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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
General Form for Registration of Securities of Small Business
Issuers under Section 12(b) or (g)
of the Securities Exchange Act of 1934
ADVANCED WIRELESS SYSTEMS, INC.
(Name of Small Business Issuer in its charter)
Alabama 63-1205304
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
927 Sunset Drive
Irving, Texas 75061
(Address of principal executive offices)
Issuer's telephone number: 972-254-7604
Securities registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
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TABLE OF CONTENTS
Item 1 Business. . . . . . . . . . . . . . . . . . . .-1-
The Mobile LLC Bankruptcy . . . . . . . . . . . . . . . .-1-
Our Business Plan . . . . . . . . . . . . . . . . . . . .-4-
Regulation. . . . . . . . . . . . . . . . . . . . . . . .-7-
Markets . . . . . . . . . . . . . . . . . . . . . . . . -13-
Competition . . . . . . . . . . . . . . . . . . . . . . -14-
Risks . . . . . . . . . . . . . . . . . . . . . . . . . -17-
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . -20-
New Accounting Pronouncements . . . . . . . . . . . . . -22-
Results of Operations . . . . . . . . . . . . . . . . . -23-
Liquidity and Capital Resources . . . . . . . . . . . . -25-
Year 2000 Compliance. . . . . . . . . . . . . . . . . . -26-
Item 3 Description of Property.. . . . . . . . . . . -27-
Item 4 Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . . -27-
Item 5 Directors, Executive Officers, Promoters and
Control Persons.. . . . . . . . . . . . . . . -28-
Item 6 Executive Compensation. . . . . . . . . . . . -30-
Summary Compensation Table. . . . . . . . . . . . . . . -30-
Stock Options Granted in 1998 . . . . . . . . . . . . . -31-
Year End Stock Option Value . . . . . . . . . . . . . . -31-
Directors' Compensation . . . . . . . . . . . . . . . . -31-
Item 7 Certain Relationships and Related Transactions-32-
Item 8 Legal Proceedings.. . . . . . . . . . . . . . -32-
Item 9 Market for Common Equity and Related Stockholder
Matters.......................................-32-
Item 10 Recent Sales of Unregistered Securities. . . . . . -33-
Item 11 Description of Securities. . . . . . . . . . . . . -35-
Item 12 Indemnification of Directors and Officers. . . . . -36-
Item 13 Financial Statements and Supplementary Data. . . . -36-
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Item 14 Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . .-36-
Item 15 Financial Statements and Exhibits. . . . . . . .. . -37-
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . -37-
Financial Statements . . . . . . . . . . . . . . . . . . . . .F-1
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ADVANCED WIRELESS SYSTEMS, INC.
Item 1 Business
We deliver wireless cable television signals and provide high speed Internet
service in the Mobile, Alabama, area. We provide cable TV services over
eleven wireless signal frequencies that are licensed by the Federal
Communications Commission and either leased or owned by us. We intend to
expand our use of our FCC licenses to provide high speed Internet services to
customers in and around Mobile.
We were incorporated in Alabama in December 1997 to take over the assets and
continue the business of Mobile Limited Liability Company, as part of the
confirmation by the U.S. Bankruptcy Court for the Northern District of Texas
of a Plan of Reorganization of Mobile Limited Liability Company. /1 Since
confirmation of the Mobile Limited Liability Company Plan of Reorganization on
January 8, 1998, we have operated the wireless cable television service that
Mobile Limited Liability Company formerly operated in the Mobile, Alabama,
area. We have begun to use our wireless frequencies to develop a high speed
Internet service. In this registration statement, Mobile Limited Liability
Company is called "Mobile LLC," and the "Plan" refers to the Mobile LLC Plan of
Reorganization approved in 1998.
Forward-Looking Statements.
This registration statement contains forward-looking statements. The words,
"anticipate," "believe," "expect," "plan," "intend," "estimate," "project,"
"could," "may," "foresee," and similar expressions are intended to identify
forward-looking statements. These statements include information regarding
expected development of the Company's business, lending activities,
relationship with clients, and development of the industry in which the
Company will focus its marketing efforts. Such statements reflect the
Company's current views with respect to future events and financial performance
and involve risks and uncertainties, including without limitation the risks
described in "Risks." Should one or more of these risks or uncertainties
occur, or should underlying assumptions prove incorrect, actual results may
vary materially and adversely from those anticipated, believed, estimated or
otherwise indicated.
- -----------------------------
/1 In Re: Mobile Limited Liability Company, d/b/a Mobile Wireless TV, Case
No. 397-37735-HCA-11, United States District Court, Norhtern District of
Texas, Dallas Division.
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The Mobile LLC Bankruptcy
History of Mobile LLC
Mobile LLC was a Nevada limited liability company formed in 1994 to acquire
and operate FCC licenses in the Mobile, Alabama area. Mobile Wireless
Partnership, a general partnership, owned 94.5% of Mobile LLC. Mobile
Wireless Partnership had been formed and capitalized by sales of partnership
units to the general public, and its only business was to invest in Mobile
LLC.
In the early 1990s the Federal Communications Commission attempted to
establish a more competitive playing field among the providers of cable TV by
granting licenses for the use of new frequencies for broadcasting wireless TV
transmission. The FCC initially granted these licenses through the use of
lotteries and later through auctions. The initial grant of these licenses
created a frenzy of activity among promoters, both legitimate an illegitimate.
One such promoter was a company, based in Las Vegas, Nevada, by the name of
Midas Media, Inc. Midas Media acquired a number of the new wireless cable TV
licenses and developed a scheme to market these licenses. Essentially, Midas
Media, Inc., would form partnerships and enter into joint ventures with the
partnership to establish wireless cable TV transmission in a given area. Then
Midas Media would offer units of participation in the partnership to raise
capital necessary to buy equipment and begin broadcasting TV signals.
Using this general framework, Midas Media formed Mobile Wireless Partners.
Midas Media initially offered for sale to the general public 2,450 partnership
units at an initial price of $3,4750.00 per unit. The price per unit
gradually increased over a period of months to $4,875.00, and the number of
units offered increased to 2,685. Through this sales effort Midas Media
raised approximately $11,500,000.00 from 1,130 partners. Mobile Wireless
Partners, Midas Media, and another company, Telecom Marketing, Inc., then
entered a joint venture in which Midas Media owned 16.5%, Telecom Marketing
owned 1%, and Mobile Wireless Partners owned 82.5% of the joint venture.
After the first 200 Mobile Wireless Partners units were sold, Midas Media
called a meeting of the partners in Las Vegas. At that meeting, the partners
elected a managing general partner and authorized Mobile LLC to be created to
operate the general partnership. Shortly after this initial meeting, Midas
Media caused Mobile Wireless Partners to enter into leases for facilities
including office space and tower facilities and set about the business of
broadcasting wireless TV transmissions.
Midas Media assigned eleven licenses designed for wireless cable TV operations
in the Mobile, Alabama, area, to Mobile LLC. Other wireless TV licenses were
promised to the enterprise but were never transferred. Midas Media also
transferred to the partnership $2,000,000.00 for operating capital. The
eleven licenses and the two million in capital were the only assets that the
partnership received in consideration for the $11,500,000.00 raised by sales
of partnership units.
The market for wireless TV transmission in the Mobile, Alabama, market, did
not prove to be profitable for the enterprise. There are three other cable TV
companies in the area as well as satellite TV providers, and all of these
providers have many more channels at their disposal than Mobile LLC, which was
never able to compete successfully for cable TV subscribers. In addition,
Mobile LLC, was not capitalized with enough funds to adequately develop the
business, especially in light of the revenues and profits that would have been
required to return the $11,500,000 initial investment within a reasonable
time.
In 1995, after about $1,000,000.00 of the original capital of the partnership
had been expended, the partners of the general partnership called a meeting
and ousted the initial managing general partner from office. Five of the
partners were elected as a directors' committee of Mobile Wireless Partners,
four of whom serve as four of our directors today. Several partners
complained to the Securities and Exchange Commission and Federal Trade
Commission. The SEC and FTC instituted injunctive lawsuits against Midas
Media and others, including Mobile Wireless Partners. Those suits resulted in
a receivership of Midas Media and Mobile Wireless Partners in early 1996. At
the beginning of the receivership, the receiver collected $200,000 from the
Mobile Wireless bank account to pay for fees and expenses of the receivership.
Initially, the receiver planned to liquidate the assets of Mobile Wireless
Partners. However, Mobile Wireless Partners hired its own counsel and
obtained a dissolution of the receivership against it. Ultimately, the SEC,
FTC, receiver, and other defendants entered a settlement agreement. The
receiver had marshalled assets of Mobile Wireless and the other defendants
during the receivership, and upon completion of the receivership we received a
return of $313,717 from the receiver, which we recorded for the year ended
December 31, 1997, as other income -- funds recovered during the bankruptcy.
Because Mobile Wireless Partnership had so many partners, the partnership
could not meet all of the requirements concerning ownership imposed by the
FCC. Eventually, Mobile Wireless Partnership and Mobile LLC were given until
December 31, 1997, to reorganize and to comply with the standards set by the
FCC. The Plan, which was confirmed on January 8, 1998, was designed to meet
this requirement through the new entity, Advanced Wireless Systems, Inc.
The Plan of Reorganization
Mobile LLC filed a petition for relief under Chapter 11 of the U.S. Bankruptcy
Code in the Northern District of Texas on August 27, 1997. On October 18,
1997, the Bankruptcy Court authorized the issuance and sale of up to
$1,000,000 in Certificates of Indebtedness to raise new capital pursuant to
Section 364(c) of the Bankruptcy Code. On November 6, 1997, our sponsors
filed a proposed Plan in which all assets and liabilities of the debtor,
Mobile LLC, and all equity interests in Mobile LLC, would be extinguished, and
Advanced Wireless Systems, Inc., would be organized to take over and continue
the business of the LLC, including the eleven FCC licenses in Mobile, Alabama.
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The Plan was premised on the sale of part of the Certificates of Indebtedness,
and the acquisition of licenses from Mobile Wireless Partners for $225,000 in
additional Certificates of Indebtedness. The $225,000 in Certificates were
convertible into 3,192,518 shares of our common stock plus 3,068,066 warrants.
Each warrant entitles the holder to purchase one share of our common stock for
$1.00 per share. When the partnership was dissolved after confirmation of
the Plan, 3,068,066 shares of the common stock and all of the warrants were
issued and distributed to the partners of the Mobile Wireless Partners.
The Plan required payment of some creditors' claims shortly after confirmation
of the Plan by the Bankruptcy Court in January 1998. During 1998, we
discharged $138,320 in prepetition claims of creditors (incurred prior to
institution of the Chapter 11 case) and $61,500 in postpetition liabilities
(incurred after institution of the Chapter 11 case). As of December 31, 1998,
all such prepetition and postpetition liabilities had been discharged.
Two of our directors, Oscar Hayes and Demetrios Tsoutsas, had lent Mobile
Wireless Partners a total of $175,000, secured by all of the assets of Mobile
Wireless Partners, in May 1997. Upon Plan confirmation, they received secured
obligations of the Company to repay these debts with interest at 9% per annum.
Mr. Tsoutsas made an additional $75,000 loan in March 1998, on the same terms
as the previous loans. These obligations became due in March and May 1999,
but the debts, including accrued interest which totaled $44,472 on March 31,
1999, remain outstanding and unpaid. These obligations are secured by all of
our property, including our FCC licenses which are essential to our operation.
The lenders have not demanded payment nor declared a default in the loans, but
neither have they waived their right to do so. We are negotiating with the
lenders to settle or renegotiate the terms of our debt to them. At present,
we could not repay them from our cash reserves without jeopardizing our
ability to continue operating.
Our Business Plan
Historically, the business of our predecessor, Mobile LLC, was to provide
subscription television service. Competition in the television broadcast and
cable business is intense. Our predecessor was unsuccessful in this business,
and we probably would not succeed in it either, in the long term. We
continue to service existing wireless cable accounts, but we are not marketing
wireless cable services nor connecting new customers. Mobile, Alabama, is
already served by broadcast television, cable TV, and direct satellite TV. We
suspended new wireless TV installations in the first quarter of 1999 because
we believe that current installation costs exceed the anticipated subscriber
revenues from those installations. To become profitable, we must provide
additional services using our existing licenses. We believe that high speed
Internet access will generate those revenues. Other companies that have
operated wireless TV service are also turning to the Internet for future
revenues and growth. We expect to gradually reduce and eventually eliminate
our wireless cable TV business as we switch to the Internet access business.
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Our wireless TV service is available for $21.95 per month. We presently have
about 190 TV customers. We are limited by the number of channels we have for
the number of TV channels we may transmit to customers; we offer only
seventeen channels now. We believe that our service appeals to customers who
want only a small number of channels (compared to most current cable
providers) for a monthly rate that is lower than other cable services.
Our long-term business strategy is to pursue implementation of a Wireless
Broadband Access ("WBA") capability that we believe will eventually be the
best use of the wireless cable spectrum. We believe that market,
technological and regulatory developments are creating an opportunity for the
current wireless cable spectrum to be used to serve small and medium-sized
business customers with fixed, one-way and two-way, high-speed data and
telephony services.
Regulatory developments have begun to benefit the WBA business strategy. In
1996, the FCC authorized the use of digital transmission over the wireless
cable spectrum. In September 1998, the FCC issued regulations that permit
two-way use of the wireless cable spectrum. Some WBA providers have since
petitioned the FCC to refine its two-way rules to permit simpler deployment of
commercial operations under the two-way rules. Actual implementation of
two-way commercial businesses will require, among other factors, some changes
in the existing rules along with creation of filing "windows" by the FCC to
submit two-way license applications. Currently we are unable to offer two-way
access, and our wireless system only provides one-way service for high-speed
downloading of data from the Internet.
We believe that the Mobile, Alabama, market has 12,000 potential business
users of our wireless Internet service. Each of our eleven frequencies can
serve approximately 1,650 subscribers at any given time. We have dedicated
one of our broadcast channels to the Internet service. In order to dedicate
one channel to Internet service, we had to remove one TV channel from our
wireless cable TV service. Each additional frequency that we dedicate to
Internet service will require a corresponding deletion of another TV channel
from our wireless cable TV service, which is another reason that we decided to
gradually eliminate our wireless cable TV service.
In 1998 we began to offer one-way, high speed Internet access. In one-way
high-speed access, customers can download data, video, graphics and high
fidelity audio at speeds that are much faster than available for most Internet
users over telephone lines, but they must upload their communications to the
Internet via traditional telephone lines. We intend to offer our services to
the business community and to a lesser extent to individuals in the Mobile,
Alabama, market. This service uses a high speed cable modem for downstream
Internet access.
As of April 7, 1999, we were providing dial-in Internet service to 251
customers at the lower speeds of conventional telephone connections, at a
monthly subscription charge of $14.95 each. Also as of April 1999, we provide
were providing high speed Internet service to eight customers on 27 work
stations. Our high speed Internet service is available at $49.95 per month
for one user, and at a base price of $99.95 per month for multi-users, with
each additional user connection costing $10 per month up to a maximum monthly
fee of $199.95 per month.
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For the present we intend to continue soliciting new business for our
conventional telephone dial-in Internet service and our high speed, one-way
Internet access. We plan to apply to the FCC for two-way high speed Internet
licenses when the FCC announces the window for accepting applications for the
licenses. The FCC has announced its intention to act expeditiously on these
applications, so long as the license application is complete when submitted,
including required engineering studies to support the application.
In addition, we are looking into applying for a development authority permit
to test and put into place a microwave frequency two-way product. This would
be in the nature of a test permit at less than our fully allowable license
capacity, which could be granted while we wait for the FCC to announce its
timetable for accepting two-way applications. The major cost components of
either the two-way license or the development authority are engineering costs
and legal costs to prepare and submit the application. We estimate that we
can afford to complete and submit either the development authority or the two-
way license application from our existing cash reserves.
Another possible means to enter high speed, two-way Internet service might
involve use of a "spread spectrum" in which unused frequencies at ranges that
do not require an FCC license could be used for the incoming access from
customers. This method has technical limitations that make it appear
unfeasible right now. Spread spectrum frequencies generally have a range of
only one or two miles. To reach customers, many point to point antennas would
have to be erected close to the customers' locations. Installing these point
to point antennae would be very expensive. Other spread spectrum solutions
are being explored and tested by various developers that are unaffiliated with
our Company. We have considered the possibility of a spread spectrum approach
but are not pursuing it now because it appears to us to be too expensive and
risky.
The high speed, two-way Internet business has many risks and uncertainties,
including:
- - not receiving the necessary FCC authorizations for two-way licenses on
terms acceptable or affordable to us; and
- - not having access to sufficient channel capacity on commercially
acceptable terms;
We cannot be sure that our business plan will provide our stockholders with a
recovery on their investments or that it will produce or maximize future
value.
We are also uncertain about the degree of subscriber demand for WBA services,
especially at pricing levels at which we can achieve an attractive return on
investment. We cannot be sure that there will be sufficient subscriber demand
for such services to justify the cost of their introduction, or that we can
successfully compete against existing or new competitors in the market for
such broadband services. We expect that the market for any such services will
be extremely competitive. See, Competition.
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On April 7, 1999, we had six full time and one part time employees. We do not
presently have sufficient sales staff to develop our proposed Internet
business. As of April 7, 1999, three computer stores in the Mobile area were
demonstrating our high speed download product on thirteen work stations.
Before we can fully develop its Internet business it will be necessary to
develop a sales program. We are attempting to train our existing sales staff
on marketing techniques, including telemarketing. See, Risks.
Regulation
The wireless cable industry is highly regulated by the FCC and other
governmental agencies. Wireless cable companies are subject to federal, state
and local regulation, as described below.
FCC Regulation
The FCC has granted wireless cable service providers access to a series of
channel groups, generally in the 2.5 to 2.7 GHz range of microwave radio
frequencies. These channel groups consist of Multipoint Distribution Service
("MDS") channels, which are allocated for commercial use and Instructional
Television Fixed Service ("ITFS") channels that are primarily authorized for
educational purposes. Currently, up to 33 total channels are potentially
available for licensing, lease or purchase by wireless cable companies in each
market. Up to 13 MDS channels in any given market typically can be owned or
leased by wireless cable operators for full-time usage without programming
restrictions. The remaining 20 frequencies in a given market generally are
allocated for ITFS use. Wireless cable providers can lease excess channel
capacity from ITFS licensees as long as the licensees provide a prescribed
minimum amount of educational programming over their channels. Wireless cable
companies generally are prohibited from owning ITFS channels. ITFS licensees
are currently allowed to meet their minimum educational programming
requirements for all licensed channels using only one channel per four-channel
group via "channel loading," if desired.
In the Mobile, Alabama, market, we control seven of the eleven MDS frequencies
that are licensed for full time usage without programming restrictions. We
lease the E Group (E-1, E-2, E-3, and E-4) frequencies from TV Communications
Network, Inc., (TVCN), of Denver. We were unable to lease the E Group for a
second five year term when this lease expired earlier this year, and we are
currently leasing the E Group from TVCN on a month to month basis for $1,200
per month. We believe that we would be offered an equal opportunity to bid on
the E Group, should TVCN decide to sell them, but we cannot be sure that we
would succeed in purchasing them. We own the licenses for three MDS
frequencies in the H Group (H-1, H-2, and H-3). The remaining four MDS
frequencies in Mobile are owned by an unaffiliated third party, and we do not
have rights to use them.
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We also lease the Mobile, Alabama, G Group of four ITFS frequencies from the
North American Catholic Educational Programming foundation, Inc. (NACEPH) for
$1,000 per month. We are in our second five year term for this lease, which
expires in August of 2002.
FCC rules generally prohibit the ownership or leasing of MDS and ITFS
authorizations by traditional franchise cable companies if the MDS facility is
located within 35 miles, or the ITFS facility is located within 20 miles, of
the cable company's franchise or service areas. Pursuant to the
Telecommunications Act of 1996, the cable-MDS cross-ownership rule does not
apply to a cable operator in a franchise area in which the operator is subject
to effective competition.
Authorizations have been issued, or applications are currently pending, for
the vast majority of MDS licenses in major U.S. markets. Under the current
regulatory structure, as discussed below, only holders of a Basic Trading Area
("BTA") authorization may apply for available, unlicensed, MDS frequencies
within the BTA. In a number of markets, certain ITFS frequencies are still
available. However, except as noted below, eligibility for ownership of ITFS
licenses is generally limited to accredited educational institutions,
governmental organizations engaged in the formal education of enrolled
students and non-profit organizations whose purposes are educational and
include providing educational and instructional television material to such
accredited institutions and governmental organizations. Non-local, qualified
applicants must demonstrate that they have arranged with local educational
entities to provide them with programming and that they have established a
local programming committee.
From November 1995 through March 1996, the FCC auctioned all available MDS
rights on the basis of BTAs, with one such authorization available per BTA.
The winning bidder has the exclusive right to apply to operate one or more
unlicensed MDS channels within the BTA, as long as proposed stations operating
on these channels comply with the FCC's interference requirements and certain
other rules. In order to provide wireless cable service in these markets, the
BTA licensee must also secure the right to a transmission facility. A BTA
licensee has a five-year build-out period within which to expand or initiate
new service within its BTA. It may sell, trade or otherwise alienate all or
part of its rights in the BTA and may also partition its BTA along
geopolitical boundaries and contract with eligible parties to allow them to
apply for MDS authorizations within the partitioned area, and conversely,
acquire such rights from other BTA licensees. The license term for each
station authorized under these BTA procedures is ten years from the date on
which the BTA auction closed.
It was in this regulatory environment that we received our eleven licenses
designed for wireless cable TV operations in the Mobile, Alabama, area. We
own licenses for seven MDS channels and we lease four ITSF channels from a
Roman Catholic educational institution. See, Description of Property.
The licenses granted to us by the FCC require us to construct transmission
capabilities for a number of channels in our Mobile market. If we do not
meet these construction commitments, and if the FCC does not grant an
extension of time to construct the required transmission facilities, the FCC
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has the authority to revoke our licenses and we would lose our rights to lease
these channels. We have fulfilled all of our present construction commitments
for our FCC licenses.
Two-Way Operations
In September 1998, the FCC issued formal rules for two-way use of MDS and ITFS
channels. We expect to apply for two-way licenses in accordance with the
filing schedule established by the FCC. Some other cable operators have
filed petitions with the SEC for reconsideration which propose to refine the
two-way rules. We believe that actual implementation of two-way commercial
businesses will require some changes in the existing two-way rules along with
filing "windows" by the FCC for operators such as our Company to submit
licensing applications.
The FCC has also adopted a number of ITFS rule changes that permit licensees
to meet the ITFS educational programming requirements by providing voice and
data services. In a digital environment, the ITFS licensee must retain 5% of
its capacity for such ITFS programming. ITFS leases may now extend for a
period of fifteen years. Certain of these new rules are also subject to
pending petitions for reconsideration.
The two-way licensing process will require substantial frequency engineering
studies and negotiations with other MDS and ITFS license holders in markets
adjacent to that of a two-way license application. These studies and
negotiations are expected to significantly increase the implementation costs
of two-way digital services. The process may involve channel swapping among
licensees within individual markets. If we decide to apply for two-way
licensing from the FCC, we may be required to negotiate with other MDS and
ITFS frequency licensees for the frequencies that will be necessary to operate
such a system.
Telecommunications Act of 1996
The Telecommunications Act of 1996 Act became law on February 8, 1996 (the
"1996 Act"). Among other things, the 1996 Act eliminated the cable/telephone
cross-ownership restriction, allowing a telephone company the option of
providing video programming within its telephone service area over a cable
system or a video platform. Conversely, cable companies are now permitted to
provide telephone service. The 1996 Act also limited, and in some cases
eliminated, FCC regulation of cable rates established by the Cable Television
Consumer Protection and Competition Act of 1992 ("1992 Cable Act"), depending
upon the size of the cable system and whether that system is subject to
effective competition and the nature of the rate. Small cable operators and
systems subject to effective competition are now exempt from rate regulation
as a result of the 1996 Act. The 1996 Act also vests the FCC with exclusive
jurisdiction over the provision of Direct Broadcast Satellite ("DBS") and
preempts the authority of local authorities to impose certain taxes on such
services.
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While current FCC regulations are intended to promote the development of a
competitive subscription television industry, we cannot be sure that these
regulations will have a favorable impact on the wireless cable industry as a
whole and/or our Company in particular. In addition, the FCC's regulation of
other spectrum could permit the operation of other wireless services to
interfere with MDS and ITFS frequencies.
The 1996 Act mandated that the FCC adopt regulations to prohibit restrictions
that impair customers' ability to receive video programming services through
reception devices. The FCC has adopted rules that prohibit restrictions that
impair the installation, maintenance or use of an antenna that receives
wireless cable signals, where the antenna is one meter or less in diameter or
diagonal measurement. The FCC has concluded that a restriction "impairs" if it
unreasonably delays, prevents or increases the cost of installation,
maintenance or use, or precludes reception of an acceptable quality signal.
Prohibited regulations include, but are not limited to, any state or local law
or regulation, including zoning, land use, or building regulation, or any
private covenant, homeowner's association rule or similar restriction on
property within the exclusive use or control of the antenna user where the
user has a direct or indirect ownership interest in the property. The matter
of whether the FCC's preemption authority extends to property not within the
exclusive use or control of a person with an ownership interest, such as a
rental property, remains pending.
The 1996 Act also requires all providers of telecommunications services to
contribute to a national Universal Service Fund (the "Fund"). The Fund was
created to promote the availability of telecommunications services to those in
low income, rural, insular and high cost areas at rates that are reasonably
comparable to the lower rates charged in urban areas. The 1996 Act expanded
the purpose of the Fund to include provision of affordable access to advanced
telecommunications services for schools, classrooms, health care facilities
and libraries. Previously, only telephone companies were required to
contribute to the Fund. The FCC is considering whether and to what extent
wireless cable operators, such as our Company, must contribute to the Fund.
This matter remains pending before the FCC.
Pursuant to the 1996 Act, video programming distributors, including wireless
cable operators, will be required to provide closed captioned video
programming on a phased-in basis starting on January 1, 2000. Requirements to
pass-through captions already contained in programming and to maintain
captioning at 1997 levels became effective on January 1, 1998. Because ITFS
programming, as a class, is exempt from captioning requirements, wireless
cable operators that retransmit such programming are not required to provide
it with closed captioning.
Pending Legislation
The State of Alabama and its local, political subdivisions do not impose any
direct taxes, such as sales tax or franchise taxes, on our wireless services,
either television or Internet. From time to time discussions are had about
the possibility of imposition of such taxes in Alabama, but no concrete
proposals are pending before the Alabama legislature now.
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Legislation has been introduced in several other states that would authorize
state and local authorities to impose taxes on providers of subscription
television programming, including wireless cable operators, based upon their
gross receipts comparable to the franchise fee cable operators pay. While the
proposals vary among states, such legislation would require as much as five
percent of gross receipts to be paid by wireless cable operators to local
authorities.
Although the majority of states impose a sales/use tax on the sale of certain
telecommunication services, the proliferation of new and emerging services has
made unclear the distinction between taxable telecommunication services and
non-telecommunication services. Internet access services could be classified
as telecommunication services in some states. In 1998 the United States
Congress enacted a three-year moratorium on the imposition of any new
taxes on Internet services.
We cannot be sure that legislation similar to what is described in the above
paragraphs will not be introduced or adopted in Alabama in the foreseeable
future.
Other Forms of Regulation
Federal law requires all "cable companies" to obtain local or state
franchises prior to constructing a subscription television distribution
system. Cable companies are defined in Section 602 of the Communications Act.
Because wireless cable systems deliver programming to subscribers by means of
microwave facilities rather than through coaxial cable that cross public
rights-of-way and are not specifically defined as "cable systems" in Section
602 of the Communications Act, the 1992 Cable Act, or in earlier statutes or
FCC regulations, wireless cable systems have not been considered cable
companies under FCC rules in this context. In Alabama, wireless cable
companies such as ours are not required to obtain franchises and are generally
not subject to state regulation by public utility or cable commissions.
The Company is also subject to various FCC regulatory limitations relating to
ownership and control. The 1996 Act and FCC rules require the FCC's approval
before a license may be assigned or control of the licensee may be
transferred. Moreover, the 1996 Act provides that certain types of licenses,
including those for MDS stations, may not be held directly by corporations of
which non-U.S. citizens or entities ("Aliens") own of record or vote more than
20% of the capital stock. In situations in which such a FCC license is
directly or indirectly controlled by another corporation, Aliens may own of
record or vote no more than 25% of the controlling corporation's capital
stock.
Wireless cable operators are also subject to regulation by the Federal
Aviation Administration and the FCC with respect to construction of
transmission towers and certain local zoning regulations affecting
construction of such towers and other facilities.
Under the federal copyright laws, permission from the copyright holder
generally must be secured before a video program may be retransmitted. Under
Section 111 of the Copyright Act, certain "cable systems" are entitled to
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engage in the secondary transmission of broadcast programming without the
prior permission of the holders of the copyright in the programming. To do so,
a cable system must secure a compulsory copyright license. Such a license is
obtained
upon the filing of certain reports with, and the payment of certain fees, to
the U.S. Copyright Office. In 1994, Congress amended copyright law to permit
wireless cable operators to rely on the cable compulsory license under Section
111 of the Copyright Act.
Section 119 of the Copyright Act provides for a similar compulsory-licensing
program for the retransmission of broadcast programming to the home via
satellite. In 1997, the Copyright Arbitration Royalty Panel significantly
increased the rates of entities operating under Section 119. While this action
has no direct impact on the rates applicable to our services, it has generated
a debate over the differences in the compulsory licensing schemes and the
disparity of the rates. Our operations may be adversely affected if existing
laws or regulations applicable to our copyright royalty liability are modified
or new laws are adopted.
Under the retransmission consent provisions of the 1992 Cable Act, wireless
and hardwire cable operators seeking to retransmit certain commercial
television broadcast signals must first obtain the permission of the broadcast
station whose signal it wishes to retransmit. However, wireless cable
systems, unlike hardwire cable systems, are not required under the FCC's "must
carry" rules to retransmit a specified number of broadcast television
channels. We carry seven such off-the-air channels in Mobile, including ABC,
CBS, NBC, and Fox.
Internet Regulation
Internet access providers are not currently subject to direct economic
regulation by the FCC or any state regulatory body, other than the regulations
that apply to businesses generally. In April 1998, the FCC reaffirmed that
Internet access providers should be classified as unregulated "information
service providers" rather than regulated "telecommunications providers" under
the terms of the Federal Telecommunications Act of 1996. As a result, we are
not subject to federal regulations applicable to telephone companies and
similar carriers merely because we provide our services using
telecommunications services provided by third-party carriers.
On June 3, 1999, the U.S. District Court for the District of Oregon ruled that
the City of Portland and Multnomah County could adopt "open access"
ordinances, requiring AT&T Corp to allow ISPs who are unaffiliated with AT&T
to connect their equipment directly to AT&T's cable modem platform, bypassing
AT&T's own proprietary cable ISP. The court ruled that the city and county
ordinances are not preempted by federal laws, including the FCC's regulation
of cable television. The court's decision would allow local governments to
mandate existing cable TV operators to permit unaffiliated, competing ISP's to
use the cable lines to provide service to homes and businesses. Coaxial cable
permits Internet access at much higher speeds than can be had over telephone
lines including ISDN lines.
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We expect that AT&T will appeal the Oregon court's decision. The decision
raises major uncertainties for the future of wireless Internet access services
like ours. For instance, open access to cable lines could greatly increase
the competitiveness of ISP's in high speed access, because they could provide
high speed access over existing cable lines without making the capital
investment required for a cable system. In addition, the court's ruling may
mean that state and local governments have authority impose a variety of
additional regulations on the Internet. We are uncertain how the Oregon
decision may affect our business. If the decision is allowed to stand, it may
adversely affect our business in many unforeseen ways, including greatly
increasing high speed Internet competition or by permitting additional local
regulations that restrict our business or raise our cost of doing business.
Governmental regulatory approaches and policies to Internet access providers
and others that use the Internet to facilitate data and communication
transmissions are continuing to develop and in the future we could be exposed
to regulation by the FCC other federal agencies or by state regulatory
agencies or bodies. For example, the FCC has expressed an intention to
consider whether to regulate providers of voice and fax services that employ
the Internet or IP switching as "telecommunications providers" even though
Internet access itself would not be regulated. The FCC is also considering
whether providers of Internet-based telephone services should be required to
contribute to the universal service fund, which subsidizes telephone service
for rural and low income consumers, or should pay carrier access charges on
the same basis as applicable to regulated telecommunications providers. To the
extent that we engage in the provision of Internet or Internet protocol based
telephony or fax services, we may become subject to regulations promulgated by
the FCC or states with respect to such activities. We cannot assure you that
such regulations will not adversely affect our ability to offer certain
enhanced business services in the future.
Due to the increasing popularity and use of the Internet by broad segments of
the population, it is possible that laws and regulations may be adopted with
respect to the Internet pertaining to content of Web sites, privacy, pricing,
encryption standards, consumer protection, electronic commerce, taxation, and
copyright infringement and other intellectual property issues. We cannot
predict the effect, if any, that any future regulatory changes or developments
may have
on the demand for our access or enhanced business services. Changes in the
regulatory environment relating to the Internet access industry, including the
enactment of laws or promulgation of regulations that directly or indirectly
affect the costs of telecommunications access or that increase the likelihood
or scope of competition from national or regional telephone companies, could
materially and adversely affect our business, operating results and financial
condition.
Markets
International Data Corporation estimates that there were over 38 million Web
users in the United States and over 68 million worldwide at the end of 1997.
International Data Corporation projects that the number of Web users will
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<PAGE>16
increase to over 135 million in the United States and over 319 million
worldwide by the end of 2002. In a report issued in April 1998, the U.S.
Department of Commerce estimates that traffic on the Internet is doubling every
100 days. Additionally, Forrester Research estimates that the number of Web
sites in the United States will increase from approximately 450,000 in 1997 to
nearly four million in 2002.
We currently propose to serve only one local market -- in and around Mobile,
Alabama. The Mobile, Alabama, market has 12,000 potential business users of
our service. Each of our eleven frequencies -- 7 MDS frequencies and 4 ITFS
frequencies -- can serve approximately 1,650 subscribers at any given time.
Although we may expand to other markets if we believe we can successfully and
profitable develop those markets, our efforts for the present will be focused
on Mobile.
Competition
Wireless Cable TV
In the Mobile, Alabama television market, we must compete against television
signal transmission from local stations, including those with national network
affiliations including ABC, CBS, NBC, and Fox and cable television, against
three cable systems in Mobile, and against direct satellite systems, including
Primestar, Echostar, and Direct TV. We lease or own eleven wireless
frequencies, which also limits our programming capacity, compared to cable and
direct broadcasters.
We have decided to gradually reduce and eventually discontinue our wireless
cable TV business, because, among other things, existing competitors can
provide better service to TV viewers in a more cost effective manner. We are
no longer marketing our wireless cable TV service or making new installations.
As customers discontinue our service, which they may do for a variety of
reasons including better channel selection, better signal reception, and
better maintenance service, we are reducing our TV customer base. We are
refocusing our attention on wireless Internet access service.
Internet Access
The Internet is available to anyone who has conventional telephone service.
The market for Internet access is highly competitive and fragmented with over
4,800 Internet service providers, primarily in local markets and averaging
less than 5,000 customers each. Although most service providers are small and
local, a number of very large companies have entered the business on a
national scale, with resources for development of proprietary, value-added
services and networks. These large businesses, such as America Online,
Microsoft, and AT&T, have brand name recognition and use marketing techniques
and resources, including television, radio, and mass mailing campaigns, that
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<PAGE>17
give them competitive advantages over small, new companies like ours.
Average Internet download speeds may vary widely based upon a number of
factors, including the capacity of the Internet Service Providers ("ISPs")
connectivity to the Internet, the number of users downloading information at
any one time from an ISP, speed of the telephone return path and the
characteristics of the user's personal computer. The Company's principal
target market is small to mid-size business customers. The overall demand
throughout the United States for Internet services is expected to grow
substantially, led by increased utility of the Internet to corporate and
consumer users, new software applications, availability of faster access
speeds and rising personal computer penetration.
The Internet access business is highly competitive. Barriers to entry are
relatively low. Current and potential competitors include local, regional and
national ISPs, telephone companies, franchise cable operators and DBS service
providers. We believe our principal competition will comes from high-speed
Internet access alternatives and not from slower dial-up connections to the
Internet. These principal competitors include franchise cable companies
offering high-speed Internet over their networks, telephone companies such as
local exchange carriers ("LECs") and competitive local exchange carriers
("CLECs") using ISDN, and digital subscriber lines ("DSL") or T1 connections,
ISP's offering a similar variety of connections as LECs and CLECs, and DBS
providers.
We believe that we have a competitive advantage in achieving relatively fast
download speed from the Internet with less capital investments than typically
required by franchise cable operators to upgrade their networks or by LECs and
CLECs offering DSL connectivity.
We believe that competition will intensify in the future and that our ability
to be successful in this business will depend on a number of factors,
including customer demand for high-speed Internet access services, acceptable
pricing structures for high-speed Internet services, reliable subscriber
equipment and our financial ability to service and grow the high-speed
Internet business. Many of our existing or potential competitors in the
Internet access business have greater name recognition and financial,
technical and human resources than we do and may be better equipped to
develop, deploy and operate Internet access systems.
The high-speed Internet access business and other businesses, such as WBA,
that use digital technologies present increased competition to us for the
renewal of channel lease agreements. This increased competition arises because
high-speed Internet access and certain other businesses that use digital
technologies may require fewer channels than the traditional analog video use
of wireless cable spectrum where a practical minimum of about 20 channels is
required. We could lose channels to competitors or incur higher costs to
renew or retain its existing channels. We believe that our service offers
communications links at higher speeds, reducing the waiting time that is
characteristic of Internet services in which users must wait for large computer
files to be downloaded to them over traditional telephone lines. We hope to
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<PAGE>18
take competitive advantage of the higher access speed as well as the
comparatively low capital investment requirements of our system, compared to
laying and maintaining land lines for telephonic or cable connections. The
communications industry has identified the need for higher speed
communications as a major competitive goal in providing Internet access, and
it is likely that large businesses will improve their Internet access speeds by
improving land line capacity and speed, improving computer communication
efficiency (such as faster modem speed), and offering wireless access similar
to our own. Thus, the already intense competition not only for content but
also for speed, dependability, and quality of delivery, will only increase
pressure on small businesses such as ours to stay competitive in the future.
Wireless Broadband Access
We believe that the best use of wireless cable spectrum is to serve small and
medium-sized business customers with fixed, two-way high-speed data and
telephony services. We are not presently offering WBA services. We face two
principal types of competition for WBA services. One group of competitors is
telephone companies such as LECs and CLECs that offer a wide variety of
non-wireless broadband T1, T3, DSL and fiber connectivity for business
customers. The other group of competitors is companies that offer or plan to
offer WBA services using radio frequencies other than wireless cable spectrum.
These competitors include companies operating in local multipoint distribution
service spectrum (27.5 to 28.35 GHz, 29.1 to 29.25 GHz and 31.0 to 31.3 GHz)
and in the 24 GHz and the 39 GHz bands. The Company believes that other
frequencies of radio spectrum are also being evaluated for WBA services by
competitors. All WBA providers are potentially competitors of the LECs because
the WBA technologies bypass the local customer access lines of the LECs and
the related costs charged by the LECs to access
such lines. The various radio spectrum used by WBA providers is subject to
different physical broadcast properties and FCC licensing rules.
A broad range of companies engaged in the communications and entertainment
businesses will be actual or potential competitors. Pending and future
technological and regulatory developments may result in additional competitors
and alternate means of providing broadband services. Almost all of our
competitors for broadband services are larger and have more capital,
technology and human resources. We depend upon regulatory and technology
actions, among other factors, in order to successfully implement our strategy.
(See -- Our Business Plan.)
Bundled Services
Many franchise cable companies have begun offering or announced their
intentions to offer, high-speed Internet access over their networks. At least
one DBS provider also offers high-speed Internet access. AT&T Corp. ("AT&T")
has completed its acquisition of Tele-Communications, Inc. ("TCI") and has
announced its intention to use the cable network of TCI to distribute data and
telephone services of AT&T. AT&T has also announced ventures with other
franchise cable companies to distribute AT&T products. This bundling activity
increases competition for the Company because of the attractiveness to
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<PAGE>19
customers of purchasing bundled services from one provider and because of the
opportunity for the provider to price bundled services more competitively than
individual services that we can offer.
Risks
We are a new company with limited operating history.
Our Company was formed in late 1997 and began operations with the confirmation
of the Plan and emergence of our business from bankruptcy in January 1998.
Since then we have continued to operate our wireless cable TV business in
Mobile, Alabama, but we have suspended our efforts to attract new wireless
cable TV business. We began offering high speed, one-way Internet service in
1998. We cannot be sure that we will be successful in this or any other
business line and do not have a track record of success in any business.
We have a history of losses and expect more losses in the foreseeable future.
Our predecessor, Mobile LLC, filed for Chapter 11 bankruptcy proceedings in
1997 because it was unable to operate profitably. Since we emerged from
bankruptcy in early 1998, we have continued to experience losses from
operations. We have determined to suspend installations for new customers in
our only business line with an operating history, the wireless cable TV
business, because we believe new installations would not be profitable. We
can expect losses in our Internet business line until we build a large enough
customer base to generate revenue in excess of start-up and operating costs.
We do not have reliable projections of how long it may take to generate
positive cash flow or operating profits from the Internet business. We have
ongoing operating costs including rent, license fees for our broadcast
frequencies, and debt service. We believe that, to make a profit from our
current business, we must expand our Internet customer base to at least 3,000
customers from a current customer list of approximately 260. Accordingly, we
cannot expect to operate at a profit in the foreseeable future.
We will need additional capital to continue and expand operations.
Since we began operations we have depended on capital provided by financing
during the bankruptcy proceedings as well as on equity provided by exercise of
warrants for our common stock which were issued as part of the reorganization.
Assuming we can successfully grow our new high speed Internet access business,
we likely must find additional capital, either in the form of loans or sale of
more equity, to invest in equipment necessary for that business and to provide
operating capital until the Internet business generates positive cash flow.
Given our history of losses and lack of operating history, we cannot be sure
that we will be able to raise sufficient capital to continue in business until
we become profitable.
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Our management is inexperienced in the wireless cable or Internet business.
Our board of directors was formed from investors in Mobile LLC who were
willing to invest their time and energy in saving that business and in
building our Company when it was formed. None of our directors have any prior
experience either in the wireless cable business or in the Internet access
business. We have existing staff in Mobile with experience in the wireless
cable business not in the Internet access business. We are currently seeking
a manager with the talent and experience necessary to make our new business
succeed. We do not know if we will be able to attract the necessary new
employees and managers with our limited resources.
Our senior secured indebtedness is due and unpaid.
