
LEC Unwired..................... 50.00% -- 1,761 --
------ ------- -------
$8,728 $ 9,835 $ 1,601
====== ======= =======
</TABLE>
Prior to June 1998, Meretel was the owner and operator of PCS licenses in
Lafayette, Louisiana; Baton Rouge, Louisiana; and Beaumont, Texas. On June 8,
1998, Meretel entered into an agreement with Sprint PCS in which Meretel agreed
to manage Sprint PCSs networks within each Basic Trading Area in which Meretel
operates. Pursuant to this agreement, Sprint PCS pays Meretel 92% of collected
revenues, as defined, from customers in these markets. The agreement requires
that Meretel build out the PCS networks in accordance with FCC requirements and
deadlines. Meretel and Sprint PCS will share equally the costs for any
necessary relocation of microwave sources that interfere with Sprint PCSs
spectrum. In conjunction with this agreement, Meretel elected to participate in
the FCC's amnesty program whereby Meretel surrendered its licenses in exchange
for extinguishment of all outstanding debt and related accrued interest due to
the FCC.
Command Connect and LA Unwired either own PCS licenses, or have rights to
use licenses owned by Sprint PCS under management agreements, in Louisiana,
Texas, Arkansas, Mississippi, and Oklahoma. As with Meretel, Sprint PCS pays
92% of collected revenues, as defined, from customers in these service areas.
Command Connect originally purchased the owned licenses, and holds the licenses
until such time as LA Unwired builds out the network for these licenses. At
that time, the license is transferred from Command Connect to LA Unwired, who
commences operations. At December 31, 1998, LA Unwired was operating in four
Louisiana markets (Lake Charles, Shreveport, Alexandria and Monroe).
GTE # 21 operates a cellular network in Texas RSA #21.
LEC Unwired is primarily engaged in providing competitive local telephone
and Internet services in Louisiana and east Texas.
F-13
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Summary financial information for the above-mentioned unconsolidated
affiliates is as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------- September 30,
1996 1997 1998 1999
------- -------- -------- -------------
(In thousands) (unaudited)
<S> <C> <C> <C> <C>
Meretel:
Total assets.................. $74,382 $115,218 $ 52,552 $ 40,598
Total liabilities............. 61,707 99,913 64,951 53,747
------- -------- -------- --------
Partners' capital............. $12,675 $ 15,305 $(12,399) $(13,149)
======= ======== ======== ========
Revenue....................... $ -- $ 173 $ 8,353 $ 16,615
======= ======== ======== ========
Operating expenses............ $ 1,867 $ 8,772 $ 30,056 $ 27,772
======= ======== ======== ========
Net loss...................... $(2,147) $(12,707) $(29,704) $ (3,561)
======= ======== ======== ========
Command Connect:
Total assets.................. $ 4,303 $ 14,402 $ 5,178 $ 6,152
Total liabilities............. 378 9,337 2,456 2,291
------- -------- -------- --------
Members' capital.............. $ 3,925 $ 5,065 $ 2,722 $ 3,861
======= ======== ======== ========
Revenue....................... $ -- $ -- $ 11 $ 4
======= ======== ======== ========
Operating expenses............ $ 75 $ 469 $ 463 $ 352
======= ======== ======== ========
Net loss...................... $ (75) $ (860) $ (452) $ (349)
======= ======== ======== ========
GTE #21:
Total assets.................. $ 2,613 $ 2,646 $ 3,285 $ N/A
Total liabilities............. 62 51 51 N/A
------- -------- -------- --------
Members' capital.............. $ 2,551 $ 2,595 $ 3,234 $ N/A
======= ======== ======== ========
Revenue....................... $ 2,271 $ 2,877 $ 2,572 $ N/A
======= ======== ======== ========
Operating expenses............ $ 1,627 $ 782 $ 798 $ N/A
======= ======== ======== ========
Net income.................... $ 1,646 $ 2,137 $ 1,808 $ N/A
======= ======== ======== ========
LA Unwired:
Total assets.................. $ -- $ -- $ 67,248 $ N/A
Total liabilities............. -- -- 51,256 N/A
------- -------- -------- --------
Members' capital.............. $ -- $ -- $ 15,992 $ N/A
======= ======== ======== ========
Revenue....................... $ -- $ -- $ 1,509 $ N/A
======= ======== ======== ========
Operating expenses............ $ -- $ -- $ 9,633 $ N/A
======= ======== ======== ========
Net loss...................... $ -- $ -- $ (9,474) $ N/A
======= ======== ======== ========
LEC Unwired:
Total assets.................. $ -- $ -- $ 6,448 $ N/A
Total liabilities............. -- -- 3,433 N/A
------- -------- -------- --------
Members' capital.............. $ -- $ -- $ 3,015 $ N/A
======= ======== ======== ========
Revenue....................... $ -- $ -- $ 570 $ N/A
======= ======== ======== ========
Operating expenses............ $ -- $ -- $ 3,081 $ N/A
======= ======== ======== ========
Net loss...................... $ -- $ -- $ (2,491) $ N/A
======= ======== ======== ========
</TABLE>
F-14
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(5) Accrued Expenses
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
December 31,
------------- September 30,
1997 1998 1999
------ ------ -------------
(In
thousands) (unaudited)
<S> <C> <C> <C>
Accrued taxes, other than income............... $ 139 $ 586 $1,321
Accrued payroll................................ 1,310 121 858
Accrued compensation........................... -- -- 533
Unearned revenue and customer deposits......... 496 56 751
Accrued interest expense....................... -- 121 31
Other.......................................... 1,012 304 500
------ ------ ------
$2,957 $1,188 $3,994
====== ====== ======
</TABLE>
(6) Long-Term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31,
--------------- September 30,
1997 1998 1999
------- ------- -------------
(In thousands) (unaudited)
<S> <C> <C> <C>
Debt outstanding under credit facilities:
Bank credit facility..................... $90,500 $28,500 $104,700
Vendor financing......................... 9,496 567 534
Other notes payable to related parties..... 70 -- --
------- ------- --------
Total long-term debt................... 100,066 29,067 105,234
Less current maturities.................... 552 1,341 1,991
------- ------- --------
Long-term obligations, excluding current
maturities................................ $99,514 $27,726 $103,243
======= ======= ========
</TABLE>
Maturities of long-term debt for the five years succeeding December 31, 1998
are as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
1999....................................................... $1,341
2000....................................................... 3,287
2001....................................................... 3,938
2002....................................................... 4,590
2003....................................................... 5,889
</TABLE>
The notes outstanding under the bank credit facility provide for quarterly
interest payments with quarterly amortization of principal beginning in June
1999 through June 2005. The notes outstanding under the vendor credit facility
provide for quarterly interest payments only through September 1997 when
quarterly amortization of principal commences with final maturity in January
2003. Interest rates 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. Weighted
average interest rates under the credit facilities were 8.31%, 8.45% and 8.40%
at December 31, 1996, 1997 and 1998, respectively. Substantially all of the
assets of the Company are pledged to secure the
F-15
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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. At December 31, 1998, the Company was not in
compliance with certain of these restrictive covenants. The Company has
obtained a waiver from the lender for such covenant violations.
See Note 13 for additional information.
(7) Income Taxes
Income tax expense (benefit) for the years ended December 31, 1996, 1997 and
1998 is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------- ---- -------
(In thousands)
<S> <C> <C> <C>
Federal:
Current............................................ $ 1,869 $-- $11,287
Deferred........................................... 297 (70) 4,020
------- ---- -------
2,166 (70) 15,307
------- ---- -------
State:
Current............................................ 220 178 1,838
Deferred........................................... 35 (13) 581
------- ---- -------
255 165 2,419
------- ---- -------
$ 2,421 $ 95 $17,726
======= ==== =======
</TABLE>
Income tax expense differed from the amounts computed by applying U.S.
federal income tax rate of 34% for the years ended December 31, 1996, 1997, and
1998, to income before income taxes, minority interest and equity in income of
affiliates as a result of the following:
<TABLE>
<CAPTION>
1996 1997 1998
------ ------ -------
(In thousands)
<S> <C> <C> <C>
Computed "expected" tax expense................... $2,017 $ 540 $20,275
Surtax............................................ -- -- 636
Change in valuation allowance..................... 193 652 --
State income taxes, net of Federal income taxes... 156 165 1,989
Equity in income (loss) of affiliates............. 12 (1,066) (4,549)
Other, net........................................ 43 (196) (625)
------ ------ -------
$2,421 $ 95 $17,726
====== ====== =======
</TABLE>
During 1998, the Company utilized all net operating losses that were carried
forward from 1997. The benefit realized from net operating loss carry forwards
totaled approximately $1,586,000.
F-16
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The tax effects of temporary differences that give rise to the significant
components of deferred tax assets and deferred tax liabilities at December 31,
are presented below:
<TABLE>
<CAPTION>
1997 1998
------- -------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Operating loss carry forwards.......................... $ 3,955 $ --
Allowance for doubtful accounts........................ 307 90
Inventory reserve...................................... -- 64
Unearned revenue....................................... 198 40
Start-up losses on equity investees.................... 545 389
Intangible assets...................................... -- 240
Other.................................................. 115 209
------- -------
Gross deferred tax asset............................. 5,120 1,032
Less valuation allowance............................... 2,427 --
------- -------
Net deferred tax asset............................... 2,693 1,032
------- -------
Deferred tax liabilities:
Fixed assets, principally due to differences in
depreciation.......................................... (2,335) (2,927)
Deferred gain from sale of PCS customers............... -- (1,942)
Other.................................................. (123) --
------- -------
Deferred tax liabilities............................. (2,458) (4,869)
------- -------
Net deferred tax asset/(liability)................... $ 235 $(3,837)
======= =======
</TABLE>
In assessing the realizability of deferred tax assets at December 31, 1997,
the Company considered whether it was 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 provided a
valuation allowance to reduce the carrying value of deferred tax assets related
to net operating losses of MS 34, a majority owned subsidiary, to the amounts
that can be realized through future reversals of existing taxable temporary
differences. As MS 34 was sold in 1998 (see Note 2), the operating loss carry
forward and the related valuation allowances have been eliminated.
Prior to consummation of the reorganization described in Note 1, certain of
the Company's cellular and paging activities were included in the consolidated
federal income tax returns of Cameron and the Company. Effective November 1,
1996, the Company files a consolidated federal income tax return which includes
the Company, and its qualifying subsidiaries. MS 34 filed a separate federal
income tax return prior to its sale in 1988.
The Company has obtained a private letter ruling from the Internal Revenue
Service (IRS) 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 land-based telephone business. In addition, tax counsel for the
Company has informed it that the merger of Cameron into the Company qualifies
as a
F-17
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
(8) Stockholder's 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 January 1996, the Company issued to key employees shares of Common Stock,
that, after the reclassification of Common Stock discussed in Note 1, totaled
66,572.14 shares of Class B Common Stock. The shares were issued at the fair
value of the Company's Common Stock, based upon an independent valuation, at
the date of the grant. As a result, the Company recognized compensation expense
of $180,000 in 1996. There were no issuances of Common Stock to employees in
1997 or 1998.
In 1997, the Company withdrew from an initial public offering of its common
stock. As a result, costs totaling $1,082,000 which were previously deferred
were expensed and are included in other expenses.
In 1998, the Board of Directors adopted the US Unwired Inc. 1998 Equity
Incentive Plan (the "1998 Equity Plan"). The aggregate amount of Common Stock
with respect to which options or other awards may be granted may not exceed
1,600,000 shares. As of December 31, 1998, the Company had not granted any
options or other awards under the 1998 Equity Plan.
See Note 13 for additional information.
(9) Commitments and Contingencies
Employees of the Company participate in a 401(k) retirement plan (the
"401(k) plan") sponsored by a related party. Employees are eligible to
participate in the 401(k) plan when the employee has completed six months of
service. 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
F-18
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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. Contribution expense related
to the 401(k) plan was approximately $178,000, $264,000, and $340,000 for the
years ended December 31, 1996, 1997, and 1998, respectively.
The Company is a party to various noncancellable operating leases for
facilities and equipment. Future minimum lease payments due under
noncancellable operating leases with terms in excess of one year are as
follows:
<TABLE>
<CAPTION>
Year ending December 31, (In thousands)
<S> <C>
1999...................................................... $958
2000...................................................... 833
2001...................................................... 685
2002...................................................... 130
2003...................................................... 117
</TABLE>
Rental expense was $768,000, $777,000 and $1,567,000 for the years ended
December 31, 1996, 1997, and 1998, 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 $5,928,000, plus
interest and fees thereon, pursuant to a loan agreement dated May 16, 1997,
related to bank financing obtained by Meretel which matures in 2007. The
Company has also guaranteed $8,100,000, plus interest and fees, pursuant to a
loan agreement dated May 13, 1998, related to bank financing for LA Unwired
which matures in 2006.
On March 31, 1999, the Company entered into an undertaking agreement as
required by LEC Unwired's loan agreements entered into in July 1998. This
undertaking agreement obligates the Company to provide cash capital
contributions, not to exceed $4.5 million, to LEC Unwired if LEC Unwired is not
in compliance with specified financial covenants in its loan agreements. The
amount of cash that the Company is required to provide depends on the covenant
with which LEC Unwired has failed to comply.
F-19
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(10) Supplemental Cash Flow Disclosure
The Company consummated the acquisition of various cellular operations and
certain other assets during 1996. In connection with these acquisitions, the
following assets were acquired and liabilities assumed:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Property and equipment..................................... $ 5,253
Intangible assets.......................................... 39,825
Other assets and liabilities excluding cash
and cash equivalents...................................... 569
-------
$45,647
=======
</TABLE>
Included in the acquisition amounts for the year ended December 31, 1996, is
$1,735,000 placed in escrow as restricted cash and a corresponding liability
was recorded in accrued expenses. During 1996, $625,000 of the original escrow
was paid to the seller with the remaining balance paid during 1997.
