UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 15, 1999
WIRELESS ONE, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-26836 72-1300837
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
2506 Lakeland Drive, Jackson, Mississippi 39208
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (601) 936-1515
1080 River Oaks Drive, Suite A150, Jackson, Mississippi
(Former Name or Former Address, if Changed Since Last Report)
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS.
On February 11, 1999, Wireless One, Inc. (the "Company")
filed a voluntary petition for reorganization under Chapter 11
of the United States Bankruptcy Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the District of Delaware
(In re Wireless One, Inc., Case No. 99-295 (PJW)). The Company
is operating its business as a debtor-in-possession under the
Bankruptcy Code.
On March 15, 1999, the Company filed a Plan of
Reorganization (the "Plan of Reorganization"), a proposed
Disclosure Statement (the "Proposed Disclosure Statement") and
certain other related documents with the Bankruptcy Court. The
Plan of Reorganization is attached as Exhibit 99.1 hereto and
is incorporated herein by reference. The Proposed Disclosure
Statement is attached as Exhibit 99.2 hereto and is
incorporated herein by reference. The Plan of Reorganization
and the Proposed Disclosure Statement are subject to further
revision and amendment. The Proposed Disclosure Statement has
not been approved by the Bankruptcy Court for use in the
solicitation of acceptances of the Plan of Reorganization
pursuant to Section 1125(b) of the Bankruptcy Code.
Accordingly, the filing and dissemination of the Proposed
Disclosure Statement with the Bankruptcy Court and as an
exhibit to this Form 8-K is not intended, nor should it be
construed, as such a solicitation, nor should the information
contained therein be relied upon for any purpose prior to a
determination by the Bankruptcy Court that the Proposed
Disclosure Statement contains adequate information.
Dissemination of the Proposed Disclosure Statement is
controlled by Bankruptcy Rule 3017.
The projected financial information included in the
Proposed Disclosure Statement as well as certain statements
made in the Plan of Reorganization and the Proposed Disclosure
Statement, including statements that are not a statement of
historical fact, may constitute "forward-looking" statements as
defined in the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended. Such statements
include, without limitation, statements regarding future
liquidity, cash needs and alternatives to address capital
needs, and are indicated by words or phrases such as
"anticipate," "estimate," "plans," "projects," "continuing,"
"ongoing," "expects," "management believes," "the Company
believes," "the Company intends," "we believe," "we intend,"
and similar words or phrases.
Important factors that could cause actual results to
differ materially from the Company's expectations include those
risk factors set forth in the Proposed Disclosure Statement as
well as, without limitation, Bankruptcy Court approval of the
Proposed Disclosure Statement and any other needed approvals
and confirmation and consummation of the Plan of
Reorganization, the ability of the Company to consummate asset
dispositions and/or to obtain financing as necessary in order
to emerge from bankruptcy and the terms and conditions of any
such dispositions and financing, and the possible need for
additional DIP financing if the Company's emergence from
bankruptcy is delayed, many of which are beyond the control of
the Company. Further information regarding these and other
factors that might cause future results to differ from those
projected in the forward-looking statements is described in
more detail under the heading "Factors That May Affect Future
Results of the Company" in the Company's Form 10-K for the year
ended December 31, 1997, under the heading "Cautionary
Statements" in the Company's Form 10-Q for the quarter ended
September 30, 1998 and under the heading "Certain Risk Factors
to be Considered" in the Proposed Disclosure Statement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(c) Exhibits.
99.1 Plan of Reorganization dated March 15, 1999.
99.2 Proposed Disclosure Statement dated March 15,
1999.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto
duly authorized.
WIRELESS ONE, INC.,
a Delaware corporation
Date: March 15, 1999 /s/ Henry M. Burkhalter
-------------------------
Henry M. Burkhalter
Chief Executive Officer
EXHIBIT INDEX
EXHIBITS
(c) Exhibits.
99.1 Plan of Reorganization dated March 15, 1999.
99.2 Proposed Disclosure Statement dated March 15, 1999.
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
____________________________________
:
In re: :
: CHAPTER 11
WIRELESS ONE, INC., :
: Case No. 99-295 (PJW)
Debtor. :
:
____________________________________
DEBTOR'S PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
---------------------------------------
LATHAM & WATKINS MORRIS, NICHOLS, ARSHT & TUNNELL
Co-Counsel for Wireless One, Inc. Co-Counsel for Wireless One, Inc.
885 Third Avenue, Suite 1000 1201 North Market Street
New York, New York 10022 P.O. Box 1347
(212) 906-1200 Wilmington, Delaware 19899-1347
(302) 658-9200
Dated: March 15, 1999
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS AND INTERPRETATION.................................1
1.1. Definitions.......................................................1
1.2. Interpretation; Application of Definitions and Rules of
Construction.....................................................11
SECTION 2. PROVISIONS FOR PAYMENT OF ADMINISTRATIVE EXPENSE CLAIMS AND
PRIORITY TAX CLAIMS.........................................11
2.1. Administrative Expense Claims....................................11
2.2. Priority Tax Claims..............................................11
SECTION 3. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS.................12
SECTION 4. PROVISIONS FOR TREATMENT OF CLAIMS AND EQUITY INTERESTS.......12
4.1. Priority Non-Tax Claims (Class 1)................................12
4.2. Secured Claims (Class 2).........................................12
4.3. BTA Installment Note Claims (Class 3)............................12
4.4. Unsecured Claims (Class 4).......................................13
4.5. Old Senior Note Claims (Class 5).................................13
4.6. Indemnity Claims (Class 6).......................................13
4.7. Old Common Stock Interests (Class 7).............................13
4.8. Other Equity Interests (Class 8).................................14
4.9. Alternative Treatment for Holders of Allowed Claims..............14
SECTION 5. IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS IMPAIRED;
ACCEPTANCE OR REJECTION OF THE PLAN...........................14
5.1. Holders of Claims and Equity Interests Entitled to Vote..........14
5.2. Holders of Claims and Equity Interests Not Entitled to Vote......14
SECTION 6. MEANS OF IMPLEMENTATION.......................................14
6.1. Distributions....................................................14
6.2. Issuance of New Securities.......................................15
6.3. New Warrant Agreement............................................15
6.4. Exit Financing...................................................15
6.5. Adoption of Stock Option Plan....................................15
6.6. Incentive Options on the Effective Date..........................15
6.7. Cancellation of Existing Securities and Agreements...............15
6.8. Corporate Action.................................................15
6.9. Restated Certificate of Incorporation............................16
6.10. Registration Rights Agreement...................................16
SECTION 7. PROVISIONS GOVERNING DISTRIBUTIONS............................16
7.1. Date of Distributions............................................16
7.2. Disbursing Agent.................................................16
7.3. Surrender of Instruments.........................................17
7.4. Compensation of Professionals....................................17
7.5. Delivery of Distributions........................................17
7.6. Manner of Payment Under the Plan.................................18
7.7. Fractional Shares................................................18
7.8. Setoffs and Recoupment...........................................18
7.9. Distributions After Effective Date...............................18
7.10. Rights and Powers of Disbursing Agent...........................18
7.11. Exculpation.....................................................19
SECTION 8. PROCEDURES FOR TREATING DISPUTED CLAIMS UNDER THE PLAN........19
8.1. Disputed Claims Process..........................................19
8.2. No Distributions Pending Allowance...............................19
8.3. Distributions After Allowance....................................19
8.4. Voting Rights of Holders of Disputed Claims......................20
SECTION 9. PROVISIONS GOVERNING EXECUTORY CONTRACTS AND UNEXPIRED LEASES.20
9.1. Assumption or Rejection of Contracts and Leases..................20
9.2. Amendments to Schedule; Effect of Amendments.....................20
9.3. Bar to Rejection Damage Claims...................................21
9.4. Indemnification Obligations......................................21
SECTION 10. CONDITIONS PRECEDENT TO EFFECTIVE DATE.......................21
10.1. Conditions Precedent to Effective Date of the Plan..............21
10.2. Waiver of Conditions Precedent..................................22
SECTION 11. EFFECT OF CONFIRMATION.......................................22
11.1. Vesting of Assets...............................................22
11.2. Binding Effect..................................................22
11.3. Discharge of Debtor.............................................22
11.4. Term of Injunctions or Stays....................................23
11.5. Indemnification Obligations.....................................23
11.6. Releases........................................................23
SECTION 12. WAIVER OF AVOIDANCE ACTION CLAIMS............................23
SECTION 13. RETENTION OF JURISDICTION....................................24
SECTION 14. MISCELLANEOUS PROVISIONS.....................................25
14.1. Payment of Statutory Fees.......................................25
14.2. Retiree Benefits................................................25
14.3. Administrative Expenses Incurred After the Confirmation Date....25
14.4. Section 1125(e) of the Bankruptcy Code..........................25
14.5. Compliance with Tax Requirements................................26
14.6. Severability of Plan Provisions.................................26
14.7. Notices.........................................................26
14.8. Governing Law...................................................27
14.9. Binding Effect..................................................28
-ii-
DEBTOR'S PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
Wireless One, Inc. proposes the following chapter 11 Plan of
Reorganization, dated as of March 15, 1999, pursuant to section 1121(a) of
the Bankruptcy Code:
SECTION 1. DEFINITIONS AND INTERPRETATION
1.1. Definitions.
The following terms used herein shall have the respective meanings
defined below:
<TABLE>
<CAPTION>
<S> <C>
1995 Senior Notes means the 13% Senior Notes Due 2003 issued by the
Debtor having an aggregate principal amount of
$150 million.
1996 Senior Discount Notes means the 13 1/2 % Senior Discount Notes Due 2006
issued by the Debtor having an aggregate principal
amount at maturity of $239,252,000 and an accreted
value on the Petition Date of $172.4 million.
Administrative Expense Claim means any right to payment constituting a cost or
expense of administration of the Chapter 11 Case
allowed under sections 503(b) and 507(a)(l) of the
Bankruptcy Code, including, without limitation,
(a) any actual and necessary costs and expenses of
preserving the Debtor's estate, (b) any actual and
necessary costs and expenses of operating the
Debtor's business in the ordinary course of
business, (c) any indebtedness or obligations
incurred or assumed by the Debtor in Possession
during the Chapter 11 Case in the ordinary course
of business, (d) any allowances of compensation
and reimbursement of expenses to the extent
allowed by Final Order under section 330 or 503 of
the Bankruptcy Code, and (e) any fees or charges
assessed against the Debtor's estate under section
1930, title 28, United States Code.
Allowed means, with reference to any Claim or Equity
Interest, (a) any Claim or Equity Interest as to
which no objection to allowance has been
interposed on or before the Confirmation Date or
such other applicable period of limitation fixed
by the Bankruptcy Code, the Bankruptcy Rules, or
the Bankruptcy Court, or as to which any objection
has been determined by a Final Order to the extent
such objection is determined in favor of the
respective holder, (b) any Claim or Equity
Interest as to which the liability of the Debtor
and the amount thereof are determined by final
order of a court of competent jurisdiction other
than the Bankruptcy Court or (c) any Claim or
Equity Interest expressly allowed hereunder.
Unless otherwise specified in the Plan or in a
Final Order of the Bankruptcy Court allowing such
claim, "Allowed" in reference to a Claim shall not
include (a) interest on the amount of such Claim
accruing from and after the Petition Date, (b)
punitive or exemplary damages or (c) any fine,
penalty or forfeiture.
BTA Installment Notes means approximately $24.9 million aggregate
principal amount of obligations of the Debtor's
wholly-owned direct and indirect subsidiaries to
the United States Government in connection with
the purchase of certain licenses to transmit
signals in certain basic trading areas which are
regularly paid by the Debtor.
BTA Installment Note Claims means Claims, if any, arising under or in
connection with the BTA Installment Notes or in
connection with the purchase of certain licenses
to transmit signals in certain basic trading areas
which relate to the BTA Installment Notes.
Bankruptcy Code means title 11, United States Code, as amended
from time to time, as applicable to the Chapter 11
Case.
Bankruptcy Court means the United States District Court for the
District of Delaware having jurisdiction over the
Chapter 11 Case and, to the extent of any
reference made under section 157, title 28, United
States Code, the unit of such District Court
having jurisdiction over the Chapter 11 Case under
section 151, title 28, United States Code.
Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure as
promulgated by the United States Supreme Court
under section 2075, title 28, United States Code,
as amended from time to time, applicable to the
Chapter 11 Case, and any Local Rules of the
Bankruptcy Court.
Bondholder Litigation Claim means a Claim (a) arising from rescission of a
purchase or sale of a debt security of the Debtor,
(b) for damages arising from the purchase or sale
of such a debt security or (c) for reimbursement
or contribution allowed under section 502 of the
Bankruptcy Code on account of a Claim for damages
or rescission arising out of a purchase or sale of
a debt security of the Debtor.
BT Alex. Brown means BT Alex. Brown, Inc.
BT Alex. Brown Stipulation means that certain stipulation among BT Alex.
Brown, the Debtor and the Unofficial Noteholders'
Committee dated as of March __, 1999.
Business Day means any day other than a Saturday, a Sunday or
any other day on which banking institutions in New
York, New York are required or authorized to close
by law or executive order.
Cash means legal tender of the United States of
America.
Chapter 11 Case means the Debtor's voluntary case filed with the
Bankruptcy Court under Chapter 11 of the
Bankruptcy Code.
Charter means the Restated Certificate of Incorporation of
Reorganized Wireless, which shall be in
substantially the form annexed as Exhibit 1 to the
Plan.
Claim means (a) any right to payment from the Debtor,
whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal,
equitable, secured, or unsecured, known or
unknown, or (b) any right to an equitable remedy
for breach of performance if such breach gives
rise to a right of payment from the Debtor,
whether or not such right to an equitable remedy
is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured,
or unsecured, known or unknown.
Class means any group of substantially similar Claims or
Equity Interests classified by the Plan pursuant
to section 1129(a)(l) of the Bankruptcy Code.
Collateral means any property or interest in property of the
Debtor's estate subject to a Lien to secure the
payment or performance of a Claim, which Lien is
not subject to avoidance under the Bankruptcy
Code.
Confirmation Date means the date on which the Clerk of the
Bankruptcy Court enters the Confirmation Order on
its docket.
Confirmation Hearing means the hearing to be held by the Bankruptcy
Court regarding confirmation of the Plan, as such
hearing may be adjourned or continued from time to
time.
Confirmation Order means the order of the Bankruptcy Court confirming
the Plan, which shall be in a form reasonably
acceptable to the Debtor, an Unofficial
Noteholders' Committee Majority and MLGAF.
Debtor means Wireless One, Inc., a Delaware corporation,
the debtor in the Chapter 11 Case.
Debtor in Possession means the Debtor in its capacity as a debtor in
possession in the Chapter 11 Case under sections
1107(a) and 1108 of the Bankruptcy Code.
DGCL means the General Corporation Law of the State of
Delaware, as amended from time to time.
Disallowed means, when used with respect to a Claim or Equity
Interest, a Claim or Equity Interest that has been
disallowed by Final Order.
Disbursing Agent means any entity in its capacity as a disbursing
agent under Sections 7.2 and 7.10 of the Plan.
Disclosure Statement means the disclosure document relating to the
Plan, including, without limitation, all exhibits
and schedules thereto as approved by the
Bankruptcy Court pursuant to section 1125 of the
Bankruptcy Code.
Disputed Claim means, with respect to a Claim or Equity Interest,
any such Claim or Equity Interest proof of which
was filed with the Bankruptcy Court and (a) which
has been or hereafter is listed on the Schedules
as unliquidated, disputed or contingent, and which
has not been resolved by written agreement of the
parties or an order of the Bankruptcy Court, or
(b) as to which the Debtor or any other party in
interest has interposed a timely objection in
accordance with the Bankruptcy Code and the
Bankruptcy Rules, which objection has not been
withdrawn or determined by a Final Order. Prior to
(i) the time an objection has been filed and (ii)
the expiration of the time within which to object
to such Claim or Equity Interest set forth herein
or otherwise established by order of the
Bankruptcy court, a Claim or Equity Interest shall
be considered a Disputed Claim or Disputed
Equity interest to the extent that the amount of
the Claim or Equity Interest specified in a proof
or Claim or Equity Interest exceeds the amount of
the Claim or Equity Interest scheduled by the
Debtor as not disputed, contingent or unliquidated.
Effective Date means the first Business Day on which all the
conditions precedent to the Effective Date
specified in Section 10.1 of the Plan shall have
been satisfied or waived as provided in Section
10.2 of the Plan; provided, however, that if a
stay of the Confirmation Order is in effect, the
Effective Date shall be the first Business Day
after such stay is no longer in effect.
Equity Interest means the interest of any holder of equity
securities of the Debtor represented by any issued
and outstanding shares of common or preferred
stock or other instrument evidencing a present
ownership interest in the Debtor, whether or not
transferable, or any option, warrant or right,
contractual or otherwise, to acquire, in
connection with or related to any such interest,
including, without limitation, any rights with
respect to the Debtor under any registration
rights agreement or stockholders agreement to
which the Debtor is a party.
Final Order means an order or judgment of the Bankruptcy Court
entered by the Clerk of the Bankruptcy Court on
the docket in the Chapter 11 Case, which has not
been reversed, vacated or stayed and as to which
(a) the time to appeal, petition for certiorari or
move for a new trial, reargument or rehearing has
expired and as to which no appeal, petition for
certiorari or other proceedings for a new trial,
reargument or rehearing shall then be pending or
(b) if an appeal, writ of certiorari, new trial,
reargument or rehearing thereof has been sought,
such order or judgment of the Bankruptcy Court
shall have been affirmed by the highest court to
which such order was appealed, or certiorari shall
have been denied or a new trial, reargument or
rehearing shall have been denied or resulted in no
modification of such order, and the time to take
any further appeal, petition for certiorari or
move for a new trial, reargument or rehearing
shall have expired; provided, however, that the
possibility that a motion under Rule 60 of the
Federal Rules of Civil Procedure, or any analogous
rule under the Bankruptcy Rules, may be filed
relating to such order, shall not cause such order
not to be a Final Order.
Incentive Options means the options to purchase shares of New Common
Stock pursuant to the Stock Option Plan.
Indemnity Claim means a Claim (i) of a director or officer of the
Debtor that was not a director or officer,
respectively, at any time on or after August 1,
1998 or (ii) that is not assumed by the Debtor
pursuant to Section 11.5 of the Plan, in each case
for any obligations of the Debtor to indemnify
directors or officers against any obligations
pursuant to the Debtor's certificate of
incorporation, by-laws, contract, applicable state
law, any combination of the foregoing, or
otherwise.
Lien means any charge against, encumbrance upon or
other interest in property, the purpose of which
is to secure payment of a debt or performance of
an obligation.
MLGAF means Merrill Lynch Global Allocation Fund, Inc.
New Common Stock means the shares of common stock of Reorganized
Wireless to be issued and outstanding as of the
Effective Date.
New Common Stock Distribution Amount means the 9,950,000 shares of New Common Stock to
be distributed to holders of Allowed Old Senior
Note Claims and Allowed Old Common Stock
Interests.
New Warrants means the warrants which are issued pursuant to,
and exercisable in accordance with, the terms and
conditions of the New Warrant Agreement.
New Warrant Agreement means the warrant agreement governing the issuance
of the New Warrants, which shall be in
substantially the form annexed as Exhibit 2 to the
Plan.
Old Common Stock means the issued and outstanding common stock of
the Debtor.
Old Common Stock Interest means an Equity Interest represented by shares of
Old Common Stock.
Old Indentures means (i) that certain indenture with respect to
the 1995 Senior Notes dated as of October 24, 1995
between the Debtor and United States Trust Company
of New York, as trustee, as amended by a
supplemental indenture dated July 26, 1996, and as
further amended by a second supplemental indenture
dated August 24, 1998, and (ii) that certain
indenture with respect to the 1996 Senior Discount
Notes dated as of August 12, 1996 between the
Debtor and United States Trust Company of New
York, as trustee, as amended by a supplemental
indenture dated August 24, 1998.
Old Senior Notes means, collectively, the 1995 Senior Notes and the
1996 Senior Discount Notes or the Old Indentures.
Old Senior Note Claim means a Claim arising under or in connection with
the Old Senior Notes or the Old Indentures.
Other Equity Interest means an Equity Interest in the Debtor, including
warrants and options, other than an Old Common
Stock Interest.
Petition Date means February 11, 1999, the date on which the
Debtor commenced the Chapter 11 Case.
Plan means this Plan of Reorganization Under Chapter 11
of the Bankruptcy Code dated as of March 15, 1999,
including, without limitation, the exhibits and
schedules hereto, as the same may be amended or
modified from time to time in accordance with the
provisions of the Bankruptcy Code and the terms
hereof.
Postpetition Financing means that certain postpetition financing facility
between the Debtor and MLGAF approved by the
Bankruptcy Court on February 12, 1999.
Priority Non-Tax Claim means any Claim other than an Administrative
Expense Claim or a Priority Tax Claim, entitled to
priority in payment under section 507(a) of the
Bankruptcy Code.
Priority Tax Claim means any Claim of a governmental unit of the kind
entitled to priority in payment as specified in
sections 502(i) and 507(a)(8) of the Bankruptcy
Code.
Ratable Proportion means, with reference to any distribution on
account of any Claim or Equity Interest in any
Class, as the case may be, a distribution equal in
amount to the ratio (expressed as a percentage)
that the amount of such Claim or number of shares
evidencing such Equity Interests, as applicable,
bears to the aggregate amount of Claims or
aggregate number of outstanding shares of Equity
Interests in the same Class, as applicable.
Rejection Claim means any Claim against the Debtor arising from
the rejection of any executory contract or
unexpired lease, including any Claim of (a) a
lessor for damages resulting from the rejection of
a lease of real property as any such claim shall
be calculated in accordance with section 502(b)(6)
of the Bankruptcy Code or (b) an employee for
damages resulting from the rejection of an
employment agreement as any such Claim shall be
calculated in accordance with section 502(b)(7) of
the Bankruptcy Code.
Reorganized Wireless means the Debtor, as it will be reorganized as of
the Effective Date in accordance with the Plan.
Schedules means the schedules of assets and liabilities and
the statement of financial affairs filed by the
Debtor under section 521 of the Bankruptcy Code,
Bankruptcy Rule 1007 and the Official Bankruptcy
Forms of the Bankruptcy Rules as such schedules
and statements have been or may be supplemented or
amended through the Confirmation Date.
Secured Claim means a Claim secured by a Lien on Collateral to
the extent of the value of such Collateral (i) as
set forth in the Plan, (ii) as agreed to by the
holder of such Claim and the Debtor or (iii) as
determined by a Final Order in accordance with
section 506(a) of the Bankruptcy Code or, in the
event that such Claim is subject to setoff under
section 553 of the Bankruptcy Code, to the extent
of such setoff.
Stockholder Litigation Claim means a Claim (a) arising from rescission of a
purchase or sale of an equity security of the
Debtor, (b) for damages arising from the purchase
or sale of such equity security or (c) for
reimbursement or contribution allowed under
section 502 of the Bankruptcy Code on account of a
Claim for damages or rescission arising out of a
purchase or sale of an equity security of the
Debtor.
Stock Option Plan means the 1999 Wireless One, Inc. Share Incentive
Plan, which shall be in substantially the form
annexed as Exhibit 3 to the Plan.
Trade Claim means an Unsecured Claim for goods, materials or
services provided to the Debtor or rendered to the
Debtor in the ordinary course of business prior to
the Petition Date. A Trade Claim shall not
include an Old Senior Note Claim.
Unofficial Noteholders' Committee means a committee of holders of Old Senior Notes
formed prior to the Petition Date consisting of
the following entities: (i) Merrill Lynch
Corporate Bond Fund, Inc.-High Income Portfolio,
(ii) Corporate High Yield Fund, Inc., (iii)
Corporate High Yield Fund II, Inc., (iv) Prospect
Street High Yield, (v) LibertyView Capital
Management, Inc. and (vi) Loeb Partners.
Unofficial Noteholders' Committee Majority means the holders of a majority in Claim amount of
the Old Senior Notes held in the aggregate by the
members of the Unofficial Noteholders' Committee
at such time.
Unsecured Claim means any Claim against the Debtor that is not an
Administrative Expense Claim, a Priority Non-Tax
Claim, a Priority Tax Claim, an Old Senior Note
Claim, a BTA Installment Note Claim or a Secured
Claim.
Warrant Agent means _________________, the agent under the New
Warrant Agreement.
</TABLE>
1.2. Interpretation; Application of Definitions and Rules of
Construction.
Unless otherwise specified, all section, schedule or exhibit
references in the Plan are to the respective section in or schedule or
exhibit to, the Plan, as the same may be amended, waived or modified from
time to time. The words "herein," "hereof," "hereto," "hereunder" and other
words of similar import refer to the Plan as a whole and not to any
particular section, subsection or clause contained in the Plan. A term used
herein that is not defined herein shall have the meaning assigned to that
term in the Bankruptcy Code. The rules of construction contained in section
102 of the Bankruptcy Code shall apply to the construction of the Plan. The
headings in the Plan are for convenience of reference only and shall not
limit or otherwise affect the provisions hereof.
SECTION 2. PROVISIONS FOR PAYMENT OF ADMINISTRATIVE EXPENSE CLAIMS AND
PRIORITY TAX CLAIMS
2.1. Administrative Expense Claims.
On the Effective Date, except to the extent that a holder of an
Allowed Administrative Expense Claim agrees to a different treatment of
such Administrative Expense Claim, Reorganized Wireless shall pay to each
holder of an Allowed Administrative Expense Claim Cash in an amount equal
to such Allowed Administrative Expense Claim; provided, however, that
Allowed Administrative Expense Claims representing liabilities incurred in
the ordinary course of business by the Debtor in Possession or liabilities
arising under loans or advances to or other obligations incurred by the
Debtor in Possession, whether or not incurred in the ordinary course of
business, shall be assumed and paid by Reorganized Wireless in the ordinary
course of business, consistent with past practice and in accordance with
the terms and subject to the conditions of any agreements governing,
instruments evidencing or other documents relating to such transactions.
The Postpetition Financing shall be repaid in full in Cash on or prior
to the Effective Date.
2.2. Priority Tax Claims.
Except to the extent that a holder of an Allowed Priority Tax Claim
agrees to a different treatment of such Allowed Priority Tax Claim,
Reorganized Wireless shall either (i) on the Effective Date pay to each
holder of an Allowed Priority Tax Claim that is due and payable on or
before the Effective Date Cash in an amount equal to such Allowed Priority
Tax Claim, or (ii) provide such other treatment as may be permitted under
Section 1129(a)(9) of the Bankruptcy Code to holders of Allowed Priority
Tax Claims. All Allowed Priority Tax Claims that are not due and payable
on or before the Effective Date shall be paid in the ordinary course of
business in accordance with the terms thereof or accorded such other
treatment as may be permitted under Section 1129(a)(9) of the Bankruptcy
Code.
SECTION 3. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
Claims against and Equity Interests in the Debtor are divided into the
following Classes:
Class 1 -- Priority Non-Tax Claims
Class 2 -- Secured Claims
Class 3 -- BTA Installment Note Claims
Class 4 -- Unsecured Claims
Class 5 -- Old Senior Note Claims
Class 6 -- Indemnity Claims
Class 7 -- Old Common Stock Interests
Class 8 -- Other Equity Interests
SECTION 4. PROVISIONS FOR TREATMENT OF CLAIMS AND EQUITY INTERESTS
4.1. Priority Non-Tax Claims (Class 1).
On the Effective Date, except to the extent that a holder of an
Allowed Priority Non-Tax Claim agrees to a different treatment of such
Allowed Priority Non-Tax Claim, each Allowed Priority Non-Tax Claim shall
be unimpaired in accordance with section 1124 of the Bankruptcy Code. All
Allowed Priority Non-Tax Claims which are not due and payable on or before
the Effective Date shall be paid in the ordinary course of business in
accordance with the terms thereof.
4.2. Secured Claims (Class 2).
On the Effective Date, except to the extent that a holder of an
Allowed Secured Claim agrees to a different treatment of such Allowed
Secured Claim, each Allowed Secured Claim shall be reinstated or rendered
unimpaired in accordance with section 1124 of the Bankruptcy Code. All
Allowed Secured Claims which are not due and payable on or before the
Effective Date shall be paid in the ordinary course of business in
accordance with the terms thereof.
4.3. BTA Installment Note Claims (Class 3).
Each BTA Installment Note Claim shall be Allowed as of the Petition
Date in the amount of outstanding principal plus accrued and unpaid
interest owed in respect thereof on the Petition Date. On the Effective
Date, each holder of an Allowed BTA Installment Note Claim shall be
reinstated or rendered unimpaired in accordance with section 1124 of the
Bankruptcy Code. All Allowed BTA Installment Note Claims which are not due
and payable on or before the Effective Date shall be paid in the ordinary
course of business in accordance with the terms thereof.
4.4. Unsecured Claims (Class 4).
Each Allowed Unsecured Claim shall be rendered unimpaired in
accordance with section 1124 of the Bankruptcy Code. All Allowed Unsecured
Claims which are not due and payable on or before the Effective Date shall
be paid in the ordinary course of business in accordance with the terms
thereof.
In any event, all Allowed Claims in Class 4 that have become due and
payable on or before the Effective Date (unless previously paid) will be
paid in full, in Cash (with interest to the extent permitted by the
Bankruptcy Court), on, or as soon as practicable after the Effective Date,
or at such other time as is mutually agreed upon by the Debtors and the
holder of such Claim, or if not due and payable on the Effective Date, such
Claims will be reinstated and paid in full in accordance with their
respective terms or otherwise rendered impaired.
4.5. Old Senior Note Claims (Class 5).
On the Effective Date, each Old Senior Note Claim shall be Allowed in
the amount of outstanding principal plus accrued and unpaid interest owed
in respect thereof on the Petition Date, or accreted value as of the
Petition Date, as applicable. On the Effective Date, each holder of an
Allowed Old Senior Note Claim shall receive, in full satisfaction of such
Allowed Old Senior Note Claim, its Ratable Proportion of 96% of the New
Common Stock Distribution Amount, subject to dilution by exercise of the
New Warrants and Incentive Options. The Old Senior Notes and any Equity
Interests issued in connection therewith shall be cancelled on the
Effective Date.
4.6. Indemnity Claims (Class 6).
On the Effective Date, holders of Allowed Indemnity Claims shall be
entitled to assert such Claims against the Debtor but only to the extent of
any available coverage under any applicable directors' and officers'
insurance.
For purposes of voting on the Plan only, the amount of each Allowed
Indemnity Claim shall be deemed to be $1.
4.7. Old Common Stock Interests (Class 7).
On the Effective Date, each holder of an Allowed Old Common Stock
Interest will receive, in full satisfaction of such Allowed Old Common
Stock Interest, its Ratable Proportion of (i) 4% of the New Common Stock
Distribution Amount and (ii) the New Warrants. On the Effective Date, the
Old Common Stock shall be cancelled.
4.8. Other Equity Interests (Class 8).
On the Effective Date, all Other Equity Interests will be cancelled
and the holders of such Equity Interests shall not receive any distribution
in respect thereof.
4.9. Alternative Treatment for Holders of Allowed Claims.
Notwithstanding the treatment provided for holders of Allowed Claims
in this Section 4, Reorganized Wireless and the holder of an Allowed Claim
may agree to other treatment of such Claim, including payment in Cash,
provided that such treatment shall not provide a return having a present
value in excess of the present value of the distribution that otherwise
would be made to such holder under Section 4 hereof.
Pursuant to the BT Alex. Brown Stipulation, BT Alex Brown has agreed
to treatment of its Claim in the manner set forth therein.
SECTION 5. IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS IMPAIRED;
ACCEPTANCE OR REJECTION OF THE PLAN
5.1. Holders of Claims and Equity Interests Entitled to Vote.
Each of Class 5 (Old Senior Note Claims), Class 6 (Indemnity Claims),
and Class 7 (Old Common Stock Interests) is impaired by the Plan and the
holders of Claims or Equity Interests in each of such Classes are entitled
to vote to accept or reject the Plan.
5.2. Holders of Claims and Equity Interests Not Entitled to Vote.
Each of Class 1 (Priority Non-Tax Claims), Class 2 (Secured Claims),
Class 3 (BTA Installment Note Claims) and Class 4 (Unsecured Claims) is
unimpaired by the Plan and the holders of Claims in each of such Classes
are conclusively presumed to have accepted the Plan and are not entitled to
vote to accept or reject the Plan.
Class 8 (Other Equity Interests) is impaired and will not receive or
retain any property on account of its Equity Interests. Therefore, it is
deemed to have rejected the Plan by operation of section 1126(g) of the
Bankruptcy Code and it is not entitled to vote to accept or reject the
Plan.
SECTION 6. MEANS OF IMPLEMENTATION
6.1. Distributions.
On the Effective Date, Reorganized Wireless shall make or cause to be
made to the holders of Allowed Claims and Allowed Equity Interests the
distributions of New Common Stock, New Warrants and Cash as provided in
Section 4 hereof. Disputed Claims shall be resolved in accordance with
Section 8 hereof and, if a Disputed Claim becomes an Allowed Claim by Final
Order, distributions shall be made on account of such Claims in accordance
with Section 8.3 hereof.
6.2. Issuance of New Securities.
The issuance of the following securities by Reorganized Wireless is
hereby authorized without further act or action under applicable law,
regulation, order or rule: (a) 10,000,000 shares of New Common Stock, (b)
the New Warrants, and (c) the Incentive Options.
6.3. New Warrant Agreement.
The New Warrant Agreement shall be executed and delivered by
Reorganized Wireless and the Warrant Agent or any replacement agent
reasonably acceptable to the Debtor and an Unofficial Noteholders'
Committee Majority.
6.4. Exit Financing.
To the extent that such financing is required, the Debtor shall obtain
exit financing reasonably acceptable to the Unofficial Noteholders'
Committee and MLGAF to repay the Postpetition Financing and provide working
capital for operations.
6.5. Adoption of Stock Option Plan.
If not theretofore adopted by the Debtor, on the Effective Date,
Reorganized Wireless shall adopt the Stock Option Plan.
6.6. Incentive Options on the Effective Date.
Reorganized Wireless is authorized to issue Incentive Options to
purchase 444,000 shares of New Common Stock at an exercise price of $13.51
pursuant and subject to the Stock Option Plan. Additional Incentive
Options to purchase 666,000 shares of New Common Stock at a yet-to-be-
determined exercise price shall be reserved for issuance thereafter
pursuant to the Stock Option Plan by Reorganized Wireless, on such terms
and conditions consistent with the Stock Option Plan.
6.7. Cancellation of Existing Securities and Agreements.
On the Effective Date, the 1995 Senior Notes, the 1996 Senior Discount
Notes and the Equity Interests shall (a) be cancelled and (b) have no
effect other than the right to participate in the distributions, if any,
provided under the Plan in respect of Claims and Equity Interests. Except
for purposes of effectuating the distributions under the Plan on the
Effective Date, the Old Indentures shall be cancelled.
6.8. Corporate Action.
(a) Board of Directors of Reorganized Wireless. On the Effective
Date, the operation of Reorganized Wireless shall become the general
responsibility of its Board of Directors, subject to, and in accordance
with, the Charter and by-laws. The initial Board of Directors of
Reorganized Wireless shall consist of seven members, one of whom shall be
Henry Burkhalter, the current President and Chief Executive Officer of the
Debtor. Subject to the immediately preceding sentence, the initial members
and the manner of selection of the Board of Directors of Reorganized
Wireless shall in all respects be subject to the approval of the Unofficial
Noteholders' Committee and MLGAF and shall be disclosed in such other
filing as may be made with the Bankruptcy Court. The directors of the
Debtor immediately prior to the Effective Date shall resign as of the
Effective Date and shall be replaced by the Board of Directors of
Reorganized Wireless.
(b) Officers of Reorganized Wireless. The initial officers of
Reorganized Wireless are or shall be disclosed in the Disclosure Statement
or such other filing as may be made with the Bankruptcy Court. The
selection of officers of Reorganized Wireless after the Effective Date
shall be as provided in its Charter and by-laws.
6.9. Restated Certificate of Incorporation.
On the Effective Date, or as soon thereafter as is practicable,
Reorganized Wireless shall file with the Secretary of State of the State of
Delaware in accordance with section 303 of the DGCL, the Charter which
shall, among other things, prohibit Reorganized Wireless from creating,
designating, authorizing or causing to be issued any class or series of
non-voting stock. On the Effective Date, the Charter shall automatically
become effective, and all other matters provided under this Plan involving
the corporate structure of Reorganized Wireless, or corporate action by it,
shall be deemed to have occurred and shall be in effect from and after the
Effective Date pursuant to section 303 of the DGCL without any requirement
of further action by the stockholders, the directors of Reorganized
Wireless or Reorganized Wireless.
6.10. Registration Rights Agreement.
Reorganized Wireless shall grant registration rights to holders of New
Common Stock who may be deemed to be statutory underwriters as such term is
used in section 1145(b) of the Bankruptcy Code and shall enter into a
registration rights agreement with such holders containing customary
registration rights provisions.
SECTION 7. PROVISIONS GOVERNING DISTRIBUTIONS
7.1. Date of Distributions.
Unless otherwise provided herein, any distributions and deliveries to
be made hereunder shall be made on the Effective Date or as soon as
practicable thereafter and deemed made on the Effective Date. In the event
that any payment or act under the Plan is required to be made or performed
on a date that is not a Business Day, then the making of such payment or
the performance of such act may be completed on the next succeeding
Business Day, and if so completed shall be deemed to have been completed as
of the required date.
7.2. Disbursing Agent.
All distributions under the Plan shall be made by Reorganized Wireless
as Disbursing Agent or such other entity designated by Reorganized Wireless
as a Disbursing Agent on the Effective Date. A Disbursing Agent shall not
be required to give any bond or surety or other security for the
performance of its duties unless otherwise ordered by the Bankruptcy Court,
and, in the event that a Disbursing Agent is so otherwise ordered, all
costs and expenses of procuring any such bond or surety shall be borne by
Reorganized Wireless.