In 1997 and 1998, our operations were partially financed by loans from two or
our directors, totaling $250,000 principal amount. Each loan is secured by
essentially all of our assets, including our wireless frequency licenses.
These loans are now due and payable in full, together with accrued, unpaid
interest. The lenders have not demanded payment nor declared the loans in
default, but they also have not waived any provisions of the loan agreements.
We are negotiating an extension or settlement of this indebtedness, but if we
are unable to renegotiate the terms of this debt, the lenders could demand
payment and foreclose on assets which are essential to continuing our
business.
System failure could disrupt our business.
All of our broadcasting facilities are located in Mobile, Alabama. A failure
of our broadcasting capability at our Mobile facilities due to mechanical
failure, or due to natural disasters such as hurricanes that periodically
occur on the coast of the Gulf of Mexico, where we are located, could cause a
complete cessation of our ability to offer any services to customers. Such a
failure would interrupt all revenues from subscriber services and prevent us
from continuing or expanding our business until the system is fixed. Not only
would we lose revenues, but customers might cancel their subscriptions and
potential customers would not subscribe to our services, which would
materially and adversely affect our financial condition and operating results.
We have built a facility with redundant equipment to protect against equipment
failure, and we believe that we could withstand all but the most severe
natural disasters or equipment failures.
We must adapt to changing technologies and markets.
Both the wireless cable market and the Internet services market are
susceptible to rapid changes due to technology innovation, evolving industry
standards, changes in subscriber needs and frequent new service and product
introductions. New services and products based on new technologies or new
industry standards expose us to risks of equipment obsolescence. We will need
to use leading technologies effectively, develop our technical expertise and
continually improve our existing services on to compete successfully. We
cannot be certain that we will be successful in using new technologies
18
<PAGE>21
effectively, developing new services or enhancing existing services or that
any new technologies or enhancements used by us or offered to our customers
will be accepted in the marketplace.
Our ability to compete successfully will also depend on the continued
compatibility and interoperability of our services with products and systems
sold by various third parties. We cannot be certain that industry standards
will be established or, if they become established, that we will be able to
conform to these new standards to develop a competitive position in the
market.
We are also at risk due to fundamental changes in the way that Internet access
may be delivered in the future. Currently, Internet services are accessed
primarily by computers connected by telephone lines. Recently, several
companies have developed cable modems, some of which are currently offered for
sale. These cable modems have the ability to transmit data at substantially
faster speeds than the modems currently used. As the Internet becomes
accessible by broad segments of the U.S. population through these cable modems
and other consumer electronic devices, or as subscriber requirements change
the means by which Internet access is provided, we will have to develop new
technologies or modify our existing technology to accommodate these
developments and remain competitive. Our pursuit of these technological
advances may require substantial time and expense, and we cannot be certain
that we will succeed in adapting our Internet access services business to
alternative access devices and conduits.
Our new proposed Internet business depends on continued growth of the
Internet.
Widespread use of the Internet is a relatively recent phenomenon. Our future
success substantially depends on continued growth in the use of the Internet
and the continued development of the Internet as a viable commercial medium.
We cannot be certain that Internet usage will continue to grow as it has in
the past or that extensive Internet content will continue to be developed and
continue to be accessible for free or at nominal cost to Internet users. If
the
use of the Internet does not continue to grow or evolves in a way that we
cannot address, our business, financial condition and operating results could
be materially and adversely affected.
If we are unable to attract and retain qualified sales personnel for our sales
program, we may not be able to obtain customers.
Our business strategy depends on hiring and keeping a qualified marketing
staff to sell our new high speed Internet services, and we have not yet hired
that sales staff. Our future success in high speed Internet services depends
on our ability to market successfully to new customer in an environment that
is increasingly competitive. We may not succeed in attracting and retaining
qualified sales managers or other sales people, which is necessary for this
type of marketing
approach.
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No market for our stock.
Prior to filing this registration statement there has been no active market
for the sale of our stock. An active public market for our common stock may
not develop in the future, and if it does not develop, investors may not be
able to sell their stock at prices reasonably related to its fair market
value. As a general proposition, some of the following factors may affect the
development of a market for our stock and market prices:
- - Interest of the investment community in small, new companies in the high
speed Internet access business.
- - Our ability to follow through on our plans to develop a high speed
Internet access business.
- - Our actual or anticipated operating results.
- - Announcements of technical innovations or industry trends and our
ability to keep up with them.
- - Our ability to attract and retain key management, marketing, and
technical personnel.
- - Operating results of other competing companies.
Substantial stock sales by existing investors could cause our stock prices to
drop.
It is by no means certain that any market for our stock will develop. If a
market does develop, many current investors (who were Mobile LLC investors and
received their stock as part of the Plan), may wish to sell their stock. Most
of these investors received stock which is eligible for resale because it was
issued under an exemption from federal and state securities laws contained in
Section 1145 of the Bankruptcy Code. If a substantial number of investors
decide to sell their stock after a market develops, it is likely that the
market price of our stock would fall. This might make it more difficult for
investors to sell their stock and might make it more difficult for us to raise
needed capital in a future securities offering.
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following information should be read in conjunction with our financial
statements and notes appearing elsewhere in this registration statement. This
registration statement contains forward-looking statements. The words,
"anticipate," "believe," "expect," "plan," "intend," "estimate," "project,"
"could," "may," "foresee," and similar expressions are intended to identify
forward-looking statements. These statements include information regarding
expected development of our business and development of the wireless cable
TV and Internet access service business where we will focus our marketing
efforts. These statements reflect our current views about future events and
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<PAGE>23
financial performance and involve risks and uncertainties, including without
limitation the risks described in "Risk Factors". Should one or more of these
risks or uncertainties occur, or should underlying assumptions prove incorrect,
actual results may vary materially and adversely from those anticipated,
believed, estimated or otherwise indicated.
Among the factors that could cause actual results to differ materially are the
following: a lack of sufficient capital to finance our business strategy on
terms satisfactory to us; pricing pressures which could affect demand for our
services; changes in labor, equipment and capital costs; our inability to
develop and implement new services such as wireless broadband access and
high-speed Internet access; our inability to obtain the necessary
authorizations from the FCC for such new services; competitive factors, such
as the introduction of new technologies and competitors into the wireless
communications business; or our Company's failure to attract strategic
partners; general business and economic conditions; inexperience of management
in deploying a wireless broadband access business.
We have sustained substantial losses since we began operations after
confirmation of the Plan and we expect to continue incurring losses in the
foreseeable future. We have suspended new installations of wireless cable
customers, which was the primary business of the Partnership which was our
predecessor, and we have not yet substantially developed our high speed
Internet access services or any other business services. Nearly all operating
revenues since inception have come from wireless cable TV subscriptions, which
are declining. We expect that revenues from wireless cable service will
continue to decline. Unless we are able to find a new source of revenue, such
as our Internet access service, we will be unable to continue as a going
concern.
We do not have reliable projections of how long it may take to generate
positive cash flow or operating profits from the Internet business. We have
ongoing operating costs including rent, license fees for our broadcast
frequencies, and debt service. We believe that, to make a profit from our
current business, we must expand our Internet customer base to at least 3,000
customers from a current customer list of approximately 260. Accordingly, we
cannot expect to operate at a profit in the foreseeable future.
We were formed in 1997 and took over the business of Mobile LLC upon
confirmation of the Plan in January 1998. Our financial statements that
accompany this registration statement present the results of operations for
the business which the Company acquired on emergence from bankruptcy, for the
years ended December 31, 1998 and 1997. Those financial statements have been
retroactively restated to present the reorganization of our business as if we
emerged from bankruptcy as of the earliest period presented. See, Note 1 to
our Financial Statements.
The bankruptcy proceedings affected our financial condition and the way that
we have reported our assets, liabilities, income and expenses. During the
bankruptcy, we accrued certain liabilities which were ultimately discharged
either as part of confirming the Plan at the beginning of 1998, or later
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during the year in 1998 after we emerged from bankruptcy. Prior to December
31, 1997, we accrued $61,500 in postpetition liabilities and $138,320 as
prepetition liabilities subject to compromise. These amounts were both
discharged in 1998 after we emerged from bankruptcy. These items are reported
on the Statements of Cash Flows. We accrued $61,500 under Cash Flows from
Operating Activities, in postpetition liabilities at December 31, 1997, that
were discharged in fiscal 1998 with a resulting charge to Operating Cash Flow
of $61,500. Similarly, Under Cash Flows from Financing Activities, we accrued
$166,889 at December 31, 1997, and discharged prepetition liabilities of
$138,320 in fiscal 1998.
On June 3, 1999, the U.S. District Court for the District of Oregon ruled that
the City of Portland and Multnomah County could adopt "open access"
ordinances, requiring AT&T Corp to allow ISPs who are unaffiliated with AT&T
to connect their equipment directly to AT&T's cable modem platform, bypassing
AT&T's own proprietary cable ISP. The court ruled that the city and county
ordinances are not preempted by federal laws, including the FCC's regulation
of cable television. The court's decision would allow local governments to
mandate existing cable TV operators to permit unaffiliated, competing ISP's to
use the cable lines to provide service to homes and businesses. Coaxial cable
permits Internet access at much higher speeds than can be had over telephone
lines including ISDN lines.
We expect that AT&T will appeal the Oregon court's decision. The decision
raises major uncertainties for the future of wireless Internet access services
like ours. For instance, open access to cable lines could greatly increase
the competitiveness of ISP's in high speed access, because they could provide
high speed access over existing cable lines without making the capital
investment required for a cable system. In addition, the court's ruling may
mean that state and local governments have authority impose a variety of
additional regulations on the Internet. We are uncertain how the Oregon
decision may affect our business. If the decision is allowed to stand, it may
adversely affect our business in many unforeseen ways, including greatly
increasing high speed Internet competition or by permitting additional local
regulations that restrict our business or raise our cost of doing business.
New Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130 (SFAS 130), Reporting Comprehensive Income. This statement requires that
all items that must be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. We adopted SFAS 130
for the period ended December 31, 1997, which had no material effect on the
accompanying financial statements.
In June 1997, the FASB issued Statements of Financial Accounting Standards No.
131 (SFAS 131), Disclosures about Segments of an Enterprise and Related
Information. The statement requires us to report income/loss, revenue,
expense and assets by business segment including information regarding the
revenues derived from specific products and services and about the countries
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where we operate. The Statement also requires that we report descriptive
information about the way that operating segments were determined, the
products and services provided by the operating segments, differences between
the measurements used in reporting segment information and those used in our
general-purpose financial statements, and changes in the measurement of
segment amounts from period to period. We adopted SFAS 131 for the period
ended December 31, 1997, which had no material effect on the accompanying
financial statements or required disclosures.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AcSEC") issued Statement of
Position ("SOP") 98-5, "Reporting on the Costs of Start-up Activities." SOP
98-5 establishes standards for the reporting and disclosure of start-up costs,
including organization costs. We adopted SOP 98-5 on January 1, 1999. We
believe that the adoption of this statement will not have a material effect on
our financial position or results of operations.
Results of Operations
Results of Operations for the Three Months Ended March 31, 1999, as Compared
to the Three Months Ended March 31, 1998
During the first quarter of 1999, we discontinued new installations of our
cable TV service because it appeared to be unprofitable, and focused on
generation of new business from Internet access service, of both the land
based (telephonic) and microwave kinds. For the quarter ended March 31, 1999,
we had a net loss from operations of $151,899, which was a $71,782 (32%)
decrease from our operating loss of $223,681 in the first quarter of 1998.
Our basic loss per share was $.04 in the first quarter 1999, compared to $.07
in the first quarter 1998.
In the first quarter of 1999, we increased revenues and decreased operating
expenses. This was due to the cessation of new cable TV installations and
improvements in operating efficiency as we concentrated on our Internet access
service. For the three months ended March 31, 1999, operating revenue
increased $1,371 (7%) to $22,206, up from $20,835 for the same period in 1998.
At the same time, operating expenses decreased by $19,040 (32%) to $39,981,
down from $59,021 in the first quarter of 1998. We were able to negotiate a
reduction in our monthly lease rate for one of our channel leases, which
substantially decreased operating expenses. In addition, we took cost savings
steps in late 1998 and early 1999, which reduced our operating expenses.
We also reduced general and administrative expenses in the first quarter of
1999. First quarter 1999 general and administrative expenses were $105,759, a
$28,217 (21%) decrease from first quarter 1998 expenses of $133,976. We
attribute the decrease to the end of bankruptcy proceedings in early 1998 and
a corresponding decrease in legal and administrative expense associated with
the Chapter 11 case and other cost saving steps, including a reduction in
staff to preserve operating capital.
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<PAGE>26
Depreciation and amortization expenses declined by $23,154 to $28,365 in the
first quarter 1999, a 45% drop from depreciation and amortization charges of
$51,519 in the first quarter 1998, primarily because some short-lived
equipment became fully depreciated by the end of 1998. We depreciate
substantially all of our capitalized assets using the straight-line method.
Interest expense increased by $1,687 (43%) in the first quarter of 1999 over
1998, due to increased borrowings from insiders. The interest charges are,
for the present, being accrued and not repaid. In March and May, 1999, the
loans on which this interest accrued became due and payable in full. These
loans were made to us by two of our directors during 1997 and 1998 to fund our
continued operations. The lenders have neither demanded repayment nor
declared a default in the loans, but they also have not waived their rights to
do so. The loans are secured by nearly all of our assets, including our
wireless frequency licenses. If we are unable to renegotiate or settle these
debts, the lenders could demand repayment of the loans and foreclose on our
property, in which case we would be unable to continue operations.
Results of Operations for the Twelve Months Ended December 31, 1998, as
Compared to the Twelve Months Ended December 31, 1997
We had a net operating loss for the year ended December 31, 1998, of $616,313,
compared to an operating loss of $597,726 in 1997. We were able to reduce our
total costs and expenses slightly, to $722,915 in 1998 from $733,105 in 1997,
a decrease of $ 10,190 (1%). This decrease was more than offset by a $28,777
(21%) decrease in revenues.
Nearly all operating revenues in both years came from wireless cable TV
subscriptions. Our operating revenues versus operating costs nearly broke
even in fiscal 1997 but suffered substantial losses in 1998. In 1997,
operating expenses exceeded revenues by $694, but in 1998 operating expenses
exceeded revenues by $53,238.
Operating revenues decreased by $28,777 (21%) to $106, 602 in fiscal 1998,
from $135,379 in 1997. The decrease was mainly due to cancellations of
service by our wireless cable TV subscribers. At the same time, Operating
expense rose by $23,767 (17%) to $159,840 in 1998, compared to $136,073 in
1997. The increase was caused by costs, such as outside labor and consulting,
associated with the start-up of our Internet services, which we began to offer
in May 1998.
In 1997, we realized non-recurring, non-operating income of $313,717 from
recovery of funds during the Chapter 11 bankruptcy case. This amount was more
than twice our 1997 operating income, and it dramatically reduced our net
loss. Our 1997 net loss, including interest income and expense and the
bankruptcy recovery, was $291,858.
In 1998, we did not receive any non-operating income besides interest, and so
our net loss in 1998 increased by 342,672 (117%) to $634,530, compared to a
net loss of $291,858 for 1997.
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<PAGE>27
Liquidity and Capital Resources
During the past two years, both during and after the Chapter 11 case, we have
satisfied our working capital needs primarily through our financing activities
including raising capital through sale of certificates of indebtedness, loans
from our directors, and the exercise of warrants that were issued as part of
the Plan. We believe that we have sufficient liquidity for the short term.
Secured loans from two of our directors in the principal amount of $250,000,
plus accrued interest of $44,472, became due and payable on March 31 and May
21, 1999. The directors have not demanded repayment of these loans, but
neither have they waived their rights to demand payment or declare a default.
We are attempting to settle or renegotiate these loans, but if we are unable
to settle or renegotiate them, we could not repay them from our cash reserves
without jeopardizing our capital reserves. The loans are secured by all of
our property including our FCC licenses, which are essential to our continued
operations.
We had total assets of $937,479 at March 31, 1999, $872,892 at December 31,
1998, and 1,259,046 at December 31, 1997. At December 31, 1998, license
acquisition costs represented $610,000 (70% of our total assets), compared to
$665,000 (53% of our total assets) in 1997. License acquisition costs include
costs incurred to develop or acquire our wireless cable licenses. All of our
licenses were acquired prior to January 2, 1998, and the change between 1997
and 1998 was entirely due to amortization of these historic costs. At March
31, 1999, license acquisition costs had decreased another $13,750, again
representing amortization of these costs.
Our inventory did not change materially from December 31, 1999 to March 31,
1999, because we did not continue using our inventory after discontinuing new
wireless cable TV service. Likewise, our prepaid expenses and accounts
receivable did not change materially in the first quarter 1999. Our other
assets, including deposits, license acquisition costs, and organization costs
also did not change materially in the first quarter of 1999 except for changes
attributed to depreciation and amortization of the licenses and organization
costs.
Under SFAS No. 121, we are required to periodically review our long-lived
assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. We implemented
the provisions of this policy for the years ended December 31, 1998 and 1997,
but the policy had no material effect on our financial condition. See, Note 1
to the Financial Statements.
Operating Activities. For the year ended December 31, 1998, cash used in
operating activities was $448,882, compared to cash used in 1997 operating
activities of $20,191. The difference results mainly from the absence of
bankruptcy recoveries in 1998, compared to 1997.
Investing Activities. For both 1998 and 1997, investing activities were
property and equipment purchases for Mobile, Alabama, operations. We
purchased $111,009 in property and equipment in 1997 but only $22,152 in 1998.
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<PAGE>28
Financing Activities. In 1997, during the bankruptcy, we raised a total of
$355,039 from financing activities. Sources of funds were the sale of debtor
certificates ($53,150) cash loans from insiders ($175,000), and deferring
prepetition liabilities ($126,889) associated with the bankruptcy filing.
In 1998, we raised an additional $417,836 from the issuance of warrants
($156,986), sale of additional debtor certificates ($185,850), and cash loans
from insiders ($75,000). These activities were partially offset by
discharging $138,320 for prepetition liabilities. As a result, the net cash
raised from financing activities decreased by $75,523 (21%) to $279,516 in
1998, from $355,039 in 1997. Because of the lack of net revenues from
operations, these financing activities were essential to our ability to meet
expenses in 1997 and 1998.
In the first quarter of 1999, we raised another $213,323 from the exercise of
warrants issued as part of the Plan. These funds were again used to meet
operating expenses.
Year 2000 Compliance
We believe that we are prepared for the challenges to management information
and other computer systems presented by Year 2000 ("Y2K"). In general, Y2K
issues relate to the way that many computer programs refer to dates and their
ability to recognize dates after the end of 1999. We have reviewed our
information systems and non-information based, automated systems for Y2K
compliance.
We have recently purchased replacement software for our billing system, which
the developer represents is Y2K compliant, and we expect that we will install
it in the near future to replace our existing billing software. We have
purchased and installed other small software programs or updates to make other
existing systems Y2K compliant. We also have recently purchased a replacement
server computer hardware that is Y2K compliant. The cost of these hardware
and software purchases to date is about $6,500.
We must also purchase a new converter management system in order to make our
television reception system for our wireless cable customers Y2K compliant.
We do not have a current estimate on the cost of this system, but we believe
that we can pay for it from our current cash resources without a material
effect on our financial condition. If we do not install a new converter
management system prior to January 1, 2000, our wireless cable system will
become inoperable on New Year's Day, with the resultant loss of revenue unless
and until the new converter is installed. We anticipate no difficulty in
purchasing and installing the new converter prior to the end of 1999. The
converter management system will not affect our Internet services, which we
believe are Y2K compliant as they exist today. Other than the need for the
new converter, we believe that we have addressed all Y2K issues for our
information systems and non-information based, automated systems.
26
<PAGE>29
Item 3 Description of Property.
We rent approximately 7,000 square feet of office and warehouse space at 4123
Government Blvd., Mobile, Alabama, for a monthly rental of $1,300. The lease
expires in March 2000, but we have the right to renew it for three successive
three-year terms. We also lease the site for our transmitter for $1,000 per
month, expiring in March 2000. See, Note 4 to our Financial Statements.
We lease the site for our transmitter subject to a five-year lease for $12,000
annually, expiring March 13, 2000.
All of our FCC frequency leases and licenses are located in the Mobile,
Alabama, market. We lease the E Group (E-1, E-2, E-3, and E-4) frequencies
from TV Communications Network, Inc., (TVCN), of Denver. We were not offered
a second five year term on this lease when it expired earlier this year, and
we are currently leasing the E Group from TVCN on a month to month basis for
$1,200 per month. We believe that we would be offered an equal opportunity to
bid on the E Group, should TVCN decide to sell them, but we cannot be sure
that we would succeed in purchasing them. We own the licenses for three MDS
frequencies in the H Group (H-1, H-2, and H-3). We acquired the H Group
frequencies in 1997, using funds raised from the Mobile Wireless partners.
The remaining four MDS frequencies in Mobile are owned by an unaffiliated
third party, and we do not have rights to use them.
We also lease the Mobile, Alabama, G Group of ITSF frequencies from the North
American Catholic Educational Programming foundation, Inc. (NACEPH) for $1,000
per month. We are in our second five year term for this lease, which expires
in August of 2002.
Item 4 Security Ownership of Certain Beneficial Owners and
Management.
The following table contains information about the ownership our common stock,
as of December 31, 1998, by stockholders who beneficially own more than 5% of
our common stock, or who are our directors or executive officers. This
information was given to us by the stockholders, and the numbers are based on
definitions found in Rules 13d-3 and 13d-5 under the Securities Exchange Act of
1934. On December 31, 1998, 3,832,009 shares of our common stock were
outstanding.
Shares Owned (1)
Shareholder Number Percent
Monte Julius 152,584 3.84%
Demetrios Tsoutsas (2) 102,270 2.61%
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<PAGE>30
Shares Owned (1)
Shareholder Number Percent
Oscar Hayes 102,600 2.62%
Miles Wm. Humphrey, Jr. 116,400 2.96%
Terry L. Hopkins 140,344 3.57%
All directors and officers as a
group (5 persons) 613,898 14.16%
(1) Includes shares which the listed shareholder has the right to acquire
before March 31, 1999, from options or warrants. Each of the listed
shareholders are directors who received the options listed below as
compensation for their service as director in 1998. See, Directors'
Compensation. Each of them also received the warrants listed below
in exchange for their claims against Mobile Limited Liability Company
as part of the Plan.
Options Warrants Total
Monte Julius 115,600 18,492 134,092
Demetrios Tsoutsas 75,000 8,250 83,250
Oscar Hayes 75,000 13,800 88,800
Miles Wm. Humphrey, Jr.75,000 20,700 95,700
Terry L. Hopkins 50,000 45,172 95,172
All officers and
directors as a group 390,600 106,414 497,014
</ TABLE>
Under SEC rules, we calculate the percentage ownership of each person
who owns exercisable options by adding (1) the number of exercisable
options for that person to (2) the number of total shares outstanding,
and dividing that result into (3) the total number of shares and
exercisable options owned by that person.
(2) Includes shares owned by Mr. Tsoutsas' spouse.
Item 5 Directors, Executive Officers, Promoters and Control
Persons.
Each of our directors became directors upon the confirmation of the Plan of
Mobile Limited Liability Company which capitalized our Company in January
1998. The directors are divided into three classes, each serving staggered
terms of up to three years.
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<PAGE>31
Class of 2001
Name Position Biographic Information
Monte Julius President, Mr. Julius, who is 65, became involved with
Director our Company as an investor in Mobile Wireless
Partners in 1994. He was semi-retired prior
to joining us, and since 1981 he has owned
and managed residential properties and
operated a plastic tools manufacturer.
Demetrios Chairman of Mr. Tsoutsas, 65, is owner and President of
Tsoutas the Board President of Melstrom Manufacturing
of Corporation, engaged in military procurements
Directors as a prime contractor to the U.S. Department
of Defense and various airframe manufacturers.
He is founder, President, and C.E.O. of Super-
Tech, L.L.C., a maker of machine parts under
subcontracts with the U. S. Department of
Defense and for private industry, since 1996.
From 1975 to 1996, he founded and operated
several companies in the military procurement
industry, including D&A Electronics
Manufacturing Company, Inc, and Ulysses, Inc.
He also founded Pluto Industries, Inc., an
electro- mechanical product manufacturer, in
1975. He received a degree in electrical
engineering from the Greek Air Force Academy
in 1954. He became involved with our Company
as an investor in Mobile Wireless Partners and
member of their management committee in 1994,
and was also a director of Mobile LLC.
Class of 2000
Oscar Hayes Secretary, Mr. Hayes, 69, has owned and operated Hayes
Director Appraisal in Albany, Georgia, since 1986.
Miles Humphrey Treasurer, Mr. Humphrey, 79, has been retired since 1992.
Director He owned and operated a chicken farming and egg
production company, Beaver Valley Eggs, Inc.,
from 1971 until his 1992 retirement.
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<PAGE>32
Class of 1999
Terry L. Director Ms. Hopkins, 52, has managed her private
Hopkins investments since 1991. She also serves
on the Board of Directors of Pacific
Diagnostic Technologies, Inc., an OTC-
Bulletin Board company.
We do not have committees of the Board of Directors, and all Directors
participate in decisions regarding compensation of management, including Mr.
Julius, who is the Chief Executive Officer as well as a Director.
Item 6 Executive Compensation
Summary Compensation Table
The following table summarizes the compensation of our President for 1998.
Long Term Compensation (1)
--------------------------------------------
Securities
Restricted Stock Underlying
Salary Compensation (2) Options/ SARs (3)
- -----------------------------------------------------------------------
Monte Julius $12,900 14,532 130,132
(1) No market existed for our common stock during 1998.
(2) On December 18, 1998, Mr. Julius was awarded 14,532 restricted shares of
common stock for his services. The Board of Directors valued these
shares at $10,400, or $0.72 per share, on the date of the award.
(3) As part of the Plan, we agreed to award Mr. Julius options to purchase
115,600 shares of common stock at $0.25 per share pursuant to our stock
award and long term incentive plan, which was adopted in December 1997,
prior to confirmation of the Plan. In addition, on December 18, 1998,
the Board of Directors awarded Mr. Julius 14,532 Class B Warrants with
an exercise price of $0.25 per share, as compensation for his services.
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<PAGE>33
Stock Options Granted in 1998
The following table summarizes the stock options that we granted to Mr.
Julius during 1998 in compensation for his services. In addition to the
options listed here, during 1998 Mr. Julius received warrants to purchase
18,492 shares of our common stock in exchange for his claims against Mobile
Limited Liability Company, as part of the Plan.
Option/SAR Grants in Last Fiscal Year
- -----------------------------------------------------------------------
Number of % of Total
Securities Options/ SARs
Underlying Granted to Exercise of
Options/ SARs Employees in Base Price Expiration
Granted (#) Fiscal Year ($/Sh) Date
- ------------------------------------------------------------------------
Monte Julius,
President 130,132 100% $0.25 Jan. 9, 2000
Year End Stock Option Value
Mr. Julius did not exercise any stock options in 1998. At December 31, 1998,
all of Mr. Julius' options to purchase our stock listed above were
exercisable. There was no market for our common stock at the end of 1998 on
which to base a valuation of Mr. Julius' shares at year-end.
Directors' Compensation
Directors are reimbursed for their travel and related expenses to attend
Board meetings. In 1998, we agreed to issue stock options to directors in
compensation for their services, pursuant to our stock award and long term
incentive plan. We paid no other compensation to our directors (other than
Mr. Julius, as described above) in 1998. The following table lists the stock
options granted to directors as compensation in 1998. All of these options
are exercisable at $0.25 per share and expire on January 9, 2000. In addition
to these options, each director also received warrants to purchase common
stock as part of the Plan, in exchange for their claims against Mobile Limited
Liability Company. See, Security Ownership of Certain Beneficial Owners and
Management.
Number of Shares
Underlying Directors'
Options
Monte Julius 115,600
Demetrios Tsoutsas 75,000
Oscar Hayes 75,000
Miles Humphrey, Jr. 75,000
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<PAGE>34
Terry L. Hopkins 50,000
Item 7 Certain Relationships and Related Transactions.
On May 21, 1997, Directors Oscar Hayes loaned $75,000 and Demetrios Tsoutsas
loaned $100,000 to Mobile LLC, with interest at 12% and secured by a lien on
all license agreements including our FCC licenses, contracts, accounts
receivable, equipment leases and other choses in action and all of its
equipment at its principal place of business in Mobile, Alabama. The Plan
provides that these loans remain outstanding in the amount of the total debt,
$175,000 secured by all of our property and equipment in Mobile, Alabama. The
Plan provided that two debts were to be paid in full, in cash plus interest at
the rate of 9% per annum, one month after confirmation of the plan. Mr. Hayes
and Mr. Tsoutsas agreed to extend the loans for one year, to May 21, 1999, on
the same terms. In addition, on March 31, 1998, Mr. Tsoutsas loaned us an
additional $75,000 on the same terms, for one year, again secured by all of
the Company's assets.
These loans in the principal amount of $250,000, plus accrued interest of
$44,472, became due and payable on March 31 and May 21, 1999. The directors
have not demanded repayment of these loans, but neither have they waived their
rights to demand payment or declare a default. We are attempting to settle or
renegotiate these loans, but if we are unable to settle or renegotiate them,
we could not repay them from our cash reserves without jeopardizing our
capital reserves. The loans are secured by all of our property including our
FCC licenses, which are essential to our continued operations.
Item 8 Legal Proceedings.
None.
Item 9 Market for Common Equity and Related Stockholder Matters.
There is no current market for our common shares. We have contacted market
makers regarding the possibility of making a market in our shares and of the
market makers' entering quotations for the purchase and sale of the stock on
the over-the-counter bulletin board, but to our knowledge, no quotations for
the purchase or sale of our shares are being made as of the date of this Form
10-SB.
Item 10 Recent Sales of Unregistered Securities.
In 1997, the Bankruptcy Court authorized the sale of Certificates to raise new
capital for the reorganized debtor pursuant to Section 364 of the Code. The
Certificates were due two years from the Effective Date of the Plan and bore
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<PAGE>35
interest at 10% annually. On May 27, 1998, the Bankruptcy Court Clerk
disbursed $242,043, representing proceeds from sales of the Certificates of
$239,000, and interest income of $3,043 to the disbursing agent, who in turn
wired the funds to our Company. A total of 120 individuals participated in
the program. The Plan of Reorganization provided that the Debtor Certificate
holders could, at their exclusive option, convert their debt at a conversion
rate of one unit of equity for each $1 lent. A unit of equity consists of two
shares of Common Stock and two Class "A" Warrants allowing the holder to
purchase additional shares at $0.75 each. 118 holders opted to convert their
certificates and two opted not to convert. On July 31, 1998, 466,000 shares
of Common Stock and 466,000 "A" Warrants were issued to the 118 Certificate
holders. Stock and Warrants issued to this group have no restrictions.
Under the Plan confirmed by the Bankruptcy Court in January 1988, we issued a
Debtor Certificate to the Partnership for $225,000, to purchase the FCC
license which we acquired in the reorganization. The Plan provided that the
Debtor Certificate could be converted into 3,192,518 shares of common stock
and 3,068,066 class "B" warrants. In the event of conversion of the Debtor
Certificates into the stock and warrants, the Partnership agreed by contract
not to assign, pledge, transfer or otherwise dispose of the 3,192,518 shares
of common stock and 3,068,066 warrants for one year from the date of
conversion. 126,000 shares of common stock held no such restriction. When
the Partnership was dissolved in July 1998, the shares and warrants were
issued and distributed to the partners in the Partnership. These shares and
warrants were issued pursuant to Section 1145 of the Bankruptcy Code.
Section 1145 of the Bankruptcy Code exempts the original issuance of
securities under a plan of reorganization from registration under the
Securities Act of 1933, as amended ("Securities Act"), and state law. For the
original issuance to be exempt, three principal requirements must be satisfied:
(i) the securities must be issued by the debtor or its successor under a plan
of reorganization, (ii) each recipient of the securities must hold a claim
against the debtor, equity interest in the debtor or a claim for an
administrative expense against the debtor, and (iii) the securities must be
issued entirely in exchange for the recipient's claim against or equity
interest in the debtor or "principally" in such exchange and "partly" for cash
or property. Our Plan called for the Company to issue common stock in
satisfaction of certain creditors' claims and certificates of indebtedness to
equity holders in Mobile LLC in exchange for their equity interests. The
certificates of indebtedness were convertible into 3,192,518 shares of common
stock and 3,068,066 warrants to purchase common stock. The Company believes
that the exemption from registration requirements provided by Section 1145 of
the Bankruptcy Code applies with respect to the issuance of common stock to
claimants and issuance of common stock upon conversion of the certificates of
indebtedness, as well as for the warrants and the underlying common stock to
be issued upon exercise of the warrants.
Although we believe that the subsequent distribution of our common stock by
its recipients would be exempt from registration and not subject to a holding
period in most circumstances, certain recipients of the securities - i.e. those
recipients who may be deemed "underwriters" as defined under Section 1145(b)
33
<PAGE>36
of the Bankruptcy Code - may be unable to resell such securities absent
registration of the securities under the Securities Act and applicable state
law, or absent exemption therefrom.
Section 1145(b) of the Bankruptcy Code defines four types of
"underwriters": (i) a person who purchases a claim against, an equity
interest in, or a claim for administrative expenses against the debtor with a
view to distributing any security received in exchange for such a claim or
equity interest; (ii) a person who offers to sell securities authorized
under a plan of reorganization for the holders of such securities; (iii)
a person who offers to buy such securities from the holders of such securities,
if the offer is (a) with a view to distributing such securities, or (b) made
under a distribution agreement; and (iv) a person who is an "issuer" with
respect to the security, as the term "issuer" as defined in Section 2(11) of
the Securities Act. An "issuer" includes any person directly or indirectly
controlling or controlled by the debtor, or any person under direct or
indirect common control with the debtor. Whether a person is an "issuer",
and therefore an "underwriter" for purposes of Section 1145(b) of the
Bankruptcy Code depends on a number of factors. Such factors include (i) the
person's equity interest in a company; (ii) the distribution and concentration
of other equity interests in a company; (iii) whether the person is an officer
or director of the company; (iv) whether the person, either alone or acting in
concert with others, has a contractual or other relationship giving that
person power over management policies and decisions of the company; and (v)
whether the person actually has such power notwithstanding the absence of
formal indicia of control. An officer or director of the company may be
deemed a controlling person, particularly if his position is coupled with
ownership of a significant percentage of voting stock. In addition, the
legislative history of Section 1145 of the Bankruptcy Code suggests that a
creditor with at least 20% of the securities of the debtor could be deemed a
controlling person.
The Company's common stock issued to claimants pursuant to the Plan, absent
underwriter status, should be freely transferable, although the Company
recommends that potential recipients consult their own counsel with respect to
their particular situation.
In addition to the issuance of actual common shares, warrants were issued to
holders of Certificates of Indebtedness who converted their shares. The
warrants carried an expiration date of May 31, 1999, which was subsequently
extended to August 29, 1999. Each warrant entitles the holder to purchase one
additional share of common stock per warrant at $1.00 per share. As with
shares of common stock, the Company believes that such warrants are be freely
transferable in the absence of a potential restriction as to "underwriters".
From the effective date of the Plan through June 11, 1999, shareholders
exercised a total of 708,284 warrants pursuant to the Plan, including 193,682
"A" warrants and 514,062 "B" warrants. We received total consideration of
$659,246 on the exercise of these warrants.
34
<PAGE>37
Item 11 Description of Securities.
We are authorized to issued up to fifty million shares of one class of common
stock, par value $0.01 per share. On March 31, 1999, 4,060,765 shares of
common stock were issued and outstanding.
Each shareholder of the Common Stock is entitled to one vote for each share of
Common Stock held on all matters to be voted on by shareholders. In the
election of directors, shareholders may not cumulate votes (i.e., cast for
any one or more candidates a number of votes greater than the number of shares)
unless a shareholder has given notice of the intention to cumulate votes prior
to the commencement of voting. If any shareholder has given notice of the
intent to cumulate votes, then each shareholder has the right to give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of shares held by the shareholder, or distributing
such number of votes among as many candidates as the shareholder sees fit.
Shareholders have no conversion rights, redemption rights, or sinking fund
provisions. Shareholders are entitled to receive dividends, when declared by
its board of directors, out of funds legally available therefore, subject to
the restrictions set forth in the Alabama Statutes. If the Company were to
liquidate, dissolve, or wind up, the holders of the Common Stock would be
entitled to receive, pro rata, the net assets of the Company remaining after
the Company satisfies its obligations with its creditors. Under Bylaw Section
3.17, the Company has eliminated the potential liability of directors to it,
and is also required to indemnify its directors against any liability for
monetary damages, to the extent allowed by Alabama law. See, Indemnification
of Directors and Officers. All outstanding shares of Common Stock are fully
paid and not subject to further calls or assessments.
If we decide to issue additional shares of common stock from authorized,
unissued shares, each shareholder has the "preemptive right" to purchase an
amount of the shares to be issued equal to his pro rata number of shares, as a
proportion of the total common shares outstanding. Our board of directors must
provide a reasonable means to exercise each shareholder's preemptive rights as
part of any decision to issue additional common shares. Shareholder
preemptive rights apply not only to issuance of common shares but also to
issuance of instruments that are convertible into or redeemable for common
shares.
Item 12 Indemnification of Directors and Officers
Alabama law requires us to indemnify our directors, officers, agents, and
employees against expenses when that person is successful in a legal
proceeding which was brought by reason of the fact of their position with the
Company. Alabama law authorizes us to indemnify a person if the person has
acted in good faith and in a manner that the person believes to be in or not
opposed to our best interests. In the case of a criminal proceeding, the
35
<PAGE>38
person must also have had no reasonable cause to believe his or her conduct
was unlawful. Our bylaws require that we must indemnify officers and
directors where permitted by Alabama law, except that directors and officers
may not be indemnified for negligence or misconduct in office.
Indemnification may be made only if ordered by a court or if authorized in a
specific case upon a determination that the applicable standard of conduct has
been met. Such a determination may be made by a majority of our disinterested
directors, by independent legal counsel, or by our shareholders. To obtain
reimbursement for expenses in advance of the final disposition of any action,
the person must agree to repay the amount if it is ultimately determined that
the person is not entitled to be indemnified.
Our bylaws also provide that the directors may extend indemnification, where
it is permitted under the standards in the preceding paragraph, to cover a
good faith settlement of a legal proceeding, whether it has been formally
instituted or not.
Our bylaws also permit us to purchase insurance to indemnify directors,
officers, agents, and employees wherever indemnification is permitted by
Alabama law. To date we have not purchased any such insurance.
Item 13 Financial Statements and Supplementary Data
Our financial statements are set forth on pages F-1, et seq., of this Form
10-SB.
Item 14 Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item 15 Financial Statements and Exhibits
Financial Statements
See, pages F-1, et seq., included herein.
Exhibits Description
2.1 Plan of Reorganization and Disclosure Statement, In Re: Mobile
Limited Liability Company d/b/a Mobile Wireless TV, Debtor, Case
No. 397-37735-HCA-11, In Proceedings Under Chapter 11, U.S.
Bankruptcy Court, Northern District of Texas, Dallas Division
(November 6, 1997)
36
<PAGE>39
3.1 Articles of Incorporation of Advanced Wireless Systems, Inc.
3.2 Bylaws of Advanced Wireless Systems, Inc.
27.1 Financial Data Schedule
Signatures
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
Advanced Wireless Systems, Inc.
/s/ Monte Julius Date: June 24, 1999
- ------------------------- --------------
Monte Julius, President
37
<PAGE>40
ADVANCED WIRELESS SYSTEMS, INC.
TABLE OF CONTENTS
Page
Report of Independent Auditors F-2
Financial Statements
--------------------
Balance Sheets F-4
Statements of Operations F-6
Statements of Stockholders' Equity F-7
Statements of Cash Flows F-8
Notes to Financial Statements F-10
F-1
<PAGE>41
REPORT OF INDEPENDENT AUDITOR'S
To the Board of Directors and Shareholders
Advanced Wireless Systems, Inc.
We have audited the accompanying balance sheets of Advanced
Wireless Systems, Inc. as of December 31, 1998 and 1997, and
the related 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 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly in all material respects, the financial position of Advanced
Wireless Systems, Inc., as of December 31, 1998 and 1997, and the
results of its operations and cash flows for the years then ended,
in conformity with generally accepted accounting principles.
F-2
<PAGE>42
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note 9 to the financial statements, the Company has
suffered recurring losses from operations. This factor raises
substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are
also described in Note 9. The financial statements do not include
any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to
continue as a going concern.
BROWN ARMSTRONG RANDALL
REYES PAULDEN & McCOWN
ACCOUNTANCY CORPORATION
Bakersfield, California
April 3, 1999
F-3
<PAGE>43
ADVANCED WIRELESS SYSTEMS, INC.
BALANCE SHEETS
MARCH 31, 1999 (UNAUDITED)
DECEMBER 31, 1998 AND 1997 (AUDITED)
March 31, December 31,
1999 1998 1997
(Unaudited) (Audited) (Audited)
---------------------------------------
[S] [C] [C] [C]
ASSETS
Current Assets
Cash $142,818 $ 56,168 $ 247,686
Accounts receivable, net 2,608 2,608 1,933
Prepaid expenses 18,000 18,000 -
Inventories 44,949 44,949 58,307
-------- ---------- ----------
Total Current Assets 208,375 121,725 307,926
Fixed Assets, net of
depreciation 110,161 115,078 227,496
Other Assets
Deposits 15,900 15,900 34,850
License acquisition costs 596,250 610,000 665,000
Organization costs, net of
amortization of $61,133
at March 31, 1999, and
$57,737 and $44,152
at December 31, 1998 and
1997, respectively 6,793 10,189 23,774
-------- ------- --------
Total Other Assets 618,943 636,089 723,624
-------- ------- --------
Total Assets $ 937,479 $ 872,892 $1,259,046
(Continued)
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>44
<TABLE>
BALANCE SHEETS
MARCH 31, 1999 (UNAUDITED)
DECEMBER 31, 1998 AND 1997 (AUDITED)
March 31, December 31,
1999 1998 1997
(Unaudited) (Audited) (Audited)
---------------------------------------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities
Current Liabilities
Debtor certificates $ 6,000 $ 6,000 $ 53,150
Notes payable, related
parties $ 250,000 250,000 175,000
Postpetition liabilities - - 61,500
Prepetition liabilities
subject to compromise - - 138,320
Accrued payroll taxes 8,394 5,231 4,518
Accrued interest payable 44,472 38,847 9,200
Commitments and Contingencies
(Note 10) - - -
Total Current Liabilities 308,866 300,078 441,688
--------- ------- -------
Stockholders' Equity
Common stock, $.01 par value,
50,000,000 shares authorized,
4,060,765, 3,832,009 and
3,192,518 shares issued and
outstanding at March 31, 1999
and December 31, 1998 and
1997, respectively 40,608 38,320 31,925
Additional paid in capital 2,270,319 2,059,284 1,675,693
Accumulated deficit (1,682,314) (1,524,790) (890,260)
----------- ----------- ----------
Total Stockholders' Equity 628,613 572,814 817,358
----------- ----------- ----------
Total Liabilities and
Stockholders'Equity $ 937,479 $ 872,892 $1,259,046
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>45
<CAPTION>
ADVANCED WIRELESS SYSTEMS, INC.
STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (AUDITED)
March 31, December 31,
1999 1998 1998 1997
(Unaudited) (Audited) (Audited) (Audited)
----------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Service and other $ 22,206 $ 20,835 $ 104,496 $ 135,379
Installation - - 2,106 -
---------- ---------- -------- ----------
Total Revenues 22,206 20,835 106,602 135,379
---------- ---------- -------- ----------
COSTS AND EXPENSES
Operating 39,981 59,021 159,840 136,073
General and
administrative 105,759 133,976 359,920 381,966
Depreciation and
amortization 28,365 51,519 203,155 215,066
---------- --------- --------- ---------
Total Costs and
Expenses 174,105 244,516 722,915 733,105
---------- --------- --------- ---------
Net Loss from
Operations (151,899) (223,681) (616,313) (597,726)
OTHER INCOME (EXPENSE)
Interest income - - 2,230 2,800
Interest expense (5,625) (3,938) (20,447) (10,649)
Recovered funds,
bankruptcy - - - 313,717
----------- ---------- --------- ---------
Total Other Income
(Expense) (5,625) (3,938) (18,217) 305,868
----------- ---------- --------- ----------
Net Loss $(157,524) $(227,619) $(634,530) $(291,858)
=========== ========== ========== ===========
Basic Loss Per Share $ (.04) $ (.07) $ (.19) $ (.09)
=========== ========== ========== ===========
Weighted Average
Number of Shares
Outstanding $3,913,438 3,192,518 3,359,207 3,192,518
=========== ========== =========== ==========
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>46
ADVANCED WIRELESS SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (AUDITED)
Common Stock Par Additional Accumulated
Shares Value Paid-in Deficit Total
Capital
------------ ----- ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance
December 31,
1996
(Restated) 3,192,518 31,925 1,675,693 (598,402) 1,109,126
Net Loss - - - (291,858) (291,858)
--------- ------ --------- ------------ ----------
Balance
December 31,
1997 3,192,518 31,925 1,675,693 (890,260) 817,538
Conversion of
Debtor
Certificates
to Common
Stock 466,000 4,660 228,340 - 233,000
Exercise of
Class A
Warrants for
Common Stock 66,020 660 48,855 - 49,515
Exercise of
Class B
Warrants for
Common Stock 107,471 1,075 103,396 - 107,471
Net Loss - - - (634,530) (634,530)
------- ------- ------- --------- ---------
Balance
December 31,
1998 3,832,009 38,320 2,059,284 (1,524,790) 572,814
Exercise of
Class A
Warrants for
Common Stock 61,733 617 45,682 - 46,300
Exercise of
Class B
Warrants for
Common Stock 167,023 1,670 165,353 - 167,023
Net Loss - - - (157,524) (157,524)
------- ------- -------- -------- ---------
Balance
December 31,
1999
(Unaudited) 4,060,765 40,608 2,270,319 1,682,314 682,613
========= ====== ========== ========== ========
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>47
ADVANCED WIRELESS SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (AUDITED)
March 31, December 31,
1999 1998 1998 1997
(Unaudited) (Audited) (Audited) (Audited)
----------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (157,524) $ (227,619) $ (634,530) $ (291,858)
Adjustments to
reconcile net loss to
net cash used
in operating
activities:
Depreciation and
amortization $ 28,365 51,519 203,155 215,066
Changes in
operating assets
and liabilities:
Trade accounts
receivable - - (675) (533)
Prepaid expenses - - (18,000) 2,363
Inventory - - 13,358 (24,197)
Deposits - - (61,500) 61,500
Postpetition
liabilities - - (61,500) 61,500
Accrued interest 5,625 3,938 29,647 9,200
Accrued payroll
taxes 3,163 (1,781) 713 4,518
----------- ---------- --------- ---------
Net Cash Used in
Operating Activities (120,371) (173,943) (448,882) (20,191)
----------- --------- --------- ---------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchases of property
and equipment (6,302) (4,299) (22,152) (111,009)
----------- ---------- --------- ----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from
exercise of Common
Stock Warrants 213,323 - 156,986 -
Proceeds from sale
of debtor
certificates - - 185,850 53,150
Proceeds from
issuance of Notes - 75,000 75,000 175,000
Prepetition
liabilities - - (138,320) 126,889
____________ ________ _________ _______
Net Cash Provided
by Financing
Activities 213,323 75,000 279,516 335,039
------------ --------- --------- -------
(Continued)
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>48
ADVANCED WIRELESS SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (AUDITED)
March 31, December 31,
1999 1998 1998 1997
(Unaudited) (Audited) (Audited) (Audited)
----------------------------------------------
Net Increase
(Decrease) in Cash
and Cash Equivalents 86,650 (103,242) (191,518) 223,839
Cash and Cash
Equivalents, beginning
of year 56,168 247,686 247,686 23,847
-------- --------- --------- ---------
Cash and Cash
Equivalents, end of
year $ 142,818 $ 144,444 $ 56,168 $247,686
========== ========= ========= =========
NONCASH TRANSACTIONS:
Conversion of Debtor
Certificates to
Common Stock $ - $ - $233,000 $ -
========== ========= ======== =========
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>49
ADVANCED WIRELESS SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENT
DECEMBER 31, 1998 (AUDITED)
MARCH 31, 1998 (UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Mobile Limited Liability Company (the "Debtor") was a Nevada limited liability
company formed on April 25, 1994 for purposes of acquiring and operating
certain FCC licenses in the Mobile, Alabama area. The majority interest
member of the LLC was a similarly named general partnership, Mobile Wireless
Partners ("Partners") comprised of 1,094 partners, with a 94.5% interest in
the Debtor. Pursuant to the Plan of Reorganization filed by Mobile Wireless,
LLC, Advanced Wireless Systems, Inc. was created and emerged from Bankruptcy
on January 8, 1998 as the Reorganized Debtor (collectively, called the
"Company") Additionally, the Plan included the acquisition by the Company of
the Partners' FCC License in exchange for 3,192,518 shares of the Company's
common stock, 3,068,066 "B" Warrants exercisable on a 1 for 1 basis for the
Company's common stock, and the extinguishment of an intercompany loan from
Partners totaling $100,000. The License has been recorded by the Company at
the Partners' historical cost basis which was $225,000. This treatment is
consistent with requirements for exchanges between entities under common
control. The financial statements of the Company have been retroactively
restated to present the reorganization and license acquisition as if the
Company had emerged from bankruptcy as of the earliest period presented.
The Company is an established provider of wireless television service in the
Mobile, Alabama market, primarily serving rural and outlying areas where the
delivery of traditional land-based cable television service is impractical.
The Company recently acquired the technology to provide high speed Internet
access through its existing broadcast frequencies and is beginning to develop
a base of service for these users, as well as continuing to provide wireless
television service to the existing market.
Reorganization
On August 23, 1997, the Debtor filed a Petition with the United States
Bankruptcy Court in the Northern District of Texas, for relief under Chapter
11 of the U.S. Bankruptcy Code, Case Number 397-37735-HCA-11. Under Chapter
11, certain claims against the Company in existence prior to the filing of the
petition for relief under the Federal bankruptcy laws were stayed while the
Company continued business operations as Debtor-in-Possession. On October 18,
1997, the Bankruptcy Court further authorized the issuance and sales of up to
$1,000,000 in Certificates of Indebtedness to raise new capital for the
Company pursuant to Section 364(c) of the Code. On November 6, 1997, the
Company filed a proposed Plan of Reorganization (the "Plan"). Under the Plan,
a new corporation would be formed such that, upon confirmation of the Plan,
all assets and liabilities of the Debtor would be assumed by the corporation,
and all equity interests in the Debtor would be extinguished. The resulting
reorganized debtor, Advanced Wireless Systems, Inc., would carry on the
business activities of the Debtor. On January 8, 1998, the Bankruptcy Court
confirmed the Company's Plan, which provided for the following:
F-10
<PAGE>50
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reorganization (Continued)
Prepetition liabilities subject to compromise - As discussed in Note 9, these
unsecured claimants may have portions of their claims rejected. Pursuant to
the Plan, creditors with claims less than $1,000 will be paid in full by the
Company following confirmation. Creditors with claims in excess of $1,000
will either be paid an amount agreed to by the parties in interest, or may
elect to receive shares of the Company's common stock in lieu of payment. All
liabilities within this category have been discharged as of December 31, 1998.
Postpetition liabilities - These amounts include professional fees, costs of
administration, wage and tax claims, and certificate of indebtedness note
holders. Claimants for professional fees and certificate holders may elect to
receive shares of the Company's common stock in lieu of payment. All
liabilities within this category have been discharged as of December 31, 1998.
Management Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements
and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
Revenues from wireless subscription services are recognized monthly upon
billing. Initial hookup revenue is recognized to the extent of direct selling
costs incurred. To date, direct selling costs have exceeded installation
revenues.
Inventory
Inventories consist of high speed modems held for resale and installation
materials, including antennas, cabling, and various other hardware and parts.
Inventory is stated at the lower of cost (first in, first out) or market.
Provision has been made for overstocked, slow moving, and obsolete inventory.
Depreciation
Property and equipment are carried at cost and depreciated on a straight-line
basis over their estimated useful lives, ranging from 2.5 to 15 years.
Maintenance and repair costs are charged to expense as incurred; major
renewals and betterments are capitalized. Subscriber installation costs are
capitalized and amortized over a 2.5 year period, the approximate average
subscription term of a subscriber. The costs of subsequently disconnecting and
reconnecting are charged to expense in the period incurred.
F-11
<PAGE>51
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
License Acquisition Costs
License acquisition costs include costs incurred to develop or acquire
wireless cable licenses. Costs incurred to acquire or lease licenses issued by
the Federal Communications Commission (FCC) are deferred and are amortized
ratably over 15 years. Accumulated amortization related to these costs was
$28,750 at March 31, 1999, respectively (unaudited) $215,000 and $160,000 at
December 31, 1998 and 1997, respectively (audited).
Marketing and Direct Selling Costs
Marketing and direct selling costs are expensed as incurred. These costs
totaled $2,750 and $8,557 at March 31, 1999 and 1998, respectively (unaudited)
and $12,612 and $4,961 at December 31, 1998 and 1997, respectively (audited).
Fair Value of Financial Instruments
The carrying value of cash, receivables, and accounts payable approximates
fair value due to the short maturity of these instruments.
Impairment of long-lived assets (SFAS 121)
In March 1995, the FASB issued SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," which requires
that long-lived assets and certain identifiable intangibles held and used 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 new standard is effective for fiscal years beginning after
December 15, 1995. The provisions of this statement were implemented for the
period under audit, and had no material effect upon the Company's financial
condition.
Common Stock
The Company has authorized 50,000,000 shares of $.01 par value common stock.
Each share entitles the holder to one vote. There are no dividend or
liquidation preferences, participation rights, call prices or dates,
conversion prices or rates, sinking fund requirements, or unusual voting
rights associated with these shares.
Warrants
Warrants to purchase up to 2,652,291 shares of Common Stock of the company,
issued pursuant to the Plan of Reorganization and in conjunction with the
conversion of Debtor Certificates, were outstanding at June 11, 1999. The
warrants issued by the Company include "A" and "B" warrants having an exercise
price of $.75 and $1, respectively. All outstanding warrants had original
expirations of May 31, 1999, but were subsequently extended until August 29,
1999.
F-12
<PAGE>52
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Deferred income taxes reflect the impact of temporary differences between the
assets and liabilities recognized for financial reporting purposes and amounts
recognized for tax purposes. There are no provisions for income taxes for the
years ended December 31, 1998 and 1997, as the Company experienced losses.
Management has established a complete allowance for the deferred tax asset
arising from possible future utilization of operating losses. 1998 was the
first year in which the Company would report taxes as a corporation.
Information concerning the Company's net operating loss for 1998 was not
available at the time of these financial statements.
Earnings Per Share (SFAS 128)
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per
Share", which was adopted by the Company for the year ended December 31, 1997.
SFAS 128 replaces the presentation of primary earnings per share with a
presentation of basic earnings per share based upon the weighted average
number of common shares for the period. It also requires dual presentation of
basic and diluted earnings per share for companies with complex capital
structures. Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Warrants to purchase
shares of common stock were not included in the computation of loss per share
as the effect would be antidilutive. As a result, the basic and diluted
earnings per share amounts are identical.
Stock-based Compensation (SFAS 123)
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation." This statement applies to the
financial statements for fiscal years beginning after December 15, 1995. It
defines a fair value based method of accounting for an employee stock option
or similar equity instrument.
However, it also allows an entity to continue to measure compensation costs
for those plans using the intrinsic value based method of accounting
prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees.
Under the fair value based method, compensation costs is measured at the grant
date based on the value of the award and is recognized over the service
period, which is usually the vesting period. Under the intrinsic value based
method, compensation costs are the excess, if any, of the quoted market price
of the stock at grant date or other measurement date over the amount an
employee must pay to acquire the stock.
The Company has elected to account for stock-based compensation under APB
Opinion No. 25. The provisions of this statement have been implemented for
the year ended December 31, 1998.
F-13
<PAGE>53
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
New Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130 (SFAS 130), Reporting Comprehensive Income. This statement requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. SFAS 130
has been adopted by the Company for the period ended December 31, 1997, which
had no material effect on the accompanying financial statements.
In June 1997, the FASB issued Statements of Financial Accounting Standards No.
131 (SFAS 131), Disclosures about Segments of an Enterprise and Related
Information. The statement requires the Company to report income/loss,
revenue, expense and assets by business segment including information
regarding the revenues derived from specific products and services and about
the countries in which the Company is operating. The Statement also requires
that the Company report descriptive information about the way that operating
segments were determined, the products and services provided by the operating
segments, differences between the measurements used in reporting segment
information and those used in the Company's general-purpose financial
statements, and changes in the measurement of segment amounts from period to
period. SFAS 131 has been adopted by the Company for the period ended
December 31, 1997, which had no material effect on the accompanying financial
statements or required disclosures.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AcSEC") issued Statement of
Position ("SOP") 98-5, "Reporting on the Costs of Start-up Activities." SOP
98-5 establishes standards for the reporting and disclosure of start-up costs,
including organization costs. The Company adopted SOP 98-5 on January 1,
1999. The Company believes that the adoption of this statement will not have
a material effect on the Company's financial position or results of
operations.
Unaudited Interim Periods Ended March 31, 1999 and 1998
The accompanying financial statements include unaudited financial information
for the three month periods ended March 31, 1999 and 1998. In the opinion of
management, the accompanying unaudited financial statements include all
adjustments, consisting only of normally recurring adjustments, necessary to
present fairly the Company's financial position and the results of its
operations and cash flows for the periods presented. The results of operations
for the three month period is not, in management's opinion, indicative of the
results to be expected for a full year of operations.
F-14
<PAGE>54
NOTE 2 - INVENTORIES
Inventories consist of the following:
March 31, December 31,
1999 1998 1997
(Unaudited) (Audited) (Audited)
----------------------------------------
Inventory held for resale $ 24,195 $ 24,195 $30,875
Installation materials 20,754 20,754 27,432
----------- --------- --------
$ 44,949 $ 44,949 $58,307
=========== ========= ========
F-15
<PAGE>55
NOTE 3 - FIXED ASSETS
Furniture and equipment are summarized as follows:
March 31, December 31,
1997 1998 1997
(Unaudited) (Audited) (Audited)
----------------------------------------
Cost:
Machinery and equipment $ 572,788 $ 566,486 $ 561,210
Furniture and fixtures 21,801 21,801 21,301
Auto and trucks 5,325 5,325 5,325
Subscriber installation
costs 47,700 47,700 72,504
Accumulated depreciation (537,453) (526,234) (432,844)
---------- ---------- ----------
$ 110,161 $ 115,078 $ 227,496
========== ========== ==========
NOTE 4 - OPERATING LEASES
The Company leases office and warehouse space subject to a six year lease,
expiring March 29, 2000. The lease provides for monthly lease payments of
$2,800, and extends the option to renew the lease for three successive three-
year terms. Upon execution of the lease, the Company delivered $33,600 to the
Lessor as deposit for the sixth year's base payments, or as security in the
event of default. In late 1998, the Company negotiated with the Lessor to
release the security deposit to the Lessor in exchange for reduced lease
payments. Beginning January 1999, the lease payments are $1,300 per month for
the remaining 15 months of the lease. Accordingly, the prepaid portion of the
deposit has been reclassified to a prepaid asset.
The Company leases the site for its transmitter subject to a five-year lease
expiring March 13, 2000. The lease provides for monthly payments of $1,000.
The Company leases four ITFS channels, referred to as the "E Block", subject
to a five-year lease term expiring May 9, 1999. The base provides for monthly
base payments of $2,000, and extends the option to renew the lease for
successive five-year terms. In May 1999, the Company renewed the lease at a
reduced lease rate of $1,200 per month for an additional five years.
The Company leases four MDS channels, referred to as the "G Block" subject to
an initial five-year term, with an automatic five year renewal term, having
been renewed on March 22, 1996, and expiring on March 22, 2001. The base
provides for monthly lease payments of $1,000. At lease expiration, the
Company has the first right of refusal to negotiate a new lease agreement for
the channels.
F-16
<PAGE>56
NOTE 4 - OPERATING LEASES (Continued)
Amounts paid by the Company to acquire the channel leases and licenses
agreements have been capitalized and are being depreciated over 15 years. The
monthly lease payments are expensed.
Future minimum lease payments under the Company's operating leases are as
follows:
1999 $ 74,400
2000 37,800
2001 17,400
2002 14,400
2003 14,400
Thereafter 3,600
---------
$ 162,000
=========
</ TABLE>
Channel lease expense totaled $9,000 and $9,000 at March 31, 1999 and 1998,
respectively (unaudited) and $33,000 and $36,000 at December 31, 1998 and
1997, respectively (audited). Other rents totaled $1,123 and $3,345 at March
31, 1999 and 1998, respectively (unaudited), and $44,498 and $45,600 at
December 31, 1998 and 1997, respectively (audited).
NOTE 5 - NOTES PAYABLE, RELATED PARTIES
Notes payable consist of two notes from two individuals who are officers and
directors of the Company. The notes are secured by liens on all license
agreements, channel leases, contracts, accounts receivable, equipment leases,
and all additions replacements, machinery, parts and goods used by the Company
in the operations of its business. The original notes bore interest at 12%,
however, the Plan of Reorganization subsequently amended the terms of
repayment providing for interest to accrue at 9%. The balance sheets at March
31, 1999, and December 31, 1998 and 1997, reflect accrued interest payable on
these notes of $44,472, $38,847 and $9,200, respectively.
F-17
<PAGE>57
As discussed in Note 1, on October 18, 1997, the Bankruptcy Court authorized
the issuance and sales of up to $1 million in Certificates of Indebtedness to
raise new capital for the reorganized debtor pursuant to Section 364 of the
Code. The Certificates were due two years from the Effective Date of the
Plan, and bore interest at 10% annually. On May 27, 1998, the Bankruptcy
Court Clerk disbursed $242,043, representing proceeds from sales of the
Certificates of $239,000, and interest income of $3,043 to Sid Diamond, Esq.
(The disbursing agent) who in turn wired the funds to the Company. A total of
120 individuals participated in the program. The Plan of Reorganization
provided that the Debtor Certificate holders could, at their exclusive option,
convert their debt at a conversion rate of one unit of equity for each $1
lent. A unit of equity consists of two shares of Common Stock and two Class
"A" Warrants allowing the holder to purchase additional shares at $0.75 each.
118 holders opted to convert their certificates and two opted not to convert.
On July 31, 1998, 466,000 shares of Common Stock and 466,000 "A" Warrants were
issued to the 118 Certificate holders. Stock and Warrants issued to this group
have no restrictions.
As discussed in Note 1, The Plan of Reorganization also provided that the
Debtor would purchase from Mobile Wireless Partners certain MDS licenses
issued by the FCC and owned by the Partnership. The Company agreed to
purchase these licenses, referred to as the "H Block" for $225,000. This
transaction was effective the date of confirmation. The Plan of Reorganization
also provided that the Company would issue a Debtor Certificate to Mobile
Partners in a like amount of the purchase price pursuant to Section 364 of the
Bankruptcy Code. The plan further provided that the Debtor Certificate could
be converted into 3,192,518 shares of Common shares at a stated value of $1
each, and 3,068,066 Class "B" Warrants allowing the holder to purchase
additional shares at $1.00 each for a period of 1 year. In the event of
conversion of the Debtor Certificate into the stock and warrants, the
Partnership agreed by contract not to assign, pledge, transfer or otherwise
dispose of the 3,192,518 shares of Common Stock and 3,068,066 warrants for one
year from the date of conversion. 126,000 shares of Common Stock held no such
restriction. Further the shares and warrants to be issued could only be
issued to the partners upon dissolution of the Partnership. The Partnership
was dissolved on July 15, 1998 and pursuant to the winding up of the
partnership, the shares and warrants were issued and distributed to the
Partners. The financial statements have been retroactively restated to reflect
the acquisition of the licenses, issuance of Common Stock, and discharge of an
intercompany loan as of the earliest period presented.
F-18
<PAGE>58
NOTE 7 - STOCK OPTION PLANS
On December 11, 1997, the Company's Board of Directors approved an Incentive
Stock Option Plan for employees, officers, and directors. The plan provides
for the issuance of a maximum of 1,000,000 shares of the Company's common
stock, issuable at the discretion of the Board of Directors, as indicated in
the Plan. As of December 31, 1998, no common stock had been issued under the
Company's stock option plan.
Also on December 11, 1997, the Board of Directors authorized the issuance of
365,600 options to officers and directors of the Company, exercisable at $.25
per share for an option term of two years. At December 31, 1998, none of
these options had been issued or exercised.
The Plan further reserved 350,000 shares of common stock to be granted in the
future at an exercise price of $.25 per share.
NOTE 8 - SUBSEQUENT EVENTS
As of June 11, 1999, shareholders had exercised a total of 708,284 Warrants
issued pursuant to the Plan of Reorganization. The exercised warrants
included 193,682 "A" Warrants, and 514,602 "B" Warrants for a total of
$659,246.
In the first quarter of 1999, management made the decision to suspend new
installations of wireless cable television service based on the current costs
of these installations, which management believes exceed the anticipated
subscriber revenues. This suspension will remain in effect until management
can evaluate alternatives for performing the installations in a more cost
effective manner.
NOTE 9 - GOING CONCERN
As discussed in Note 1, the Company has emerged from Chapter 11 Bankruptcy.
The Company's ability to continue as a going concern depends, in part, on its
ability to develop new markets for its MDS frequencies including, but not
limited to, high speed Internet access, and to raise new capital through
public offerings of the Company's stock. There can be no assurance that the
Company will successfully develop new markets for its services, or that sales
of the Company's stock will generate sufficient working capital to offset
operating losses.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company has entered into a series of noncancelable agreements to purchase
entertainment programming for rebroadcast which expire through 2000. The
agreements generally require monthly payments based upon the number of
subscribers to the Company's systems, subject to certain minimums. Such
expenses totaled $13,812 and 21,180 for the three months ended March 31, 1999
and 1998, respectively (unaudited), and $65,149 and $85,737 for the years
ended December 31, 1998 and 1997, respectively (audited).
F-19
</TABLE>
<PAGE>
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE:
MOBILE LIMITED LIABILITY COMPANY CASE NO. 397-37735-HCA-11
d/b/a Mobile Wireless TV,
Debtor. IN PROCEEDINGS UNDER
EMPLOYER ID. NO.: CHAPTER 11
88-0317243
PLAN OF REORGANIZATION
AND DISCLOSURE STATEMENT
Proposed By:
The Debtor
Dated: November 6, 1997
Submitted By:
Sidney J. Diamond,
Counsel To The Debtor
5862 Cromo Drive, Suite 100
El Paso, Texas 79912
(915) 584-8141(Voice)
(915) 584-0509 (Fax)
[email protected] (email)
<PAGE>60
TABLE OF CONTENTS
PAGE
1. The Debtor ............................................................. 1
2. History of the Debtor .................................................. 1
3. Court Approval ......................................................... 4
4. Hearing on Plan Confirmation and Final Hearing on the Adequacy of
Information Contained in Disclosure Statement .......................... 4
5. Time and Manner of Voting .............................................. 4
6. Disclaimers, Representations and Accuracy .............................. 4
6.1 No Judgment on the Merits of the Plan by the Court ................ 4
6.2 No Representations ................................................ 4
6.3 Materiality ....................................................... 5
6.4 Additional Information ............................................ 5
7. Financial History and Background of the Debtor ......................... 5
8. Post-Petition Earnings of the Debtor in Chapter 11 ..................... 6
9. The Reorganized Debtor ................................................. 6
10. Future Business Activities ............................................. 6
11. Basis of the Plan ...................................................... 7
12. Future Income and Expenses Under the Plan .............................. 7
13. Future Management of the Reorganized Debtor ............................ 8
13.1 Officers and Directors of the Reorganized Debtor ................. 8
13.2 Biography of Officers and Directors .............................. 9
13.3 Compensation of Management ....................................... 9
13.4 ISO .............................................................. 10
13.5 Significant Transactions Between the Debtor and the
Officers and Directors of the Debtor ............................. 10
14. Principal Shareholders of the Reorganized Debtor ....................... 11
15. Accounting Method Used and Source of Financial Information ............. 11
16. Analysis and Valuation of Property ..................................... 12
16.1 Real Property of the Debtor ...................................... 12
16.2 Tangible Personal Property of the Debtor ......................... 12
16.3 Intangible Personal Property of the Debtor ....................... 13
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<PAGE>61
16.4 Liquidation Value of the Debtor's Assets ......................... 13
17. Classification Claims Under the Plan ................................... 14
17.1 Class 1 - Administrative Expenses ................................ 14
17.2 Class 2 - Wage Claims ............................................ 14
17.3 Class 3 - Tax Claims ............................................. 14
17.4 Class 4 - Unsecured Claims ....................................... 15
17.5 Class 5 - Secured Claims ......................................... 15
17.6 Class 6 - Retained Interest of the Equity Security Holders ....... 16
18. Treatment and Distribution Under the Plan .............................. 16
18.1 Summary of Plan Payments ......................................... 16
18.2 Class 1(a) - Professional Fees ................................... 17
18.3 Class 1(b) - Costs of Administration ............................. 17
18.4 Class 1(c) - Certificates of Indebtedness ........................ 18
18.5 Class 2 - Wage Claims ............................................ 18
18.6 Class 3 - Tax Claims ............................................. 19
18.7 Class 4(a) - Allowed Unsecured Claims of $1,000 or Less .......... 20
18.8 Class 4(b) - Allowed Unsecured Claims of More Than $1,000 ........ 22
18.9 Class 5(a) - Hayes ............................................... 24
18.10 Class 5(b) - Tsoutsas ............................................ 24
19. Means For Execution of the Plan ........................................ 25
19.1 Reinvestment of Property ......................................... 25
19.2 Cash Payments .................................................... 25
19.3 Source of Funds - Certificates of Indebtedness and Future Earnings 25
20. Feasibility ............................................................ 26
20.1 Forecasts ........................................................ 26
20.2 Future Business Activity of the Reorganized Debtor ............... 26
20.3 No Further Reorganization Proceedings ............................ 26
21. Time Period for Filing Claims .......................................... 26
22. Claims Allowance Procedure and Conditions to Distribution .............. 26
22.1 Objections to Claims ............................................. 27
22.2 No Distribution Until Objection Resolved ......................... 27
22.3 Deficiency Claims ................................................ 27
22.4 Other Claims, Including Amendment to Claims ...................... 27
22.5 Performance of Obligations ....................................... 27
22.6 Surrender and Cancellation of Debt Instruments ................... 28
23. General Terms and Conditions ........................................... 28
23.1 Reinvestment of Title ............................................ 28
23.2 Discharge ........................................................ 28
23.3 Preservation of Bankruptcy Causes of Action ...................... 28
ii
<PAGE>62
23.4 No Additional Charges ............................................ 29
23.5 De Minimis Distributions ......................................... 29
23.6 Securities Laws .................................................. 29
23.7 Securities Law Compliance ........................................ 29
23.8 Representations of Acquiring Shareholders in the
Reorganized Debtor ............................................... 29
23.9 Closing the Case ................................................. 30
23.10 Time Period Within Which to Close Case ........................... 30
23.11 Non-Waiver ....................................................... 31
23.12 Law Governing Construction ....................................... 31
24. Terms and Conditions Relating to Secured Creditors ..................... 31
24.1 Preserved Liens .................................................. 31
24.2 Release of Liens ................................................. 31
24.3 Determination Of Secured Status .................................. 31
24.4 Section 1111(b) Election ......................................... 31
25. Determination of Interest and Other Fees ............................... 32
26. Unexpired Leases and Executory Contracts ............................... 32
26.1 Rejection ........................................................ 32
26.2 Cure of Defaults ................................................. 33
26.3 Claims After Rejection ........................................... 33
26.4 Previously Assumed Leases and Contract ........................... 33
27. Satisfaction of Claims and Interests ................................... 33
28. Retention of Jurisdiction by the Court ................................. 33
28.1 Claims ........................................................... 33
28.2 Title to and Liens Against Assets ................................ 34
28.3 Correction of Defects ............................................ 34
28.4 Modification After Confirmation .................................. 34
28.5 Enforcement ...................................................... 34
28.6 Further Orders ................................................... 34
28.7 Previous Orders .................................................. 34
28.8 Continuing Jurisdiction .......................................... 34
28.9 Adversary Proceedings ............................................ 34
28.10 Implementation of Plan ........................................... 34
28.11 Conclusion ....................................................... 35
29. Class 6 - Interests of the Equity Security Holders ..................... 35
30. Transfer of The Debtor's Assets and Assumption of Liabilities .......... 35
31. Purchase of Licenses From Mobile ....................................... 35
32. Liquidation Analysis of the Debtor's Property .......................... 36
32.1 Valuation of the Assets .......................................... 36
iii
<PAGE>63
32.2 Method of Valuation .............................................. 36
32.3 Sale of the Debtor's Assets ...................................... 36
32.4 Conversion to Chapter 7 .......................................... 37
32.5 Distribution to Unsecured Creditors by a Chapter 7 Trustee ....... 37
32.6 Dismissal of Chapter 11 Case ..................................... 37
32.7 Another Plan ..................................................... 38
32.8 Summary .......................................................... 38
33. Risk Factors Pertaining to the Debtor .................................. 38
33.1 Wireless TV ...................................................... 38
33.2 New Business Venture ............................................. 38
33.3 Competition ...................................................... 38
34. Litigation Pertaining to the Debtor .................................... 39
34.1 Bankruptcy Litigation ............................................ 39
34.2 Non-Bankruptcy Litigation ........................................ 39
35. Tax Consequences ....................................................... 39
35.1 Tax Consequences to the Debtor ................................... 39
35.2 Tax Consequences To The Creditors ................................ 40
35.3 No Opinion ....................................................... 40
36. Summary of Significant Orders .......................................... 40
36.1 Certificates of Indebtedness ..................................... 40
36.2 Cash Collateral Orders ........................................... 40
36.3 Assumption of Contracts and Lease ................................ 40
37. Appointment of Disbursing Agent ........................................ 42
37.1 Duties of Disbursing Agent ....................................... 42
37.2 Fees and Expenses of Disbursing Agent ............................ 42
37.3 Termination of Disbursing Agent's Duties ......................... 42
38. Reservation of Rights .................................................. 42
39. In Summary ............................................................. 42
40. The Disclosure Statement ............................................... 43
40.1 Purpose of this Disclosure Statement ............................. 43
40.2 Requirements of a Disclosure Statement ........................... 43
41. Chapter 11 ............................................................. 43
41.1 How a Chapter 11 Case is Started and by Whom ..................... 43
41.2 Who may be a Chapter 11 Debtor ................................... 43
41.3 What a Chapter 11 Accomplishes Initially ......................... 43
41.4 Debt Adjustment .................................................. 44
iv
<PAGE>64
42. The Confirmation Process ............................................... 44
42.1 Voting ........................................................... 44
42.2 Confirmation of a Consensual Plan of Reorganization .............. 45
42.3 Confirmation of a Non-Consensual Plan of Reorganization .......... 48
43. Modification of a Plan of Reorganization ............................... 52
43.1 Disclosure Requirements .......................................... 53
43.2 Acceptance or Rejection Before Modifications ..................... 53
43.3 Who May Seek Modification ........................................ 53
43.4 Substantial Consummation ......................................... 53
43.5 Importance of Right to Modify .................................... 53
43.6 When a Modification is Effective ................................. 53
43.7 Confirmation of a Modified Plan .................................. 53
43.8 Prior Acceptances Binding ........................................ 54
44. Definitions ............................................................ 54
44.1 Administrative Claim ............................................. 54
44.2 Administrative Claimant .......................................... 54
44.3 Administrative Expenses .......................................... 54
44.4 Advanced ......................................................... 55
44.5 Allowance Date ................................................... 55
44.6 Allowed Claim .................................................... 55
44.7 Allowed Priority Claim ........................................... 55
44.8 Allowed Secured Claim ............................................ 55
44.9 Allowed Unsecured Claim .......................................... 55
44.10 Bar Date ......................................................... 55
44.11 Blue Sky Laws .................................................... 56
44.12 Cases ............................................................ 56
44.13 Certificates of Indebtedness ..................................... 56
44.14 Certificate of Indebtedness Holders .............................. 56
44.15 Chapter 11 ....................................................... 56
44.16 Claim or Claims .................................................. 56
44.17 Claimant or Claimants ............................................ 56
44.18 Claims of the Estate ............................................. 56
44.19 Class of Claims and Payment ...................................... 56
44.20 Class or Classes ................................................. 57
44.21 Code ............................................................. 57
44.22 Collateral ....................................................... 57
44.23 Collateral Value ................................................. 57
44.24 Common Stock ..................................................... 57
44.25 Common Stockholders .............................................. 57
44.26 Confirmation ..................................................... 57
44.27 Confirmation Date ................................................ 57
44.28 Confirmation Hearing ............................................. 57
44.29 Confirmation Order ............................................... 57
44.30 Consummation Date ................................................ 57
v
<PAGE>65
44.31 Court ............................................................ 58
44.32 Creditor or Creditors ............................................ 58
44.33 Cross-References, etc. ........................................... 58
44.34 Debtor ........................................................... 58
44.35 Debtor-In-Possession ............................................. 58
44.36 Disbursing Agent ................................................. 58
44.37 Disclosure Statement ............................................. 58
44.38 Effective Date ................................................... 58
44.39 Equity Security Holder ........................................... 58
44.40 Equity Security Interest ......................................... 58
44.41 Estate ........................................................... 58
44.42 FCC .............................................................. 58
44.43 Filing Date ...................................................... 58
44.44 Final Order ...................................................... 59
44.45 Hayes ............................................................ 59
44.46 Headings ......................................................... 59
44.47 Interest or Interests ............................................ 59
44.48 IRS .............................................................. 59
44.49 ISO .............................................................. 59
44.50 Lien ............................................................. 59
44.51 Limited .......................................................... 59
44.52 Mobile ........................................................... 59
44.53 NASD ............................................................. 59
44.54 Order Confirming Plan ............................................ 59
44.55 Person ........................................................... 59
44.56 Plan ............................................................. 60
44.57 Plan Payments .................................................... 60
44.58 Plan Year ........................................................ 60
44.59 Preserved Liens .................................................. 60
44.60 Priority Claim ................................................... 60
44.61 Priority Creditor ................................................ 60
44.62 Pro Rata ......................................................... 60
44.63 Property or Properties ........................................... 60
44.64 Proponent ........................................................ 60
44.65 Reorganization Case .............................................. 60
44.66 Reorganized Debtor ............................................... 60
44.67 Rule or Rules .................................................... 60
44.68 Secured Claim .................................................... 61
44.69 Secured Creditor ................................................. 61
44.70 Securities Act ................................................... 61
44.71 Securities Exchange Act .......................................... 61
44.72 SEC .............................................................. 61
44.73 Substantial Consummation of the Plan ............................. 61
44.74 Small Business ................................................... 61
44.75 Tax Claim ........................................................ 61
44.76 Tax Claimant ..................................................... 61
vi
<PAGE>66
44.77 Trust Indenture Act .............................................. 61
44.78 Tsoutsas ......................................................... 61
44.79 Undefined Terms .................................................. 61
44.80 Unsecured Claim .................................................. 61
44.81 Unsecured Creditor ............................................... 62
44.82 Value of Property ................................................ 62
44.83 Warrants ......................................................... 62
44.84 Warrant Holders .................................................. 62
vii
<PAGE>67
TABLES AND THEIR LOCATION
PAGE
OFFICERS AND DIRECTORS OF THE REORGANIZED DEBTOR ........................... 8
PRINCIPAL SHAREHOLDERS OF THE REORGANIZED DEBTOR
SUBSEQUENT TO CONFIRMATION ............................................... 11
SUMMARY OF THE DEBTOR'S TANGIBLE PERSONAL PROPERTY ......................... 12
SUMMARY OF THE DEBTOR'S INTANGIBLE PERSONAL PROPERTY ....................... 13
SUMMARY OF USE OF FUNDS - YEARS ONE THROUGH FIVE ........................... 16
SUMMARY OF UNSECURED CREDITORS WITH CLAIMS
OF ONE THOUSAND DOLLARS OR LESS .......................................... 20
SUMMARY OF UNSECURED CREDITORS WITH CLAIMS
OF MORE THAN ONE THOUSAND DOLLARS ........................................ 22
SUMMARY OF VALUATION OF THE DEBTOR'S ASSETS ................................ 36
SUMMARY OF LIQUIDATION VALUE OF THE DEBTOR'S PROPERTY ...................... 37
SUMMARY OF LIQUIDATION ANALYSIS IF CASE WERE CONVERT TO
ONE UNDER CHAPTER 7 OF THE CODE .......................................... 37
i
<PAGE>68
EXHIBIT REFERENCES AND THEIR LOCATION
PAGE
Exhibit "A": - Annual Operating Projections For Five (5) Years ........... 7
Exhibit "B": - Projected Annual Sources and Uses of Cash For
Five (5)Years ............................................. 7
Exhibit "C": - Monthly Operating Projections For One (1) Year ............ 7
Exhibit "D": - Projected Monthly Sources And Uses Of Cash For
One (1)Year ............................................... 7
i
<PAGE>69
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE:
MOBILE LIMITED LIABILITY COMPANY CASE NO. 397-37735-HCA-11
d/b/a Mobile Wireless TV,
Debtor. IN PROCEEDINGS UNDER
EMPLOYER ID. NO.: CHAPTER 11
88-0317243
DEBTOR'S PLAN OF REORGANIZATION AND DISCLOSURE STATEMENT
DATED: November 6, 1997.
FILED BY: Mobile Limited Liability Company.
INTRODUCTION
The Debtor
1. The Debtor. The Debtor is Mobile Limited Liability Company, a limited
liability company organized and existing under the laws of the State Of
Nevada, with its principal place of business located in Mobile,
Alabama. See "Section 7 - Financial History and Background of the
Debtor," Page 5.:
2. History of the Debtor. In the early part of the 1990's the Federal
Communication Commission attempted to establish a more competitive
playing field among the providers of cable TV by granting licenses for
the use of what is known as MMDS & ITFS frequencies for broadcasting
wireless TV transmission. These licenses were initially granted
through the use of lotteries and later through the use of auctions.
The initial grant of these licenses created a frenzy of activity among
promoters, both legitimate and illegitimate. One of the less savory
promoters was a company, based in Las Vegas, Nevada, by the name of
Midas Media, Inc. (including a number of similarly named corporations)
1
<PAGE>70
all of which were substantially owned and controlled by Jeff Jolcover.:
Midas Media, Inc. acquired a number of these licenses. In the
case of the licenses for the "Mobile, Alabama Market", licenses
were acquired by lease. Four (4) MMDS frequencies were leased from
a entity by the name of TVCN, four (4) ITFS frequencies were leased
from an entity by name of NACEPF and three (3) H group licenses
were leased from Ivan Nachman. Midas Media, Inc. developed a
scheme, which later proved to be a fraudulent endeavor, to market
these licenses. Essentially Midas Media, Inc. would cause to be
formed a general partnership. Midas Media, Inc. would then enter
into a joint venture with the general partnership for the purported
purpose of establishing wireless TV transmission in a given area.
Midas Media, Inc. would then offer units of participation in the
general partnership to generate the capital necessary to buy the
necessary equipment and facilities to begin broadcasting TV
signals.
Using the general framework outlined above Midas Media, Inc.
caused to be formed a general partnership under the Laws of the
State Of Nevada known as "Mobile Wireless Partners". Midas Media,
Inc. initially offered for sale to the general public Two Thousand
Four Hundred Fifty (2,450) units of general partnership interest
at an initial price of Three Thousand Seven Hundred Fifty Dollars
and 00/100 ($3,750.00) each, which price was increased over a
period of months to Four Thousand Eight Hundred Seventy Five
Dollars and 00/100 ($4,875.00) each and the number of general
partnership units increased to Two Thousand Six Hundred Ninety Five
(2,695). Through this sales effort Midas Media, Inc. raised
approximately Eleven Million Five Hundred Thousand Dollars and
00/100 ($11,500,000.00). At the conclusion of the sales effort
Midas Media, Inc. caused to be amended the original joint venture
to include Telecom Marketing, Inc. The result was that Midas
Media, Inc. owned Sixteen and one half percent (16.5%), Telecom
Marketing, Inc. owned one percent (1%), and the general partnership
owned eighty two and one half percent (82.5%) of the joint venture.
Of the total funds raised the general partnership received a total
of Two Million Dollars and 00/100 ($2,000,000.00) The general
partnership is now composed of approximately one thousand one
hundred thirty (1,130) partners.
After the first two hundred (200) units of general partnership
participation were sold Midas Media, Inc. called a meeting of the
general partners, which meeting was held in Las Vegas Nevada. At
that meeting Midas Media, Inc. caused to be elected a managing
general partner by the name of Robert Miller and further caused to
be formed an entity to operate the interest of the general
partnership. This entity was Mobile Limited Liability Company,
which is the Debtor in this case. Midas Media, Inc., shortly after
this initial meeting of partners, caused the general partnership to
enter into leases for facilities including office space and tower
facilities and in general set about the business of broadcasting
wireless TV transmission.
In addition to the initial licenses that were assigned to
Mobile Limited Liability Company, the Debtor herein, Midas Media,
Inc. represented to Mobile Limited Company that certain other
licenses would be acquired by it and assigned to Mobile Limited
Liability Company. These additional licenses never came to
fruition. Thus the only things of value that the partnership
acquired for the Eleven Million Five Hundred Thousand Dollars and
00/100 ($11,500,000.00) in capital was Two Million Dollars and
00/100 ($2,000,000.00) of that capital and the assignment of Eleven
(11) leased channels from Midas Media, Inc. These assets became
the property of the Debtor in this case.