(11) 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 term nature of these
items. The estimated fair value of the Company's long-term debt at December 31,
1997 and 1998 was $101,801,000 and $29,040,000, compared to its carrying value
of $100,066,000 and $29,068,000. 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.
(12) Related Party Transactions
During the years ended December 31, 1996, 1997, and 1998, the Company paid
$304,000, $318,000, and $290,000, respectively, to a company owned by certain
of the Company's principal stockholders for voice mail services which the
Company uses in its business and also resells to its cellular subscribers.
The Company contracts with Unibill, Inc. ("Unibill"), a subsidiary of
Cameron, for all subscriber billing. The aggregate amounts paid to Cameron for
such services during 1996, 1997, and 1998 totaled $1,605,000, $2,674,000 and
$2,923,000, respectively.
F-20
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
From October 1997 through July 1998, the Company purchased PCS wholesale
minutes from Meretel pursuant to an oral agreement and resold the minutes to
the Company's customers. The aggregate amounts paid to Meretel for these
minutes during the years ended December 31, 1997 and 1998 totaled $105,000 and
$1,222,000, 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, 1996, 1997, and 1998, totaled $803,000, $951,000, and $764,000,
respectively.
In 1996, the Company sold land to a related party for $611,000, which
approximated the carrying value.
The Company has entered into management agreements with several affiliated
entities. During 1996, 1997, and 1998, the Company recorded $624,000,
$1,375,000, and $4,455,000, respectively, in management fee revenues pursuant
to these agreements. During 1997, the Company entered into an agreement with
Meretel whereby the Company receives a commission for each customer activated
for Meretel. Commissions received under this agreement totaled approximately
$1,200,000 in 1997 and $1,900,000 in 1998.
(13) Subsequent Events
From January 8, 1999 through September 30, 1999, the Company made a series
of capital contributions to LA Unwired and LEC Unwired which increased its
ownership percentage in LA Unwired and LEC Unwired to 71% and 53%,
respectively. As a result, the Company's operating results during 1999 include
the operations of LA Unwired and LEC Unwired on a consolidated basis.
On June 23, 1999, LA Unwired entered into senior credit facilities for $130
million with certain lenders. The senior credit facilities provide for an $80
million reducing revolving credit facility, which matures on September 30,
2007, and a $50 million delay draw term loan, which matures on September 30,
2007. All loans made under the senior credit facilities bear interest at
variable rates tied to the prime rate, the federal funds rate or the London
Interbank Offering Rate. The senior credit facilities are secured by a first
priority security interest in all tangible and intangible assets of LA Unwired
(including the owned PCS licenses, if legally permitted); a pledge by the
Company and Cameron of 100% of the ownership interests in LA Unwired; a pledge
by LA Unwired of its ownership interest in any of LA Unwired's present and
future subsidiaries; and an assignment of all Sprint PCS agreements and any
network contract (including software rights).
A portion of the proceeds from this new credit facility were used to
extinguish LA Unwired's existing credit facility. As a result, the unamortized
debt issuance costs related to this existing credit facility, totaling
$614,000, were written off, net of tax of $134,000, as an extraordinary item.
F-21
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On September 7, 1999, the Company entered into an agreement with Meretel to
receive an 80% interest in each of the Beaumont and Lufkin BTA markets in
exchange for a reduction in the Company's ownership interest in Meretel from
24.33% to 13.5%. Additionally, this transaction resulted in a similar reduction
in the Company's guarantee of Meretel's debt.
Subsequent to December 31, 1998, the Board of Directors amended and modified
the 1998 Equity Plan to the US Unwired Inc. 1999 Equity Incentive Plan (the
"1999 Equity Plan"). As part of this amendment, the maximum aggregate amount of
Common Stock with respect to which options or other awards may be granted was
increased from 1,600,000 to 2,300,000 shares. On July 16, 1999, the Company
granted stock options for a total of 664,600 shares under the 1999 Equity Plan.
These options will vest over a four year period and have an exercise price of
$6.00 per share except for 166,600 options which have an exercise price of
$26.55 per share. Additionally, another 425,400 shares were granted on November
8, 1999 with an exercise price of $26.55 per share.
On September 27, 1999, the Company completed a reorganization by which the
shareholders of US Unwired Inc. exchanged all of their shares of common stock
for an equal number of shares with the same rights and privileges in "new" US
Unwired (the Holding Company) and "old" US Unwired changed its name to Unwired
Telecom Corp. All outstanding stock options were exchanged for stock options of
the Holding Company at the same exchange ratio. As a result, Unwired Telecom
Corp. is now a wholly-owned subsidiary of the Holding Company. This
reorganization has been accounted for at historical cost in a manner similar to
that in pooling of interests accounting.
Effective October 1, 1999, US Unwired entered into senior credit facilities
for $130.0 million. The senior credit facilities provide for an $80.0 million
reducing revolving credit facility, which matures on September 30, 2007, and a
$50.0 million delay draw term loan, which matures on September 30, 2007. The
reducing revolver will be permanently reduced in quarterly installments
beginning on June 30, 2000, in amounts which vary between $1.3 million and $6.0
million. The term loan will be amortized in quarterly installments beginning on
June 30, 2003, in quarterly amounts which vary between $1.3 million and $3.7
million. Interest on all loans made under the senior credit facilities bear
interest at variable rates tied to the prime rate, the federal funds rate or
the London Interbank Offering Rate.
These senior credit facilities require US Unwired to pay an annual
commitment fee ranging from 1.5% to 1% of the unused commitment under the
senior credit facilities. The senior credit facilities are secured by a first
priority security interest in all tangible and intangible assets of US Unwired
(other than the corporate headquarters building), LA Unwired and Unwired
Telecom (including the owned PCS licenses, to the extent legally permitted); a
pledge by US Unwired and Cameron of 100% of the ownership interests in LA
Unwired, a pledge by US Unwired of its ownership interest in Unwired Telecom;
and an assignment by LA Unwired of all Sprint PCS agreements and any network
contract (including software rights).
In connection with the execution of the above mentioned US Unwired senior
credit facilities, LA Unwired's existing $130 million senior credit facilities
and US Unwired's existing bank credit
F-22
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
facility were extinguished. As a result, the unamortized debt issuance costs
related to these existing credit facilities, totaling $2,380,000, were written
off in October 1999, net of tax of $904,000, as an extraordinary item.
On October 29, 1999, the Holding Company issued $209.2 million of 13 3/8%
Senior Subordinated Discount Notes due 2009 ("the Notes"). The Notes are fully
and unconditionally guaranteed by one wholly owned and one non-wholly owned
subsidiary of the Holding Company (collectively "Guarantor Subsidiaries" and
individually "Guarantor"). Each of the guarantees is a general unsecured
obligation of the Guarantor and will rank equally in right of payment to all of
our existing and future senior subordinated indebtedness and senior in right of
payment of existing and future obligations that are expressly subordinated in
right to payment to the Notes. The Notes will rank junior to all existing and
future senior debt. The following condensed consolidating balance sheets as of
December 31, 1998 and 1997 and the related condensed consolidating statements
of operations and cash flows for each of the three years in the period ended
December 31, 1998 sets forth certain financial information concerning the
Guarantor and non-Guarantor Subsidiaries.
F-23
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
------------------------------------------------------------------------------
Guarantor Subsidiaries
-------------------------- Non-
US Unwired LA Guarantor Consolidated
Unwired Inc. Telecom Corp. Unwired, LLC Subsidiaries Eliminations Total
------------ ------------- ------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATING
BALANCE SHEET
Current asset:
Cash and cash
equivalents.......... $ -- $32,475 $ 1,350 $1,686 $ (3,036) $32,475
Subscriber
receivables, net..... -- 4,419 362 -- (362) 4,419
Other receivables..... -- 27 -- -- -- 27
Inventory............. -- 2,541 350 -- (350) 2,541
Prepaid expenses...... -- 5,855 244 61 (305) 5,855
Receivables from
related parties...... -- 5,460 872 (365) (507) 5,460
Receivables from
officers............. -- 92 -- -- -- 92
------- ------- ------- ------ -------- -------
Total current
assets............. -- 50,869 3,178 1,382 (4,560) 50,869
Restricted cash
escrow............... -- 5,164 -- -- -- 5,164
Investments in
subsidiaries......... 113 9,835 -- -- (113) 9,835
Property and
equipment, net....... -- 22,565 57,581 4,047 (61,628) 22,565
Cellular licenses,
net.................. -- -- 5,684 -- (5,684) --
Other assets.......... -- 1,481 805 654 (1,459) 1,481
------- ------- ------- ------ -------- -------
Total assets........ $ 113 $89,914 $67,248 $6,083 $(73,444) $89,914
======= ======= ======= ====== ======== =======
Current liabilities:
Accounts payable...... $ -- $ 2,972 $12,414 $2,629 $(15,043) $ 2,972
Accrued expenses...... -- 1,188 712 336 (1,048) 1,188
Due to member......... -- -- -- 75 (75) --
Due to affiliates..... -- -- -- 28 (28) --
Current maturities of
long term debt....... -- 1,341 -- -- -- 1,341
------- ------- ------- ------ -------- -------
Total current
liabilities......... -- 5,501 13,126 3,068 (16,194) 5,501
Long term debt, net of
current maturities..... -- 27,726 38,130 -- (38,130) 27,726
Deferred income taxes... -- 3,837 -- -- -- 3,837
Stockholders' equity:
Common Stock.......... 113 113 -- -- (113) 113
Additional paid-in
capital.............. -- 1,835 -- -- -- 1,835
Members' capital...... -- -- 25,466 5,506 (30,972) --
Retained earnings
(deficit)............ -- 50,902 (9,474) (2,491) 11,965 50,902
------- ------- ------- ------ -------- -------
Total stockholders'
equity............. 113 52,850 15,992 3,015 (19,120) 52,850
------- ------- ------- ------ -------- -------
Total liabilities
and stockholders'
equity............. $ 113 $89,914 $67,248 $6,083 $(73,444) $89,914
======= ======= ======= ====== ======== =======
</TABLE>
F-24
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1997
---------------------------------------------------------
Guarantor
Subsidiary
----------
US Unwired Non-
Unwired Telecom Guarantor
Inc. Corp. Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATING
BALANCE SHEET
Current assets:
Cash and cash
equivalents............ $ -- $ 2,421 $ 2,534 $ -- $ 4,955
Subscriber receivables,
net.................... -- 5,318 3,345 -- 8,663
Other receivables....... -- 528 (111) -- 417
Inventory............... -- 1,489 896 -- 2,385
Deferred income taxes... -- 421 (186) 1,798 2,033
Prepaid expenses........ -- 2,078 148 -- 2,226
Receivables from related
parties................ -- (21,620) 22,212 -- 592
Receivables from
officers............... -- 81 -- -- 81
---- ------- -------- -------- --------
Total current assets.. $ -- $(9,284) $ 28,838 $ 1,798 $ 21,352
Investments in
subsidiaries........... 113 55,592 -- (46,977) 8,728
Property and equipment,
net.................... -- 14,886 24,290 (285) 38,891
Cellular licenses, net.. -- 1,414 69,485 -- 70,899
Other assets............ -- 654 1,609 -- 2,263
---- ------- -------- -------- --------
Total assets.......... $113 $63,262 $124,222 $(45,464) $142,133
==== ======= ======== ======== ========
Current liabilities:
Accounts payable........ $ -- $ 3,328 $ 10,340 $ (285) $ 13,383
Accrued expenses........ -- 756 2,201 -- 2,957
Current maturities of
long term debt......... -- -- 552 -- 552
---- ------- -------- -------- --------
Total current
liabilities.......... -- 4,084 13,093 (285) 16,892
Long term debt, net of
current maturities....... -- 10,194 89,320 -- 99,514
Deferred income taxes..... -- -- -- 1,798 1,798
Stockholders' equity:
Common Stock............ 113 1,476 21,386 (22,862) 113
Additional paid-in
capital................ -- 1,835 9,189 (9,189) 1,835
Retained earnings
(deficit).............. -- 45,673 (8,766) (14,926) 21,981
---- ------- -------- -------- --------
Total stockholders'
equity............... 113 48,984 21,809 (46,977) 23,929
---- ------- -------- -------- --------
Total liabilities and
stockholders' equity.. $113 $63,262 $124,222 $(45,464) $142,133
==== ======= ======== ======== ========
</TABLE>
F-25
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
------------------------------------------------------------------------------------
Guarantor Subsidiaries
-----------------------------
Non-
Unwired Guarantor Consolidated
US Unwired Inc. Telecom Corp. LA Unwired, LLC Subsidiaries Eliminations Total
--------------- ------------- --------------- ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATING
STATEMENT OF OPERATIONS
Revenues............... $ -- $ 67,735 $ 1,509 $ 4,546 $ (2,079) $ 71,711
Operating expenses..... -- 63,704 9,633 6,613 (12,714) 67,236
---- -------- ------- ------- -------- --------
Operating income
(loss)................ -- 4,031 (8,124) (2,067) 10,635 4,475
Interest expense...... -- (5,455) (1,580) (702) 1,580 (6,157)
Interest income....... -- 1,754 230 44 (250) 1,778
Loss on sale of
assets............... -- (114) -- -- -- (114)
Gain on sale of