7.3. Surrender of Instruments.
As a condition to receiving any distribution under the Plan each
holder of a 1995 Senior Note, 1996 Senior Discount Note or Old Common Stock
Interest must surrender such 1995 Senior Note, 1996 Senior Discount Note or
Old Common Stock Interest to Reorganized Wireless or its designee. Any
holder of a 1995 Senior Note, 1996 Senior Discount Note or Old Common Stock
Interest that fails to (a) surrender such instrument or (b) execute and
deliver an affidavit of loss and/or indemnity reasonably satisfactory to
Reorganized Wireless and, if so requested, furnish a bond in form,
substance, and amount reasonably satisfactory to Reorganized Wireless
before the first anniversary of the Effective Date shall be deemed to have
forfeited all rights and claims and may not participate in any distribution
under the Plan.
7.4. Compensation of Professionals.
Each person retained or requesting compensation in the Chapter 11 Case
pursuant to section 330 or 503(b) of the Bankruptcy Code shall be required
to file an application for allowance of final compensation and
reimbursement of expenses in the Chapter 11 Case on or before a date to be
determined by the Bankruptcy Court in the Confirmation Order or any other
order of the Bankruptcy Court. Objections to any application made under
this section 7.4 shall be filed on or before a date to be fixed and
determined by the Bankruptcy Court in the Confirmation Order or other order
of the Bankruptcy Court.
7.5. Delivery of Distributions.
Subject to Bankruptcy Rule 9010, all distributions to any holder of an
Allowed Claim or an Allowed Equity Interest shall be made at the address of
such holder as set forth on the Schedules filed with the Bankruptcy Court
or on the books and records of the Debtor or its agents, unless the Debtor
or Reorganized Wireless, as applicable, have been notified in writing of a
change of address, including, without limitation, by the filing of a proof
of claim or interest by such holder that contains an address for such
holder different from the address reflected on such Schedules for such
holder. In the event that any distribution to any holder is returned as
undeliverable, the Disbursing Agent shall use reasonable efforts to
determine the current address of such holder, but no distribution to such
holder shall be made unless and until the Disbursing Agent has determined
the then current address of such holder, at which time such distribution
shall be made to such holder without interest; provided that such
distributions shall be deemed unclaimed property under section 347(b) of
the Bankruptcy Code at the expiration of one year from the Effective Date.
After such date, all unclaimed property or interest in property shall
revert to Reorganized Wireless, and the claim of any other holder to such
property or interest in property shall be discharged and forever barred.
7.6. Manner of Payment Under the Plan.
At the option of the Disbursing Agent, any Cash payment to be made
hereunder may be made by a check or wire transfer or as otherwise required
or provided in applicable agreements.
7.7. Fractional Shares.
No fractional shares of New Common Stock or New Warrants or Cash in
lieu thereof shall be distributed. No New Warrants shall be issued for
fractional shares of New Common Stock. For purposes of distribution,
fractional shares of New Common Stock and fractional New Warrants shall be
rounded down to the previous whole number.
7.8. Setoffs and Recoupment.
The Debtor may, but shall not be required to, setoff against, or
recoup from, any Claim and the payments to be made pursuant to the Plan in
respect of such Claim (other than Old Senior Note Claims), any claims of
any nature whatsoever that the Debtor may have against the claimant, but
neither the failure to do so nor the allowance of any Claim hereunder shall
constitute a waiver or release by the Debtor of any such claim it may have
against such claimant.
7.9. Distributions After Effective Date.
Distributions made after the Effective Date to holders of Disputed
Claims that are not Allowed Claims as of the Effective Date but which later
become Allowed Claims shall be deemed to have been made on the Effective
Date.
7.10. Rights and Powers of Disbursing Agent.
(a) Powers of the Disbursing Agent. The Disbursing Agent shall be
empowered to (i) effect all actions and execute all agreements, instruments
and other documents necessary to perform its duties under the Plan, (ii)
make all distributions contemplated hereby, (iii) employ professionals to
represent it with respect to its responsibilities and (iv) exercise such
other powers as may be vested in the Disbursing Agent by order of the
Bankruptcy Court, pursuant to the Plan, or as deemed by the Disbursing
Agent to be necessary and proper to implement the provisions hereof.
(b) Expenses Incurred on or After the Effective Date. Except as
otherwise ordered by the Bankruptcy Court, the amount of any reasonable
fees and expenses incurred by the Disbursing Agent on or after the
Effective Date (including, without limitation, taxes) and any reasonable
compensation and expense reimbursement claims (including, without
limitation, reasonable attorney fees and expenses) made by the Disbursing
Agent shall be paid in Cash by Reorganized Wireless.
7.11. Exculpation.
The Debtor, Reorganized Wireless, MLGAF, each member of the Unofficial
Noteholders' Committee and the Disbursing Agent, and their respective
members, partners, officers, directors, employees and agents (including any
attorneys, financial advisors, investment bankers and other professionals
retained by such persons) shall have no liability to any holder of any
Claim or Equity Interest for any act or omission in connection with, or
arising out of, the Disclosure Statement, the Plan, the solicitation of
votes for and the pursuit of confirmation of the Plan, the consummation of
the Plan, or the administration of the Plan or the property to be
distributed under the Plan, except for willful misconduct or gross
negligence as determined by a Final Order of the Bankruptcy Court and, in
all respects, shall be entitled to rely upon the advice of counsel with
respect to their duties and responsibilities under the Plan.
SECTION 8. PROCEDURES FOR TREATING DISPUTED CLAIMS UNDER THE PLAN
8.1. Disputed Claims Process.
Except as to applications for allowances of compensation and
reimbursement of expenses under sections 330 and 503 of the Bankruptcy
Code, the Debtor or Reorganized Wireless shall have the exclusive right to
make and file objections to Administrative Expense Claims, Claims and
Equity Interests subsequent to the Confirmation Date. All objections shall
be litigated to Final Order; provided, however, that Reorganized Wireless
shall have the authority to compromise, settle, otherwise resolve or
withdraw any objections, without approval of the Bankruptcy Court. Unless
otherwise ordered by the Bankruptcy Court, the Debtor or Reorganized
Wireless shall file all objections to Administrative Expense Claims that
are the subject of proofs of claim or requests for payment filed with the
Bankruptcy Court (other than applications for allowances of compensation
and reimbursement of expenses), Claims and Equity Interests and serve such
objections upon the holder of the Administrative Expense Claim, Claim or
Equity Interest as to which the objection is made as soon as is
practicable, but in no event later than (a) one hundred twenty (120) days
after the Effective Date or the date on which a proof of claim or request
for payment is filed with the Bankruptcy Court or (b) such later date as
may be approved by the Bankruptcy Court.
8.2. No Distributions Pending Allowance.
Notwithstanding any other provision hereof, if any portion of a Claim
is a Disputed Claim, no payment or distribution provided hereunder shall be
made on account of such Claim unless and until such Disputed Claim becomes
an Allowed Claim.
8.3. Distributions After Allowance.
To the extent that a Disputed Claim or Disputed Equity Interest
ultimately becomes an Allowed Claim or Allowed Equity Interest, a
distribution shall be made to the holder of such Allowed Claim or Allowed
Equity Interest in accordance with the provisions of the Plan. As soon as
practicable after the date that the order or judgment of the Bankruptcy
Court allowing any Disputed Claim or Disputed Equity Interest becomes a
Final Order, the Disbursing Agent shall provide to the holder of such Claim
or Equity Interest the distribution to which such holder is entitled under
the Plan.
8.4. Voting Rights of Holders of Disputed Claims.
Pursuant to Bankruptcy Rule 3018(a), a Disputed Claim will not be
counted for purposes of voting on the Plan to the extent it is disputed,
unless an order of the Bankruptcy Court is entered after notice and a
hearing temporarily allowing the Disputed Claim for voting purposes under
Bankruptcy Rule 3018(a). Such disallowance for voting purposes is without
prejudice to the claimant's right to seek to have its Disputed Claim
allowed for purposes of distribution under the Plan.
SECTION 9. PROVISIONS GOVERNING EXECUTORY CONTRACTS AND UNEXPIRED LEASES
9.1. Assumption or Rejection of Contracts and Leases.
This Plan constitutes a motion by the Debtor to assume, as of the
Effective Date, all executory contracts and unexpired leases to which the
Debtor is a party, except for an executory contract or unexpired lease that
(a) has been assumed or rejected pursuant to Final Order of the Bankruptcy
Court, (b) is specifically rejected on Schedule 9.1 hereto filed by the
Debtor on or before the commencement of the hearing on approval of the
Disclosure Statement or such later date as may be fixed by the Bankruptcy
Court, (c) is the subject of a separate motion filed under section 365 of
the Bankruptcy Code by the Debtor prior to the filing of the schedule
described in section 9.1(b) hereof or (d) is otherwise assumed hereunder.
For purposes hereof, each executory contract and unexpired lease listed on
Schedule 9.1 hereto that relates to the use or occupancy of real property
shall include (i) modifications, amendments, supplements, restatements, or
other agreements made directly or indirectly by any agreement, instrument,
or other document that in any manner affects such executory contract or
unexpired lease, without regard to whether such agreement, instrument or
other document is listed on Schedule 9.1 hereto and (ii) executory
contracts or unexpired leases appurtenant to the premises listed on
Schedule 9.1 hereto including all easements, licenses, permits, rights,
privileges, immunities, options, rights of first refusal, powers, uses,
usufructs, reciprocal easement agreements, vault, tunnel or bridge
agreements or franchises, and any other interests in real estate or rights
in rem relating to such premises to the extent any of the foregoing are
executory contracts or unexpired leases, unless any of the foregoing
agreements are assumed.
9.2. Amendments to Schedule; Effect of Amendments.
The Debtor shall assume each of the executory contracts and unexpired
leases not listed on Schedule 9.1 hereto; provided, that the Debtor may at
any time on or before the first Business Day before the date of the
commencement of the Confirmation Hearing amend Schedule 9.1 hereto to
delete or add any executory contract or unexpired lease thereto, in which
event such executory contract or unexpired lease shall be deemed to be,
respectively, assumed and, if applicable, assigned as provided therein, or
rejected. The Debtor shall provide notice of any amendments to Schedule 9.1
hereto to the parties to the executory contracts or unexpired leases
affected thereby. The fact that any contract or lease is scheduled on
Schedule 9.1 hereto shall not constitute or be construed to constitute an
admission by the Debtor that the Debtor has any liability thereunder.
9.3. Bar to Rejection Damage Claims.
In the event that the rejection of an executory contract or unexpired
lease by the Debtor results in damages to the other party or parties to
such contract or lease, a Claim for such damages, if not heretofore
evidenced by a filed proof of claim, shall be forever barred and shall not
be enforceable against the Debtor, or its properties or interests in
property as agents, successors, or assigns, unless a proof of claim is
filed with the Bankruptcy Court and served upon counsel for the Debtor on
or before 30 days after the earlier to occur of (a) the giving of notice to
such party under section 9.1 or 9.2 hereof and (b) the entry of an order by
the Bankruptcy Court authorizing rejection of a particular executory
contract or lease.
9.4. Indemnification Obligations.
The obligations of the Debtor pursuant to, or under its,
certificate or articles of incorporation, by-laws, contract, applicable
state law or otherwise to indemnify its directors and officers for any
claims or causes of action arising out of acts or omissions that occurred
before August 1, 1998 shall be deemed to be, and shall be treated as though
they are, executory contracts that are rejected under the Plan. Any Claims
arising from such rejection shall be treated as Indemnity Claims under
Section 4.6 hereof.
SECTION 10. CONDITIONS PRECEDENT TO EFFECTIVE DATE
10.1. Conditions Precedent to Effective Date of the Plan.
The occurrence of the Effective Date of the Plan is subject to
satisfaction of the following conditions precedent:
(a) The Effective Date shall have occurred prior to August 6, 1999.
(b) The Confirmation Order, in form and substance reasonably
acceptable to the Debtor, the Unofficial Noteholders' Committee and MLGAF,
shall have been entered by the Clerk of the Bankruptcy Court and there
shall not be a stay or injunction in effect with respect thereto.
(c) An order shall have been entered by the Bankruptcy Court
estimating the Bondholder Litigation Claims and the Stockholder Litigation
Claims at zero.
(d) All Unsecured Claims shall have become Allowed Claims, Disallowed
Claims or estimated for distribution purposes hereunder by Final Order(s)
or by operation of law and the aggregate amount of all such Allowed
Unsecured Claims and estimated Unsecured Claims, if any, shall not exceed
$10 million.
(e) The New Warrant Agreement shall have been executed and delivered.
(f) The Debtor shall have received approval from the Federal
Communications Commission ("FCC") of all of the Debtor's transfer of
control applications requesting FCC approval of the transfer of the basic
trading areas authorizations and channel licenses held directly or
indirectly by the Debtor (or its affiliates).
(g) All other actions and all agreements, instruments or other
documents necessary to implement the terms and provisions hereof shall have
been effected.
10.2. Waiver of Conditions Precedent.
Each of the conditions precedent in section 10.1 hereof may be waived,
in whole or in part, by the Debtor, with the prior written consent of an
Unofficial Noteholders' Committee Majority and MLGAF. Any such waivers of a
condition precedent in section 10.1 hereof may be effected at any time,
without notice, without leave or order of the Bankruptcy Court and without
any formal action (other than by the Debtor, an Unofficial Noteholders'
Committee Majority and MLGAF).
SECTION 11. EFFECT OF CONFIRMATION
11.1. Vesting of Assets.
On the Effective Date, the Debtor, its properties and interests in
property and its operations shall be released from the custody and
jurisdiction of the Bankruptcy Court, and the estate of the Debtor shall
vest in Reorganized Wireless. From and after the Effective Date,
Reorganized Wireless may operate its business and may use, acquire and
dispose of property free of any restrictions of the Bankruptcy Code or the
Bankruptcy Rules, subject to the terms and conditions of the Plan.
11.2. Binding Effect.
Except as otherwise provided in section 1141(d)(3) of the Bankruptcy
Code and subject to the occurrence of the Effective Date, on and after the
Confirmation Date, the provisions of the Plan shall bind any holder of a
Claim against, or Equity Interest in, the Debtor and such holder's
respective successors and assigns, whether or not the Claim or Equity
Interest of such holder is impaired under the Plan and whether or not such
holder has accepted the Plan.
11.3. Discharge of Debtor.
Except to the extent otherwise provided herein, the treatment of all
Claims against or Equity Interests in the Debtor hereunder shall be in
exchange for and in complete satisfaction, discharge and release of all
Claims against or Equity Interests in the Debtor of any nature whatsoever,
known or unknown, including, without limitation, any interest accrued or
expenses incurred thereon from and after the Petition Date, or against its
estate or properties or interests in property. Except as otherwise
provided herein, upon the Effective Date, all Claims against and Equity
Interests in the Debtor will be satisfied, discharged and released in full
exchange for the consideration provided hereunder. Except as otherwise
provided herein, all entities shall be precluded from asserting against the
Debtor or Reorganized Wireless or their respective properties or interests
in property, any other Claims based upon any act or omission, transaction
or other activity of any kind or nature that occurred prior to the
Effective Date.
11.4. Term of Injunctions or Stays.
Unless otherwise provided, all injunctions or stays arising under or
entered during the Chapter 11 Case under section 105 or 362 of the
Bankruptcy Code, or otherwise, and in existence on the Confirmation Date,
shall remain in full force and effect until the Effective Date.
11.5. Indemnification Obligations.
Subject to the occurrence of the Effective Date, the obligations of
the Debtor, only to the extent permitted under the laws of the State of
Delaware, to indemnify, defend or reimburse directors or officers who were
or are directors or officers of the Debtor on or after August 1, 1998,
respectively, against any claims or causes of action as provided in the
Debtor's certificate of incorporation, by-laws, applicable state law or
contract, insofar as any such claims or causes of action arise out of acts
or omissions occurring on or after August 1, 1998, shall survive
confirmation of the Plan, remain unaffected thereby and not be discharged.
11.6. Releases.
On the Effective Date, the Debtor, on behalf of itself and its non-
debtor subsidiaries, will release the present and former officers and
directors of the Debtor and its subsidiaries from any and all claims,
obligations, suits, judgments, damages, rights, causes of action and
liabilities whatsoever, whether known or unknown, foreseen or unforeseen,
existing or hereafter arising, in law, equity or otherwise, based in whole
or in part upon any action or omission, transaction, event or other
occurrence taking place on or prior to the Effective Date in any way
relating to such officers and directors, the Debtor, the Reorganization
Case or the Plan.
On the Effective Date, each holder of a Claim or Equity Interest shall
be deemed to release the present and former officers and directors of the
Debtor and its subsidiaries from any and all claims, obligations, suits,
judgments, damages, rights, causes of action and liabilities whatsoever,
whether know or unknown, foreseen or unforeseen, existing or hereafter
arising, in law, equity or otherwise, based in whole or in part upon any
action or omission, transaction, event or other occurrence taking place on
or prior to the Effective Date in any way relating to such officers and
directors, the Debtor, the Reorganization Case or the Plan.
SECTION 12. WAIVER OF AVOIDANCE ACTION CLAIMS
Effective as of the Effective Date, the Debtor waives the right to
prosecute any avoidance or recovery actions under section 547 of the
Bankruptcy Code that belong to the Debtor or Debtor in Possession.
SECTION 13. RETENTION OF JURISDICTION
The Bankruptcy Court shall have exclusive jurisdiction of all matters
arising out of, or related to, the Chapter 11 Case and the Plan pursuant
to, and for the purposes of, sections 105(a) and 1142 of the Bankruptcy
Code and for, among other things, the following purposes:
(a) To hear and determine pending applications for the assumption or
rejection of executory contracts or unexpired leases and the allowance of
Claims resulting therefrom.
(b) To determine any and all adversary proceedings, applications and
contested matters, including, without limitation, under sections 544, 545,
548, 549, 550, 551 and 553 of the Bankruptcy Code.
(c) To ensure that distributions to holders of Allowed Claims and
Allowed Equity Interests are accomplished as provided herein.
(d) To hear and determine any timely objections to Administrative
Expense Claims or to proofs of claim and equity interests, including,
without limitation, any objections to the classification of any Claim or
Equity Interest, and to allow or disallow any Disputed Claim or Disputed
Equity Interest, in whole or in part.
(e) To enter and implement such orders as may be appropriate in the
event the Confirmation Order is for any reason stayed, revoked, modified or
vacated.
(f) To issue such orders in aid of execution of the Plan, to the
extent authorized by section 1142 of the Bankruptcy Code.
(g) To consider any amendments to or modifications of the Plan, or to
cure any defect or omission, or reconcile any inconsistency, in any order
of the Bankruptcy Court, including, without limitation, the Confirmation
Order.
(h) To hear and determine all applications under sections 330, 33l
and 503(b) of the Bankruptcy Code for awards of compensation for services
rendered and reimbursement of expenses incurred prior to the Confirmation
Date.
(i) To hear and determine disputes arising in connection with the
interpretation, implementation or enforcement of the Plan, the Confirmation
Order, any transactions or payments contemplated hereby or any agreement,
instrument or other document governing or relating to any of the foregoing.
(j) To hear and determine matters concerning state, local and federal
taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy Code.
(k) To hear any other matter not inconsistent with the Bankruptcy
Code.
(l) To hear and determine all disputes involving the existence, scope
and nature of the discharges granted under section 11.3 hereof
(m) To issue injunctions and effect any other actions that may be
necessary or desirable to restrain interference by any entity with the
consummation or implementation of the Plan.
(n) To enter a final decree closing the Chapter 11 Case.
SECTION 14. MISCELLANEOUS PROVISIONS
14.1. Payment of Statutory Fees.
All fees payable under section 1930, chapter 123, title 28, United
States Code, as determined by the Bankruptcy Court at the Confirmation
Hearing, shall be paid on the Effective Date. Any such fees accrued after
the Effective Date will constitute an Allowed Administrative Expense Claim
and be treated in accordance with section 2.1 hereof.
14.2. Retiree Benefits.
The Debtor does not have any obligations for any retiree benefits
implicated by Section 1129(a)(13) of the Bankruptcy Code.
14.3. Administrative Expenses Incurred After the Confirmation Date.
Administrative expenses incurred by the Debtor or Reorganized Wireless
after the Confirmation Date, including (without limitation) Claims for
professionals' fees and expenses, shall not be subject to application and
may be paid by the Debtor or Reorganized Wireless, as the case may be, in
the ordinary course of business and without further Bankruptcy Court
approval; provided, however, that no Claims for professional fees and
expenses incurred after the Confirmation Date shall be paid until after the
occurrence of the Effective Date.
14.4. Section 1125(e) of the Bankruptcy Code.
As of the Confirmation Date, the Debtor shall be deemed to have
solicited acceptances of the Plan in good faith and in compliance with the
applicable provisions of the Bankruptcy Code. The Debtor, MLGAF and each
member of the Unofficial Noteholders' Committee (and each of their
respective affiliates, agents, directors, officers, employees, investment
bankers, financial advisors, attorneys and other professionals) have, and
shall be deemed to have, participated in good faith and in compliance with
the applicable provisions of the Bankruptcy Code in the offer and issuance
of the securities under the Plan, and therefore are not, and on account of
such offer, issuance and solicitation will not be, liable at any time for
the violation of any applicable law, rule or regulation governing the
solicitation of acceptances or rejections of the Plan or the offer and
issuance of securities under the Plan.
14.5. Compliance with Tax Requirements.
In connection with the consummation of the Plan, the Debtor shall
comply with all withholding and reporting requirements imposed by any
taxing authority, and all distributions hereunder shall be subject to such
withholding and reporting requirements.
14.6. Severability of Plan Provisions.
In the event that, prior to the Confirmation Date, any term or
provision of the Plan is held by the Bankruptcy Court to be invalid, void
or unenforceable, the Bankruptcy Court shall have the power to alter and
interpret such term or provision to make it valid or enforceable to the
maximum extent practicable, consistent with the original purpose of the
term or provision held to be invalid, void or unenforceable, and such term
or provision shall then be applicable as altered or interpreted.
Notwithstanding any such holding, alteration or interpretation, the
remainder of the terms and provisions hereof shall remain in full force and
effect and shall in no way be affected, impaired or invalidated by such
holding, alteration or interpretation. The Confirmation Order shall
constitute a judicial determination and shall provide that each term and
provision hereof, as it may have been altered or interpreted in accordance
with the foregoing, is valid and enforceable in accordance with its terms.
All actions taken under this section 14.6 shall require the consent of the
Debtor and an Unofficial Noteholders' Committee Majority.
14.7. Notices.
All notices, requests, and demands to or upon the Debtor to be
effective shall be in writing (including by facsimile transmission) and,
unless otherwise expressly provided herein, shall be deemed to have been
duly given or made when actually delivered or, in the case of notice by
facsimile transmission, when received and telephonically confirmed,
addressed as follows:
Wireless One, Inc.
2506 Lakeland Drive
Jackson, Mississippi 39208
Attn: Thomas G. Noulles, Esq.
Senior Vice President and General Counsel
Telephone: (601) 936-1515
Telecopier: (601) 936-1517
and
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022
Attn: Martin N. Flics, Esq.
Telephone: (212) 906-1200
Telecopier: (212) 751-4864
and
Morris, Nichols, Arsht & Tunnell
1201 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899-1347
Attn: William H. Sudell, Jr., Esq.
Telephone: (302) 658-9200
Telecopier: (302) 658-3989
14.8. Governing Law.
Except to the extent that the Bankruptcy Code or other federal law is
applicable, or to the extent an Exhibit hereto provides otherwise,the
rights, duties and obligations arising under the Plan shall be governed
by,and construed and enforced in accordance with, the laws of the State
of Delaware without giving effect to the principles of conflict of laws
thereof.
14.9. Binding Effect.
The Plan shall be binding upon and inure to the benefit of the Debtor,
the holders of Claims and Equity Interests, and their respective successors
successors and assigns, including, without limitation,Reorganized Wireless.
Dated: March __, 1999
Respectfully submitted
Wireless One, Inc.
By:______________________________________
Name: Henry G. Schopfer, III
Title: Executive Vice President, Chief
Financial Officer and Secretary
INDEX OF EXHIBITS
EXHIBIT 1 - Restated Certificate of Incorporation of Reorganized
Wireless
EXHIBIT 2 - New Warrant Agreement for Reorganized Wireless
EXHIBIT 3 - 1999 Wireless One, Inc. Share Incentive Plan
EXHIBIT 1
CHARTER OF REORGANIZATION WIRELESS
RESTATED
CERTIFICATE OF INCORPORATION
OF
WIRELESS ONE, INC.
Wireless One, Inc., a corporation incorporated and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
A. The name of the Corporation is Wireless One, Inc. The original
Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on June 14, 1995, and amended
and restated on July 24, 1995.
B. This Restated Certificate of Incorporation has been duly adopted
in accordance with Sections 242, 245 and 303 of the General Corporation Law
of the State of Delaware and, pursuant to such provisions, this Restated
Certificate of Incorporation amends and restates the Certificate of
Incorporation. Provision for the making of this Restated Certificate of
Incorporation is contained in an order, entered _________, 1999, of the
United States Bankruptcy Court for the District of Delaware, having
jurisdiction over a proceeding for the reorganization of the Corporation
commenced under Chapter 11 of the United States Bankruptcy Code.
C. The Certificate of Incorporation of the Corporation, as amended
and restated hereby, shall, upon the filing hereof with the Secretary of
State of the State of Delaware, read in its entirety as follows:
ARTICLE I.
The name of the Corporation is Wireless One, Inc.
ARTICLE II.
The address of the Corporation's registered office in the State
of Delaware is 1209 Orange Street, Wilmington, Delaware, County of New
Castle. The name of its registered agent at such address is The
Corporation Trust Company. The registered office and/or registered agent
of the Corporation may be changed from time to time by action of the board
of directors.
ARTICLE III.
The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which Corporations
may be organized under the General Corporation Law of the State of
Delaware.
ARTICLE IV.
CAPITAL STOCK
(a) The total number of shares of common stock that the
Corporation shall have authority to issue is 50,000,000, par value $.0l per
share (the "Common Stock"). The total number of shares of preferred stock
that the Corporation shall have authority to issue is 10,000,000, par value
$.0l per share (the "Preferred Stock"). No non-voting equity securities of
the Corporation shall be issued by the Corporation.
(b) The Common Stock shall rank junior to the Preferred Stock in
right of payment of dividends and upon liquidation and is subject to all
the powers, rights, privileges, preferences and priorities of the Preferred
Stock as provided herein or in any resolution or resolutions adopted by the
board of directors pursuant to authority expressly vested in it by the
provisions of Paragraph (c) of this ARTICLE IV.
The Common Stock shall not be convertible into, or exchangeable
for, shares of any other class or classes or of any other series of the
same of the Corporation's capital stock.
No holder of Common Stock shall have any preemptive, redemption
or sinking fund rights with respect to the Common Stock, or to any
obligations convertible (directly or indirectly) into stock of the
Corporation whether now or hereafter authorized.
The Common Stock shall have voting rights for the election of
directors and for all other purposes, each holder of Common Stock being
entitled to one vote for each share thereof held by such holder, except as
otherwise required by law.
(c) Authority is hereby expressly vested in the board of
directors of the Corporation, subject to the provisions of this ARTICLE IV
and to the limitations prescribed by law, to authorize the issuance from
time to time of one or more series of Preferred Stock. The authority of
the board of directors with respect to each series shall include, but not
be limited to, the determination or fixing of the following by resolution
or resolutions adopted by the affirmative vote of a majority of the total
number of the directors then in office:
(i) The designation of such series;
(ii) The dividend rate of such series, the conditions and dates
upon which such dividends shall be payable, the relation which such
dividends shall bear to the dividends payable on any other class or classes
or series of the Corporation's capital stock, and whether such dividends
shall be cumulative or non-cumulative;
(iii) Whether the shares of such series shall be subject to
redemption for cash, property or rights, including securities of any other
corporation, by the Corporation or upon the happening of a specified event,
and, if made subject to any such redemption, the times or events, prices,
rates, adjustments and other terms and conditions of such redemptions;
(iv) The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series;
(v) Whether or not the shares of such series shall be
convertible into, or exchangeable for, at the option of either the holder
or the Corporation or upon the happening of a specified event, shares of
any other class or classes or of any other series of the same of the
Corporation's capital stock, and, if provision be made for conversion or
exchange, the times or events, prices, rates, adjustments and other terms
and conditions of such conversions or exchanges;
(vi) The restrictions, if any, on the issue or reissue of any
additional Preferred Stock;
(vii) The rights of the holders of the shares of such series
upon the voluntary or involuntary liquidation, dissolution or winding up of
the Corporation; and
(viii) The provisions as to voting, optional and/or other special
rights and preferences, if any, including, without limitation, the right to
elect one or more directors.
ARTICLE V.
The Corporation is to have perpetual existence.
ARTICLE VI.
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the Corporation is expressly authorized
to make, alter, amend, change, add to or repeal the by-laws of the
Corporation. Any alteration or repeal of the by-laws of the Corporation by
the stockholders of the Corporation shall require the affirmative vote of a
majority of the outstanding shares of the Corporation entitled to vote on
such alteration or repeal, subject to ARTICLE IX hereof.
ARTICLE VII.
Meetings of stockholders may be held within or without the State
of Delaware, as the by-laws of the Corporation may provide. The books of
the Corporation may be kept outside the State of Delaware at such place or
places as may be designated from time to time by the board of directors or
in the by-laws of the Corporation. Election of directors need not be by
written ballot unless the by-laws of the Corporation so provide.
ARTICLE VIII.
(a) Subject to the rights of the holders of any series of
Preferred Stock, from and after the date on which the Common Stock of the
Corporation is registered pursuant to the Securities Exchange Act of 1934,
as amended, (A) any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special
meeting of stockholders of the Corporation and may not be effected in lieu
thereof by any consent in writing by such stockholders, and (B) special
meetings of stockholders of the Corporation may be called only by the
chairman of the board, the president or the board of directors pursuant to
a resolution adopted by the affirmative vote of the majority of the total
number of directors then in office.
(b) A director of the Corporation shall not in the absence of
fraud be disqualified by his office from dealing or contracting with the
Corporation either as a vendor, purchaser or otherwise, nor in the absence
of fraud shall any transaction or contract of the Corporation be void or
voidable or affected by reason of the fact that any director, or any firm
of which any director is a member, or any corporation of which any director
is an officer, director or stockholder, in any way interested in such
transaction or contract; provided that at the meeting of the board of
directors or of a committee thereof having authority in authorizing or
affirming such contract or transaction, the existence of the interest of
such director, firm or Corporation is disclosed or made known and such
contract or transaction shall be approved by a majority of directors not so
interested or connected. Nor shall any director be liable to account to
the Corporation for any profit realized by him from or through any such
transaction or contact of the Corporation ratified or approved as
aforesaid, by reason of the fact that he or any firm of which he is a
member, or any corporation of which he is an officer, director or
stockholder, was interested in such transaction or contract. Directors so
interested may be counted when present at meetings of the board of
directors or such committee for the purpose of determining the existence of
a quorum. Any contact, transaction or act of the Corporation or of the
board of directors or of any committee thereof (whether or not approved or
ratified as hereinabove in this paragraph provided) which shall be ratified
by a majority in interest of a quorum of the stockholders having voting
power at any annual meeting or any special meeting called for such purpose,
shall be as valid and as binding as though ratified by every stockholder of
the Corporation.
(c) The number of directors which shall constitute the whole
board shall be such as from time to time shall be fixed by resolution
adopted by affirmative vote of a majority of the board of directors except
that such number shall not be less than one (1) nor more than nine (9), the
exact number to be determined by resolution adopted by affirmative vote of
a majority of the board of directors
(d) Except to the extent prohibited by law, the board of
directors shall have the right (which, to the extent exercised, shall be
exclusive) to establish the rights, powers, duties, rules and procedures
that from time to time shall govern the board of directors and each of its
members, including without limitation the vote required for any action by
the board of directors, and that from time to time shall affect the
directors' power to manage the business and affairs of the Corporation; and
no by-law shall be adopted by stockholders which shall impair or impede the
implementation of the foregoing.
(e) the board of directors shall have authority from time to
time to set apart out of any assets of the Corporation otherwise available
for dividends a reserve or reserves as working capital or for any other
purpose or purposes, and to abolish or add to any such reserve or reserves
from time to time as said board may deem to be in the interest of the
Corporation; and said board shall likewise have power to determine in its
discretion, except as herein otherwise provided, what part of the assets of
the Corporation available for dividends in excess of such reserve or
reserves shall be declared in dividends and paid to the stockholders of the
Corporation.
(f) Any and all right, title, interest and claim in or to any
dividends declared by the Corporation, whether in cash, stock or otherwise,
which are unclaimed by the stockholder entitled thereto for a period of six
years after the close of business on the payment date, shall be and shall
be deemed to be extinguished and abandoned; and such unclaimed dividends in
the possession of the Corporation, its transfer agents or other agents or
depositories, shall at such time become the absolute property of the
Corporation, free and clear of any and all claims of any persons
whatsoever.
(g) The shares of all classes of stock of the Corporation may be
issued by the Corporation from time to time for such consideration as from
time to time may be fixed by the board of directors of the Corporation,
provided that shares of stock having a par value shall not be issued for a
consideration less than such par value, as determined by the board. At any
time, or from time to time, the Corporation may grant rights or options to
purchase from the Corporation any shares of its stock of any class or
classes to run for such period of time, for such consideration, upon such
terms and conditions, and in such form as the board of directors may
determine. The board of directors shall have authority, as provided by
law, to determine that only a part of the consideration, which shall be
received by the Corporation for the shares of its stock which it shall
issue from time to time, shall be capital, provided, however, that, if all
the shares issued shall be shares having a par value, the amount of the
part of such consideration so determined to be capital shall be equal to
the aggregate par value of such shares. The excess, if any, at any time,
of the total net assets of the Corporation over the amount so determined to
be capital, as aforesaid, shall be surplus. All classes of stock of the
Corporation shall be and remain at all times nonassessable.
(h) The board of directors is hereby expressly authorized, in
its discretion, in connection with the issuance of any obligations or stock
of the Corporation (but without intending hereby to limit its general power
so to do in other cases), to grant rights or options to purchase stock of
the Corporation of any class upon such terms and during such period as the
board of directors shall determine, and to cause such rights to be
evidenced by such warrants or other instruments as it may deem advisable.
(i) The board of directors shall have power from time to time to
determine to what extent and at what times and places and under what
conditions and regulations the accounts and books of the Corporation, or
any of them, shall be open to the inspection of the stockholders; and no
stockholder shall have any right to inspect any account or book or document
of the Corporation, except as conferred by the laws of the State of
Delaware, unless and until authorized so to do by resolution of the board
of directors or of the stockholders of the Corporation.
(j) Except as otherwise provided in the by-laws, the
stockholders of the Corporation and the board of directors may hold their
meetings and have an office or offices outside of the State of Delaware,
and, subject to the provisions of the laws of said State, may keep the
books of the Corporation outside of said State at such places as may, from
time to time, be designated by the board of directors.
(k) The by-laws of the Corporation may confer powers upon the
directors in addition to those granted in the Certificate of Incorporation,
as amended, and in addition to the powers expressly conferred upon them by
the laws of the State of Delaware.
ARTICLE IX.
Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, Section 10 of Article II, and Sections 2, 3,
4 and 5 of Article III of the by-laws of the Corporation and Sections (a),
(c) and (d) of ARTICLE VIII, this ARTICLE IX and ARTICLE X of this
Certificate of Incorporation shall not be altered, amended or repealed and
no provision inconsistent therewith shall be adopted without the
affirmative vote of the holders of at least 80% of the capital stock
entitled to vote in the election of directors, voting together as a single
class.
ARTICLE X.
Section 1. LIMITATION OF LIABILITY.
(a) To the fullest extent permitted by the General Corporation
Law of the State of Delaware (the "Delaware General Corporation Law") as it
now exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than permitted prior thereto),
and except as otherwise provided in the Corporation's by-laws, no director
of the Corporation shall be liable to the Corporation or its stockholders
for monetary damages arising from a breach of fiduciary duty owed to the
Corporation or its stockholders.
(b) Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification.
Section 2. RIGHT TO INDEMNIFICATION. Each person who was or is
made a party or is threatened to be made a party to or is otherwise
involved (including involvement as a witness) in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or
was a director or officer of the Corporation or, while a director or
officer of the Corporation, is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (hereinafter, an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a director or officer or in any other capacity while
serving as a director or officer, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than
permitted prior thereto), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA exercise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered
by such indemnitee in connection therewith and such indemnification shall
continue as to an indemnitee who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the indemnitee's heirs,
executors and administrators; PROVIDED, HOWEVER, that, except as provided
in Section 3 of ARTICLE X with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the board of
directors of the Corporation. The right to indemnification conferred in
this Section 2 of ARTICLE X shall be a contract right and shall include the
right to be paid by the Corporation the expenses incurred in defending any
such proceeding in advance of its final disposition (hereinafter an
"advance of expenses"); PROVIDED, HOWEVER, that, if and to the extent that
the Delaware General Corporation Law requires, an advance of expenses
incurred by an indemnitee in his or her capacity as a director or officer
(and not in any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to
repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal
(hereinafter a "final adjudication") that such indemnitee is not entitled
to be indemnified for such expenses under this Section 2 of ARTICLE XI or
otherwise. The Corporation may, by action of its board of directors,
provide indemnification to employees and agents of the Corporation with the
same scope and effect as the foregoing indemnification of director and
officers.