2
<PAGE>71
In 1995 the partners began to realize that they had been the
victim of a "Scam". At this point approximately One Million
Dollars and 00/100 ($1,000,000.00) of the initial Two Million
Dollars and 00/100 ($2,000,000.00) in capital had been expended.
In addition it was learned that other partnerships had been formed
and operated in a similar fashion. A meeting of the general
partnership was called and the initial managing general partner was
ousted from office. Five (5) of the partners of Mobile were
elected as the directors committee of the Debtor, four (4) of which
individuals, are still managing the affairs of the Debtor today.
Complaints by various partners were made to the Securities And
Exchange Commission and the Federal Trade Commission. The
Commissions response to such complaints instituted a Receivership
against Midas Media, Inc. and others, including the Debtor. In the
early part of 1996 the Debtor was put into receivership by the
Commissions The Court appointed receiver took approximately Two
Hundred Thousand Dollars and 00/100 ($200,000.00) of the Debtors
funds to cover the fees and expenses of the receiver and the
receiver took possession and control of all of the assets of the
Debtor. Initially the receiver was to liquidate the assets of the
Debtor. However, the Debtor hired its own counsel and approximately
six (6) months later the receivership was dissolved against
the Debtor and the assets, including the licenses reassigned to the
Debtor. Ultimately the Securities And Exchange Commission, The
Federal Trade Commission, The Receiver and the other Defendants
entered into a settlement agreement, which agreement is presently
unfunded, but assuming the participates honor their agreements,
approximately Three Hundred Seventy Five Thousand Dollars and
00/100 ($375,000.00) maybe returned to the Debtor, first to repay
the funds taken by the receiver and any additional funds as
damages. The foregoing is based upon conversations with the
receiver inasmuch as the Debtor is not privy to the terms and
conditions of the agreement.
However, the foregoing has not ended the legal difficulties of
either the general partnership or the Debtor. Because there are so
many partners it is impossible to meet all of the requirements
concerning ownership imposed by the Federal Communications
Commission. The general partnership and the Debtor have been given
until December 31, 1997 to reorganize and to comply with the
standards set by the Federal Communications Commission. One of the
purposes of this Chapter 11 is to cause, upon confirmation, the
dissolution of Debtor, the formation of a C Corporation, which will
become the Reorganized Debtor in this Case and which will acquire
all of the assets of the Debtor and the partnership and will assume
the obligations under the proposed plan of the Debtor. The effect
of this reorganization will be that any entity owning 5% or more
would be subject to Federal Communication Commission review.
However, the Debtor estimates that there will be no entity which
owns 5% or more of the Reorganized Debtor and therefore the
conditions to the assignment of the licenses will automatically be
met.
The market for wireless TV transmission in the Mobile, Alabama
marketing area has not proved to be profitable for any number of
reasons including the fact that there are three (3) cable TV
companies in that market as well as satellite TV providers, each of
which is able to provided a much larger number of channels
available than the Debtor. The debtor has chosen to change
strategy to develop and sell high speed data transmission via
internet which is substantially faster than that which is presently
available to home and small business users and which it is
estimated will generate substantially more revenue. During the past
year the partnership has acquired, from funds raised from the
partners, three (3) frequencies called the H Group. Some of the
equipment for this purpose has been purchased by the Debtor and is
partially in place. Certain additional equipment needs to be
purchased and certain training needs to be accomplished at the
conclusion of which the Debtor will begin a marketing effort.
Based upon the experience of similarly situated enterprises the
Debtor believes that this venture will be highly profitable. See
"Section 10 - Future Business Activities," page 6.
3
<PAGE>72
The Disclosure Statement
3. Court Approval. The Disclosure Statement contained within this Plan
Of Reorganization And Disclosure Statement has been conditionally
found to contain "adequate information," as described in Section 40 -
Requirements of a Disclosure Statement, by Order of the Court, dated
November 6, 1997.:
4. Hearing on Plan Confirmation and Final Hearing on the Adequacy of
Information Contained in Disclosure Statement. The Court will hold a
hearing to determine whether or not this Plan should be confirmed on
26th day of November, 1997, at 1:45 o'clock p.m., in the United States
Bankruptcy Courtroom #2, located at United States Bankruptcy Courthouse,
1100 Commerce Street, 14th Floor, Dallas, Texas. You may attend
that hearing and present to the Court your arguments in favor of or in
opposition to the Confirmation of the Plan. Additionally the Court
will, at the same time, conduct a final hearing on whether or not the
Disclosure Statement contained within this Plan Of Reorganization And
Disclosure Statement contains "adequate information" pursuant to
Section 1125 of the Code.:
5. Time and Manner of Voting. The Court has issued its Order requiring
that all votes for the acceptance or rejection of the Plan proposed
by the Debtor be received by 5:00 p.m. on 24th day of November, 1997.
Voting may be on the ballot which is provided along with this Plan Of
Reorganization And Disclosure Statement or in any other written manner.
Mail or deliver your ballot so that it will reach Sidney J. Diamond, A
Professional Corporation, before the deadline. A vote received by
Sidney J. Diamond, A Professional Corporation, after that time may not
be counted. The ballot should be sent to::
Original and a Copy to:
Sidney J. Diamond,
5862 Cromo Drive, Suite 100
El Paso, Texas 79912
DISCLAIMERS
6. Disclaimers, Representations and Accuracy. Mobile Limited Liability
Company, through its directors committee, makes the following
disclaimers concerning this Plan Of Reorganization And Disclosure
Statement:
6.1 No Judgment on the Merits of the Plan by the Court. The
conditional approval of this Disclosure Statement, which
is a part of this Plan Of Reorganization And Disclosure
Statement, by the Court is required by Section 1125 of the
Code and does not constitute a judgment by the Court as to
the desirability of this Plan, or as to the value or
suitability of any consideration offered thereby.:
6.2 No Representations. No representations concerning the Debtor
or this Plan Of Reorganization And Disclosure Statement
are authorized by Mobile Limited Liability Company other
than as set forth in this Plan Of Reorganization And
Disclosure Statement. Any representations or inducements
made by any person to secure your vote which are other
than those contained herein should not be relied upon, and
4
<PAGE>73
such representations or inducements should be reported to
counsel for the Debtor who shall deliver such information
to the Court. The information contained herein and the
Exhibits attached hereto have been submitted by the
Debtor, unless specifically stated to be from other
sources, and have not been subject to a certified audit.
The Debtor maintains records internally and also currently
utilizes outside accounting services to the extent
indicated herein. Financial forecasts are based on various
assumptions which are fully described in this Plan Of
Reorganization And Disclosure Statement. See "Section 12
- Future Income And Expenses Under The Plan," page - 7 and
Exhibits hereto.:
6.3 Materiality. Mobile Limited Liability Company has caused
this Plan Of Reorganization and Disclosure Statement to be
prepared to disclose that information which, in the
opinion of the directors committee of Mobile Limited
Liability Company, is important and necessary to an
evaluation of this Plan. The material contained herein is
intended solely for that purpose and solely for the use of
Creditors and other parties in interest of the Debtor and,
accordingly, may not be relied upon for any purpose other
than determination of how to vote on this Plan. In
addition, the materials contained in this Plan Of Reorganization
And Disclosure Statement may not be sufficient
for the formation of a judgment by any Creditor of the
preferability of an alternative to this Plan. The
directors committee of Mobile Limited Liability Company
has proposed this Plan and favors it. Materials referring
to alternatives to this Plan are limited by both partial
considerations of space and opinion of the directors
committee of Mobile Limited Liability Company. :
6.4 Additional Information. Certain of the materials contained
in this Plan Of Reorganization And Disclosure Statement
are taken from other instruments or are digests of other
instruments. While the directors committee of Mobile
Limited Liability Company has made every effort to retain
the meaning of the other instruments or portions transposed,
the directors committee of Mobile Limited Liability
Company urges that any reliance on the contents of such
other instruments should depend upon a complete review of
the instruments themselves.:
FINANCIAL PICTURE OF THE DEBTOR AND THE REORGANIZED DEBTOR
Background
7. Financial History and Background of the Debtor. The Debtor is engaged in
the wireless transmission of television signals in the "Mobile, Alabama
Market". The Debtor competes against (i) ordinary transmission of
television signals from local stations, including those with national
affiliations such as ABC, NBC, CBS and Fox; (ii) cable television, of
which there are three (3) in the Mobile, Alabama market; and by all of
the direct satellite systems, such as Primestar, Echostar and Direct
TV. In competing against the cable broadcasters and the direct
broadcasting systems the Debtor is handicapped by inadequate programming
limited by 11 Channels. As a result the Debtor's operations have
not proven to be financial successful. Companies similarly situated
have also not been able to generate sufficient revenues to obtain
profitability. In order to become profitable the Reorganized Debtor
must provide additional services, utilizing its existing licenses.
Management believes that offering high speed internet access will
generate those revenues. See "Section 10 - Future Business Activities,"
page 6.
8. Post-Petition Earnings of the Debtor in Chapter 11. The Debtor
commenced this case on August 22, 1997. Therefore the only results of
operations are for the periods ended August 31, 1997 and September 30,
1997, which results are summarized as follows:
5
<PAGE>74
MONTHLY OPERATING REPORTS
- -----------------------------------------------------------------------------
August September
- -----------------------------------------------------------------------------
Net Revenue $ 9,870.67
Cost Of Goods Sold 13,176.96
Gross Profit (3,306.29)
Operating Expenses $4,048.19 11,003.61
Income Before
Non-Operating Expenses (4,048.19) (14,309.90)
-----------
Depreciation 3,751.07
Reorganization Expenses
4,912.25
========
Net Loss ($8,960.44) ($18,060.97)
==============================================================================
</ TABLE>
The Future
9. The Reorganized Debtor. The directors committee of the Debtor will cause
to be formed Advanced Wireless Systems, Inc. a Alabama corporation, or
if that name is not available such other name as maybe appropriate in
the opinion of the Directors Committee of the Debtor. This corporation
will have an authorized capitalization of fifty million (50,000,000)
shares of Common Stock, with a par value of one cent (.01) each. On
Effective Date all of the assets of the Debtor will vest in Advanced
Wireless Systems, Inc., the Reorganized Debtor, and all liabilities
under the Confirmed Plan Of Reorganization will be assumed by it. In
addition to the foregoing the Reorganized Debtor is purchasing from
Mobile certain licenses. The shareholders of the Reorganized Debtor
will consist of (i) those creditors in classes 1(a), 2, and 4(b) who
elect to receive Common Stock in the Reorganized Debtor in lieu of a
cash payment; (ii) purchasers of Certificate Of Indebtedness who elect
to convert their debt instruments to equity; and, (iii) Mobile, or the
partners of Mobile on dissolution of the partnership should that
Certificate of Indebtedness be converted to equity. See "Section 18.3
- Class 1(b) - Costs Of Administration," page 17, "Section 18.4 - Class
1(c) - Certificates Of Indebtedness," page 18, "Section 30 Transfer Of
The Debtor's Assets and Assumption of Liabilities," page 35, and
"Section 31 Purchase Of licenses From Mobile," page 35.:
10. Future Business Activities. In addition to the delivery of wireless
television signals the Reorganized Debtor will offer to the business
community and to some lesser extent individuals in the "Mobile, Alabama
Market", "High Speed Internet Access". This service offers customers
the ability to download data, video, graphics and high fidelity audio
at speeds that are much faster than available for users using telephone
lines to connect to the internet. Initially the service will only
6
<PAGE>75
provide this greatly improved speed to download data. The technology
in this area has been expanding at a rapid rate and the Federal
Communication Commission has been moving rapidly to adopt rules and
regulations concerning the development of this new technology.
Currently pending before the Federal Communication Commission are
proposed rules that will allow two way transmission of signals via the
Reorganized Debtor's broadband licenses and which further expands the
allowable activity of license holders by authorizing telephonic
communications. This new technology coupled with proposed rules and
regulations proposed by the Federal Communications Commission are known
"Flex Spectrum". Management believes that this new endeavor will proof
to be highly profitable. The Mobile Alabama Market has Twelve Thousand
(12,000) potential business users, which potential market is
sufficiently large enough to generate a substantial revenue stream.
The Reorganized Debtor owns or leases eleven (11) frequencies, with
each frequency having the ability to service approximately Sixteen
Hundred Fifty (1,650) subscribers at any given time. See "Section 12
Future Income and Expenses Under the Plan," - page 7.:
11. Basis of the Plan. The Plan is premised upon the sale of part of the
Certificates Of Indebtedness that has been previously authorized by the
Court in the amount of One Million Dollars and 00/100 ($1,000,000.00);
the acquisition of additional licenses from Mobile for a purchase price
of Two Hundred Twenty Five Thousand Dollars and 00/100 ($225,000.00) to
be paid for through the issuance of an additional Certificate Of
Indebtedness to Mobile; and, the future business activities of the
Reorganized Debtor. See "Section 12 Future Income and Expenses Under
the Plan," - page 7.:
12. Future Income and Expenses Under the Plan. Attached to this Plan Of
Reorganization And Disclosure Statement as exhibits are the forecasts
of future income and expenses, and sources and uses of funds of the
Debtor as follows::
(a) Exhibit "A"- Annual Operating Projections For Five (5)
Years.:
(b) Exhibit "B"- Projected Annual Sources and Uses of Cash
For Five (5) Years.:
(c) Exhibit "C"- Monthly Operating Projections For One (1)
Year.:
(d) Exhibit "D"- Projected Monthly Sources And Uses Of Cash
For One (1) Year.:
7
<PAGE>76
13. Future Management of the Reorganized Debtor. The following (5)
sections set forth (i) the officer and directors of the Reorganized
Debtor,(ii)a brief history of such officers and directors,
(iii) the ownership of the Common Stock in the Reorganized Debtor for any
entity that will own more than five percent (5%) of such Common and
the ownership of officers and directors as a group, (iv) the future
compensation under the Plan of officers and directors and (v) significant
transactions between such officers and directors and the Debtor.:
13.1 Officers and Directors of the Reorganized Debtor. The
following table summaries the officers and directors of
the Reorganized Debtor, as follows:
===============================================================================
OFFICERS AND DIRECTORS
OF
THE REORGANIZED DEBTOR
- -------------------------------------------------------------------------------
Name Address Age Position
- -------------------------------------------------------------------------------
Monte Julius 927 Sunset Dr. 64 President and
Irving, Texas 75061 Director /1
Terry Hopkins 4670 Heritage Oaks Lane 50 Director /2
Suisum, California 94585
Oscar L. Hayes 2308 Stuart Ave 60 Secretary and
Albany, California 31707 Director /3
Miles Humphrey 32508 Orchid Lane 72 Treasurer and
Parkersburg, Iowa 50665 Director /4
Demetrios Tsoutsas 470 Burlington Rd
Freehold, New Jersey 7728 63 Director /5
Todd Parr 9440 Seven Hills Curve So 39 Vice-President
Mobile, Alabama 3665
===============================================================================
</ TABLE>
- ----------------------------------------
/1 An initial term of three (3) years as director.
/2 An initial term of one (1) year as director.
/3 An initial term of two (2) years as director.
/4 An initial term of two (2) years as director.
/5 An initial term of three (3) years as director.
8
<PAGE>77
13.2 Biography of Officers and Directors. The following sections
sets forth a brief biography of each officer and director
of the Reorganized Debtor, as follows:
(a) Monte Julius. Mr. Julius has been involved in new business
ventures for the past twenty five (25) years as well as
the ownership and operation of hotels, retail sales
business and contracting services. Mr. Julius operates an
OEM business and manages several real estate properties
that he owns. Mr. Julius has been the Chairmen of
Wireless for the past three (3) years.:
(b) Terry Hopkins. Mr. Hopkins received a bachelors decree
from California State University at Chico in 1970. Ms.
Hopkins has been involved for the past five (5) years as
both an investor and manger of various wireless
telecommunication businesses.:
(c) Oscar Hayes. Mr. Hayes was previously employ by major
financial corporations over the previous twenty eight (28)
years in various capacities including company auditor and
branch operations manager. Since 1985, Mr. Hayes has been
engaged in the real estate appraisal business and own and
operates SWAG Real Estate Appraisal Service which has
offices in Columbus, Georgia and Albany, Georgia.:
(d) Miles Humphrey. Mr. Humphrey was previously engaged in the
agriculture industry for forty five (45) years. He is a
former Marine Corps fighter pilot and was president and
chief executive officer of Beaver Valley enterprises for
twenty (20) years, when he left that venture in 1992.:
(e) Demetrios Tsoutsas. Mr. Tsoutsas received a bachelors
degree in electrical engineering from the Greek Air Force
Academy in 1954. From 1954 until 1960 Mr. Tsoutsas taught
various courses in electronics. From 1960 until 1974 Mr.
Tsoutsas held various management positions in the
communications industry. In 1974 Mr. Tsoutsas started his
own business and he currently owns, controls and manages five
corporate entities that are involved in military procurement
as prime contractors for the Department of Defense and major
air frame manufacturers.:
(f) Todd Parr. Mr. Parr is a fifteen (15) year veteran of the
cable television business. Mr. Parr has held various
management positions with cable television companies. Mr.
Parr acquired his knowledge of electronics while serving
in the United States Coast Guard. Todd Parr has been an
employed by the Debtor since 1995 as general manager. Mr.
Parr in currently completing a degree program at the
University of Mobile anticipates receiving a bachelor of
science degree in August of 1998.:
13.3 Compensation of Management. The following sections sets
forth the compensation of each officer and director of the
Reorganized Debtor who will receive compensation from the
Reorganized Debtor as follows:
(a) Todd Parr. Mr. Parr receives an salary of Forty Six
Thousand Two Hundred Dollars and 00/100 ($46,200.00),
payable monthly plus health insurance and is reimbursed
for necessary and reasonable business expenses.:
9
<PAGE>78
(b) Monte Julius. Mr. Julius receives an salary of Twenty
Four Thousand Dollars and 00/100 ($24,000.00), payable
monthly plus health insurance and is reimbursed for
necessary and reasonable business expenses.:
13.4 ISO. The board of directors of the Reorganized Debtor will
adopt an Incentive Stock Option Plan for employees and
present such plan to the shareholders for approval. If
adopted by the shareholders, the following initial options
will be granted to officers and directors::
(a) Monte Julius. Mr. Julius will be granted an option to
purchase One Hundred Fifteen Thousand Six Hundred
(115,600) shares of common stock for a period of two (2)
years at an exercise price of Twenty Five Cents ($0.25)a
share.:
(b) Demetrios Tsoutsas. Mr. Tsoutsas will be granted an
option to purchase Seventy Five Thousand (75,000) shares
of common stock for a period of two (2) years at an
exercise price of Twenty Five Cents ($0.25) a share.:
(c) Oscar Hayes. Mr. Hayes will be granted an option to
purchase Seventy Five Thousand (75,000) shares of common
stock for a period of two (2) years at an exercise price
of Twenty Five Cents ($0.25) a share.:
(d) Miles Humphrey. Mr. Humphrey will be granted an option
to purchase Seventy Five Thousand (75,000) shares of
common stock for a period of two (2) years at an exercise
price of Twenty Five Cents ($0.25) a share.:
(e) Terry Hopkins. Ms. Hopkins will be granted an option to
purchase Fifty Thousand (50,000) shares of common stock
for a period of two (2) years at an exercise price of
Twenty Five Cents ($0.25) a share.:
(f) Additional Options to Employees. Such plan will reserve
an additional option(s) to purchase an additional Three
Hundred Fifty Thousand (350,000) shares of Common Stock at
an initial exercise price of Twenty Five Cents ($0.25).
Options will be granted to employees, as determined by the
Board of Directors and the ISO as incentives. :
13.5 Significant Transactions Between the Debtor and the Officers
and Directors of the Debtor. The following sections set forth
significant transactions between the officers and directors of
the Debtor, as follows:
(a) Oscar Hayes. On May 21, 1997 the Debtor borrowed Seventy
Five Thousand Dollars and 00/100 ($75,000.00) from Mr.
Hayes at an interest rate of twelve percent (12%). That
loan is secured by certain assets of the Debtor. In the
opinion of the Directors Committee of the Debtor the
transaction is reasonable under the existing circumstances
and on terms that are more favorable than the Debtor could
have obtained from a third party.:
10
<PAGE>79
(b) Demetrios Tsoutsas. On May 21, 1997 the Debtor borrowed
One Hundred Thousand Dollars and 00/100 ($100,000.00)from
Mr. Tsoutsas at an interest rate of twelve percent(12%).
That loan is secured by certain assets of the Debtor. In
the opinion of the Directors Committee of the Debtor the
transaction is reasonable under the existing circumstances
and on terms that are more favorable than the Debtor could
have obtained from a third party.:
14. Principal Shareholders of the Reorganized DebtorThe following table
sets forth the ownership of Common Stock in the Reorganized Debtor,
after giving effect to the winding up and dissolution of Mobile
Wireless Partners, by (i) each person who to the knowledge of the
Debtor who will be a record or beneficial holder of more than five
percent (5%) of the outstanding Common Stock of the Reorganized Debtor,
and (ii) all Directors and Officers of the Reorganized Debtor as a
group following the transactions contemplated by this Plan Of
Reorganization and Disclosure Statement:
===============================================================================
PRINCIPAL SHAREHOLDERS OF THE REORGANIZED DEBTOR
SUBSEQUENT TO CONFIRMATION /1
- -------------------------------------------------------------------------------
Name Address Type Of Ownership Shares Percentage of
Owned Class
- -------------------------------------------------------------------------------
None
Officers and
Directors as
a Group Common Stock 633,480 /2 5.6%
===============================================================================
</ TABLE>
15. Accounting Method Used and Source of Financial Information. The accrual
method accounting was used in accordance with generally accepted
accounting principles consistently applied for the forecasts.
Depreciation was computed using straight-line methods and the useful
lives as those used for federal income tax purposes. The forecasts
were prepared by Daniel J. Demers, MBA. See "Section 8 Post-Petition
Earnings Of The Debtor in Chapter 11," page 6 and Section 12 "Future
Income And Expenses Under The Plan", page 7.:
ANALYSIS AND VALUATION OF PROPERTY
16. Analysis and Valuation of Property. The following three(3)Subsections
of this Disclosure Statement set forth the Debtor's Property, the
value of such Property and the Liens, if any, against such Property.
- -----------------------------
/1 The foregoing assumes not only the distribution of shares of Common
Stock issued to Mobile Wireless Partners but also assumes that the
Certificate of Indebtedness issued to purchase certain licenses by the
Reorganized Debtor has been converted to Common Stock. The foregoing
analysis does not give effect to the potential purchase of Common Stock
by any Warrant Holder.
/2 The foregoing assumes the following (i) that all Claims have been paid in
stock rather than in cash; (ii) that all warrants issued to officers and
directors have been exercised; (iii) that all options issued to officers
and directors have been exercised; and (iv) that no director has purchased
a certificate of indebtedness and exercised the option to convert such
common stock.
11
<PAGE>80
The fourth Section arrives at the total value of the Debtor's Property,
net of liens and encumbrances, but before costs of disposition of assets
or costs of administration of this case. Section 32 - Liquidation
Analysis of the Debtor's Property, page 36 contains an analysis of what
would be realized by Creditors if the Debtor's case were converted to one
under Chapter 7 of the Code and the property liquidated. In order to
understand the Debtor's assets and what would be realized from a sale
of those assets, both sections must be read.:
16.1 Real Property of the Debtor. The Debtor owns no real property.
16.2 Tangible Personal Property of the Debtor. The Debtor owns
personal property consisting of which is described in the
following table:
===============================================================================
SUMMARY OF THE DEBTOR'S TANGIBLE PERSONAL PROPERTY
- -------------------------------------------------------------------------------
Type Value Method Lien Net Equity
- -------------------------------------------------------------------------------
Vehicles /1 $ 8,500.00 Market $ 5,500.00 $ 3,000.00
Machinery
and Equipment $ 306,590.00 Market $200,000.00 $106,590.00
Inventory /2 $ 64,237.00 Market $ 64,237.00 $ 64,237.00
=================================================================
TOTALS $ 379,327.00 $205,500.00 $173,827.00
===============================================================================
</ TABLE>
- -----------------------------
/1 The Debtor, at the Filing Date, had the right to purchase a 1995 Chev.
10 pickup for a cash price of $5,000.00.
/2 The inventory further secures the debt set forth under machinery and
equipment.
12
<PAGE>81
16.3 Intangible Personal Property of the Debtor. The following
table sets forth the Debtor's intangible personal property
as valued by the Debtor as of the Filing Date:
===============================================================================
SUMMARY OF THE DEBTOR'S INTANGIBLE PERSONAL PROPERTY
- -------------------------------------------------------------------------------
Type Value Method Lien /1 Net Equity
- -------------------------------------------------------------------------------
Cash and
Cash in Banks $ 25,940.28 Face $ 25,940.28
Security
Deposit $ 33,600.00 Face $ 33,600.00
Receivership /2 $375,000.00 Estimated $375,000.00
Leased MMDS
& ITFS /3
Frequencies $560,000.00 Market $560,000.00
Accounts
Receivable $ 4,888.00 Face $ 4,888.00
==============================================================
TOTALS $999,438.28 $999,438.28
===============================================================================
</ TABLE>
16.4 Liquidation Value of the Debtor's Assets. Based upon the
presentation in the three preceding Subsections of this
Plan Of Reorganization And Disclosure Statement, the
Debtor's Estate has a net equity value of One Million One
Hundred Seventy Thousand Two Hundred Sixty Five Dollars
and 28/100 ($1,173,265.28) after addressing the Claims of
Secured Creditors, but before the cost of the disposition
of such assets and before the Cost of Administration of
this Chapter 11 case and the potential Costs of
Administration of a Chapter 7 estate. See "Section 32 -
Liquidation Analysis of the Debtor's Property," page 36.:
THE DEBTOR'S PLAN
Claim Classification Under the Plan
17. Classification Claims Under the Plan. The Plan establishes ten (10)
classes that deal with Claims of Creditors and the Interest of Equity
Security Holders in the Debtor. The following Sections summarize the
- -----------------------------
/1 The liens referred to in the preceding section are all encompassing and
therefore are further secured by the property in this section.
/2 The Debtor anticipates that it will receive $375,000.00 from a
receivership action that involved the original promoters. However, the figure
is based upon representations made by the receivers' attorney, which amounts
he has estimated based upon future settlement payments being made by certain
third parties. Therefore there can be no assurance that such funds will be
received. As of the date of this Plan of Reorganization and Disclosure
Statement the Debtor has received $200,000.00 from the receiver.
/3 The foregoing leases are not disclosed on schedule B of the Debtor's
schedules but rather on schedule G. The Debtor's management has used its best
efforts in arriving at a market value of these leases. However, there can be
no assurances that the leases can be successfully assigned to third parties
because of the various requirements of the FCC.
13
<PAGE>82
claim classification that the Debtor has utilized in formulating this
Plan Of Reorganization:
17.1 Class 1 - Administrative Expenses. Class 1 consists of the
costs and expenses of administration, as defined in
Section 503(b) of the Code and given priority pursuant to
Section 507(a)(1) of the Code, for which application or
allowance is made, or a Claim is filed prior to the
Effective Date, as the same are allowed, approved, and
ordered paid by the Court, except operating expenses
incurred in the ordinary course of business and Claims
arising under Section 364 of the Code. Class 1 is divided
into three (3) Classes as follows:
(a) Class 1(a) - Professional FeesClass 1(a) consists of all
Claims arising under Sections 330 and 503 of the Code, as
the same may be allowed and ordered paid by the Court in
the approximate future amount of ($). See "Section 18.2 -
Class 1(a) - Professional Fees," page 17. :
(b) Class 1(b) - Costs of Administration. Class 1(b) consists
of all costs and expenses of administration, except Claims
arising under Sections 330 and 503 of the Code, as the
same may be allowed and ordered paid by the Court,
including, but not limited to, the costs of reproduction
and mailing of this Plan Of Reorganization and Disclosure
Statement, including the fees due to the United States
Trustee, and any post-petition operating expenses which
are due and unpaid at the date of Confirmation. See
"Section 18.3 - Costs of Administration," page 17.:
(c) Class 1(c) - Certificates Of IndebtednessClass 1(c)
consists of all Claims arising out of the issuance of
Certificates Of Indebtedness authorized by the Court
pursuant to Section 364(c) of the Code previously
authorized by an Order of the Court dated October 9, 1997.
See "Section 18.4 - Class 1(c) - Certificates Of
Indebtedness," page 18.:
17.2 Class 2 - Wage Claims. This Class consists of all Tax Claims
which are entitled to priority pursuant to Section
507(a)(3) of the Code. See "Section 18.5 - Class 3- Tax
Claims," page 18.:
17.3 Class 3 - Tax Claims. This Class consists of all Tax Claims
which are entitled to priority pursuant to Section
507(a)(8) of the Code. See "Section 18.6 - Class 2- Tax
Claims," page 19.:
17.4 Class 4 - Unsecured Claims. This Class consists of all
Unsecured Claims except those in Classes 1, 2, 3 and 5.
Class 4 is divided into Two Classes, each of which shall
vote separately, as follows:
(a) Class 4(a) - Claims of $1,000 or less. This Class consists
of all Allowed Unsecured Claims, including Priority Tax
Claims in the amount of One Thousand Dollars and 00/100
($1,000.00) or less, including Allowed Claims of those
Unsecured Creditors in excess of One Thousand Dollars and
001/00 ($1,000.00) in Class 3(b) who agree to reduce their
Claims to One Thousand Dollars and 00/100 ($1,000.00), and
excluding those Claims in Classes 1, 2, 3 and 5. See
"Section 18.7 - Class 3(a) - Claims of $1,000 or less,"
page 20.:
14
<PAGE>83
(b) Class 4(b) - Claims of More Than $1,000. This Class consists
of all Allowed Unsecured Claims in excess of One Thousand
Dollars and 00/100 ($1,000.00), including Creditors whose
Claims arise out of the rejection of executory contracts
and unexpired leases and the deficiency Claims of
Creditors who were previously secured, and whose Claims
have been determined to be unsecured in whole or in part,
pursuant to Section 506(a) or Section 1111(b) of the Code,
or by agreement between the Secured Creditor and the
Debtor, excluding Allowed Claims of the Unsecured
Creditors in this Class who agree to reduce their Claims
to Two Hundred Dollars ($200) and excluding those Claims
in Classes 1, 2, 3(a), 4 and 5. See "Section 18.8 - Class
3(b) - Claims of More than $1,000," page 22.:
17.5 Class 5 - Secured Claims. Class 5 consists of all Secured
Claims. Class 5 is divided into two (2) Classes, each of
which shall vote separately, as follows:
(a) Class 5(a) - Hayes. The Secured Claim of Hayes in the
approximate amount of Seventy Five Thousand Dollars and
00/100 ($75,0000), as of the Filing Date, secured by a
lien on all license agreements, channel leases, contracts,
accounts receivable, equipment leases and other choses in
action of the Debtor and all additions, replacements,
machinery, parts and goods used by the Debtor in the
operation of its business located at 4123-A, Unit 1,
Mobile, Alabama. See "Section 18.9 - Class 5(a) - Hayes,"
page 24.:
(b) Class 5(b) - Tsoutsas. The Secured Claim of Tsoutsas in
the approximate amount of One Hundred Thousand Dollars and
00/100 ($100,000.00), as of the Filing Date, secured by a
lien on all license agreements, channel leases, contracts,
accounts receivable, equipment leases and other choses in
action of the Debtor and all additions, replacements,
machinery, parts and goods used by the Debtor in the
operation of its business located at 4123-A, Unit 1,
Mobile, Alabama. See "Section 18.10 - Class 5(b) -
Tsoutsas," page 24.:
17.6 Class 6 - Retained Interest of the Equity Security Holders. This
Class consists of holders of . See "Section 29 - Class 6 -
Retained Interest of the Equity Security Holders," page 35.:
Treatment and Distribution to Classes Under the Plan
18. Treatment and Distribution Under the Plan. The following Sections
describe the treatment given to each Class of Creditors under the Plan
and the distribution to be made to them.:
15
<PAGE>84
18.1 Summary of Plan Payments. The Debtor has prepared the
following table showing the estimated payments to be made
under the Plan to each Class of Creditors. See also
Exhibit "A" of this Plan Of Reorganization And Disclosure
Statement (Note: In some cases, payments are estimated.
A complete reading of this Plan Of Reorganization And
Disclosure Statement is required):
===============================================================================
SUMMARY OF USE OF FUNDS - YEARS ONE THROUGH FIVE
- -------------------------------------------------------------------------------
Class Year 1 Year 2 Year 3 Year 4 Year 5
- -------------------------------------------------------------------------------
Class 1(a) $ 57,500.00
Class 1(b)
Class 1(c) /1 $ 500,000.00 $500,000.00
Class 2 $ 4,000.00
Class 3 $ 1,403.76
Class 4(a) $ 3,174.51
Class 4(b) $ 285,602.00
Class 5(a) /2 $ 75,000.00
Class 5(b) /3 $ 100,000.00
===============================================================
TOTALS $1,026,680.27 $500,000.00
===============================================================================
</ TABLE>
Class 1 - Administrative Expenses
18.2 Class 1(a) - Professional Fees. The following expenses
incurred in the administration of the Chapter 11 Case must
be approved by the Court:
(a) Attorneys For The Debtor. The Debtor estimates that the
Reorganized will have to pay its counsel the approximate
future sum of Forty Five Thousand Dollars and 00/100
($45,000.00). No applications for compensation has been
submitted to the Court for approval of such fees and
expenses by counsel for the Debtor.
- -----------------------------
/1 Excludes accrued interest.
/2 Excludes accrued interest.
/3 Excludes accrued interest.
16
<PAGE>85
(b) Accountants For The Debtor. The Debtor estimates that
the Reorganized Debtor will have to pay its accountant
the approximate sum of Seven Thousand Five Hundred Dollars
and 00/100 ($7,500.00).:
(c) FCC Counsel. The Debtor estimates that the Reorganized
Debtor will have to pay its FCC counsel the approximate
sum of Five Thousand Five Dollars and 00/100 ($5,000.00).:
(d) Payment of Professional Fees. Any Administrative Expense
which has not been approved by the Court by the Effective
Date will be estimated by the Debtor and an appropriate
reserve maintained therefore, until the amount thereof has
been determined by the Court. Each Administrative
Claimant within this Class 1(b) shall have the right to
convert their Administrative Claim into Units Of Equity in
the manner provided for in Class 1(c).:
(e) Court Costs. Any Court fees or Court reporter's fees
which have not been paid. The directors committee of the
Debtor does not know of any such fees, but if such fees do
exist, they will not be significant.:
(f) Costs of Distribution and Mailing of Plan Of Reorganiza-
tion and Disclosure StatementThe cost of reproduction and
mailing of the Debtor's Plan and Disclosure Statement to
the Creditors and other parties in interest in this case.
These expenses have not been determined.:
18.3 Class 1(b) - Costs of Administration. Administrative Expenses,
including the fees and expenses of the United States Trustee,
incurred in the ordinary course of business shall be paid in
accordance with the terms upon which credit was extended or in
accordance with any subsequent amendment of the original credit
terms as agreed to by the Administrative Expense Claimant and the
Debtor. Administrative Expenses incurred, other than in the
ordinary course of business, shall be paid, to the extent that
they have not already been paid, in full, on the fifteenth (15th)
day of the first full month following the Effective Date. Any
such Administrative Expense which has not been approved by the
Court by the Effective Date will be estimated by the Debtor and
an appropriate reserve maintained therefore, until the amount
thereof has been determined by the Court, and paid promptly
thereafter. Each Administrative Claimant within this Class 1(b)
shall have the right to convert their Administrative Claim into
Units Of Equity in the manner provided for in Class 1(c).:
18.4 Class 1(c) - Certificates of Indebtedness. Claimants within
Class 1(c) shall be paid in full according to the terms
and conditions set forth in the Certificates Of
Indebtedness. The Court has previously authorized the
issuance of One Million Dollars and 00/100 ($1,000,000.00)
pursuant to Section 364(c) of the Code. The sales effort,
as of the date of this Disclosure Statement is ongoing and
therefore the Debtor is unable to estimate either the
amount of Claims in this Class or the number of Claimants.:
(a) Option to Convert to Common Stock and Warrants. The holders
of the Certificates Of Indebtedness shall have the option
to convert their Certificates of Indebtedness into Units
17
<PAGE>86
of Equity by receiving one Unit Of Equity for each One
Dollar and 00/100 ($1.00) of debt.:
(b) Units of Equity. Each Unit of Equity shall consist of (2)
Shares of Common Stock and two (2) Series "A" Warrants,
which warrants shall give the holders thereof the right,
for one (1) year following the Effective Date, to purchase
one (1) share of Common Stock in the Reorganized Debtor
for Seventy Five Cents ($0.75) for each such Warrant.:
(c) How Exercised. Each Holder of a Certificate of Indebtedness
who desires to convert their debt to Units of Equity shall
do so by filling in the form provided Holder thereof and
returning the same to the Reorganized Debtor along with
the Original of the Certificate Of Indebtedness held by
such Holder.:
(d) Time Period Within Which To Covert. The right to convert
into Units Of Equity pursuant to this Class 1(c) shall
expire on the anniversary date of the Effective Date.:
Class 2 - Wage Claims Entitled To Priority
18.5 Class 2 - Wage Claims. Wage Claims in this Class shall be
paid in full on the first day of the first full month
following the Effective Date or in the alternative such
Claimant may elect to receive Common Stock in the same
manner and on the same terms and conditions as Class 4(b)
Claimants. There is one Claimant in this Class with a
Claim of Four Thousand Dollars and 00/100 ($4,000.00).:
(a) Impairment. The Allowed Unsecured Priority Tax Claim in
this Class is Impaired as that term is defined in Section
1124 of the Code.:
(b) Fair and Equitable. The Plan is Fair and Equitable with
respect to the Allowed Claim of Claimants in this Class as
that term is defined in Section 1129(b) of the Code.:
(c) Discrimination. The Plan does not discriminate unfairly
with respect to the Allowed Secured Claim of the Claimant,
pursuant to Section 1129(b)(1) of the Code.:
(d) Option To Convert To Equity. Each Wage Claimant within
this Class 2 shall have the right to convert their Wage
Claim into Units Of Equity in the manner provided for in
Class 1(c).:
Class 3 - Tax Claims Entitled to Priority
18.6 Class 3 - Tax Claims. Tax Claims in this Class shall be
paid in full on the first day of the first full month
following the Effective Date. To the extent that a tax
measured by income or gross receipts, pursuant to Section
507(a)(8)(B) of the Code, became due more than three (3)
18
<PAGE>87
years prior to the Filing Date, such Claim shall not be
entitled to interest after the Filing Date nor shall it
accrue interest after the Effective Date. To the extent
that a property tax, assessed before the commencement of
the case and last payable without penalty after one year
before the date of the filing of the petition of a kind
specified in Section 507(a)(8)(B) of the Code, exceeds
such period, such Claim shall not be entitled to interest
after the Filing Date nor shall it accrue interest after
the Effective Date. To the extent that a penalty related
to a Claim is not compensation for an actual pecuniary
loss, it shall not accrue interest after the Filing Date
nor after the Effective Date, pursuant to the provisions
of Section 507(a)(8)(G) of the Code. To the extent that a
Claim in this Class is outside of the provisions of
Section 507(a)(8) of the Code, it shall not bear interest
after the Filing Date and shall not bear interest after
the Effective Date. Tax Claims not entitled to priority,
pursuant to Section 507(a)(8) of the Code, shall be paid
pursuant to the provisions of Class 4(b). There is one (1)
Claimant in this Class with a Claim of One Thousand Four
Hundred Three Dollars and 76/100 ($1,403.76).:
(a) Impairment. The Allowed Unsecured Priority Tax Claim
in this Class is Impaired as that term is defined in
Section 1124 of the Code.:
(b) Fair and Equitable. The Plan is Fair and Equitable
with respect to the Allowed Claim of Claimants in this
Class as that term is defined in Section 1129(b) of the
Code.:
(c) Discrimination. The Plan does not discriminate unfairly
with respect to the Allowed Secured Claim of the Claimant,
pursuant to Section 1129(b)(1) of the Code.:
19
<PAGE>88
Class 4 - Unsecured Claims
18.7 Class 4(a) - Allowed Unsecured Claims of $1,000 or Less.
Claims in this Class shall be paid in full on the first day of
the first full month following the Effective Date or in the
alternative the Claimants within this Class may elect to receive
shares of Common Stock in the same manner and on the same
conditions as Class 4(b) Claimants. The Debtor estimates that
there are twenty five (25) Claimants in this Class with Claims
totaling Three Thousand One Seventy Four Dollars and 51/100
($3,174.51, which are summarized as follows:
===============================================================================
SUMMARY OF UNSECURED CREDITORS WITH CLAIMS
OF ONE THOUSAND DOLLARS OR LESS
- -------------------------------------------------------------------------------
Name of Creditor Proof Of Claim Amount Scheduled
- -------------------------------------------------------------------------------
Alabama Power $ 757.51
American Medical Response 9.95
American Medical Security 34.66
Bell South 412.31
Best Power 175.58
PB Oil 62.86
Cable View 140.00
Contec Limited Partnership 324.19
David Yommer 5.79
Dearl Fussell 4.54
Great Lakes Data Systems 130.00
John Cassity 23.45
Kelly's Pest Control 50.00
Mobile Area Water 10.96
Mobile Comm 27.00
Mobile Press Register 48.60
Network Solutions 100.00
Office Max 128.42
Roebuck - Robert Brothers 844.04
Rohn 558.80
20
<PAGE>89
===============================================================================
SUMMARY OF UNSECURED CREDITORS WITH CLAIMS
OF ONE THOUSAND DOLLARS OR LESS
- -------------------------------------------------------------------------------
Name of Creditor Proof Of Claim Amount Scheduled
- -------------------------------------------------------------------------------
Ronnie Breland 13.00
Teri Fuga 5.85
Wanda Johnson 12.87
Waste Management 56.84
Wesco Eng. Supply Co. 4.75
================================================
TOTAL $3,174.51
===============================================================================
</ TABLE>
(a) Amounts In Class May Vary. Inasmuch as Creditors in Class
3(b) are given the option of reducing their Claims to One
Thousand Dollars and 00/100 ($1,000.00) to be included in
this Class 3(a) the number and amount of Claims may vary.