certain markets...... -- 57,364 -- -- -- 57,364
Gain on sale of PCS
customer base
to affiliate......... -- 2,285 -- -- -- 2,285
---- -------- ------- ------- -------- --------
Income (loss) before
income taxes.......... -- 59,865 (9,474) (2,725) 11,965 59,631
Provision for
income taxes......... -- 17,726 -- -- -- 17,726
---- -------- ------- ------- -------- --------
Income (loss) before
equity in losses
of affiliates........ -- 42,139 (9,474) (2,725) 11,965 41,905
Equity in losses
of affiliates........ -- (12,984) -- -- -- (12,984)
---- -------- ------- ------- -------- --------
Net income (loss)...... $ -- $ 29,155 $(9,474) $(2,725) $ 11,965 $ 28,921
==== ======== ======= ======= ======== ========
</TABLE>
F-26
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1997
--------------------------------------------------------------------
Guarantor
Subsidiary
------------- Non-
Unwired Guarantor
US Unwired Inc. Telecom Corp. Subsidiaries Eliminations Consolidated
--------------- ------------- ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATING
STATEMENT OF OPERATIONS
Revenues............... $ -- $49,618 $36,632 $(11,582) $74,668
Operating expenses..... -- 42,151 34,538 (11,582) 65,107
------ ------- ------- -------- -------
Operating income
(loss)................ -- 7,467 2,094 -- 9,561
Interest expense...... -- (2,110) (6,470) -- (8,580)
Interest income....... -- 247 1,443 -- 1,690
Other expenses........ -- (1,082) -- -- (1,082)
------ ------- ------- -------- -------
Income (loss) before
income taxes.......... -- 4,522 (2,933) -- 1,589
Provision for
income taxes......... -- 730 (635) -- 95
------ ------- ------- -------- -------
Income (loss) before
minority interest
and equity in
losses of affiliates.. -- 3,792 (2,298) -- 1,494
Minority interest in
losses
of subsidiary........ -- -- - 134 134
Equity in losses
of affiliates........ -- (2,894) -- (243) (3,137)
------ ------- ------- -------- -------
Net income (loss)...... $ -- $ 898 $(2,298) $ (109) $(1,509)
====== ======= ======= ======== =======
</TABLE>
F-27
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
------------------------------------------------------------------------
Guarantor
Subsidiary
------------- Non-
Unwired Guarantor
US Unwired Inc. Telecom Corp. Subsidiaries Eliminations Consolidated
--------------- ------------- ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATING
STATEMENT OF OPERATIONS
Revenues............... $ -- $40,550 $29,604 $(8,261) $61,893
Operating expenses..... -- 31,507 26,484 (8,261) 49,730
------ ------- ------- ------- -------
Operating income....... -- 9,043 3,120 -- 12,163
Interest expense...... -- (1,877) (4,662) -- (6,539)
Interest income....... -- 183 134 -- 317
Loss on sale of
assets............... -- (9) -- -- (9)
------ ------- ------- ------- -------
Income (loss) before
income taxes.......... -- 7,340 (1,408) -- 5,932
Provision for
income taxes......... -- 1,610 811 -- 2,421
------ ------- ------- ------- -------
Income (loss) before
minority interest
and equity in income
of affiliates....... -- 5,730 (2,219) -- 3,511
Minority interest in
losses
of subsidiary........ -- -- - 308 308
Equity in income
of affiliates........ -- 4,701 -- (4,666) 35
------ ------- ------- ------- -------
Net income (loss)...... $ -- $10,431 $(2,219) $(4,358) $ 3,854
====== ======= ======= ======= =======
</TABLE>
F-28
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
------------------------------------------------------------------------------------
Guarantor Subsidiaries
-----------------------------
Non-
Unwired Guarantor
US Unwired Inc. Telecom Corp. LA Unwired, LLC Subsidiaries Eliminations Consolidated
--------------- ------------- --------------- ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATING
STATEMENT OF CASH FLOWS
Net cash (used in)
operating activities... $ -- $(13,480) $(9,866) $(2,277) $10,957 $ (14,666)
Cash flows from
investing activities:
Purchases of property
and equipment........ -- (20,380) (44,749) (2,074) 46,628 (20,575)
Payments for microwave
relocation costs..... -- -- (755) -- 755 --
Investments in
unconsolidated
affiliates........... -- (15,416) -- -- -- (15,416)
Distributions from
unconsolidated
affiliates........... -- 813 -- -- -- 813
Net proceeds from sale
of certain markets... -- 154,944 -- (67) -- 154,877
Purchase of licenses.. -- (6,514) -- -- -- (6,514)
------ -------- ------- ------- ------- ---------
Net cash provided by
(used in)
investing activities... -- 113,447 (45,504) (2,141) 47,383 113,185
Cash flows from
financing activities:
Capital
contributions........ -- (9,894) 23,303 14,894 (28,303) --
Proceeds from long-
term debt............ -- 29,724 38,131 -- (38,131) 29,724
Principal payments on
long-term debt....... -- (91,156) (4,302) (9,567) 4,302 (100,723)
Other................. -- -- (412) (345) 757 --
------ -------- ------- ------- ------- ---------
Net cash provide by
(used in)
financing activities... (71,326) 56,720 4,982 (61,375) (70,999)
------ -------- ------- ------- ------- ---------
Net increase in cash.... -- 28,641 1,350 564 (3,035) 27,520
Cash at beginning of
year................... -- 3,834 -- 1,121 -- 4,955
------ -------- ------- ------- ------- ---------
Cash at end of year..... $ -- $ 32,475 $ 1,350 $ 1,685 $(3,035) $ 32,475
====== ======== ======= ======= ======= =========
</TABLE>
F-29
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1997
--------------------------------------------------------------------------------
Guaranteed Subsidiaries
---------------------------- Non-
US Unwired Mercury Guarantor
Unwired Inc. Telecom Corp. Cellular, Inc. Subsidiaries Eliminations Consolidated
------------ ------------- -------------- ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATING
STATEMENT OF CASH FLOWS
Net cash provided by
(used in) operating
activities............. $ -- $ 18,791 $ -- $ (6,752) $ -- $ 12,039
Cash flows from
investing activities:
Purchases of property
and equipment........ -- (179) -- (12,380) -- (12,559)
Investments in
unconsolidated
affiliates........... -- (5,040) -- -- -- (5,040)
----- -------- ----- -------- ----- --------
Net cash used in
investing activities... -- (5,219) -- (12,380) -- (17,599)
Cash flows from
financing activities:
Proceeds from long-
term debt............ -- (11,903) -- 18,673 -- 6,770
Principal payments on
long-term debt....... -- (2,410) -- (194) -- (2,604)
Debt issuance costs... -- 416 -- (641) -- (225)
----- -------- ----- -------- ----- --------
Net cash provided by
(used in) financing
activities............. -- (13,897) -- 17,838 -- 3,941
----- -------- ----- -------- ----- --------
Net decrease in cash.... -- (325) -- (1,294) -- (1,619)
Cash at beginning of
year................... -- 3,360 -- 3,214 -- 6,574
----- -------- ----- -------- ----- --------
Cash at end of year..... $ -- $ 3,035 $ -- $ 1,920 $ -- $ 4,955
===== ======== ===== ======== ===== ========
</TABLE>
F-30
<PAGE>
US UNWIRED INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
---------------------------------------------------------------------
Guarantor
Subsidiary
------------- Non-
US Unwired Guarantor
Unwired Inc. Telecom Corp. Subsidiaries Eliminations Consolidated
------------ ------------- ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATING
STATEMENT OF CASH FLOWS
Net cash provided by
operating activities... $ -- $ 6,340 $ 4,224 $ -- $ 10,564
Cash flows from
investing activities:
Proceeds from sale of
assets............... -- 609 2 -- 611
Purchases of property
and equipment........ -- (5,286) (1,937) -- (7,223)
Purchase of markets... -- -- (45,647) -- (45,647)
Distributions from
unconsolidated
affiliates........... -- 2,302 -- -- 2,302
Investments in
unconsolidated
affiliates........... -- (3,643) -- -- (3,643)
Transfer to escrow.... -- 1,110 -- -- 1,110
----- ------- -------- ----- --------
Net cash (used in)
investing activities... -- (4,908) (47,582) -- (52,490)
Cash flows from
financing activities:
Capital
contributions........ -- (5,898) 5,898 -- --
Proceeds from long-
term debt............ -- 10,078 40,327 -- 50,405
Principal payments on
long-term debt....... -- (5,712) (843) -- (6,555)
Debt issuance costs... -- 64 (516) -- (452)
----- ------- -------- ----- --------
Net cash provided by
(used in) financing
activities............. -- (1,468) 44,866 -- 43,398
----- ------- -------- ----- --------
Net increase (decrease)
in cash................ -- (36) 1,508 -- 1,472
Cash at beginning of
year................... -- 2,286 2,816 -- 5,102
----- ------- -------- ----- --------
Cash at end of year..... $ -- $ 2,250 $ 4,324 $ -- $ 6,574
===== ======= ======== ===== ========
</TABLE>
Contemporaneously with the issuance of the Notes, the Company issued 500,000
shares of Series A preferred stock for $50 million. The present holder of the
Series A preferred and any of its affiliates who become holders may convert the
preferred stock into Class B common stock, at any time, at a price of $26.55
per share, and such holders have voting rights of Class B common shareholders
on an as-converted basis. Upon a sale or transfer of the preferred stock by
such holders to a non-affiliate of such holders, the preferred stock becomes
convertible into Class A common stock and the transferee holders will have
voting rights of Class A common shareholders on an as-converted basis. The
Series A preferred stock has a mandatory redemption at its stated value 91 days
after the maturity of the Notes.
F-31
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
Louisiana Unwired, LLC
We have audited the balance sheet of Louisiana Unwired, LLC as of December
31, 1998, and the related statements of operations, members' equity, and cash
flows for the period from January 8, 1998 (inception) through December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our 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 Louisiana Unwired, LLC at
December 31, 1998, and the results of its operations and its cash flows for the
period from January 8, 1998 (inception) through December 31, 1998, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Houston, Texas
April 9, 1999, except for Note 6
as to which the date is
October 1, 1999
F-32
<PAGE>
LOUISIANA UNWIRED, LLC
BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ -------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 1,350 $ 693
Accounts receivable.............................. 362 1,618
Inventories...................................... 350 1,503
Prepaid expenses................................. 244 508
Due from members................................. 217 --
Due from affiliates.............................. 655 622
------- -------
Total current assets........................... 3,178 4,944
Property and equipment, net........................ 57,581 73,339
Licenses, net of accumulated amortization of $448
and $763.......................................... 5,684 6,933
Deferred financing costs, net of accumulated
amortization of $87 and $170...................... 692 3,074
Other assets....................................... 113 138
------- -------
Total assets................................... $67,248 $88,428
======= =======
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable................................. $12,414 $ 4,924
Due to members................................... -- 644
Accrued expenses and other liabilities........... 712 1,065
------- -------
Total current liabilities...................... 13,126 6,633
Long-term debt..................................... 38,130 66,890
Commitments and contingencies
Members' equity:
Members' capital................................. 25,466 44,566
Accumulated deficit.............................. (9,474) (29,661)
------- -------
Total members' equity.......................... 15,992 14,905
------- -------
Total liabilities and members' equity.......... $67,248 $88,428
======= =======
</TABLE>
See accompanying notes to the financial statements.
F-33
<PAGE>
LOUISIANA UNWIRED, LLC
STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Period from
January 8, 1998 Nine Months
(inception) Ended
through September 30,
December 31, -----------------
1998 1998 1999
--------------- ------- --------
(unaudited)
<S> <C> <C> <C>
Revenues:
Service revenues.......................... $ 787 $ 247 $ 8,899
Merchandise sales revenue................. 722 92 2,693
------- ------- --------
Total revenues........................... 1,509 339 11,592
Operating expenses:
Cost of service........................... 1,912 1,067 6,223
Merchandise cost of sales................. 1,422 177 5,580
Administrative expenses................... 3,045 1,210 6,846
Depreciation and amortization............. 3,254 1,183 9,129
------- ------- --------
Total operating expenses................. 9,633 3,637 27,778
------- ------- --------
Operating loss............................ (8,124) (3,298) (16,186)
Other income (expense):
Interest expense.......................... (1,580) (862) (3,442)
Interest income........................... 230 79 55
------- ------- --------
Total other income (expense)............. (1,350) (783) (3,388)
------- ------- --------
Loss before extraordinary item............ (9,474) (4,081) (19,573)
Extraordinary item--extinguishment of
debt..................................... -- -- (614)
------- ------- --------
Net loss.................................. $(9,474) $(4,081) $(20,187)
======= ======= ========
</TABLE>
See accompanying notes to the financial statements.
F-34
<PAGE>
LOUISIANA UNWIRED, LLC
STATEMENTS OF MEMBERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
US Cameron
Unwired Communications
Inc. Corporation Total
------- -------------- -------
<S> <C> <C> <C>
Capital contributions......................... $12,733 $12,733 $25,466
Net loss...................................... (4,737) (4,737) (9,474)
------- ------- -------
Balance at December 31, 1998.................. 7,996 7,996 15,992
Capital contributions (unaudited)............. 19,100 -- 19,100
Net loss (unaudited).......................... (12,928) (7,259) (20,187)
------- ------- -------
Balance at September 30, 1999 (unaudited)..... $14,168 $ 737 $14,905
======= ======= =======
</TABLE>
See accompanying notes to the financial statements.