Section 3. PROCEDURE FOR INDEMNIFICATION. Any indemnification
of a director or officer of the Corporation or advance of expenses under
Section 2 of this ARTICLE X shall be made promptly, and in any event within
forty-five (45) days (or, in the case of an advance of expenses, twenty
(20) days), upon the written request of the director or officer. If a
determination by the Corporation that the director or officer is entitled
to indemnification pursuant to this ARTICLE X is required, and the
Corporation fails to respond within sixty (60) days to a written request
for indemnity, the Corporation shall be deemed to have approved the
request. If the Corporation denies a written request for indemnification
or advances of expenses, in whole or in part, or if payment in full
pursuant to such request is not made within forty-five (45) days (or, in
the case of an advance of expenses, twenty (20) days), the right to
indemnification or advances as granted by this ARTICLE X shall be
enforceable by the director or officer in any court of competent
jurisdiction. Such person's costs and expenses incurred in connection with
successfully establishing his or her right to indemnification, in whole or
in part, in any such action shall also be indemnified by the Corporation.
It shall be a defense to any such action (other than an action brought to
enforce a claim for the advance of expenses where the undertaking required
pursuant to Section 2 of this ARTICLE X, if any, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which
make it permissible under the Delaware General Corporation Law for the
Corporation to indemnify the claimant for the amount claimed, but the
burden of such defense shall be on the Corporation. Neither the failure of
the Corporation (including its board of directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper
in the circumstances because he or she has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its board of directors,
independent-legal counsel, or its stockholders) that the claimant has not
met such applicable standard of conduct, shall be a defense to the action
or create a presumption that the claimant has not met the applicable
standard of conduct. The procedure for indemnification of other employees
and agents for whom indemnification is provided pursuant to Section 2 of
this ARTICLE X shall be the same procedure set forth in this Section 3 for
directors or officers, unless otherwise set forth in the action of the
board of directors providing indemnification for such employee or agent.
Section 4. SERVICE FOR SUBSIDIARIES. Any person serving as a
director, officer, employee or agent of a Subsidiary shall be conclusively
presumed to be serving in such capacity at the request of the Corporation.
Section 5. RELIANCE. Persons who after the date of the adoption
of this provision become or remain directors or officers of the Corporation
or who, while a director or officer of the Corporation, become or remain a
director, officer, employee or agent of a subsidiary, shall be conclusively
presumed to have relied on the rights to indemnity, advance of expenses and
other rights contained in this ARTICLE X in entering into or continuing
such service. The rights to indemnification and to the advance of expenses
conferred in this ARTICLE X shall apply to claims made against an
indemnitee arising out of acts or omissions which occurred or occur both
prior and subsequent to the adoption hereof.
Section 6. NON-EXCLUSIVITY OF RIGHTS. The rights to
indemnification and to the advance of expenses conferred in this ARTICLE X
shall not be exclusive of any other right which any person may have or
hereafter acquire under this Certificate of Incorporation or under any
statute, by-law, agreement, vote of stockholders or disinterested directors
or otherwise.
Section 7. INSURANCE. The Corporation may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee or agent of the Corporation or was serving at
the request of the Corporation as a director, officer, employee or agent of
another Corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss asserted against him or her and
incurred by him or her in any such capacity, whether or not the Corporation
would have the power to indemnify such person against such expenses,
liability or loss under the Delaware General Corporation Law.
ARTICLE XI.
The Corporation expressly elects to be governed by Section 203 of
the Delaware General Corporation Law.
ARTICLE XII.
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed herein and by the laws of the State of
Delaware, and all rights conferred upon stockholders herein are granted
subject to this reservation.
EXHIBIT 2
NEW WARRANT AGREEMENT
WIRELESS ONE, INC.
and
[________________________]
as
WARRANT AGENT
WARRANT AGREEMENT
Dated as of __________, 1999
INDEX
Section 1. Appointment of Warrant Agent..................................1
Section 2. Form of Warrant Certificates..................................1
Section 3. Signature and Registration....................................1
Section 4. Transfer, Split Up, Combination and Exchange of Warrant
Certificates; Mutilated, Destroyed, Lost or Stolen Warrant
Certificates................................................2
Section 5. Subsequent Issue of Warrant Certificates......................2
Section 6. Exercise of Warrants; Exercise Price; Expiration Date.........3
Section 7. Cancellation and Destruction of Warrant Certificates..........4
Section 8. Reservation and Availability of Common Stock..................4
Section 9. Common Stock Record Date......................................5
Section 10. Adjustment of Exercise Price, Number of Shares or Number of
Warrants....................................................5
Section 11. Certification of Adjusted Exercise Price and Number of Shares
Issuable...................................................11
Section 12. Consolidation, Merger or Sale of Assets; Change of Control..11
Section 13. Fractional Shares...........................................12
Section 14. Rights of Action............................................13
Section 15. Agreements, Representations and Warranties and Indemnity
Obligations of Warrant Certificate Holders.................13
Section 16. Warrant Agent...............................................13
Section 17. Change of Warrant Agent.....................................15
Section 18. Issuance of New Warrant Certificates........................15
Section 19. Notice of Proposed Actions..................................15
Section 20. Reports.....................................................16
Section 21. Notices to Company, Warrant Agent and Warrant Holders.......16
Section 22. Supplements and Amendments..................................17
Section 23. Successors..................................................17
Section 24. Benefits of This Agreement..................................17
Section 25. New York Contract...........................................17
Section 26. Counterparts................................................17
Section 27. Descriptive Headings........................................18
EXHIBIT A: Form of Warrant Certificate............................... A-1
WARRANT AGREEMENT
This Warrant Agreement, dated as of ____________, 1999 (this "Warrant
Agreement" or "Agreement"), is between WIRELESS ONE, INC., a Delaware
corporation (the "Company"), and [ ] (the
"Warrant Agent").
WITNESSETH:
WHEREAS, pursuant to the Company's Plan of Reorganization dated as of
__________, 1999 (the "Plan of Reorganization"), confirmed by order of the
United States Bankruptcy Court for the District of Delaware entered
____________, 1999, the Company proposes, as of the date hereof and in
conjunction with the emergence of the Company from the protection provided
by Chapter 11 of Title 11 of the United States Code, to issue warrants as
hereinafter described (the "Warrants") to purchase up to an aggregate of
1,235,000 shares, subject to adjustment as hereinafter provided (the
"Warrant Shares"), of the Company's common stock, par value $.01 per share
(the "Common Stock"), upon the terms and subject to the conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT.
The Company hereby appoints the Warrant Agent to act as agent for
the Company in accordance with the terms and conditions hereinafter set
forth in this Agreement and the Warrant Agent hereby accepts such
appointment. The Company may from time to time appoint such co-warrant
agents as it may deem necessary or desirable.
SECTION 2. FORM OF WARRANT CERTIFICATES.
The Warrant Certificates (the "Warrant Certificates") (and the forms
of election to purchase shares and assignment to be attached on the reverse
thereof) shall be substantially of the tenor and purport recited in EXHIBIT
A hereto and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Warrant
Agreement, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
stock exchange on which the Warrants may from time to time be listed, or to
conform to usage. Subject to the provisions of Section 18 hereof, the
Warrant Certificates shall be dated as of the date of issuance thereof by
the Company, either upon initial issuance or upon transfer or exchange, and
each Warrant shall entitle the holder thereof to purchase one share of
Common Stock each at the price per share set forth therein (the "Exercise
Price"), but the number of such shares and the Exercise Price per share
shall be subject to adjustments as provided herein.
SECTION 3. SIGNATURE AND REGISTRATION.
The Warrant Certificates shall be executed on behalf of the Company
by the Chief Executive Officer or any Vice President, by facsimile
signature and have affixed thereto a facsimile of the Company's seal which
shall be attested by the Secretary or an Assistant Secretary of the Company
by facsimile signature. The Warrant Certificates shall be manually
countersigned by the Warrant Agent and shall not be valid for any purpose
unless so countersigned. In case any officer of the Company who shall have
signed any of the Warrant Certificates shall cease to be such officer of
the Company before countersignature by the Warrant Agent and issuance and
delivery by the Company, such Warrant Certificates, nevertheless, may be
countersigned by the Warrant Agent and issued and delivered with the same
force and effect as though the person who signed such Warrant Certificates
had not ceased to be such officer of the Company and any Warrant
Certificate may be signed on behalf of the Company by any person who, at
the actual date of the execution of such Warrant Certificate, shall be a
proper officer of the Company to sign each Warrant Certificate, although at
the date of the execution of this Warrant Agreement any such person was not
such an officer.
The Warrant Agent will keep or cause to be kept, at its principal
place of business, books for registration and transfer of the Warrant
Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Warrant Certificates, the number
of Warrants evidenced on its face by each of the Warrant Certificates and
the date of each of the Warrant Certificates.
SECTION 4. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF WARRANT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN WARRANT CERTIFICATES.
Subject to the provisions of Section 13 hereof, any Warrant
Certificate, with or without other Warrant Certificates, may be
transferred, split up, combined or exchanged for another Warrant
Certificate or Warrant Certificates, entitling the registered holder to
purchase a like number of shares of Common Stock as the Warrant Certificate
or Warrant Certificates surrendered then entitled such holder to purchase.
Subject to any restriction on transferability that may appear on a Warrant
Certificate in accordance with the terms hereof or any "stop-transfer"
instructions issued by the Company, any registered holder desiring to
register the transfer of, or to split up, combine or exchange any Warrant
Certificate shall make such request in writing delivered to the Warrant
Agent, and shall surrender such Warrant Certificate or Warrant Certificates
at the stock transfer office of the Warrant Agent. Thereupon the Warrant
Agent shall deliver to the person entitled thereto a Warrant Certificate or
Warrant Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer, split up, combination
or exchange of Warrant Certificates.
Upon receipt by the Company and the Warrant Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Warrant Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them, and
reimbursement to the Company and the Warrant Agent of all reasonable
expenses incidental thereto, and upon surrender and cancellation of the
Warrant Certificate if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor to the Warrant Agent for delivery to the
registered owner in lieu of the Warrant Certificate so lost, stolen,
destroyed or mutilated.
SECTION 5. SUBSEQUENT ISSUE OF WARRANT CERTIFICATES.
Subsequent to their original issuance, no Warrant Certificates shall
be issued except (a) Warrant Certificates issued upon any transfer,
combination, split up or exchange of Warrants pursuant to Section 4 hereof,
(b) Warrant Certificates issued in replacement of mutilated, destroyed,
lost or stolen Warrant Certificates pursuant to Section 4 hereof, (c)
Warrant Certificates issued pursuant to Section 6 hereof upon the partial
exercise of any Warrant Certificate to evidence the unexercised portion of
such Warrant Certificate and (d) Warrant Certificates issued pursuant to
Section 18 hereof. Nothing contained in this Agreement shall prohibit the
Company from issuing from time to time additional Warrants, each
representing the right to purchase Common Stock upon the terms and subject
to the conditions set forth herein, or other warrants, options or rights to
purchase securities issued by the Company.
SECTION 6. EXERCISE OF WARRANTS; EXERCISE PRICE; EXPIRATION DATE.
(a) The registered holder of any Warrant Certificate may exercise
the Warrants evidenced thereby in whole or in part at any time upon
surrender of the Warrant Certificates, with the form of election to
purchase on the reverse side thereof duly executed, to the Warrant Agent at
the stock transfer office of the Warrant Agent in New York, New York,
together with payment of the Exercise Price for each share of Common Stock
as to which the Warrants are exercised, at or prior to 5:00 p.m. (Eastern
Time) on __________, 2004 (the "Expiration Date"), which is the date on
which the right to exercise the Warrants will expire.
(b) The Exercise Price for each Warrant Share purchased pursuant to
the exercise of a Warrant shall initially be $29.46 and shall be subject to
adjustment as provided in Sections 10 and 12 hereof and shall be payable
(i) in the form of cash or by certified or official bank check payable to
the order of the Company, (ii) by tendering additional Warrants having a
fair market value (equal to the closing sales price on the day prior to the
date of such tender on the principal trading market therefor, if any, and
otherwise as determined in good faith by the Board of Directors of the
Company) equal to the Exercise Price or (iii) any combination of cash or
Warrants.
(c) Upon receipt of a Warrant Certificate, with the form of election
to purchase duly executed, accompanied by payment of the Exercise Price for
the shares to be purchased and an amount equal to any applicable transfer
tax, the Warrant Agent shall thereupon promptly (i) requisition from any
transfer agent of the Common Stock of the Company certificates for the
number of whole shares of Common Stock to be purchased and, when
appropriate, for the number of fractional shares to be sold by the Warrant
Agent, and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional
shares, and (iii) promptly after receipt of such certificates cause the
same to be delivered to or upon the order of the registered holder of such
Warrant Certificate, registered in such name or names as may be designated
by such holder, and, when appropriate, promptly after receipt deliver such
cash to or upon the order of the registered holder of such Warrant
Certificate.
(d) In case the registered holder of any Warrant Certificate shall
exercise less than all the Warrants evidenced thereby, a new Warrant
Certificate evidencing Warrants equivalent to the Warrants remaining
unexercised shall be issued by the Warrant Agent to the registered holder
of such Warrant Certificate or to his duly authorized assigns, subject to
the provisions of Section 13 hereof.
(e) The Warrant Agent shall account promptly to the Company with
respect to any Warrant exercise and concurrently pay to the Company all
monies received for the purchase of the Common Stock through the exercise
of Warrants.
SECTION 7. CANCELLATION AND DESTRUCTION OF WARRANT CERTIFICATES.
All Warrant Certificates surrendered for the purpose of exercise,
exchange, substitution or registration of transfer shall, if surrendered to
the Company or to any of its agents, be delivered to the Warrant Agent for
cancellation, or if surrendered to the Warrant Agent shall be cancelled by
it, and no Warrant Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Warrant Agreement. The
Company shall deliver to the Warrant Agent for cancellation and retirement,
and the Warrant Agent shall so cancel and retire, any other Warrant
Certificate purchased or acquired by the Company otherwise than upon the
exercise, exchange, substitution or registration of transfer thereof. The
Warrant Agent shall deliver all cancelled Warrant Certificates to the
Company or shall, at the written request of the Company, destroy such
cancelled Warrant Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
SECTION 8. RESERVATION AND AVAILABILITY OF COMMON STOCK.
The Company covenants and agrees that it will cause to be reserved
and kept available, out of its authorized and unissued Common Stock or its
authorized and issued Common Stock held in its treasury, the number of
shares of Common Stock that will be sufficient to permit the exercise in
full of all outstanding Warrants.
For so long as the Common Stock issuable upon the exercise of Warrants
may be listed on any national securities exchange or on the NASDAQ National
Market, the Company shall use its best efforts to cause all shares reserved
for such issuance to be listed upon official notice of issuance upon such
exercise.
The Company covenants and agrees that it will take all such action as
may be necessary to insure that all Common Stock delivered upon exercise of
Warrants will, at the time of delivery of the certificates for such shares
(subject to payment of the Exercise Price), be duly and validly authorized
and issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when due and
payable, any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Warrant
Certificates or of any certificates of Common Stock shares upon the
exercise of Warrants. The Company shall not, however, be required to pay
any transfer tax which may be payable in respect of any transfer involved
in the transfer or delivery of Warrant Certificates or the issuance or
delivery of certificates for Common Stock in a name other than that of the
registered holder of the Warrant Certificate evidencing Warrants
surrendered for exercise or to issue or deliver any certificates for Common
Stock upon the exercise of any Warrants until any such tax shall have been
paid (any such tax being payable by the holder of such Warrant Certificate
at the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
SECTION 9. COMMON STOCK RECORD DATE.
Each person in whose name any certificate for Common Stock is issued
upon the exercise of Warrants shall for all purposes be deemed to have
become the holder of record of the Common Stock represented thereby on, and
such certificate shall be dated, the date upon which the Warrant
Certificate evidencing such Warrants was duly surrendered and payment of
the Exercise Price (and any applicable transfer taxes) was made; PROVIDED,
HOWEVER, that if the date of such surrender and payment is a date upon
which the Common Stock transfer books of the Company are closed, such
person shall be deemed to have become the record holder of such shares on,
and such certificate shall be dated, the next succeeding business day on
which the Common Stock transfer books of the Company are open.
PRIOR TO THE EXERCISE OF THE WARRANTS EVIDENCED THEREBY, THE HOLDER OF
A WARRANT CERTIFICATE SHALL NOT BE ENTITLED TO ANY RIGHTS OF A STOCKHOLDER
OF THE COMPANY WITH RESPECT TO SHARES FOR WHICH THE WARRANTS SHALL BE
EXERCISABLE, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO VOTE, TO RECEIVE
DIVIDENDS OR OTHER DISTRIBUTIONS OR TO EXERCISE ANY PREEMPTIVE RIGHTS, AND
SHALL NOT BE ENTITLED TO RECEIVE ANY NOTICE OF ANY PROCEEDINGS OF THE
COMPANY, EXCEPT AS PROVIDED HEREIN.
SECTION 10. ADJUSTMENT OF EXERCISE PRICE, NUMBER OF SHARES OR NUMBER
OF WARRANTS.
The Exercise Price, the number of Warrant Shares covered by each
Warrant and the number of Warrants outstanding are subject to adjustments
from time to time upon the occurrence of the events enumerated in this
Section 10.
(a) In case the Company shall at any time after the date of this
Agreement (i) declare a dividend on the Common Stock payable in Common
Stock, (ii) subdivide the outstanding Common Stock into a greater number of
shares, (iii) combine the outstanding Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock in a reclassification
of the Common Stock (including any such reclassification in connection with
a consolidation or merger in which the Company is the surviving
corporation), the Exercise Price in effect at the time of the record date
for such dividend or of the effective date of such subdivision, combination
or reclassification, shall be proportionately adjusted so that the holder
of any Warrant thereafter exercised may receive the aggregate number and
kind of shares of capital stock of the Company which such holder would have
owned immediately following such action if such Warrant had been exercised
immediately prior to such action. If after an adjustment a holder of a
Warrant, upon exercise of it, may receive shares of two or more classes of
capital stock of the Company, the Company shall determine the allocation of
the adjusted Exercise Price between the classes of capital stock. After
such allocation, the exercise privilege and the Exercise Price of each
class of capital stock shall thereafter be subject to adjustment on terms
comparable to those applicable to Common Stock in this Section. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Common Stock entitling them
to subscribe for or purchase Common Stock (or securities convertible into
or exchangeable or exercisable for Common Stock) at a price per share of
Common Stock (or having an initial conversion, exchange or exercise price
per share of Common Stock, if a security convertible into or exchangeable
or exercisable for Common Stock) less than the current market price per
share of Common Stock (as defined in Section 10(f)) on such record date,
the Exercise Price shall be adjusted in accordance with the following
formula:
O + N x P
-----
E'=E x M
----------
O + N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the record
date.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after
the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which
such rights, options or warrants are exercisable, not all rights, options
or warrants shall have been exercised, the Exercise Price shall be
immediately readjusted to what it would have been if "N" in the above
formula had been the number of shares actually issued.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the surviving corporation) of the Company's assets (including
cash), debt securities, preferred stock or rights or warrants (excluding
those referred to in Section 10(b)), the Exercise Price shall be adjusted
in accordance with the following formula:
E' = E x M - F
-----
M
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the current market price per share of Common Stock on the record
date.
F = the fair market value on the record date of the assets,
securities, preferred stock, rights or warrants applicable to one
share of Common Stock and distributed to all holders of Common
Stock. The fair market value shall be determined in good faith by
the members of the Board of Directors of the Company (the "Board
of Directors" or the "Board").
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
distribution. This subsection (c) does not apply to rights, options or
warrants referred to in subsection (b) of this Section 10 or to the payment
of dividends or distributions payable out of consolidated earnings or
earned surplus of the Company.
(d) If the Company issues shares of Common Stock for a consideration
per share less than the current market price per share on the date the
Company fixes the offering price of such additional shares, the Exercise
Price shall be adjusted in accordance with the following formula:
P
---
E' = E x O + M
-------
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior to the
issuance of such additional shares.
P = the aggregate consideration received for the issuance of
such additional shares.
M = the current market price per share on the date of issuance
of such additional shares.
A = the number of shares outstanding immediately after the issuance
of such additional shares.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
The subsection (d) does not apply to:
(1) any of the transactions described in subsections (a), (b) or
(c) of this Section 10;
(2) the exercise of Warrants, or the conversion or exchange of
other securities convertible or exchangeable for Common Stock;
(3) Common Stock up to an aggregate of 1,110,000 shares issued
upon the exercise of options issued under the management incentive option
plan (the "Stock Option Plan") adopted by the Company pursuant to the Plan
of Reorganization, if such Common Stock would otherwise be covered by this
subsection (d);
(4) Common Stock issued upon the exercise of rights, options or
warrants, other than options issued pursuant to the Stock Option Plan;
(5) Common Stock issued in a bona fide public offering pursuant
to a firm commitment underwriting;
(6) Common Stock issued in a bona fide private placement through
a placement agent which is a member firm of the National Association of
Securities Dealers, Inc. (except to the extent that any discount from the
current market price attributable to restrictions on transferability of the
Common Stock, as determined in good faith by the Board of Directors, shall
exceed 10%); or
(7) Common Stock issued to acquire, or in the acquisition of,
all or any portion of a business as a going concern, whether such
acquisition shall be effected by purchase of assets, exchange of
securities, merger, consolidation or otherwise.
(e) If the Company issues any securities convertible into or
exchangeable or exercisable for Common Stock (other than securities issued
in any of the transactions described in subsections (a), (b) or (c) of this
Section 10) for an aggregate consideration per share of Common Stock (which
consideration shall equal the sum of (i) the amount per share of Common
Stock paid for such security plus (ii) the amount per share of Common Stock
payable upon exercise thereof) less than the current market price per share
on the date of issuance of such securities, the Exercise Price shall be
adjusted in accordance with the following formula:
DX P
----
E' = E x O + M
-------
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior to the
issuance of such securities.
P = the consideration per share received (which consideration shall
equal the sum of (i) the amount per share of Common Stock paid
for such security plus (ii) the amount per share of Common Stock
payable upon exercise thereof).
M = the current market price per share on the date of issuance of
such securities.
D = the maximum number of shares deliverable upon conversion or in
exchange for such securities at the initial conversion or
exchange rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange or
exercise of such securities has not been issued when such securities are no
longer outstanding, then the Exercise Price shall promptly be readjusted to
the Exercise Price which would then be in effect had the adjustment upon
the issuance of such securities been made on the basis of the actual number
of shares of Common Stock issued upon conversion or exchange or exercise of
such securities.
This subsection (e) does not apply to:
(1) convertible securities issued in a bona fide public offering
pursuant to a firm commitment underwriting;
(2) convertible securities issued in a bona fide private
placement through a placement agent which is a member firm of the National
Association of Securities Dealers, Inc. (except to the extent that any
discount from the current market price attributable to restrictions on
transferability of the Common Stock issuable upon conversion, as determined
in good faith by the Board of Directors, shall exceed 20%);
(3) convertible securities issued to acquire, or in the
acquisition of, all or any portion of a business as a going concern,
whether such acquisition shall be effected by purchase of assets, exchange
of securities, merger, consolidation or otherwise;
(4) options exercisable for up to an aggregate of 1,110,000
shares of Common Stock issued under the Stock Option Plan, if such employee
stock options would otherwise be covered by this subsection (e).
(f) For the purpose of any computation under Section 10(b), (c), (d)
or (e), the current market price per share of Common Stock on any date
shall be deemed to be the average of Quoted Prices of the Common Stock for
20 consecutive trading days commencing 30 trading days before the date in
question. The "Quoted Price" of the Common Stock is the last reported sales
price of the Common Stock as reported by NASDAQ National Market, or if the
Common Stock is listed on a securities exchange, the last reported sales
price of the Common Stock on such exchange which shall be for consolidated
trading if applicable to such exchange, or if neither so reported or
listed, the last reported bid price of the Common Stock. In the absence of
such quotations on one or more such trading days, the Board of Directors
shall determine the Quoted Price for such trading days on the basis of such
quotations as it in good faith considers appropriate.
(g) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such
price; PROVIDED, HOWEVER, that any adjustments which by reason of this
Section 10(g) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 10 shall be made to the nearest cent or to the nearest
hundredth of a share as the case may be. Notwithstanding the first sentence
of this Section 10(g), any adjustment required by this Section 10 shall be
made no later than the earlier of two years from the date of the
transaction which mandates such adjustment or the Expiration Date.
(h) All Warrants originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of Warrant Shares into
which such Warrants are exercisable (after giving effect to any adjustment
thereto pursuant to Section 10(i) in connection with such adjustment to the
Exercise Price), all subject to further adjustment as provided herein.
(i) Unless the Company shall have exercised its election as provided
in Section 10(j), upon each adjustment of the Exercise Price as a result of
the calculations made in Section 10(a), (b), (c), (d) or (e), each Warrant
outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Exercise Price,
that number of shares (calculated to the nearest hundredth) obtained by (i)
multiplying the number of Warrant Shares covered by a Warrant immediately
prior to this adjustment of the number of shares by the Exercise Price in
effect immediately prior to such adjustment of the Exercise Price and (ii)
dividing the product so obtained by the Exercise Price in effect
immediately after such adjustment of the Exercise Price.
(j) The Company may elect on or after the date of any adjustment of
the Exercise Price to adjust the number of Warrants in lieu of (but not in
addition to) any adjustment in the number of Warrant Shares as provided in
Section 10(i). Each of the Warrants outstanding after such adjustment of
the number of Warrants shall be exercisable for one Warrant Share. Each
Warrant held of record prior to such adjustment of the number of Warrants
shall become that number of Warrants (calculated to the nearest hundredth)
obtained by dividing the Exercise Price in effect prior to adjustment of
the Exercise Price by the Exercise Price in effect after adjustment of the
Exercise Price. The Company shall make a public announcement of its
election to adjust the number of Warrants, indicating the record date for
the adjustment, and, if known at the time, the amount of the adjustment to
be made. This record date may be the date on which the Exercise Price is
adjusted or any day thereafter, but shall be at least 10 days later than
the date of the public announcement. Upon each adjustment of the number of
Warrants pursuant to this subsection (j), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Warrant
Certificates on such record date Warrant Certificates evidencing, subject
to Section 13, the additional Warrants to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Warrant Certificates held by such holders prior to the
date of adjustment, and upon surrender thereof, if required by the Company,
new Warrant Certificates evidencing all the Warrants to which such holders
shall be entitled after such adjustment. Warrant Certificates so to be
distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the
adjusted Exercise Price) and shall be registered in the names of the holers
of record of Warrant Certificates on the record date specified in the
public announcement.
(k) Irrespective of any adjustment or change in the Exercise Price or
the number of Warrant Shares, the Warrant Certificates theretofore and
thereafter issued may continue to express the Exercise Price per share and
the number of shares which were expressed upon the initial Warrant
Certificates issued hereunder.
(l) The Company may at any time reduce the Exercise Price to any
amount (but not less than the par value of the Common Stock) for any period
of time (but not less than 20 business days) deemed appropriate by the
Board of Directors of the Company.
(m) In any case in which this Section 10 shall require that an
adjustment in the Exercise Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of
such event the issuing to the holder of any Warrant exercised after such
record date the Common Stock and other capital stock of the Company, if
any, issuable upon such exercise over and above the Common Stock and other
capital stock of the Company, if any, issuable upon such exercise on the
basis of the Exercise Price in effect prior to such adjustment, PROVIDED,
HOWEVER, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such
adjustment.
(n) In the event any one or more adjustments in the Exercise Price
are made pursuant to this Section 10 and subsequent thereto the Exercise
Price is required to be reduced pursuant to Section 12(b) hereof, then such
adjustment or adjustments shall be recalculated as if the event requiring
adjustment pursuant to Section 12(b) had occurred prior to the first event
that required adjustment pursuant to this Section 10.
SECTION 11. CERTIFICATION OF ADJUSTED EXERCISE PRICE AND NUMBER OF
SHARES ISSUABLE.
Whenever the Exercise Price and the number of Warrant Shares are
adjusted as provided in Section 10 above, the Company shall (a) promptly
obtain a certificate of a firm of independent public accountants of
recognized standing selected by the Board of Directors (who may be the
regular auditors of the Company) setting forth the Exercise Price as so
adjusted, the number of shares of Common Stock issuable upon the exercise
of each Warrant as so adjusted and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Warrant Agent
and with each transfer agent for the Common Stock a copy of such
certificate, and (c) mail a brief summary thereof to each holder of a
Warrant Certificate in accordance with Section 21.
SECTION 12. CONSOLIDATION, MERGER OR SALE OF ASSETS; CHANGE OF
CONTROL.
(a) If the Company shall at any time consolidate or merge with one
or more Persons or transfer or lease all or substantially all of its assets
to another Person (a "Transaction") in which Common Stock is exchanged for
securities, cash or other assets or a combination thereof (collectively,
"Transaction Consideration"), then the Warrants will automatically become
exercisable for the Transaction Consideration which the holder of the
Warrants would have owned or been entitled to receive immediately after the
Transaction if the holder had exercised the Warrants before the effective
date of the Transaction. Concurrently with the consummation of such
transaction, the corporation formed by or surviving any such consolidation
or merger, or the person to which such sale or conveyance shall have been
made, shall enter into a supplemental warrant agreement so providing and
further providing for adjustments which shall be as nearly equivalent as
may be practical to the adjustments provided for in Section 10. The
successor company shall mail to holders of Warrants a notice describing the
supplemental warrant agreement. If this Section 12 applies, Section 10 of
this Agreement will not apply to the specific transaction, but shall apply
thereafter.
(b) In the event of a "change of control" of the Company within one
year of the date hereof, the Exercise Price will be reduced to $23.22 per
Warrant Share, subject to adjustment as provided in Section 10 hereof. For
purposes of this Agreement, a "change of control" means the occurrence of
any of the following events:
any Person (as defined herein) or "group" (as
defined in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934) acquires beneficial ownership of
(x) more than 50% of the total outstanding Common Stock
of the Company or (y) more than 30% of the total
outstanding Common Stock of the Company with the right
to designate a majority of the Board of Directors of
the Company;
the Company consolidates with, or merges with or
into, any Person or sells, assigns, conveys, transfers,
or leases or otherwise disposes of all or substantially
all of its assets to any Person, or any Person
consolidates with, or merges with or into, the Company,
in any such event pursuant to a transaction in which
the outstanding Common Stock is changed into or
exchanged for cash, securities or other property, other
than any such transaction where the outstanding Common
Stock is not changed or exchanged at all (except to the
extent necessary to reflect a change in the
jurisdiction of incorporation of the Company); or
the Company or any of its affiliates enters into
any agreement, arrangement or understanding with
respect to any event described in subparagraph (i) or
(ii) of this Section 12(b);
provided, however, that in the case of a "change of control" as described
in (iii) above, such reduction shall not occur unless and until such event
thereafter occurs (whether within one year of the date hereof or any time
thereafter). As used in this Section 12, "Person" shall mean any
individual, corporation, limited liability company, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
SECTION 13. FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of shares
upon an exercise of Warrants or to distribute share certificates which
evidence fractional shares, nor shall the Company be required to make any
cash adjustment in respect of a fractional interest in a share, but the
fractional interest to which any person is entitled shall be sold in the
manner set forth in subsection (b) of this Section 13 by the Warrant Agent,
acting as agent for the person entitled to such fractional interest, except
as otherwise provided in such subsection.
(b) The Warrant Agent shall remit to such person the proceeds of the
sale of any such fractional interest sold by it as such agent. Fractional
interests shall be non-transferable except by or to the Company acting as
herein authorized. The Warrant Agent may sell fractional interests on the
basis of market prices of the Common Stock as determined by the Company in
its sole discretion. In lieu of making an actual sale of a fractional
interest, the Company may value fractional interests without actual sale on
the basis of the current market price of the Common Stock as determined by
the Company in its sole discretion.
(c) The holder of a Warrant, by the acceptance of the Warrant,
expressly waives his right to receive any fractional share upon exercise of
a Warrant.
SECTION 14. RIGHTS OF ACTION.
All rights of action in respect of this Agreement are vested in the
respective registered holders of the Warrant Certificates; and any
registered holder of any Warrant Certificate, without the consent of the
holder of any other Warrant Certificate, may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of,
his right to exercise the Warrants evidenced by such Warrant Certificate in
the manner provided in such Warrant Certificate and in this Agreement.
SECTION 15. AGREEMENTS, REPRESENTATIONS AND WARRANTIES AND INDEMNITY
OBLIGATIONS OF WARRANT CERTIFICATE HOLDERS.
Every holder of a Warrant Certificate by accepting the same
acknowledges, consents and agrees with, and represents and warrants to the
Company and with every other holder of a Warrant Certificate that:
(a) transfer of the Warrant Certificates shall be registered on the
registry books of the Warrant Agent only if surrendered at the stock
transfer office of the Warrant Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(b) prior to due presentment for registration of transfer, the
Company and the Warrant Agent may deem and treat the person in whose name
the Warrant Certificate is registered as the absolute owner thereof and of
the Warrants evidenced thereby (notwithstanding any notations of ownership
or writing on the Warrant Certificate made by anyone other than the Company
or the Warrant Agent) for all purposes whatsoever, and the Company shall
not be affected by any notice to the contrary.
SECTION 16. WARRANT AGENT.
The Warrant Agent undertakes the duties and obligations of registrar
for the Warrants imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants by
their acceptance thereof, shall be bound:
(a) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company and the Warrant Agent assumes
no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken or to be taken by it. The
Warrant Agent assumes no responsibility with respect to the distribution of
the Warrant Certificates except as herein otherwise provided;
(b) The Warrant Agent shall not be responsible for the failure of the
Company to comply with any of the covenants contained in this Agreement or
on the Warrant Certificates to be complied with by the Company;
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it and shall incur no liability or responsibility to any
holder of any Warrant Certificate in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with the opinion
or the advice of such counsel, provided the Warrant Agent shall have
exercised reasonable care in the selection and continued employment of such
counsel;
(d) The Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant Certificate for any action
taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document or instrument believed by it to be
genuine and to have been signed, sent or presented by the proper party or
parties;
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for the services rendered by the Warrant Agent in the
execution of this Agreement. The Company also agrees to reimburse the
Warrant Agent for all expenses, taxes and governmental charges and other
charges of any kind and nature incurred by the Warrant Agent in the
execution of this Agreement and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments, expenses and
counsel fees, for anything done or omitted by the Warrant Agent in the
execution of this Agreement except as a result of the Warrant Agent's
negligence or bad faith;
(f) The Warrant Agent and any stockholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants
or other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein shall preclude the
Warrant Agent from acting in any other capacity for the Company or for any
other legal entity;
(g) Except as set forth in Section 13, the Warrant Agent shall act
hereunder solely as agent for the Company, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not be
liable for anything which it may do or refrain from doing in connection
with this Agreement except for its own negligence or bad faith; and
(h) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
the Chief Executive Officer of the Company, or any Senior Vice President or
the Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for
any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer.
SECTION 17. CHANGE OF WARRANT AGENT.
The Warrant Agent may resign and be discharged from its duties under
this Agreement by giving to the Company notice in writing, and by giving
notice in writing by first class mail, postage prepaid, to each registered
holder of a Warrant Certificate at his address appearing in the Warrant
register, specifying a date when such resignation shall take effect, which
notice shall be sent at least 30 days prior to the date so specified. The
Company may remove the Warrant Agent or any successor warrant agent upon 30
days' notice in writing, mailed to the Warrant Agent or successor warrant
agent and to each transfer agent of the Common Stock by registered or
certified mail, and to the holders of Warrant Certificates at their
addresses appearing in the Warrant register. If the Warrant Agent shall
resign or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Warrant Agent. If the Company shall fail to
make such appointment within a period of 30 days after it has been notified
in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by the registered holder of a Warrant
Certificate, then the registered holder of any Warrant Certificate may
apply to any court of competent jurisdiction for the appointment of a
successor to the Warrant Agent. Pending appointment of a successor to the
Warrant Agent, either by the Company or by such a court, the duties of the
Warrant Agent shall be carried out by the Company. Any successor warrant
agent, whether appointed by the Company or by such a court, shall be a bank
or trust company in good standing, incorporated under the laws of any State
of the United States of America, and having its stock transfer office in
New York, New York, and having at the time of its appointment as warrant
agent a combined capital and surplus of at least $100,000,000. After
appointment the successor warrant agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally
named as warrant agent without further act or deed; but the former Warrant
Agent shall deliver and transfer to the successor warrant agent any
property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose.
Failure to give any notice provided for in this Section, however, or any
defect therein, shall not affect the legality or validity of the
resignation or removal of the Warrant Agent or the appointment of the
successor warrant agent, as the case may be.
SECTION 18. ISSUANCE OF NEW WARRANT CERTIFICATES.
Notwithstanding any of the provisions of this Agreement or of the
Warrants to the contrary, the Company may, at its option, issue new Warrant
Certificates evidencing Warrants in such form as may be approved by its
Board of Directors to reflect any adjustment or change in the Exercise
Price per share and the number or kind or class of shares of stock or other
securities or property purchasable under the several Warrant Certificates
made in accordance with the provisions of this Agreement.
SECTION 19. NOTICE OF PROPOSED ACTIONS.
In case the Company shall propose (a) to pay any dividend payable in
stock of any class to the holders of its Common Stock or to make any other
distribution to the holders its Common Stock (other than a cash dividend)
or (b) to offer to the holders of its Common Stock rights or warrants to
subscribe for or to purchase any additional Common Stock or shares of stock
of any class or any other securities, rights or options or (c) to effect
any reclassification of its Common Stock (other than a reclassification
involving only the subdivision or combination of outstanding Common Stock)
or (d) to effect any consolidation, merger or sale, transfer or other
disposition of all or substantially all of the property, assets or business
of the Company or (e) to effect the liquidation, dissolution or winding up
of the Company, then, in each such case, the Company shall give to each
holder of a Warrant, in accordance with Section 21, a notice of such
proposed action, which shall specify the record date for the purposes of
such stock dividend, distribution of rights or warrants, or the date on
which such reclassification, consolidation, merger, sale, transfer,
disposition, liquidation, dissolution, or winding up is to take place and
the date of participation therein by the holders of the Common Stock, if
any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (a) or (b) above at least ten days prior to
the record date for determining holders of the Common Stock for purposes of
such action, and in the case of any such action, at least ten days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of Common Stock, whichever shall be the earlier.