(b) Impairment. The Allowed Unsecured Claims of Creditors in
this Class are Unimpaired as that term is defined in
Section 1124 of the Code.:
(c) Fair and Equitable. The Plan is Fair and Equitable with
respect to the Allowed Claim of Claimants in this Class as
that term is defined in Section 1129(b) of the Code.:
(d) Discrimination. The Plan does not discriminate unfairly
with respect to the Allowed Secured Claim of the Claimant,
pursuant to Section 1129(b)(1) of the Code.:
21
<PAGE>90
18.8 Class 4(b) - Allowed Unsecured Claims of More Than $1,000. Class
4(b) will be paid in full, in cash the first day of the second full
month following the Effective Date or in the alternative Claimants
within this Class have the options of (i) receiving shares of
Common Stock in the Reorganized Debtor or (ii) reducing their Claim
to One Thousand Dollars and 00/100 ($1,000.00) and being paid
soon after Effective Date, as set forth below. The Debtor estimates,
that there are twelve (12) Claimants in this Class, with Claims
totaling Three Hundred Thirteen Nine Hundred Sixty One Dollars
and 80/100 ($313,961.80), without giving effect to any Claimant who
may elect to paid pursuant to Class 4(a) or Claims that maybe become
subject to the Objection Procedure, which are summarized as follows:
===============================================================================
SUMMARY OF UNSECURED CREDITORS WITH CLAIMS
OF MORE THAN ONE THOUSAND DOLLARS
- -------------------------------------------------------------------------------
Name of Creditor Amount Scheduled Proof of Election To
Claims Shares Of
Common Stock
- -------------------------------------------------------------------------------
Alan R. Turam /1 $ 2,883.00 2,883
Alverson Taylor /2 5,500.00 5,500
Cavell, Mertz & Perrymen /3 7,237.50 $ 7,237.50 7,238
Hybird Networks, Inc. 134,668.00 134,668
ISP Alliance /4 22,047.00 0.00
Mobile Wireless Partners 90,000.00 90,000
Monte Julius 10,400.00 10,400
Pepper & Corazzini /5 5,457.35 2,500.00 2,500
- -----------------------------
/1 The Debtor has objected to this Claim as being excessive.
/2 The Debtor has objected to this Claim as being excessive.
/3 The Debtor has objected to this Claim as being excessive.
/4 The Debtor, in furtherance of its present business activities purchased a
24 bank router. During the course of the transaction the vendor from whom ISP
Alliance was purchasing the equipment ran a two for one special. The effect
of that transaction was to extinguish the Claim of ISP Alliance in the amount
of $22,047.00.
/5 By written agreement between the Debtor and the Claimant the Allowed
Unsecured Claim has been reduced to $2,500.00.
22
<PAGE>91
===============================================================================
SUMMARY OF UNSECURED CREDITORS WITH CLAIMS
OF MORE THAN ONE THOUSAND DOLLARS
- -------------------------------------------------------------------------------
Name of Creditor Amount Scheduled Proof of Election To
Claims Shares Of
Common Stock
- -------------------------------------------------------------------------------
[S] [C] [C] [C]
Rosenman & Collin /1 25,212.00 18,500.00 1,850
Tower Associates, Inc. /2 7,356.60 7,357
Two-Way Communications /3 1,698.50 1,699
Water, McPherson, McNeil /4 1,901.93 1,902
==================================================
TOTAL $314,361.80 245,797
===============================================================================
</ TABLE>
(a) Election To Receive Common Stock. Each Claimant within this
Class 4(b) shall have the option of receiving shares of
Common Stock in the Reorganized Debtor in lieu of the cash
payment provided for herein. Upon such election such
electing Claimant shall have the right to receive one (1)
share of Common Stock in the Reorganized Debtor for each
One Dollar and 00/100 ($1.00) of Allowed Claim within this
Class. Such election must be made at the time the
Unsecured Creditor casts his ballot on the Plan.:
(b) Election To Reduce Claims To One Thousand Dollars. Unsecured
Creditors whose Claims fall within this Class 4(b) have
the option of being included in Class 4(a) to be paid in
full, pursuant to the terms of payment set forth in Class
4(a), by reducing their Claim to One Thousand Dollars and
00/100 ($1,000.00). Such election must be made at the
time the Unsecured Creditor casts his ballot on the Plan.:
(c) Impairment. The Allowed Unsecured Claims of Creditors in
this Class are Impaired as that term is defined in Section
1124 of the Code. :
(d) Discrimination. The Plan does not discriminate unfairly with
respect to the Allowed Secured Claim of the Claimant,
pursuant to Section 1129(b)(1) of the Code.:
- -----------------------------
/1 By written agreement between the Debtor and the Claimant the Allowed
Unsecured Claim has been reduced to $18,500.00.
/2 The Debtor has objected to this Claim as excessive.
/3 The Debtor has objected to this Claim as excessive.
/4 The Debtor has objected to this Claim as excessive.
23
<PAGE>92
(e) Fair and Equitable. The Plan is Fair and Equitable with
respect to the Allowed Secured Claim of the Claimant as
that term is defined in Section 1129(b) of the Code.:
(f) Discrimination. The Plan does not discriminate unfairly
with respect to the Allowed Secured Claim of the Claimant,
pursuant to Section 1129(b)(1) of the Code.:
Class 5 - Secured Claims
18.9 Class 5(a) - Hayes. The following terms, conditions and
method of payment shall apply to the Allowed Secured Claim
of Hayes:
(a) Interest Rate and Payment. Hayes shall be paid in full, in
cash, on the first day of the first full month following
the Effective Date with interest thereon at the rate of
Nine percent (9%).:
(b) Lien Retention. The Claimant shall retain its Lien on
the real property and all improvements located thereon
and shall retain its lien on the personal property
consisting of tractors and trailers.:
(c) Conditions of Default and Remedies. A failure by the
Debtor to make payment to Hayes, pursuant to the terms
of this Class 4(b) shall be an event of default. The
Debtor shall have fifteen (15) days from receipt of notice
from such Claimant to cure the default. If the default
is not cured within the fifteen (15) day period, the
Claimant may (a)accelerate its Allowed Secured Claim to
be immediately due and owing and/or (b) pursue any and all
available state and federal rights and remedies. The
Debtor is permitted to cure a default once.:
(d) Discrimination. The Plan does not discriminate unfairly
with respect to the Allowed Secured Claim of the Claimant,
pursuant to Section 1129(b)(1) of the Code.:
(e) Fair and Equitable. The Plan is Fair and Equitable with
respect to the Allowed Secured Claim of the Claimant as
that term is defined in Section 1129(b) of the Code.:
(f) Impairment. The Allowed Secured Claim of the Claimant is
Impaired as that term is defined in Section 1124 of the
Code.:
18.10 Class 5(b) - Tsoutsas. The following terms, conditions and
method of payment shall apply to the Allowed Secured Claim
of Tsoutsas:
(a) Interest Rate and Payment. Tsoutsas shall be paid in full,
in cash, on the first day of the first full month
following the Effective Date with interest thereon at the
rate of Nine percent (9%).
24
<PAGE>93
(b) Lien Retention. The Claimant shall retain its Lien on the
real property and all improvements located thereon and
shall retain its lien on the personal property consisting
of tractors and trailers.
(c) Conditions of Default and Remedies. A failure by the
Debtor to make payment to Tsoutsas, pursuant to the terms
of this Class 4(b) shall be an event of default. The Debtor
shall have fifteen (15) days from receipt of notice from such
Claimant to cure the default. If the default is not cured
within the fifteen (15) day period, the Claimant may (a)
accelerate its Allowed Secured Claim to be immediately due
and owing and/or (b) pursue any and all available state
and federal rights and remedies. The Debtor is permitted
to cure a default once.
(d) Discrimination. The Plan does not discriminate unfairly with
respect to the Allowed Secured Claim of the Claimant,
pursuant to Section 1129(b)(1) of the Code.
(e) Fair and Equitable. The Plan is Fair and Equitable with
respect to the Allowed Secured Claim of the Claimant as
that term is defined in Section 1129(b) of the Code.
(f) Impairment. The Allowed Secured Claim of the Claimant is
Impaired as that term is defined in Section 1124 of the
Code.:
Mechanics and Implementation of the Plan
19. Means For Execution of the Plan. The Proponent of the Plan provides
the following means for the execution of the Plan:
19.1 Reinvestment of Property. On Confirmation, the Reorganized Debtor
shall be reinvested with the Property of its Estate, subject only
to the terms of the Plan and the Liens of the Secured Creditors
described herein:
19.2 Cash Payments. Beginning on the Effective Date, the Reorganized
Debtor shall, from time to time, deliver to the Disbursing Agent
sufficient cash for the benefit of Creditors and other parties in
interest to satisfy the cash payments required under the Plan.
See "Section 18 - Treatment and Distributions to Creditors Under The
Plan," page 16.
19.3 Source of Funds - Certificates of Indebtedness and Future Earnings.
The source of funds is the sale of the Certificates Of Indebtedness
and the future operations of the Reorganized Debtor. See "Section
18.4 - Class 1(c) - Certificates Of Indebtedness," page 18, and
"Section 12 - Future Income and Expenses Under the Plan," page 7:
Feasibility of the Plan.
20. Feasibility. The following Sections describe the feasibility of this Plan
Of Reorganization as proposed by the Debtor:
25
<PAGE>94
20.1 Forecasts. Reference is made to Section 12 - Future Income and
Expenses Under the Plan, page 7 for a list of the Financial
Forecasts attached to this Disclosure Statement.
20.2 Future Business Activity of the Reorganized Debtor. The directors
committee of the Debtor believes that the business plan developed
for the Reorganized Debtor will realize a substantial profit and
that there will be no necessity for any further reorganization
proceedings. See "Section 12 - Future Income and Expenses Under
the Plan," page 7.
20.3 No Further Reorganization Proceedings. It is the opinion of the
directors committee of the Debtor that the sale of the Certificates
Of Indebtedness will generate sufficient working capital for the
Reorganized Debtor to implement the Reorganized Debtor's business
plan, which will in turn generate substantial profits. The
directors committee of the Debtor is of the opinion that no further
reorganization proceedings will be necessary and that Reorganized
Debtor will be able to compete successfully in the market place.
Bar Date
21. Time Period for Filing Claims. The list of Creditors filed in this case
by the Debtor shall constitute the filing of a Claim by each Creditor
which is not listed as disputed, contingent or unliquidated as to
amount. However, the Debtor reserves the right to object to any such
Claim where it appears that the amount scheduled by the Debtor is
improper or where there is some dispute with regard to that Claim. All
other Creditors, or Creditors who disagree with the amounts as
scheduled by the Debtor, must file a Claim by the Bar Date, January 19,
1998, unless a separate Bar Date applies for the rejection of executory
contracts and unexpired leases under the Plan or where there exists
deficiency claims arising out of the abandonment of collateral to
previously Secured Creditors or as a result of the granting an order
for relief from the provisions of Section 362 of the Code or a Final
Order pursuant to Sections 506(a) of the Code or Section 1111(b) of the
Code or the Claimant is a Governmental Unit.
Claims Allowance Procedure
22. Claims Allowance Procedure and Conditions to Distribution. The following
terms and conditions are conditions precedent to the right of a
Creditor to receive distributions under the Plan:
22.1 Objections to Claims. All references to Claims and amounts
of Claims refer to the amount of the Claim as allowed by
the Court, an Allowed Claim. The Debtor, or any party in
interest who wishes to object to a Claim, must object to
such Claim within one hundred eighty (180) days after the
Effective Date in order to have the Court determine the
amount allowed to be paid under the Plan. Upon
application filed within such one hundred eighty (180) day
period, if cause is shown, the Court may extend such
period for a time reasonable under the circumstances. If
no objection is filed within the time so limited to the
allowance of any Claim, such Claim shall become an Allowed
Claim. See "Section 28 - Retention of Jurisdiction by the
Court," page 33.
22.2 No Distribution Until Objection Resolved. If the Debtor, or
another party in interest, files an objection to a Claim,
no payment shall be made on such Claim until the dispute
is resolved by the Court pursuant to a Final Order. If
any Claim, or a portion thereof, is challenged by
objection, the Debtor or the Disbursing Agent shall
segregate and set aside funds consistent with this Plan Of
26
<PAGE>95
Reorganization, sufficient to satisfy the Claim as filed,
or as scheduled by the Debtor as set forth in the
preceding Section 22.1 - Objections To Claims. When an
objection to a Claim has been resolved, distribution shall
be made accordingly. If the Court determines that the
Debtor is obligated on any such Claim, such Claim shall be
paid in accordance with the terms herein as allowed by the
Court. Such Creditor shall then be paid pursuant to the
terms set forth in Section 12 - Treatment and Distributions to
Creditors Under the Plan, page 9 of this Plan Of Reorganization
And Disclosure Statement. Such payment or payments shall constitute
full satisfaction and discharge of each of such Claims.
22.3 Deficiency Claims. Unsecured Creditors whose Claims arise
out of a deficiency resulting from the abandonment of
collateral to a previously Secured Creditor, or resulting
from Orders granting relief from the provisions of Section
362 of the Code, must file their Claims within thirty (30)
days after Confirmation of this Plan Of Reorganization.
Unsecured Creditors whose Claims arise out of an Order
issued pursuant to Section 506(a) or 1111(b) of the Code
must file their Claims by the later of the Bar Date or
thirty (30) days after the entry of the Section 506(a) or
Section 1111(b) of the Code Final Order to be included in
Class 3.
22.4 Other Claims, Including Amendment to Claims. All Claims not
allowed or filed prior to Confirmation, including post-petition
Claims, and not previously barred by prior Order and not covered
by the preceding two (2) Sections, shall be barred if not filed on
or before thirty (30) days after Confirmation, including Claims, or
amendments to Claims and/or applications for compensation arising
under Sections 330, 503 or 506 of the Code, unless the Bar Date
shall not have expired in which event the later of the two
(2) dates shall apply.
22.5 Performance of Obligations. Any entity, including a Creditor,
which has not, within the time provided in this Plan Of
Reorganization And Disclosure Statement or any Final Order of the
Court, performed any material act acquired in this Plan Of
Reorganization And Disclosure Statement or any Final Order of the
Court, shall not be entitled to participate in any distribution under
this Plan Of Reorganization.
22.6 Surrender and Cancellation of Debt Instruments. No holder of
a promissory note, bond, payment guaranty or security
agreement (collectively referred to as "instruments")
shall receive any distribution under this Plan Of
Reorganization until such instrument has been surrendered
to, or satisfactory evidence of loss has been provided to,
the Debtor and the holder has filed a UCC-2 with the
Secretary of State of the State of Alabama. No holder of
a judgment lien or notice of lis pendens shall receive any
distributions under the Plan until such Lien or notice of
lis pendens has been released or removed. Any holder of an
instrument that fails to surrender such instrument or
provide satisfactory evidence of loss thereof within
twelve (12) months after the Effective Date shall be
deemed to have no further Claim against or in the Debtor,
and shall receive no distribution under this Plan. Any
such distribution which otherwise would have been made to
such holder will thereafter become the unencumbered
property of the Debtor. Other than the Liens for Secured
Creditors specifically set forth in this Plan Of
Reorganization, all mortgages, deeds of trust, security
agreements, judgment liens, notices of lis pendens and
other Liens securing any Claim shall be deemed to have
been relinquished and reconveyed to the Debtor as of the
Effective Date.
27
<PAGE>96
General Terms and Conditions
23. General Terms and Conditions. The following general terms and conditions
apply to the Plan:
23.1 Reinvestment of Title. On Confirmation, the Debtor shall be
reinvested with the Property of its Estate, subject only
to the terms of the Plan and the Liens of the Secured
Creditors described herein.
23.2 Discharge. The Debts of the Debtor are being discharged
pursuant to the provisions of Section 1141(d) of the Code.
23.3 Preservation of Bankruptcy Causes of Action. Pursuant to
Section 1123(b)(3)(B) of the Code, the Debtor shall retain
each and every claim, demand or cause of action whatsoever
which the Debtor or the Debtor-in-Possession had or had
power to assert immediately prior to Confirmation of this
Plan of Reorganization. Included, without limitation, are
actions for the avoidance and recovery, pursuant to
Section 550 of the Code, of transfers avoidable by reason
of Sections 544, 545, 547, 549 or 553(b) of the Code. The
Debtor may commence or continue in any appropriate court
or tribunal any suit or other proceeding for the
enforcement of the same. Any and all Claims which the
Debtor or the estate of the Debtor may have or which may
arise under any of the provisions of the Code or which may
be enforceable under any of the provisions of the Code or
any other law or statute, including Claims of the Estates,
shall be preserved and the Court shall retain jurisdiction
to dispose of such causes of action, including common or
statutory law causes of action unrelated to bankruptcy,
pursuant to Section 1123(b)(3)(B) of the Code. All such
causes of action shall belong to the Debtor as part of the
Property of such Debtor. To the extent any cause of
action shall be non-transferable to the Debtor, the Debtor
shall prosecute such causes of action for the benefit of
the estate. Any recovery of such non-transferable causes
of action shall be distributed as the Court finds is fair
and equitable.
23.4 No Additional Charges. Except as expressly stated in this
Plan, or as allowed by Court Order, no interest, penalty,
late charge or additional charges (such as attorneys fees)
shall be allowed on any Claim subsequent to the Filing
Date.
23.5 De Minimis Distributions. Notwithstanding anything to the
contrary herein, no distributions of cash shall be made
hereunder in an amount less than Ten Dollars ($10). All
cash not distributed pursuant to this provision shall vest
in the Debtor, free of any Claim.
23.6 Securities Laws. Any satisfaction provided to any Creditor
or other party in interest pursuant to this Plan which may
be deemed to be a security, is exempt from registration
under certain state and federal securities laws pursuant
to Section 1145 of the Code. Absent registration or
another exemption from the requirements of registration
pursuant to the Securities Act of 1933, as amended, and
any applicable State Securities Law, the subsequent
transfer of any such securities is not so exempt.
23.7 Securities Law Compliance. The Reorganized Debtor will not
be a reporting company and therefore has not filed a
report with the Securities and Exchange Commission
pursuant to the requirements of Section 13 and/or 15(d) of
28
<PAGE>97
the Securities Exchange Act of 1934, as amended. The
Reorganized Debtor, after the Effective Date, intends to
seek to be listed on the NASD Electronic Bulletin Board by
filing a report on form 15(c)(2)(11). Although not
initially required, the Reorganized will be required to
meet certain financial statement requirements in order to
continue such listing, if granted, including certified
audits of its financial condition. There can be no
assurance that the Reorganized Debtor will obtain a
listing, or if a listing is obtained, that such listing
will be kept current.
23.8 Representations of Acquiring Shareholders in the Reorganized
Debtor. In order to meet certain FCC requirements concerning the
acquisition of licenses any entity that either is (i) acquiring
five percent (5%) or more of the Common Stock of the Reorganized
Debtor or (ii) the right to acquire five percent (5%) or more the
Common Stock of the Reorganized Debtor must disclose and represent
to the Reorganized Debtor the following facts:
(a) FCC License. Has such person had any FCC station license or
permit revoked or had any application for permit, license
or renewal denied by the FCC.
(b) Monopoly. Has any court finally adjudged such person guilty
of unlawfully monopolizing or attempting unlawfully to
monopolize radio communication, directly or indirectly,
through control of manufacture or sale of radio apparatus,
exclusive traffic arrangement, or other means of unfair
methods of competition.
(c) Criminal Acts. Has such person ever been convicted of a
felony by any state or Federal court. Has such person
been convicted of a crime for which the penalty imposed
was a fine of $500.00 or more, or an imprisonment of six
months or more. Has such person been finally adjudged
guilty as above stated.
(d) Pending Matters. Is such person presently a party in any
matter referred to in items (b) and (c).
(e) Other Stations. Is such person, either directly or
indirectly, through contract or otherwise, currently
interested in the ownership or control of any other radio
station licensed by the FCC.
(f) Foreign Government. Is such person a representative of an
alien or of a foreign government.
(g) Other Ownership. Has such person in the past fifteen years
been directly or indirectly interested in the ownership or
control of any radio stations other than those referred to
above.
(h) MDS or MMDS. Is such person directly or indirectly
interested in or affiliated with, or has leasing
arrangements with a cable television company.
(i) Corporation. If such person is a corporation answer the
following:
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<PAGE>98
(1) Ownership. Is more than one-fifth of capital stock
owned of record or may it be voted by alies or
their representatives or by a foreign government
or representatives thereof, or by any corporation
organized under the laws of a foreign country.
(2) Directors. Is any director or officer an alien.
23.9 Closing the Case. At such time as the Case has been fully
administered, that is, when all things requiring action by
the Court have been done, pursuant to Section 350 of the
Code, and this Plan has been Substantially Consummated,
pursuant to Section 1101(2) of the Code, this case shall
be closed. To close the Case, the Debtor shall file an
application for final decree showing that the Case has
been fully administered and that this Plan has been
Substantially Consummated. The Court shall conduct a
hearing upon the application, after notice to all
Creditors and other parties in interest, after which an
order closing the Case (final decree) may be entered.
23.10 Time Period Within Which to Close Case. The Debtor shall
file an Application For Final Decree within six (6) months
from the date of the Order Confirming Plan.
23.11 Non-Waiver. Nothing in the Plan shall be deemed to waive,
limit or restrict in any way the discharge granted upon
Confirmation of this Plan in Section 1141 of the Code.
23.12 Law Governing Construction. This Plan shall be governed by,
and construed and enforced, including defaults under this
Plan, in accordance with, the laws of the State of Texas
and where applicable the laws of the United States.
Terms and Conditions Applicable to Secured Creditors
24. Terms and Conditions Relating to Secured Creditors. Classes 4(a)
through 4(d) consist of the Secured Claims of all Secured Creditors,
except those Creditors whose collateral has been abandoned to them, or
for which an order for relief from the provisions of Sections 362 of the
Code has been granted as finally allowed and ordered paid by the Court,
and to the extent that such Claims are not greater than the value of
the Debtors' assets which the Court finds are valid security for such
Claims. The following terms and conditions apply to all Creditors
holding Liens against Property of the Estate:
24.1 Preserved Liens. To the extent required under Section 1124(2) of
the Code, to preserve the rights of a Creditor having a Secured
Claim dealt with pursuant to Section 18.9 through Section 18.10,
the Lien of that Creditor shall, to the extent valid, be preserved.
24.2 Release of Liens. Other than the Liens securing the Claims
described in Section 18.9 through Section 18.10 all Liens
securing any Secured Claim shall be deemed to have been
relinquished and reconveyed to the Debtor as of the
Effective Date. Upon payment in full to the Secured
Creditors described in Section 18.9 through Section 18.10,
such Secured Creditors shall execute the documents
necessary to release their Liens securing such property.
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<PAGE>99
24.3 Determination Of Secured Status. The Debtor reserves the
right to commence proceedings to determine a Creditor's
secured status, pursuant to Section 506(b) of the Code,
for a period of one hundred eighty (180) days after the
Effective Date.
24.4 Section 1111(b) Election. If a Claimant is entitled to and
makes an election to be deemed fully secured pursuant to
Section 1111(b) of the Code, then:
(a) Present Dollar Value. The present dollar value of all
payments made on account of such Claim pursuant to this
Plan shall be equal to or greater than the Collateral
Value; and
(b) Total of Payments. The total of all payments made on
account of such Claim pursuant to this Plan shall be equal
to or greater than the Allowed Claim.
(c) Condition to be Satisfied. If the payments called for in the
preceding Section (b) fail to equal the Allowed Claim,
then the monthly payments shall be extended until such
condition is satisfied.
Treatment of Late Charges, Interest,
Penalties, Costs, Fees and Additional Charges
25. Determination of Interest and Other Fees. In determining the amount of
an Allowed Claim of any Creditor, or the amount of payment to be made by
the Debtor to cure defaults under any existing secured notes or
contracts, any interest, penalties, late charges, attorneys' fees or
additional charges of any nature whatsoever accruing after the Filing
Date, shall not be allowed unless (a) such Creditor files a proof of
claim which conforms with Official Bankruptcy Form No. 19 and is titled
"Proof of Claim for Additional Charges" with the Court and serves a
copy of such Claim on counsel for the Debtor (Sidney J. Diamond, Esq.,
Sidney J. Diamond, A Professional Corporation, 5862 Cromo Drive, Suite
100, El Paso, Texas, 79912) within fifteen (15) days after the
Confirmation Date, and (b) such proof of claim specifically describes
the nature and calculation of additional charges incurred by such
Creditor, and, where recovery of attorneys' fees is sought, provides an
itemized fee statement sufficient in detail to comply with the
requirements of the Code and Rules (including Local Bankruptcy Rules Of
Procedure for the Western District of Texas. FAILURE OF ANY CREDITOR
TO TIMELY AND PROPERLY FILE SUCH PROOF OF CLAIM SHALL BE DEEMED A
WAIVER OF ITS CLAIM FOR ADDITIONAL CHARGES AND SUCH CLAIM SHALL BE
DISCHARGED. Upon the filing of such Claim, the Debtor or the
Reorganized Debtor shall have thirty (30) days in which to object to
the allowance of such Claim. If no objection is filed before the
expiration of thirty (30) days following the filing of such a Claim,
the Claim shall be deemed an Allowed Claim and paid pursuant to the
terms of this Plan. In the event that an objection to such Claim is
filed, such Claim be paid only upon allowance of such Claim by the
Court. Objections to Claims, except Claims for additional charges
which are governed by this paragraph 25, may be filed after voting on
and after Confirmation of the Plan pursuant to the provisions of
paragraph 22 hereof.
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<PAGE>100
Executory Contracts and Unexpired Leases
26. Unexpired Leases and Executory Contracts. The Debtor is a party to
certain unexpired leases and executory contracts, pre-petition, not
being assumed by it. The following sections specify the (i) acceptance
and rejection of such leases and contracts and (ii) the cure of any
default of such leases and contracts that are assumed and (iii) the bar
date for the filing of Claims based upon the rejection of such leases
and contracts:
26.1 Rejection. All leases and executory contracts, not previously
assumed by an Order resulting from a Motion To Assume A Lease Or
Executory Contract, of the Debtor are hereby rejected; provided
however, that the Debtor specifically reserves the right, on behalf
of the Debtor, for a period of one hundred twenty (120) days
following Confirmation of the Plan, to assume any such rejected
executory contract or unexpired lease, in which event the
rejection shall be deemed null and void and the Debtor and
the other contracting party shall be deemed bound by the
terms and provisions of the contract involved. Any
damages arising from the rejection of an executory
contract or unexpired lease shall be treated as a Class 3
Claim.
26.2 Cure of Defaults. Upon Confirmation, the Court shall provide
that any contract herein assumed or previously assumed
pursuant to Section 365 of the Code will be in force upon
cure of any defaults requiring cure under Section 365 of
the Code.
26.3 Claims After Rejection. Any Creditor who wishes to assert a
Claim due to the rejection of any executory contract or
unexpired lease must file said Claim with the Court within
thirty (30) days after Confirmation.
26.4 Previously Assumed Leases and Contract. Executory Contracts
and Leases previously assumed by the Debtor shall be
governed by the Orders allowing such assumptions. See
"Section 36.3 - Assumption of Contracts and Leases," page
40.
Satisfaction of Claims and Interests
27. Satisfaction of Claims and Interests. Various Classes of Claims and
Interests are defined in this Plan Of Reorganization. This Plan Of
Reorganization is intended to deal with all Claims against the Debtor
of whatever character, whether or not contingent or liquidated, and
whether or not allowed by the Court pursuant to Section 502(h) of the
Code. However, only those Claims allowed pursuant to Section 502(a) of
the Code will receive distributions under this Plan. All Creditors and
other parties in interest who have or assert Claims in any Class shall,
upon Confirmation of this Plan, be deemed to have acknowledged that
their respective Claims are fully satisfied by the distribution
provided herein, each of which Claims, whether known or unknown,
scheduled or unscheduled, filed or unfiled, asserted or assertable, are
declared and shall be, for all purposes, upon the entry of the Order
Confirming Plan, satisfied in full, pursuant to Section 1141(a) of the
Code. All Impaired Classes of Claims shall receive the distributions
set forth in Section 17 of this Plan Of Reorganization And Disclosure
Statement on account of, and in complete satisfaction of, all such
Allowed Claims (and any interest accrued thereon). Without limiting
the foregoing and effective on the Effective Date, each Creditor (or
its successor) shall be deemed to have assigned to the Debtor all such
Claims and all such parties shall be deemed to have waived,
relinquished and released any and all of their rights, Claims (other
than as provided for in this Plan Of Reorganization And Disclosure
Statement or in the Order Confirming Plan) against the Debtor.:
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<PAGE>101
Retention of Jurisdiction
28. Retention of Jurisdiction by the Court. Subject to the limitations set
forth in this Plan, the Court shall retain jurisdiction, until this
Plan Of Reorganization has been fully administered, for certain
purposes including, but not limited to:
28.1 Claims. The classification of the Claim of any Creditor, and
re-examination of Claims which have been allowed for
purposes of voting, and the determination of such
objections to Claims as may be filed. The failure of the
Debtor to object to, or to examine, any Claim for the
purposes of voting, shall not be deemed a waiver of the
Debtor's right to object to, or re-examine, the Claim in
whole or in part. If a Creditor does not file a Claim in
these proceedings, the Debtor may object to the amount
scheduled as owing to that Creditor, in whole or in part.
If any objection to a Claim is filed, no payment will be
made with respect to such Claim until a determination on
such objection has been made by the Court as provided
elsewhere in this Plan Of Reorganization.
28.2 Title to and Liens Against Assets. Determination of all
questions and disputes regarding title to and Liens on the
assets of the estate and determination of all causes of
action, controversies, disputes or conflicts, whether or
not subject to an action pending as of the date of
Confirmation, between the Debtor and any other party,
including, but not limited to, the right of the Debtor to
recover assets pursuant to the provisions of the Code.
28.3 Correction of Defects. The correction of any defect, the
curing of any omission or the reconciliation of any
inconsistency in this Plan Of Reorganization or in the
Order of Confirmation as may be necessary to carry out the
purposes and intent of this Plan Of Reorganization.
28.4 Modification After Confirmation. The modification of this
Plan of Reorganization after Confirmation pursuant to
Section 1127(b) of the Code.
28.5 Enforcement. The enforcement and interpretation of the terms
and conditions of this Plan Of Reorganization.
28.6 Further Orders. Entry of any Order, including injunctions,
necessary to enforce the title, rights and powers of the
Debtor and to impose such limitations, restrictions, terms
and conditions of such title, rights and powers as the
Court may deem necessary.
28.7 Previous Orders. To enforce all Orders previously entered by
the Court.
28.8 Continuing Jurisdiction. Determination of all issues and
disputes regarding title to Property of the Estate, and
determination of all causes of action, controversies,
duties, or conflicts, whether or not subject to litigation
or proceedings as of Confirmation, between the Debtor and
any other party, including, but not limited to, any right
of the Debtor to recover assets pursuant to the provisions
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<PAGE>102
of the Code, and to enter such order(s) or give such
direction(s) as may be appropriate under Sections 364,
1109, 1129, 1141, 1142 and 1145 of the Code.
28.9 Adversary Proceedings. The Debtor reserves the right to
begin or continue any adversary proceedings permitted
under the Code and the applicable Federal Rules Of
Bankruptcy Procedure.
28.10 Implementation of Plan. Entry of any Order or such direction
as may be appropriate under Section 1142 of the Code for
the purpose of Implementing this Plan Of Reorganization.
28.11 Conclusion. Entry of an order concluding and terminating
this Case, provided, however, the Court shall retain
jurisdiction over any and all adversary proceedings which
may be pending.
The Equity Security Holders Of The Debtor
29. Class 6 - Interests of the Equity Security Holders. The Equity Security
Holders of the Debtor will retain their interests in the Debtor. On
the Effective Date all assets of the Debtor will be transferred to the
Reorganized Debtor and the Reorganized Debtor will assume all of the
obligations under the Plan. Once the Debtor has completed its
obligations under this Plan, which obligations are limited to the
transfer of assets to the Reorganized Debtor and such other activities
as are reasonable necessary to carry out the implementation of the Plan
it shall cease all business activities and the directors committee
shall take whatever steps are reasonably necessary to cause the Debtor
to dissolve under the laws of the State Of Nevada. See "Section 30 -
Transfer Of The Debtor's Assets and Assumption of Liabilities," page
35.
Transfer Of The Debtor's Assets To And Assumption Of Liabilities By The
Reorganized Debtor
30. Transfer of The Debtor's Assets and Assumption of Liabilities. On the
Effective Date the Reorganized Debtor shall acquire all of the assets
of the Debtor and shall assume all of the obligations to be performed
under the Plan pursuant to the Sale and Purchase Agreement. A copy of
such agreement can be obtained from counsel for the Debtor, at no
charge, upon request.:
Purchase Of Licenses From Mobile Wireless Partners
31. Purchase of Licenses From Mobile. Mobile, in February, 1997 purchased
from Ivan C. Nachman licenses granted by the Federal Communication
Commission certain Multipoint Distribution Service Stations for a cash
consideration of Two Hundred Twenty Five Thousand Dollars and 00/100
($225,000.00). Mobile has agreed to sell such licenses to the
Reorganized Debtor upon entry of the Order Confirming the Debtor's Plan
for Two Hundred Twenty Five Thousand Dollars ($225,000.00). The
purchase price will be paid by the issuance of a Certificate Of
Indebtedness issued pursuant to Section 364(c) of the Code, which sale
is exempt from the various securities laws pursuant to Section 364(f)
of the code. The Certificate of Indebtedness will be for a term of two
(2) years, will be secured by the licenses, and will bear interest at
the rate of nine percent (9%) per-annum. The Order Confirming Plan
will contain appropriate provisions authorizing the issuance of the
Certificate Of Indebtedness. The Certificate Of Indebtedness will be
convertible into Three Million One Ninety Four Thousand Sixty Six
(3,194,066) Shares of Common Stock of the Reorganized Debtor and Three
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<PAGE>103
Million Sixty Eight Thousand Sixty Six (3,068,066) Class B Warrants,
which Warrants will entitle the holder to purchase one additional share
of Common Stock of the Reorganized Debtor for each Warrant at One
Dollar and 00/100 ($1.00) a share. Mobile has agreed, if it exercises
the option to convert to Common Stock and Warrants, for a period of one
(1) year following the date issuance of the Common Stock and Warrants,
not to transfer, assign, pledge or otherwise dispose Three Million
Sixty Eight Thousand Sixty Six (3,068,066) shares of the Common Stock,
the warrants and the common stock underlying the warrants, except upon
dissolution of the Partnership and then only to the Partners as part of
the winding up of the affairs of the partnership. A copy of such
agreement can be obtained from counsel for the Debtor, at no charge,
upon request.
ALTERNATIVES TO THE PLAN
32. Liquidation Analysis of the Debtor's Property. In order to arrive at a
judgment on whether or not to vote for or against this Plan Of
Reorganization proposed by the Debtor, a Creditor or other party in
interest needs to have an understanding of the consequences of what
would be realized by the estate of the Debtor if any of the Property of
the Debtor was sold pursuant to another Plan, the Property was sold
pursuant to a motion to sell and the net proceed was available for
distribution, or the case converted to one under Chapter 7 of the Code.
Additionally, in order for the Court to confirm this Plan, it must
find, pursuant to Section 1129(a)(7)(A)(i)(ii) of the Code, with
respect to each impaired class of Claims that each holder of a Claim of
such class (i) has accepted this Plan of Reorganization or (ii) will
receive or retain under this Plan Of Reorganization on account of such
Claim, property of a value, as of the Effective Date of this Plan Of
Reorganization, that is not less than the amount that such holder would
receive under Chapter 7 on such date, which is known as the "Best
Interest Of Creditors Test." The Code further requires that if Section
1111(b)(2) of the Code applies to Claims of a class, each holder of a
Claim of such class will receive or retain under this Plan Of
Reorganization, on account of such Claim, property of a value, as of
the Effective Date of this Plan Of Reorganization, that is not less
than the value of such holder's Interest in the estate's Interest in
the property that secured such Claims, pursuant to Section
1129(a)(7)(B) of the Code:
32.1 Valuation of the Assets. The directors committee of the
Debtor has placed a value of One Million Three Hundred
Eighty Eight Thousand Seven Hundred Sixty Five Dollars and
28/100 ($1,138,765.28) or One Million One Seventy Three
Thousand Two Sixty Five Dollars and 28/100
($1,173,265.28), after deduction for Secured Claims, on
all of the assets of the Debtor. See "Section 16 -
Analysis and Valuation of Property," page 12.
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32.2 Method of Valuation. The following table sets forth the
method of valuation used by the directors committee of the
Debtor in determining the value of the Debtor's assets and
the value arrived at:
===============================================================================
SUMMARY OF VALUATION OF THE DEBTOR'S ASSETS
- -------------------------------------------------------------------------------
TYPE METHOD VALUE
- -------------------------------------------------------------------------------
Personal Property Market $ 379,327.00
Intangible Property Face 999,438.28
===============
TOTAL $1,388,765.28
===============================================================================
32.3 Sale of the Debtor's Assets. The following table estimates
what would be realized by a chapter 7 trustee if the assets of
the Debtor were sold:
===============================================================================
SUMMARY OF LIQUIDATION VALUE OF THE DEBTOR'S PROPERTY
- -------------------------------------------------------------------------------
TYPE VALUE LIENS DISPOSITION NET PROCEEDS
COST
- -------------------------------------------------------------------------------
Personal
Property $ 379,327.00 $200,000.00 $ 40,000.00 $139,827.00
Intangible
Property 999,438.28 100,000.00 899,438.28
===============================================================
TOTALS $1,388,765.28 $200,000.00 $140,000.00 $939,265.28
===============================================================================
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<PAGE>105
32.4 Conversion to Chapter 7. If the Case were converted to one
under Chapter 7 of the Code, and the property liquidated
as set forth in the proceeding Section the proceeds from
such liquidation would be distributed according to the
priorities mandated by the Code. The result of such
conversion are set forth in the following table:
===============================================================================
SUMMARY OF LIQUIDATION ANALYSIS IF CASE WERE CONVERT TO ONE UNDER
CHAPTER 7 OF THE CODE
- -------------------------------------------------------------------------------
Description Amount
- -------------------------------------------------------------------------------
Net Value of Estate $939,365.28
Chapter 7 Cost of Administration 50,000.00
Chapter 11 Cost of Administration 50,000.00
Priority Claims 5,403.00
============
AMOUNT AVAILABLE FOR DISTRIBUTION TO UNSECURED CREDITORS $838,962.28
===============================================================================
</ TABLE>
32.5 Distribution To Unsecured Creditors by a Chapter 7 Trustee.
Based upon the foregoing sections Unsecured Creditors would be paid
in full by a Chapter 7 Trustee.
32.6 Dismissal of Chapter 11 Case. The most significant event that would
occur if the case were dismissed would be that the Debtor would have
failed to honor its commitment to the Federal Trade Commission of
reorganizing by December 31, 1997. The Debtor can not predict if
this deadline can be extended. However, assuming that no extension
is granted by the Federal Communications Commission the failure to
have completed a reorganization by December 31, 1997 would have a
materially adverse impact on the Debtor which would probably include
a loss of the Debtor's licenses to broadcast television signals. In
addition to the foregoing the Debtor may not be able to generate
sufficient funds to pay the two (2) Secured Creditors who would then
be free to foreclose on their security interest in the Debtor's
personal property and intangible property. In the end analysis the
Debtor's business would be so irreparably damaged that it would
probably not be able to carry on any type of business activity and
the unsecured creditors would receive little or nothing.
32.7 Another Plan. The directors committee of the Debtor knows of no
other Plan which is to be proposed to the Court. The directors
committee of the Debtor believes that this Plan Of Reorganization
represents the Debtor's best efforts for repayment to its Creditors.
32.8 Summary. The Plan of the Debtor's represents the best method by
which Creditors would maximize the amounts to be distribution to
them. The Debtor, through its directors committee, has proposed
this Plan and believes that this Plan is the only reasonable avenue
that is appropriate under the existing circumstances.
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RISKS TO CREDITORS UNDER THE PLAN
33. Risk Factors Pertaining to the Debtor. Certain significant risk factors
are inherent in the consummation of any Plan of Reorganization in a
Chapter 11 Case. The successful implementation of the Debtor' Plan is
dependent upon the ability of the management of the Debtor to maintain
a certain level of revenue generated from lease income to service the
cash requirements of this Plan. Certain other risks are inherent to
this Plan, which are:
33.1 Wireless TV. The entire field of television broadcasting by
wireless transmission, other than conventual television
signals, is in a state of flux. The technology has been
increasing at a dramatic rate. The dramatic increase in
technology has brought major competitors into the realm of
television broadcasting via wireless transmission. The
dramatic increase in technology and the enter into the
field by large, well financed competitors may well have a
substantial adverse impact on the Reorganized Debtors
ability to compete.
33.2 New Business Venture. The Plan that has been proposed puts
the Reorganized Debtor into a brand new business venture
using the present licenses owned by the Debtor. This new
venture, the delivery of broadband data to home homes and
small business via the internet, is based upon new
technology. As of the date of this Plan and Disclosure
Statement there are very few entities that have entered
this type of business venture. While it appears that
businesses entering the field have met with customer
acceptance and appear to be successful information
concerning these ventures is very limited and to some
extent based upon conjecture and therefore there can be no
assurance. There can be no assurance that such a venture
will prove to be successful or if successful that such
success by the Reorganized Debtors and other will not
attract larger, more well financed organizations to enter
into the field, which entry may well have an adverse
effect on the Reorganized Debtor's ability to compete
successfully.
33.3 Competition. The Reorganized Debtor will face competition
from other developing technologies, some of which maybe
able to deliver the same service to be offered by the
Reorganized Debtor, as a cheaper prices. As business
opportunities develop the Debtor will probably face
competition from larger, well financed, experienced
business concerns.
LITIGATION
34. Litigation Pertaining to the Debtor. The following Sections detail all
known litigation against the Debtor, whether actually pending or
threatened by the third parties, or pending or contemplated by the
Debtor against a third party:
34.1 Bankruptcy Litigation. No bankruptcy litigation is either
pending or threatened, either for or against the Debtor
except as to Claims objections specifically set forth in
this Plan And Disclosure Statement.
34.2 Non-Bankruptcy Litigation. No non-bankruptcy litigation is
either pending or threatened, either for or against the
Debtor. The Directors Committee of the Debtor has
instructed its counsel to review the Receivership Action
against third parties by the Federal Trade Commission and
the Securities And Exchange Commission to determine
whether or not fees and expenses of the receiver and his
counsel are reasonable under the existing circumstances
and if unreasonable whether or not a portion of those fees
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and expenses can be recovered by the Debtor either in the
United States Bankruptcy Court or another Court of
competent jurisdiction.