F-35
<PAGE>
LOUISIANA UNWIRED, LLC
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Period from
January 8, 1998
(inception) Nine Months Ended
through September 30,
December 31, ------------------
1998 1998 1999
--------------- -------- --------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................. $ (9,474) $ (4,081) $(20,187)
Adjustments to reconcile net loss to net
cash used in operating activities:
Extraordinary item...................... -- -- 614
Depreciation and amortization........... 3,254 1,183 9,129
Changes in operating assets and
liabilities:
Accounts receivable................... (362) (50) (1,256)
Inventories........................... (350) (506) (1,153)
Prepaid expenses...................... (242) (263) (264)
Due from members...................... (281) 1,381 861
Due to affiliates..................... (2,225) (2,072) 33
Accounts payable...................... (514) (840) 1,167
Accrued expenses and other
liabilities.......................... 440 -- 353
Other assets.......................... (112) (9) (25)
-------- -------- --------
Net cash used in operating
activities........................... (9,866) (5,257) (10,728)
Cash flows from investing activities:
Payments for microwave relocation costs... (755) (495) (1,564)
Payments for the purchase of equipment.... (44,749) (40,277) (32,980)
-------- -------- --------
Net cash used in investing
activities........................... (45,504) (40,772) (34,544)
Cash flows from financing activities:
Capital contributions from members........ 23,303 19,303 19,100
Proceeds from long-term debt.............. 38,131 31,962 28,760
Principal payments of long-term debt...... (4,302) (4,302) --
Payments for financing costs.............. (412) (369) (3,245)
-------- -------- --------
Net cash provided by financing
activities........................... 56,720 46,594 44,615
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents.............................. 1,350 565 (657)
======== ======== ========
Cash and cash equivalents at beginning of
period -- -- 1,350
-------- -------- --------
Cash and cash equivalents at end of
period................................... $ 1,350 $ 565 $ 693
======== ======== ========
Supplemental cash flow disclosures:
Cash paid for interest.................... $ 1,617 $ 654 $ 2,169
======== ======== ========
Noncash transactions:
Purchases of equipment in accounts
payable.................................. $ 12,348 $ 4,372 $ 3,691
======== ======== ========
Contributions of net assets by members.... $ 2,163 $ 2,163 $ --
======== ======== ========
</TABLE>
See accompanying notes to the financial statements.
F-36
<PAGE>
LOUISIANA UNWIRED, LLC
NOTES TO FINANCIAL STATEMENTS
(1) Description of Business and Summary of Significant Accounting Policies
(a) Description of Organization
Louisiana Unwired, LLC (the "Company"), is principally engaged in providing
access to and usage of its personal communications service ("PCS") networks in
Louisiana. PCS is a new generation of wireless communications, offering
customers advanced, secure, two-way digital wireless services and applications.
As of December 31, 1998, the Company has been primarily engaged in the buildout
of its networks. In April 1998, the Company's members contributed PCS licenses
in four Louisiana markets to the Company from an affiliated company with common
ownership. Additionally, certain related assets and liabilities, including debt
used to finance the purchase of these four licenses, were also contributed.
These contributed assets and liabilities were recorded at their historical
costs. The Company commenced operations in these markets in late 1998. The
Company is currently in the process of building out PCS networks in other
markets for which its members hold licenses through the above mentioned
affiliated company. At the point these networks become operational, the
Company's members plan to contribute the applicable license to the Company
prior to commencement of operations. The Company is 50% owned by US Unwired
Inc. ("US Unwired"), and 50% by Cameron Communications Corporation ("Cameron").
See Note 6 for additional information.
The Company is economically dependent on its members for the continued
funding of its development and operations. The Company's members have committed
to provide such funding.
(b) Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
(c) Inventory
Inventory consists of PCS telephones and related accessories and is carried
at cost. Cost is determined by the average cost method, which approximates the
first-in, first-out method.
(d) Property and Equipment
Property and equipment is stated at cost and depreciation is provided on a
straight-line basis over the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
Year
<S> <C>
Facilities and equipment............................................ 5
Office equipment and fixtures....................................... 5 to 7
Vehicles............................................................ 5
Leasehold improvements.............................................. 3 to 5
</TABLE>
F-37
<PAGE>
LOUISIANA UNWIRED, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(e) Licenses
Licenses consist primarily of costs incurred in connection with the
acquisition of PCS licenses. These assets are recorded at cost and amortized
using the straight-line method over an estimated useful life of 20 years.
Amortization expense charged to operations in 1998 was $268,901.
(f) Long-Lived Assets
The Company assesses long-lived assets for impairment under Statement of
Financial Accounting Standards ("SFAS") 121, Accounting for Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS 121 requires
that long-lived assets and certain identifiable intangibles to be held or
disposed of by an entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company periodically evaluates the recoverability of the
carrying amounts of its licenses and property and equipment in each market, as
well as the depreciation and amortization periods, based on estimated
undiscounted future cash flows and other factors to determine whether current
events or circumstances warrant reduction of the carrying amounts or
acceleration of the related amortization period.
(g) Deferred Financing Costs
Deferred financing costs include costs incurred in connection with the
issuance of the Company's long-term debt which are amortized over the term of
the related debt.
(h) Revenue Recognition
The Company earns revenue by providing access to and usage of its PCS
networks and sales of PCS merchandise. Service revenues include revenues for
charges to subscribers for both access to and usage of the Company's networks.
These revenues are recognized as they are earned by the Company. Revenues from
the sales of merchandise are recognized when the merchandise is delivered.
(i) Advertising Cost
Advertising costs are expensed as incurred. For the period from January 8,
1998 (inception) through December 31, 1998, approximately $935,000 of
advertising costs were incurred.
(j) 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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-38
<PAGE>
LOUISIANA UNWIRED, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(k) Income Taxes
No provision for income taxes is provided as the Company's federal and state
income and/or loss is included in the income tax returns of its members.
(l) Concentrations of Credit Risk
Financial instruments which potentially expose the Company to concentrations
of credit risk 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 receivables is impacted by
economic trends in the Company's markets. The Company believes that accounts
receivable at December 31, 1998, is fully collectible and, as such, no
allowance was provided as of that date.
(m) Unaudited Interim Information
The financial information for the six months ended June 30, 1998 and 1999
has not been audited by independent accountants. Certain information and
footnote disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted from the unaudited interim financial information. In the opinion of
management of the Company, the unaudited interim financial information includes
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation. Results of operations for the interim periods are not
necessarily indicative of the results of operations for the respective full
years.
(2) Property and Equipment:
The major categories of property and equipment at December 31, 1998 were as
follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Facilities and equipment................................... $43,352
Office equipment and fixtures.............................. 145
Vehicles................................................... 32
Leasehold improvements..................................... 39
Construction in progress................................... 16,910
-------
60,478
Less accumulated depreciation ............................. 2,897
-------
$57,581
=======
</TABLE>
The Company recorded depreciation expense of $2,897,306 during the period
from January 8, 1998 (inception) through December 31, 1998.
F-39
<PAGE>
LOUISIANA UNWIRED, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(3) Long-term Debt:
In May 1998, the Company executed a $48,600,000 bank credit facility. The
notes outstanding under this bank credit facility provide for quarterly
interest only payments through December 2001 and quarterly principal payments
ranging from $190,651 to $3,145,751 plus interest commencing March 2002 through
December 2006. Interest rates are comprised of a combination of variable rates
based on either a variable lending rate established by a commercial bank plus a
margin ranging up to .375% or LIBOR plus a margin ranging up to 2.375%. At
December 31, 1998, the effective interest rate for these notes was 7.55% and
the total unfunded commitment was approximately $10,470,000. Substantially all
of the assets of the Company are pledged to secure the Company's obligation
including a security interest in all property and equipment, and pledge
agreements for all membership interests in the Company. Additionally, the
members have guaranteed a portion of the credit facility. The debt is subject
to certain restrictive covenants including maintaining certain financial
ratios, reaching defined subscriber growth goals, and limiting annual capital
expenditures. At December 31, 1998, the Company was not in compliance with the
restrictive covenants related to the number of subscribers and capital
expenditures. The Company has obtained a waiver from the lender for such
covenant violations.
Maturities of long-term debt for the five years succeeding December 31, 1998
are as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
1999....................................................... $ --
2000....................................................... --
2001....................................................... --
2002....................................................... 763
2003....................................................... 3,813
</TABLE>
The Company has entered into an interest rate swap agreement with a
commercial bank to reduce the impact of changes in interest rates on its
floating rate long-term debt. As the notional amount in the swap agreement
corresponds to the principal amount outstanding on the debt and the variable
rates in the swap and the debt use the same index, this agreement effectively
changes the Company's interest rate exposure on $16 million of floating rate
notes to a fixed 8.37%. The interest rate swap agreements mature at the time
the related notes mature. The Company is exposed to credit loss in the event of
nonperformance by the other party to the interest rate swap agreements.
However, the Company does not anticipate nonperformance by the counterparties.
The net position is settled quarterly and is recorded as an adjustment to
interest expense.
See Note 6 for additional information.
(4) Commitments and Contingencies:
The Company's PCS licenses are subject to a requirement that the Company
construct network facilities that offer coverage to at least one-third of the
population in each of its Basic Trading Areas ("BTAs") within five years from
the grant of the licenses and to at least two-thirds of the population within
10 years from the grant of the licenses. Should the Company fail to meet these
coverage
F-40
<PAGE>
LOUISIANA UNWIRED, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
requirements, it may be subject to forfeiture of its licenses or the imposition
of fines by the FCC. The PCS buildout in each BTA is subject to the successful
completion of the network design, site and facility acquisitions, the purchase
and installation of the network equipment, network testing and the satisfactory
accommodation of microwave users currently using the spectrum.
The Company has open purchase orders totaling approximately $1,950,000
outstanding at December 31, 1998. These purchase orders are primarily
commitments to purchase fixed assets.
The Company is a party to various operating leases for facilities and
equipment. Rent expense for the year ended December 31, 1998 was $713,161.
Future minimum annual lease payments due under noncancelable operating leases
with terms in excess of one year are as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
1999....................................................... $1,124
2000....................................................... 1,108
2001....................................................... 1,058
2002....................................................... 1,008
2003....................................................... 950
Thereafter................................................. 3,740
------
$8,988
======
</TABLE>
A PCS licensee, such as the Company, is required to share a portion of its
spectrum with existing licensees that operate certain fixed microwave systems
within each of its BTAs. These licensees will initially have priority use of
their portion of the spectrum. To secure sufficient amount of unencumbered
spectrum to operate its PCS network efficiently, the Company has negotiated
agreements to pay for the microwave relocation of many of these existing
licensees, which costs have been capitalized. The Company also may be required
to contribute to the costs of relocation under agreements reached with other
PCS licenses if such relocation benefits the Company's license areas. Depending
on the terms of such agreements, the Company's ability to operate its PCS
network profitably could be adversely affected.
Employees of the Company participate in a 401(k) retirement plan (the
"401(k) plan") sponsored by a related party. Employees are eligible to
participate in the 401(k) plan when the employee has completed six months of
service. 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.
Contribution expense related to the 401(k) plan was approximately $1,300 for
the period from January 8, 1998 (inception) through December 31, 1998.
F-41
<PAGE>
LOUISIANA UNWIRED, LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(5) Related Party Transactions:
During the year ended December 31, 1998, the Company incurred management
fees of $960,000 and $240,000 to US Unwired and Cameron, respectively, of which
$80,000 is payable to US Unwired and $60,000 is payable to Cameron at December
31, 1998.
The Company contracts with UniBill, Inc. ("UniBill"), a subsidiary of
Cameron, for all subscriber billing and accounts receivable data processing.
UniBill charges a $2.50 fee per bill processed. Billing expenses totaled
approximately $22,000 in 1998, of which $13,485 is payable at December 31,
1998.
(6) Subsequent Event
From January 8, 1999 through September 30, 1999, US Unwired made a series of
capital contributions to the Company which increased US Unwired's ownership
percentage in the Company to 71%.
On June 23, 1999, the Company entered into senior credit facilities for $130
million with certain lenders. The senior credit facilities provide for an $80
million reducing revolving credit facility, which matures on September 30,
2007, and a $50 million delay draw term loan, which matures on September 30,
2007. All loans made under the senior credit facilities bear interest at
variable rates tied to the prime rate, the federal funds rate or the London
Interbank Offering Rate. The senior credit facilities are secured by a first
priority security interest in all tangible and intangible assets of the Company
and its subsidiaries (including the owned PCS licenses, if legally permitted);
a pledge by US Unwired and Cameron of 100% of the ownership interests in the
Company; a pledge by the Company of its ownership interest in any of the
Company's present and future subsidiaries; and an assignment of all Sprint PCS
agreements and any network contract (including software rights).
A portion of the proceeds from this new credit facility were used to
extinguish the Company's existing credit facility. As a result, the unamortized
debt issuance costs related to this existing credit facility, totaling
$614,000, were written off as an extraordinary item.
Effective October 1, 1999, US Unwired entered into a $130 million senior
credit facility. In connection with this new credit facility, the Company's
$130 million senior credit facilities discussed above were extinguished. As a
result, the unamortized debt issuance costs related to this existing credit
facility, totaling $3,151,000, were written off in October 1999 as an
extraordinary item.
F-42
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF US UNWIRED APPEARS HERE]
US Unwired Inc.
Offer to Exchange 13 3/8% Series B Senior
Subordinated Discount Notes due 2009
For All Existing 13 3/8% Series A Senior
Subordinated Discount Notes due 2009
-----------------------------
PROSPECTUS
-----------------------------
, 2000
- --------------------------------------------------------------------------------
Until , all dealers that effect transactions in these securities, whether
or not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealer's obligation to deliver a prospectus when
acting as underwriters and when reselling their unsold allotments or
subscriptions.
Each broker-dealer that receives new notes for its own account in the exchange
offer must acknowledge that it will deliver a prospectus when reselling these
new notes. A broker-dealer that does so will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. A broker-dealer may
use this prospectus to resell new notes that it received in exchange for old
notes acquired through market-making activities or other trading activities. We
have agreed to make this prospectus available to these broker-dealers for one
year and 30 days after the effective date of the registration statement of
which this prospectus is a part.
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than what is in this
prospectus. You should not rely on any information or representations other
than what is in this prospectus as having been authorized by us. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
securities other than the old and new notes. It is not an offer to sell or a
solicitation of an offer to buy securities in any jurisdiction or under any
circumstances in which an offer or solicitation is unlawful. This prospectus
speaks only as of its date. You should not imply from the delivery of this
prospectus or a related sale that our affairs have not changed since the date
of this prospectus or that the information in this prospectus is correct as of
any time after its date.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Officers and Directors.