The failure to give notice required by this Section 19 or any defect
therein shall not affect the legality or validity of the action taken by
the Company or the vote upon any such action.
SECTION 20. REPORTS.
The Company shall cause copies of all annual and other periodic
reports, whether or not filed with the Securities and Exchange Commission,
and whether or not the Company is subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended, to be mailed by the
Warrant Agent and to the holders of the Warrants at their addresses
appearing in the register maintained by the Warrant Agent to the same
extent as such reports are furnished to the holders of the Common Stock.
SECTION 21. NOTICES TO COMPANY, WARRANT AGENT AND WARRANT HOLDERS.
Notices or demands authorized by this Agreement to be given or made
by the holder of any Warrant Certificate to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until notice of another address is given) as follows:
Wireless One, Inc.
2506 Lakeland Drive
Jackson, Mississippi 39208
Attention: General Counsel
The principal office of the Warrant Agent where the Warrant
Certificates may be presented for registration, transfer, exchange or
exercise pursuant to the terms of this Agreement, and where notice and
demands to or upon the Company in respect of the Warrants, Warrant
Certificates or this Agreement may be served, shall be, as of the date
hereof, as follows:
[Name of Warrant Agent]
[Address of Warrant Agent]
Attention: Compliance Department
Any such notice or demand shall be sufficiently given if sent by first-
class mail, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent) to the Company or the Warrant Agent at said
address.
Notices or demands authorized by this Agreement to be given or made by
the Company to the holder of any Warrant Certificate shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed to
such holder at the address of such holder as shown on the registry books of
the Company.
SECTION 22. SUPPLEMENTS AND AMENDMENTS.
The Company and the Warrant Agent may from time to time supplement
or amend this Agreement without the approval of any holders of Warrant
Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
other provisions herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company and the Warrant
Agent may deem necessary or desirable and which shall not adversely affect
the interests of the holders of Warrant Certificates. In addition, the
Company and the Warrant Agent may from time to time supplement or amend
this Agreement with the consent of the holders of not less the majority of
the Warrants (excluding Warrants held by the Company or any of its
affiliates); PROVIDED, HOWEVER, that no such amendment or supplement shall
increase the Exercise Price, shorten the time within which holders may
exercise their Warrants or decrease the number of Warrant Shares
purchasable upon exercise of each Warrant (other than in accordance with
Section 10) without the consent of each holder of Warrants adversely
affected thereby.
SECTION 23. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
SECTION 24. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any person
or corporation other than the Company, the Warrant Agent and the registered
holders of the Warrant Certificates any legal or equitable right, remedy,
or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Warrant Agent and the registered
holders of the Warrant Certificates.
SECTION 25. NEW YORK CONTRACT.
This Agreement and each Warrant Certificate issued hereunder shall
be deemed to be a contract made under the laws of the State of New York and
for all purposes shall be governed by and construed in accordance with the
laws of such state applicable to contracts to be made and performed
entirely within such state.
SECTION 26. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 27. DESCRIPTIVE HEADINGS.
Descriptive headings of the several Sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and attested, all as of the day and year first above written.
WIRELESS ONE, INC.
By:___________________________________
______________________________________
Name:
Title:
[WARRANT AGENT]
By:___________________________________
Authorized Officer
[Form of Face of Warrant Certificate] EXHIBIT A
NOT EXERCISABLE AFTER _________, 2004
No. ________ ________Warrants
WARRANT CERTIFICATE
WIRELESS ONE, INC.
This Warrant Certificate certifies that _______________________, or
registered assigns, is the registered holder of the number of Warrants set
forth above (the "Warrants"), each of which entitles the holder to purchase one
share (subject to adjustment) of Common Stock, par value $.01 per share (the
"Common Stock"), of Wireless One, Inc., a Delaware corporation (the "Company").
Each Warrant expires on _________, 2004 and entitles the holder upon exercise
to receive from the Company one fully paid and nonassessable share of Common
Stock (a "Warrant Share") at the exercise price (the "Exercise Price") of
$29.46 payable in lawful money of the United States of America (or, upon
exercise and at the election of the holder of the Warrant, by delivery of
Warrants as set forth in the Warrant Agreement referred to on the reverse
hereof or any combination of cash and Warrants) upon presentation and surrender
of this Warrant Certificate with the Form of Election to Purchase duly executed
and payment of the Exercise Price to the order of the Company at the stock
transfer office of [Name of Warrant Agent] (the "Warrant Agent"), but subject
to the conditions set forth herein and in the Warrant Agreement.
As provided in the Warrant Agreement, the Exercise Price and number of
Warrant Shares issuable upon exercise of the Warrants evidenced by this Warrant
Certificate are, upon the occurrence of certain events, subject to modification
and adjustment.
The Warrant Agreement also provides that, in the event that a "change of
control" (as defined in the Warrant Agreement) of the Company occurs on or
prior to __________, 2000, the Exercise Price shall, subject to the terms and
conditions of the Warrant Agreement, be reduced to $23.22 per share of Common
Stock, subject to adjustment as provided in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., Eastern Time, on _________,
2004 (the "Expiration Date"), and to the extent not exercised by such time,
such Warrants shall become void.
Neither the Warrants nor this Warrant Certificate entitles any holder or
transferee hereof to the right to vote for or to consent to, or to receive
notice as stockholder in respect of the meetings of stockholders for, the
election of directors of the Company or any other matter, or any rights
whatsoever of a stockholder of the Company.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, Wireless One, Inc. has caused this Warrant Certificate
to be signed by its [Chairman] and by its Secretary and has caused its
corporate seal to be affixed hereunto or imprinted hereon.
Dated:__________, ______
WIRELESS ONE, INC.
By:________________________________
Chairman of the Board and
Chief Executive Officer
ATTEST:
By:
Secretary
[WARRANT AGENT]
By:___________________________
Authorized Officer
[Form of Reverse of Warrant Certificate]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring _________, 2004 entitling the holder on
exercise to receive shares of Common Stock, and are issued pursuant to a
Warrant Agreement dated as of _________, 1999 (the "Warrant Agreement"),
between the Company and the Warrant Agent, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the Company and the
holder (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Warrant Agent.
Warrants may be exercised at any time prior to 5:00 p.m. on the Expiration
Date. The holder of Warrants evidenced by this Warrant Certificate may
exercise them by surrendering this Warrant Certificate, with the Form of
Election to Purchase set forth hereon properly completed and executed, together
with payment of the Exercise Price in cash or by certified or official bank
check payable to the order of the Company or, upon exercise and at the election
of the Warrant holder, by delivery of Warrants as set forth in the Warrant
Agreement or, any combination of cash and Warrants, at the stock transfer
office of the Warrant Agent. In the event that upon any exercise of Warrants
evidenced hereby the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the holder hereof
or his assignee a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any cash dividends which may have
accrued on any shares of Common Stock issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that either the number of shares of Common Stock issuable
upon the exercise of each Warrant or the number of Warrants held by each holder
also shall be adjusted. No fractions of a share of Common Stock will be issued
upon the exercise of any Warrant, but the Company will pay the amount, if any,
received upon sale by the Warrant Agent of such fractional share.
Warrant Certificates, when surrendered at the stock transfer office of the
Warrant Agent by the registered holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the stock transfer office of the Warrant Agent, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided in
the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
The Warrant Agent and the Company may deem and treat the registered
holder(s) hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Warrant Certificate)
TO WIRELESS ONE, INC.
The undersigned hereby irrevocably elects to exercise ____________
Warrants represented by this Warrant Certificate to purchase the Common Stock
issuable upon the exercise of such Warrants and requests that certificates for
such shares be issued in the name of:
Please insert social security or other identifying number:_____________________
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the remainder of such
Warrants shall be registered in the name of and delivered to:
Please insert social security or other identifying number:_____________________
(Please print name and address)
Dated: __________, _____
Signature
(Signature must conform in all respects to name of holder
as specified on the face of this Warrant Certificate)
Signature Guaranteed:
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate)
FOR VALUE RECEIVED________________________________________________________
_______________________________________hereby sells, assigns and transfers unto
_______________________________________________________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: ____________, _____
Signature_____________________________________
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
EXHIBIT 3
STOCK OPTION PLAN
WIRELESS ONE, INC.
STOCK OPTION PLAN
1. PURPOSE. The purpose of the Stock Option Plan (the "Plan") of
Wireless One, Inc. ("Wireless") is to provide for the grant of non-
qualified options (the "Options") to purchase shares of the common stock,
$.01 par value per share (the "common Stock") of Wireless to officers,
directors, key employees and consultants of Wireless and its subsidiaries
(collectively, the "Company"). The Plan is intended to increase
shareholder value and advance the interests of the Company by providing an
incentive to attract and retain key management personnel. As used in the
Plan, the term "subsidiary" means any corporation of which Wireless owns
(directly or indirectly) within the meaning of Section 425(f) of the
Internal Revenue Code of 1986, as amended (the "Code"), 50% or more of the
total combined voting power of all classes of stock.
2. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of Wireless, by the compensation committee of the Board of
Directors of Wireless, or by a subcommittee of the compensation committee.
The Board of Directors or the committee or subcommittee that administers
the Plan shall hereinafter be referred to as the "Committee." The
Committee shall have plenary authority to determine who will receive
Options under the Plan, to grant Options under the Plan, to set the terms
of those Options, to interpret the Plan, to establish any rules or
regulations relating to the Plan that it determines to be appropriate, to
enter into an agreement with participants as to the terms of the Options
(the "Option Agreement") and to make any other determination that it
believes necessary or advisable for the proper administration of the Plan.
Its decisions in matters relating to the Plan shall be final and conclusive
on the Company and participants.
3. ELIGIBLE PARTICIPANTS. Key senior management level employees of
the Company (including officers and directors) and consultants and advisors
to the Company shall become eligible to receive Options under the Plan when
or if designated by the Committee.
4. SHARES SUBJECT TO THE PLAN.
4.1. NUMBER OF SHARES. Subject to adjustment as provided in Section
6.5, a total of 1,110,000 shares of Common Stock are authorized to be
issued under the Plan (440,000 of which shall be subject to Options issued
on the effective date of the Plan of Reorganization of Wireless dated March
__, 1999 at an exercise price of $13.51 and otherwise in accordance with
the format of the Stock Option Agreement attached hereto as Exhibit A). In
the event that an Option granted hereunder expires or is terminated or
canceled prior to exercise, any shares of Common Stock that were issuable
hereunder may again be issued under the Plan.
4.2. TYPE OF COMMON STOCK. Common Stock issued under the Plan may be
authorized and unissued shares or issued shares held as treasury shares.
5. TERMS OF OPTIONS. Each Option granted under the Plan shall be a
non-qualified stock option and subject to the following terms and
conditions:
5.1. PRICE. The exercise price per share shall be determined by the
Committee and shall be no less than the Fair Market Value of a share of
Common Stock on the effective date of the Option grant, subject to
adjustment under Section 6.5.
5.2. NUMBER. The number of shares of Common Stock subject to the
Option shall be determined by the Committee, subject to adjustment as
provided in Section 6.5; provided, however, that no participant may be
granted Options with respect to more than [300,000] shares of Common Stock
in a calendar year.
5.3. DURATION AND TIME FOR EXERCISE. Subject to earlier termination
as provided in Section 6.3, the term of each Option shall be five years.
Each Option shall become exercisable at such time or times during its term
as shall be determined by the Committee. The Option shall also be subject
to automatic acceleration under Section 6.10.
5.4. MANNER OF EXERCISE. An Option may be exercised, in whole or in
part, by giving written notice to the Company, specifying the number of
shares of Common Stock to be purchased. The exercise notice shall be
accompanied by the full purchase price for such shares. The exercise price
shall be payable in United States dollars and may be paid by (a) cash; (b)
check; (c) by delivery of shares of Common Stock, which, unless otherwise
determined by the Committee, have been held by the optionee for at least
six months, which shares shall be valued for this purpose at the Fair
Market Value on the business day immediately preceding the date such Option
is exercised; (d) by the simultaneous exercise of the Option and sale of
the shares of Common Stock acquired upon exercise, pursuant to a brokerage
arrangement that has been approved in advance by the Committee; or (e) in
such other manner as may be authorized from time to time by the Committee.
In the case of delivery of an uncertified check upon exercise of an Option,
no shares shall be issued until the check has been paid in full. Prior to
the issuance of shares of Common Stock upon the exercise of an Option, a
participant shall have no rights as a shareholder.
6. GENERAL.
6.1 DURATION. Subject to Section 6.10, the Plan shall remain in
effect until all Options granted under the Plan have either been exercised
or been terminated under the terms of the Plan.
6.2 TRANSFERABILITY. No Options granted hereunder may be
transferred, pledged, assigned or otherwise encumbered by a participant
except: (a) by will; (b) by the laws of descent and distribution; (c)
pursuant to a domestic relations order, as defined in the Code, if
permitted by the Committee and so provided in the Option Agreement or an
amendment thereto; or (d) if permitted by the Committee and so provided in
the Option Agreement or an amendment thereto, (i) to Immediate Family
members, (ii) to a partnership in which Immediate Family Members, or
entities in which Immediate Family Members are the sole owners, members or
beneficiaries, as appropriate, are the sole partners, (iii) to a limited
liability company in which Immediate Family Members, or entities in which
Immediate Family Members are the sole owners, members or beneficiaries, as
appropriate, are the sole members, or (iv) to a trust for the sole benefit
of Immediate Family Members. "Immediate Family Members" shall be defined
as the spouse and natural or adopted children or grandchildren of the
participant and their spouses. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of Options, or levy of attachment or
similar process upon Options not specifically permitted herein, shall be
null and void and without effect.
6.3 EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH. In the event that a
participant ceases to be an employee, director or consultant of the Company
for any reason, including death, disability, early retirement or normal
retirement, any Options may be exercised or shall expire at such times as
may be determined by the Committee and provided in the Option Agreement.
6.4 ADDITIONAL CONDITION. Anything in this Plan to the contrary
notwithstanding: (a) the Company may, if it shall determine it necessary
or desirable for any reason, at the time of the grant of any Option or the
issuance of any shares of Common Stock pursuant to any Option, require the
recipient of the Option, as a condition to the receipt thereof or to the
receipt of shares of Common Stock issued pursuant thereto, to deliver to
the Company a written representation of present intention to acquire the
Option or the shares of Common Stock issued pursuant thereto for his own
account for investment and not for distribution; and (b) if at any time the
Company further determines, in its sole discretion, that the listing,
registration or qualification (or any updating of any such document) of any
Option or the shares of Common Stock issuable pursuant thereto is necessary
on any securities exchange or under any federal or state securities or blue
sky law, or that the consent or approval of any governmental regulatory
body is necessary or desirable as a condition of, or in connection with the
award of any Option, the issuance of shares of Common Stock pursuant
thereto, or the removal of any restrictions imposed on such shares, such
Option shall not be awarded or such shares of Common Stock shall not be
issued or such restrictions shall not be removed, as the case may be, in
whole or in part, unless such listing, registration, qualification, consent
or approval shall have been effected or obtained free of any conditions not
acceptable to the Company.
6.5 ADJUSTMENT. In the event of any merger, consolidation or
reorganization of the Company with any other corporation or corporations,
there shall be substituted for each of the shares of Common Stock then
subject to the Plan, including shares subject to Options, the number and
kind of shares of stock or other securities, or property (including,
without limitation, cash) to which the holders of the shares of Common
Stock will be entitled pursuant to the transaction. In the event of any
recapitalization, stock dividend, stock split, combination of shares or
other change in the Common Stock, the number of shares of Common Stock then
subject to the Plan, including shares subject to outstanding Options, shall
be adjusted in proportion to the change in outstanding shares of Common
Stock. In the event of any such adjustments, the purchase price of any
Option, the performance objectives of any Option, and the shares of Common
Stock issuable pursuant to any Option shall be adjusted as and to the
extent appropriate, in the reasonable discretion of the Committee, to
provide participants with the same relative rights before and after such
adjustment.
6.6 OPTION AGREEMENT. The terms of each Option shall be stated in an
Option Agreement.
6.7 WITHHOLDING. The Company shall have the right to collect as a
condition to exercise of an Option any taxes required by law to be
withheld. At any time that a participant is required to pay to the Company
an amount required to be withheld under applicable income tax laws in
connection with the exercise of an Option, the participant may, subject to
disapproval by the Committee, satisfy this obligation in whole or in part
by electing (the "Election") to have the Company withhold shares of Common
Stock having a value equal to the amount required to be withheld. The
value of the shares to be withheld shall be based on the Fair Market Value
of the Common Stock on the date that the amount of tax to be withheld shall
be determined ("Tax Date"). Each Election must be made prior to the Tax
Date. The Committee may disapprove of any Election or may suspend or
terminate the right to make Elections.
6.8 NO CONTINUED EMPLOYMENT. No participant under the Plan shall
have any right, because of his or her participation, to continue in the
employ of the Company for any period of time or to any right to continue
his or her present or any other rate of compensation.
6.9 AMENDMENT OF THE PLAN. The Board may amend or discontinue the
Plan at any time. No amendment or discontinuance shall, subject to
adjustments permitted under Section 6.5, materially impair, without the
consent of the recipient, an Option previously granted, except that the
Company retains the right to require the forfeiture of an Option if a
participant's employment is terminated for cause.
6.10 CHANGE OF CONTROL. (a) A Change of Control means the occurrence
of any of the following events::
(i) any Person (as defined herein) or "group" (as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934)
acquires beneficial ownership of (x) more than 50% of the total
outstanding Common Stock of the Company or (y) more than 30% of
the total outstanding Common Stock of the Company with the right
to designate a majority of the Board of Directors of the Company;
or
(ii) the Company consolidates with, or merges with or into,
any Person or sells, assigns, conveys, transfers, or leases or
otherwise disposes of all or substantially all of its assets to
any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in
which the outstanding Common Stock is changed into or exchanged
for cash, securities or other property, other than any such
transaction where the outstanding Common Stock is not changed or
exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of incorporation of the Company).
As used in this Section 6.10, "Person" shall mean any individual,
corporation, limited liability company, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
(b) Upon a Change of Control, or immediately prior to the
closing of a transaction that will result in a Change of Control, if
consummated, all outstanding Options granted pursuant to the Plan shall
automatically become fully exercisable without the necessity of action by
any person.
6.11 DEFINITION OF FAIR MARKET VALUE. Whenever "Fair Market Value" of
Common Stock shall be determined for purposes of this Plan, it shall be
determined as follows: (i) if the Common Stock is listed on an established
stock exchange or any automated quotation system that provides sale
quotations, the closing sale price for a share of the Common Stock on such
exchange or quotation system on the applicable date; (ii) if the Common
Stock is not listed on any exchange or quotation system, but bid and asked
prices are quoted and published, the mean between the final quoted bid and
asked prices on the applicable date, and if bid and asked prices are not
available on such day, on the next preceding day on which such prices were
available; and (iii) if the Common Stock is not regularly quoted, the fair
market value of a share of Common Stock on the applicable date, as
established by the Committee in good faith.
EXHIBIT A
[FOR EFFECTIVE DATE GRANTS]
STOCK OPTION AGREEMENT
FOR THE GRANT OF
NON-QUALIFIED STOCK OPTIONS UNDER THE
WIRELESS ONE, INC.
STOCK OPTION PLAN
THIS AGREEMENT is entered into as of ___________, between Wireless
One, Inc., a Delaware corporation (the "Company"), and __________
_________, Optionee (the "Optionee").
WHEREAS Optionee is an employee of the Company and the Company
considers it desirable and in its best interest that Optionee be given an
incentive to advance the interests of the Company by possessing an option
to purchase shares of the common stock of the Company, $.01 par value per
share (the "Common Stock") in accordance with the Wireless One, Inc. Stock
Option Plan (the "Plan").
NOW, THEREFORE, in consideration of the premises, it is agreed by and
between the parties as follows:
I.
Grant of Option
The Company hereby grants to Optionee effective this ______________
(the "Date of Grant") the right, privilege and option to purchase _________
shares of Common Stock (the "Option") at a price of $13.51 per share (the
"Exercise Price"). The Option shall be exercisable at the times specified
in Section II below. The Option is a non-qualified stock option and shall
not be treated as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
II.
Time of Exercise
2.1 Subject to the provisions of the Plan and the other provisions of
this Section II, the Optionee shall be entitled to exercise the Option as
follows:
One-third of the total number of shares covered by the
Option beginning on the Date of Grant;
Two-thirds of the total number of shares covered by the
Option beginning two years following the Date of Grant,
less any shares previously issued; and
All of the shares covered by the Option beginning three
years following the Date of Grant, less any shares
previously issued.
2.2 During Optionee's lifetime, the Option may be exercised only by
him or his guardian if he has been declared incompetent. In the event of
death, the Option may be exercised as provided herein by the Optionee's
estate or by the person to whom such right devolves as a result of the
Optionee's death.
2.3 If an Optionee ceases to be an employee of the Company for any
reason, the Option must be exercised, to the extent otherwise exercisable
at the time of termination of employment, within one year from the date on
which the Optionee ceases to be an employee, but in no event later than
five years following the Date of Grant. [Revise for directors or
consultants]. Portions of the Options that are not exercisable at the time
of termination of employment are forfeited.
2.4 The Option shall expire and may not be exercised later than five
years following the Date of Grant.
III.
Method of Exercise of Option
3.1 Optionee may exercise all or a portion of the Option by
delivering to the Company a signed written notice of his intention to
exercise the Option, specifying therein the number of shares to be
purchased. Upon receiving such notice, and after the Company has received
full payment of the Exercise Price, the appropriate officer of the Company
shall cause the transfer of title of the shares purchased to Optionee on
the Company's stock records and cause to be issued to Optionee a stock
certificate for the number of shares being acquired. Optionee shall not
have any rights as a shareholder until the stock certificate is issued to
him.
3.2 The Option may be exercised by the payment of the Exercise Price
in cash, in shares of Common Stock held for six months or in a combination
of cash and shares of Common Stock held for six months. The Optionee may
also pay the Exercise Price by delivering a properly executed exercise
notice together with irrevocable instructions (with a copy to the Company)
to a broker approved by the Committee (as defined in the Plan) to promptly
deliver to the Company the amount of sale or loan proceeds to pay the
Exercise Price.
IV.
No Contract of Employment Intended
Nothing in this Agreement shall confer upon Optionee any right to
continue in the employment of the Company, or to interfere in any way with
the right of the Company to terminate Optionee's employment relationship
with the Company at any time.
V.
Binding Effect
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators and
successors.
VI.
Non-Transferability
The Option granted hereby may not be transferred, assigned, pledged or
hypothecated in any manner, by operation of law or otherwise, other than by
will, by the laws of descent and distribution or pursuant to a domestic
relations order, as defined in the Code, and shall not be subject to
execution, attachment or similar process.
VII.
Inconsistent Provisions
The Option granted hereby is subject to the provisions of the Plan as
in effect on the date hereof and as it may be amended. In the event any
provision of this Agreement conflicts with such a provision of the Plan,
the Plan provision shall control.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed on the day and year first above written.
WIRELESS ONE, INC.
By:__________________________________________
__________________________________________
Optionee
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
_______________________________________________________________________________
In re:
CHAPTER 11
WIRELESS ONE, INC.,
Case No. 99-295(PJW)
Debtor.
______________________________________
DEBTOR'S DISCLOSURE STATEMENT PURSUANT TO
SECTION 1125 OF THE BANKRUPTCY CODE
Morris, Nichols, Arsht & Tunnell
1201 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899-1347
(302) 658-9200
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022-4802
(212) 906-1200
CO-COUNSEL FOR DEBTOR
AND DEBTOR IN POSSESSION
Dated:
Wilmington, Delaware
March 15, 1999
THIS PROPOSED DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE BANKRUPTCY
COURT FOR USE IN THE SOLICITATION OF ACCEPTANCES OF THE PLAN DISCLOSED PURSUANT
TO SECTION 1125(B) OF THE BANKRUPTCY CODE. ACCORDINGLY, THE FILING AND
DISSEMINATION OF THIS PROPOSED DISCLOSURE STATEMENT IS NOT INTENDED, NOR SHOULD
IT BE CONSTRUED, AS SUCH A SOLICITATION, NOR SHOULD THE INFORMATION CONTAINED
HEREIN BE RELIED UPON FOR ANY PURPOSE PRIOR TO A DETERMINATION BY THE
BANKRUPTCY COURT THAT THE PROPOSED DISCLOSURE STATEMENT CONTAINS ADEQUATE
INFORMATION. DISSEMINATION OF THIS PROPOSED DISCLOSURE STATEMENT IS CONTROLLED
BY BANKRUPTCY RULE 3017.
TABLE OF CONTENTS
PAGE
I. INTRODUCTION.........................................................1
A. Holders of Claims and Equity Interests Entitled to Vote..........2
B. Voting Procedures................................................3
C. Confirmation Hearing.............................................4
II. OVERVIEW OF THE PLAN................................................5
III. GENERAL INFORMATION................................................7
A. Description and History of Business..............................7
1. Business....................................................7
2. History.....................................................9
3. Significant Indebtedness...................................10
4. Selected Historical Financial Data.........................11
B. Events Leading to the Commencement of the Chapter 11 Case.......12
IV. EVENTS DURING THE CHAPTER 11 CASE..................................14
A. Continuation of Business; Stay of Litigation....................14
B. First Day Orders................................................14
C. Statutory Committee.............................................15
D. Debtor in Possession Financing..................................15
E. BT Alex. Brown Stipulation......................................17
F. Planned Asset Dispositions......................................18
V. THE PLAN OF REORGANIZATION..........................................19
A. Classification and Treatment of Claims and Equity Interests.....19
1. Administrative Expense Claims..............................19
2. Priority Tax Claims........................................20
3. Class 1 - Priority Non-Tax Claims..........................20
4. Class 2 - Secured Claims...................................20
5. Class 3 - BTA Installment Note Claims......................21
6. Class 4 - Unsecured Claims.................................21
7. Class 5 - Old Senior Note Claims...........................21
8. Class 6 - Indemnity Claims.................................22
9. Class 7 - Old Common Stock Interests.......................22
10. Class 8 - Other Equity Interests..........................22
11. Alternative Treatment for Holders of Allowed Claims or
Equity Interests.........................................22
B. Securities to be Issued Under the Plan..........................23
1. New Common Stock...........................................23
2. New Warrants...............................................23
C. Means of Implementation.........................................25
1. Distributions..............................................25
2. Issuance of New Securities.................................25
3. New Warrant Agreement......................................25
4. Exit Financing.............................................25
5. Adoption of Stock Option Plan..............................25
6. Incentive Options on the Effective Date....................25
7. Cancellation of Existing Securities and Agreements.........26
8. Corporate Action...........................................26
9. Restated Certificate of Incorporation......................26
10. Registration Rights Agreement.............................27
D. Provisions Governing Distributions..............................27
1. Date of Distributions......................................27
2. Disbursing Agent...........................................27
3. Surrender of Instruments...................................27
4. Compensation of Professionals..............................27
5. Delivery of Distributions..................................28
6. Manner of Payment Under the Plan...........................28
7. Fractional Shares..........................................28
8. Setoffs and Recoupment.....................................28
9. Distributions After Effective Date.........................29
10. Rights and Powers of Disbursing Agent.....................29
a. Powers of the Disbursing Agent........................29
b. Expenses Incurred on or After the Effective Date......29
11. Exculpation...............................................29
E. Resolution of Disputed Claims and Interests.....................29
F. Executory Contracts and Unexpired Leases........................30
1. Assumption and Rejection of Executory Contracts and
Unexpired Leases.........................................30
2. Amendments to Schedule; Effect of Amendments...............31
3. Bar to Rejection Damage Claims.............................31
4. Certain Indemnification Obligations........................31
G. Conditions to Confirmation and Effective Date...................31
H. Effect of Confirmation..........................................32
1. Vesting of Assets..........................................32
2. Binding Effect.............................................32
3. Discharge of Debtor........................................33
4. Term of Injunctions or Stays...............................33
5. Indemnification Obligations................................33
6. Releases...................................................33
I. Waiver of Certain Claims........................................34
J. Retention of Jurisdiction by the Bankruptcy Court...............34
K. Summary of Other Provisions of the Plan.........................35
1. Payment of Statutory Fees..................................35
2. Retiree Benefits...........................................35
3. Administrative Expenses Incurred After the Confirmation
Date.....................................................35
4. Section 1125(e) of the Bankruptcy Code.....................35
5. Compliance with Tax Requirements...........................36
6. Severability of Plan Provisions............................36
7. Governing Law..............................................36
VI. CONFIRMATION AND CONSUMMATION PROCEDURE............................36
A. Solicitation of Votes...........................................36
B. The Confirmation Hearing........................................37
C. Confirmation....................................................38
1. Acceptance.................................................38
2. Unfair Discrimination and Fair and Equitable Tests.........38
a. Secured Creditors.....................................38
b. Unsecured Creditors...................................38
3. Feasibility................................................39
a. Financial Projections.................................39
b. Business Strategy -- Overview.........................40
c. Subscription Video....................................40
d. WarpOne -- High-Speed Data/Internet...................41
e. Additional Financing..................................41
4. Best Interests Test........................................41
D. Consummation....................................................43
VII. MANAGEMENT OF REORGANIZED DEBTOR...................................43
A. Board of Directors and Management...............................43
1. Composition of the Board of Directors......................43
2. Identity of Officers.......................................44
B. Compensation of Executive Officers..............................45
C. Management Contracts............................................45
D. Stock Option Plan...............................................45
E. Other Compensation Plans........................................46
F. Post-Effective Date Security Ownership of Certain Owners........46
VIII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS TO THE NEW
COMMON STOCK TO BE DISTRIBUTED UNDER THE PLAN......................47
A. Section 1145 of the Bankruptcy Code.............................47
B. Registration Rights.............................................48
IX. REORGANIZATION VALUES..............................................48
A. Introduction....................................................48
B. Methodology.....................................................50
1. Comparable Public Company Analysis.........................50
2. Discounted Cash Flow ("DCF") Analysis......................51
3. Comparable Mergers and Acquisitions Analysis...............51
C. Valuation of Reorganized Wireless...............................52
X. CERTAIN RISK FACTORS TO BE CONSIDERED...............................52
A. Overall Risk to Recovery by Holders of Claims...................53
1. Dependence on Future Asset Sales and/or Additional
Financing................................................53
2. Projected Financial Information............................53
3. Dependence of Internet Product on Hardware Supplier........54
4. Competition................................................55
a. Subscription Television Industry......................55
b. High-Speed Data/Internet Competition..................55
5. Government Regulation......................................56
a. General...............................................56
b. FCC Approval; Transfer of Control Applications........57
c. BTA Authorizations; Repayment of Bidding Credit and
BTA Notes.............................................57
d. Interference Issues...................................58
6. Dependence on Channel Leases; Need for License Extensions;
Loss of Licenses by Lessors..............................59
7. Dependence on Program Suppliers.........................,..59
8. Dependence on DIRECTV Contracts............................59
9. Physical Limitations of Signal Transmission................60
10. Difficulties and Uncertainties of a New Industry..........60
11. Changes in Technology.....................................60
12. Significant Holders.......................................60
13. Lack of Established Market for New Common Stock...........61
14. Dividend Policies.........................................61
15. Preferred Stock; Certain Provisions of the Charter and By-
laws and the DGCL........................................61
16. Pending Litigation........................................62
17. Year 2000 Compliance......................................62
B. Hart-Scott-Rodino Act Requirements..............................63
XI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN................63
A. Introduction....................................................63
B. Federal Income Tax Consequences to the Debtor...................64
1. Cancellation of Indebtedness and Reduction of Tax
Attributes...............................................64
2. Section 382 Limitations on NOLs............................65
C. Federal Income Tax Consequences to Holders of Old Senior Notes
(Class 5).....................................................67
1. Exchange of Old Senior Notes for New Common Stock..........67
2. New Common Stock...........................................69
a. Dividends.............................................69
b. Sale or Other Taxable Dispositions....................69
D. Federal Income Tax Consequences to Holders of Old Common Stock
(Class 7).....................................................69
1. Exchange of Old Common Stock for New Common Stock and New
Warrants.................................................69
2. New Warrants...............................................70
a. Sale or Expiration....................................70
b. Exercise..............................................70
c. Adjustments...........................................70
E. Federal Income Tax Consequences to Holders of Other Claims......70
F. Accrued Interest and Original Issue Discount....................71
G. Information Reporting and Backup Withholding....................71
XII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN.........72
A. Liquidation Under Chapter 7.....................................72
B. Alternative Plan of Reorganization..............................72
XIII. CONCLUSION AND RECOMMENDATION....................................74
INDEX OF EXHIBITS
EXHIBIT A - The Plan
EXHIBIT B - Order of the Bankruptcy Court dated __________ __, 1999 among
other things, approving this Disclosure Statement and
establishing certain procedures with respect to the solicitation
and tabulation of votes to accept or reject the Plan
EXHIBIT C - Wireless One, Inc. Form 10-K for the Year ended December 31,
1998 [TO BE PROVIDED]
EXHIBIT D - Projected Financial Information
EXHIBIT E - Liquidation Analysis [TO BE PROVIDED]
EXHIBIT F - Letter, dated February 25, 1999 from Heartland Wireless
Communications, Inc. to the Debtor regarding a proposed
alternate plan of reorganization
GLOSSARY
<TABLE>
<CAPTION>
<S> <C>
1995 Senior Notes means the 13% Senior Notes Due 2003 issued by the
Debtor having an aggregate principal amount of
$150 million.
1996 Senior Discount Notes means the 13 1/2 % Senior Discount Notes Due 2006
issued by the Debtor having an aggregate principal
amount at maturity of $239,252,000 and an accreted
value on the Petition Date of $172.4 million.
Administrative Expense Claim means any right to payment constituting a cost or
expense of administration of the Chapter 11 Case
allowed under sections 503(b) and 507(a)(l) of the
Bankruptcy Code, including, without limitation,
(a) any actual and necessary costs and expenses of
preserving the Debtor's estate, (b) any actual and
necessary costs and expenses of operating the
Debtor's business in the ordinary course of
business, (c) any indebtedness or obligations
incurred or assumed by the Debtor in Possession
during the Chapter 11 Case in the ordinary course
of business, (d) any allowances of compensation
and reimbursement of expenses to the extent
allowed by Final Order under section 330 or 503 of
the Bankruptcy Code, and (e) any fees or charges
assessed against the Debtor's estate under section
1930, title 28, United States Code.
Allowed means, with reference to any Claim or Equity
Interest, (a) any Claim or Equity Interest as to
which no objection to allowance has been
interposed on or before the Confirmation Date or
such other applicable period of limitation fixed
by the Bankruptcy Code, the Bankruptcy Rules, or
the Bankruptcy Court, or as to which any objection
has been determined by a Final Order to the extent
such objection is determined in favor of the
respective holder, (b) any Claim or Equity
Interest as to which the liability of the Debtor
and the amount thereof are determined by final
order of a court of competent jurisdiction other
than the Bankruptcy Court or (c) any Claim or
Equity Interest expressly allowed hereunder.
Unless otherwise specified in the Plan or in a
Final Order of the Bankruptcy Court allowing such
claim, "Allowed" in reference to a Claim shall not
include (a) interest on the amount of such Claim
accruing from and after the Petition Date, (b)
punitive or exemplary damages or (c) any fine,
penalty or forfeiture.
BTA Installment Notes means approximately $24.9 million aggregate
principal amount of obligations of the Debtor's
wholly-owned direct and indirect subsidiaries to
the United States Government in connection with
the purchase of certain licenses to transmit
signals in certain basic trading areas which are
regularly paid by the Debtor.
BTA Installment Note Claims means Claims, if any, arising under or in
connection with the BTA Installment Notes or in
connection with the purchase of certain licenses
to transmit signals in certain basic trading areas
which relate to the BTA Installment Notes.
Bankruptcy Code means title 11, United States Code, as amended
from time to time, as applicable to the Chapter 11
Case.
Bankruptcy Court means the United States District Court for the
District of Delaware having jurisdiction over the
Chapter 11 Case and, to the extent of any
reference made under section 157, title 28, United
States Code, the unit of such District Court
having jurisdiction over the Chapter 11 Case under
section 151, title 28, United States Code.
Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure as
promulgated by the United States Supreme Court
under section 2075, title 28, United States Code,
as amended from time to time, applicable to the
Chapter 11 Case, and any Local Rules of the
Bankruptcy Court.
Bondholder Litigation Claim means a Claim (a) arising from rescission of a
purchase or sale of a debt security of the Debtor,
(b) for damages arising from the purchase or sale
of such a debt security or (c) for reimbursement
or contribution allowed under section 502 of the
Bankruptcy Code on account of a Claim for damages
or rescission arising out of a purchase or sale of
a debt security of the Debtor.
Business Day means any day other than a Saturday, a Sunday or
any other day on which banking institutions in New
York, New York are required or authorized to close
by law or executive order.
Cash means legal tender of the United States of
America.
Chapter 11 Case means the Debtor's voluntary case filed with the
Bankruptcy Court under Chapter 11 of the
Bankruptcy Code.
Charter means the Restated Certificate of Incorporation of
Reorganized Wireless, which shall be in
substantially the form annexed as Exhibit 1 to the
Plan.
Claim means (a) any right to payment from the Debtor,
whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal,
equitable, secured, or unsecured, known or
unknown, or (b) any right to an equitable remedy
for breach of performance if such breach gives
rise to a right of payment from the Debtor,
whether or not such right to an equitable remedy
is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured,
or unsecured, known or unknown.