TAX CONSEQUENCES
35. Tax Consequences. The following summary describes certain of the
anticipated federal income tax consequences to the Debtor and its
Creditors upon confirmation and consummation of this Plan Of
Reorganization. This summary is necessarily general in nature and does
not describe all of the tax consequences to the Debtor or the Creditors
arising under the Plan. The Debtor has not obtained rulings from the
Internal Revenue Service with respect to any of these matters, and the
anticipated federal income tax consequences are not binding on the
Internal Revenue Service. The following discussion is not intended as
a substitute for professional tax advise, including the evaluation of
recently enacted and pending legislation, in part because the recent
changes in the federal income law and the Code lack authoritative
interpretation. The brevity of the following discussion required
omission of matters which might affect one or more Creditors, depending
upon their individual circumstances. CREDITORS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE CONSEQUENCES TO THEM, UNDER FEDERAL
AND APPLICABLE STATE AND LOCAL TAX LAWS, OF THE CONSUMMATION OF THIS
PLAN OF REORGANIZATION:
35.1 Tax Consequences to the Debtor. The potential tax
consequences to the Debtor fall into two (2) categories
which are (i) the application of the Original Issue
Discount Rule resulting from either an extension of
indebtness over a period of time or (ii) a discharge of
indebtness, either of which could result in recognition of
income by the Debtor. Under this Plan Of Reorganization,
Classes 2, 3, 4(b), 5(a) and 5(b) Creditors will be paid
interest at the rate of ten (10%) percent per annum. All
Creditors will be paid in full plus interest. The
Reorganized Debtor will deduct this interest as an
ordinary and necessary business expense in determining
taxable income. Since the rate of interest is in excess
of the applicable federal rate, the Original Issue
Discount Rules do not apply. In addition, the Debtor will
not recognize any income due to forgiveness of debt, nor,
will any tax attributes of the Debtor be affected.
35.2 Tax Consequences To The Creditors. To the extent that a
Creditor receives or expects to receive less from the
Debtor under this Plan Of Reorganization than the
Creditor's tax basis in the Claim to which such amount
relates, such Creditor may be entitled to claim a bad debt
deduction. The amount and availability of such deduction
will depend, among other things, upon the Creditor's tax
accounting method for bad debts. It should be noted that
if the debt is not business related, the deduction may be
available only if the debt is worthless. To the extent
that a Creditor receives payment pursuant to this Plan Of
Reorganization in an amount in excess of the Creditor's
adjusted tax basis the Claim to which payment relates,
such excess may be income to the Creditor.
35.3 No Opinion. Neither the Debtor, the Reorganized Debtor nor
its counsel or accountant express any opinion that any
Creditor may rely upon as to the tax consequences to any
Claimant under this Plan Of Reorganization. Each Creditor
is urged to consult an appropriate tax advisor.
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SUMMARY OF SIGNIFICANT ORDERS ENTERED IN THE CASE
36. Summary of Significant Orders The following sections describe the
significant Orders entered in this Case:
36.1 Certificates of Indebtedness. Pursuant to a Final Order,
dated October 9, 1997, the Debtor has been authorized to
issue One Million Dollars and 00/100 ($1,000,000.00) in
Certificates Of Indebtedness, which Certificates Of
Indebtedness will be secured by substantially all of the
assets of the Reorganized Debtor, are for a term of two
year, which yields interest at the rate of ten per cent
(10%) and are convertible into Common Stock and Warrants.
See "Section 18.4 - Class 1(c) - Certificates of
Indebtedness," page 17.
36.2 Cash Collateral Orders. The Debtor has entered into two (2)
agreed cash collateral orders with two (2) insiders of the
Debtor, as follows:
(a) Hayes. Hayes has been granted a replacement lien on his
collateral as adequate protection of his Allowed Secured
Claim.
(b) Tsoutsas. Tsoutsas has been granted a replacement lien on
his collateral as adequate protection of his Allowed
Secured Claim.
36.3 Assumption of Contracts and Leases. The Debtor, pursuant to
Final Orders has assumed the following leases and executory
contracts as follows:
(a) TVCN. The assumption of lease for four (4) MMDS
frequencies.
(b) Southern Satellite Systems, Inc. The assumption of an
executory contact for service and distribution agreement
for MMDS frequencies.
(c) Health Partners of Alabama, Inc. Assumption of an executory
contract for group health insurance.
(d) Uunet Technologies, Inc. The assumption of an executory
contract for internet access and equipment.
(e) RTS Max Marketing. The assumption of an executory contract
for service and installation of equipment for the Debtor's
existing retail business.
(f) PVI Sales And Marketing, Inc. The assumption of an
executory contract for the distribution of MMDS Showtime
Channel.
(g) PVI Sales And Marketing, Inc. The assumption of an
executory contract for the distribution of MMDS Movie
Channel.
(h) NACEPF. The assumption of a lease for 4 ITFS Frequencies.
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<PAGE>109
(i) The Weavil Company. The assumption of a lease for the
Debtor's office space.
(j) Pinnacle Towers. The assumption of a lease for a tower
site from which the Debtor broadcasts its signals.
(k) Motorola, Inc. The assumption of a lease for a tower cite
from which the Debtor broadcasts its signals.
(l) ESPN, Inc. The assumption of an executory contract for
distribution of ESPN.
(m) MTV Network. The assumption of an executory contract for
distribution of MTV, Music Television, Nickeloden/Nick At
Nite and VH-1/Video.
(n) World Satellite Network. The assumption of an executory
contract for distribution World Satellite.
(o) Opryland USA, Inc. The assumption of an executory contract
for the Nashville Network.
(p) The Associates Leasing. The assumption of a lease for a
two radios.
DISBURSING AGENT
37. Appointment of Disbursing Agent. The Debtor has appointed Sidney J.
Diamond to act as Disbursing Agent. The Disbursing Agent shall have
the following duties, receive the following compensation and be
discharged of responsibilities as follows:
37.1 Duties of Disbursing Agent. The Disbursing Agent shall
receive, disburse and account to the Court, Creditors,
Interest Holders and other parties in interest for the
cash disbursements and shall be responsible for reviewing
and approving all Claims (all disputes to be resolved by
the Court, keep adequate records of all transactions,
receipts and disbursements, communicating with and
advising all Creditors, Interest Holders and other parties
in interest as needed, and such other duties as may be
consistent with the responsibilities of a Disbursing
Agent.
37.2 Fees and Expenses of Disbursing Agent. The Disbursing
Agent's fees for all services to be rendered pursuant to
this Plan are part of the "flat fee" counsel for the
Debtor has agreed to accept in this case, however the
disbursing agent shall be entitled reasonable
disbursements, and shall be paid pursuant to Class 1(a) -
Professional Fees.
37.3 Termination of Disbursing Agent's Duties. The entry of a
Final Decree shall discharge the Disbursing Agent.
Thereafter, the Debtor shall make all payments required
under this Plan Of Reorganization.
RESERVATION OF RIGHTS
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38. Reservation of Rights. The filing of this Plan Of Reorganization And
Disclosure Statement, nor any statement or provision contained in this
Plan Of Reorganization And Disclosure Statement, nor the taking by a
Creditor or other party in interest of any action with respect to this
Plan Of Reorganization And Disclosure Statement shall (a) be or be
deemed to be an admission against interest, or (b) until the Effective
Date, be or be deemed to be a waiver of any rights that any Creditor or
other party in interest might have against the Debtor or any Property
of the Estates, as that term is defined in Section 541 of the Code, or
any other Creditor or other party in interest of the Debtor, and until
the Effective Date all such rights are specifically reserved. In the
event that the Effective Date does not occur the Plan Of Reorganization
And Disclosure Statement, nor any statement contained in this Plan Of
Reorganization And Disclosure Statement may be used or relied upon in
any manner in any suit, action, proceeding, or controversy within the
Cases involving the Debtor.
CONCLUSION
39. In Summary. The directors committee of the Debtor has caused this Plan
Of Reorganization And Disclosure Statement to be filed and favors it. No
other option exists that offers any distribution to Unsecured Creditors
more favorable than as proposed by this Plan. Far more will be
realized under the Plan than if the estate of the Debtor was
liquidated.
THE DISCLOSURE STATEMENT
40. The Disclosure Statement. The following Sections describe the purpose,
requirements and the process utilized by the Court in approving or
denying the use of this Disclosure Statement in soliciting votes of
holders of Claims for approval of this Plan:
40.1 Purpose of this Disclosure Statement. The directors committee
of the Debtor has prepared and caused this Disclosure Statement to
be filed on behalf of the Debtor for the Court's approval and for
submission to the holders of Claims with respect to the Debtor and
their assets. The purpose of this Disclosure Statement is to
provide the holders of Claims against the Debtor with adequate
information about the Debtor so that each holder of a Claim may
make an informed judgment about the merits of the Plan, and decide
whether to accept or reject the same.
40.2 Requirements of a Disclosure Statement. The Code requires
that this Disclosure Statement contain "Adequate
Information." The definition of "Adequate Information"
refers to information of a kind, and in sufficient detail,
as far as is reasonably practical in light of the nature
and history of the debtors and the conditions of the
debtor's books and records, that would enable a
hypothetical reasonable investor, typical of holders of
claims or interests of the relevant class, to make an
informed judgment about a plan of reorganization, but
adequate information need not include such information
about any other possible or proposed plan of reorganization.
Chapter 11
41. Chapter 11. The following Sections explain, in general terms, Chapter 11
of the Code:
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41.1 How a Chapter 11 Case is Started and by Whom. A Chapter 11
case may be filed "voluntarily" by a debtor or may be
filed "involuntarily" against a debtor by an unsecured
creditor(s) and, in some cases, by a secured creditor(s).
The number of creditors necessary to commence an
involuntary case depends primarily upon the number of
creditors that a debtor has. The usual purpose of a
Chapter 11 filing is to enable a business to continue in
operation despite its temporary inability to meet its
obligations to creditors as they become due. However, a
Chapter 11 proceeding might also be filed for the sole
purpose of closing a business and liquidating its assets.
41.2 Who may be a Chapter 11 Debtor. While most Chapter 11
debtors are corporations, partnerships and individuals
also may be debtors under Chapter 11. Although nearly all
of the debtors who file a bankruptcy case are, in fact,
unable to pay their debts as they become due, there is no
requirement that the debtor be in any particular financial
condition in order to file a case. A debtor may file a
Chapter 11 case even though the value of the debtor's
assets exceeds the amount of the debtor's liabilities and
even though none of the debtor's obligations are in
default.
41.3 What a Chapter 11 Accomplishes Initially. The filing of a
Chapter 11 petition automatically stays all entities from
any further efforts to collect their debts or enforce
their liens until the stay is lifted by the Court or
expires. In a Chapter 11 case, the debtor is the only
possible proponent of a plan of reorganization during the
initial one hundred twenty (120) days of the case unless
certain special conditions are met (appointment of a
trustee) or the one hundred twenty (120) day period is
reduced (unless the Court extends it). At the conclusion
of the one hundred twenty (120) day period, any party in
interest may propose a plan of reorganization. Once a
plan of reorganization has been filed by a debtor, within
such period, or if such period has expired and the
debtor's disclosure statement has been approved by the
Court, no other plan of reorganization may be submitted
to creditors until additional time has expired for
acceptance of that plan of reorganization.
41.4 Debt Adjustment. Chapter 11 permits the adjustment of
secured claims, unsecured claims and equity claims or
interests. A Chapter 11 plan of reorganization may
provide less than full satisfaction of senior indebtedness
and payment of junior indebtedness or may provide for
return to equity owners, absent full satisfaction of
indebtedness, so long as no impaired class votes against
the plan of reorganization.
The Process of Confirming a Plan of Reorganization Under Chapter 11
42. The Confirmation Process. The following Sections explain the process of
confirming a plan of reorganization under Chapter 11:
42.1 Voting. The following Sections explain the voting requirements
under Chapter 11:
(a) Requirements of Voting. A Creditor or Interest Holder, in
order to vote on the Plan, must have filed a proof of
claim with the Court prior to the Bar Date, unless that
Creditor or Interest Holder was scheduled by the Debtor as
not disputed, not liquidated and not contingent. Any
Creditor or Interest Holder scheduled as not disputed, not
liquidated and not contingent is, to the extent scheduled,
deemed to have filed a Claim and, absent objection, such
Claim is deemed allowed.
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(b) Importance of Voting. As a Creditor, your vote is important.
The Plan can be confirmed by the Court if it is accepted
by the holders of two-thirds (2/3) in amount and more than
one-half (1/2) in number of Claims voting on the Plan in
each Class of Claims and by the holders of two-thirds (2/3)
in amount of Interest voting on the Plan in each Class of
Interests. In the event the requisite acceptances are not
obtained, the Court may nevertheless confirm the Plan if
one "impaired class" votes for Confirmation and if the
Court finds that the Plan does not "discriminate unfairly"
and accords "fair and equitable treatment" to the Classes
rejecting it.
(c) Fill in Ballots Properly. Each Creditor and other parties
in interest are urged to fill in, date, sign, and promptly
mail the enclosed Ballot which is furnished to you. Be
sure to properly complete the form and legibly identify
the name of the Claimant.
(d) Parties Bound. Whether a Creditor votes on the Plan or not,
such Creditor will be bound by the terms and treatment set
forth in the Plan, if the Plan is accepted by the
requisite majorities of Classes of Creditors and is
confirmed by the Court. Absent some affirmative act
constituting a vote, such Creditor will not be included in
the tally. Allowance of a Claim for voting purposes does
not necessarily mean that all or a portion of the Claim
will be allowed for distribution purposes.
(e) Solicitations. The Debtor, or others, might solicit your
vote. The cost of any solicitation by the Debtor will be
borne by the Debtor.
42.2 Confirmation of a Consensual Plan of Reorganization. A plan
of reorganization may be confirmed in one of two ways.
The first is with the approval of creditors by their
affirmative vote for confirmation, provided that certain
conditions have been complied with, which is known as the
confirmation of a consensual plan of reorganization. The
second method is over the opposition of one or more
classes of creditors, which is known as the "cramdown"
confirmation of a plan of reorganization. In either event,
the plan of reorganization proponent must have sought and
obtained approval of a disclosure statement from which the
proponent has sought to solicit the votes of creditors and
interest holders. The Court can confirm a plan of
reorganization, assuming all other requirements are met,
if two-thirds (2/3) in amount and more than one-half (1/2) in
number of the allowed claims of each impaired class of
claims and more than two-thirds (2/3) in amount of the
allowed interests of each impaired class of interest votes
affirmatively for a plan of reorganization. The following
Sections explain the general requirements that must be met
in order for a debtor to confirm a plan of reorganization
consensually.
(a) Compliance With the Bankruptcy Code. The plan of
reorganization must comply with the applicable provisions
of the Code. These provisions mean that the plan of
reorganization must not only meet the requirements of the
confirmation section of the Code but must also comply with
the other relevant Sections of the Code, such as claim
classification and the contents of the plan of
reorganization.
(b) Claim Classification. Probably the most important
provisions of Chapter 11, outside of the requirements of
the confirmation section of the Code, which must be met,
are those relating to classification. Claims in particular
classes must be substantially similar to the other claims
of the class, with the modest exception that a separate
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class of claims based on the size of the claims can be
created for administrative convenience.
(c) Contents of the Plan of Reorganization. The plan of
reorganization must provide the same treatment for each
claim of a particular class, absent consent to less
favorable treatment by the holder of a particular claim.
There are certain formalities that a plan of
reorganization must adhere to under the Code. Among
others, the plan of reorganization must designate classes
and specify whether or not classes are impaired, and their
treatment if they are impaired. The plan of
reorganization must also provide adequate means for its
execution.
(d) Compliance by Plan of Reorganization Proponent. The
proponent of a plan of reorganization must comply with
the applicable provisions of Chapter 11. An important
provision by which the proponent is bound is the ban on
post-petition solicitation of the plan of reorganization
unaccompanied by a written disclosure statement approved
by the Court. A failure to abide by the ban would result
in a disqualification of the acceptances, but would not
necessarily preclude confirmation.
(e) Plan of Reorganization Must be Proposed in Good Faith and
Not by Any Means Forbidden by Law. The Code precludes
confirmation of the plan of reorganization that is not
proposed in good faith. Good faith means that a plan of
reorganization has a reasonable likelihood of achieving a
result consistent with the objectives of the Code. The
Code refuses to use acceptances or rejections which are
not in good faith as a basis for denial of confirmation of
a plan of reorganization. Instead, the Court, at the
request of a party in interest and after notice and a
hearing, "may designate any entity whose acceptances or
rejection of such plan of reorganization was not in good
faith." If the Court makes such a designation, then an
acceptance or rejection by that entity is not counted.
The Code precludes confirmation if the plan of reorganization
is proposed "by any means forbidden by law." By referring to
"law" rather than the "Act or Title 11," the Code broadens
the scope of this prohibition and encompasses such statutes
as those which, among other things, make it a crime to
knowingly and fraudulently give, offer, receive or attempt
to obtain any money or property, remuneration, compensation,
reward, advantage or promise for acting or forbearing to act
in any bankruptcy case.
(f) Approval of Services and Expenses. Payments made or promises
given for services and expenses in or in connection with
the case or plan of reorganization or incident to the case
must be disclosed to the Court, if such payments are made
or promised by the plan of reorganization proponent, by
the debtor, or by a person issuing securities or acquiring
property under the plan of reorganization. The Court
cannot confirm a plan of reorganization absent such a
disclosure. The Code, however, goes beyond conditioning
confirmation on disclosure; the pre-confirmation payments
must have been approved by the Court as reasonable and any
payments after confirmation are subject to the approval of
the Court as reasonable.
(g) Approval by Regulatory Authorities. If the Debtor's rates
are subject to regulatory approval, then the rates
contained in the plan of reorganization must have either
been approved by such regulatory authority or be subject
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to the approval of the regulatory authority.
(h) The "Best Interest of Creditors" Test. If unanimous
agreement is achieved, the Court may confirm a plan of
reorganization which is accepted by each class of claims
impaired under the plan of reorganization. Only the
holders of claims actually voting are counted in determin-
ing class acceptance. However, the Court must find that
each holder of a claim of the class will receive not less
than the holder would receive if the debtor was liquidated
under Chapter 7 of the Code, which is known as the "Best
Interest of Creditors" test. Therefore, if there is no
dissenting class, the test for approval by the Court of a
Chapter 11 plan of reorganization (i.e. Confirmation) is
whether the plan of reorganization is in the best interest
of creditors. In simple terms, a plan of reorganization
is considered by the Court to be in the best interest of
creditors if the plan of reorganization will provide a
better recovery to the creditors than they would obtain if
the debtor were liquidated and the proceeds of liquidation
were distributed in accordance with the bankruptcy
liquidation (Chapter 7) priority. Therefore, if the plan
of reorganization provides creditors with money or other
property of a value exceeding the probable dividend in a
liquidation bankruptcy, then the plan of reorganization is
in the best interest of creditors. The Court, in
considering this factor, is not required to consider any
alternative to the plan of reorganization other than
liquidation bankruptcy.
(i) Priority Claims. The Code prescribes the priority of claims
that is applicable to reorganization as well as
liquidation. Generally speaking, priority is afforded
administrative expenses, claims arising during the "gap
period," wage and related claims, employee benefit
contributions, consumer deposits, taxes and customs
duties. These priority claims must be paid in either
deferred cash payments with interest, if such classes vote
for acceptance of the plan of reorganization, or in cash,
with the exception of tax claims which may be paid over a
period of six (6) years, with interest from the date of
assessment.
(j) Feasibility. The Code requires as a condition of
confirmation "that confirmation of the plan of
reorganization is not likely to be followed by the
liquidation, or the need for further financial
reorganization, of the debtor or any successor to the
debtor under the plan of reorganization, unless such
liquidation or reorganization is proposed in the plan of
reorganization." The Code excepts from this condition a
plan of reorganization which proposes liquidation; in
addition, a reorganization proposed in the plan of
reorganization is excluded. In considering feasibility,
i.e., that confirmation is not likely to be followed by
liquidation or further reorganization, the Court is only
required to determine whether the plan of reorganization
can be fulfilled by the debtor. This entails
determining:
(1) Available Cash. The availability of cash for
payments required at confirmation;
(2) Future Cash. The ability of the debtor to generate
future cash flow sufficient to make payments
called for under the plan of reorganization and
to continue in business; and
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(3) Absence of Other Factors. The absence of any other
factor which might make it impossible for the
debtor to accomplish that which it promises to
accomplish in the plan of reorganization or to
continue its existence as contemplated in the
plan of reorganization.
(k) Determination That the Plan of Reorganization Has Been
Accepted. In the event a class is unimpaired, it is
automatically deemed to accept the plan of reorganization.
A class is unimpaired, in essence, if (1) its rights after
confirmation are the same as what existed (or what would
have existed absent defaults) before the commencement of
the Chapter 11 case and any existing defaults are cured or
provided for and the class is reimbursed actual damages;
or (2) the allowed claims of the classes are paid in full
in cash as though matured. In determining whether a class
has accepted, for purposes of satisfying this condition of
confirmation, the vote of an insider is disregarded.
Therefore, if there are insiders who have voted in one or
more classes, not only do all classes of claims have to
accept the plan of reorganization, but a further condition
exists that requires one of such classes to have voted in
favor of the plan of reorganization, after disregarding
the votes of such insiders. An insider is broadly defined
under the Code and includes, where the debtor is a
corporation, officers, directors, and persons in control,
as well as their relatives. If a debtor is an individual,
the definition of insider includes relatives. If the
debtor is a business, insider includes the equity security
holders, and relatives of the equity security holders and
persons in control. Control is not defined, but at a
minimum, it encompasses management and those in a position
to elect management.
42.3 Confirmation of a Non-Consensual Plan of Reorganization.
The Court may confirm a plan of reorganization where there
is a negative class vote if the plan of reorganization meets
all of the other requirements of confirmation, and at
least one impaired class of claims has accepted the plan
of reorganization: the plan of reorganization "does not
discriminate unfairly," and is "fair and equitable," with
respect to each class of claims that is impaired under,
and has not accepted, the plan of reorganization.
Therefore, if an impaired class votes against the plan of
reorganization, this does not necessarily make
implementation of the plan of reorganization impossible,
so long as the plan of reorganization does not discrimi-
nate unfairly and is fair and equitable, in that the class
is afforded certain treatment defined by the Code. That
certain treatment may be very broadly defined as providing
to a creditor the full value of his claim. That value is
determined by the Court and balanced against the treatment
afforded the dissenting class of creditors. If the latter
is equal to or greater than the former, the plan of
reorganization may be confirmed over the dissent of that
class, depending on treatment of junior claims. This
type of confirmation of a plan of reorganization is known
as the "cramdown." Cramdown is a colloquial term for
confirmation of a plan of reorganization over the dissent
of a class of claims. A plan of reorganization proponent
must request a cramdown, as the Court cannot consider this
alternative on its own motion. In the alternative, if
there is a dissenting class of claims, the Court can
confirm a plan of reorganization if the proponent of the
plan of reorganization so requests and the Court finds
that all requirements, other than all classes consenting,
are met and the plan of reorganization "does not
discriminate unfairly," and is "fair and equitable" with
respect to each class of claims or interest that is
impaired under, and has not accepted, the plan of
reorganization.
(a) Secured Creditors and the Cramdown. In order to be
fair and equitable to a dissenting impaired class of
secured claims, a plan of reorganization must satisfy
one of three (3) alternative prerequisites. A dissenting
class of secured claims will be considered not to have
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received fair and equitable treatment under the plan of
reorganization unless one of the alternative means is
met. The following Sections explain how a plan of
reorganization may be confirmed over the objection of
secured creditors.
(b) Cash Out - An Alternative to Cramdown. Another means of
dealing with a dissenting, secured creditor, other than
cramdown, is to provide in the plan of reorganization that
the secured creditor will be "cashed out." This is so
because a secured creditor is not considered to have its
rights impaired if the plan of reorganization provides
that, on the effective date of the plan of reorganization,
the holder of such claim receives, on account of such
claim, cash equal to the allowed amount of such claim.
The result are that the secured creditor is deemed to
accept the treatment and the cramdown requirements need
not be met. Under Section 506(a) of the Code, "an allowed
claim" of a creditor secured by a lien on property in
which the estate has an interest, or that is subject to
set-off under Section 553 of this title, is an allowed
secured claim to the extent of the value of such
creditor's interest in the estate's interest in such
property, or to the extent of the amount subject to set-off,
as the case may be. It is an unsecured claim to the
extent that the value of such creditor's interest or the
amount so subject to set-off is less than the amount of
such "allowed claim." If the value of the collateral is
less than the claim, then the secured claim is limited to
the value of the collateral. If the holder of the secured
claim is paid that amount, there is no impairment and the
result is that the secured creditor, at least as far as
the secured claim is concerned, "is deemed to have
accepted the plan of reorganization." The efficacy of the
"cash out" is destroyed, however, by the Code provision
which allows the holder of a secured claim or a class of
secured claims to elect to have an under-collateralized
claim treated as totally secured, pursuant to 1111(b) of
the Code. The "cash out" provision can be used in
conjunction with the cramdown in a plan of reorganization
at least to force the under-collateralized secured
creditor to accept cash in the amount of the value of the
collateral and an unsecured claim for the balance or cash
having a present value equal to the value of the
collateral without an unsecured claim. Although the "cash
out" provision has been shifted from the cramdown
provisions of the Code, the result is the same. Secured
creditors can be cashed out regardless of assent. There
is one difference, however; there is a need to set forth
the "cash out" in the plan of reorganization. This is
different than the use of the cramdown power, which can be
requested of the Court and need not be in the plan of
reorganization itself.
(c) Present Value Test. The Code considers it, as one of
the alternative prerequisites, to be fair treatment of a
dissenting class of secured claims if the security is
retained and each holder of a claim receives deferred cash
payments in the allowed amount of the claim. The present
value of the deferred cash payments, measured at the
effective date of the plan of reorganization, must be at
least the value of the security. In most cases, this
means the secured creditor must receive a "market rate of
interest" on the creditor's allowed secured claim. To
summarize, if a holder of a secured claim retains his
lien, he can be paid off over a period of time. He must
receive cash; he cannot, in most cases, receive
reorganization securities or other property. The present
value of the cash to be paid over a period of time must be
at least the value of the security. The retained lien only
secures the "allowed amount of [secured] claims." The
allowed amount of the claim must be determined; if the
secured creditor is over-collateralized, the secured
creditor is also entitled to accruing interests and
reasonable costs that are contained in the contract
between the debtor and the secured creditor. This would be
calculated as of the effective date of the plan of
reorganization. This is also the date for determining the
present value of the deferred payments. However, there is
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no indication in the Code as to what the effective date of
a plan of reorganization is. It is not necessarily the
date of confirmation or substantial consummation. The
plan of reorganization or the order of confirmation will
have to establish an appropriate effective date. An under-
collateralized secured creditor may elect to have its
claim treated entirely as a secured claim, except in cases
where such creditor's interest in the estate's interest in
such property is of an "inconsequential nature," pursuant
to Section 1111(b) of the Code. In contrast to the very
effective protection to the holder of a secured claim who
is to be cashed out, the election is of limited value as
far as the cramdown is concerned, because the present
value of the deferred cash payments need only equal the
value of the collateral. Thus, the plan of reorganization
can be confirmed under the cramdown power, over objection
of the electing under-collateralized secured creditor, if
the creditor receives cash over a period of time, equal to
the present value of the collateral. For example, if the
secured claim is One Thousand Dollars ($1,000) and the
value of the collateral is Five Hundred Dollars ($500),
the holder of the secured claim would be paid the One
Thousand Dollars ($1,000) over an extended period, without
interest or if the proposed payments of Five Hundred
Dollars ($500) plus interest equal or exceed One Thousand
Dollars ($1,000) the cramdown has been accomplished. The
only advantage to the electing creditor is that it will
have a lien securing the full amount of the allowed claim,
so that if the value of the collateral increases after the
case is closed, the deferred payments will be secured
claims. This would be important only if there is a
subsequent insolvency or foreclosure. A question may
arise, in the case of an under-collateralized secured
claim or a secured claim as to which the collateral is not
sufficient to cover ongoing interest whether deferred cash
payments of a present value equal to the amount of the
claim are fair and equitable. If the pre-petition
contractual rate of interest was ten percent (10%), while
the interest rate prevailing at the effective date of the
plan of reorganization is six percent (6%), the holder of
the security will have been given a six percent (6%)
interest bearing obligation for a ten percent (10%)
interest bearing obligation. It is true that there may be
no differential risk, since the same security is retained
but there is a security of a lesser quality. The fact
that the holder of the secured claim ends up with a
different return on his investment is due to the
calculation of the claim based on its liquidation value.
(d) Sale Free and Clear of Lien. Another method of dealing
with a dissenting class of a secured creditor is to sell
the collateral free and clear of the lien, with the lien
to attach to the proceeds. The holder of the secured
claim must also receive deferred cash payment having a
present value of the amount of the proceeds or the
"indubitable equivalent" of its claim secured by the
proceeds. In addition, the holder of the secured claim
may bid at the sale and offset the allowed claim against
the purchase price of the property, in the event that the
holder of the claim purchases the property. If there are
senior and junior secured creditors, secured by the same
collateral, the result of a sale may be to allow the senior
creditors to bid in the property to the exclusion of the
junior creditors. There would be no proceeds, since the
senior creditors will offset their secured claims against
the purchase price. Under those circumstances, simply
because they were unable to bid enough to protect their
position, the junior secured creditors would have no
proceeds to look to and could not otherwise share such
proceeds under the plan of reorganization.
(e) Indubitable Equivalent of a Secured Claim. A third
alternative method of dealing with dissenting secured
creditors is to provide for the realization by the secured
creditors of the "indubitable equivalent" of the secured
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claims. Abandonment of the collateral to a secured
creditor would clearly satisfy indubitable equivalence, as
would a lien on similar collateral. However, present cash
payments less than the secured claim would not satisfy the
standard because the creditor is deprived of an
opportunity to gain from a future increase in value of the
collateral. Unsecured notes as to the secured claim or
equity securities of the debtor would not be the
indubitable equivalent. With respect to an oversecured
creditor, the secured claim will never exceed the allowed
claim.
(f) Unsecured Creditors and the Cramdown. The following Sections
explain how a plan of reorganization may be confirmed over
the objections of unsecured creditors and how the
"absolute priority rule" effects confirmation when
unsecured creditors fail to vote in favor of a plan of
reorganization:
(g) Overcompensation to Senior Creditors and the Absolute
Priority Rules. The Code requires that senior creditors
are not to be overcompensated. If the established valuation
is such that senior creditors are not overcompensated, the
plan of reorganization can be confirmed even though
unsecured creditors receive nothing, if no class junior to
the unsecured creditors receives anything. If the senior
creditors are not overcompensated, the dissenting class of
junior creditors is adequately compensated if they receive
less than the allowed amount of their claims, but again,
no class junior to the dissenting class may receive or
retain any property under the plan of reorganization. The
absolute priority rule has one exception which requires
that such junior class make a substantial equity
contribution. If the Court finds that an equity
contribution is necessary for the implementation of the
plan of reorganization and that the proposed equity
contribution is substantial, the rule is circumvented.
(h) Junior Classes. Before any junior claimant can participate
under the plan of reorganization, each holder of a claim
of a dissenting class of unsecured claims must secure or
retain property with a value, as of the effective date of
the plan of reorganization, equal to the allowed amount of
that holder's claim. Unsecured creditors need not be paid
in cash; they can be paid by issuance of reorganization
securities. If paid in cash, they can be paid over a
period of time. In order to meet the requirement of the
Code, dissenting unsecured creditors will be paid in full
before juniors can participate.
(i) Interests and the Cramdown. The following Sections describe
some of the more relevant provisions of the Code that deal
with the rights of holders of interests in corporations
and partnerships such as stockholders or investment units
in limited partnerships and individuals who seek to retain
non-exempt property under a plan of reorganization:
(j) Interests. The Court has the power under the Code to confirm
a plan of reorganization over the objection of a
dissenting class of interests. Interest is not a defined
term, but it is used throughout the Code as shorthand for
ownership interests. Interest, as used in Chapter 11,
necessarily encompasses all ownership interests, as
Chapter 11 is for individual debtors as well as corporate
and partnership debtors.
(k) Absolute Priority Rule. The cramdown provisions applicable
to interests are similar to those applicable to unsecured
claims. The plan of reorganization can be confirmed over
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the dissent of a class of interest if the holders are paid
off or no junior interests receive or retain anything,
subject to the exception of equity contribution explained
above.
Modification of a Plan of Reorganization
43. Modification of a Plan of ReorganizationThe proponent of a plan of
reorganization may modify the plan of reorganization at any time before
confirmation. As soon as a modification is filed, the modified plan of
reorganization becomes the effective plan of reorganization. The plan
of reorganization as modified must meet the Code requirements as to
classification and plan of reorganization contents, pursuant to Section
1127(b) of the Code. The following Sections describe how a plan of
reorganization may be modified both before and after confirmation of
the plan of reorganization:
43.1 Disclosure Requirements. The proponents of a plan of
reorganization as modified must also comply with the
disclosure requirements of the Code. There can be no
solicitation of an acceptance unless the one solicited has
received a written disclosure statement approved by the
Court after notice and hearing. If a disclosure
statement as to the original plan of reorganization was
already approved, then the additional disclosure statement
may be relatively streamlined or simple, but that would
depend on the facts and circumstances. Regardless of the
simplicity of the modification, the disclosure procedures
must be met.
43.2 Acceptance or Rejection Before Modifications. If acceptance
or rejection has been obtained prior to the filing of a
modification, the accepting or rejecting party must take
affirmative action to change its previous acceptance or
rejection. The Court must establish a time within which
an acceptance or rejection can be changed. If the party
accepting or rejecting does nothing within the set time,
he is deemed to have accepted or rejected, whichever is
appropriate, the plan of reorganization as modified.
43.3 Who May Seek Modification. After confirmation of a plan of
reorganization, either the proponent of the plan of
reorganization, the reorganized debtor or the debtor may
seek to modify the plan of reorganization. However, the
attempt must be made prior to substantial consummation of
the plan of reorganization. The plan of reorganization as
modified must meet the requirements of the Code as to
classification and contents.
43.4 Substantial Consummation. Substantial consummation under the
Code is defined as a transfer of the property proposed to
be transferred by the plan of reorganization, assumption
by the debtor, or the debtor's successor, of the business
or management of the property dealt with by the plan of
reorganization, and commencement of distribution under the
plan of reorganization. At that point in time, rights are
vested and cannot be modified.
43.5 Importance of Right to Modify. The real importance of post-
confirmation modification is that it may enable plan of
reorganization participants to increase their share as a
result of subsequent events. It may be that seniors who
have received most of the reorganization values can now be
paid off through other financing, thereby significantly
increasing the participation of juniors.
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<PAGE>120
43.6 When a Modification is Effective. A modification is
effective only if the Court, after notice and a hearing,
confirms the plan of reorganization as modified. To do
so, the Court must make the same findings required under
the Code as to the confirmation of a plan of
reorganization and, in addition, find that the
circumstances warrant the modification.
43.7 Confirmation of a Modified Plan. One of the requirements of
reorganization is that appropriate acceptances be
obtained; absent such acceptances, the cramdown power must
be utilized. Before acceptance can be solicited, the
proponent must comply with the disclosure requirements.
Only after the Court has, after notice and hearing,
approved a proposed disclosure statement, will the
proponent be in a position to transmit a disclosure
statement. After the necessary acceptances are obtained,
the Court can have the modification hearing and confirm,
if the confirmation requirements of the Code are met and
the circumstances warrant.
43.8 Prior Acceptances Binding. The proponent is assisted
somewhat in that the prior acceptances are binding unless
the one accepting decides to reject. The same is true of
prior rejections; the one rejecting must decide to change
the rejection to an acceptance, or the rejection
continues.
DEFINITIONS
44. Definitions. The following terms have the following meanings (such
meanings to be equally applicable to both the singular and plural
forms of the terms defined) whenever used in the Plan:
44.1 Administrative Claim. Administrative Claim shall mean an
administrative expense which is entitled to priority
pursuant to Section 507(a)(1) and allowed under Section
503(b) of the Code.
44.2 Administrative Claimant. Administrative Claimant shall mean
the holder of an Administrative Claim.
44.3 Administrative Expenses. Administrative Expenses shall mean
Claims and expenses of the type described in Sections 12.1
of the Plan Of Reorganization And Disclosure Statement
which are allowed and ordered paid by the Court pursuant
to Section 503(b) of the Code and which are entitled to
priority pursuant to Section 507(a)(1) of the Code,
including, without limitation.
(a) Preservation of the EstatePreservation of the Estate shall
mean the actual, necessary costs and expenses of
preserving the Debtor's estates and of operating the
business of the Debtor (other than such Claims or portions
thereof which, by their express terms, are not due or
payable on the Effective Date);
(b) Professional Fees. Professional Fees shall mean the full
amount of all Claims for allowance of compensation or
reimbursement of costs and expenses for legal, accounting,
or other professional services under Section 330 or
Section 331 of the Code or otherwise allowed by the Court
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pursuant to the provisions of Section 503 of the Code;:
(c) Assessed Charges. Assessed Charges shall mean all fees and
charges assessed against the Property of the Debtor's
estate under Chapter 123 of Title 28, United States Code;
and:
(d) United States Trustee Fees. United States Trustee Fees shall
mean the fees and expenses of the United States Trustee.:
44.4 Advanced. Advanced shall mean Advanced Wireless Systems,
Inc., a corporation organized under the laws of the State
Of Alabama, the successor to the Debtor herein.
44.5 Allowance Date. Allowance Date shall mean the date of a
Final Order of the Court allowing a Claim or Interest in
this Cases.
44.6 Allowed Claim. Allowed Claim shall mean a Claim (a) in
respect of which a proof of claim has been filed with the
Court within the applicable period of limitation fixed by
the Court, pursuant to Rule 3003 or (b) scheduled in the
list of Creditors prepared and filed with the Court,
pursuant to Rule 1007(b) and not listed as disputed,
contingent or unliquidated as to amount, in either case,
as to which no objection to the allowance thereof has been
interposed within any applicable period of limitation
fixed by Rule 3003 or an Order of the Court, or as to
which any such objection has been determined by an order
or judgment which is no longer subject to appeal or
certiorari proceeding and as to which no appeal or
certiorari proceeding is pending, a Final Order. Allowed
Claim shall not include interest on the principal amount
of such Claim subsequent to the Filing Date, except as may
be otherwise provided in the Plan.
44.7 Allowed Priority Claim. Allowed Priority Claim shall mean an
Allowed Claim for which the holder asserts, and is
determined to be entitled to, priority under Section 507,
et seq., of the Code, in an amount allowed by Final Order
of the Court upon a request pursuant to Section 503(a) of
the Code.
44.8 Allowed Secured Claim. Allowed Secured Claim shall mean an
Allowed Claim arising on or before the Filing Date that is
secured by a valid Lien on Property of the Debtor which is
not void or voidable under any state or federal law,
including any provision of the Code, as hereinafter
defined, or an Allowed Claim for which the holder asserts
a set off under Section 553 of the Code, to the extent of
the value (which is either agreed to by the Debtor
pursuant to the Plan or, in the absence of an agreement,
has been determined in accordance with Sections 506(a) or
1111(b) of the Code) of the interest of the holder of such
Allowed Claim on the Property of the Debtor, or an Allowed
Claim that the Debtor has agreed to treat as an Allowed
Secured Claim pursuant to the Plan. That portion of such
Allowed Claim exceeding the value of security held
therefor shall be an Allowed Unsecured Claim, unless
otherwise modified by this Plan.
44.9 Allowed Unsecured Claim. Allowed Unsecured Claim shall mean
an Allowed Claim against the Debtor which is not an
Allowed Administrative Claim, an Allowed Priority Claim,
an Allowed Secured Claim, or a retained Interest by the
Debtor.
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44.10 Bar Date. Bar Date shall mean January 19, 1998. The Court
established January 19, 1998 as the last day for the
filing of Claims in this case. Notice of that Order was
given to all Creditors and other parties in interest in
these proceedings. A separate Bar Date may apply to
Claims arising out of the rejection of executory contracts
and unexpired leases specified in the Plan Of Reorganiza-
tion And Disclosure Statement, "Section 20 - Unexpired
Leases and Executory Contracts," or to deficiency Claims
arising out of the abandonment of collateral to previously
Secured Creditors, or arising out of orders granting
relief from the provisions of Section 362 of the Code or
arising out of orders pursuant to Sections 506(a) or
1111(b) of the Code.
44.11 Blue Sky Laws. Blue Sky Laws shall mean the securities acts,
as amended, adopted by the several states of the United
States of America.
44.12 Cases. Case shall mean the pending Chapter 11 case of Mobile
Limited Liability Company, Case Number 397-37735-HCA-11.
44.13 Certificates of Indebtedness. Certificates of Indebtedness
shall mean the Certificates of Indebtedness authorized by
a Final Order of the Court on October 9, 1997, and by the
Final Order Confirming the Debtor's Plan.
44.14 Certificate of Indebtedness Holders. Certificate of
Indebtedness Holders shall mean the (i) purchasers of the
Certificates Indebtedness authorized by the Court on
October 9, 1997; (ii) the Debtor who acquires such
Certificate of Indebtedness in exchange for the licenses
acquired under this Plan; and, (iii) Creditors and other
parties in interest who elect to receive Certificates of
Indebtedness in exchange for their Allowed Claims.
44.15 Chapter 11. Chapter 11 shall mean Chapter 11 of the
Bankruptcy Code. Reference to section numbers are
references to sections in the Bankruptcy Code, 11 U.S.C.,
Section 101, et seq., Public Law 95-598, effective October
1, 1979, as amended, unless otherwise specified.:
44.16 Claim or Claims. Claim or Claims shall mean a right to
payment from the Debtor, which is evidenced by a timely
filed proof of claim or application for payment which is
allowed by the Court, or if a proof of claim is not filed,
a right which otherwise appears in the applicable
schedules of the Debtor and (1) is not listed as disputed,
contingent or unliquidated, or (2) has been resolved by
Final Order of the Court pursuant to the terms of the
Plan.
44.17 Claimant or Claimants. Claimant or Claimants shall mean the
holders of a Claim against the Debtor.
44.18 Claims of the Estate. Claims of the Estate shall mean all
asserted and unasserted Claims of the Debtor, existing
prior to Confirmation, against anyone.
44.19 Class of Claims and Payment. Class of Claims and Payment
shall mean the various classes of Claims that are defined
in the Plan. The Plan is intended to deal with all Claims
against the Debtor of whatever character, whether or not
contingent or liquidated, and whether or not allowed by
the Court pursuant to Section 502(h) of the Code.
However, only those Claims allowed pursuant to Section
502(a) of the Code will receive payment under the Plan.
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<PAGE>123
44.20 Class or Classes. Class or Classes shall mean any Class into
which Allowed Claims or Allowed Interests are classified
pursuant to Section 12 of the Plan Of Reorganization And
Disclosure Statement and shall mean a category of holders
of Claims or Interests with substantially similar to the
Other Claims in such Class.
44.21 Code. Code shall mean the Bankruptcy Reform Act of 1978,
sometimes referred to as the Bankruptcy Code of 1978, as
contained in Title 11 U.S.C., Section 101, et seq., and
all amendments thereto.
44.22 Collateral. Collateral shall mean Property in which the
Debtor has an interest and which is subject to a Lien
(other than any Lien granted under the Plan) securing an
Allowed Secured Claim, but only to the extent of the
Debtor's interest in such property; and "Related Collateral"
shall, with respect to any Allowed Secured Claim,
mean all Collateral securing such Allowed Secured Claim.