Section 83A(1) of the Louisiana Business Corporation Law permits a
corporation to indemnify any person who was or is a party or is threatened to
be made a party to any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, including any action by or in the right of
the corporation, by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee, or agent of another business,
foreign or nonprofit corporation, partnership, joint venture, or other
enterprise, against expenses, including attorneys' fees, judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit, or proceeding if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 83A(2) provides that, in case of actions by or in the right of the
corporation, the indemnity shall be limited to expenses, including attorneys'
fees and amounts paid in settlement not exceeding, in the judgment of the board
of directors, the estimated expense of litigating the action to conclusion,
actually and reasonably incurred in connection with the defense or settlement
of such action, and that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person 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, unless, and only to the extent that the court shall
determine upon application that, despite the adjudication of liability but 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.
Section 83(B) provides that to the extent that a director, officer, employee
or agent of a corporation has been successful on the merits or otherwise in
defense of any such action, suit or proceeding, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
Any indemnification under Section 83A, unless ordered by the court, shall be
made by the corporation only as authorized in a specific case upon a
determination that the applicable standard of conduct has been met, and such
determination shall be made:
. By the board of directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit, or
proceeding, or
. If such a quorum is not obtainable and the board of directors so
directs, by independent legal counsel, or
. By the shareholders.
The indemnification provided for by Section 83 shall not be deemed exclusive
of any other rights to which the person indemnified is entitled under any
bylaw, agreement, authorization of shareholders or directors, regardless of
whether directors authorizing such indemnification are
II-1
<PAGE>
beneficiaries thereof, or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of his heirs and legal representative;
however, no such other indemnification measure shall permit indemnification of
any person for the results of such person's willful or intentional misconduct.
Section 24 of the Louisiana Business Corporation Law provides that the
articles of incorporation of a corporation may contain a provision eliminating
or limiting the personal liability of a director or officer to the corporation
or its shareholders for monetary damages for breach of fiduciary duty as a
director or officer, provided that such provision shall not eliminate or limit
the liability of a director or officer:
. For any breach of the director's or officer's duty of loyalty to the
corporation or its shareholders;
. For acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. Who knowingly or without the exercise of reasonable care and inquiry
votes in favor of a dividend paid in violation of Louisiana law, any
other unlawful distribution, payment or return of assets to be made to
the shareholders or stock purchases or redemptions in violation of
Louisiana law; or
. For any transaction from which the director or officer derived an
improper personal benefit.
Article VI of US Unwired's Articles of Incorporation contains the provisions
permitted by Section 24 of the Louisiana Business Corporation Law and permits
the Board of Directors to take further action to provide indemnification to,
and limit the liability of, to the full extent permitted by law, the directors
and officers of US Unwired by causing US Unwired to enter into contracts with
its directors and officers, adopting by-laws or resolutions, and causing US
Unwired to procure and maintain directors' and officers' liability insurance or
other similar arrangements, 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 insurance or
arrangements.
Article VI permits the Board of Directors to cause US Unwired to approve for
its direct and indirect subsidiaries limitation of liability and
indemnification provisions comparable to the foregoing.
Section 11 of US Unwired's by-laws makes mandatory the indemnification of
any of its officers and directors against any expenses, costs, attorneys' fees,
judgments, punitive or exemplary damages, fines and amounts paid in settlement
actually and reasonably incurred by him (as they are incurred) by reason of his
position as director or officer of US Unwired or any subsidiary or other
specified positions if he is successful in his defense of the matter on the
merits or otherwise or has been found to have met the applicable standard of
conduct.
The standard of conduct is met when the director or officer is found to have
acted in good faith and in a manner that he reasonably believed to be in, or
not opposed to, the best interest of US
II-2
<PAGE>
Unwired, and, in the case of a criminal action or proceeding, with no
reasonable cause to believe that his conduct was unlawful. No indemnification
is permitted in respect of any matter as to which a director or officer shall
have been finally 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.
Section 11 further provides that indemnification granted pursuant to this
section shall not be deemed exclusive of any other rights to which a director
or officer is or may become entitled under any statute, article of
incorporation, by-law, authorization of shareholders or directors, agreement or
otherwise; and that US Unwired intends by this section to indemnify and hold
harmless a director or officer to the fullest extent permitted by law.
On October 29, 1999, US Unwired issued $50 million of its Series A preferred
stock to The 1818 Fund. The 1818 Fund has already designated one individual as
a member of the Board of Directors of US Unwired and is entitled to appoint one
additional individual to become a member of the Board of Directors, but has not
yet done so. This individual, when appointed to our Board of Directors, will be
entitled to the foregoing indemnification. In connection with the issuance of
the Series A preferred stock to The 1818 Fund, US Unwired entered into a
registration rights agreement with The 1818 Fund pursuant to which a seller of
registrable securities may be required to indemnify US Unwired and its officers
and directors under specified circumstances.
US Unwired maintains a directors' and officers' liability insurance policy.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
3.1+ Articles of Incorporation of US Unwired Inc. dated as of September 23,
1999.
3.2+ Articles of Amendment to Articles of Incorporation of US Unwired Inc.
dated as of October 25, 1999.
3.3+ By-laws of US Unwired Inc. adopted September 30, 1999.
3.4* Articles of Organization of Louisiana Unwired, LLC dated as of January
2, 1998.
3.5* Operating Agreement of Louisiana Unwired, LLC dated as of February 23,
1998.
3.6* Articles of Incorporation of Unwired Telecom Corp., as amended.
3.7* By-laws of Unwired Telecom Corp. dated as of January 16, 1997.
4.1+ Indenture dated as of October 29, 1999 among US Unwired Inc., the
Guarantors (as defined therein) and State Street Bank and Trust
Company.
4.2+ Pledge and Security Agreement dated as of October 29, 1999 by and
between Louisiana Unwired, LLC and State Street Bank and Trust
Company.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
4.3+ Intercreditor Agreement dated as of October 29, 1999 between CoBank,
ACB and State Street Bank and Trust Company.
4.4+ A/B Exchange Registration Rights Agreement dated as of October 29,
1999 by and among US Unwired Inc.; Louisiana Unwired, LLC; Unwired
Telecom Corp.; Donaldson, Lufkin & Jenrette Securities Corporation;
First Union Securities, Inc. and BNY Capital Markets, Inc.
5.1* Opinion of Correro Fishman Haygood Phelps Walmsley & Casteix, L.L.P.
10.1+ Purchase Agreement dated as of October 26, 1999 among US Unwired Inc.;
Louisiana Unwired, LLC; Unwired Telecom Corp.; Donaldson, Lufkin &
Jenrette Securities Corporation; First Union Securities, Inc. and BNY
Capital Markets, Inc.
10.2+ Shareholders Agreement dated as of September 24, 1999 among US Unwired
Inc. and the shareholders of US Unwired Inc. who are signatories
thereto.
10.3+ US Unwired Inc. 1999 Equity Incentive Plan.
10.4* Sprint PCS Management Agreement dated February 8, 1999 among
Wirelessco, L.P., Sprint Spectrum L.P., SprintCom, Inc. and Louisiana
Unwired, LLC, including Addendum I, Addendum II, Sprint Trademark and
Service Mark License Agreement and Sprint Spectrum Trademark and
Service Mark License Agreement.
10.5* Sprint PCS Management Agreement dated June 8, 1998 among Wirelessco,
L.P., Sprint Spectrum L.P., SprintCom, Inc. and Louisiana Unwired,
LLC, including Addendum I, Addendum II, Sprint Trademark and Service
Mark License Agreement and Sprint Spectrum Trademark and Service Mark
License Agreement.
10.6+ Securities Purchase Agreement dated as of October 29, 1999 between US
Unwired Inc. and The 1818 Fund III, L.P.
10.7+ Registration Rights Agreement dated as of October 29, 1999 between US
Unwired Inc. and The 1818 Fund, L.P.
10.8+ Shareholders Agreement dated as of October 29, 1999 by and among US
Unwired Inc., The 1818 Fund III, L.P. and the shareholders of US
Unwired Inc. who are signatories thereto.
10.9* Headquarters Building Lease.
10.10+ Credit Agreement dated as of October 1, 1999 by and among US Unwired
Inc., as Borrower, and CoBank, ACB, as Administrative Agent and a
Lender, First Union Capital Markets Corp., as Syndication Agent and a
Co-Arranger, The Bank of New York, as Documentation Agent and a
Lender, BNY Capital Markets, Inc., as a Co-Arranger, First Union
National Bank, as a Lender, and the other Lenders referred to therein.
10.11* Management and Construction Agreement dated as of January 1, 1999 by
and between US Unwired Inc. and Louisiana Unwired, LLC.
10.12* Authorized Dealer Agreement dated as of May 13, 1998 by and between US
Unwired Inc. and Louisiana Unwired, LLC.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.13* Agreement dated as of May 13, 1998 by and between US Unwired Inc. and
Louisiana Unwired, LLC for Louisiana Unwired, LLC to do business as US
Unwired Inc.
10.14* Billing Agreement dated as of May 13, 1998 by and between Unibill,
Inc. and Louisiana Unwired, LLC.
10.15* Long Distance Agreement dated as of June 10, 1998 by and between
Cameron Communications Corporation and US Unwired Inc.
10.16* Omnibus Agreement dated as of September 7, 1999 by and among US
Unwired Inc., EATELCORP, Inc., Fort Bend Telephone Company, XIT
Leasing, Inc., Wireless Management Corporation, Meretel Communications
Limited Partnership and Meretel Wireless, Inc.
12.1+ Ratio of earnings to fixed charges.
21.1+ Subsidiaries of US Unwired Inc.
23.1+ Consent of Ernst & Young LLP.
23.2+ Consent of KPMG LLP.
23.3* Consent of Correro, Fishman, Haygood, Phelps, Walmsley & Casteix, LLP
(included in Exhibit 5.1).
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Beneficial Owners.
99.4 Form of Letter to Registered Holders and Book-Entry Transfer Facility
Participants.
99.5 Form of Instruction to Registered Holder and Book-Entry Transfer
Facility Participant from Owner.
</TABLE>
- --------
*To be filed by amendment.
+Previously filed.
(b) Financial Statement Schedules
No financial statement schedules are filed because the required information
is not applicable or is included in the consolidated financial statements or
related notes.
Item 22. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrants of expenses
incurred or paid by a director, officer or controlling person of the
registrants 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
II-5
<PAGE>
registrants will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities (if
the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrants hereby undertake to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant 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 28, 1999.
US UNWIRED INC.
/s/ Robert W. Piper
By:
----------------------------------
Robert W. Piper
President and Chief Operating
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on December 28, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ William L. Henning, Jr. Chairman of the Board of Directors,
______________________________________ Chief Executive Officer and Director
William L. Henning, Jr. (Principal Executive Officer)
/s/ Jerry E. Vaughn Chief Financial Officer (Principal
______________________________________ Financial Officer)
Jerry E. Vaughn
/s/ Don Loverich Controller (Principal Accounting
______________________________________ Officer)
Don Loverich
/s/ Robert W. Piper President, Chief Operating Officer and
______________________________________ Director
Robert W. Piper
/s/ William L. Henning, Sr. Director
______________________________________
William L. Henning, Sr.
/s/ Thomas G. Henning Director
______________________________________
Thomas G. Henning
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant set forth below 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 28, 1999.
LOUISIANA UNWIRED, LLC
/s/ Robert W. Piper
By:
----------------------------------
Robert W. Piper
Manager/President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on December 28, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Robert W. Piper Manager/President (Principal Executive
______________________________________ Officer, Principal Financial Officer
Robert W. Piper and Principal Accounting Officer)
/s/ Thomas G. Henning Assistant Manager/Secretary
______________________________________
Thomas G. Henning
</TABLE>
UNWIRED TELECOM CORP. Member
/s/ Robert W. Piper
By:
-------------------------------
Robert W. Piper, President
CAMERON COMMUNICATIONS Member
CORPORATION
/s/ Thomas G. Henning
By:
-------------------------------
Thomas G. Henning, Vice
President
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant set forth below 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 28, 1999.
UNWIRED TELECOM CORP.
/s/ Robert W. Piper
By:
----------------------------------
Robert W. Piper
President and Chief Operating
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on December 28, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ William L. Henning, Jr. Chairman of the Board of Directors,
______________________________________ Chief Executive Officer and Director
William L. Henning, Jr. (Principal Executive Officer)
/s/ Jerry E. Vaughn Chief Financial Officer (Principal
______________________________________ Financial Officer)
Jerry E. Vaughn
/s/ Don Loverich Controller (Principal Accounting
______________________________________ Officer)
Don Loverich
/s/ Robert W. Piper President, Chief Operating Officer and
______________________________________ Director
Robert W. Piper
/s/ William L. Henning, Sr. Director
______________________________________
William L. Henning, Sr.
/s/ Thomas G. Henning Director
______________________________________
Thomas G. Henning
</TABLE>
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description of Exhibit Pages
------- ---------------------- ------------
<C> <S> <C>
3.1+ Articles of Incorporation of US Unwired Inc. dated as
of September 23, 1999.
3.2+ Articles of Amendment to Articles of Incorporation of
US Unwired Inc. dated as of October 25, 1999.
3.3+ By-laws of US Unwired Inc. adopted September 30, 1999.
3.4* Articles of Organization of Louisiana Unwired, LLC
dated as of January 2, 1998.
3.5* Operating Agreement of Louisiana Unwired, LLC dated as
of February 23, 1998.
3.6* Articles of Incorporation of Unwired Telecom Corp., as
amended.
3.7* By-laws of Unwired Telecom Corp. dated as of January
16, 1997.
4.1+ Indenture dated as of October 29, 1999 among US Unwired
Inc., the Guarantors (as defined therein) and State
Street Bank and Trust Company.
4.2+ Pledge and Security Agreement dated as of October 29,
1999 by and between Louisiana Unwired, LLC and State
Street Bank and Trust Company.