Class means any group of substantially similar Claims or
Equity Interests classified by the Plan pursuant
to section 1129(a)(l) of the Bankruptcy Code.
Collateral means any property or interest in property of the
Debtor's estate subject to a Lien to secure the
payment or performance of a Claim, which Lien is
not subject to avoidance under the Bankruptcy
Code.
Confirmation Date means the date on which the Clerk of the
Bankruptcy Court enters the Confirmation Order on
its docket.
Confirmation Hearing means the hearing to be held by the Bankruptcy
Court regarding confirmation of the Plan, as such
hearing may be adjourned or continued from time to
time.
Confirmation Order means the order of the Bankruptcy Court confirming
the Plan, which shall be in a form reasonably
acceptable to the Debtor, an Unofficial
Noteholders' Committee Majority and MLGAF.
Debtor means Wireless One, Inc., a Delaware corporation,
the debtor in the Chapter 11 Case.
Debtor in Possession means the Debtor in its capacity as a debtor in
possession in the Chapter 11 Case under sections
1107(a) and 1108 of the Bankruptcy Code.
DGCL means the General Corporation Law of the State of
Delaware, as amended from time to time.
Disallowed means, when used with respect to a Claim or Equity
Interest, a Claim or Equity Interest that has been
disallowed by Final Order.
Disbursing Agent means any entity in its capacity as a disbursing
agent under Sections 7.2 and 7.10 of the Plan.
Disclosure Statement means the disclosure document relating to the
Plan, including, without limitation, all exhibits
and schedules thereto as approved by the
Bankruptcy Court pursuant to section 1125 of the
Bankruptcy Code.
Disputed Claim means, with respect to a Claim or Equity Interest,
any such Claim or Equity Interest proof of which
was filed with the Bankruptcy Court and (a) which
has been or hereafter is listed on the Schedules
as unliquidated, disputed or contingent, and which
has not been resolved by written agreement of the
parties or an order of the Bankruptcy Court, or
(b) as to which the Debtor or any other party in
interest has interposed a timely objection in
accordance with the Bankruptcy Code and the
Bankruptcy Rules, which objection has not been
withdrawn or determined by a Final Order. Prior
to (i) the time an objection has been filed and
(ii) the expiration of the time within which to
object to such Claim or Equity Interest set forth
herein or otherwise established by order of the
Bankruptcy Court, a Claim or Equity Interest shall
be considered a Disputed Claim or Disputed Equity
Interest to the extent that the amount of the
Claim or Equity Interest specified in a proof of
Claim or Equity Interest exceeds the amount of the
Claim or Equity Interest scheduled by the Debtor
as not disputed, contingent or unliquidated.
Effective Date means the first Business Day on which all the
conditions precedent to the Effective Date
specified in Section 10.1 of the Plan shall have
been satisfied or waived as provided in Section
10.2 of the Plan; provided, however, that if a
stay of the Confirmation Order is in effect, the
Effective Date shall be the first Business Day
after such stay is no longer in effect.
Equity Interest means the interest of any holder of equity
securities of the Debtor represented by any issued
and outstanding shares of common or preferred
stock or other instrument evidencing a present
ownership interest in the Debtor, whether or not
transferable, or any option, warrant or right,
contractual or otherwise, to acquire, in
connection with or related to any such interest,
including, without limitation, any rights with
respect to the Debtor under any registration
rights agreement or stockholders agreement to
which the Debtor is a party.
Final Order means an order or judgment of the Bankruptcy Court
entered by the Clerk of the Bankruptcy Court on
the docket in the Chapter 11 Case, which has not
been reversed, vacated or stayed and as to which
(a) the time to appeal, petition for certiorari or
move for a new trial, reargument or rehearing has
expired and as to which no appeal, petition for
certiorari or other proceedings for a new trial,
reargument or rehearing shall then be pending or
(b) if an appeal, writ of certiorari, new trial,
reargument or rehearing thereof has been sought,
such order or judgment of the Bankruptcy Court
shall have been affirmed by the highest court to
which such order was appealed, or certiorari shall
have been denied or a new trial, reargument or
rehearing shall have been denied or resulted in no
modification of such order, and the time to take
any further appeal, petition for certiorari or
move for a new trial, reargument or rehearing
shall have expired; provided, however, that the
possibility that a motion under Rule 60 of the
Federal Rules of Civil Procedure, or any analogous
rule under the Bankruptcy Rules, may be filed
relating to such order, shall not cause such order
not to be a Final Order.
Incentive Options means the options to purchase shares of New Common
Stock pursuant to the Stock Option Plan.
Indemnity Claim means a Claim (i) of a director or officer of the
Debtor that was not a director or officer,
respectively, at any time on or after August 1,
1998 or (ii) that is not assumed by the Debtor
pursuant to Section 11.5 of the Plan, in each case
for any obligations of the Debtor to indemnify
directors or officers against any obligations
pursuant to the Debtor's certificate of
incorporation, bylaws, contract, applicable state
law, any combination of the foregoing, or
otherwise.
Lien means any charge against, encumbrance upon or
other interest in property, the purpose of which
is to secure payment of a debt or performance of
an obligation.
MLGAF means Merrill Lynch Global Allocation Fund, Inc.
New Common Stock means the shares of common stock of Reorganized
Wireless to be issued and outstanding as of the
Effective Date.
New Common Stock Distribution Amount means the 9,950,000 shares of New Common Stock to
be distributed to holders of Allowed Old Senior
Note Claims and Allowed Old Common Stock
Interests.
New Warrants means the warrants which are issued pursuant to,
and exercisable in accordance with, the terms and
conditions of the New Warrant Agreement.
New Warrant Agreement means the warrant agreement governing the issuance
of the New Warrants, which shall be in
substantially the form annexed as Exhibit 2 to the
Plan.
Old Common Stock means the issued and outstanding common stock of
the Debtor.
Old Common Stock Interest means an Equity Interest represented by shares of
Old Common Stock.
Old Indentures means (i) that certain indenture with respect to
the 1995 Senior Notes dated as of October 24, 1995
between the Debtor and United States Trust Company
of New York, as trustee, as amended by a
supplemental indenture dated July 26, 1996 and as
further amended by a second supplemental indenture
dated August 24, 1998 and (ii) that certain
indenture with respect to the 1996 Senior Discount
Notes dated as of August 12, 1996 between the
Debtor and United States Trust Company of New
York, as trustee, as amended by a supplemental
indenture dated August 24, 1998.
Old Senior Notes means, collectively, the 1995 Senior Notes and the
1996 Senior Discount Notes or the Old Indentures.
Old Senior Note Claim means a Claim arising under or in connection with
the Old Senior Notes or the Old Indentures.
Other Equity Interest means an Equity Interest in the Debtor, including
warrants and options, other than an Old Common
Stock Interest.
Petition Date means February 11, 1999, the date on which the
Debtor commenced the Chapter 11 Case.
Plan means the Debtor's Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code dated as of
March 15, 1999, including, without limitation, the
exhibits and schedules thereto, as the same may be
amended or modified from time to time in
accordance with the provisions of the Bankruptcy
Code and the terms thereof.
Priority Non-Tax Claim means any Claim other than an Administrative
Expense Claim or a Priority Tax Claim, entitled to
priority in payment under section 507(a) of the
Bankruptcy Code.
Priority Tax Claim means any Claim of a governmental unit of the kind
entitled to priority in payment as specified in
sections 502(i) and 507(a)(8) of the Bankruptcy
Code.
Ratable Proportion means, with reference to any distribution on
account of any Claim or Equity Interest in any
Class, as the case may be, a distribution equal in
amount to the ratio (expressed as a percentage)
that the amount of such Claim or number of shares
evidencing such Equity Interests, as applicable,
bears to the aggregate amount of Claims or
aggregate number of outstanding shares of Equity
Interests in the same Class, as applicable.
Rejection Claim means any Claim against the Debtor arising from
the rejection of any executory contract or
unexpired lease, including any Claim of (a) a
lessor for damages resulting from the rejection of
a lease of real property as any such claim shall
be calculated in accordance with section 502(b)(6)
of the Bankruptcy Code or (b) an employee for
damages resulting from the rejection of an
employment agreement as any such Claim shall be
calculated in accordance with section 502(b)(7) of
the Bankruptcy Code.
Reorganized Wireless means the Debtor, as it will be reorganized as of
the Effective Date in accordance with the Plan.
Schedules means the schedules of assets and liabilities and
the statement of financial affairs filed by the
Debtor under section 521 of the Bankruptcy Code,
Bankruptcy Rule 1007 and the Official Bankruptcy
Forms of the Bankruptcy Rules as such schedules
and statements have been or may be supplemented or
amended through the Confirmation Date.
Secured Claim means a Claim secured by a Lien on Collateral to
the extent of the value of such Collateral (i) as
set forth in the Plan, (ii) as agreed to by the
holder of such Claim and the Debtor or (iii) as
determined by a Final Order in accordance with
section 506(a) of the Bankruptcy Code or, in the
event that such Claim is subject to setoff under
section 553 of the Bankruptcy Code, to the extent
of such setoff.
Stockholder Litigation Claim means a Claim (a) arising from rescission of a
purchase or sale of an equity security of the
Debtor, (b) for damages arising from the purchase
or sale of such equity security or (c) for
reimbursement or contribution allowed under
section 502 of the Bankruptcy Code on account of a
Claim for damages or rescission arising out of a
purchase or sale of an equity security of the
Debtor.
Stock Option Plan means the 1999 Wireless One, Inc. Share Incentive
Plan, which shall be in substantially the form
annexed as Exhibit 3 to the Plan.
Trade Claim means an Unsecured Claim for goods, materials or
services provided to the Debtor or rendered to the
Debtor in the ordinary course of business prior to
the Petition Date. A Trade Claim shall not
include an Old Senior Note Claim.
Unofficial Noteholders' Committee means a committee of holders of Old Senior Notes
formed prior to the Petition Date consisting of
the following entities: (i) Merrill Lynch
Corporate Bond Fund, Inc.-High Income Portfolio,
(ii) Corporate High Yield Fund, Inc., (iii)
Corporate High Yield Fund II, Inc., (iv) Prospect
Street High Yield, (v) LibertyView Capital
Management, Inc. and (vi) Loeb Partners.
Unofficial Noteholders' Committee Majority means the holders of a majority in Claim amount of
the Old Senior Notes held in the aggregate by the
members of the Unofficial Noteholders' Committee
at such time.
Unsecured Claim means any Claim against the Debtor that is not an
Administrative Expense Claim, a Priority Non-Tax
Claim, a Priority Tax Claim, an Old Senior Note
Claim, a BTA Installment Note Claim or a Secured
Claim.
</TABLE>
I. INTRODUCTION
Wireless One, Inc., a Delaware corporation ("Wireless" or the
"Debtor"), submits this Disclosure Statement dated March 15, 1999 (the
"Disclosure Statement") pursuant to section 1125 of title 11 of the United
States Code (the "Bankruptcy Code") to holders of Claims and Equity
Interests in the Debtor in connection with (i) the solicitation of
acceptances or rejections of the Debtor's Plan of Reorganization under
Chapter 11 of the Bankruptcy Code dated March 15, 1999 (the "Plan") filed
by the Debtor with the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") and (ii) the hearing to consider
confirmation of the Plan (the "Confirmation Hearing") scheduled for
__________ __, 1999 at __:__ _.m., Eastern Time. Unless otherwise defined
herein, all capitalized terms contained herein have the meanings ascribed
to them in the Plan.
Attached as Exhibits to this Disclosure Statement are copies of the
following:
<circle> The Plan (Exhibit A);
<circle> Order of the Bankruptcy Court dated _________ __, 1999 (the
"Disclosure Statement Order"), among other things, approving this
Disclosure Statement and establishing certain procedures with respect to
the solicitation and tabulation of votes to accept or reject the Plan
(Exhibit B);
<circle> Wireless One, Inc. Form 10-K for the Year ended December 31,
1998 (Exhibit C) [TO BE PROVIDED];
<circle> Projected Financial Information (Exhibit D);
<circle> Liquidation Analysis (Exhibit E) [TO BE PROVIDED]; and
<circle> Letter, dated February 25, 1999 from Heartland Wireless
Communications, Inc. to the Debtor regarding a proposed alternate plan of
reorganization (Exhibit F).
In addition, a ballot for the acceptance or rejection of the Plan is
enclosed with the Disclosure Statement submitted to the holders of Claims
and Equity Interests that Wireless believes may be entitled to vote to
accept or reject the Plan.
On _________ __, 1999, after notice and a hearing, the Bankruptcy
Court approved this Disclosure Statement as containing adequate information
of a kind and in sufficient detail to enable hypothetical, reasonable
investors typical of the Debtor's creditors and equity interest holders to
make an informed judgment whether to accept or reject the Plan. APPROVAL
OF THIS DISCLOSURE STATEMENT DOES NOT, HOWEVER, CONSTITUTE A DETERMINATION
BY THE BANKRUPTCY COURT AS TO THE FAIRNESS OR MERITS OF THE PLAN.
The Disclosure Statement Order, a copy of which is annexed hereto as
Exhibit B, sets forth in detail the deadlines, procedures and instructions
for voting to accept or reject the Plan and for filing objections to
confirmation of the Plan, the record date for voting purposes, and the
applicable standards for tabulating Ballots. In addition, detailed voting
instructions accompany each Ballot. Each holder of a Claim or an Equity
Interest entitled to vote on the Plan should read the Disclosure Statement,
the Plan, the Disclosure Statement Order and the instructions accompanying
the Ballots in their entirety before voting on the Plan. These documents
contain, among other things, important information concerning the
classification of Claims and Equity Interests for voting purposes and the
tabulation of votes. No solicitation of votes to accept the Plan may be
made except pursuant to section 1125 of the Bankruptcy Code.
A. HOLDERS OF CLAIMS AND EQUITY INTERESTS ENTITLED TO VOTE.
--------------------------------------------------------
Pursuant to the provisions of the Bankruptcy Code, only holders of
allowed claims or equity interests in classes of claims or equity interests
that are impaired under the terms and provisions of a chapter 11 plan and
that will receive distributions under the chapter 11 plan are entitled to
vote to accept or reject the plan. Classes of claims or equity interests
in which the holders of claims or interests will not receive or retain any
property under a chapter 11 plan are deemed to have rejected the plan and
are not entitled to vote to accept or reject the plan. Classes of claims
or equity interests in which the holders of claims or interests are
unimpaired under a chapter 11 plan are deemed to have accepted the plan and
are not entitled to vote to accept or reject the plan.
Classes 5 (Old Senior Note Claims), 6 (Indemnity Claims) and 7 (Old
Common Stock Interests) of the Plan are impaired and, to the extent such
Claims or Equity Interests are Allowed, the holders of such Claims and
Equity Interests will receive distributions under the Plan. Holders of
Claims and Equity Interests in those Classes are entitled to vote to accept
or reject the Plan. Classes 1 (Priority Non-Tax Claims), 2 (Secured
Claims), 3 (BTA Installment Note Claims) and 4 (Unsecured Claims) are
unimpaired under the Plan and the holders of Claims in those Classes are
conclusively presumed to have accepted the Plan. Class 8 (Other Equity
Interests) are impaired and are not retaining any property or receiving any
distribution under the Plan. Accordingly, holders of Equity Interests in
this Class are deemed to have rejected the Plan. Therefore, the Debtor is
soliciting acceptances only from holders of Allowed Claims in Classes 5 and
6 and holders of Allowed Equity Interests in Class 7.
The Bankruptcy Code defines "acceptance" of a plan by a class of
claims as acceptance by creditors in that class that hold at least two-
thirds in dollar amount and more than one-half in number of the claims that
cast ballots for acceptance or rejection of the plan. For a complete
description of the requirements for confirmation of the Plan, see Section
VI., "Confirmation and Consummation Procedure."
If a Class of Claims or Equity Interests rejects the Plan or is deemed
to reject the Plan, the Debtor has the right to request confirmation of the
Plan pursuant to section 1129(b) of the Bankruptcy Code. Section 1129(b)
permits the confirmation of a plan notwithstanding the nonacceptance of
such plan by one or more impaired classes of claims or equity interests.
Under that section, a plan may be confirmed by a bankruptcy court if it
does not "discriminate unfairly" and is "fair and equitable" with respect
to each nonaccepting class. For a more detailed description of the
requirements for confirmation of a nonconsensual plan, see Section VI.C.2.,
"Confirmation and Consummation Procedure -- Unfair Discrimination and Fair
and Equitable Tests."
If one or more of the Classes entitled to vote on the Plan votes to
reject the Plan, the Debtor will request confirmation of the Plan over the
rejection of the Plan by such Class or Classes. The determination as to
whether to seek confirmation of the Plan under such circumstances will be
announced before or at the Confirmation Hearing.
B. VOTING PROCEDURES.
-----------------
If you are entitled to vote to accept or reject the Plan, a Ballot is
enclosed for the purpose of voting on the Plan. If you hold Claims in more
than one Class and you are entitled to vote Claims in more than one Class,
you will receive separate Ballots which must be used for each separate
Class of Claims. Please vote and return your Ballot(s) to:
WIRELESS ONE, INC.
c/o Wireless One Claims Processing
P.O. Box 5075, FDR Stations
New York, New York 10150
DO NOT RETURN YOUR NOTES OR SECURITIES WITH YOUR BALLOT.
TO BE COUNTED, YOUR BALLOT INDICATING ACCEPTANCE OR REJECTION OF THE
PLAN MUST BE RECEIVED NO LATER THAN __:__ _.M., EASTERN TIME, ON
_____________ __, 1999. ANY EXECUTED BALLOT RECEIVED THAT DOES NOT
INDICATE EITHER AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL BE DEEMED TO
CONSTITUTE AN ACCEPTANCE OF THE PLAN.
Any Claim or Equity Interest in an impaired Class as to which an
objection or request for estimation is pending or which is scheduled by the
Debtor as unliquidated, disputed or contingent is not entitled to vote
unless the holder of such Claim or Equity Interest has obtained an order of
the Bankruptcy Court temporarily allowing such Claim or Equity Interest for
the purpose of voting on the Plan.
Pursuant to the Disclosure Statement Order, the Bankruptcy Court set
__________ __, 1999 as the record date for voting on the Plan.
Accordingly, only holders of record as of __________ __, 199_ that are
otherwise entitled to vote under the Plan will receive a Ballot and may
vote on the Plan.
If you are a holder of a Claim or Equity Interest entitled to vote on
the Plan and did not receive a Ballot, received a damaged Ballot or lost
your Ballot, or if you have any questions concerning the Disclosure
Statement, the Plan or the procedures for voting on the Plan, please call
Kathy Gerber at (212) 376-8494 (Wireless One Claims and Balloting Agent).
C. CONFIRMATION HEARING.
--------------------
Pursuant to section 1128 of the Bankruptcy Code, the Confirmation
Hearing will be held on __________ __, 1999 at __:__ __.m. Eastern Time,
before the Honorable Peter J. Walsh, United States Bankruptcy Judge, at the
United States Bankruptcy Court, 824 Market Street, Wilmington, Delaware
19801. The Bankruptcy Court has directed that objections, if any, to
confirmation of the Plan be served and filed so that they are received on
or before __________ __, 1999 at __:__ _.m. Eastern Time, in the manner
described below in Section VI.B., "Confirmation and Consummation Procedure
- -- The Confirmation Hearing." The Confirmation Hearing may be adjourned
from time to time by the Bankruptcy Court without further notice except for
the announcement of the adjournment date made at the Confirmation Hearing
or at any subsequent adjourned Confirmation Hearing.
THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE AS OF
THE DATE HEREOF UNLESS ANOTHER TIME IS SPECIFIED HEREIN, AND THE DELIVERY
OF THIS DISCLOSURE STATEMENT SHALL NOT CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION STATED SINCE THE DATE HEREOF. HOLDERS OF
CLAIMS AND EQUITY INTERESTS SHOULD CAREFULLY READ THIS DISCLOSURE STATEMENT
IN ITS ENTIRETY, INCLUDING THE PLAN, PRIOR TO VOTING ON THE PLAN.
FOR THE CONVENIENCE OF HOLDERS OF CLAIMS AND EQUITY INTERESTS, THIS
DISCLOSURE STATEMENT SUMMARIZES THE TERMS OF THE PLAN, BUT THE PLAN ITSELF
QUALIFIES ALL SUMMARIES. IF ANY INCONSISTENCY EXISTS BETWEEN THE PLAN AND
THE DISCLOSURE STATEMENT, THE TERMS OF THE PLAN ARE CONTROLLING. THE
DISCLOSURE STATEMENT MAY NOT BE RELIED ON FOR ANY PURPOSE OTHER THAN TO
DETERMINE WHETHER TO VOTE TO ACCEPT OR REJECT THE PLAN, AND NOTHING STATED
SHALL CONSTITUTE AN ADMISSION OF ANY FACT OR LIABILITY BY ANY PARTY, OR BE
ADMISSIBLE IN ANY PROCEEDING INVOLVING THE DEBTOR OR ANY OTHER PARTY, OR BE
DEEMED CONCLUSIVE EVIDENCE OF THE TAX OR OTHER LEGAL EFFECTS OF THE PLAN ON
THE DEBTOR OR HOLDERS OF CLAIMS OR EQUITY INTERESTS. CERTAIN OF THE
STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT, BY NATURE, ARE FORWARD-
LOOKING AND CONTAIN ESTIMATES AND ASSUMPTIONS. THERE CAN BE NO ASSURANCE
THAT SUCH STATEMENTS WILL BE REFLECTIVE OF ACTUAL OUTCOMES. ALL HOLDERS OF
CLAIMS AND EQUITY INTERESTS SHOULD CAREFULLY READ AND CONSIDER FULLY
SECTION X. OF THIS DISCLOSURE STATEMENT, "CERTAIN RISK FACTORS TO BE
CONSIDERED," BEFORE VOTING TO ACCEPT OR REJECT THE PLAN.
SUMMARIES OF CERTAIN PROVISIONS OF AGREEMENTS REFERRED TO IN THIS
DISCLOSURE STATEMENT DO NOT PURPORT TO BE COMPLETE AND ARE SUBJECT TO, AND
ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO, THE FULL TEXT OF THE
APPLICABLE AGREEMENT, INCLUDING THE DEFINITIONS OF TERMS CONTAINED IN SUCH
AGREEMENT.
THE DEBTOR BELIEVES THAT THE PLAN WILL ENABLE IT TO SUCCESSFULLY
REORGANIZE AND ACCOMPLISH THE OBJECTIVES OF CHAPTER 11 AND THAT ACCEPTANCE
OF THE PLAN IS IN THE BEST INTERESTS OF THE DEBTOR AND ITS CREDITORS AND
EQUITY INTEREST HOLDERS. THE DEBTOR URGES THAT CREDITORS AND EQUITY
INTEREST HOLDERS VOTE TO ACCEPT THE PLAN.
After carefully reviewing this Disclosure Statement, including the
Exhibits, each holder of an Allowed Claim in Classes 5 and 6 and each
holder of an Allowed Equity Interest in Class 7 should vote on the Plan.
PRIOR TO THE PETITION DATE, THE DEBTOR BEGAN NEGOTIATIONS WITH CERTAIN
HOLDERS OF THE 1995 SENIOR NOTES AND 1996 SENIOR DISCOUNT NOTES. SOME OF
THESE HOLDERS FORMED THE UNOFFICIAL NOTEHOLDERS' COMMITTEE FOR THE PURPOSE
OF NEGOTIATING THE SUBSTANTIVE TERMS OF THE PLAN WITH WIRELESS. THE DEBTOR
HAS REACHED AN AGREEMENT WITH THE NOTEHOLDERS COMPRISING THE UNOFFICIAL
NOTEHOLDERS' COMMITTEE AND CERTAIN OTHER LARGE NOTEHOLDERS ON THE MATERIAL
TERMS OF A RESTRUCTURING OF THE DEBTOR. SUCH TERMS FORM THE BASIS OF THE
PLAN REFLECTED HEREIN.
II. OVERVIEW OF THE PLAN
The following table briefly summarizes the classification and
treatment of Claims and Equity Interests under the Plan. The recoveries
set forth below are merely estimated recoveries based upon various
assumptions. The estimated recoveries assume that approximately 10,000,000
shares of New Common Stock having an approximate aggregate value of
$128,410,000 and New Warrants to purchase an aggregate of 1,235,000 shares
of New Common Stock having an approximate aggregate value of $5.3 million
will be issued under the Plan. For a discussion of the valuation of the
New Common Stock and the New Warrants, see Section IX., "Reorganization
Values." There is no assurance that the New Common Stock and the New
Warrants issued under the Plan will actually trade at the projected
reorganization value or that any trading market in the New Common Stock and
the New Warrants will develop or be sustained. For a complete description
of the risks associated with the recoveries provided under the Plan, see
Section X., "Certain Risk Factors To Be Considered."
<TABLE>
<CAPTION>
SUMMARY OF CLASSIFICATION AND TREATMENT
OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN{1}
Type of Claim or Estimated
Class Equity Interest Treatment Recovery
- ------- -------------------------------- ------------------------------------ ----------------
<S> <C> <C> <C>
-- Administrative Expense Paid in full, in Cash, or in 100%
Claims accordance with the terms and
conditions of transactions or
agreements relating to
obligations incurred in the
ordinary course of business
during the pendency of the
Chapter 11 Case or assumed by the
Debtor in Possession.
-- Priority Tax Claims Reorganized Wireless shall either 100%
(i) pay to each holder of an
Allowed Priority Tax Claim that
is due and payable on or before
the Effective Date Cash in an
amount equal to such Allowed
Priority Tax Claim or (ii)
provide such Claims other
treatment as may be permitted
under section 1129(a)(9) of the
Bankruptcy Code. All Allowed
Priority Tax Claims which are not
due and payable on or before the
Effective Date shall be paid in
the ordinary course of business
in accordance with the terms
thereof or accorded such other
treatment as may be permitted
under section 1129(a)(9) of the
Bankruptcy Code.
1 Priority Non-Tax Claims Unimpaired; each Allowed Priority 100%
(to be paid in the ordinary Non-Tax Claim shall be unimpaired
course of business) in accordance with section 1124
of the Bankruptcy Code. All
Allowed Priority Non-Tax Claims
which are not due and payable on
or before the Effective Date
shall be paid in the ordinary
course of business in accordance
with the terms thereof.
2 Secured Claims Unimpaired; each Allowed Secured 100%
Claim shall be unimpaired in
accordance with section 1124 of
the Bankruptcy Code. All Allowed
Priority Non-Tax Claims which are
not due and payable on or before
the Effective Date shall be paid
in the ordinary course of
business in accordance with the
terms thereof.
3 BTA Installment Note Claims Unimpaired; the BTA Installment 100%
Note Claims shall be unimpaired
in accordance with section 1124
of the Bankruptcy Code. All
Allowed Priority Non-Tax Claims
which are not due and payable on
or before the Effective Date
shall be paid in the ordinary
course of business in accordance
with the terms thereof.
4 Unsecured Claims Unimpaired; each Unsecured Claim 100%
shall be unimpaired in accordance
with section 1124 of the
Bankruptcy Code. All Unsecured
Claims which are not due and
payable on or before the
Effective Date shall be paid in
the ordinary course of business
in accordance with the terms
thereof.
5 Old Senior Note Claims Impaired; the Old Senior Notes 37.3%
shall be cancelled and holders on
the Record Date of Allowed Old
Senior Note Claims shall receive
a Ratable Proportion of 96% of
the New Common Stock Distribution
Amount.
6 Indemnity Claims Impaired; holders of Allowed n/a
Indemnity Claims will be entitled
to assert such Claims against the
Debtor, but only to the extent of
the coverage available under any
applicable directors' and
officers' insurance.
7 Old Common Stock Interests Impaired; the Old Common Stock n/a
shall be cancelled and holders on
the Record Date of Allowed Old
Common Stock Interests shall
receive a Ratable Proportion of
4% of the New Common Stock
Distribution Amount and the New
Warrants.
8 Other Equity Interests Impaired; Other Equity Interests 0%
shall be cancelled and the
holders of such Other Equity
Interests shall receive no
distribution in respect thereof.
</TABLE>
III. GENERAL INFORMATION
A. DESCRIPTION AND HISTORY OF BUSINESS.
-----------------------------------
1. BUSINESS.
Wireless holds licenses and authorizations
necessary to the development and operation of wireless
cable television systems in eleven contiguous states and
operates 38 such systems in Texas, Louisiana,
Mississippi, Alabama, Tennessee, Florida and Georgia.
It is the largest wireless cable television provider in
the Southeast United States. Wireless has traditionally
targeted its subscription service to suburban and rural
single family households, apartment complexes and
businesses, including hotels, hospitals and educational
institutions, that are unable to receive traditional
hardwired cable television and to urban households,
apartment complexes and businesses seeking an
alternative to traditional cable or satellite
television. In addition, Wireless uses its existing
licenses and transmission facilities to offer some
markets high-speed data and two-way Internet access
services that forgo the use of conventional telephone
lines.
Wireless cable transmissions are sent and
received through the air on microwave frequencies from a
transmission facility to a receiving antenna at each
subscriber's location. Wireless uses frequencies for
this microwave transmission known as the "broadband
spectrum." This system uses transmission equipment
located on towers to transmit television and data
signals to the subscribers of Wireless. Since microwave
transmission of signals depends on the subscriber's
location within the "line-of-sight" of the transmission
tower (which is generally limited to a radius of
approximately 35 miles), Wireless employs
geographically-clustered operating systems to enable
cost-effective delivery of its television entertainment
services.
Wireless owns or leases exclusive licenses in
the "Multi-Point Multi Channel Distribution System" and
"Wireless Communications Spectrum" which are regulated
by the Federal Communications Commission ("FCC") and
referred to collectively as the "broadband spectrum."
These licenses permit Wireless to transmit its
television programming and other services. Wireless
provides subscribers with various channels, including
television entertainment services such as The Learning
Channel, HBO, Showtime, and The Disney Channel. In
addition to these specialty channels and programming
networks, Wireless also provides its customers with high
quality rebroadcasts of local television stations' and
educational institutions' programming.{2}
Currently, most of the revenues of Wireless
are derived from the sale of subscription-based
television programming. Wireless offers its
subscription-based television programming service to
single-family residential units ("SFUs") and to
apartments, colleges, hotels, hospitals, nursing homes
and other multiple-dwelling units ("MDUs"). The
business of Wireless involves substantial capital
expenditure in the construction and modification of
transmission equipment as well as the installation of
reception equipment for subscribers. Wireless has found
that capital expenditures are lower per subscriber for
MDU installations.
Wireless has traditionally offered its
subscribers programming content equivalent to that
offered by traditional, hard-wire cable providers.
Wireless typically offers programming from local
affiliates of the ABC, NBC, CBS, PBS and Fox television
networks. Wireless also provides programming from
channels such as A&E, BET, CMT, CNN, CSPAN, Discovery,
Disney, ESPN, FAM, Fox Sports History, Learning,
Lifetime, Nickelodeon, TBS, TNN, TNT, USA, VH-1,
Weather, WQN, HBO, Showtime and Cinemax, as well as pay-
per-view programming.
Wireless has also entered into a long term
cooperative agreement with DIRECTV, Inc., a digital
satellite programming provider ("DIRECTV"). This
agreement allows Wireless to offer DIRECTV's digital
satellite television service to the subscribers of
Wireless. Wireless is thus able to offer its
subscribers both its traditional wireless cable product
and enhanced packages that offer DIRECTV's digital
satellite programming. Under the terms of its agreement
with DIRECTV, DIRECTV bears a portion of the costs
associated with installing service in a subscriber's
residence.{3} Because of lower costs associated with
offering the DIRECTV product and the lower capital costs
per subscriber associated with providing the product of
Wireless in MDUs, the Debtor has shifted the focus of
its sales and marketing efforts to emphasize sales to
MDU customers and promotion of the DIRECTV service. As
a result, Wireless has reduced personnel and operating
expenses associated with its traditional SFU wireless
cable market.
Wireless has developed and launched a high-
speed, two-way wireless Internet access product. This
product can be delivered over any of the existing
frequencies and facilities of Wireless, and uses the
existing broadband spectrum licenses of Wireless to
deliver high-speed data services and Internet access to
its customers. The product, marketed under the name
"WarpOne," is capable of delivering data at speeds up to
10,000 kilobytes per second ("Kbps"). For comparison,
conventional Internet access products deliver data at up
to 56 Kbps, and current high-speed Internet access
providers typically operate at 1,500 Kbps. In 1998
Wireless launched this product in its Jackson,
Mississippi, Baton Rouge, Louisiana, and Memphis,
Tennessee markets. Wireless initially offered the
WarpOne product to small and medium sized businesses
which are currently not served by other high-speed data
and Internet access services. Wireless, however,
believes that home offices, large corporations,
educational institutions and its traditional MDU
wireless cable customers may also represent significant
markets for the WarpOne product. In late 1998, Wireless
also introduced a wholesale broadband wireless service
which allows customers of Internet service providers
("ISPs") to utilize the two-way high-speed Internet
access of Wireless.
In total, the licenses of Wireless cover an
estimated 7,700,000 households and 700,000 businesses in
67 markets. Wireless currently has over 104,000
subscribers in the 38 markets in which it currently
operates, most of whom are single family household
subscribers to television programming services.
Wireless is licensed or registered to do business in 11
states, and is headquartered in Jackson, Mississippi.
As of March 1, 1999, Wireless employed approximately 400
persons. Wireless also regularly employs approximately
34 temporary employees.
2. HISTORY.
Wireless was formed in 1995 by the
shareholders of its predecessor company, also "Wireless
One, Inc." (the "Old Wireless One"), and Heartland
Wireless Communications, Inc. (the "Heartland
Transaction"). The consummation of the Heartland
Transaction included acquisition by Wireless of all of
the outstanding capital stock of Old Wireless One and
certain wireless cable television assets and related
liabilities in Heartland's markets in Texas, Louisiana,
Alabama, Georgia and Florida. In connection with the
Heartland Transaction, the shareholders of Old Wireless
One received approximately 6.5 million shares of the
common stock of Wireless and Heartland received
approximately 3.5 million shares of the common stock of
Wireless.
In 1996 and 1997, Wireless purchased wireless
cable transmission assets and companies throughout the
Southeast. By the end of 1997, Wireless served
approximately 38 operating markets with its
subscription-based video programming.
3. SIGNIFICANT INDEBTEDNESS.
1995 SENIOR NOTES
-----------------
In 1995, the Debtor consummated the offering
of the 1995 Senior Notes, which are debt securities
having an aggregate principal amount of $150 million.
The 1995 Senior Notes are due in 2003 and bear an
interest rate of 13% per annum. In connection with the
1995 Senior Notes, the Debtor also issued 450,000
warrants to purchase an equal number of shares of Old
Common Stock at an exercise price of $11.55 per share.
The Debtor placed approximately $53.2 million of the
approximately $143.8 million of net proceeds from the
sale of the 1995 Senior Notes and associated warrants
into an escrow account to cover the first three years of
interest payments on the 1995 Senior Notes as required
by the terms of the indenture governing the 1995 Senior
Notes. That escrow has been exhausted. Under the terms
of the indenture, the Debtor would be liable for an
interest payment of approximately $9.8 million on April
15, 1999.
1996 SENIOR DISCOUNT NOTES
--------------------------
In August of 1996, the Debtor consummated the
offering of the 1996 Senior Discount Notes, which are
debt securities having an aggregate principal amount at
maturity of approximately $239 million with an accreted
value of $172.4 million as of February 11, 1999. The
1996 Senior Discount Notes are due in 2006. In
connection with that offering, the Debtor also issued
239,252 warrants to purchase 544,059 shares of Old
Common Stock at an exercise price of $16.64 per share.
SENIOR SECURED FACILITY
-----------------------
On September 4, 1998, Wireless entered into a
Senior Secured Discretionary Note Facility (the "Senior
Secured Facility") with MLGAF. Prior to the Petition
Date, the Debtor issued $13.5 million in aggregate
principal amount of notes (the "Senior Secured Notes")
under that facility to MLGAF. The Senior Secured
Facility bore interest at 13% per annum and would have
matured on April 15, 1999. The Senior Secured Facility
was secured by substantially all of the Debtor's assets,
as well as pledges of the stock of all of the Debtor's
direct and indirect subsidiaries. In connection with
the issuance of the Senior Secured Notes, Wireless also
issued to MLGAF seven-year detachable warrants to
purchase up to 6% of the fully-diluted Old Common Stock
at an exercise price of $0.72 per share. In order to
obtain the Postpetition Financing (as defined and
discussed below), the Debtor restated the Senior Secured
Notes as postpetition obligations.
BTA INSTALLMENT NOTES
---------------------
The Debtor also regularly pays obligations
incurred by its wholly-owned direct and indirect
subsidiaries in connection with the purchase from the
United States Government of licenses to transmit its
signals in certain "basic trading areas" (as defined
herein, the "BTA Installment Notes"). The BTA
Installment Notes were issued in aggregate principal
amount of approximately $24.9 million, and are owned
exclusively by the United States Government. All of the
BTA Installment Notes are obligations of a wholly-owned
holding company subsidiary of the Debtor named Wireless
One PCS, Inc.
4. SELECTED HISTORICAL FINANCIAL DATA.
The selected historical financial information
set forth below for the years ended December 31, 1997
and December 31, 1996 has been derived from the audited
financial statements of Wireless. The financial data
for the nine-month periods and three-month periods ended
September 30, 1998 and 1997 were derived from unaudited
financial statements. The unaudited financial
statements include all adjustments, consisting only of
normal recurring adjustments, which Wireless considers
necessary for a fair presentation of the financial
position and the results of operations for the periods.