44.23 Collateral Value. Collateral Value shall mean the fair
market value, at Confirmation, of any perfected and valid
interest in collateral of the Debtor, securing any Claim,
as agreed to by the Debtor and the effected Secured
Creditor or, in the event of disagreement, as resolved by
Final Order of the Court pursuant to Section 506(a) or
Section 1111(b) of the Code.
44.24 Common Stock. Common Stock shall mean the authorized, issued,
non-assessable and outstanding shares of the common capital stock
of Advanced.
44.25 Common Stockholders. Common Stockholders shall mean the
registered holders of the Common Stock in Advanced after
the Effective Date.:
44.26 Confirmation. Confirmation shall mean the entry by the Court
of an Order Confirming Plan at or after a hearing held
pursuant to Section 1128 of the Code.
44.27 Confirmation Date. Confirmation Date shall mean the date the
Confirmation Order is entered by the Court.
44.28 Confirmation Hearing. Confirmation Hearing shall mean the
hearing to be held by the Court to determine whether or
not the Debtor's Plan meets the requirements of Chapter 11
of the Code and is entitled to Confirmation.
44.29 Confirmation Order. Confirmation Order shall mean the Order
of the Court confirming the Plan pursuant to Section 1129
of the Code.
44.30 Consummation Date. Consummation Date shall mean the Effective
Date.
44.31 Court. Court shall mean the United States Bankruptcy Court,
Northern District of Texas, Dallas Division, including the
United States Bankruptcy Judge presiding in the Chapter 11
Cases of the Debtor.
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44.32 Creditor or Creditors. Creditor or Creditors shall mean all
Creditors of the Debtor holding Allowed Claims for debts,
liabilities, demands or Claims of any character whatsoever, as
defined in Section 101(4) of the Code.
44.33 Cross-References, etc.. Cross References, etc. shall mean
references in the Plan Of Reorganization And Disclosure
Statement to any Section which are, unless otherwise
specified, to such Section of the Plan Of Reorganization
And Disclosure Statement. The words "hereof", "herein",
"hereunder" and similar terms shall refer to the Plan Of
Reorganization And Disclosure Statement and not to any
particular Section or provision of the Plan Of Reorganization
And Disclosure Statement.
44.34 Debtor. Debtor shall mean Mobile Limited Liability Company.
44.35 Debtor-In-Possession. Debtor-In-Possession shall mean the
Debtor in the capacity and with the status and rights
conferred by Section 1107 of the Code.
44.36 Disbursing Agent. Disbursing Agent shall mean Sidney J.
Diamond, 5862 Cromo, Suite 100, El Paso, Texas 79912.
44.37 Disclosure Statement. Disclosure Statement shall mean the
Plan Of Reorganization And Disclosure Statement filed by
the Debtor in this Case in accordance with Section 1125 of
the Code, as it may be amended, supplemented or modified.
44.38 Effective Date. Effective Date shall mean thirty (30) days
after Confirmation.
44.39 Equity Security Holder. Equity Security Holder shall mean
the holders of Units in the Debtor.
44.40 Equity Security Interest. Equity Security Interest shall
mean the units of equity in the Debtor as authorized by
the Debtor's Operating Agreement and the laws of the State
Of Nevada.
44.41 Estate. Estate shall mean the estate of the Debtor created
in the Reorganization Case by Section 541 of the Code.:
44.42 FCC. FCC shall mean the Federal Communication Commission and
agency of the government of the United States Of America.
44.43 Filing Date. Filing Date shall mean the date of filing of
the Chapter 11 Petition in this Case by the Debtor, which
date was, August 22, 1997.
44.44 Final Order. Final Order shall mean an Order ("Order") of
the Court which, not having been reversed, modified or
amended and not being stayed and the time to appeal from
which or to seek review or certiorari or rehearing of
which having expired, and from which no such appeal,
review, certiorari or rehearing is pending, has become
conclusive of all matters adjudicated thereby and is in
full force and effect.
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44.45 Hayes. Hayes shall mean Oscar Hayes, an individual, who is
a Secured Creditor herein and a member of the Directors
Committee of the Debtor.
44.46 Headings. Headings shall mean the various headings in the
Plan Of Reorganization And Disclosure Statement which are
inserted for convenience only and shall not affect the
meaning or interpretation of the Plan Of Reorganization
And Disclosure Statement or any provision therein.
44.47 Interest or Interests. Interest or Interests shall mean the
Equity Interest in the Debtor.
44.48 IRS. IRS shall mean the Internal Revenue Service, an agency
of the government of the United States of America.:
44.49 ISO. ISO shall mean Incentive Stock Plan, a plan to be
adopted by the Reorganized Debtor for the purpose of
granting stock options to management of the Reorganized
Debtor.
44.50 Lien. Lien shall mean any charge against or interest in
property to secure payment of a debt or performance of an
obligation as defined in Section 101(33) of the Code, and
includes, without limitation, any judicial lien, security
interest, mortgage, deed of trust and statutory lien as
defined in Section 101 of the Code.
44.51 Limited. Limited shall mean Mobile Limited Liability
Company, a limited liability Company, organized under the
laws of the State Of Nevada, the Debtor herein.
44.52 Mobile. Mobile shall mean Mobile Wireless Partners, a
general partnership and a principal Unit Holder of the
Debtor.
44.53 NASD. NASD shall mean the National Association of Securities
Dealers.
44.54 Order Confirming Plan. Order Confirming Plan shall mean the
Final Order of the Court determining that the Plan meets
the requirements of Section 1129 of the Code and is
entitled to Confirmation. The date that the Confirmation
Order is entered on the Court Clerk's docket is the
Confirmation Date.
44.55 Person. Person shall mean an individual, corporation,
partnership, joint venture, trust, estate, unincorporated
organization, or a government or any agency or political
subdivision thereof or other entity.
44.56 Plan. Plan shall mean the Plan of Reorganization And
Disclosure Statement in its present form, or as it may be
amended, supplemented or modified.
44.57 Plan Payments. Plan Payments shall mean the payments, in
cash or other distributions of value, made by the Debtor
pursuant to the Confirmed Plan Of Reorganization.
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44.58 Plan Year. Plan year shall mean twelve (12) months commencing on
the first day of the first full month following the Effective Date
and continuing until the last day of the twelfth (12th) month
thereafter, and each succeeding twelve (12) months thereafter.
44.59 Preserved Liens. Preserved Liens shall mean to the extent required
under Section 1124(2) of the Code, to preserve the rights of a
Creditor having a Secured Claim dealt with pursuant to that Section,
the Lien or encumbrance of that Creditor shall, to the extent valid,
be preserved.
44.60 Priority Claim. Priority Claim shall mean any Claim entitled
to priority pursuant to Section 507(a) of the Code.
44.61 Priority Creditor. Priority Creditor shall mean the owner
and holder of a Priority Claim.
44.62 Pro Rata. Pro Rata shall mean the proportion that the amount
of a Claim against the Debtor in a particular class bears
to the aggregate amount of all Claims (including undetermined
Claims until disallowed) in such Class.:
44.63 Property or Properties. Property or Properties shall mean
all "Property of the Estate of the Debtor" as previously
or hereafter determined by Final Order of a Court of
competent jurisdiction and/or as defined in Section 541 of
the Code, including, but not limited to, any and all
claims of the Estate or causes of action in favor of the
Debtor against third parties (except as otherwise provided
herein).
44.64 Proponent. Proponent shall mean the Debtor.
44.65 Reorganization Case. Reorganization Case shall mean the
Chapter 11 commenced by the Debtor's filing of its
voluntary Chapter 11 petition under the Code.
44.66 Reorganized Debtor. Reorganized Debtor shall mean Advanced
Wireless Systems, Inc., after the Effective Date.
44.67 Rule or Rules. Rule or Rules shall mean the Federal Bankruptcy
Rules of Procedure and any applicable Local Bankruptcy Rules
adopted by the Court.
44.68 Secured Claim. Secured Claim shall mean any Claim secured by
Property of the Debtor under a duly perfected Lien, to the
extent of the Collateral Value, as agreed to between the
Secured Creditor and the Debtor, or as determined by a
Final Order of the Court in accordance with Section 506 or
Section 1111(b) of the Code.
44.69 Secured Creditor. Secured Creditor shall mean a Creditor who
holds a Secured Claim, which has been properly perfected
as required by law, on any Property of the Debtor.
44.70 Securities Act. Securities Act shall mean the Securities Act
of 1933, as amended.
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44.71 Securities Exchange Act. Securities Exchange Act shall mean
the Securities Exchange Act of 1934, as amended.
44.72 SEC. SEC shall mean the Securities and Exchange Commission
an agency of the government of the United States of America.
44.73 Substantial Consummation of the Plan. Substantial Consummation
shall mean the accomplishment of all things provided
for in the Plan, pursuant to Section 1101 of the Code.
44.74 Small Business. Small Business shall mean a Debtor that
meets the criteria set forth in Section 101(51)(C) of the
Code and who has filed an election to be considered the
same pursuant to Section 1121(e) of the Code. The Debtor
has filed such an election.
44.75 Tax Claim. Tax Claim shall mean a Priority Claim entitled to
priority, pursuant to Section 507(a)(8) of the Code.
44.76 Tax Claimant. Tax Claimant shall mean the holder of a
Priority Tax Claim.
44.77 Trust Indenture Act. Trust Indenture Act shall mean the
Trust Indenture Act of 1939, as amended.
44.78 Tsoutsas. Tsoutsas shall mean Demetrios Tsoutsas, an
individual, who is a Secured Creditor and a member of the
Directors Committee of the Debtor.
44.79 Undefined Terms. Undefined Terms shall mean terms that are
used in the Plan and not defined herein have the meaning
ascribed to such terms in the Code or Rules.
44.80 Unsecured Claim. Unsecured Claim shall mean a Creditor,
other than one having a right to priority under Section
507 of the Code, and which is not a Secured Claim. An
unsecured Claim is a Claim included in Class 3 of the Plan.
44.81 Unsecured Creditor. Unsecured Creditor shall mean an
Unsecured Creditor of the Debtor holding an Allowed Claim
for an unsecured debt, an unsecured liability, an unsecured
demand or an Unsecured Claim of any character whatsoever, except
a Claim entitled to priority pursuant to Section 507 of the Code.
44.82 Value of Property. Value of Property shall mean the value of
Property and the determination of the status of Secured
Claims against Property shall be determined by a hearing
to be held by the Court pursuant to Section 506 or Section
1111(b) of the Code, resulting in a Final Order or by
agreement between the Debtor and the effected Secured Creditor.
44.83 Warrants. Warrants shall mean the Warrants issued by the
Reorganized Debtor, as authorized by its Board of Directors,
pursuant to the provisions of the Plan.
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44.84 Warrant Holders. Warrant Holders shall mean the owner of the
Warrants issued pursuant to the provision of the Plan.
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<PAGE>129
DATED: November 6, 1997
MOBILE LIMITED LIABILITY COMPANY
--------------------------------
By: Monte Julius, its Chairmen
ATTORNEYS FOR MOBILE LIMITED LIABILITY COMPANY:
SIDNEY J. DIAMOND,
A PROFESSIONAL CORPORATION
- ---------------------------
Sidney J. Diamond
Attorney For
Mobile Limited Liability Company
Texas Bar No.: 05803000
5862 Cromo Drive
Suite 100
El Paso, Texas 79912
(915) 584-8141 (Voice)
(915) 584-0509 (Fax)
[email protected] (email)
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Mobile LLC Exhibit A Page 1 Revised
Pro Forma Cash Flow (1) 11/3/97
Ttl 1st Ttl 2nd Ttl 3rd Ttl 4th Ttl 5th
Year Year Year Year Year
High Speed
Internet Customer 922 1,454 1,720 1,960 2,080
Low Speed
Internet Customer 144 216 324 486 730
Wireless TV Customer 380 380 170 170 170
REVENUES
Wireless TV @ $4.21
p/wk $90,972 $90,972 $39,780 $39,780 $38,780
Modem Sales-Single
Use 134,000 79,600 39,600 36,000 39,780
Modem Sales-Multi
Use 249,600 141,600 70,400 64,000 13,500
Installation Fees 91,500 53,100 26,400 29,000 9,375
Installation
Materials 91,500 53,100 26,400 24,000 11,280
Configuration of PC 92,200 53,200 26,600 24,000 12,000
Sales Commission
Contribution 55,320 31,920 22,440 14,400 7,200
High Speed
@ $50 p/wk 1,201,200 2,000,000 3,489,600 4,065,600 4,723,000
Low Speed
@ $3.91 p/wk 2,440 3,660 5,443 8,181 12,240
----- ----- ----- ----- ------
Total Revenues $2,008,732 $2,507,202 $3,746,663 $4,304,961 $4,872,125
COSTS OF GOODS SOLD
Installation
Materials $91,500 $53,000 $26,400 $24,000 $11,250
Modems-Single User 134,000 79,650 39,600 36,000 13,500
Modems-Multi User 249,600 141,600 70,400 64,000 36,000
------- ------- ------- ------- -------
Total Cost of
Good Sold $475,100 $274,250 $136,400 $124,000 $60,750
-------- -------- -------- -------- -------
Gross Profit $1,533,632 $2,232,952 $3,610,263 $4,180,961 $4,811,375
OPERATING EXPENSES
Accounting and Legal $19,305 $23,369 $25,695 $28,264 $31,091
Advertising 36,000 24,000 12,000 12,000 12,000
Consulting Fees 14,300 15,730 17,303 19,033 20,937
Dues & Subscribers 780 858 944 1,038 1,142
Installation-Contract
Instals 104,000 114,400 125,840 138,424 152,266
Insurance-Business 10,400 11,440 12,584 13,842 15,227
Insurance-Health 8,320 9,152 10,067 11,074 12,181
Insurance-Wkrs. Comp 4,420 4,862 6,348 5,883 6,471
Internet Access Fees
UU Net 21,000 21,000 21,000 21,000 21,000
Internet Consulting
SPA 83,096 116,175 137,428 156,604 166,192
Licenses and Fees 36,400 40,040 44,044 48,448 53,293
Meals &
Entertainment 3,900 4,290 4,719 5,191 5,710
Modem Configuration 92,200 53,200 26,600 24,000 12,000
Office Supplies &
Equipment 12,000 4,862 5,348 5,883 6,471
Payroll Taxes 15,600 17,160 18,876 20,764 22,840
Programming Fees 47,880 47,880 47,880 47,880 47,880
Property Tax 1,820 2,002 2,202 2,422 2,665
Postage & Deliveries 3,913 4,304 4,734 5,208 5,729
Rent-Office 33,800 37,180 40,898 44,988 49,487
Rent-Tower 12,012 13,213 14,534 15,988 17,587
Rent-Repeater Site 3,640 4,004 4,404 4,845 5,329
Repairs &
Maintenance 1,820 2,002 2,202 2,422 2,665
Salaries & Wages 109,200 120,120 132,132 145,345 159,880
Sales-Commissions 69,150 39,100 23,000 12,000 6,000
Supplies 2,600 2,860 3,146 3,461 3,807
Telephone 64,400 187,200 216,000 244,800 264,000
Travel & Lodging 11,960 13,156 14,472 15,919 17,511
Utilities 9,100 10,010 11,011 12,112 13,323
Vehicle 8,232 8,232 8,232 8,232 8,232
----- ----- ----- ----- -----
Total Operating
Expenses $841,248 $951,791 $992,644 $1,077,071 $1,142,914
Net Cash Flow $692,384 $1,291,161 $2,617,619 $3,103,890 $3,668,461
<PAGE>131
Exhibit A Page 2
Note #1. These projections are done on a strict "cash flow" basis. Accordingly
no calculation or deduction for non-cash items, such as depreciation,
are presented. Additionally, no calculation for interest income is
presented.
<PAGE>132
Mobile LLC Exhibit B Revised
Sources and Uses of Cash 11/3/97
Ttl 1st Ttl 2nd Ttl 3rd Ttl 4th Ttl 5th
Year Year Year Year Year
Sources
Net Revenues $1,533,632 $2,232,962 $3,610,263 $4,180,961 $4,811,375
Debtor Certificates $1,000,000
Received from
Receiver $334,000
Exercise Warrants(1) $250,000 $250,000
-------- --------
Total Sources $3,117,632 $2,482,962 $3,610,263 $4,180,961 $4,811,375
Uses
Pay off Chapter 11
Creditors
Class 1(a)
Professional Fees $57,500
Class 1(b)
Administrative Costs $7,500
Class 1(c) Debtor
Certificates (2) $500,000 $500,000
Class 2 Wage Claims $4,000
Class 3 Tax Claims $1,404
Class 4(a) Unsecured
$1000 or less $3,175
Class 4(b) Unsecured
$1000 or more $285,602
Class 5(a) Secured-
Mayes $81,000
Class 5(b) Secured-
Tsoutsas $108,000
Debtor Certificate
Commissions $100,000
Operating Expenses $841,248 $949,668 $990,309 $1,074,502 $1,140,089
-------- -------- -------- ---------- ----------
Subtotal $1,489,429 $1,449,668 $1,490,309 $1,074,502 $1,140,089
---------- ---------- ---------- ---------- ----------
Taxes @ 35% $15,346 $449,152 $741,984 $1,087,261 $1,284,950
Capital Expenditures $400,000 $400,000 $500,000 $750,000
-------- -------- -------- --------
Total Uses $1,504,775 $2,298,820 $2,632,293 $2,661,763 $3,175,039
Difference Between
Use & Source $1,612,857 $184,142 $977,970 $1,519,198 $1,636,336
(1) A total of 2,000,000 warrants will be issued exercisable at $0.75 each and
3,068,066 warrants will be issued exercisable at $1 each. This pro forma
Source & Use Statement assumes only 10% of the warrants will be exercised.
(2) Debtor Certificate purchasers will have the right to convert their debt to
equity in the Reorganized Debtor. As of the date of the preparation of
this Source & Use Statement, purchasers had all indicated their intent to
convert. Repayment is shown here simply to demonstrate sufficient funds
will be available for repayment, if necessary.
<PAGE>133
Mobile LLC Exhibit C Page 1 Revised
Pro Forma Cash Flow (1) 11/3/97
Month 1 Month 2 Month 3 Month 4 Month 5
High Speed Internet
Customer 60 50 50 85 85
Low Speed Internet
Customer 0 0 0 0 0
Wireless TV Customers 380 380 380 380 380
REVENUES
Wireless TV @
$4.21 p/wk 7,372 7,600 7,600 7,600 7,600
Modem Sales-Single
User 7,266 7,267 7,267 12,353 12,353
Modem Sales-Multi
User 13,536 13,536 13,536 23,010 23,010
Installation Fees 4,950 4,950 4,950 8,415 8,415
Installation
Materials 4,950 4,950 4,950 8,415 8,415
Configuration of PC 5,000 5,000 5,000 8,500 8,500
Sales Commission
Contribution 3,000 3,000 3,000 5,100 5,100
High Speed @
$50 p/wk 65,141 65,141 65,141 110,739 110,739
Low Speed @
$3.91 p/wk
Total Revenues 111,215 111,444 111,444 184,132 184,132
Costs of Goods Sold
Installation
Materials 4,950 4,950 4,950 8,415 8,415
Modems-Single User 7,266 7,267 7,267 12,353 12,353
Modems-Multi User 13,536 13,536 13,536 23,010 23,010
Total Costs of Goods
Sold 25,752 25,753 25,753 43,778 43,778
------ ------ ------ ------ ------
Gross Profit 85,463 85,691 85,691 140,354 140,354
Operating Expenses
Accounting and Legal 1,606 1,609 1,609 1,609 1,609
Advertising 10,000 10,000 7,000 1,000 1,000
Consulting Fees 1,200 1,200 1,190 1,190 1,190
Dues & Subscriptions 65 65 65 65 65
Installation-Contract
Instals 5,640 5,640 5,640 9,587 9,587
Insurance-Business 3,467 3,467
Insurance-Health 693 693 693 693 693
Insurance-Wks. Comp. 368 368 368 368 368
Internet Access Fees
UU Net 1,750 1,750 1,750 1,750 1,750
Internet Consulting
SPA 4,500 4,500 4,500 7,650 7,650
Licenses and Fees 12,134 12,133
Meals &
Entertainment 325 325 325 325 325
Modem Configuration 5,000 5,000 5,000 8,500 8,500
Office Supplies &
Equipment 1,000 1,000 1,000 1,000 1,000
Payroll Taxes 1,300 1,300 1,300 1,300 1,300
Programming Fees 3,990 3,990 3,990 3,990 3,990
Property Tax 910
Postage & Deliveries 326 326 326 326 326
Rent-Office 2,816 2,816 2,816 2,816 2,816
Rent-Tower 1,001 1,001 1,001 1,001 1,001
Rent-Repeater Site 303 303 303 303 303
Repairs &
Maintenance 150 150 150 150 150
Salaries & Wages 9,100 9,100 9,100 9,100 9,100
Sales-Commission 3,750 3,750 3,750 6,375 6,375
Supplies 215 215 215 215 215
Telephone 3,500 3,500 3,500 5,950 5,950
Travel & Lodging 965 965 965 965 965
Utilities 800 800 750 750 750
Vehicle 686 686 686 686 686
Total Operating
Expenses 77,560 61,052 57,992 67,664 83,264
Net Cash Flow 7,903 24,639 27,699 72,690 57,090
<PAGE>134
Exhibit C Page 2
<TABLE>
<CAPTION>
Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Total
<S> <C> <C> <C> <C> <C> <C> <C>
85 85 85 85 85 87 90 922
0 24 24 24 24 24 24 144
380 380 380 380 380 380 380 380
0
7,600 7,600 7,600 7,600 7,600 7,600 7,600 90,972
12,353 12,353 12,353 12,353 12,353 12,644 13,066 134,001
23,010 23,010 23,010 12,010 23,010 23,552 24,370 249,600
8,415 8,415 8,415 8,415 8,415 8,724 9,021 91,500
8,415 8,415 8,415 8,415 8,415 8,724 9,021 91,500
8,500 8,500 8,500 8,500 8,500 8,700 9,000 92,200
5,100 5,100 5,100 5,100 5,100 5,220 5,400 55,320
110,739 110,739 110,739 110,739 110,739 113,356 117,248 1,201,220
404 407 407 407 407 407 2,439
184,132 184,536 184,539 184,539 184,539 188,927 195,153 2,008,732
0
8,415 8,415 8,415 8,415 8,415 8,724 9,021 91,500
12,353 12,353 12,353 12,353 12,353 12,644 13,086 134,001
23,010 23,010 23,010 12,010 23,010 23,552 24,370 249,600
43,778 43,778 43,778 43,778 43,778 44,920 46,477 475,101
------ ------ ------ ------ ------ ------ ------ -------
140,354 140,768 140,761 140,761 140,761 144,007 148,676 1,533,631
1,609 1,609 1,609 1,609 1,609 1,609 1,609 19,305
1,000 1,000 1,000 1,000 1,000 1,000 1,000 36,000
1,190 1,190 1,190 1,190 1,190 1,190 1,190 14,300
65 65 65 65 65 65 65 780
9,587 9,587 9,587 9,587 9,587 9,820 10,151 104,000
3,466 10,400
693 693 693 694 694 694 694 8,320
368 368 368 369 369 369 369 4,420
1,750 1,750 1,750 1,750 1,750 1,750 1,750 21,000
7,650 7,650 7,650 7,650 7,573 7,830 8,293 83,096
12,133 36,400
325 325 325 325 325 325 325 3,900
8,500 8,500 8,500 8,500 5,500 8,700 9,000 92,200
1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
1,300 1,300 1,300 1,300 1,300 1,300 1,300 15,600
3,990 3,990 3,990 3,990 3,990 3,990 3,990 47,880
910 1,820
326 326 326 326 326 326 327 3,913
2,816 2,816 2,816 2,816 2,816 2,816 2,824 33,800
1,001 1,001 1,001 1,001 1,001 1,001 1,001 12,012
303 303 303 304 304 304 304 3,640
150 150 150 155 155 155 155 1,820
9,100 9,100 9,100 9,100 9,100 9,100 9,100 109,200
6,375 6,375 6,375 6,375 6,375 6,525 6,750 69,150
215 215 215 220 220 220 220 2,600
5,950 5,950 5,950 5,950 5,950 6,050 5,200 64,400
965 965 965 1,065 1,065 1,065 1,045 11,960
750 750 750 750 750 750 750 9,100
686 686 686 686 686 686 686 8,232
67,664 68,574 67,664 83,376 67,700 68,640 70,098 841,248
72,690 72,184 73,097 67,385 73,061 76,367 78,578 692,383
</TABLE>
<PAGE>
Exhibit C Page 3
Note #1 These projections are done on a strict "cash flow" basis. Accordingly,
no calculation or deduction for non-cash items, such as depreciation,
are presented. Additionally, no calculation for interest income is
presented.
<PAGE>136
Mobile LLC Exhibit D Page 1 Revised
Sources and Uses of Cash 11/3/97
Month 1 Month 2 Month 3 Month 4 Month 5
Sources
Net Revenues $85,463 $85,691 $85,691 $140,354 $140,354
Debtor Certificates 1,000,000
Received from
Receiver 334,000
Exercise Warrants 25,000 25,000
Total Sources $1,419,463 485,691 $85,691 $165,354 $165,354
Uses
Pay Off Chapter 11
Creditors
Class 1(a)
Professional Fees (1) 57,500
Class 1(c)
Administrative Costs 7,500
Class 1(c) Debtor
Certificates (2)
Class 2 Wage Claims 4,000
Class 3 Tax Claims 1,404
Class 4(a) Unsecured
$1000 or less 3,175
Class 4(b) Unsecured
$1000 or more 285,603
Class 5(a) Secured-
Hayes (3) 61,000
Class 5(b) Secured-
Tsoutsas (4) 108,000
Debtor Certificate
Commissions 100,000
Operating Expenses 77,560 81,052 57,992 67,664 83,264
Subtotal $180,735 $606,059 $57,992 $67,664 $83,264
Taxes @ 35% 5,116
Total Uses $180,735 $606,059 $57,992 $72,780 $83,264
Difference Between
Use & Source $1,238,728 ($520,368) $27,669 $92,574 $82,090
(1) Legal Fees to be paid in stock at the option of the claimant.
(2) Debtor Certificate purchasers will have the right to convert their debt
to equity in the Reorganized Debtor. Debtor Certificate purchasers as
of the date of preparation of this Source and Use of Funds Statement
have all indicated their intent to convert. Consequently, no payments
are shown.
(3) Includes eight months of interest at 12% per annum.
(4) Includes eight months of interest at 12% per annum.
<PAGE>137
Exhibit D Page 2
<TABLE>
<CAPTION>
Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Total
<S> <C> <C> <C> <C> <C> <C> <C>
$140,354 $140,354 $140,354 $140,354 $140,354 $146,037 $148,272 $1,533,632
1,000,000
334,000
25,000 25,000 50,000 50,000 50,000 250,000
$165,354 $165,354 $190,354 $190,354 $190,354 $146,037 $148,272 $3,117,632
57,500
7,500
0
4,000
1,404
3,175
285,603
81,000
108,000
100,000
67,664 67,664 68,574 83,376 67,700 68,640 70,098 841,248
$67,664 $67,664 $68,574 $83,376 $67,700 $68,640 $70,098 $1,489,430
5,116 5,114 15,346
$67,664 $67,664 $73,890 $83,376 $67,700 $68,640 $75,212 $1,604,776
$97,690 $97,690 $116,664 $106,978 $122,654 $77,397 $73,060 $1,612,856
</TABLE>
State of Alabama
For-Profit Corporation
Articles of Incorporation
Pursuant to the provisions of the Alabama Business Corporation Act,
the undersigned hereby adopts the following Articles of Incorporation.
Article I
The name of the corporation. Advanced Wireless Systems, Inc.
Article II The duration of the corporation is perpetual, unless
otherwise stated.
Article III The corporation has been organized for the following
purpose(s):
SEE 1 IN ADDENDUM.
Article IV The number of shares which the corporation shall have
the authority to issue is -- SEE 2.
Article V The name and street address of the initial registered
agent; NO PO BOX. THE CORPORATION COMPANY 60 Commerce Street, Suite 1100,
Montgomery, AL 36104
Article VI The names and address(es) of the Director(s).
SEE 3 IN ADDENDUM
Article VII The name(s) and address(es) of the Incorporator(s).
Craig Carter. 350 N. St. Paul, Dallas, Texas 75201
Any provision, not inconsistent with the law, for the regulation of
the internal affairs of the corporation or for the restriction of the transfer
of shares may be added.
IN WITNESS THEREOF, the undersigned incorporator executed these
Articles of Incorporation on this the 9 day of December, 1997.
Craig Carter
- -----------------------------------
Type or Print Name of Incorporator
/s/ Craig Carter
- -----------------------------------
Signature of Incorporator
1
<PAGE>
Addendum
1. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the laws of Alabama.
Notwithstanding the foregoing, the purpose shall be the broadcasting of TV
signals and providing access to the internet at high speed over broad band
communications.
2. 50,000,000
3. Monte Julius, 927 Sunset Drive, Irving, TX 75061
Terry Hopkins, 4670 Heritage Oaks Lane, Sulsum, CA 94585
Oscar L. Hayes, 2308 Stuart Avenue, Albany, CA 31707
Miles Humphrey, 32508 Orchid Lane, Parkersburg, IA 50665
Demetrios Tsoutsas, 470 Burlington Road, Freehold, NJ
State of Alabama )
) Probate Court
Montgomery County )
I. Walker Hobbie, Jr., Judge of Probate in and for the said County, in said
State, hereby certify that the within and foregoing pages are a full, true and
complete copy of ARTICLES OF INCORPORATION OF ADVANCED WIRELESS SYSTEMS, INC.
as fully and completely as the same appears of record in this office in Book
NO. 206 of CORP at page 370.
Given under my hand and official seal this
18th day of December A.D. 1997
/s/ Walker Hobbie, Jr.
- --------------------------------------------------
Judge of Probate Court, Montgomery County, Alabama
2
BYLAWS OF ADVANCED WIRELESS SYSTEMS, INC.
ARTICLE ONE OFFICES
Registered Office
1.01. The registered office of the corporation is located at CT CORPORATION,
2000 Interstate Park Drive, Suite 204, Montgomery, Alabama 36109.
Registered Agent
1.02. The name of the registered agent of the corporation at such address is
The Corporation Company, 2000 Interstate Park Drive, Suite 204, Montgomery,
Alabama 36109.
Principal Office
1.03. The principal office for the transaction of the business of this
corporation is located at 4123-A Government Blvd., Unit 1, Mobile, AL 33693.
The Board of Directors has full power and authority to change the principal
office from one location to another by noting the changed address and the
effective date below:
______________________________________ Dated: __________________
______________________________________ Dated: __________________
______________________________________ Dated: __________________
Other Offices
1.04. The corporation may also have offices at such other places, within or
outside the State of Alabama, where the corporation is qualified to do
business, as the Board of Directors may from time to time designate, or the
business of the corporation may require.
ARTICLE TWO SHAREHOLDERS' MEETINGS
Place of Meetings
2.01. Meetings of shareholders shall be held at any place within or without
the State of Alabama designated by the by the Board of Directors pursuant to
authority hereinafter granted to the Board, or by the written consent of all
persons entitled to vote thereat. In the absence of any such designation,
shareholders, meetings shall be held at the Principal office of the
corporation. Any meeting is valid wherever held if held by the written
consent of all the persons entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the corporation.
1
<PAGE>
Time of Annual Meeting--Business Transacted
2.02. The annual meetings of the shareholders shall be held each year at 9:
00 on the First Monday of January. If this day falls on a legal holiday, the
annual meeting shall be held at the same time on the next following business
day. At such meetings directors shall be elected, reports of the affairs of
the corporation shall be considered, and any other business may be transacted
that is within the powers of the shareholders.
Failure to Hold Annual Meeting
2.03. If, within any 13-month period, an annual meeting of shareholders is
not held, any shareholder may apply to any court of competent jurisdiction in
the county in which the principal office of the corporation is located for a
summary order that an annual meeting be held.
Conduct of Meetings
2.04. At every meeting of the shareholders, the President, or, in the
President's absence, a Vice President designated by the President, or, in the
absence of such designation, any other person chosen by a majority of the
shareholders of the corporation present in person or by proxy and entitled to
vote, shall act as chairman of the shareholders' meeting. The Secretary of
the corporation, or, in the Secretary's absence, an Assistant Secretary, shall
act as Secretary of all meetings of the shareholders. In the absence of the
Secretary of Assistant Secretary, the chairman may appoint another person to
act as Secretary of the meeting.
Action Without Meeting
2.05. Any action that, under any provision of the Alabama Business
Corporation Act, may be taken at a meeting of the shareholders, may be taken
without a meeting if authorized by a writing signed by all of the persons who
would be entitled to vote on that action at a meeting, and filed with the
Secretary of the corporation. Any such signed consent, or a signed copy
thereof, shall be placed in the minute book of the corporation.
Telephone Meetings
2.06. Subject to the notice provisions required by these bylaws and by the
Business Corporation Act, shareholders may participate in and hold a meeting
by means of conference telephone or similar communications equipment by which
all persons participating can hear each other. Participation in such a
meeting shall constitute presence in person at such meeting, except
participation for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or coined.
Notice of Meetings
2.07. (1) Notice of all meetings of shareholders shall be given in writing
to shareholders entitled to vote by the President or Secretary or by the
officer or person calling the meeting, or, in case of that person's neglect or
refusal, or if there is no person charged with the duty of giving notice, by
any director or shareholder. The notice shall be given to each shareholder,
either personally or by prepaid mail, addressed to the shareholder at his
address as it appears on the transfer books of the corporation.
2
<PAGE>
Time of Notice
(2) Notice of any meeting of shareholders shall be sent to each
shareholder entitled thereto not less than ten nor more than sixty days before
the meeting, except in the case of a meeting for the purpose of approving a
merger or consolidation agreement, in which case the notice must be given not
less than twenty days prior to the date of the meeting.
Contents of Notice
(3) Notice of any meeting of shareholders shall specify the place,
date, and hour of the meeting. The notice shall also specify the purpose of
the meeting if it is a special meeting, or if its purpose, or one of its
purposes, will be to consider a proposed amendment of the articles of
incorporation, to consider a proposed reduction of stated capital without
amendment, to consider a proposed merger or consolidation, to consider a
voluntary dissolution or the revocation of a voluntary dissolution by act of
the corporation, or to consider a proposed disposition of all, or
substantially all, of the assets of the corporation outside of the ordinary
course of business.
Notice of Adjourned Meeting
(4) When a shareholders, meeting is adjourned for thirty days or more,
notice of the adjourned meeting shall be given as in the case of an original
meeting. When a meeting is adjourned for less than thirty days, it is not
necessary to give any notice of the time and place of the adjourned meeting or
of the business to be transacted thereat other than by announcement at the
meeting at which the adjournment is taken.
When Notice Excused
(5) Any notice required to be given to a shareholder under any
provision of the Business Corporation Act or the articles of incorporation or
the bylaws need not be given to the shareholder if (1) notice of two
consecutive annual meetings and all notices of meetings held during the period
between those annual meetings, if any, or (2) all (but in no event less than
two) payments (if sent by first class mail) of distributions or interest on
securities during a 12-month period have been mailed to that shareholder,
addressed at his or her address as shown on the records of the corporation,
and have been returned undeliverable. Any action or meeting taken or held
without notice to such a person shall have the same force and effect as if the
notice had been duly given and, if the action taken by the corporation is
reflected in any articles or document filed with the Secretary of State, those
articles or that document may state that notice was duly given to all persons
to whom notice was required to be given. If such a person delivers to the
corporation a written notice setting forth his or her then current address,
the requirement that notice be given to that person shall be reinstated.
Waiver of Notice
2.08. Any notice required by law or by these bylaws may be waived by
execution of a written waiver of notice executed by the person entitled to the
3
<PAGE>
notice. The waiver may be signed before or after the time stated in the
notice.
Persons Entitled to Call Special Meetings
2.09. (1) Special meetings of the shareholders, for any purpose whatsoever,
may be called at any time by any of the following:
(a) the President;
(b) the Board of directors;
(c) the holders of at least One percent of all the
shares entitled to vote at the proposed special
meeting;
(2) Any person or persons entitled under Subparagraph (1) above to
call a special meeting of shareholders may do so only by written request sent
by registered mail or delivered in person to the President or Secretary. The
officer receiving the written request shall within ten days from the date of
its receipt cause notice of the meeting to be given in the manner provided in
Paragraph 2.07 of these Bylaws to all shareholders entitled to vote at the
meeting. If the officer does not give notice of the meeting within ten days
after the date of receipt of the written request, the person or persons
calling the meeting may fix the time of meeting and give the notice in the
manner provided in Paragraph 2.07 of these Bylaws. Nothing contained in this
section shall be construed as limiting, fixing, or affecting the time ordate
when a meeting of shareholders called by action of the Ecard of Directors may
be held.
Quorum of Shareholders
2.10. (1) The presence in person or by proxy of the persons entitled to vote
a majority of the voting shares at any meeting constitutes a quorum for the
transaction of business.
Adjournment for Lack or Loss of Quorum
(2) In the absence of a quorum or the withdrawal of enough
shareholders to leave less than a quorum, any meeting of shareholders may be
adjourned from time to time by the vote of a majority of the shares, the
holders of which are either present in person or represented by proxy thereat,
but no other business may be transacted.
Determination of Eligible Shareholders
2.11. (1) For the purpose of determining shareholders entitled to notice of
or to vote at any meeting of shareholders or any adjournment thereof, or
entitled to receive distribution (other than a purchase or redemption of any
of the corporation's shares) or a share dividend, or in order to make a
determination of shareholders for any other proper purpose, the board of
directors may provide that the share transfer books shall be closed for a
stated period not to exceed, in any case, sixty days. If the transfer books
shall be closed for the purpose of determining shareholders, such books shall
be closed for at least ten days immediately preceding such meeting.
4
<PAGE>
Record Date for Determination of Shareholders
(2) In lieu of closing the share transfer books, the Board of
Directors may fix in advance a date as the record date for any determination
of shareholders, such date in any case to be not more than sixty days and, in
case of a meeting of shareholders, not less than ten days prior to the date on
which the action requiring that determination of shareholders is to be taken.
Date of Notice or Resolution for Dete=ination of Shareholders
(3) If the share transfer books are not closed and no record date is
fixed for the determination of shareholders entitled to notice of or to vote
at a meeting of shareholders, or shareholders entitled to receive a
distribution (other than a distribution involving a purchase or redemption by
the corporation of any of its own shares) or a share dividend, the date on
which notice of the meeting is mailed or the date on which the resolution of
the ]Board of Directors declaring the distribution or share dividend is
adopted, as the case may be, is the record date for determination of
shareholders.
Adjourned Meetings
(4) When any determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this Paragraph, that
determination shall apply to any adjournment thereof except when the
determination has been made through closing of the transfer books and the
stated period of closing has expired, in which case the Board of Directors
shall make a new determination as hereinbefore provided.
Distributions Held in Suspense or Paid into Escrow
(5) Distributions of cash or property (tangible or intangible)
made or payable by the corporation, whether in liquidation or from earnings,
profits, assets, or capital, including all distributions that were payable but
not paid to the registered owner of the shares, his or her heirs, successors,
or assigns but that are now being held in suspense by the corporation or that
were paid or delivered by the corporation into an escrow account or to a
trustee or custodian, shall be payable by the corporation, escrow agent,
trustee, or custodian to the person registered as owner of the shares in the
corporation's stock transfer books as of the record date determined for that
distribution as provided in Paragraph 2. 11, or to his or her heirs,
successors, or assigns. The person in whose name the shares are or were
registered in the stock transfer books of the corporation as of the record
date shall be deemed to be the owner of the shares registered in his or her
name at the time. Neither the corporation nor any of its Directors, officers,
or agents shall be under any liability for making such a distribution to a
person in whose name shares were registered in the stock transfer books as of
the record date or to the heirs, successors, or assigns of that person, even
though the person, or his or her heirs, successors, or assgns, may not possess
a certificate for shares.
5
<PAGE>
Voting List
2.12. At least ten days before each meeting of shareholders, the officer or
agent having charge of the stock transfer books for shares of the corporation
shall make a complete list of the shareholders entitled to vote at that
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each. The list shall be kept on
file at the Principal office of the corporation for a period of ten days prior
to the meeting, and shall be subject to inspection by any shareholder at any
time during usual business hours. The list shall also be produced and kept
open at the time and place of the meeting and shall be subject, during the
whole time of the meeting, to the inspection of any shareholder. The original
share transfer books shall be prima facie evidence as to the shareholders
entitled to examine such list or transfer books or to vote at any meeting of
shareholders. However, failure to prepare and to make the list available in
the manner provided above shall not affect the validity of any action taken at
the meeting.
Votes Per Share
2.13. Each outstanding share, regardless of class, shall be entitled to
One vote on each matter submitted to a vote at a meeting of shareholders.
Number of Votes Necessary to Take Action
2.14. The vote of the holders of a majority of the shares entitled to vote
and represented at a meeting at which a quorum is present shall be the act of
the shareholders, meeting.
Voting by Voice and Ballot
2.15. Elections for Directors need not be by ballot unless a shareholder
demands election by ballot at the election and before the voting begins.
2.16. (1) Shares standing in the name of another corporation, domestic or
foreign (including a foreign corporation without a permit to do business in
the state of Alabama), may be voted by that officer, agent, or proxy as the
bylaws of that other corporation may authorize, or in the absence of such
authorization, as the board of directors of that corporation may determine.
Administrators, Executors, Guardians, and Conservators as
Shareholders
(2) Shares held by an administrator, executor, guardian, or
conservator may be voted by that person without a transfer of the shares
into his or her name, provided those shares form a part of the estate and
are in the possession of that person. The shares may be voted either in
person or by proxy.
Trustees as Shareholders
(3) Shares standing in the name of a trustee may be voted by that
trustee, either in person or by proxy, but only if the shares to be voted are
in his name as trustee.
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Receivers as Shareholders
(4) Shares standing in the name of a receiver may be voted by that
receiver. Shares held by or under the control of a receiver may be voted by
that receiver without the transfer thereof into his or her name if authority
to do so is contained in an appropriate order of the court by which that
receiver was appointed.
Pledged Shares
(5) A shareholder whose shares are pledged shall be entitled to vote
those shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the transferred
shares.
Proxies
2.17. A Shareholder may vote either in person or by proxy executed in writing
by the shareholder or by his duly authorized attorney in fact. No proxy shall
be valid after eleven months from the date of its execution, unless otherwise
provided in the proxy. Each proxy shall be revocable unless the proxy form
conspicuously states that the proxy is irrevocable and the proxy is coupled
with an interest. Proxies coupled with an interest include the appointment as
proxy of (1) a pledgee; (2) a person who purchased or agreed to purchase, or
owns or holds an option to purchaze, the shares; (3) a creditor of this
corporation who extended it credit under terms requiring the appointment; (4)
an employee of this corporation whose employment contract requires the
appointment; or (5) a party to a voting agreement created under Article 2.30
of the Business Corporation Act and Paragraph 2.20 of these bylaws.