4.3+ Intercreditor Agreement dated as of October 29, 1999
between CoBank, ACB and State Street Bank and Trust
Company.
4.4+ A/B Exchange Registration Rights Agreement dated as of
October 29, 1999 by and among US Unwired Inc.;
Louisiana Unwired, LLC; Unwired Telecom Corp.;
Donaldson, Lufkin & Jenrette Securities Corporation;
First Union Securities, Inc. and BNY Capital Markets,
Inc.
5.1* Opinion of Correro Fishman Haygood Phelps Walmsley &
Casteix, L.L.P.
10.1+ Purchase Agreement dated as of October 26, 1999 among
US Unwired Inc.; Louisiana Unwired, LLC; Unwired
Telecom Corp.; Donaldson, Lufkin & Jenrette Securities
Corporation; First Union Securities, Inc. and BNY
Capital Markets, Inc.
10.2+ Shareholders Agreement dated as of September 24, 1999
among US Unwired Inc. and the shareholders of US
Unwired Inc. who are signatories thereto.
10.3+ US Unwired Inc. 1999 Equity Incentive Plan.
10.4* Sprint PCS Management Agreement dated February 8, 1999
among Wirelessco, L.P., Sprint Spectrum L.P.,
SprintCom, Inc. and Louisiana Unwired, LLC, including
Addendum I, Addendum II, Sprint Trademark and Service
Mark License Agreement and Sprint Spectrum Trademark
and Service Mark License Agreement.
10.5* Sprint PCS Management Agreement dated June 8, 1998
among Wirelessco, L.P., Sprint Spectrum L.P.,
SprintCom, Inc. and Louisiana Unwired, LLC, including
Addendum I, Addendum II, Sprint Trademark and Service
Mark License Agreement and Sprint Spectrum Trademark
and Service Mark License Agreement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description of Exhibit Pages
------- ---------------------- ------------
<C> <S> <C>
10.6+ Securities Purchase Agreement dated as of October 29,
1999 between US Unwired Inc. and The 1818 Fund III,
L.P.
10.7+ Registration Rights Agreement dated as of October 29,
1999 between US Unwired Inc. and The 1818 Fund, L.P.
10.8+ Shareholders Agreement dated as of October 29, 1999 by
and among US Unwired Inc., The 1818 Fund III, L.P. and
the shareholders of US Unwired Inc. who are signatories
thereto.
10.9* Headquarters Building Lease.
10.10+ Credit Agreement dated as of October 1, 1999 by and
among US Unwired Inc., as Borrower, and CoBank, ACB, as
Administrative Agent and a Lender, First Union.Capital
Markets Corp., as Syndication Agent and a Co-Arranger,
The Bank of New York, as Documentation Agent and a
Lender, BNY Capital Markets, Inc., as a Co-Arrnager,
First Union National Bank, as a Lender, and the other
Lenders referred to therein.
10.11* Management and Construction Agreement dated as of
January 1, 1999 by and between US Unwired Inc. and
Louisiana Unwired, LLC.
10.12* Authorized Dealer Agreement dated as of May 13, 1998 by
and between US Unwired Inc. and Louisiana Unwired, LLC.
10.13* Agreement dated as of May 13, 1998 by and between US
Unwired Inc. and Louisiana Unwired, LLC for Louisiana
Unwired, LLC to do business as US Unwired Inc.
10.14* Billing Agreement dated as of May 13, 1998 by and
between Unibill, Inc. and Louisiana Unwired, LLC.
10.15* Long Distance Agreement dated as of June 10, 1998 by
and between Cameron Communications Corporation and US
Unwired Inc.
10.16* Omnibus Agreement dated as of September 7, 1999 by and
among US Unwired Inc., EATELCORP, Inc., Fort Bend
Telephone Comany, XIT Leasing, Inc., Wireless
Management Corporation, Meretel Communications Limited
Partnership and Meretel Wireless, Inc.
12.1+ Ratio of earnings to fixed charges.
21.1+ Subsidiaries of US Unwired Inc.
23.1+ Consent of Ernst & Young LLP.
23.2+ Consent of KPMG LLP.
23.3* Consent of Correro, Fishman, Haygood, Phelps, Walmsley
& Casteix, LLP (included in Exhibit 5.1).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Beneficial Owners.
99.4 Form of Letter to Registered Holders and Book-Entry Transfer Facility
Participants.
99.5 Form of Instruction to Registered Holder and Book-Entry Transfer
Facility Participant from Beneficial Owner.
</TABLE>
- --------
*To be filed by amendment.
+Previously filed.
<PAGE>
LETTER OF TRANSMITTAL
US UNWIRED INC.
Offer to Exchange
13 3/8% Series B Senior Subordinated Discount Notes due 2009,
which have been registered under the Securities Act of 1933,
for any and all of its outstanding
13 3/8% Series A Senior Subordinated Discount Notes due 2009
Pursuant to the Prospectus
Dated , 2000
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 2000, UNLESS THE OFFER IS EXTENDED.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Delivery or Hand:
State Street Bank and Trust Company. State Street Bank and Trust Company.
Corporate Trust Department Corporate Trust Department
P. O. Box 778 2 Avenue de Lafayette
Boston, MA 02102-0078 Corporate Trust Window, Fifth Floor
Contact: Kellie Mullen Boston, MA 02111-1724
Contact: Kellie Mullen
</TABLE>
Facsimile Transmissions:
(617) 662-1452
Attention: Kellie Mullen
To Confirm by Telephone
or for Information:
(617) 664-5587
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OR INSTRUCTIONS VIA FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned hereby acknowledges receipt of the prospectus dated
, 2000 (the "Prospectus") of US Unwired Inc. (the "Company") and this Letter
of Transmittal, which together constitute the Company's offer (the "Exchange
Offer") to exchange $1,000 principal amount of its 13 3/8% Series B Senior
Subordinated Discount Notes due 2009 (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which the Prospectus is a part, for
each $1,000 principal amount of its outstanding 13 3/8% Series A Senior
Subordinated Discount Notes due 2009 (the "Existing Notes"). The term
"Expiration Date" shall mean 5:00 p.m., New York City Time, on , 2000,
1
<PAGE>
unless the Company, in its sole discretion, extends the Exchange Offer, in
which case the term shall mean the latest date and time to which the Exchange
Offer is extended. Capitalized terms used but not defined herein have the
meaning given to them in the Prospectus.
This Letter of Transmittal is to be completed by holders of Existing Notes
(as defined below) if Existing Notes are to be forwarded herewith. If tenders
of Existing Notes are to be made by book-entry transfer to an account
maintained by State Street Bank and Trust Company (the "Exchange Agent") at The
Depository Trust Company ("DTC") pursuant to the procedures set forth in "The
Exchange Offer--Book-Entry Transfer" and "Book-Entry, Transfer and Delivery" in
the Prospectus and in accordance with the Automated Tender Offer Program
("ATOP") established by DTC, a tendering holder will become bound by the terms
and conditions hereof in accordance with the procedures established under ATOP.
Holders of Existing Notes whose certificates (the "certificates") for such
Existing Notes are not immediately available or who cannot deliver their
certificates and all other required documents to the Exchange Agent on or prior
to the expiration date (as defined in the Prospectus) or who cannot complete
the procedures for book-entry transfer on a timely basis, must tender their
Existing Notes according to the guaranteed delivery procedures set forth in
"The Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. See
Instruction 1.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX:
List below the Existing Notes to which this Letter of Transmittal relates.
If the space indicated below is inadequate, the certificate or registration
numbers and principal amounts should be listed on a separately signed schedule
affixed hereto.
DESCRIPTION OF EXISTING NOTES TENDERED HEREBY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name(s) and
Address(es)
of Aggregate
Registered Certificate Principal
Owner(s) or Amount Principal
(Please Registration Represented Amount
fill in) Numbers* by Notes Tendered**
- ------------------------------------------------
<S> <C> <C> <C>
----------------------------------
----------------------------------
----------------------------------
Total
- ------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such notes. All tenders
must be in integral multiples of $1,000.
2
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[_]CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
DTC Account Number _________________________________________________________
Transaction Code Number ____________________________________________________
[_]CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name of Registered Holder(s) _______________________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed _______________________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution ______________________________________________
DTC Account Number _________________________________________________________
Transaction Code Number ____________________________________________________
[_]CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED EXISTING
NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH
ABOVE.
[_]CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE EXISTING NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES AND
WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
3
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to US Unwired Inc., a Louisiana corporation
(the "Company"), the principal amount of the Company's 13 3/8% Series A Senior
Subordinated Discount Notes due 2009 (the "Existing Notes") specified above in
exchange for a like aggregate principal amount of the Company's 13 3/8% Series
B Senior Subordinated Discount Notes due 2009 (the "Exchange Notes"), upon the
terms and subject to the conditions set forth in the Prospectus dated ,
2000 (as the same may be amended or supplemented from time to time, the
"Prospectus"), receipt of which is acknowledged, and in this Letter of
Transmittal (which, together with the Prospectus, constitute the "Exchange
Offer"). The Exchange Offer has been registered under the Securities Act of
1933, as amended (the "Securities Act"). The Existing Notes and the Exchange
Notes are sometimes collectively referred to as the "Notes."
Subject to and effective upon the acceptance for exchange of all or any
portion of the Existing Notes tendered herewith in accordance with the terms
and conditions of the Exchange Offer (including, if the Exchange Offer is
extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Company all right, title and interest in and to such Existing
Notes as are being tendered herewith. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent and attorney-in-fact
(with full knowledge that the Exchange Agent is also acting as agent of the
Company in connection with the Exchange Offer) with respect to the tendered
Existing Notes, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), subject only to
the right of withdrawal described in the Prospectus, to cause the Notes to be
assigned, transferred and exchanged.
The undersigned hereby represents and warrants that it has full power and
authority to tender, exchange, sell, assign and transfer the Existing Notes
tendered hereby and to acquire Exchange Notes issuable upon the exchange of
Existing Notes, and that, when the Existing Notes are accepted for exchange,
the Company will acquire good, marketable and unencumbered title thereto, free
and clear of all liens, restrictions, charges and encumbrances, and that the
Existing Notes tendered hereby are not subject to any adverse claims or
proxies. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company or the Exchange Agent to be necessary or
desirable to complete the exchange, assignment and transfer of the Existing
Notes tendered hereby, and the undersigned will comply with its obligations
under the Registration Rights Agreement. The undersigned has read and agrees to
all of the terms of the Exchange Offer.
The name(s) and address(es) of the registered holder(s) of the Existing
Notes tendered hereby should be printed above, if they are not already set
forth above, as they appear on the certificates representing such Existing
Notes. The certificate number(s) and the Existing Notes that the undersigned
wishes to tender should be indicated in the appropriate boxes above.
If any tendered Existing Notes are not exchanged pursuant to the Exchange
Offer for any reason, or if certificates are submitted for more Existing Notes
than are tendered or accepted for exchange, certificates for such unaccepted or
nonexchanged Existing Notes will be returned (or, in the case of Existing Notes
tendered by book-entry transfer, such Existing Notes will be credited to an
account maintained at DTC), without expense to the tendering holder, promptly
following the expiration or termination of the Exchange Offer.
4
<PAGE>
The undersigned understands that tenders of Existing Notes pursuant to any
one of the procedures described in "The Exchange Offer--Procedures for
Tendering Old Notes" in the Prospectus and in the instructions hereto will,
upon the Company's acceptance for exchange of such tendered Existing Notes,
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer. In all cases in
which a DTC participant elects to accept the Exchange Offer by transmitting an
express acknowledgment in accordance with the established ATOP procedures, such
participant shall be bound by all of the terms and conditions of this Letter of
Transmittal. The undersigned recognizes that, under certain circumstances set
forth in the Prospectus, the Company may not be required to accept for exchange
any of the Existing Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange Notes be
issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Existing Notes, that such Exchange Notes be credited to the account
indicated above maintained at DTC. If applicable, substitute certificates
representing Existing Notes not exchanged or not accepted for exchange will be
issued to the undersigned or, in the case of a book-entry transfer of Existing
Notes, will be credited to the account indicated above maintained at DTC.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please deliver Exchange Notes to the undersigned at the address shown below the
undersigned's signature. If an Exchange Note is to be issued to a person other
than the person(s) signing this Letter of Transmittal, or if an Exchange Note
is to be mailed to someone other than the person(s) signing this Letter of
Transmittal or to the person(s) signing this Letter of Transmittal at an
address different than the address shown on this Letter of Transmittal, the
appropriate boxes of this Letter of Transmittal should be completed. If
Existing Notes are surrendered by holder(s) that have completed either the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" in this Letter of Transmittal, signature(s) on this Letter of
Transmittal must be guaranteed by an Eligible Institution (defined in
Instruction 1).
By tendering Existing Notes and executing, or otherwise becoming bound by,
this letter of transmittal, the undersigned hereby represents and agrees that
(i) the undersigned is not an "affiliate" of the Company,
(ii) any Exchange Notes to be received by the undersigned are being
acquired in the ordinary course of its business, and
(iii) the undersigned is not engaged in, does not intend to participate
in, and has no arrangement or understanding with any person to participate
in, a distribution (within the meaning of the Securities Act) of such
Exchange Notes.
By tendering Existing Notes pursuant to the exchange offer and executing, or
otherwise becoming bound by, this letter of transmittal, a holder of Existing
Notes that is a broker-dealer represents and agrees, consistent with certain
interpretive letters issued by the staff of the Division of Corporation Finance
of the Securities and Exchange Commission to third parties, that (a) such
Existing Notes held by the broker-dealer are held only as a nominee, or (b)
such Existing Notes were
acquired by such broker-dealer for its own account as a result of market-making
activities or other trading activities and it will deliver the prospectus (as
amended or supplemented from time to time) meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes
5
<PAGE>
(provided that, by so acknowledging and by delivering a prospectus, such
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act).