Operating results for the nine-month period ended
September 30, 1998 are not necessarily indicative of the
results that might be expected for the entire year
ending December 31, 1998. The data should be read in
conjunction with the historical consolidated financial
statements of Wireless, and the related notes thereto,
set forth in the exhibits hereto.
<TABLE>
<CAPTION>
SELECTED HISTORICAL FINANCIAL DATA
Year Ended December 31
--------------------------------
1997 1997
-------------- ------------
(In thousnds, except share data)
<S> <C> <C>
Statement of operations data:
Revenues.............................................................$ 34,980 $ 11,365
Operating expenses:
Systems operations................................................... 23,398 8,416
Selling, general and administrative.................................. 28,318 15,559
Depreciation and amortization........................................ 35,741 11,626
------------- -----------
87,457 35,601
------------- -----------
Operating loss....................................................... (52,877) (24,236)
------------- -----------
Interest expense..................................................... (41,829) (28,088)
Interest income...................................................... 4,711 8,147
Equity in losses of investee......................................... (445) (193)
------------- -----------
Total other expense.................................................. (37,563) (20,134)
------------- -----------
Loss before income taxes............................................. (90,440) (44,370)
Income tax benefit................................................... 1,300 4,700
------------- -----------
Net Loss............................................................. (89,140) (39,670)
Preferred stock dividends and discount accretion..................... -- --
------------- -----------
Net loss applicable to common stock.................................. $ (89,140) $ (39,670)
============= ===========
Basic and diluted loss per
common share......................................................... $ (5.26) $ (2.65)
============= ===========
Basic and diluted weighted average common shares outstanding......... 16,940,374 14,961,934
============= ===========
</TABLE>
<TABLE>
<CAPTION>
Three months ended Nine Months ended
September 30 September 30
--------------------------- ----------------------------
1998 1997 1998 1997
------------ ---------- ----------- -----------
(In thousands, except share data)
Statement of operations data:
<S> <C> <C> <C> <C>
Revenues $ 9,244 $ 9,128 $ 29,749 $ 24,534
Operating expenses:
Systems operations...................... 6,214 5,752 18,440 16,610
Selling, general and administrative..... 6,602 7,582 17,940 20,290
Depreciation and amortization........... 11,372 9,124 31,322 23,305
------------- ----------- ----------- -----------
24,188 22,458 67,702 60,205
------------- ----------- ----------- -----------
Loss from operations.................... (14,944) (13,330) (37,953) (35,671)
------------- ----------- ----------- -----------
Interest expense........................ (11,492) (10,430) (33,312) (31,100)
Interest income......................... 130 965 1,013 4,056
Equity in losses of affiliate........... (155) 27 (424) (298)
Gain on sale of investment.............. -- -- 1,000
Other................................... (209) -- (230)
------------- ----------- ----------- -----------
(11,726) (9,438) (31,953) (27,342)
------------- ----------- ----------- -----------
Loss before income taxes................ (26,670) (22,768) (69,906) (63,013)
Income tax benefit...................... 1,300 325 3,900 975
------------- ----------- ----------- -----------
Net loss................................ (25,370) (22,443) (66,006) (62,038)
============= =========== =========== ===========
Basic and diluted loss per common share. $ (1.50) $ (1.32) $ (3.90) $ (3.66)
============= =========== =========== ===========
Basic and diluted weighted average
common shares outstanding............. 16,910,064 16,946,697 16,910,064 16,946,697
============= =========== =========== ===========
</TABLE>
B. EVENTS LEADING TO THE
COMMENCEMENT OF THE CHAPTER 11
CASE.
The wireless cable television
industry is both highly competitive
and capital intensive. Wireless
cable television subscription
services compete with, among other
things, traditional "hardwired"
cable services and satellite video
subscription services. Wireless
cable television transmission is
limited to receivers within the
"line of sight" of the transmission
facility. A wireless cable service
provider must establish a
sufficient number of transmission
towers to provide line-of-sight
access to a large number of
potential customers. This can
require a significant initial
capital outlay before revenue is
generated by the business. In
addition, licenses that are
regulated by the FCC must be
purchased or leased in order to
transmit signals over the broadband
spectrum. At the time of its
initial public offering in October
1995, Wireless had disclosed a
business plan which would require
it to procure additional funding
for a number of years. In keeping
with this plan, Wireless offered
debt securities in both 1995 and
1996. At the time of these debt
offerings, Wireless reasonably
expected that continued aggressive
growth would be necessary to
generate adequate revenue to meet
its debt service obligations under
the offerings, and disclosed its
expectation that further financing
of Wireless would be necessary to
fund such continued growth (see,
for example, the registration
statement (Form S-1) and the
amended registration statement
(Form S-1/A) filed with the
Securities and Exchange Commission
on June 4, 1996, and August 7,
1996, respectively, in connection
with the offering of the 1996
Senior Discount Notes, the
registration statement (Form S-1)
filed with the Securities and
Exchange Commission on September
20, 1996, in connection with the
Debtor's initial public offering of
equity securities and certain
filings under the Exchange Act).
In March 1998, Wireless hired
BT Alex. Brown as financial
advisors to review the business
operations of Wireless, including
its immediate working capital
needs. With the assistance of BT
Alex. Brown and other
professionals, Wireless began a
number of initiatives and strategic
alternatives to improve the cash
flow and liquidity of Wireless,
which had been adversely affected
by operating losses and capital
expenditures incurred to fund the
growth of its wireless cable
business and the development of its
two way Internet data transmission
business. The initiatives to
improve cash flow and liquidity
included refocusing the marketing
efforts of Wireless on its MDU and
DIRECTV services and its WarpOne
Internet service. Wireless plans
to expand both these areas of its
business in order to reduce
operating and capital costs per
subscriber.
In September of 1998, Wireless
entered into the Senior Secured
Facility to fund the ongoing
operations of the Debtor and its
subsidiaries. Wireless borrowed
$13.5 million in aggregate
principal amount under that
facility prior to the Petition
Date.
To preserve capital and
liquidity, Wireless has implemented
a contingency plan that has
curtailed or delayed its plans to
expand into new markets, instead
concentrating on the maintenance of
its existing 38 markets. Wireless
has also consolidated the
operations of 38 field offices into
28, and reduced its workforce by
approximately 20%.
Management of Wireless
concluded that the best alternative
for recapitalizing Wireless and
maximizing the recovery for
creditors and equity interest
holders is through a prenegotiated
plan of reorganization. Therefore,
in January 1999, Wireless began
intensive negotiations with holders
of the 1995 Senior Notes and the
1996 Senior Discount Notes with
respect to restructuring such
indebtedness through a
prenegotiated plan. In connection
with such negotiations Wireless
commenced discussions with the
Unofficial Noteholders' Committee,
whose members include several of
the largest holders of the 1995
Senior Notes and the 1996 Senior
Discount Notes, including (i)
Merrill Lynch Corporate Bond Fund,
Inc.-High Income Portfolio, (ii)
Corporate High Yield Fund, Inc.,
(iii) Corporate High Yield Fund II,
Inc., (iv) Prospect Street High
Yield, (v) LibertyView Capital
Management, Inc., and (vi) Loeb
Partners and with additional large
holders of the Old Senior Notes.
The Unofficial Noteholders'
Committee retained Wachtell,
Lipton, Rosen & Katz as its legal
counsel. Throughout January 1999
and in the first days of February
1999 leading up to the filing by
Wireless of its voluntary petition
under the Bankruptcy Code, Wireless
engaged in discussions and
negotiations with the Unofficial
Noteholders' Committee and certain
other holders of the Old Senior
Notes on the terms of a proposed
restructuring of the Debtor.
During the period of
negotiations, the Debtor entered
into agreements with members of the
Unofficial Noteholders' Committee
and certain other holders
providing, among other things, that
the Debtor would supply that
committee and its counsel with
confidential information and that
the committee members would
maintain the confidentiality of
such information. In addition, the
Debtor has agreed to pay the fees
and expenses of the counsel for the
Unofficial Noteholders' Committee
pursuant to a letter dated January
19, 1999. After extensive
negotiations with the Unofficial
Noteholders' Committee and other
holders of the Old Senior Notes,
the parties reached an agreement on
the material terms of a
restructuring of Wireless (the
"Noteholders Agreement") which has
formed the basis for the Plan. The
basis of the Noteholders Agreement
is a complete conversion of the Old
Senior Notes into the New Common
Stock. In addition, the
Noteholders Agreement proposes to
treat general unsecured creditors
of Wireless (other than the holders
of the Old Senior Notes) as
unimpaired.
IV. EVENTS DURING THE CHAPTER 11
CASE
On February 11, 1999 Wireless
commenced the Chapter 11 Case in
the Bankruptcy Court. Wireless
continues to operate its business
and manage its properties as a
debtor in possession pursuant to
sections 1107 and 1108 of the
Bankruptcy Code.
A. CONTINUATION OF BUSINESS; STAY
OF LITIGATION.
Following the commencement of
the bankruptcy case, Wireless has
continued to operate as a debtor in
possession with the protection of
the Bankruptcy Court. The
Bankruptcy Court has certain
supervisory powers over the
operations of Wireless during the
pendency of the bankruptcy case.
Wireless will operate in the
ordinary course of business with
any transactions that are outside
the ordinary course of business
requiring Bankruptcy Court
approval.
An immediate effect of the
filing of a bankruptcy case was the
imposition of the automatic stay
under the Bankruptcy Code which,
with limited exceptions, enjoins
the commencement or continuation of
all litigation against Wireless.
The automatic stay will remain in
effect until the Effective Date
unless modified or vacated by the
order of the Bankruptcy Court.
B. FIRST DAY ORDERS.
On the Petition Date, Wireless
filed with the Bankruptcy Court a
number of "first day orders," along
with supporting applications and
affidavits. These first day orders
included, among others, (i) an
order authorizing the retention of
Latham & Watkins and Morris,
Nichols, Arsht & Tunnell as co-
counsel to Wireless; (ii) an order
authorizing the retention of KPMG
Peat Marwick as accountants to
Wireless; (iii) an order
authorizing the retention of Zolfo
Cooper, LLC as special financial
advisors; (iv) an order authorizing
the maintenance of business forms,
bank accounts and the Debtor's cash
management system; (v) an order
authorizing the Debtor to obtain
post-petition financing on an
interim basis and scheduling a
final hearing for approval of such
financing; (vi) an order permitting
payment of prepetition wages,
reimbursable employee expenses and
employee benefits; (vii) an order
to maintain utility services to
Wireless; (viii) an order to permit
payment of prepetition trade
creditors; (ix) an order
authorizing Wireless to honor
certain prepetition customer
obligations and (x) an order
authorizing Wireless to pay certain
prepetition sales, use and other
taxes. On February 12, 1999, the
Bankruptcy Court granted each of
these orders.
In sum, these first day orders
permit the Debtor to operate its
business in a manner which will
minimize the impact of the
bankruptcy case on the Debtor's
day-to-day activities.
Additionally, in light of the terms
of the Plan which provides for
unimpairment of all Classes of
Claims other than the Class of Old
Senior Notes, the relief granted
will not have an impact on the
distributions proposed in the Plan.
C. STATUTORY COMMITTEE.
To date, the U.S. Trustee has
not appointed a statutory committee
pursuant to section 1102 of the
Bankruptcy Code.
D. DEBTOR IN POSSESSION
FINANCING.
By a motion filed on the
Petition Date, the Debtor requested
authorization to obtain
postpetition financing from MLGAF.
On February 12, 1999, the
Bankruptcy Court entered an interim
order authorizing the Debtor to
enter into a postpetition financing
facility with MLGAF (the
"Postpetition Financing") and on
February 25, 1999, the interim
order became a final order by its
terms due to the absence of any
objections.
Under the terms of the
Postpetition Financing, MLGAF will
provide the Debtor with financing
in aggregate principal amount of
approximately $18.9 million. The
Debtor issued a note to MLGAF in
the aggregate amount of the
Postpetition Financing on February
12, 1999 (the "DIP Note"). The
aggregate amount of Postpetition
Financing includes (i) $13.5
million representing the
outstanding principal amount of
Existing Notes issued under the
Senior Secured Facility, (ii)
accrued interest on the Senior
Secured Notes and (iii) a facility
fee of $625,000 due to MLGAF in
connection with the Senior Secured
Facility (these amounts
collectively, the "Restated Note").
Additionally, the Postpetition
Financing limits the availability
of amounts over and above the
Restated Note to approximately $2
million until an order approving
the retention of a special
financial advisor reasonably
acceptable to MLGAF has become
final. MLGAF stated that Zolfo
Cooper, LLC, which is the special
financial advisor retained by the
Debtor, is acceptable. On February
12, 1999, the Court approved the
retention of Zolfo Cooper, LLC and
such order has become final.
Amounts outstanding under the
Postpetition Financing bear
interest at 15% per annum. The
Postpetition Financing will
terminate on the earliest to occur
(the "Maturity Date") of (i) August
12, 1999 (the date which is the
six-month anniversary of the date
of the entry of an interim order),
(ii) the date the DIP Note have
become or are declared to be
immediately due and payable as a
result of an Event of Default (as
defined in the Postpetition
Financing), (iii) the date of the
redemption of the DIP Note by
Wireless and (iv) the Effective
Date. The Postpetition Financing
provides for a "facility fee" of 5%
per annum, to be paid by the
Debtor. This fee shall be due in
advance for the first quarter and
monthly in advance thereafter and
shall accrue interest at the
interest rate accruing on the DIP
Note from and after the date due,
and be payable to MLGAF on the
Maturity Date.
Under the terms of the
Postpetition Financing, all
obligations of the Debtor to MLGAF
are:
(i) claims entitled to
the benefits of
Bankruptcy Code
section 364(c)(1),
having a
superpriority over
any and all
administration
expenses of the kind
specified in
Bankruptcy Code
section 503(b) or
507(b), subject to a
carve-out for
professional fees
and fees pursuant to
28 U.S.C. section
1930 and any fees
payable to the clerk
of the Bankruptcy
Court (the "Carve-
Out," as defined in
the Postpetition
Financing);
(ii) secured, pursuant to
Bankruptcy Code
section 364(c)(2),
subject to the
Carve-Out, by a
first priority
perfected lien on,
and security
interest in, all
present and after
acquired property of
Wireless (including
all licenses issued
by the FCC, and the
proceeds thereof, to
the extent permitted
by applicable
nonbankruptcy law);
(iii) secured, pursuant
to Bankruptcy Code
section 364(c)(3),
subject to the
Carve-Out, by a
perfected junior
lien on, and
security interest
in, all property of
Wireless that is
otherwise subject to
a valid and
perfected lien or
security interest on
the Petition Date
(other than property
that is subject to
liens securing
obligations under
the Senior Secured
Facility, all of
which liens shall
continue to secure
the Debtor's
obligations under
the Postpetition
Financing) or a
valid lien perfected
(but not granted)
after the Petition
Date to the extent
such post-Petition
Date perfection in
respect of a pre-
Petition Date claim
is expressly
permitted under the
Bankruptcy Code; and
(iv) secured by a first
priority lien on,
and security
interest in, all
present and after-
acquired property of
each of the Debtor's
wholly owned direct
and indirect non-
debtor subsidiaries
which guarantee the
obligations of the
Debtor under the
Postpetition
Financing.
The Postpetition Financing
contains substantially the same
affirmative and negative covenants
as those contained in the Senior
Secured Facility. In addition, the
Postpetition Financing provides for
certain informational and other
requirements which are customary
for a debtor-in-possession
financing facility as well as
certain additional bankruptcy
related defaults, such as (i)
failure of Wireless to provide
monthly financial statements,
budgets, cash forecasts, and other
financial data; (ii) payment of
pre-petition Claims (other than
those pre-petition Claims that
Wireless is permitted by Bankruptcy
Court order to pay); (iii) the
granting by Wireless of additional
superpriority Claims to any other
party; (iv) the Chapter 11 Case is
dismissed or converted to a
liquidation under chapter 7 of the
Bankruptcy Code; (v) a trustee or
examiner with enlarged powers is
appointed in the Chapter 11 Case;
(vi) an order granting final
approval of the Postpetition
Financing is not entered by the
Bankruptcy Court within 30 days
after the Petition Date; (vii) any
interim or final order approving
the Postpetition Financing is
stayed, modified, reversed or
vacated; (viii) a change of control
shall occur (other than as a result
of individuals who were directors
of the Debtor prior to the filing
date ceasing to be directors
thereafter); (ix) the Bankruptcy
Court enters an order granting
relief from the automatic stay so
as to allow a third party to
proceed against any material asset
or assets of the Debtor; (x) there
shall occur any event after the
Filing Date which results in a
Material Adverse Change (as defined
in the Postpetition Financing);
(xi) after having been retained
pursuant to a final order, a
financial consultant reasonably
satisfactory to MLGAF shall cease
for any reason (other than for
reasons unrelated to noncooperation
by the Debtor) to be employed or
otherwise retained without MLGAF's
prior written consent; and (xii)
the filing of a plan of
reorganization that is not in form
and substance reasonably
satisfactory to MLGAF.
The Postpetition Financing is
guaranteed by each of the direct
and indirect non-debtor
subsidiaries that was a guarantor
to the Senior Secured Facility.
By means of the Postpetition
Financing, the Debtors' cash needs
under its business plan will be met
through April of 1999. The Debtor
anticipates that certain asset
dispositions permitted under the
Postpetition Financing will occur
prior to the end of April of 1999
which will provide the Debtor with
sufficient cash until the Effective
Date of the Plan. Although the
Debtor is actively pursuing certain
asset sales, there can be no
assurance that the Debtor will be
able to dispose of it assets or
find additional financing in the
event such financing is needed.
See X.A.1, "Certain Risk Factors to
be Considered -- Overall Risk to
Recovery by Holders of Claims --
Dependence on Future Asset Sales
and/or Additional Financing."
E. BT ALEX. BROWN STIPULATION.
On March 25, 1998, the Debtor
and BT Alex. Brown, Inc. ("BT Alex.
Brown") entered into an agreement
(the "Engagement Letter") under the
terms of which BT Alex. Brown would
act as the Debtor's financial
advisor and consultant in
connection with the restructuring
of the Debtor's debt securities and
perform certain tasks associated
with that restructuring. The
Engagement Letter, among other
things, provided the Debtor would
pay BT Alex. Brown a maximum fee
equal to 1% of any debt obligations
eliminated as a result of any
restructuring or similar
transaction.
Under the Engagement Letter,
BT Alex. Brown has asserted that it
is entitled to total fees of
approximately $3.27 million
($900,000 of which was paid by the
Debtor prior to the Petition Date)
under the Engagement Letter, based
on the Debtor's commencement of
this prenegotiated chapter 11 Case.
The Unofficial Noteholders'
Committee disputed BT Alex. Brown's
asserted entitlement to the full
amount of this fee under the terms
of the Engagement Letter. In order
to resolve these issues without the
time and expense of litigation, the
Debtor, the Unofficial Noteholders'
Committee and BT Alex. Brown have
agreed to enter into a stipulation
setting forth a settlement of these
claims (the "BT Alex. Brown
Stipulation").
Under the BT Alex. Brown
Stipulation Reorganized Wireless
will, on the Effective Date of the
Plan or as soon thereafter as
practicable, (i) pay BT Alex. Brown
$500,000 in cash and (ii) issue to
BT Alex. Brown 50,000 shares of New
Common Stock. This consideration
will be in full satisfaction of BT
Alex. Brown's claim under the
Engagement Letter. In addition, BT
Alex. Brown has agreed to cooperate
with the Debtor and the Debtor's
professionals in aid of
confirmation of the Plan, including
providing testimony as necessary,
and to make information, analyses
and testimony gained through its
prepetition work on behalf of the
Debtor available to the Debtor and
its professionals.
The BT Alex. Brown Stipulation
is conditioned upon the approval of
the Bankruptcy Court and the
consummation of the Plan. The
Debtor expects to file shortly a
motion seeking approval of the BT
Alex. Brown Stipulation.
F. PLANNED ASSET DISPOSITIONS.
During the pendency of the
Chapter 11 Case, Wireless and/or
its subsidiaries expects (with such
Bankruptcy Court approval as may be
required) to sell certain assets
which are not a part of its core
business or are no longer necessary
to the operation of its business
(the "Planned Asset Dispositions").
In particular, Wireless expects to
sell a hardwire cable system (as
contrasted to the Debtor's core
business of wireless cable) in
Huntsville, Alabama. The terms of
this sale have not been finalized
although Wireless has received an
expression of interest from a
potential purchaser of this asset.
Wireless also is actively seeking
to sell certain transmission towers
used by Wireless to transmit its
signals and will arrange with any
proposed purchaser to lease only
the space that Wireless needs on
these towers. In addition,
Wireless will be seeking to sell
excess inventory of customer
premises equipment ("CPE"),
including reception antennas and
decoding boxes. Wireless is in the
process of marketing its
transmission towers and excess CPE.
In addition, pursuant to certain
limited liability company
organizational documents and other
agreements, Wireless One of North
Carolina, LLC ("WONC"), a limited
liability company in which Wireless
holds 50% of the membership
interests, will receive from a
subsidiary of Wireless certain FCC
licenses and take on certain debt
obligations associated therewith
and Wireless, through its
subsidiary, will receive cash.
Wireless expects to seek approval
of this transaction by a motion to
be filed shortly.
Wireless expects to identify
and seek to sell other assets in
certain markets during the Chapter
11 Case. In that regard, Wireless
is investigating whether to sell
some or all of its 50% interest in
WONC. The Planned Asset
Dispositions will be the subject of
one or more motions filed with the
Bankruptcy Court seeking such
approval as may be necessary under
the Bankruptcy Code. To the extent
required by the terms of the
Postpetition Financing, all or a
portion of the proceeds of the
Planned Asset Dispositions will be
used to pay down the amounts due
under the Postpetition Financing.
V. THE PLAN OF REORGANIZATION
Wireless believes that (i)
through the Plan, creditors will
obtain a substantially greater
recovery from the estate of
Wireless than the recovery which
would be available if the assets of
Wireless were liquidated under
chapter 7 of the Bankruptcy Code
and (ii) the Plan will afford
Wireless the opportunity and
ability to continue in business as
a viable going concern.
The Plan is annexed hereto as
Exhibit A and forms a part of this
Disclosure Statement. The summary
of the Plan set forth below is
qualified in its entirety by
reference to the more detailed
provisions set forth in the Plan.
A. CLASSIFICATION AND TREATMENT
OF CLAIMS AND EQUITY INTERESTS.
1. ADMINISTRATIVE EXPENSE
CLAIMS.
Administrative Expense
Claims are Claims constituting a
cost or expense of administration
of the Chapter 11 Case allowed
under section 503(b) of the
Bankruptcy Code. Such claims
include any actual and necessary
costs and expenses of preserving
the estate of the Debtor, any
actual and necessary costs and
expenses of operating the business
of the Debtor in Possession, any
indebtedness or obligations
incurred or assumed by the Debtor
in Possession in connection with
the conduct of its business or the
acquisition or lease of property or
the rendition of services, any
allowance of compensation and
reimbursement of expenses to the
extent allowed by a Final Order
under section 330 of the Bankruptcy
Code, and fees or charges assessed
against the Debtor's estate under
section 1930 of title 28 of the
United States Code.
All payments to
professionals for compensation and
reimbursement of expenses and all
payments to reimburse expenses of
members of the Creditors' Committee
will be made in accordance with the
procedures established by the
Bankruptcy Code, the Bankruptcy
Rules and the Bankruptcy Court
relating to the payment of interim
and final compensation and
expenses. The Bankruptcy Court
will review and determine all
requests for compensation and
reimbursement of expenses.
The Postpetition
Financing will be repaid in full in
Cash on or prior to the Effective
Date with the proceeds of the
Planned Asset Dispositions or with
the proceeds of such exit financing
as may be arranged.
In addition to the
foregoing, section 503(b) of the
Bankruptcy Code provides for
payment of compensation to
creditors, indenture trustees and
other persons making a "substantial
contribution" to a reorganization
case, and to attorneys for and
other professional advisors to such
persons. The amounts, if any,
which may be sought by entities for
such compensation are not known by
Wireless at this time. Requests
for compensation must be approved
by the Bankruptcy Court after a
hearing on notice at which Wireless
and other parties in interest may
participate and, if appropriate,
object to the allowance of any
compensation and reimbursement of
expenses.
2. PRIORITY TAX CLAIMS.
Priority Tax Claims are
those Claims for taxes entitled to
priority in payment under section
507(a)(8) of the Bankruptcy Code.
Except to the extent that a holder
of an Allowed Priority Tax Claim
agrees to a different treatment of
such Allowed Priority Tax Claim,
Reorganized Wireless shall either
(i) pay to each holder of an
Allowed Priority Tax Claim Cash in
an amount equal to such Allowed
Priority Tax Claim or (ii) provide
such other treatment as may be
permitted under section 1129(a)(9)
of the Bankruptcy Code to holders
of Allowed Priority Tax Claims.
All Allowed Priority Tax Claims
which are not due and payable on or
before the Effective Date shall be
paid in the ordinary course of
business in accordance with the
terms thereof or accorded such
other treatment as may be permitted
under section 1129(a)(9) of the
Bankruptcy Code. The Debtor does
not believe that there will be any
Priority Tax Claims due and payable
on the Effective Date.
3. CLASS 1 - PRIORITY NON-
TAX CLAIMS.
The Priority Non-Tax
Claims are Claims which are
entitled to priority in accordance
with section 507(a) of the
Bankruptcy Code (other than
Administrative Expense Claims and
Priority Tax Claims). Such Claims
include (i) unsecured claims for
accrued employee compensation
earned within ninety days prior to
commencement of the Chapter 11 Case
to the extent of $4,300 per
employee and (ii) contributions to
employee benefit plans arising from
services rendered within 180 days
prior to the commencement of the
Chapter 11 Case but only for each
such plan to the extent of (x) the
number of employees covered by such
plan multiplied by $4,300, less (y)
the aggregate amount paid to such
employees from the estate for
wages, salaries or commissions.
Due to the fact that Wireless has
paid its employees and their
benefit plans in full pursuant to
an order of the Bankruptcy Court
signed on February 12, 1999 (see
Section IV.B. "Events During the
Chapter 11 Case -- First Day
Orders"), Wireless believes that
there are no Priority Non-Tax
Claims.
Pursuant to the Plan, on
the Effective Date, except to the
extent that a holder of an Allowed
Priority Non-Tax Claim agrees to a
different treatment of such Allowed
Priority Non-Tax Claim, each
Allowed Priority Non-Tax Claim
shall be unimpaired in accordance
with section 1124 of the Bankruptcy
Code. All Allowed Priority Non-Tax
Claims which are not due and
payable on or before the Effective
Date shall be paid in the ordinary
course of business in accordance
with the terms thereof.
4. CLASS 2 - SECURED CLAIMS
Class 2 consists of all
Allowed Secured Claims. Class 2 is
unimpaired. Each Allowed Claim in
Class 2 will be treated as follows:
(i) the Plan will leave unaltered
the legal, equitable and
contractual rights to which such
Claim entitles the holders or (ii)
notwithstanding any contractual
provision or applicable law that
entitles the holder of an Allowed
Claim in Class 2 to demand or
receive payment of such Claim prior
to the stated maturity of such
Claims from and after the
occurrence of a default, such
Allowed Claim in Class 2 will be
reinstated and rendered unimpaired
in accordance with section 1124(2)
of the Bankruptcy Code.
5. CLASS 3 - BTA INSTALLMENT
NOTE CLAIMS
Class 3 consists of BTA
Installment Note Claims. Class 3
is unimpaired. The BTA Installment
Note Claims will be treated as
follows: (i) the Plan will leave
unaltered the legal, equitable and
contractual rights to which such
Claims entitled the holder or (ii)
notwithstanding any contractual
provision or applicable law that
entitles the holder of the BTA
Installment Note Claims to demand
or receive payment of such Claim
prior to the stated maturity of
such Claims from and after the
occurrence of a default, each
Allowed Claim in Class 3 will be
reinstated and rendered unimpaired
in accordance with section 1124(2)
of the Bankruptcy Code.
The Debtor believes that
the BTA Installment Notes and
obligations related thereto are
obligations only of a subsidiary of
the Debtor. Accordingly, the
Debtor believes that there are no
BTA Installment Note Claims.
6. CLASS 4 - UNSECURED
CLAIMS
Class 4 consists of all Allowed Unsecured Claims, including the
Trade Claims. Class 4 is unimpaired. Each Allowed Unsecured Claim will be
treated as follows: (i) the Plan will leave unaltered the legal, equitable
and contractual rights to which such Claims entitled the holder or (ii)
such other treatment which will render the Allowed Claim being deemed
unimpaired.
Class 4 includes Trade Claims, which, as set forth above, the
Debtor is authorized to pay in the ordinary course of business. In any
event, all Allowed Claims in Class 4 that have become due and payable on or
before the Effective Date (unless previously paid) will be paid in full, in
Cash (with interest, to the extent permitted by the Bankruptcy Court), on,
or as soon as practicable after the Effective Date, or at such other time
as is mutually agreed upon by the Debtors and the holder of such Claim, or
if not due and payable on the Effective Date, such Claims will be
reinstated and paid in full in accordance with their respective terms or
otherwise rendered unimpaired.
7. CLASS 5 - OLD SENIOR NOTE CLAIMS
Class 5 consists of all Allowed Senior Note Claims. Class 5 is
impaired. Pursuant to the Plan, on the Effective Date or as soon as
practicable thereafter, holders of Allowed Old Senior Note Claims on the
Record Date will receive their Ratable Proportion of 96% of the New Common
Stock Distribution Amount. The Old Senior Notes and any Equity Interests
issued in connection therewith will be cancelled on the Effective Date.
Accordingly, under the Plan and subject to the limitation on the
distribution of fractional shares set forth therein, holders of Allowed
1995 Senior Note Claims will receive 30.27 shares of New Common Stock for
every $1000 in principal amount of 1995 Senior Notes held on the Record
Date and holders of Allowed 1996 Senior Discount Note Claims will receive
20.94 shares of New Common Stock for every $1000 in face amount at maturity
of 1996 Senior Discount Notes held on the Record Date.
8. CLASS 6 - INDEMNITY CLAIMS
Class 6 consists of all Allowed Indemnity Claims. Class 6 is
impaired. Holders of Allowed Indemnity Claims will be entitled to assert
such Claims against the Debtor, but only to the extent of coverage
available under any applicable directors' and officers' insurance.
For purposes of voting on the Plan only, the value of each
Allowed Indemnity Claim will be deemed to be $1.
9. CLASS 7 - OLD COMMON STOCK INTERESTS
Class 7 consists of all Allowed Old Common Stock Interests.
Class 7 is impaired. Pursuant to the Plan, on the Effective Date or as
soon as practicable thereafter, holders of Allowed Old Common Stock
Interests on the Record Date will receive their Ratable Proportion of 4% of
the New Common Stock Distribution Amount and of the New Warrants, which are
5-year warrants to purchase an aggregate of 1,235,000 shares of New Common
Stock at an exercise price of $29.57 per share, such price subject to
adjustment under certain circumstances. See V.B.2., "Plan of
Reorganization -- Securities to be Issued Under the Plan -- New Warrants."
The Old Common Stock and any Equity Interests issued in connection
therewith or otherwise related thereto will be cancelled on the Effective
Date.
Accordingly, under the Plan and subject to the limitation on the
distribution of fractional shares set forth therein, holders of Allowed Old
Common Stock Interests will receive 1 share of New Common Stock for every
42.56 shares of Old Common Stock held on the Record Date and a New Warrant
to purchase 1 share of New Common Stock (subject to post-Effective Date
adjustment under certain circumstances set forth in the New Warrant
Agreement) for every 13.72 shares of Old Common Stock held on the Record
Date.
10. CLASS 8 - OTHER EQUITY INTERESTS
Class 8 consists of all Other Equity Interests. Class 8 is
impaired. On the Effective Date, all Other Equity Interests will be
cancelled and the holders of such Equity Interests will not receive any
distribution in respect thereof.
11. ALTERNATIVE TREATMENT FOR HOLDERS OF ALLOWED CLAIMS OR EQUITY
INTERESTS.
Notwithstanding the treatment provided for holders of Allowed
Claims and Equity Interests in Section 4 of the Plan, Reorganized Wireless
and the holder of an Allowed Claim may agree to other treatment of such
Claim, including payment in Cash, provided that such treatment shall not
provide a return having a present value in excess of the present value of
the distribution that otherwise would be made to such holder under Section
4 of the Plan.
As set forth above, BT Alex. Brown has agreed, pursuant to the BT
Alex. Brown Stipulation, to treatment other than as set forth in the
classes set forth above. The Debtor submits that such treatment provides a
return having a present value less than the present value that would have
otherwise been made to BT Alex. Brown under the Plan.
B. SECURITIES TO BE ISSUED UNDER THE PLAN.
--------------------------------------
1. NEW COMMON STOCK.
Pursuant to the Plan, on the Effective Date, all Equity Interests
will be cancelled. Commencing on the Effective Date, Reorganized Wireless
will distribute New Common Stock to holders of Allowed Old Senior Note
Claims, holders of Allowed Old Common Stock Interests and BT Alex. Brown in
accordance with the Plan and the BT Alex. Brown Stipulation. Pursuant to
the Plan, Reorganized Wireless is authorized to issue 10,000,000 shares of
New Common Stock, of which an aggregate of 9,950,000 shares of New Common
Stock will be issued to holders of Allowed Old Senior Note Claims and
holders of Allowed Common Stock Interests.
Holders of the New Common Stock will be entitled to one vote per
share on all matters to be voted upon by the stockholders. Holders of a
plurality of the shares voting for the election of directors can elect all
of the directors since the holders of the New Common Stock will not have
cumulative voting rights. For a more detailed description of the process
by which Reorganized Wireless will elect its Board of Directors, see
Section VII.A, "Management of Reorganized Debtor -- Board of Directors and
Management."
2. NEW WARRANTS.
On the Effective Date, Reorganized Wireless will issue, pursuant
to Sections 4.7, 6.1, 6.2, 6.3 and 7.7 of the Plan, New Warrants to
purchase an aggregate of 1,235,000 shares of New Common Stock, at an
exercise price (the "Exercise Price") of $29.57 per share of New Common
Stock, subject to adjustment in certain circumstances as described below.
The New Warrants will be exercisable until 5:00 p.m., New York City time,
on the date that is five years after the Effective Date (or, if such date
is not a Business Day, the next succeeding Business Day). The New Warrants
will have no voting rights, will not be entitled to receive dividends or
other distributions declared on the New Common Stock and will not be
entitled to share in any of the assets of Reorganized Wireless upon any
liquidation, dissolution or winding-up of Reorganized Wireless.
The number of shares of New Common Stock for which a New Warrant
will be exercisable and the exercise price of the New Warrants will be
subject to adjustment upon the occurrence of certain events, including (i)
stock dividends, subdivisions and combinations affecting the New Common
Stock, (ii) reclassifications and recapitalizations involving Reorganized
Wireless, (iii) if the Reorganized Wireless (A) fixes a record date for
issuance of rights, options or warrants to all holders of New Common Stock
entitling them to subscribe for or purchase New Common Stock, (B) issues
shares of New Common Stock or (C) issues any securities convertible into or
exchangeable or exercisable for Common Stock, in the case of (A), (B), (C)
above at a price per share of New Common Stock less than the then current
market price per share of New Common Stock and (iv) if Reorganized Wireless
fixes a record date for the making of a distribution to all holders of New
Common Stock of assets, debt securities, preferred stock or rights or
warrants. In the event of a merger or consolidation of Reorganized
Wireless with or into one or more Persons (as defined below) or the
transfer or lease of all or substantially all of the assets of Reorganized
Wireless to another Person (a "Transaction") in which New Common Stock is
exchanged for securities, cash or other assets or a combination thereof
(collectively, "Transaction Consideration"), then the New Warrants will
automatically become exercisable for the Transaction Consideration which
the holder of the New Warrants would have owned or been entitled to receive
immediately after the Transaction if the holder had exercised the New
Warrants before the effective date of the Transaction.
In the event of a "change of control" of Reorganized Wireless
within one year of the Effective Date, the exercise price of the New
Warrants will be reduced to $23.22 per Warrant Share, subject to adjustment
as provided in section 10 of the New Warrant Agreement. For purposes of
the New Warrant Agreement, a "change of control" means the occurrence of
any of the following events:
(i) any Person or "group" (as defined in Sections 13(d)
and 14(d) of the Exchange Act) acquires beneficial
ownership of (x) more than 50% of the total outstanding
New Common Stock of Reorganized Wireless or (y) more
than 30% of the total outstanding New Common Stock of
Reorganized Wireless with the right to designate a
majority of the board of directors of Reorganized
Wireless;
(ii)Reorganized Wireless consolidates with, or merges
with or into, any Person or sells, assigns, conveys,
transfers, or leases or otherwise disposes of all or
substantially all of its assets to any Person, or any
Person consolidates with, or merges with or into,
Reorganized Wireless, in any such event pursuant to a
transaction in which the outstanding New Common Stock
is changed into or exchanged for cash, securities or
other property, other than any such transaction where
the outstanding New Common Stock is not changed or
exchanged at all (except to the extent necessary to
reflect a change in the jurisdiction of incorporation
of Reorganized Wireless); or
(iii)Reorganized Wireless or any of its affiliates
enters into any agreement, arrangement or understanding
with respect to any event described in subparagraph (i)
or (ii) above; provided, however, that in the case of a
"change of control" as described in this subpart (iii),
such reduction shall not occur unless and until such
event thereafter occurs (whether within one year of the
Effective Date or any time thereafter). "Person" is
defined in the New Warrant Agreement as any individual,
corporation, limited liability company, partnership,
joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency
or political subdivision thereof.
A complete description of the terms and provisions governing the
New Warrants is set forth in the New Warrant Agreement, which shall be in
substantially the form annexed as Exhibit 2 to the Plan.