Voting Trusts
2.18. Any number of shareholders of this corporation may create a voting
trust for the purpose of conferring upon trustees the right to vote or
otherwise represent their shares. The members of the voting trust must enter
into a written voting trust agreement transferring their shares to the
trustees, and specifying the terms and conditions of the voting trust. A
counterpart of the agreement must be deposited at this corporation's
registered office. The counterpart of the agreement will be subject to the
same right of examination by any shareholder of the corporation, in person or
by agent or attorney, as the rest of the books and records of the corporation,
and will be subject to examination by any holder of a beneficial interest in
the voting trust, either in person or by agent or attorney, at any reasonable
time for any proper purpose.
Voting Agreement
2.19. Any number of shareholders of this corporation may enter into a voting
agreement in writing for the purpose of voting their shares as a unit, in the
manner prescribed in the agreement, on any matter submitted to a vote at any
shareholders' meeting. A counterpart of the agreement must be deposited at
this corporation's principal office. The counterpart of this agreement will
be subject to the same right of examination by any shareholder of the
corporation, in person or by agent or attorney, as the rest of the books and
records of the corporation. Each certificate representing shares held by the
parties to the agreement shall contain a statement that the shares represented
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by the certificate are subject to the provisions of a voting agreement, a
counterpart of which has been deposited with the corporation at its principal
office.
2.20. Appointment of Inspectors of Election
2.21. (1) In advance of any meeting of shareholders, the Board of Directors
may appoint any persons, other than nominees for office, as inspectors of
election to act at that meeting or any adjournment thereof. If inspectors of
election are not appointed, the chairman on the request of any shareholder or
shareholder's proxy shall, appoint inspectors of election at the meeting. The
number of inspectors shall be either one or three. If appointed at a meeting
on the request of one or more shareholders or proxies, the majority of shares
present shall determine whether one or three inspectors are to be appointed.
In case any person appointed as inspector fails to appear or fails or refuses
to act, the vacancy may be filled by appointment by the Board of Directors in
advance of the meeting, or at the meeting by the person acting as chairman.
Duties of Inspectors
(2) The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, and the authenticity, validity, and effect
of proxies. The inspectors shall also receive votes, ballots, or consents,
hear and determine all challenges and questions in any way arising in
connection with the right to vote, count and tabulate all votes or consents,
determine the result, and to such acts as may be proper to conduct the
election or vote with fairness to all shareholders. The inspectors of
election shall perform their duties impartially, in good faith, to the best of
their ability, and as expeditiously as is practical.
Vote of Inspectors
(3) If there are three inspectors of election the decision, act, or
certificate of a majority is effective in all respects as the decision, act,
or certificate of all.
Report of Inspectors
(4) On request of the chairman of the meeting or of any shareholder or
his proxy the inspectors shall make a report in writing of any challenge or
question or matter determined by them and execute a certificate of any fact
found by them. Any report or certificate made by them is prima facie evidence
of the facts stated therein.
ARTICLE THREE DIRECTORS
Directors Defined
3.01. "Directors," when used in relation to any power or duty requiring
collective action, means "Board of Directors."
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Powers
3.02. The business and affairs of the corporation and ail corporate powers
shall be exercised by or under authority of the Board of Directors, subject to
limitation imposed by the Alabama Business Corporation Act, the articles of
incorporation, or these bylaws as to action that requires authorization or
approval by the shareholders.
Number of Directors
3.03. Directors, who shall be divided in 3 (Three) classes. There shall be 1
(one) Directors in the first class, who shall hold office until the first
annual meeting of shareholders after thier election and until their successors
are elected and qualified; there shall be 2 (two) Directors in the second
class, who shall hold office until the second annual meeting of shareholders
after thier election and until their successors are elected and qualified;
there shall be 3 (three) Directors in the third class, who shall hold office
until the third annual meeting of shareholders after election and until their
successors are elected and qualified.
Term of Office
3.04. The Director named in the articles shall hold office until the first
annual meeting of shareholders and until his or her successors are elected and
qualified, either at an annual or a special meeting of shareholders.
Directors, other than those named in the articles, shall hold office until the
next annual meeting and until their successors are elected and qualified.
3.05. (1) Vacancies on the Board of Directors shall exist in the case of the
occurrence of any of the following events: (a) the death, resignation, or
removal of any Director; (b) the authorized number of Directors is increased;
or (c) at any annual, regular, or special meeting of shareholders at which any
Director is elected, the shareholders fail to elect the full authorized number
of Directors to be voted for at that meeting.
Declaration of Vacancy
(2) The Board of Directors may declare vacant the office of a Director
in either of the following cases: (a) if the director is adjudged incompetent
by an order of court, or finally convicted of a felony; or (b) if within sixty
(60) days after notice of election, the director does not accept the office
either in writing or by attending a meeting of the Board of Directors.
Filling Vacancies by Directors
(3) Vacancies other than those caused by an increase in the number of
Directors may be filled by a majority of the remaining Directors, though less
than a quorum, or by a sole remaining Director. Each Director so elected
shall hold office until his successor is elected at an annual, regular, or
special meeting of the shareholders.
Filling Vacancies by Shareholders
(4) Any vacancy caused by an increase in the number of Directors shall
be filled by the shareholders at an annual meeting or at a special meeting
called for that purpose. The shareholders may also elect a Director at any
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time to fill any vacancy not filled by the Directors. If the Board of
Directors accepts the resignation of a Director tendered to take effect at a
future time, the Board or the shareholders may elect a successor to take
office when the resignation becomes effective.
Reduction of Authorized Number of Directors
(5) A reduction of the authorized number of Directors shall not
remove any Director prior to the expiration of that Director's term of office.
Removal of Directors
3.06. The entire Board of Directors or any individual Director may be removed
from office by a vote of shareholders holding a majority of the outstanding
shares entitled to vote at an election of Directors. No director may be
removed except at an election of the class of Directors of which he is a part.
If any or all directors are so removed, new Directors may be elected at the
same meeting. Whenever a class or series of shares is entitled to elect one
or more Directors under authority granted by the articles, the provisions of
this Paragraph apply to the vote of that class or series and not to the vote
of the outstanding shares as a whole.
Place of Meetings
3.07. Regular meetings of the Board of Directors shall be held at any place
within or without the state of Alabama that may be designated from time to
time by resolution of the Board or by written consent of all members of the
Board. In the absence of such designation, regular meetings shall be held at
the Principal office of the corporation. Special meetings of the Board may be
held either at a place so designated or at the Principal office. Any regular
or special meeting is valid, wherever held, if held on written consent of all
members of the Board given either before or after the meeting and filed with
the Secretary of the corporation.
Regular Meetings
3.08. (1) Regular meetings of the Board of Directors shall be held at 10:00
on the First Monday of each month, or at such other time and place as shall
from time to time be determined by the Board.
Call of Regular Meetings
(2) All regular meetings of the Board of Directors of this corporation
shall be called by the President, or, if he is absent or is unable or refuses
to act, by any Vice President or by any two Directors.
Notice of Regular Meetings
(3) Written notice of the time and place of the regular meetings of
the board of directors shall be delivered personally to each Director, or sent
to each Director by mail or by other form of written communication at least
seven days before the meeting. If the address of a Director is not shown on
the records and is not readily ascertainable, notice shall be addressed to
that director at the city or place in which the meetings of the Directors are
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regularly held. Notice of the time and place of holding an adjourned meeting
need not be given to absent Directors if the time and place are fixed at the
meeting adjourned.
Validation of Meeting Defectively Called or Noticed
(4) The transactions of any meeting of the Board of Directors, however
called and noticed or wherever held, are as valid as though made at a meeting
duly held after regular call and notice, if a quorum is present and if, either
before or after the meeting, each of the Directors not present signs a waiver
of notice, a consent to holding the meeting, or an approval of the minutes
thereof. All waivers, consents, or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance by
a Director at a meeting shall constitute a waiver of notice of the meeting,
unless the express purpose of the attendance is to present the objection that
the meeting is not lawfully called or convened.
Call of Special Meeting
3.09. (1) Special meetings of the Board of Directors of this corporation shall
be called by the President, or, if he is absent or is unable or refuses to
act, by any Vice President or by any two Directors.
Notice of Special Meeting
(2) Written notice of the time, place, and purpose of special meetings
of the Board of Directors shall be delivered personally to each Director, or
sent to each Director by mail or by other form of written communication, at
least seven days before the meeting. If the address of a Director is not
shown on the records and is not readily ascertainable, notice shall be
addressed to him at the city or place in which the meetings of the Directors
are regularly held. Notice of the time and place of holding an adjourned
meeting need not be given to absent Directors if the time and place are fixed
at the meeting adjourned.
Quorum
3.10. A majority of the authorized number of Directors constitutes a quorum
of the Board for the transaction of business.
Majority Action
3.11. Every act or decision done or made by a Simple percent majority of the
Directors present at any duly held meeting at which a quorum is present is an
act of the Board of Directors. Each Director who is present at a meeting will
be deemed to have assented to any action taken at such meeting uniess the
Director's dissent to the action is entered in the minutes of the meeting, or
unless the Director shall file a written dissent thereto with the Secretary of
the meeting or shall forward that dissent by registered mail to the Secretary
of the corporation immediately after the meeting.
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Action by Consent of Board Without Meeting
3.12. Any action required or permitted to be taken by the Board of Directors
under any provision of the Alabama Business Corporation Act may be taken
without a meeting, if all members of the Board shall individually or
collectively consent in writing to the action. The written consent or
consents shall be filed with the minutes of the proceedings of the Board. Any
action by written consent shall have the same force and effect as a unanimous
vote of those consenting Directors. Any certificate or other document filed
under any provision of the Alabama Business Corporation Act that relates to
action so taken shall state that the action was taken by unanimous written
consent of the Board of Directors without a meeting and that these bylaws
authorize the Directors to so act, and that statement shall be prima facie
evidence of such authority.
Adjournment
3.13. (1) In the absence of a quorum a majority of the Directors present
may adjourn from time to time until the time fixed for the next regular
meeting of the Board.
Notice of Adjourned Meeting
(2) Notice of the time and place of holding an adjourned meeting need
not be given to absent Directors if the time and place are fixed at the
meeting adjourned.
Conduct of Meetings
3.14. At every meeting of the Board of Directors, the Chairman of the Board
of Directors, if there is such an officer, and if not, the President, or in
the President's absence, a Vice President designated by the President, or in
the absence of such designation, a chairman chosen by a majority of the
Directors present, shall preside. The Secretary of the corporation shall act
as Secretary of the Board of Directors. In case the Secretary shall be absent
from any meeting, the chairman may appoint any person to act as Secretary of
the meeting.
Telephone Meetings
3.15. Subject to the provisions for notice required by these Bylaws and the
Business Corporation Act for notice of meetings, Directors may participate in
and hold a meeting by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each
other. Participation in the meeting shall constitute presence in person at
the meeting, except when a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
Compensation
3.16. Directors shall receive such compensation for their services as
Directors as shall be determined from time to time by resolution of the Board.
Any Director may serve the corporation in any other capacity as an officer,
agent, employee, or otherwise and receive compensation therefor.
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Indemnification of Directors and Officers
3.17. The Board of Directors shall authorize the corporation to pay or
reimburse any present or former director or officer of the corporation any
costs or expenses actually and necessarily incurred by that officer in any
action, suit, or proceeding to which the officer is made a party by reason of
holding that position, provided, however, that the officer shall not receive
indemnification if he or she is finally adjudicated therein to be liable for
negligence or misconduct in office. The indemnification herein provided shall
also extend to good faith expenditures incurred in anticipation of, or
preparation for, threatened or proposed litigation. The Board of Directors
may, in proper cases, extend the indemnification to cover the good faith
settlement of any such action, suit, or proceeding, whether formally
instituted or not.
Insurance or Other Arrangement on Directors, Officers, or
Employees
3.18. The corporation may purchase and maintain insurance or other
arrangement on behalf of any person who is or was a Director, officer,
employee, or agent of the corporation or who is or was serving at the request
of the corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign or
domestic corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan, or other enterprise, against any liability asserted
against him or her and incurred by him or her in such a capacity or arising
out of his or her status as such a person, whether or not the corporation
would have the power to indemnify him or her against that liability under
Business Corporation Act Article 2.02-1. If the insurance or other
arrangement is with a person or entity that is not regularly engaged in the
business of insurance coverage, the insurance or arrangement may provide for
payment of a liability with respect to which the corporation would not have
the power to indemnify the person only if including coverage for the
additional liability has been approved by the shareholders. Without limiting
the corporation's power to procure or maintain any kind of insurance or other
arrangement, the corporation may, for the benefit of persons it has
indemnified, (1) create a trust fund; (2) establish any form of self-insurance;
(3) secure its indemnity obligation by grant of a security interest
or other lien on the corporation's assets; or (4) establish a letter of
credit, guaranty, or surety arrangement. The insurance or other arrangement
may be procured, maintained, or established within the corporation or with any
insurer or other person deemed appropriate by the Board of directors
regardless of whether all or part of the stock or other securities of the
insurer or other person are owned in whole or in part by the corporation. In
the absence of fraud, the judgment of the Board of Directors as to the terms
and conditions of the insurance or other arrangement and the identity of the
insurer or other person participating in an arrangement shall be conclusive,
and the insurance or arrangement to liability, on any ground, regardless of
whether Directors participating in the approval are beneficiaries of the
insurance or arrangement.
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Interested Directors
3.19. Any contract or other transaction between the corporation and any of
its Directors (or any corporation or firm in which any of its Directors is
directly or indirectly interested) shall be valid for all purposes
notwithstanding the presence of that Director at the meeting during which the
contract or transaction was authorized, and notwithstanding the Director's
participation in that meeting. The foregoing shall apply only if the interest
of each Director is known or disclosed to the Board of Directors and the Board
nevertheless authorizes or ratifies the contract or transaction by a majority
of the Directors present. Each interested Director is to be counted in
determining whether a quorum is present, but not in calculating the majority
necessary to carry the vote. The foregoing shall also apply only if the
contract or transaction is just and reasonable to the corporation at the time
it is authorized and ratified. this section shall not be construed to
invalidate any contract or transaction that would be valid in the absence of
this paragraph.
Board Committees--Authority to Appoint
3.20. (1) The Board of Directors may, by resolution adopted by a majority
of the authorized number of directors, designate an executive committee and
one or more other committees to conduct the business and affairs of the
corporation, to the extent authorized by the resolution. The Board of
Directors, by a majority vote, shall have the power at any time to change the
powers and members of any committees to fill vacancies, and to dispose of any
committee. Members of any committee shall receive such compensation as the
Board of directors may from time to time provide. The designation of any
committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed
by law.
Authority of Executive and Other Conanittees
(2) Any committee referred to in Section 3.20, above, to the extent
provided by resolution, shall have all the authority of the Board, except with
respect to the following:
(a) Amending the Articles of Incorporation;
(b) Approving a plan of merger or consolidation;
(c) Recommending to the shareholders the sale, lease, or
exchange of all or substantially all of the property and
assets of the corporation otherwise than in the usual course
of its business;
(d) Recommending to the shareholders a voluntary dissolution of
the corporation or a revocation thereof;
(e) Amending, altering, or repealing these Bylaws or adopting
new Bylaws;
(f) Filling vacancies in the Board of Directors or any committee
of the Board;
(g) Filling any directorship to be filled by reason of an
increase in the number of directors;
(h) Electing or removing officers or members of any Board
committee;
(i) Fixing the compensation of any member of any Board committee;
(j) Altering or repealing any resolution of the Board of
Directors that by its terms provides that it shall not be
so amended or repealed; and
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(k) Authorizing the issuance of shares of the corporation or
declaring a dividend, unless a resolution of the Board
of Directors, or the Articles of Incorporation or Bylaws
expressly authorize these actions.
ARTICLE FOUR OFFICERS
Number and Titles
4.01. The officers of the corporation shall be a President, a Vice President,
a Secretary and a Treasurer. The corporation may also have, at the discretion
of the Board of Directors, a Chairman of the Board, one or more additional
Vice Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Paragraph 4.03 of this Article. One person may hold two or more
offices.
Election
4.02. The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Paragraph 4.03 or Paragraph
4.05 of this Article, shall be chosen annually by the Board of Directors, and
each shall hold office until he or she shall resign or shall be removed or
otherwise disqualified to serve, or a successor shall be elected and
qualified.
Subordinate Officers
4.03. The Board of Directors may appoint such other officers or agents as the
business of the corporation may require, each of whom shall hold office for
such period, have such authority, and perform such duties as are provided in
these bylaws or as the Board of Directors may from time to time determine.
The Board of Directors may delegate to any officer or committee the power to
appoint any subordinate officers, committees, or agents, to specify their
duties, and to determine their compensation.
Removal and Resignation
4.04.Any officer may be removed, either with or without cause, by a majority
of the Directors, at any regular or special meeting of the Board, or, except
in case of an officer chosen by the Board of Directors, by any committee or
officer upon whom that power of removal may be conferred by the Board of
Directors, provided, however, that the removal shall be without prejudice to
the contract rights, if any, of the person removed. Any of'Licer may resign
at any time by giving written notice to the Bcard of Directors, the President,
or the Secretary of the corporation. Any resignation shall take effect at the
date of the receipt of that notice or at any later time specified therein,
and, unless otherwise specified therein, the acceptance of that resignation
shall not be necessary to make it effective.
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Vacancies
4.05. If the office of the President, Secretary, Treasurer, Assistant
Secretary (if any), or Assistant Treasurer, (if any) becomes vacant by reason
of death, resignation, removal, or otherwise, the Board of Directors shall
elect a successor who shall hold office for the unexpired term, and until a
successor is elected.
Chairman of the Board
4.06. The Chairman of the Board, if there shall be such an officer, shall, if
present, preside at all meetings of the Board of ]Directors and exercise and
perform such other powers and duties as may be from time to time assigned to
the Chairman by the Board of directors or prescribed by the bylaws.
President
4.07. Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the Chairman of the Board, if there be such an officer,
the President shall be the chief executive officer of the corporation and
shall, subject to the control of the Board of Directors, have general
supervision, direction, and control of the business and officers of the
corporation, and shall have the general powers and duties as may be prescribed
by the Board of Directors or the bylaws. Within this authority and in the
course of his duties the President shall:
Conduct Meetings
(1) Preside at all meetings of the shareholders and in the absence of
the Chairman of the Board, or, if there is nune, at all meetings
of the Board of Directors, and shall be ex officio a member of
all the standing committees, including the executive committee,
if any.
Sign Share Certificates
(2) Sign all certificates of shares of the corporation, in
conjunction with the Secretary or Assistant Secretary, unless
otherwise ordered by the Board of Directors. The President's
signature on the certificates may be facsimile if the
certificates are countersigned by a transfer agent or registered
by a registrar, neither of which is the corporation itself or any
employee of the corporation.
Execute Instruments
(3) When authorized by the Board of Directors or required by
law, execute, in the name of the corporation deeds, conveyances,
notices, leases, checks, drafts, bills of exchange, warrants,
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promissory notes, bonds, debentures, contracts, and other papers
and instruments in writing, and, unless the Board of Directors
shall order otherwise by resolution, make such contracts as the
ordinary conduct of the corporation's business may require.
Hire and Fire Employees
(4) Appoint and remove, employ and discharge, and prescribe the
duties and fix the compensation of all agents, employees, and
clerks of the corporation other than the duly appointed
officers, subject to the approval of the Board of Directors,
and control, subject to the direction of the Board of Directors,
all of the officers, agents, and employees of the corporation.
Meetings of Other Corporations
(5) Unless otherwise directed by the Board of Directors, attend all
meetings of the shareholders of any corporation in which this
corporation holds stock, and act and vote on behalf of the
corporation at those meetings. The President may attend in
person or by substitute appointed by the President or Vice
President and the Secretary or Assistant Secretary.
Vice President
4.08. In the absence or disability of the President, the vice Presidents, in
order of their rank as fixed by the Board of Directors or, if not ranked, the
Vice President designated by the Board of Directors, shall perform all the
duties of the President, and when so acting shall have all the powers of, and
be subject to all the restrictions on, the President. The Vice Presidents
shall have such other powers and perform such other duties as from time to
time may be prescribed for them respectively by the Board of Directors or the
bylaws.
Secretary
4.09. The Secretary shall:
Sign Share Certificates
(1) Sign, with the President or a Vice President, certificates
for shares in the corporation. An Assistant Secretary may sign
the certificates instead of the Secretary. The Secretary's
signature on the certificates may be facsimile if the certificates
are countersigned by a transfer agent or registered by a registrar,
neither of which is the corporation itself or any employee of the
corporation.
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Bylaws
(2) Attest and keep at the principal office of the corporation
the original or a copy of these Bylaws as amended or otherwise
altered to date.
Articles of incorporation
(3) Keep the original or a copy of the Articies of Incorporation,
certified by the secretary of state, with all amendments thereof
to date in the minute book.
Minutes of Meetings
(4) Keep at the principal office of the corporation or such other
place as the Board of Directors may order, a book of minutes of
all meetings of its Directors and Shareholders, executive
committee, and other committees. The minutes shall show the time
and place of the meeting, whether regular or special, and if
special, how authorized, the notice thereof given, the names
of those present at directors' meetings, the number of shares or
member present or represented at shareholders, meetings. and the
proceedings thereof.
Notices
(5) See that all notices are duly given in accordance with the
provisions of these Bylaws or as required by the law. In case
of the absence or disability of the Secretary, or the Secretary's
refusal or neglect to act, notice may be given and served by an
Assistant Secretary or by the President or Vice President or by
the Board of Directors.
Custodian of Records and Seal
(6) Be custodian of the records and of the seal of the
corporation and see that it is engraved, lithographed, printed,
stamped, impressed upon, or affixed to all certificates for shares
prior to their issuance and to all documents, the execution of
which on behalf of the corporation under its seal is duly
authorized in accordance with the provisions of these bylaws.
Sign or Attest Documents
(7) Sign or attest any documents as required by law or the
business of the corporation and affix the corporate seal to
instruments when necessary or proper.
Share Register
(8) Keep at the principal office of the corporation a share
register or duplicate share register showing the names of
the shareholders and their addresses; the number, date of issue,
and class of shares represented by each outstanding share
certificate; and the number and date of cancellation of
each certificate surrendered fir cancellation.
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Reports and Statements
(9) See that the books, reports, statements, certificates, and all
other documents and records required by law are properly kept
and filed.
Exhibit Records
(10) Exhibit at all reasonable times to any Director, on written
demand stating the purpose thereof of any person who has been a
shareholder of record for at least six months immediately
preceding the demand or who is the holder of record of at least
5 percent of all of the outstanding shares of the corporation,
the bylaws, the share register, and minutes of proceedings of the
shareholders and Directors of the corporation.
Other Duties
(11) In general, perform all duties incident to the office of
Secretary, and such other duties as from time to time may be
assigned to him or her by the Board of Directors.
Absence of Secretary
(12) In case of the absence or disability of the Secretary or the
Secretary, or if there be none, the Treasurer, acting as
Assistant Secretary, may perform all of the functions of the
Secretary. In the absence or inability to act, or refusal or
neglect to act of the Secretary, Assistant Secretary, and
Treasurer any person thereunto authorized by the President or
Vice President or by the Board of Directors may perform the
functions of the Secretary.
Assistant Secretary
4.10. At the request of the Secretary, or in the Secretary's absence or
disability, the Assistant Secretary, designated as set fourth in preceding
Subparagraph 4.10 (12) of these bylaws shall perform all the duties of the
Secretary, and when so acting, the Assistant Secretary shall have all the
powers of, and be subject to all the restrictions on, the Secretary. The
Assistant Secretary shall perform such other duties as from time to time may
be assigned to him or her by the Board of Directors or the Secretary.
Treasurer
4.11. The Treasurer shall:
Funds - Custody and Deposit
(1) Have charge and custody of, and be responsible for, all funds and
securities of the corporation, and deposit all funds in the name
of the corporation in those banks, trust companies, or others
depositories that shall be selected by the Board of Directors.
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Funds - Receipt
(2) Receive, and give receipt for, moneys due and payable to the
corporation from any source whatever.
Funds - Disbursements
(3) Disburse or cause to be disbursed the funds of the corporation as
may be directed by the Board of Directors, taking proper vouchers
for those disbursements.
Maintain Accounts
(4) Keep and maintain adequate and correct accounts of the
corporations's properties and business transactions including
account of its assets, liabilities, receipts, disbursements, gains,
losses, capital, surplus, paid-in surplus, and surplus arising from
a reduction of stated capital, shall be classified according to
source and shown in a separate account.
Exhibit Records
(5) Exhibit at all reasonable times the books account and records to
any Director on application, or to any person who has been a
shareholder of record for at least six months immediately
preceding his demand or who is the holder of record of at least
5 percent of all the outstanding shares of the corporation, on
written demand stating the purpose thereof, during business
hours at the office of the corporation where such books and
records are kept.
Reports to President and Directors
(6) Render to the President and Directors, whenever they request it,
an account of all his or her transaction as Treasurer and of the
financial condition of the corporation.
Financial Report to Shareholders
(7) Prepare, or cause to be prepared, and certify the financial
statements to be included in the annual report to shareholders and
statements of the affairs of the corporation when requested by
shareholders holding at least 10 percent of the number of
outstanding shares of the corporation.
19
<PAGE>
Bond
(8) If required by the Board of Directors or the President, give the
corporation a bind to assure the faithful performance of the
duties of the Treasurer's office and the restoration to the
corporation of all corporate books, papers, vouchers, money,
and other property of whatever kind in the Treasurer's
possession or control, in case of the Treasurer's death,
resignation, retirement or removal from office. Such
a bond must be in a sum satisfactory to the Board of Directors,
with one or more sureties or a surety company satisfactory to
the Board of Directors.
Other Duties
(9) In general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be
assigned to the Treasurer by the Board of Directors.
Absence of Treasurer
(10) In case of the absence or disability of the Treasurer or the
Treasurer's refusal or neglect to act, the Assistant Treasurer
or the Secretary acting as Assistant Treasurer may perform all
of the functions of the Treasurer, In the absence or inability
to act, or refusal or neglect to act, of the Treasurer, the
Assistant Treasurer, and the Secretary, any person thereunto
authorized by the President or Vice President or by the Board of
Directors may perform the functions of the Treasurer.
Assistant Treasurer
4.12. The Assistant Treasurer, if required to do so by the Board of
Directors, shall give bond for the faithful discharge of the duties of the
Assistant Treasurer, in such sum, and with such sureties as the Board of
Directors shall require, St the request of the Treasurer, or in the
Treasurer's absence or disability, the Assistant Treasurer designated as set
forth in preceding Subparagraph 4.11 (10 of these bylaws shall perform all the
duties of the Treasurer, and when so acting, shall have all the powers of, and
be subject to all the restrictions on, the Treasurer. The Assistant Treasurer
shall perform such other duties as from time to time may be assigned to him or
her by the Board of Directors or the Treasurer.
Salaries
4.13.The salaries of the officers shall be fixed from time to time by the
Board of Directors, and no officer shall be prevented from receiving a salary
by reason of the fact that the officer is also a Director of the corporation.
20
<PAGE>
ARTICLE FIVE EXECUTION OF INSTRUMENTS
AND DEPOSIT OF FUNDS
Authority for Execution of Instruments
5.01. The Board of Directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, agent or agents, to enter into any
contract or execute and deliver any instrument in the name of and on behalf of
the corporation, and that authority may be general or confined to specific
instances, and unless authorized, no officer, agent, or employee shall have
any contract or engagement or to pledge its credit or to tender it liable
pecuniarily for any purpose or in any amount.
Execution of Instruments
5.02. Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, formal contracts of the corporation, promissory
notes, deeds of trust, mortgages and other evidences of indebtedness of the
corporation, other 7orporate instruments or documents, and certificates of
shares of stock owned by the corporation shall be executed, signed, or
endorsed by the President or any Vice President and by the Secretary or
theTreasurer, or any Assistant Secretary or Assistant Treasurer, and may have
the corporate seal affixed thereto.
Bank Accounts and Deposits
5.03. (1) All funds of the corporation shall be deposited from time to time
to the credit of the corporation with such banks, trust companies, or other
depositories as the Board of Directors may select or as may be selected by any
officer or officers, agent or agents of the corporation to whom that power may
be delegated from time to time by the Board of Directors.
Endorsement Without Countersignature
(2) Endorsements for deposit to the credit of the corporation in any of
its duly authorized depositories may be made without countersignature by the
President or any Vice President, or the Treasurer or any Assistant Treasurer,
or by any other officer or agent of the corporation to whom the Board of
Directors. by resolution, shall have delegated that power, or by hand stamped
impression in the name of the corporation.
Signing of Instruments
(3) All checks, drafts or other order for payment if money, notes or
other evidences of indebtedness, issued in the name of or payable to the
corporation, shall be signed or endorsed by such person or persons and in such
manner as shall be determined form time to time by resolution of the Board of
Director.
21
<PAGE>
ARTICLE SIX ISSUANCE AND TRANSFER OF
SHARES
Classes and Series Of Shares
6.01. The corporation may issue one or more classes or series of shares, or
both, any of which classes or series may be with par value or without par
value and with full, limited, or no voting rights, and with such other
preferences, rights, privileges, and restrictions as are stated or authorized
in the Articles of Incorporation. All shares of any one class shall have the
same voting rights, conversion, redemption and other rights, preferences,
privileges, and restrictions, unless the class is divided into series. If
a class is divided into series, all the shares of any one series shall have
the same voting rights, conversion, redemption, and other rights, preferences,
privileges, and restrictions. There shall always be a class or series of
shares outstanding that has complete voting rights except as limited or
restricted by voting rights conferred on some other class or series of
outstanding shares.
Certificates for Fully Paid Shares
6.02. Neither shares nor certificates representing shares may be issued by
the corporation until the full amount of the consideration has been paid.
When the consideration has been paid to the corporation, the shares shall be
deemed to have been issued and the certificate representing the shares shall
be issued to the shareholder.
Consideration for Shares
6.03. The consideration paid for the issuance of shares shall consist of
money paid, labor done, or property actually received, and neither promissory
notes nor the promise of future services shall constitute payment or part
payment for shares of the corporation.
Compliance with Corporate Securities Law
6.04. The corporation shall not sell or offer to sell any security issued by
it, whether or not through underwriters, until that offer or sale has been
qualified by the Alabama Securities Commissioner as required by the Alabama
Securities Act and the rules and regulations of the Commissioner, unless the
security or transaction is exempted from qualification and the applicable
statutes and rules and regulations have been complied with.
Contents of Share Certificates
6.05. (1) Certificates for shares shall be of such form and style, printed
or otherwise, as the Board of directors may designate, and each certificate
shall state all of the following facts:
(a) That the corporation is organized under the laws of the State
of Alabama;
(b) The name of the person to whom issued;
(c) The number and class of shares and the designation of the
series, if any, that the certificate represents; and
(d) The par value of each share represented by the certificate,
or a statement that the shares are without par value.
22
<PAGE>
Shares in Classes or Series
(2) If the corporation is authorized to issue shares of more than one
class, the certificate shall set forth, either on the face or back of the
certificate, a full or summary statement of all of the designations,
preferences, limitations, and relative rights of the shares of each class
authorized to be issued. If the corporation is authorized to issue any
preferred or special class in series, the statement must set forth the
variations among the relative rights and preferences of the shares of each
such series so far as the same have been fixed and determined, and the
authority of the Board of Directors to fix and determine the relative rights
and preferences of any subsequent series. In lieu of providing such a
statement in full on the certificate, a statement on the face or back of
the certificate may provide that the corporation will furnish this information
to any shareholder without charge upon written request to the corporation at
its principal place of business or registered office and that copies of the
information are on file in the of f ice of the Secretary of State.
Restriction on Transfer
(3) Any restrictions imposed by the corporation on the sale or
other disposition of its shares and on the transfer thereof must be copied at
length or in summary form on the face, or so copied on the back and referred
to on the face, of each certificate representing shares to which the
restriction applies. The certificate may, however, state on the face or back
that such a restriction exists pursuant to a specified document and that
the corporation will furnish a copy of the document to the holder of the
certificate without charge upon written request to the corporation at its
principal place of business.
Preemptive Rights
(4) Any preemptive rights of a shareholder to acquire unissued or
treasury shares of the corporation that are limited or denied by the Articles
of Incorporation must be set forth at length on the face or back of the
certificate representing shares subject thereto. In lieu of providing such a
statement in full on the certificate, a statement on the face or back of the
certificate may provide that the corporation will furnish the information to
any shareholder without charge upon written request to the corporation at its
principal place of business and that a copy of the information is on file in
the office of the Secretary of State.
Signing Certificates--Facsimile Signatures
6.06. All share certificates shall be signed by such officer or officers as
the bylaws of the corporation prescribe. The signatures of such officer or
officers may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar either of which is not the corporation
itself or an employee of the corporation. If the officer who has signed or
whose facsimile signature has been placed on the certificate has ceased to be
such officer before the certificate is issued, the certificate may be issued
by the corporation with the same effect as if he or she were such officer on
the date of its issuance.
23
<PAGE>
Fractional Shares or Scrip
Authority to Issue
6.07 (1) The corporation may, if the Board so determines, issue fractions
of shares. Fractional shares may be issued originally or on transfer.
Failure to Issue
(2) If the corporation does not issue fractions of shares, it must, in
connection with any original issuance of shares:
(a) Designate an agent to conduct a sale of fractional interests
on behalf of the shareholders, and to distribute the proceeds
prorata among those entitled thereto;
(b) Pay in cash the fair value of fractional interests as of the
time when the owners of those interests are determined
(provided, however, that the corporation may not pay cash for
fractional interests is that action would result in the
cancellation of more than 10 percent of the outstanding
shares of any class); or
(c) Issue scrip, in registered or bearer form, that shall entitle
the holder to receive a certificate for a full share or, if
otherwise allowable, an uncertified full share, on the
surrender of scrip aggregating a full share. Scrip shall
not entitle the holder to exercise voting rights, to receive
dividends thereon, or to participate in any of the assets of
the corporation in the event of liquidation, unless otherwise
stated on the scrip certificate. Any scrip issued shall become
void if not exchanged for certificates representing full
shares before the date specified on the scrip certificate.
Options--Authority to Adopt
6.08. (1) The corporation may, if so determined by the Board, and subject to
any restrictions or limitations in the Articles of Incorporation, grant
options to purchase shares of any class or series on such terms and conditions
as the Board may deem expedient. options may be issued in connection with the
issue, subscription, or sale of any of its shares, bonds, debentures, notes,
or other securities, or independently thereof. Option rights may be
transferable or nontransferable and separable or inseparable from other
securities of the corporation, as determined by the Board.
Requirements of Options
(2) The option must set forth the terms on which, the time or times
within which, and the price or prices at which the option shares may be
purchased from the corporation on exercise of the option.
24
<PAGE>
Transfer of Lost or Destroyed Shares
6.09. (1) When a share certificate has been lost, apparently destroyed, or
wrongfully taken and the owner fails to notify the corporation of that fact
within a reasonable time after noticing it, and the corporation registers a
transfer of the share represented by the certificate before receiving such a
notification, the owner is precluded from asserting against the corporation
any claim for registering the transfer or any claim to a new certificate.
Replacement of Lost or Destroyed Certificates
(2) When the holder of a share certificate claims that the certificate
has been lost, destroyed, or wrongfully taken, the corporation shall issue a
new certificate in place of the original certificate if the owner (a) requests
a new certificate before the corporation has notice that the share has been
acquired by a bona fide purchaser, (b) files with the corporation a sufficient
indemnity bond, and (c) satisfies any other reasonable requirements imposed by
the Board of Directors.
Transfer After Replacement
(3) If, after the issue of a new certificate as a replacement for a
lost, destroyed, or wrongfully taken certificate, a bona fide purchaser of the
original certificate presents it for registration of transfer, the corporation
must register the transfer unless registration would result in overissue. If
the registration of transfer would result in overissue, the corporation shall,
on request of the bona fide purchaser, purchase and deliver an identical
security to that purchaser against surrender of the certificate, if an
identical security is reasonable available. If an identical security is not
reasonably available, the corporation must, on request of the bona fide
purchaser, pay to that purchaser the price paid for the security, with
interest from the date of demand. In addition to any rights on the indemnity
bond, the corporation may recover the new security from the person to whom it
was issued or any person taken under him except a bona fide purchaser.
Transfer Agents and Registrars
6.10. The Board of Directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, at such times and places as the
requirements of the corporation may necessitate and the Board of Directors may
designate. The registrar shall be an incorporated bank or trust company,
either domestic or foreign.
Conditions of Transfer
6.11. A person in whose name shares of stock stand on the books of the
corporation shall be deemed the owner thereof as regards the corporation,
provided that whenever any transfer of shares shall be made for collateral
security, and not absolutely, and written notice thereof shall be given to the
Secretary of the corporation or its transfer agent, if any, such fact shall be
stated in the entry of the transfer.
25
<PAGE>
Reasonable Doubts as to Right to Transfer
6.12. When a transfer of shares is requested and there is reasonable doubt as
to the right of the person seeking the transfer, the corporation or its
transfer agent, before recording the transfer of the shares on its books or
issuing any certificate therefor, may require from the person seeking the
transfer reasonable proof of that person's right to the transfer. If there
remains a reasonable doubt of the right to the transfer, the corporation may
refuse a transfer unless the person gives adequate security or a bond of
indemnity executed by a corporate surety or by two individual sureties
satisfactory to the corporation as to form, amount, and responsibility of
sureties. The bond shall be conditioned to protect the corporation, its
officers, transfer agents, and registrars, or any of them, against any loss,
damage, expense, or other liability to the owner of the shares by reason of
the recordation of the transfer or the issuance of a new certificate for
shares.
ARTICLE SEVEN CORPORATE RECORDS, REPORTS, AND SEAL
Minutes of Corporate Meetings
7.01. The corporation shall keep at the Principal office, or such other place
as the Board of Directors may order, a book of minutes of all meetings of its
Directors and of its shareholders or members, with the time and place of
holding, whether regular or special, and, if special, how authorized, the
notice thereof given, the names of those present at Director's meetings, the
number of shares or members present or represented at shareholders, or
members, meetings, and the proceedings thereof.
Books of Account
7.02. The corporation shall keep and maintain adequate and correct accounts of
its properties and business transactions, including accounts of its assets,
liabilities, receipts, disbursement, gains, losses, capital, surplus, and
shares. any surplus, including earned surplus, paid-in surplus, and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account.
Share Register
7.03. The corporation for profit shall keep at the Principal office, or at
the office of the transfer agent, a share register, showing the names of the
shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The above-specified information may be kept by the corporation on an
information storage device such as electronic data processing equipment
provided that the equipment is capable of reproducing the information in
clearly legible form for the purposes of inspection as provided in Section
7.04 of these Bylaws.
26
<PAGE>
Inspection of Records by Shareholders
7.04. (1) Any person who shall have been a shareholder of record for at
least six months immediately preceding that person's demand to inspect the
corporate records, or who is the holder of record of at least 5 percent of all
of the outstanding shares of the corporation, on written demand stating the
purpose thereof, has the right to examine, in person, or by agent, accountant,
or attorney, at any reasonable time or times, for any proper purpose, its
books and records of account, minutes, and rectrd of shareholders, and is
entitled to make extracts therefrom.
Inspection of Records by Directors
(2) Every Director shall have the absolute right at any reasonable time
to inspect all books, records, documents of every kind, and the physical
properties of the corporation, and also of its subsidiary corporations,
domestic or foreign. Such inspection by a Director may be made in person or
by agent or attorney, and the right of inspection includes the right to make
extracts.
Annual Report to Shareholders
7.05. (1) The Board of Directors shall cause an annual report to be sent to
the shareholders not later than One Thousand Two Hundred Thirty Four days
after the close of the fiscal or calendar year.
Contents of Annual Reports
(2) The annual report shall include the toiiowing financial
statements:
(a) A balance sheet as of that closing date;
(b) A statement of income or profit and loss for the year
ended on that closing date; and
(c) other information as the Directors shall determine.
Preparation of Financial Statements
(3) The financial statements shall be prepared from the books and
shall be in accordance therewith and shall be certified by the President,
Secretary, Treasurer, or a public accountant. They shall be prepared in a
form sanctioned by sound accounting practice for the particular kind of
business carried on by the corporation.
Fiscal Year
7.06. The fiscal year of the corporation shall be as determined by the Board
of Directors.
Corporate Seal
7.07. The Board of Directors may adopt, use, and thereafter alter the
corporate seal.
27
<PAGE>
ARTICLE EIGHT AMENDMENT OF BYLAWS
Adoption, Amendment, Repeal of Bylaws by Directors
8.01. Bylaws may be amended or repealed, and new bylaws may be adopted, by
the Directors, unless the power to do so is reserved exclusively to the
shareholders by the articles of incorporation or by the Alabama Business
Corporation Act, or unless the shareholders, in amending, repealing, or
adopting a particular bylaw expressly provide that the Directors may not amend
or repeal that bylaw. Unless the articles of incorporation or a bylaw adopted
by the shareholders provides otherwise as to all or some portion of the
bylaws, the shareholders may amend, repeal, or adopt bylaws, even though the
bylaws may also be amended, repealed, or adopted by the Directors.
Adopted by the Board of Directors on
January 5, 1998
_______________________________________
Monte Julius
_______________________________________
Terry Hopkins
_______________________________________
Oscar Hayes
_______________________________________
Myles Humphrey
_______________________________________
Demetrios Tsoutsas
28
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<ARTICLE>5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> $56,168 $142,818
<SECURITIES> $0 $0
<RECEIVABLES> $2,608 $2,608
<ALLOWANCES> $0 $0
<INVENTORY> $44,949 $44,949
<CURRENT-ASSETS> $121,725 $121,725
<PP&E> $641,312 $647,614
<DEPRECIATION> $526,234 $537,453
<TOTAL-ASSETS> $872,892 $937,479
<CURRENT-LIABILITIES> $300,078 $308,866
<BONDS> $0 $0
$0 $0
$0 $0
<COMMON> $38,320 $40,608
<OTHER-SE> $534,494 $588,005
<TOTAL-LIABILITY-AND-EQUITY> $872,892 $937,479
<SALES> $0 $0
<TOTAL-REVENUES> $106,602 $22,206
<CGS> $0 $0
<TOTAL-COSTS> $722,915 $174,105
<OTHER-EXPENSES> $18,217 $0
<LOSS-PROVISION> $0 $0
<INTEREST-EXPENSE> $20,447 $5,625
<INCOME-PRETAX> $(634,530) $(157,524)
<INCOME-TAX> $0 $0
<INCOME-CONTINUING> $0 $0
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> $(634,530) $(157,524)
<EPS-BASIC> $(0.19) $(0.04)
<EPS-DILUTED> $(0.19) $(0.04)
</TABLE>