The Company has agreed that, subject to the provisions of the Registration
Rights Agreement, the Prospectus, as it may be amended or supplemented from
time to time, may be used by a participating broker-dealer (as defined below)
in connection with resales of Exchange Notes received in exchange for Existing
Notes, where such Existing Notes were acquired by such participating broker-
dealer for its own account as a result of market-making activities or other
trading activities, for a period ending one year and 30 days after the
effective date of the registration statement of which the Prospectus is a part
or, if earlier, when all such Exchange Notes have been disposed of by such
participating broker-dealer. In that regard, each broker dealer who acquired
Existing Notes for its own account as a result of market-making or other
trading activities (a "participating broker-dealer"), by tendering such
Existing Notes and executing, or otherwise becoming bound by, this letter of
transmittal, agrees that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained in the prospectus untrue in any material respect or which causes the
prospectus to omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading or of the occurrence of certain other events
specified in the Registration Rights Agreement, such participating broker-
dealer will suspend the sale of Exchange Notes pursuant to the prospectus until
the Company has amended or supplemented the prospectus to correct such
misstatement or omission and has furnished copies of the amended or
supplemented prospectus to the participating broker-dealer or the Company has
given notice that the sale of the Exchange Notes may be resumed, as the case
may be. If the Company gives such notice to suspend the sale of the Exchange
Notes, it shall extend the one year and 30 day period referred to above during
which participating broker-dealers are entitled to use the prospectus in
connection with the resale of Exchange Notes by the number of days during the
period from and including the date of the giving of such notice to and
including the date when participating broker-dealers shall have received copies
of the supplemented or amended prospectus necessary to permit resales of the
Exchange Notes or to and including the date on which the Company has given
notice that the sale of Exchange Notes may be resumed, as the case may be.
The undersigned represents to the Company that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned, and (ii) neither the undersigned nor any such
other person is engaged or intends to engage in, or has an arrangement or
understanding with any person to participate in, the distribution of such
Exchange Notes. If the undersigned or the person receiving the Exchange Notes
covered hereby is a broker-dealer that is receiving the Exchange Notes for its
own account in exchange for Existing Notes that were acquired as a result of
market-making activities or other trading activities, the undersigned
acknowledges that it or such other person will deliver a prospectus in
connection with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. The
undersigned and any other person receiving Exchange Notes acknowledge that, if
they are participating in the Exchange Offer for the purpose of distributing
the Exchange Notes, (i) they cannot rely on the position of the staff of the
Division of Corporate Finance of the Securities and Exchange Commission to
third parties and, in the absence of an exemption therefrom, must comply with
the
6
<PAGE>
registration and prospectus delivery requirements of the Securities Act in
connection with the resale transaction and (ii) failure to comply with such
requirements in such instance could result in the undersigned or any such other
person incurring liability under the Securities Act for which such persons are
not indemnified by the Company.
The undersigned agrees that acceptance by the Company of any tendered
Existing Notes and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Registration Rights Agreement and that the Company shall have no further
obligations or liabilities thereunder for the registration of the Existing
Notes or the Exchange Notes.
The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer--Certain Conditions to the
Exchange Offer." The undersigned recognizes that as a result of these
conditions (which may be waived, in whole or in part, by the Company), as more
particularly set forth in the Prospectus, the Company may not be required to
exchange any of the Existing Notes tendered hereby and, in such event, the
Existing Notes not exchanged will be returned to the undersigned at the address
shown below the signature of the undersigned.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
HOLDER(S) SIGN HERE
(See Instructions 2, 5 and 6)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) for the Existing Notes hereby tendered or on a security position
listing, or by any person(s) authorized to become the registered holder(s) by
endorsements and documents transmitted herewith. If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary or representative capacity, please
set forth the signer's full title. See Instruction 5.
_____________________________________________________________________________
(Signature(s) of Holder(s))
Date ___________________________________________________________________, 2000
Name(s) ________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity: ______________________________________________________________________
(Include Full Title)
Address ________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
________________________________________________________________________________
(Tax Identification or Social Security Number(s))
7
<PAGE>
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
________________________________________________________________________________
(Please Print)
Date _____________________________________________________________________, 2000
Capacity or Title ______________________________________________________________
Name of Firm ___________________________________________________________________
Address ________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, AND 6) SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the
Exchange Notes are to be issued in To be completed ONLY if the Exchange
the name of someone other than the Notes are to be sent to someone other
registered holder of the Existing than the registered holder of the
Notes whose name(s) appear(s) above. Existing Notes whose name(s) appear(s)
above, or to such registered holder(s)
Issue Exchange Notes to: at an address other than that shown
above.
Name ________________________________
(Please Print) Mail Exchange Notes To:
_____________________________________ Name ___________________________________
(Please Print)
Address _____________________________
________________________________________
_____________________________________
Address ________________________________
_____________________________________
(Include Zip Code) ________________________________________
_____________________________________ ________________________________________
(Taxpayer Identification or Social (Include Zip Code)
Security Number)
________________________________________
(Taxpayer Identification or Social
Security Number)
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed if certificates are
to be forwarded herewith. If tenders are to be made pursuant to the procedures
for tender by book-entry transfer set forth in "The Exchange Offer--Book-Entry
Transfer" and "Book-Entry, Transfer and Delivery" in the Prospectus and in
accordance with ATOP established by DTC, a tendering holder will become bound
by the terms and conditions hereof in accordance with the procedures
established under ATOP. Certificates, or timely confirmation of a book-entry
transfer of such Existing Notes into the Exchange Agent's account at DTC, as
well as this Letter of Transmittal (or facsimile thereof), if required,
properly completed and duly executed, with any required signature guarantees,
and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent at one of its addresses set forth herein on or
prior to the Expiration Date. Existing Notes may be tendered in whole or in
part in the principal amount of $1,000 and integral multiples of $1,000.
Holders who wish to tender their Existing Notes and (i) whose Existing
Notes are not immediately available or (ii) who cannot deliver their Existing
Notes, this Letter of Transmittal and all other required documents to the
Exchange Agent on or prior to the Expiration Date or (iii) who cannot complete
the procedures for delivery by book-entry transfer on a timely basis, may
tender their Existing Notes by properly completing and duly executing a Notice
of Guaranteed Delivery pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery Procedures" in the
Prospectus. Pursuant to such procedures: (i) such tender must be made by or
through an Eligible Institution (as defined below); (ii) a properly completed
and duly executed Letter of Transmittal (or facsimile) thereof and Notice of
Guaranteed Delivery, substantially in the form made available by the Company,
must be received by the Exchange Agent on or prior to the expiration date; and
(iii) the certificates (or a book-entry confirmation (as described in the
Prospectus)) representing all tendered Existing Notes, in proper form for
transfer, together with any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within five New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in "The Exchange Offer--Guaranteed Delivery
Procedures" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile or mail to the Exchange Agent, and must include
a guarantee by an Eligible Institution in the form set forth in such Notice.
For Existing Notes to be properly tendered pursuant to the guaranteed delivery
procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on
or prior to the expiration date. As used herein and in the Prospectus,
"Eligible Institution" means a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act.
THE METHOD OF DELIVERY OF EXISTING NOTES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING
HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT
9
<PAGE>
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, BE USED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO
LETTERS OF TRANSMITTAL OR EXISTING NOTES SHOULD BE SENT TO THE COMPANY.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), or any agent's message (as described in the Prospectus) in
lieu thereof, waives any right to receive any notice of the acceptance of such
tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in DTC
whose name appears on a security position listing as the owner of the
Existing Notes) of Existing Notes tendered herewith, unless such holder(s)
has completed either the box entitled "Special Issuance Instructions" or
the box entitled "Special Delivery Instructions" above, or
(ii) such Existing Notes are tendered for the account of a firm that is
an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Existing Notes" is inadequate, the certificate number(s)
and/or the principal amount of Existing Notes and any other required
information should be listed on a separate signed schedule which is attached
to this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Existing Notes will be
accepted only in the principal amount of $1,000 and integral multiples
thereof. If less than all the Existing Notes evidenced by any certificate
submitted are to be tendered, fill in the principal amount of Existing Notes
which are to be tendered in the box entitled "Principal Amount of Existing
Notes Tendered (if less than all)." In such case, new certificate(s) for the
remainder of the Existing Notes that were evidenced by your old certificate(s)
will only be sent to the holder of the Existing Note, promptly after the
Expiration Date. All Existing Notes represented by certificates delivered to
the Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
Except as otherwise provided herein, tenders of Existing Notes may be
withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective on or prior to that time, a written notice of
withdrawal must be timely received by the Exchange Agent at one of its
addresses set forth above or in the Prospectus on or prior to the Expiration
Date. Any such notice of withdrawal must specify the name of the person who
tendered the Existing Notes to be withdrawn, identify the Existing Notes to be
withdrawn (including the principal amount of such Existing Notes) and (where
certificates for Existing Notes have been transmitted) specify the name in
which such Existing Notes are registered, if different from that of the
withdrawing holder. If certificates for the Existing Notes have been delivered
or otherwise identified to the Exchange Agent, then prior to the release of
such certificates, the withdrawing holder must submit the serial numbers of
the particular certificates for the Existing Notes to be withdrawn and a
signed notice of withdrawal with signatures
10
<PAGE>
guaranteed by an Eligible Institution, unless such holder is an Eligible
Institution. If Existing Notes have been tendered pursuant to the procedures
for book-entry transfer set forth in the Prospectus under "The Exchange Offer--
Book-Entry Transfer" and "Book-Entry, Transfer and Delivery," any notice of
withdrawal must specify the name and number of the account at DTC to be
credited with the withdrawal of Existing Notes and otherwise comply with the
procedures of such facility. Existing Notes properly withdrawn will not be
deemed validly tendered for purposes of the Exchange Offer, but may be
retendered at any time on or prior to the expiration date by following one of
the procedures described in the Prospectus under "The Exchange Offer--
Procedures for Tendering Existing Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Existing Notes
which have been tendered for exchange but which are not exchanged for any
reason will be returned to the holder thereof without cost to such holder (or,
in the case of Existing Notes tendered by book-entry transfer into the Exchange
Agent's account at DTC pursuant to the book-entry procedures described in the
Prospectus under "The Exchange Offer--Book-Entry Transfer" and "Book-Entry,
Transfer and Delivery," such Existing Notes will be credited to an account
maintained with DTC for the Existing Notes) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the
Existing Notes tendered hereby, the signature(s) must correspond exactly with
the name(s) as written on the face of the certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Existing Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Existing Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or facsimiles thereof) as there are different
registrations of certificates.
If this Letter of Transmittal or any certificates or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
the Company, proper evidence satisfactory to the Company of such persons'
authority to so act must be submitted.
When this Letter of Transmittal is signed by the registered holder(s) of the
Existing Notes listed and transmitted hereby, no endorsement(s) of
certificate(s) or written instrument or instruments of transfer or exchange are
required unless Exchange Notes are to be issued in the name of a person other
than the registered holder(s). Signature(s) on such certificate(s) or written
instrument or instruments of transfer or exchange must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Existing Notes listed, the certificates must be
endorsed or accompanied by a written instrument or
11
<PAGE>
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion and executed by the registered holder(s), in
either case signed exactly as the name or names of the registered holder(s)
appear(s) on the certificates. Signatures on such certificates or written
instrument or instruments of transfer or exchange must be guaranteed by an
Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If Exchange Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if Exchange Notes are to be sent to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Existing Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion, all
questions as to the form, validity, eligibility (including time of receipt) and
acceptance for exchange of any tender of Existing Notes, which determination
shall be final and binding. The Company reserves the absolute right to reject
any and all tenders of any particular Existing Notes not properly tendered or
to not accept any particular Existing Notes which acceptance might, in the
judgment of the Company or its counsel, be unlawful. The Company also reserves
the absolute right, in its sole discretion, to waive any defects or
irregularities or conditions of the Exchange Offer as to any particular
Existing Notes either before or after the expiration date (including the right
to waive the ineligibility of any holder who seeks to tender Existing Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Existing Notes either before or after the
expiration date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with the tender of Existing
Notes for exchange must be cured within such reasonable period of time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Existing Notes for exchange, nor
shall any of them incur any liability for failure to give such notification.
8. Backup Federal Income Tax Withholding and Substitute Form W-9. Under the
federal income tax laws, payments that may be made by the Company on account of
Exchange Notes issued pursuant to the Exchange Offer may be subject to backup
withholding at the rate of 31%. In order to avoid such backup withholding, each
tendering Holder should complete and sign the Substitute Form W-9 included in
this Letter of Transmittal and either (a) provide the correct taxpayer
identification number ("TIN") and certify, under penalties of perjury, that the
TIN provided is correct and that (i) the Holder has not been notified by the
Internal Revenue Service (the "IRS") that the Holder is subject to backup
withholding as a result of failure to report all interest or dividends or (ii)
the IRS has notified the Holder that the Holder is no longer subject to backup
withholding; or (b) provide an adequate basis for exemption. If the tendering
Holder has not been issued a TIN and has applied for one, or intends to apply
for one in the near future, such Holder should write "Applied For" in the space
provided for the TIN in Part I of the Substitute Form W-9, sign and date the
Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer
Identification Number. If "Applied For" is written in Part I, the Company (or
the Paying Agent under the indenture governing the Exchange
12
<PAGE>
Notes) shall retain 31% of payments made to the tendering Holder during the
sixty-day period following the date of the Substitute Form W-9. If the Holder
furnishes the Exchange Agent or the Company with its TIN within sixty days
after the date of the Substitute Form W-9, the Company (or the Paying Agent)
shall remit such amounts retained during the sixty-day period to the Holder and
no further amounts shall be retained or withheld from payments made to the
Holder thereafter. If, however, the Holder has not provided the Exchange Agent
or the Company with its TIN within such sixty-day period, the Company (or the
Paying Agent) shall remit such previously retained amounts to the IRS as backup
withholding. In general, if a Holder is an individual, the TIN is the Social
Security number of such individual. If the Exchange Agent or the Company are
not provided with the correct TIN, the Holder may be subject to a $50 penalty
imposed by the IRS. Certain Holders (including, among others, certain
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, such Holder must submit a statement (generally,
IRS Form W-8), signed under penalties of perjury, attesting to that
individual's exempt status. Such statements can be obtained from the Exchange
Agent. For further information concerning backup withholding and instructions
for completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if Old Notes are registered in more than one name), consult the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause Old
Notes to be deemed invalidly tendered, but may require the Company (or the
Paying Agent) to withhold 31% of the amount of any payments made on account of
the Exchange Notes. Backup withholding is not an additional federal income tax.
Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If backup
withholding results in an overpayment of taxes, a refund may be obtained from
the IRS.
9. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Existing Notes have been lost, destroyed or stolen, the holder
should promptly notify the Exchange Agent. The holder will then be instructed
as to the steps that must be taken in order to replace the certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost, destroyed or stolen certificate(s) have been
followed.
11. SECURITY TRANSFER TAXES. Holders who tender their Existing Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith, except that holders who instruct the Company to register Exchange
Notes in the name of or request that Existing Notes not tendered or not
accepted in the Exchange Offer to be returned to, a person other than the
registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
13
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF), OR AN AGENT'S
MESSAGE IN LIEU THEREOF, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY
THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Old Notes are
accepted for payment is required to provide the Exchange Agent (as payer) with
such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such Holder is an individual,
the TIN is his social security number. If the Exchange Agent is not provided
with the correct TIN, a $50 penalty may be imposed by the IRS, and payments
made pursuant to the Exchange Offer may be subject to backup withholding.
Certain Holders (including, among others, certain corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Exchange Agent a properly completed IRS Form W-8, signed under penalties of
perjury, attesting to that Holder's exempt status. A Form W-8 can be obtained
from the Exchange Agent. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the Holder or other payee. Backup withholding is
not an additional federal income tax. Rather, the federal income tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to the Exchange
Offer, the Holder is required to provide the Exchange Agent with either: (i)
the Holder's correct TIN by completing the Substitute Form W-9 below,
certifying that the TIN provided on Substitute Form W-9 is correct (or that
such Holder is awaiting a TIN) and that (A) the Holder has not been notified by
the IRS that the Holder is subject to backup withholding as a result of failure
to report all interest or dividends or (B) the IRS has notified the Holder that
the Holder is no longer subject to backup withholding or (ii) an adequate basis
for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered holder of
the Old Notes. If the Old Notes are held in more than one name or are held not
in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
14
<PAGE>
PAYOR'S NAME: US Unwired Inc.
THIS SUBSTITUTE FORM W-9 MUST BE COMPLETED AND SIGNED. Please provide your
social security number or other taxpayer identification number on the following
Substitute Form W-9 and certify therein that you are subject to backup
withholding.
Part I--PLEASE PROVIDE YOUR
TIN IN THE BOX AT THE RIGHT
AND CERTIFY BY SIGNING AND
DATING BELOW. For all
accounts, enter TIN in the
box at right. (For most
individuals, this is your
social security number. If
you do not have a number, see
enclosed Guidelines for
Certification of Taxpayer
Identification Number on
Substitute Form W-9.) Certify
by signing and dating below.
-------------------
SUBSTITUTE
Social Security
Form W-9 Number
Department of the OR____________
Treasury
Employer
Internal Revenue Identification
Service Number
(If awaiting TIN,
write
-------------------------------------------------------
Payer's Request for PART II--For Payees exempt from backup
Taxpayer withholding, see the enclosed Guidelines for
Certification of Taxpayer Identification Number on
Substitute Form W-9 and complete as instructed
therein.
"Applied for")
Identification Number
(TIN)
- --------------------------------------------------------------------------------
Certification--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number or a Taxpayer Identification Number has not be issued to me and
either (a) I have mailed or delivered an application to receive a
Taxpayer Identification Number to the appropriate Internal Revenue
Service ("IRS") Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future; and
(2) I am not subject to backup withholding either because (a) I am exempt
from backup withholding, (b) I have not been notified by the IRS that I
am subject to backup withholding as a result of failure to report all
interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
Certificate Instructions--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if
after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS that you are no longer
subject to backup withholding, do not cross out item (2). (Also see
instructions in the enclosed Guidelines.)
- --------------------------------------------------------------------------------
The IRS does not require your consent to any provision of this document
other than the certifications required to avoid backup withholding.
- --------------------------------------------------------------------------------
SIGNATURE___________________________________________________DATE, 199
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE EXCHANGE NOTES.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
15
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATION IF YOU WROTE "APPLIED FOR"
INSTEAD OF A TIN IN THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be withheld
until I provide a number, but will be refunded if I provide a certified
taxpayer identification number within 60 days.
------------------------------------- -------------------------------------
Signature Dated:
16
<PAGE>
NOTICE OF GUARANTEED DELIVERY
For Tender Of
13 3/8% Series A Senior Subordinated Discount Notes due 2009
(including those in book-entry form)
of
US Unwired Inc.
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the Company's (as defined below) 13 3/8% Series A Senior
Subordinated Discount Notes due 2009 (the "Existing Notes") are not immediately
available, (ii) Existing Notes and any other documents required by the Letter
of Transmittal cannot be delivered to State Street Bank and Trust Company (the
"Exchange Agent") on or prior to the Expiration Date (as defined in the
Prospectus referred to below) or (iii) the procedures for book-entry transfer
cannot be completed on a timely basis. This Notice of Guaranteed Delivery may
be delivered by hand or sent by facsimile transmission, overnight courier,
telex, telegram or mail to the Exchange Agent. See "The Exchange Offer--
Guaranteed Delivery Procedures" in the Prospectus dated , 2000 (which,
together with the related Letter of Transmittal, constitutes the "Exchange
Offer") of US Unwired Inc., a Louisiana corporation (the "Company").
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
STATE STREET BANK AND TRUST COMPANY
By Hand or Overnight Delivery: By Registered or Certified Mail:
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department
2 Avenue de Lafayette P. O. Box 778
Corporate Trust Window, Fifth Floor Boston, MA 02102-0078
Boston, MA 02111-1724 Contact: Kellie Mullen
Contact: Kellie Mullen
Facsimile Transmissions:
(Eligible Institutions Only)
(617) 662-1452
Attention: Kellie Mullen
To Confirm by Telephone or
for Information Call:
(617) 664-5587
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA A
FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED ON THE LETTER
OF TRANSMITTAL.
1
<PAGE>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States or an eligible guarantor institution within
the meaning of Rule 17Ad-15 of the Securities Exchange Act, hereby guarantees
to deliver to the Exchange Agent, at one of its addresses set forth above,
either the certificates for all physically tendered Existing Notes, in proper
form for transfer, or confirmation of the book-entry transfer of such Existing
Notes to the Exchange Agent's account at The Depository Trust Company, pursuant
to the procedures for book-entry transfer set forth in the Prospectus, in
either case together with any other documents required by the Letter of
Transmittal, within five New York Stock Exchange trading days after the date of
execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Existing Notes
tendered hereby to the Exchange Agent within the time period set forth above
and that failure to do so could result in a financial loss to the undersigned.
Name of Firm: _______________________
____________________________________
(Authorized Signature)
Address: ____________________________
_____________________________________ Name: _______________________________
(Please type or print)
(Zip Code)
Title: ______________________________
Area Code and Telephone Number: _____
_____________________________________ Date: _______________________________
NOTE: DO NOT SEND EXISTING NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY.
ACTUAL SURRENDER OF EXISTING NOTES MUST BE MADE PURSUANT TO, AND BE
ACCOMPANIED BY, A PROPERLY COMPLETED AND FULLY EXECUTED LETTER OF
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
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Offer to Exchange
13 3/8% Series B Senior Subordinated Discount Notes due 2009,
which have been registered under the Securities Act of 1933,
for any and all outstanding
13 3/8% Series A Senior Subordinated Discount Notes due 2009
of
US UNWIRED INC.
To Our Clients:
Enclosed is a Prospectus, dated , 2000, of US Unwired Inc., a
Louisiana corporation (the "Company"), and a related Letter of Transmittal
(which together constitute the "Exchange Offer") relating to the offer by the
Company to exchange its 13 3/8% Series B Senior Subordinated Discount Notes due
2009 (the "Exchange Notes"), pursuant to an offering registered under the
Securities Act of 1933, as amended (the "Securities Act"), for a like principal
amount of its issued and outstanding 13 3/8% Series A Senior Subordinated
Discount Notes due 2009 (the "Existing Notes") upon the terms and subject to
the conditions set forth in the Exchange Offer.
Please note that the Exchange Offer will expire at 5:00 p.m., New York City
time, on , 2000, unless extended.
The Exchange Offer is not conditioned upon any minimum number of Existing
Notes being tendered.
We are the holder of record and/or participant in the book-entry transfer
facility of Existing Notes held by us for your account. A tender of such
Existing Notes can be made only by us as the record holder and/or participant
in the book-entry transfer facility and pursuant to your instructions. The
Letter of Transmittal is furnished to you for your information only and cannot
be used by you to tender Existing Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of the
Existing Notes held by us for your account pursuant to the terms and conditions
of the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of Existing Notes will
represent to the Company that (i) the holder is not an "affiliate" of the
Company, (ii) any Exchange Notes to be received by it are being acquired in the
ordinary course of its business, and (iii) the holder has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Exchange Notes. If the tendering holder
is a broker-dealer that will receive Exchange Notes for its own account in
exchange for Existing Notes, you will represent on behalf of such broker-dealer
that the Existing Notes to be exchanged for the Exchange Notes were acquired by
it as a result of market-making activities or other trading activities, and
acknowledge on
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behalf of such broker-dealer that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such Exchange Notes, such broker-dealer is not deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
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<PAGE>
Offer to Exchange
13 3/8% Series B Senior Subordinated Discount Notes due 2009,
which have been registered under the Securities Act of 1933,
for any and all outstanding
13 3/8% Series A Senior Subordinated Discount Notes due 2009
of
US UNWIRED INC.
To Registered Holders and
Book-Entry Transfer Facility Participants:
We are enclosing herewith the material listed below relating to the offer by
US Unwired Inc., a Louisiana corporation (the "Company"), to exchange its 13
3/8% Series B Senior Subordinated Discount Notes due 2009 (the "Exchange
Notes"), pursuant to an offering registered under the Securities Act of 1933,
as amended (the "Securities Act"), for a like principal amount of its issued
and outstanding 13 3/8% Series A Senior Subordinated Discount Notes due 2009
(the "Existing Notes") upon the terms and subject to the conditions set forth
in the Company's Prospectus, dated , 2000, and the related Letter of
Transmittal (which together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated , 2000;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder and/or Book-Entry Transfer
Participant from Beneficial Owner; and
5. Letter which may be sent to your clients for whose account you hold
Existing Notes in your name or in the name of your nominee, to accompany
the instruction form referred to above, for obtaining such client's
instruction with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the Exchange
Offer will expire at 5:00 p.m., New York City time, on , 2000 unless
extended.
The Exchange Offer is not conditioned upon any minimum number of Existing
Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Existing Notes will
represent to the Company that (i) the holder is not an "affiliate" of the
Company, (ii) any Exchange Notes to be received by it are being acquired in the
ordinary course of its business, and (iii) the holder has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Exchange Notes. If the tendering holder
is a broker-dealer that will receive Exchange Notes for its own account in
exchange for Existing Notes, you will represent on
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behalf of such broker-dealer that the Existing Notes to be exchanged for the
Exchange Notes were acquired by it as a result of market-making activities or
other trading activities, and acknowledge on behalf of such broker-dealer that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. By acknowledging that it
will deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes, such
broker-dealer is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The enclosed Instruction to Registered Holder and/or Book-Entry Transfer
Participant from Beneficial Owner contains an authorization by the beneficial
owners of the Existing Notes for you to make the foregoing representations.
The Company will not pay any fee or commission to any broker or dealer or to
any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Existing Notes pursuant to the Exchange Offer.
The Company will pay or cause to be paid any transfer taxes payable on the
transfer of Existing Notes to it, except as otherwise provided in Instruction
10 of the enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
STATE STREET BANK AND TRUST COMPANY
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF US UNWIRED INC. OR STATE STREET BANK AND TRUST COMPANY OR
AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN
CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH
AND THE STATEMENTS CONTAINED THEREIN.
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INSTRUCTION TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
US UNWIRED INC.
13 3/8% Series A Senior Subordinated Discount Notes due
2009 (the "Existing Notes")
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated ,
2000 (the "Prospectus") of US Unwired Inc., a Louisiana corporation (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus or the Letter of Transmittal.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Existing Notes held by you for the account
of the undersigned.
The aggregate face amount of the Existing Notes held by you for the account
of the undersigned is (fill in amount):
$ of the 13 3/8% Series A Senior Subordinated Discount Notes due
2009
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] To TENDER the following Existing Notes held by you for the account
of the undersigned (insert principal amount of Existing Notes to be
tendered, if any):
$ of the 13 3/8% Series A Senior Subordinated Discount Notes due
2009
[_] NOT to TENDER any Existing Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Existing Notes held by you
for the account of the undersigned, it is understood that you are authorized
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including but not limited to the representations, that
(i) the holder is not an "affiliate" of the Company, (ii) any Exchange Notes
to be received by the holder are being acquired in the ordinary course of its
business, and (iii) the holder has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of such Exchange Notes. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Existing Notes, it
represents that such Existing Notes were acquired as a
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result of market-making activities or other trading activities, and it
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes. By
acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes, such broker-dealer is not deemed to admit that it is an
"underwriter" within the meaning of the Securities Act of 1933, as amended.
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