C. MEANS OF IMPLEMENTATION.
-----------------------
1. DISTRIBUTIONS.
On the Effective Date or as soon as practicable thereafter,
Reorganized Wireless shall make or cause to be made to the holders of
Allowed Claims and Allowed Equity Interests the distributions of New Common
Stock, New Warrants and Cash as provided in Section 4 of the Plan.
Disputed Claims shall be resolved in accordance with Section 8 of the Plan
and, if a Disputed Claim becomes an Allowed Claim by Final Order,
distributions shall be made on account of such Claims in accordance with
Section 8.3 of the Plan.
2. ISSUANCE OF NEW SECURITIES.
The issuance of the following securities by Reorganized Wireless
is authorized under the Plan without further act or action under applicable
law, regulation, order or rule: (a) 10,000,000 shares of New Common Stock,
(b) the New Warrants and (c) the Incentive Options.
3. NEW WARRANT AGREEMENT.
The New Warrant Agreement shall be executed and delivered by
Reorganized Wireless and the warrant agent or any replacement agent
reasonably acceptable to the Debtor and the Unofficial Noteholders'
Committee Majority.
4. EXIT FINANCING
To the extent that the Planned Asset Dispositions have not been
completed on terms that would permit the Debtor to emerge from the Chapter
11 Case without additional financing (to either repay the Postpetition
Financing or to have sufficient liquidity to operate after the Effective
Date), the Debtor will obtain exit financing reasonably acceptable to the
Unofficial Noteholders' Committee and MLGAF to repay in full in Cash all
obligations under the Postpetition Financing and provide working capital
for operations.
5. ADOPTION OF STOCK OPTION PLAN.
If not previously adopted by Wireless, on the Effective Date,
Reorganized Wireless will adopt the Stock Option Plan.
6. INCENTIVE OPTIONS ON THE EFFECTIVE DATE.
On the Effective Date, Reorganized Wireless is authorized under
the Plan to issue Incentive Options to management of Reorganized Wireless
to purchase 444,000 shares of New Common Stock at an exercise price of
$13.51 pursuant and subject to the Stock Option Plan. Additional Incentive
Options for management to purchase 666,000 shares of New Common Stock at a
yet-to-be-determined exercise price shall be available for issuance
pursuant to the Stock Option Plan.
7. CANCELLATION OF EXISTING SECURITIES AND AGREEMENTS.
On the Effective Date, the 1995 Senior Notes, the 1996 Senior
Discount Notes and the Equity Interests shall (a) be cancelled and (b) have
no effect other than the right to participate in the distributions, if any,
provided under the Plan in respect of Claims and Equity Interests.
8. CORPORATE ACTION.
Board of Directors of Reorganized Wireless. On the Effective
Date, the operation of Reorganized Wireless shall become the general
responsibility of its Board of Directors, subject to, and in accordance
with, the Charter and by-laws. The Charter and by-laws provide for, among
other things, removal of directors only for cause and only by the
affirmative vote of the holders of a majority of the voting power of the
then outstanding voting capital stock of Reorganized Wireless. The initial
Board of Directors of Reorganized Wireless shall consist of seven members,
one of which will be Henry Burkhalter, the current President and Chief
Executive Officer of the Debtor. Subject to the immediately preceding
sentence, the initial members and the manner of selection of the Board of
Directors of Reorganized Wireless shall in all respects be subject to the
approval of the Unofficial Noteholders' Committee and MLGAF and shall be
disclosed on or prior to the Confirmation Hearing. The directors of the
Debtor immediately prior to the Effective Date shall resign as of the
Effective Date and shall be replaced by the Board of Directors of
Reorganized Wireless.
Officers of Reorganized Wireless. The initial officers of
Reorganized Wireless are or shall be disclosed in the Disclosure Statement
or an amendment or supplement to the Disclosure Statement or such other
filing as may be made with the Bankruptcy Court. The selection of officers
of Reorganized Wireless after the Effective Date shall be as provided in
its Charter and by-laws.
9. RESTATED CERTIFICATE OF INCORPORATION.
On the Effective Date, or as soon thereafter as is practicable,
Reorganized Wireless shall file with the Secretary of State of the State of
Delaware in accordance with section 303 of the DGCL, the Charter which
shall, among other things, prohibit Reorganized Wireless from creating,
designating, authorizing or causing to be issued any class or series of
non-voting stock. On the Effective Date, the Charter shall automatically
become effective, and all other matters provided under this Plan involving
the corporate structure of Reorganized Wireless, or corporate action by it,
shall be deemed to have occurred and shall be in effect from and after the
Effective Date pursuant to section 303 of the DGCL without any requirement
of further action by the stockholders, the directors of Reorganized
Wireless or Reorganized Wireless.
10. REGISTRATION RIGHTS AGREEMENT.
Reorganized Wireless will grant registration rights to holders of
New Common Stock who may be deemed to be statutory underwriters as such
term is used in section 1145(b) of the Bankruptcy Code and will enter into
a registration rights agreement with such holders containing customary
registration rights provisions.
D. PROVISIONS GOVERNING DISTRIBUTIONS.
----------------------------------
1. DATE OF DISTRIBUTIONS.
Any distributions and deliveries to be made under the Plan shall
be made on the Effective Date or as soon as practicable thereafter and
deemed made on the Effective Date. In the event that any payment or act
under the Plan is required to be made or performed on a date that is not a
Business Day, then the making of such payment or the performance of such
act may be completed on the next succeeding Business Day, but shall be
deemed to have been completed as of the required date.
2. DISBURSING AGENT.
All distributions under the Plan shall be made by Reorganized
Wireless as Disbursing Agent or such other entity designated by Reorganized
Wireless as a Disbursing Agent on the Effective Date. A Disbursing Agent
shall not be required to give any bond or surety or other security for the
performance of its duties unless otherwise ordered by the Bankruptcy Court;
and, in the event that a Disbursing Agent is so otherwise ordered, all
costs and expenses of procuring any such bond or surety shall be borne by
Reorganized Wireless.
3. SURRENDER OF INSTRUMENTS.
As a condition to receiving any distribution under the Plan, each
holder of a 1995 Senior Note, 1996 Senior Discount Note or Old Common Stock
Interest must surrender such 1995 Senior Note, 1996 Senior Discount Note or
Old Common Stock Interest to Reorganized Wireless or its designee. Any
holder of a 1995 Senior Note, 1996 Senior Discount Note or certificate
representing such Old Common Stock Interest that fails to (a) surrender
such instrument or (b) execute and deliver an affidavit of loss and/or
indemnity reasonably satisfactory to Reorganized Wireless and, if so
requested, furnish a bond in form, substance, and amount reasonably
satisfactory to Reorganized Wireless before the first anniversary of the
Effective Date shall be deemed to have forfeited all rights and claims and
may not participate in any distribution under the Plan.
4. COMPENSATION OF PROFESSIONALS.
Each person retained or requesting compensation in the Chapter 11
Case pursuant to section 330 or 503(b) of the Bankruptcy Code shall be
required to file an application for allowance of final compensation and
reimbursement of expenses in the Chapter 11 Case on or before a date to be
determined by the Bankruptcy Court in the Confirmation Order or any other
order of the Bankruptcy Court. Objections to any such application shall be
filed on or before a date to be fixed and determined by the Bankruptcy
Court in the Confirmation Order or such other order.
5. DELIVERY OF DISTRIBUTIONS.
Subject to Bankruptcy Rule 9010, all distributions to any holder
of an Allowed Claim or an Allowed Equity Interest shall be made at the
address of such holder as set forth on the Schedules filed with the
Bankruptcy Court or on the books and records of the Debtor or its agents,
unless the Debtor or Reorganized Wireless, as applicable, has been notified
in writing of a change of address, including, without limitation, by the
filing of a proof of claim or interest by such holder that contains an
address for such holder different from the address reflected on such
Schedules for such holder. In the event that any distribution to any
holder is returned as undeliverable, the Disbursing Agent shall use
reasonable efforts to determine the current address of such holder, but no
distribution to such holder shall be made unless and until the Disbursing
Agent has determined the then current address of such holder, at which time
such distribution shall be made to such holder without interest; provided
that such distributions shall be deemed unclaimed property under section
347(b) of the Bankruptcy Code at the expiration of one year from the
Effective Date. After such date, all unclaimed property or interest in
property shall revert to Reorganized Wireless, and the claim of any other
holder to such property or interest in property shall be discharged and
forever barred.
6. MANNER OF PAYMENT UNDER THE PLAN.
At the option of the Disbursing Agent, any Cash payment to be
made under the Plan may be made by a check or wire transfer or as otherwise
required or provided in applicable agreements.
7. FRACTIONAL SHARES.
No fractional shares of New Common Stock or New Warrants or Cash
in lieu thereof shall be distributed. No New Warrants shall be issued for
fractional shares of New Common Stock. For purposes of distribution,
fractional shares of New Common Stock and fractional New Warrants shall be
rounded down to the previous whole number.
8. SETOFFS AND RECOUPMENT.
The Debtor may, but shall not be required to, setoff against, or
recoup from, any Claim and the payments to be made pursuant to the Plan in
respect of such Claim (other than Old Senior Note Claims), any claims of
any nature whatsoever that the Debtor may have against the claimant; but
neither the failure to do so nor the allowance of any Claim thereunder
shall constitute a waiver or release by the Debtor of any such claim it may
have against such claimant.
9. DISTRIBUTIONS AFTER EFFECTIVE DATE.
Distributions made after the Effective Date to holders of
Disputed Claims that are not Allowed Claims as of the Effective Date but
which later become Allowed Claims shall be deemed to have been made on the
Effective Date.
10. RIGHTS AND POWERS OF DISBURSING AGENT.
a. POWERS OF THE DISBURSING AGENT.
------------------------------
The Disbursing Agent shall be empowered to (i) effect all actions
and execute all agreements, instruments and other documents necessary to
perform its duties under the Plan, (ii) make all distributions contemplated
hereby, (iii) employ professionals to represent it with respect to its
responsibilities and (iv) exercise such other powers as may be vested in
the Disbursing Agent by order of the Bankruptcy Court, pursuant to the
Plan, or as deemed by the Disbursing Agent to be necessary and proper to
implement the provisions of the Plan.
b. EXPENSES INCURRED ON OR AFTER THE EFFECTIVE DATE.
------------------------------------------------
Except as otherwise ordered by the Bankruptcy Court, the amount
of any reasonable fees and expenses incurred by the Disbursing Agent on or
after the Effective Date (including, without limitation, taxes) and any
reasonable compensation and expense reimbursement claims (including,
without limitation, reasonable attorney fees and expenses) made by the
Disbursing Agent shall be paid in Cash by Reorganized Wireless.
11. EXCULPATION.
The Debtor, Reorganized Wireless, each of the members of the
Unofficial Noteholders' Committee, MLGAF, the Disbursing Agent, and their
respective members, partners, officers, directors, employees and agents
(including any attorneys, accountants, financial advisors, investment
bankers and other professionals retained by such persons) shall have no
liability to any holder of any Claim or Equity Interest for any act or
omission in connection with, or arising out of, the Disclosure Statement,
the Plan, the solicitation of votes for and the pursuit of confirmation of
the Plan, the consummation of the Plan, or the administration of the Plan
or the property to be distributed under the Plan, except for willful
misconduct or gross negligence as determined by a Final Order of the
Bankruptcy Court and, in all respects, shall be entitled to rely upon the
advice of counsel with respect to their duties and responsibilities under
the Plan.
E. RESOLUTION OF DISPUTED CLAIMS AND INTERESTS.
-------------------------------------------
Except as to applications for allowances of compensation and
reimbursement of expenses under sections 330 and 503 of the Bankruptcy
Code, the Debtor or Reorganized Wireless shall have the exclusive right to
make and file objections to Administrative Expense Claims, Claims and
Equity Interests subsequent to the Confirmation Date. All objections shall
be litigated to Final Order; PROVIDED, HOWEVER, that Reorganized Wireless
shall have the authority to compromise, settle, otherwise resolve or
withdraw any objections, without approval of the Bankruptcy Court. Unless
otherwise ordered by the Bankruptcy Court, the Debtor or Reorganized
Wireless shall file all objections to Administrative Expense Claims that
are the subject of proofs of claim or requests for payment filed with the
Bankruptcy Court (other than applications for allowances of compensation
and reimbursement of expenses), Claims and Equity Interests and serve such
objections upon the holder of the Administrative Expense Claim, Claim or
Equity Interest as to which the objection is made as soon as is
practicable, but in no event later than (a) 120 days after the Effective
Date or the date on which a proof of claim or request for payment is filed
with the Bankruptcy Court or (b) such later date as may be approved by the
Bankruptcy Court.
Notwithstanding any provision of the Plan, if any portion of a Claim
is a Disputed Claim, no payment or distribution provided thereunder shall
be made on account of such Claim unless and until such Disputed Claim
becomes an Allowed Claim. To the extent that a Disputed Claim or Disputed
Equity Interest ultimately becomes an Allowed Claim or Allowed Equity
Interest, a distribution shall be made to the holder of such Allowed Claim
or Allowed Equity Interest in accordance with the provisions of the Plan.
Pursuant to Bankruptcy Rule 3018(a), a Disputed Claim will not be
counted for purposes of voting on the Plan to the extent it is disputed,
unless an order of the Bankruptcy Court is entered after notice and a
hearing temporarily allowing the Disputed Claim for voting purposes under
Bankruptcy Rule 3018(a). Such disallowance for voting purposes is without
prejudice to the claimant's right to seek to have its Disputed Claim
allowed for purposes of distribution under the Plan.
F. EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
----------------------------------------
1. ASSUMPTION AND REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED
LEASES.
The Plan constitutes a motion by the Debtor to assume, as of the
Effective Date, all executory contracts and unexpired leases to which the
Debtor is a party, except for an executory contract or unexpired lease that
(i) has been assumed or rejected pursuant to Final Order of the Bankruptcy
Court, (ii) is specifically rejected on Schedule 9.1 to the Plan filed by
the Debtor on or before the commencement of the hearing on approval of the
Disclosure Statement or such later date as may be fixed by the Bankruptcy
Court, (iii) is the subject of a separate motion filed under section 365 of
the Bankruptcy Code by the Debtor prior to the filing of Schedule 9.1 to
the Plan or (iv) is otherwise assumed pursuant to the Plan. Each executory
contract and unexpired lease listed on Schedule 9.1 to the Plan that
relates to the use or occupancy of real property shall include (i)
modifications, amendments, supplements, restatements, or other agreements
made directly or indirectly by any agreement, instrument, or other document
that in any manner affects such executory contract or unexpired lease,
without regard to whether such agreement, instrument or other document is
listed on Schedule 9.1 to the Plan and (ii) executory contracts or
unexpired leases appurtenant to the premises listed on Schedule 9.1 to the
Plan including all easements, licenses, permits, rights, privileges,
immunities, options, rights of first refusal, powers, uses, usufructs,
reciprocal easement agreements, vault, tunnel or bridge agreements or
franchises, and any other interests in real estate or rights IN REM
relating to such premises to the extent any of the foregoing are executory
contracts or unexpired leases, unless any of the foregoing agreements are
assumed.
2. AMENDMENTS TO SCHEDULE; EFFECT OF AMENDMENTS.
The Debtor shall assume each of the executory contracts and
unexpired leases not listed on Schedule 9.1 to the Plan; provided, that the
Debtor may at any time on or before the first Business Day before the date
of the commencement of the Confirmation Hearing amend Schedule 9.1 to the
Plan to delete or add any executory contract or unexpired lease thereto, in
which event such executory contract or unexpired lease shall be deemed to
be, respectively, assumed and, if applicable, assigned as provided therein,
or rejected. The Debtor shall provide notice of any amendments to Schedule
9.1 to the Plan to the parties to the executory contracts or unexpired
leases affected thereby. The fact that any contract or lease is scheduled
on Schedule 9.1 to the Plan shall not constitute or be construed to
constitute an admission by the Debtor that the Debtor has any liability
thereunder.
3. BAR TO REJECTION DAMAGE CLAIMS.
In the event that the rejection of an executory contract or
unexpired lease by the Debtor results in damages to the other party or
parties to such contract or lease, a Claim for such damages, if not
evidenced by a filed proof of claim, shall be forever barred and shall not
be enforceable against the Debtor, or its properties or interests in
property as agents, successors, or assigns, unless a proof of claim is
filed with the Bankruptcy Court and served upon counsel for the Debtor on
or before 30 days after the earlier to occur of (i) the giving of notice to
such party under Section 9.1 or 9.2 of the Plan and (ii) the entry of an
order by the Bankruptcy Court authorizing rejection of a particular
executory contract or lease.
4. CERTAIN INDEMNIFICATION OBLIGATIONS.
The obligations of the Debtor pursuant to, or under its,
certificate or articles of incorporation, bylaws, contract, applicable
state law or otherwise to indemnify its directors and officers for any
claims or causes of action arising out of acts or omissions that occurred
before August 1, 1998 shall be deemed to be, and shall be treated as though
they are, executory contracts that are rejected under the Plan. Any Claims
arising from such rejection shall be treated as Indemnity Claims under
Section 4.6 of the Plan.
G. CONDITIONS TO CONFIRMATION AND EFFECTIVE DATE.
---------------------------------------------
The Plan shall not become effective unless and until the following
conditions shall have been satisfied in full or waived in accordance with
the provisions specified below:
a. The Effective Date shall have occurred prior to August 6,
1999.
b. The Confirmation Order, in form and substance reasonably
acceptable to the Debtor, the Unofficial Noteholders' Committee and MLGAF
shall have been entered by the Clerk of the Bankruptcy Court and there
shall not be a stay or injunction in effect with respect thereto.
c. An order shall have been entered by the Bankruptcy Court
estimating the Bondholder Litigation Claims and the Stockholder Litigation
Claims at zero.
d. All Unsecured Claims shall have become Allowed Claims,
Disallowed Claims or estimated for distribution purposes under the Plan by
Final Order(s) or by operation of law and the aggregate amount of all such
Allowed Unsecured Claims and estimated Unsecured Claims, if any, shall not
exceed $10 million.
e. The New Warrant Agreement shall have been executed and
delivered.
f. The Debtor shall have received approval from the FCC of all
of the FCC Applications of Wireless (as defined in Section X.A.5.b.
hereof).
g. All other actions and all agreements, instruments or other
documents necessary to implement the terms and provisions of the Plan shall
have been effected.
Each of the conditions specified above may be waived, in whole or in
part, by the Debtor, with the prior written consent of an Unofficial
Noteholders' Committee Majority and MLGAF. Any such waivers of a condition
precedent may be effected at any time, without notice, without leave or
order of the Bankruptcy Court and without any formal action (other than by
the Debtor, an Unofficial Noteholders' Committee Majority and MLGAF).
H. EFFECT OF CONFIRMATION.
----------------------
1. VESTING OF ASSETS.
On the Effective Date, the Debtor, its properties and interests
in property and its operations shall be released from the custody and
jurisdiction of the Bankruptcy Court, and the estate of the Debtor shall
vest in Reorganized Wireless. From and after the Effective Date,
Reorganized Wireless may operate its business and may use, acquire and
dispose of property free of any restrictions of the Bankruptcy Code or the
Bankruptcy Rules, subject to the terms and conditions of the Plan.
2. BINDING EFFECT.
Except as otherwise provided in section 1141(d)(3) of the
Bankruptcy Code and subject to the occurrence of the Effective Date, on and
alter the Confirmation Date, the provisions of the Plan shall bind any
holder of a Claim against, or Equity Interest in, the Debtor and such
holder's respective successors and assigns, whether or not the Claim or
Equity Interest of such holder is impaired under the Plan and whether or
not such holder has accepted the Plan.
3. DISCHARGE OF DEBTOR.
Except to the extent otherwise provided in the Plan, the
treatment of all Claims against or Equity Interests in the Debtor under the
Plan shall be in exchange for and in complete satisfaction, discharge and
release of all Claims against or Equity Interests in the Debtor of any
nature whatsoever, known or unknown, including, without limitation, any
interest accrued or expenses incurred thereon from and after the Petition
Date, or against its estate or properties or interests in property. Except
as otherwise provided in the Plan, upon the Effective Date, all Claims
against and Equity Interests in the Debtor will be satisfied, discharged
and released in full exchange for the consideration provided under the
Plan. Except as otherwise provided in the Plan, all entities shall be
precluded from asserting against the Debtor or Reorganized Wireless or
their respective properties or interests in property, any other Claims
based upon any act or omission, transaction or other activity of any kind
or nature that occurred prior to the Effective Date.
4. TERM OF INJUNCTIONS OR STAYS.
Unless otherwise provided, all injunctions or stays arising under
or entered during the Chapter 11 Case under section 105 or 362 of the
Bankruptcy Code, or otherwise, and in existence on the Confirmation Date,
shall remain in full force and effect until the Effective Date.
5. INDEMNIFICATION OBLIGATIONS.
Subject to the occurrence of the Effective Date, the obligations
of the Debtor, only to the extent permitted under the laws of the State of
Delaware, to indemnify, defend or reimburse directors or officers who were
or are directors or officers of the Debtor on or after August 1, 1998,
respectively, against any claims or causes of action as provided in the
Debtor's certificate of incorporation, by-laws, applicable state law or
contract, insofar as any such claims or causes of action arise out of acts
or omissions occurring on or after August 1, 1998, shall survive
confirmation of the Plan, remain unaffected thereby and not be discharged.
6. RELEASES.
On the Effective Date, the Debtor, on behalf of itself and its
non-debtor subsidiaries, will release the present and former officers and
directors of the Debtor and its subsidiaries from any and all claims,
obligations, suits, judgments, damages, rights, causes of action and
liabilities whatsoever, whether known or unknown, foreseen or unforeseen,
existing or hereafter arising, in law, equity or otherwise, based in whole
or in part upon any action or omission, transaction, event or other
occurrence taking place on or prior to the Effective Date in any way
relating to such officers and directors, the Debtor, the Reorganization
Case or the Plan. The Debtor believes that no such causes of action or
liabilities exist against such officers and directors.
On the Effective Date, each holder of a Claim or Equity Interest
shall be deemed to release the present and former officers and directors of
the Debtor and its subsidiaries from any and all claims, obligations,
suits, judgments, damages, rights, causes of action and liabilities
whatsoever, whether know or unknown, foreseen or unforeseen, existing or
hereafter arising, in law, equity or otherwise, based in whole or in part
upon any action or omission, transaction, event or other occurrence taking
place on or prior to the Effective Date in any way relating to such
officers and directors, the Debtor, the Reorganization Case or the Plan.
I. WAIVER OF CERTAIN CLAIMS.
------------------------
Effective as of the Effective Date, the Debtor waives the right to
prosecute any avoidance or recovery actions under section 547 of the
Bankruptcy Code that belong to the Debtor or Debtor in Possession. The
Debtor is not aware of any avoidance actions the pursuit and recovery of
which would benefit its chapter 11 estate.
J. RETENTION OF JURISDICTION BY THE BANKRUPTCY COURT.
-------------------------------------------------
Under the terms of the Plan, the Bankruptcy Court will retain
jurisdiction in the following instances, notwithstanding entry of the
Confirmation Order or the occurrence of the effective Date. The Bankruptcy
Court will retain jurisdiction over the Chapter 11 Case for the purposes of
Sections 105(a) and 1142 of the Bankruptcy Code and for, among other
things, the following purposes: (i) to hear and determine pending
applications for the assumption or rejection of executory contracts or
unexpired leases and the allowance of Claims resulting therefrom; (ii) to
determine any and all adversary proceedings, applications and contested
matters, including, without limitation, under sections 544, 545, 548, 549,
550, 551 and 553 of the Bankruptcy Code.; (iii) to ensure that
distributions to holders of Allowed Claims and Allowed Equity Interests are
accomplished as provided therein; (iv) to hear and determine any timely
objections to Administrative Expense Claims or to proofs of claim and
equity interests, including, without limitation, any objections to the
classification of any Claim or Equity Interest, and to allow or disallow
any Disputed Claim or Disputed Equity Interest, in whole or in part; (v) to
enter and implement such orders as may be appropriate in the event the
Confirmation Order is for any reason stayed, revoked, modified or vacated;
(vi) to issue such orders in aid of execution of the Plan to the extent
authorized by section 1142 of the Bankruptcy Code; (vii) to consider any
amendments to or modifications of the Plan or to cure any defect or
omission, or reconcile any inconsistency, in any order of the Bankruptcy
Court, including, without limitation, the Confirmation Order; (viii) to
hear and determine all applications under sections 330, 331 and 503(b) of
the Bankruptcy Code for awards of compensation for services rendered and
reimbursement of expenses incurred prior to the Confirmation Date; (ix) to
hear and determine disputes arising in connection with the interpretation,
implementation or enforcement of th Plan, the Confirmation Order, any
transactions or payments contemplated thereby or any agreement, instrument
or other document governing or relating to any of the foregoing; (x) to
hear and determine matters concerning state, local and federal taxes in
accordance with sections 346, 505 and 1146 of the Bankruptcy Code; (xi) to
hear any other matter not inconsistent with the Bankruptcy Code; (xii) to
hear and determine all disputes involving the existence, scope and nature
of the discharges granted under the Plan; (xiii) to issue injunctions and
effect any other actions that may be necessary or desirable to restrain
interference by any entity with the consummation or implementation of the
Plan; and (xiv) to enter a final decree closing the Chapter 11 Case.
K. SUMMARY OF OTHER PROVISIONS OF THE PLAN.
---------------------------------------
The following paragraphs summarize certain other significant
provisions of the Plan. The Plan should be referred to for the complete
text of these and other provisions of the Plan.
1. PAYMENT OF STATUTORY FEES.
All fees payable under section 1930, title 28, United States
Code, as determined by the Bankruptcy Court at the Confirmation Hearing,
shall be paid on the Effective Date. Any such fees accrued after the
Effective Date will constitute an Allowed Administrative Expense Claim and
be treated in accordance with Section 2.1 of the Plan.
2. RETIREE BENEFITS.
Section 1129(a)(13) of the Bankruptcy Code requires a debtor to
continue to pay any retiree benefits (within the meaning of section 1114 of
the Bankruptcy Code), at the level established in accordance with section
1114 of the Bankruptcy Code, at any time prior to the Confirmation Date,
for the duration of the period for which the debtor has obligated itself to
provide any such benefits. The Debtor does not have any obligations for
any such retiree benefits.
3. ADMINISTRATIVE EXPENSES INCURRED AFTER THE CONFIRMATION DATE.
Administrative expenses incurred by the Debtor or Reorganized
Wireless after the Confirmation Date, including (without limitation) claims
for professionals' fees and expenses, shall not be subject to application
and may be paid by the Debtor or Reorganized Wireless, as the case may be,
in the ordinary course of business and without further Bankruptcy Court
approval; PROVIDED, HOWEVER, that no claims for professional fees and
expenses incurred after the Confirmation Date shall be paid until after the
occurrence of the Effective Date.
4. SECTION 1125(e) OF THE BANKRUPTCY CODE.
As of the Confirmation Date, the Debtor shall be deemed to have
solicited acceptances of the Plan in good faith and in compliance with the
applicable provisions of the Bankruptcy Code. The Debtor, MLGAF and each
of the members of the Unofficial Noteholders' Committee (and each of their
respective affiliates, agents, directors, officers, employees, investment
bankers, financial advisors, attorneys and other professionals) have, and
shall be deemed to have, participated in good faith and in compliance with
the applicable provisions of the Bankruptcy Code in the offer and issuance
of the securities under the Plan, and therefore are not, and on account of
such offer, issuance and solicitation will not be, liable at any time for
the violation of any applicable law, rule or regulation governing the
solicitation of acceptances or rejections of the Plan or the offer and
issuance of securities under the Plan.
5. COMPLIANCE WITH TAX REQUIREMENTS.
In connection with the consummation of the Plan, the Debtor shall
comply with all withholding and reporting requirements imposed by any
taxing authority, and all distributions thereunder shall be subject to such
withholding and reporting requirements.
6. SEVERABILITY OF PLAN PROVISIONS.
In the event that, prior to the Confirmation Date, any term or
provision of the Plan is held by the Bankruptcy Court to be invalid, void
or unenforceable, the Bankruptcy Court shall have the power to alter and
interpret such term or provision to make it valid or enforceable to the
maximum extent practicable, consistent with the original purpose of the
term or provision held to be invalid, void or unenforceable, and such term
or provision shall then be applicable as altered or interpreted.
Notwithstanding any such holding, alteration or interpretation, the
remainder of the terms and provisions of the Plan shall remain in full
force and effect and shall in no way be affected, impaired or invalidated
by such holding, alteration or interpretation. The Confirmation Order
shall constitute a judicial determination and shall provide that each term
and provision of the Plan, as it may have been altered or interpreted in
accordance with the foregoing, is valid and enforceable in accordance with
its terms. All actions taken under Section 14.6 of the Plan shall require
the consent of the Debtor and an Unofficial Noteholders' Committee Majority
and MLGAF.
7. GOVERNING LAW.
Except to the extent that the Bankruptcy Code or other federal
law is applicable, or to the extent an Exhibit thereto provides otherwise,
the rights, duties and obligations arising under the Plan shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Delaware without giving effect to the principles of conflict of laws
thereof.
VI. CONFIRMATION AND CONSUMMATION PROCEDURE
Under the Bankruptcy Code, the following steps must be taken to
confirm the Plan:
A. SOLICITATION OF VOTES.
---------------------
In accordance with sections 1126 and 1129 of the Bankruptcy Code, the
Claims in Classes 5 (Old Senior Notes), 6 (Indemnity Claims) and 7 (Old
Common Stock Interests) are impaired and the holders of Allowed Claims and
Allowed Equity Interests in each of such Classes are entitled to vote to
accept or reject the Plan. Claims in Classes 1 (Priority Non-Tax Claims),
2 (Secured Claims), 3 (BTA Installment Note Claims) and 4 (Unsecured
Claims) are unimpaired and the holders of Allowed Claims in each of such
Classes are conclusively presumed to have accepted the Plan and the
solicitation of acceptances with respect to such Class is not required
under section 1126(f) of the Bankruptcy Code. Furthermore, Equity
Interests in Class 8 (Other Equity Interests) will not retain property or
receive distributions under the Plan on account of such Equity Interests
and the holders of such Equity Interests are deemed to have rejected the
Plan under section 1126(g) of the Bankruptcy Code.
As to classes of claims entitled to vote on a plan, the Bankruptcy
Code defines acceptance of a plan by a class of creditors as acceptance by
holders of at least two-thirds in dollar amount and more than one-half in
number of the claims of that class that have timely voted to accept or
reject a plan. As to classes of equity interests entitled to vote on a
plan, the Bankruptcy Code defines acceptance of a plan by a class of equity
interests as acceptance by at least two-thirds of the allowed equity
interests that have timely voted to accept or reject a plan. A vote may be
disregarded if the Bankruptcy Court determines, after notice and a hearing,
that such acceptance or rejection was not solicited or procured in good
faith or in accordance with the provisions of the Bankruptcy Code.
B. THE CONFIRMATION HEARING.
------------------------
The Bankruptcy Code requires the Bankruptcy Court, after notice, to
hold a confirmation hearing. The Confirmation Hearing in respect of the
Plan has been scheduled for ____________ __, 1999 at __:__ _.m., Eastern
Time, before the Honorable Peter J. Walsh, United States Bankruptcy Judge,
at the United States Bankruptcy Court, 824 Market Street, Wilmington,
Delaware 19801. The Confirmation Hearing may be adjourned from time to
time by the Bankruptcy Court without further notice except for an
announcement of the adjourned date made at the Confirmation Hearing. Any
objection to confirmation must be made in writing and specify in detail the
name and address of the objector, all grounds for the objection and the
amount of the Claim or number of shares of stock of the Debtor held by the
objector. Any such objection must be filed with the Bankruptcy Court and
served so that it is received by the Bankruptcy Court and the following
parties on or before __________ __, 1999 at __:__ _.m., Eastern Time:
Wireless One, Inc.
2506 Lakeland Drive
Jackson, Mississippi 39208
Attn: Thomas Noulles, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022
Attn: Martin Flics, Esq.
Morris, Nichols, Arsht & Tunnell
1201 Market Street
P.O. Box 1347
Wilmington, Delaware 19899
Attn: William Sudell, Esq.
Objections to confirmation of the Plan are governed by Bankruptcy Rules
3015 and 9014.
C. CONFIRMATION.
------------
At the Confirmation Hearing, the Bankruptcy Court will confirm the
Plan only if all of the requirements of section 1129 of the Bankruptcy Code
are met. Among the requirements for confirmation of a plan are that the
plan is (i) accepted by all impaired classes of claims and equity interests
or, if rejected by an impaired class, that the plan "does not discriminate
unfairly" and is "fair and equitable" as to such class, (ii) feasible and
(iii) in the "best interests" of creditors and stockholders which are
impaired under the plan.
1. ACCEPTANCE.
Classes 5, 6 and 7 of the Plan are impaired under the Plan and
are entitled to vote to accept or reject the Plan. The Debtor reserves the
right to seek nonconsensual confirmation of the Plan with respect to any
Class of Claims or Equity Interests that is entitled to vote to accept or
reject the Plan if such Class rejects the Plan.
2. UNFAIR DISCRIMINATION AND FAIR AND EQUITABLE TESTS.
To obtain nonconsensual confirmation of the Plan, it must be
demonstrated to the Bankruptcy Court that the Plan "does not discriminate
unfairly" and is "fair and equitable" with respect to each impaired,
nonaccepting Class. The Bankruptcy Code provides a non-exclusive
definition of the phrase "fair and equitable." The Bankruptcy Code
establishes "cram down" tests for secured creditors, unsecured creditors
and equity holders, as follows:
a. SECURED CREDITORS.
-----------------
Either (i) each impaired secured creditor retains its liens
securing its secured claim and receives on account of its secured claim
deferred Cash payments having a present value equal to the amount of its
allowed secured claim, (ii) each impaired secured creditor realizes the
"indubitable equivalent" of its allowed secured claim or (iii) the property
securing the claim is sold free and clear of liens with such liens to
attach to the proceeds of the sale and the treatment of such liens on
proceeds is provided in clause (i) or (ii) of this subparagraph.
b. UNSECURED CREDITORS.
-------------------
Either (i) each impaired unsecured creditor receives or retains
under the Plan property of a value equal to the amount of its allowed claim
or (ii) the holders of claims and interests that are junior to the claims
of the dissenting class will not receive any property under the Plan.
c. EQUITY INTERESTS.
----------------
Either (i) each holder of an equity interest will receive or
retain under the Plan property of a value equal to the greatest of the
fixed liquidation preference to which such holder is entitled, the fixed
redemption price to which such holder is entitled or the value of the
interest or (ii) the holder of an interest that is junior to the
nonaccepting class will not receive or retain any property under the Plan.
The Debtor believes that the Plan and the treatment of all
Classes of Claims and Equity Interests under the Plan satisfy the foregoing
requirements for nonconsensual confirmation of the Plan.
3. FEASIBILITY.
a. FINANCIAL PROJECTIONS.
---------------------
The Bankruptcy Code requires that confirmation of a plan is not
likely to be followed by liquidation or the need for further financial
reorganization. For purposes of determining whether the Plan meets this
requirement, Wireless has analyzed its ability to meet its obligations
under the Plan. As part of this analysis, Wireless has prepared
projections of its financial performance for each of the three fiscal years
following the year of confirmation of the Plan (the "Projection Period").
These projections, and the assumptions on which they are based, are
included in the Projected Financial Information annexed hereto as Exhibit
D. Based upon such projections, the Debtor believes that it will be able
to make all payments required pursuant to the Plan and, therefore, that
confirmation of the Plan is not likely to be followed by liquidation or the
need for further reorganization.
The financial information and projections appended to the
Disclosure Statement include for six months ending December 31, 1999 and
each of the three years ending December 31, 2000 through 2002:
<circle> Pro Forma Balance Sheet of Reorganized Wireless as of
June 30, 1999;
<circle> Projected Balance Sheets of Reorganized Wireless for
each of the years December 31, 1999 through 2002;
<circle> Projected Income Statements of Reorganized Wireless for
the six months ending December 31, 1999 and for each of the years ending
December 31, 2000 through 2002; and
<circle> Projected Cash Flow Statements of Reorganized Wireless
for the six months ending December 31, 1999 and for each of the years
ending December 31, 2000 through 2002.
The pro forma financial information and the projections are based
on the assumption that the Plan will be confirmed by the Bankruptcy Court
and, for projection purposes, that the Effective Date under the Plan and
the initial distributions thereunder take place as of June 20, 1999.
Wireless has prepared these financial projections based upon
certain assumptions which it believes to be reasonable under the
circumstances. Those assumptions considered to be significant are
described in the Projected Financial Information, annexed hereto as Exhibit
D. The Financial Projections have not been examined or compiled by
independent accountants. Wireless makes no representation as to the
accuracy of the projections or its ability to achieve the projected
results. Many of the assumptions on which the projections are based are
subject to significant uncertainties. Inevitably, some assumptions will
not materialize and unanticipated events and circumstances may affect the
actual financial results. Therefore, the actual results achieved
throughout the Projection Period may vary from the projected results and
the variations may be material. See Section X.A.2., "Certain Risk Factors
to be Considered --Overall Risk to Recovery by Holders of Claims --
Projected Financial Information." All holders of Claims and Equity
Interests that are entitled to vote to accept or reject the Plan are urged
to examine carefully all of the assumptions on which the Financial
Projections are based in evaluating the Plan.
b. BUSINESS STRATEGY -- OVERVIEW.
-----------------------------
The long-term business strategy of Wireless is to maximize the
value of its broadband spectrum by the transmission of both video and data.
Currently, most Wireless revenues are derived from the sale of
subscription-based television programming to SFU and MDU customers.
Reorganized Wireless will continue to shift its sales and marketing focus
with regard to its subscription video products to emphasize sales to MDU
customers and promotion of the DIRECTV service and to de-emphasize its
traditional SFU wireless cable market. This change is motivated by the
lower operating costs and capital expenditures per subscriber associated
with MDUs and DIRECTV. Wireless currently has operating systems in place
for this business in 39 markets. Wireless does not presently plan to build
out any new markets for delivery of wireless video cable services (although
it may sell DIRECTV service in areas outside its currently serviced
markets). Wireless intends to launch its data service operations in an
additional 18 markets through 2002, 14 of which currently have video
operations. Wireless holds FCC licenses that cover an additional 28
markets that have not yet been launched. Wireless intends to evaluate
these markets to determine whether return on these assets can be maximized
either by using them to deliver data services or by a sale of some or all
of its license rights for these markets.
c. SUBSCRIPTION VIDEO.
------------------
SFU/MDU Wireless Cable Market. The business of Wireless involves
substantial capital expenditure in the construction and modification of
transmission equipment as well as the installation of reception equipment
for subscribers. Wireless has found that capital expenditures for
reception equipment are lower per subscriber for MDU installations.
DIRECTV. Wireless has entered into several long term cooperative
marketing agreements with DIRECTV, Inc., a digital satellite programming
provider, which allow Wireless to offer DIRECTV's digital satellite
television service to the subscribers of Wireless. Wireless is thus able
to offer its subscribers both its traditional wireless cable product and
enhanced packages that offer DIRECTV's digital satellite programming.
Terms of the DIRECTV Agreements include an activation commission structure,
a revenue sharing provision, and a marketing and equipment rebate
allowance. Based on these provisions, Wireless is able to build its
subscriber base at a significantly lower net capital expenditure outlay
than in its traditional SFU/MDU wireless business. In addition, Wireless
has found that the DIRECTV Agreement has resulted in certain operational
cost savings due to lower maintenance and manpower requirements associated
with the DIRECTV satellite and reception equipment.
d. WARPONE -- HIGH-SPEED DATA/INTERNET.
-----------------------------------
Wireless also uses its existing licenses and transmission
facilities to offer some markets high-speed two-way data transmission and
Internet access services that forgo the use of conventional telephone
lines. Wireless has developed and launched a product that delivers high-
speed data services and Internet access using its existing frequencies,
facilities and broadband spectrum licenses. Marketed under the name
"WarpOne," the product is capable of delivering data at speeds up to 10,000
Kbps. This far exceeds the capabilities of both conventional Internet
access products, which deliver data at up to 56 Kbps, and current high-
speed Internet access providers, which typically operate at 1,500 Kbps.
Wireless launched WarpOne on a retail basis in its Jackson,
Mississippi, Baton Rouge, Louisiana, and Memphis, Tennessee markets in
1998. Wireless initially offered WarpOne to small and medium sized
businesses that are not served by other high-speed data services. Wireless
believes that home offices, teleworkers of large corporations, educational
institutions and its traditional MDU wireless cable customers may also
represent significant markets for WarpOne. In late 1998, Wireless also
introduced a wholesale broadband wireless service that allows customers of
ISPs to utilize the two way high-speed Internet access of Wireless.
e. ADDITIONAL FINANCING.
---------------------
The business plan of Wireless assumes that Reorganized Wireless
will require one or more substantial investments to finance its projected
subscriber growth and the launch and development of its high-speed data
business after emergence from bankruptcy. Reorganized Wireless may finance
projected capital expenditures and operating expenses for system
development in whole or in part through debt or equity financing, secured
or unsecured credit facilities, joint ventures, sale of non-strategic
assets or other arrangements. There can be no assurance that Reorganized
Wireless will be able to access this additional capital in a timely manner
or on satisfactory terms and conditions.
4. BEST INTERESTS TEST.
With respect to each impaired Class of Claims and Equity
Interests, confirmation of the Plan requires that each holder of a Claim or
Equity Interest either (i) accept the Plan or (ii) receive or retain under
the Plan property of a value, as of the Effective Date, that is not less
than the value such holder would receive or retain if the Debtor was
liquidated under chapter 7 of the Bankruptcy Code. To determine what
holders of Claims and Equity Interests of each impaired Class would receive
if the Debtor was liquidated under chapter 7, the Bankruptcy Court must
determine the dollar amount that would be generated from the liquidation of
the Debtor's assets and properties in the context of a chapter 7
liquidation case. The Cash amount which would be available for
satisfaction of Unsecured Claims and Equity Interests would consist of the
proceeds resulting from the disposition of the unencumbered assets of the
Debtor, augmented by the unencumbered Cash held by the Debtor at the time
of the commencement of the liquidation case. Such Cash amount would be
reduced by the amount of the costs and expenses of the liquidation and by
such additional administrative and priority claims that may result from the
termination of the Debtor's business and the use of chapter 7 for the
purposes of liquidation.
The Debtor's costs of liquidation under chapter 7 would include
the fees payable to a trustee in bankruptcy, as well as those which might
be payable to attorneys and other professionals that such a trustee may
engage. In addition, claims would arise by reason of the breach or
rejection of obligations incurred and leases and executory contracts
assumed or entered into by the Debtor in Possession during the pendency of
the Chapter 11 Case. The foregoing types of claims and other claims which
may arise in a liquidation case or result from the pending Chapter 11 Case,
including any unpaid expenses incurred by the Debtor in Possession during
the Chapter 11 Case such as compensation for attorneys, financial advisors
and accountants, would be paid in full from the liquidation proceeds before
the balance of those proceeds would be made available to pay prepetition
Unsecured Claims.
To determine if the Plan is in the best interests of each
impaired class, the present value of the distributions from the proceeds of
the liquidation of the Debtor's unencumbered assets and properties, after
subtracting the amounts attributable to the foregoing Claims, are then
compared with the value of the property offered to such Classes of Claims
and Equity Interests under the Plan.
After considering the effects that a chapter 7 liquidation would
have on the ultimate proceeds available for distribution to creditors in a
Chapter 11 Case, including (i) the increased costs and expenses of a
liquidation under chapter 7 arising from fees payable to a trustee in
bankruptcy and professional advisors to such trustee, (ii) the erosion in
value of assets in a chapter 7 case in the context of the expeditious
liquidation required under chapter 7 and the "forced sale" atmosphere that
would prevail and (iii) the substantial increases in claims which would be
satisfied on a priority basis or on parity with creditors in the Chapter 11
Case, the Debtor has determined that confirmation of the Plan will provide
each holder of an Allowed Claim or Equity Interest with a recovery that is
not less than such holder would receive pursuant to liquidation of the
Debtor under chapter 7 liquidation.
The Debtor also believes that the value of any distributions to
each class of Allowed Claims in a chapter 7 case, including all Secured
Claims, would be less than the value of distributions under the Plan
because such distributions in a chapter 7 case would not occur for a
substantial period of time. It is likely that distribution of the proceeds
of the liquidation could be delayed after the completion of such
liquidation in order to resolve claims and prepare for distributions. In
the likely event litigation was necessary to resolve claims asserted in the
chapter 7 case, the delay could be prolonged.
The Debtor's Liquidation Analysis is attached hereto as Exhibit
E. The information set forth in Exhibit E provides a summary of the
liquidation values of the Debtor's assets assuming a chapter 7 liquidation
in which a trustee appointed by the Bankruptcy Court would liquidate the
assets of the Debtor's estate. Reference should be made to the Liquidation
Analysis for a complete discussion and presentation of the Liquidation
Analysis. The Liquidation Analysis was prepared by management of Wireless
with the assistance of its financial advisor.
Underlying the Liquidation Analysis are a number of estimates and
assumptions that, although developed and considered reasonable by
management, are inherently subject to significant economic and competitive
uncertainties and contingencies beyond the control of the Debtor and
management. The Liquidation Analysis is also based upon assumptions with
regard to liquidation decisions that are subject to change. Accordingly,
the values reflected may not be realized if the Debtor was, in fact, to
undergo such a liquidation. The Chapter 7 liquidation period is assumed to
be a period of at least six months allowing for the (i) discontinuation of
operations, (ii) selling of assets, and (iii) collection of receivables.
D. CONSUMMATION.
------------
The Plan will be consummated on the Effective Date. The Effective
Date of the Plan is the first Business Day following the date on which the
conditions precedent to the effectiveness of the Plan, as set forth in
Section 10.1 thereof are satisfied or waived. For a more detailed
discussion of the conditions precedent to the Plan and the impact of the
failure to meet such conditions, see Section V.G., "The Plan of
Reorganization -- Conditions to Confirmation and Effective Date."
The Plan is to be implemented pursuant to the provisions of the
Bankruptcy Code.
VII.
MANAGEMENT OF REORGANIZED DEBTOR
As of the Effective Date, the management, control and operation of
Reorganized Wireless will become the general responsibility of its Board of
Directors.
A. BOARD OF DIRECTORS AND MANAGEMENT.
---------------------------------
1. COMPOSITION OF THE BOARD OF DIRECTORS.
The initial Board of Directors of Reorganized Wireless will
consist of seven members (one of whom will be Henry Burkhalter) whose names
and affiliations will be disclosed at or prior to the Confirmation Hearing.
The members of such initial Board of Directors shall serve until the first
annual meeting of stockholders of Reorganized Wireless or their earlier
resignation or removal in accordance with the Restated Certificate
Incorporation or Restated By-laws, as the same may be amended from time to
time.
2. IDENTITY OF OFFICERS.
Each of the officers of the Debtor set forth below will continue
in his then current positions as officers of Reorganized Wireless:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Henry Burkhalter 51 President and Chief Executive
Officer
Ernest D. Yates 53 Executive Vice President and
Chief Operating Officer
Henry G. Schopfer 52 Executive Vice President, Chief
Financial Officer and Secretary
Thomas G. Noulles. 49 Senior Vice President and General
Counsel
</TABLE>
Henry Burkhalter became Chief Executive Officer of the Company
in May 1997. Mr. Burkhalter became a director of the Company in April 1996
and President of the Company and Vice Chairman of the Board upon
consummation of the Company's merger with TruVision Wireless, Inc.
("TruVision") in July 1996. Mr. Burkhalter stepped down as Vice Chairman of
the Board in connection with his appointment as Chief Executive Officer of
the Company in May 1997. Mr. Burkhalter had been Chairman of the Board of
Directors, President and Chief Executive Officer of TruVision since its
incorporation in April 1994. He has also served as the Chairman of Pacific
Coast Paging, Inc. since 1990. From 1974 through 1992, he served as
President of Burkhalter & Company, the largest local certified public
accounting and consulting firm in Mississippi. The firm's primary focus was
in the telecommunications industry. Mr. Burkhalter also serves as a
director of AmMex Commercial, Inc.
Ernest D. Yates joined Wireless on December 31, 1997, as
Executive Vice President and Chief Operating Officer. Mr. Yates'
entire career has been in the telecommunication industry, where he
has extensive experience in telecommunications technology in
traditional switching and networks, video, wireless, fiber optics and
advanced data networks and services. Mr. Yates most recently served
as Executive Vice President of Operations for Electric Lightwave, a
Competitive Local Exchange Carrier (CLEC) located in Vancouver,
Washington. Mr. Yates has held executive management positions with
Southwestern Bell Corporation, a Texas-based Regional Bell Operating
Company (RBOC), where he developed start up businesses and acquired
companies and negotiated strategic international telecommunications
business relationships.
Henry G. Schopfer, III became Executive Vice President and
Chief Financial Officer on December 9, 1996. He also serves as the
Secretary of the Debtor. From 1988 to 1996, Mr. Schopfer served as
an Executive Officer with Daniel Industries, Inc., a Houston, Texas-
based manufacturer of oil field related products, most recently as
Vice President and Chief Financial Officer. From 1982 to 1988, Mr.
Schopfer held accounting management positions with Cooper Industries,
Inc., a Houston, Texas-based Fortune 100 manufacturer. Prior
experience includes nine years with Big Six accounting firms in
Houston, Texas, and New Orleans, Louisiana. Mr. Schopfer has been a
certified public accountant since 1972.
Thomas G. Noulles joined Wireless on August 10, 1998, as
Senior Vice President and General Counsel. Mr. Noulles came to
Wireless from National Data Corporation ("NDC"), where he served as
Outside Corporate Counsel to NDC and Vice President, General Counsel
and Secretary to C.I.S. Technologies, Inc., a subsidiary of NDC. Mr.
Noulles also has twenty-two years of law firm experience in
transactions, mergers and acquisitions, structured transactions under
the United States securities laws and business negotiations.
B. COMPENSATION OF EXECUTIVE OFFICERS.
----------------------------------
1998 COMPENSATION. The following table sets forth the current
-----------------
annual salary for certain of the officers of Wireless:
<TABLE>
<CAPTION>
Name of Individual Capacities in which Served Salary
- ------------------------ -------------------------------------- -------------
<S> <C> <C>
Henry Burkhalter President and Chief Executive Officer $ 275,000
Ernest D. Yates Chief Operating Officer $ 200,000
Henry G. Schopfer Chief Financial Officer $ 130,000
Thomas G. Noulles General Counsel $ 139,000
</TABLE>
C. MANAGEMENT CONTRACTS.
--------------------
Henry Burkhalter, Ernest Yates, Henry Schopfer and Thomas
Noulles will each execute management contracts with Reorganized
Wireless. Mr. Burkhalter's contract will have a term of three years
and will provide for an annual salary of $300,000. Mr. Yates'
contract will have a term of two years and will provide for an annual
salary of $220,000. Mr. Schopfer's contract will have a term of two
years and will provide for an annual salary of $145,000. Mr.
Noulles' contract will have a term of two years and will provide for
an annual salary of $142,000. Each of the contracts will also
provide for the use of a company car or a car allowance, 1 year of
severance pay (1 1/2 years upon a change of control), annual
performance bonuses at the discretion of the Board of Directors of
Reorganized Wireless and standard employee benefits such as health
care.
D. STOCK OPTION PLAN.
-----------------
In connection with the Plan, Wireless or Reorganized Wireless
will adopt a Share Incentive Plan (the "Stock Option Plan"), that is
intended to provide incentives to attract, retain and motivate highly
competent persons as non-employee directors, officers and key
employees of, and consultants to, Reorganized Wireless by providing
such persons with options ("Incentive Options") to acquire shares of
New Common Stock of Reorganized Wireless. Additionally, the Stock
Option Plan is intended to assist in further aligning the interests
of the directors, officers, key employees and consultants of
Reorganized Wireless to those of its stockholders.
Under the Stock Option Plan, management of Reorganized Wireless
will be issued 5-year Incentive Options to purchase an aggregate of
1,110,000 shares of New Common Stock. Incentive Options to purchase
an aggregate of 444,000 shares of New Common Stock will have an
exercise price of $13.51 per share. These options will be awarded to
management on the Effective Date pursuant to an allocation formulated
by the Board of Directors of the Debtor and will vest one-third on
the Effective Date, one-third on the second anniversary of the
Effective Date and one-third on the third anniversary of the
Effective Date. Incentive Options to purchase the remaining shares
will have an exercise price and vesting schedule which will be
determined by the Board of Directors of Reorganized Wireless. If a
change of control occurs, the Incentive Options will vest immediately
upon such change of control.
E. OTHER COMPENSATION PLANS.
------------------------
On the Effective Date, retention and 1998 performance bonuses in
an aggregate amount of $400,000 will be paid to certain employees of
Reorganized Wireless on such date who do not have employment
agreements. This bonus pool will be allocated by the Board of
Directors of the Debtor or the compensation committee of the same,
either of which may delegate such authority to the Chief Executive
Officer of the Debtor.
In addition, on the Effective Date, bonuses in an aggregate
amount of $70,000 will be paid to certain senior officers of the
Debtor (other than Mr. Burkhalter) if each has an employment
agreement with Reorganized Wireless and remains employed thereby.
This bonus pool will be allocated by the Board of Directors of the
Debtor or the compensation committee of the same, either of which may
delegate such authority to the Chief Executive Officer of the Debtor.
F. POST-EFFECTIVE DATE SECURITY OWNERSHIP OF CERTAIN OWNERS.
--------------------------------------------------------
The following table sets forth those entities which, to the
knowledge of the Debtor based upon the analysis of the Debtor of the
holdings of Old Senior Notes and Old Common Stock will own
beneficially more than five percent of the New Common Stock as of the
Effective Date.{4} The estimates of ownership set forth below are
based upon the most current information available to the Debtor, some
of which may be up to eight months old. Thus, there can be no
assurance that these estimates remain accurate as of the date hereof.
<TABLE>
<CAPTION>
NAME OF OWNER Estimated Percentage of Ownership
---- -- ----- --------- ---------- -- ---------
<S> <C>
Merrill Lynch Global Allocation 20.6
Fund, Inc.
Merrill Lynch Corporate Bond 10.5
Fund, Inc.-High Income
Portfolio
Quaker Capital Management
Corporation 7.6
State Street Research High
Income Fund 7.4
</TABLE>
A number of parties may actively trade in claims during the
Chapter 11 Case. It is possible that certain of these parties may
beneficially acquire more than five percent of the New Common Stock
following distributions under the Plan. See Section X.A.11.,
"Certain Risk Factors To Be Considered -- Overall Risk To Recovery By
Holders of Claims -- Significant Holders."
VIII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS
TO THE NEW COMMON STOCK TO BE DISTRIBUTED UNDER THE PLAN
A. SECTION 1145 OF THE BANKRUPTCY CODE.
-----------------------------------
In reliance upon an exemption from the registration
requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and state securities and "blue sky" laws afforded
by section 1145 of the Bankruptcy Code, the New Common Stock
and/or New Warrants to be issued on the Effective Date to
holders of Allowed Claims in Class 5 and to holders of Allowed
Equity Interests in Class 7 pursuant to the Plan, will not
require registration under the 1933 Act or any state securities
or `blue sky" laws. Accordingly, shares of New Common Stock
issued to holders of Allowed Claims in such Classes pursuant to
the Plan may be resold by any holder without registration under
the 1933 Act or other Federal securities laws pursuant to the
exemption provided by section 4(1) of the 1933 Act, unless the
holder is an "underwriter" with respect to such securities, as
that term is defined in the Bankruptcy Code (a "Statutory
Underwriter"). In addition, such securities generally may be
resold by the recipients thereof without registration on the
state level pursuant to various exemptions provided by the
respective laws of the several states. However, recipients of
securities issued to holders of Allowed Claims and Allowed
Equity Interests under the Plan are advised to consult with
their own counsel as to the availability of any such exemption
from registration under Federal or state law in any given
instance and as to any applicable requirements or conditions to
the availability thereof.
Section 1145(b) of the Bankruptcy Code defines a Statutory
Underwriter for purposes of the 1933 Act as one who (i)
purchases a claim with a view to distribution of any security
to be received in exchange for the claim, (ii) offers to sell
securities issued under a plan for the holders of such
securities, (iii) offers to buy securities issued under a plan
from persons receiving such securities, if the offer to buy is
made with a view to distribution of such securities or (iv) is
a controlling person of the issuer of the securities, in this
case, Reorganized Wireless.
Entities deemed to be Statutory Underwriters may be able
to sell securities without registration pursuant to the
provisions of Rule 144 under the 1933 Act which, in effect,
permit the public sale of securities received pursuant to the
Plan by Statutory Underwriters subject to the availability of
public information concerning Reorganized Wireless, volume
limitations, holding periods and certain other conditions.
Entities who believe they may be Statutory Underwriters under
the definition contained in section 1145 of the Bankruptcy Code
are advised to consult their own counsel with respect to the
availability of the exemption provided by such Rule.
Pursuant to the Plan, certificates evidencing shares of
New Common Stock received by holders of New Common Stock who
may be deemed to be Statutory Underwriters will bear a legend
substantially in the form below:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR
SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED
OR QUALIFIED UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR UNLESS WIRELESS RECEIVES AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT
THAT SUCH REGISTRATION OR QUALIFICATION IS NOT
REQUIRED.
B. REGISTRATION RIGHTS.
-------------------
Reorganized Wireless will grant registration rights to
holders of New Common Stock who may be deemed to be Statutory
Underwriters. Reorganized Wireless will enter into a
registration rights agreement with such holders containing
customary registration rights provisions.
IX. REORGANIZATION VALUES
A. INTRODUCTION.
------------
In conjunction with formulating the Plan, the Debtor
determined that it was necessary to estimate post-confirmation
going concern enterprise value for Reorganized Wireless. Prior
to the Petition Date, the Debtor engaged BT Alex. Brown to
prepare such a valuation. This valuation is based on a number
of assumptions, including a successful reorganization of the
Debtor's business and finances in a timely manner, the
achievement of the forecasts reflected in the financial
projections, the availability of certain tax attributes, the
continuation of current market conditions through the Effective
Date, and the Plan becoming effective in accordance with its
terms.
Estimates of value do not purport to be appraisals or
necessarily reflect the values which may be realized if assets
are sold. The estimates of value represent hypothetical
reorganization values of Reorganized Wireless as the continuing
owner and operator of its business and assets. Such estimates
reflect computations of the estimated reorganization value of
Reorganized Wireless through the application of various
valuation techniques and do not purport to reflect or
constitute appraisals liquidation values or estimates of the
actual market value that may be realized through the sale of
any securities to be issued pursuant to the Plan, which may be
significantly different than the amounts set forth herein. The
value of an operating business such as the business of Wireless
is subject to uncertainties and contingencies which are
difficult to predict and will fluctuate with changes in factors
affecting the financial conditions and prospects of such a
business.
AS A RESULT, THE ESTIMATE OF THE RANGE OF REORGANIZATION
VALUES SET FORTH HEREIN IS NOT NECESSARILY INDICATIVE OF ACTUAL
OUTCOMES, WHICH MAY BE SIGNIFICANTLY MORE OR LESS FAVORABLE
THAN THOSE SET FORTH THEREIN. BECAUSE SUCH ESTIMATE IS
INHERENTLY SUBJECT TO UNCERTAINTIES, NEITHER WIRELESS, BT ALEX.
BROWN NOR ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR ITS
ACCURACY. IN ADDITION, BT ALEX. BROWN DID NOT INDEPENDENTLY
VERIFY THE DEBTOR'S PROJECTIONS IN CONNECTION WITH THE
VALUATION AND NO INDEPENDENT EVALUATIONS OR APPRAISALS OF THE
DEBTOR'S ASSETS WERE SOUGHT OR OBTAINED THEREWITH. THE
VALUATION OF NEWLY-ISSUED SECURITIES SUCH AS THE NEW COMMON
STOCK IS SUBJECT TO ADDITIONAL UNCERTAINTIES AND CONTINGENCIES,
ALL OF WHICH ARE DIFFICULT TO PREDICT.
Actual market prices of such securities at issuance will
depend upon, among other things, prevailing interest rates,
conditions in the financial markets, the anticipated initial
securities holdings of prepetition creditors, some of which may
prefer to liquidate their investment rather than hold it on a
long-term basis, and other factors which generally influence
the prices of securities. It should be noted that there is
presently no trading market for the New Common Stock and there
can be no assurance that such a trading market will develop.
In preparing a range of the estimated reorganization value
of Reorganized Wireless, BT Alex. Brown (i) reviewed certain
historical financial information of Wireless for recent years
and interim periods, (ii) reviewed certain internal financial
and operating data of Wireless including financial projections
provided by management relating to its business and prospects,
(iii) met with certain members of senior management of Wireless
to discuss operations and future prospects, (iv) reviewed
publicly available financial data and considered the market
values of public companies deemed generally comparable to the
operating business of Wireless, (v) considered estimated total
number of households, estimated line-of-sight households,
video, digital and data subscribers, spectrum, operating and
future development markets, (vi) considered certain economic
and industry information relevant to the operating business and
(vii) conducted such other analyses as BT Alex. Brown deemed
appropriate. Although BT Alex. Brown conducted a review and
analysis of the business, operating assets and liabilities and
business plans of Wireless, BT Alex. Brown assumed and relied
on the accuracy and completeness of all (i) financial and other
information furnished to it by Wireless and by other firms
retained by Wireless and (ii) publicly available information.
B. METHODOLOGY
-----------
In preparing its valuation, BT Alex. Brown performed a
variety of analyses and considered a variety of factors. The
following summary of the analyses and factors does not purport
to be a complete description of the analyses and factors
considered.
In determining the indicated enterprise value range of
Wireless, BT Alex. Brown placed various weights on each of the
analyses and factors and made judgments as to the significance
and relevance of each analysis and factor. BT Alex. Brown did
not consider any one analysis or factor to the exclusion of any
other analysis or factor. Accordingly, BT Alex. Brown believes
that its valuations must be considered as a whole and that
selecting portions of its analyses, without considering all
such analyses would create a misleading or incomplete view of
the processes underlying the preparation of its findings and
conclusions. In its analyses, BT Alex. Brown made numerous
assumptions with respect to Wireless, industry performance,
general business, regulatory, economic, market and financial
conditions and other matters, many of which are beyond the
control of Wireless. In addition, analyses relating to the
value of the business or securities do not purport to be
appraisals or to reflect the prices at which such business or
securities will trade.
BT Alex. Brown has employed several generally accepted
valuation techniques in estimating the enterprise value of
Wireless. The total enterprise value consists of both the debt
and equity of Wireless. The methodologies on which BT Alex.
Brown primarily relied are: comparable public company analysis
, discounted cash flow analysis and comparable mergers and
acquisitions analysis.
1. COMPARABLE PUBLIC COMPANY ANALYSIS
In a comparable public company analysis, a subject
company is valued by comparing it with publicly-held companies
in reasonably similar lines of business. The subject company,
together with the comparable companies, may be viewed as
alternative investments available to the prudent investor. The
price that a prudent investor is willing to pay for each
company's publicly-traded securities is related to the
perceived future benefits of ownership and the required rate of
return on the investment. The price also reflects an implied
market value of the total company (the enterprise value). The
comparable public companies are chosen based on, among other
attributes, their similarity to the subject company's size,
profitability, market presence, geographical concentration and
leverage.
After analyzing Wireless, a selected list of
comparable companies was compiled from various sources,
including discussions with management. In this analysis, the
following comparable companies were chosen: American
Telecasting Inc., CAI Wireless Systems, Inc., CS Wireless
Systems, Inc., Heartland Wireless Communications, Inc. and
People's Choice TV Corp. Publicly-held corporations differ in
terms of markets, size, financial structure, organization and
corporate strategies; however, these companies were deemed to
be the most comparable to Wireless.
The analytical work performed included, among other
things, a detailed multi-year financial comparison of each
company's income statement, balance sheet and cash flow
statement. Each company's performance, profitability, market
presence, leverage and business strategy were examined. Based
on certain analyses, numerous financial multiples and ratios
were developed to measure each company's valuation and relative
performance. One specific analysis entailed comparing the
enterprise value (defined as market value of equity plus debt
minus excess Cash) for each of the comparable public companies
to its gross line of sight households.
2. DISCOUNTED CASH FLOW ("DCF") ANALYSIS
The second common valuation methodology which was used to
determine the enterprise value of Wireless was the discounted
cash flow. The discounted cash flow represents the present
value of unlevered, after-tax cash flows to all providers of
capital using an appropriate discount rate. The DCF approach
takes into account the projected operating strategy of Wireless
by using company projections as the basis for the financial
model. In essence, the DCF method entails estimating the free
cash flow available to debt and equity investors (i.e. the
annual cash flows generated by the business) and a terminal
value of the business at the end of a time horizon and
discounting these flows back to the present using a discount
rate to arrive at the present value of these flows. The
terminal value is determined by assuming the sale of the
business at the end of the time horizon.
The projections of Wireless, as shown in this Disclosure
Statement, reflect significant assumptions made by the
management of Wireless concerning anticipated results. The
assumptions and judgments used in the projections may or may
not prove correct, and there can be no assurance that projected
results are attainable or will be realized. Actual future
results may vary significantly from the forecasts. BT Alex.
Brown cannot and does not make any representations or
warranties as to the accuracy or completeness of the
projections of Wireless.
3. COMPARABLE MERGERS AND ACQUISITIONS ANALYSIS
The comparable mergers and acquisitions analysis was
the third valuation methodology used to determine an enterprise
value for Wireless. This approach entails calculating
multiples based upon the purchase price (including any debt
assumed and equity purchased) of mergers and acquisitions
activity of similar companies to Wireless. These multiples are
then applied to the subject company to determine the implied
enterprise value. Unlike the comparable public company
analysis, the valuation in this methodology includes a
"control" premium, which represents the purchase of the
majority of a company's assets. As a result, this approach
generally produces higher valuations than the comparable public
company methodology.
For purposes of estimating the enterprise value of
Reorganized Wireless, BT Alex. Brown used the transaction
values of a selected group of transactions. As with the
comparable public company analysis, since no acquisition used
in any analysis is identical to a target transaction, valuation
conclusions cannot be based solely upon quantitative results.
The reasons for and circumstances surrounding each acquisition
transaction are specific to such transaction and there are
inherent differences between the businesses, operations and
prospects of each. Therefore, qualitative judgments must be
made concerning the differences between the characteristics of
these transactions and other factors and issues which could
affect the price an acquirer is willing to pay in an
acquisition.
Utilizing publicly available information, BT Alex.
Brown evaluated a series of transactions involving companies in
the wireless cable industry. The transactions considered
included eight transactions between 1996 and 1998: BellSouth's
acquisition of systems in New Orleans, Atlanta and other
Georgia markets and Miami and other Florida markets, People's
Choice TV Corp.'s acquisition of a system in Salt Lake City and
other Utah Markets, CS Wireless Systems, Inc.'s acquisition of
a system in Kansas City and Prime One's acquisition of a system
in Los Angeles. As in the comparable public companies
analysis, total enterprise value to gross line-of-sight
households is the preferred valuation statistic.
C. VALUATION OF REORGANIZED WIRELESS.
---------------------------------
Based upon its analyses, the assumptions made, matters
considered and limits of review as set forth above, BT Alex.
Brown has concluded that an appropriate estimate for the post-
confirmation going concern enterprise value of Reorganized
Wireless would be approximately $160 million.
THE VALUATIONS REPRESENT THE DEBTOR'S ESTIMATED
REORGANIZATION VALUES AND DO NOT NECESSARILY REFLECT VALUES
THAT COULD BE ATTAINABLE IN PUBLIC OR PRIVATE MARKETS. THE
EQUITY VALUE ASCRIBED IN THE ANALYSIS DOES NOT PURPORT TO BE AN
ESTIMATE OF THE POST-REORGANIZATION MARKET TRADING VALUE. SUCH
TRADING VALUE, IF ANY, MAY BE MATERIALLY DIFFERENT FROM THE
REORGANIZATION EQUITY VALUE RANGES ASSOCIATED WITH THE
VALUATION ANALYSIS.
X. CERTAIN RISK FACTORS TO BE CONSIDERED
HOLDERS OF CLAIMS AGAINST THE DEBTOR SHOULD READ AND
CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS THE
OTHER INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT (AND
THE DOCUMENTS DELIVERED TOGETHER HEREWITH AND/OR INCORPORATED
BY REFERENCE), PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN.
THESE RISK FACTORS SHOULD NOT, HOWEVER, BE REGARDED AS
CONSTITUTING THE ONLY RISKS INVOLVED IN CONNECTION WITH THE
PLAN AND ITS IMPLEMENTATION.
A. OVERALL RISK TO RECOVERY BY HOLDERS OF CLAIMS.
---------------------------------------------
The ultimate recoveries under the Plan to holders of
Claims (other than those holders who are paid in Cash under the
Plan) depend upon the realizable value of the New Common Stock.
The securities to be issued pursuant to the Plan are subject to
a number of material risks, including, but not limited to,
those specified below. The factors specified below assume that
the Plan is approved by the Bankruptcy Court and that the
Effective Date occurs on or about July 1, 1999. Prior to
voting on the Plan, each holder of a Claim should carefully
consider the risk factors specified or referred to below,
including the Exhibits annexed hereto, as well as all of the
information contained in the Plan.
1. DEPENDENCE ON FUTURE ASSET SALES AND/OR ADDITIONAL
FINANCING.
The Plan assumes that, in order to repay the
Postpetition Financing and successfully emerge from bankruptcy,
the Debtor will require additional cash that will be obtained
through asset sales or additional financing. Although the
Debtor is actively pursuing certain asset sales and financing
transactions (see Section IV.F., "Events During the Chapter 11
Case - Planned Asset Dispositions"), the Debtor has no
agreements providing for such sales or financing. Any such
sales or financings must be on terms reasonably acceptable to
the Unofficial Noteholders' Committee and MLGAF to the extent
required by the terms of the Postpetition Financing and would
be subject to Bankruptcy Court approval. There can be no
assurance that the Debtor will be able to find additional
financing or dispose of its assets at a fair price or raise
sufficient funds through such asset dispositions to permit it
to pay off the Postpetition Financing and to fund ongoing
working capital requirements upon emerging from bankruptcy.
In addition to the repayment of the Postpetition
Financing and funding Wireless' current working capital
requirements, the Debtor's business plan on which the Projected
Financial Information is based assumes that, after emergence
from bankruptcy, Reorganized Wireless will require one or more
substantial investments to finance projected capital
expenditures and operating expenses for system development.
These activities may be financed in whole or in part by
Reorganized Wireless through debt or equity financing, secured
or unsecured credit facilities, joint ventures, or other
arrangements. There are no assurances, however, that the
financing necessary to fund the Business Plan will be available
on satisfactory terms and conditions, if at all. Additional
debt could result in a substantial portion of the cash flow of
Reorganized Wireless from operations being dedicated to the
payment of principal and interest on such indebtedness and may
render Reorganized Wireless more vulnerable to competitive
pressures and economic downturns. The failure to obtain
additional financing could adversely affect the growth of
Reorganized Wireless and its ability to compete successfully in
the subscription television and telecommunications services
industries.
2. PROJECTED FINANCIAL INFORMATION.
The Projected Financial Information included in this
Disclosure Statement is dependent upon the successful
implementation of the Business Plan and the validity of the
other assumptions contained therein. The Projected Financial
Information reflects numerous assumptions, including
confirmation and consummation of the Plan in accordance with
its terms, certain assumptions with respect to competitors of
the general business of Wireless and economic conditions and
other matters, many of which are beyond the control of
Wireless, including certain matters which are the subject of
risk factors described below. In addition, unanticipated
events and circumstances occurring subsequent to the
preparation of the Projected Financial Information may affect
the actual financial results of Wireless. Although Wireless
believes that the projected results included in the Projected
Financial Information are reasonably attainable, some or all of
the estimates will vary and variations between the actual
financial results and those projected may be material.
THE PROJECTED FINANCIAL INFORMATION WAS NOT PREPARED
WITH A VIEW TOWARD COMPLIANCE WITH THE GUIDELINES ESTABLISHED
BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
("AICPA") OR THE FINANCIAL ACCOUNTING STANDARDS BOARD ("FASB").
FURTHERMORE, THE PROJECTED FINANCIAL INFORMATION HAS NOT BEEN
AUDITED OR REVIEWED BY THE INDEPENDENT ACCOUNTANTS OF WIRELESS.
WHILE PRESENTED WITH NUMERICAL SPECIFICITY, THE PROJECTIONS ARE
BASED UPON A VARIETY OF ESTIMATES AND ASSUMPTIONS, WHICH,
ALTHOUGH DEVELOPED AND CONSIDERED REASONABLE BY MANAGEMENT, MAY
NOT BE REALIZED AND ARE SUBJECT TO SIGNIFICANT BUSINESS,
ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY
OF WHICH ARE BEYOND THE CONTROL OF REORGANIZED WIRELESS AND ITS
MANAGEMENT. CONSEQUENTLY, THE PROJECTED FINANCIAL INFORMATION
SHOULD NOT BE REGARDED AS A REPRESENTATION OR WARRANTY BY
WIRELESS, OR ANY OTHER PERSON, AS TO THE ACCURACY OF THE
PROJECTIONS OR THAT THE PROJECTIONS WILL BE REALIZED. ACTUAL
RESULTS MAY VARY MATERIALLY FROM THOSE PRESENTED IN THE
PROJECTED FINANCIAL INFORMATION.
3. DEPENDENCE OF INTERNET PRODUCT ON HARDWARE SUPPLIER.
The Debtor's business plan, which is the basis for
the Projected Financial Information, assumes substantial growth
and development of "WarpOne", the high-speed, two-way wireless
Internet/high-speed data access product of the Debtor. The
current supplier of the modems used by the Debtor's WarpOne
customers has notified its customers, including the Debtor,
that, due to excess demand and cash flow difficulties of the
supplier, the modems have been "placed on allocation" and would
be shipped only for cash or an irrevocable letter of credit.
The Debtor has made arrangements with the supplier for the
shipment of sufficient modems to meet the Debtor's projected
needs through August 1999. The Debtor intends to work with the
supplier or to pursue other ways to resolve long-term supply
needs and believes that comparable alternative modems are
available or will be available in the near-term. No assurance
can be made, however, that the supplier will be able to
continue meeting the Debtor's demand for modems or provide
technical support for the modems already purchased by the
Debtor, that the Debtor will be able to meet the terms of the
supplier, or that the Debtor will be able to find comparable
alternative suppliers. The inability of the Debtor to maintain
an adequate supply of these modems could have a material
adverse effect on the Debtor's business and results of
operations.
4. COMPETITION.
a. SUBSCRIPTION TELEVISION INDUSTRY.
--------------------------------
The subscription television industry is highly
competitive. The Debtor's wireless cable and DIRECTV products
face or may face competition from several sources, such as
traditional hard-wire cable systems, other direct broadcast
satellite ("DBS") systems, satellite master antenna television
("SMATV") systems and other alternative methods of distributing
and receiving video programming. Furthermore, premium movie
services offered by DBS providers and cable television systems
have encountered significant competition from the home video
cassette recorder ("VCR") industry. In areas where several
local off-air VHF/UHF broadcast channels can be received
without the benefit of subscription television, hard-wire and
wireless cable systems also have experienced competition from
the availability of broadcast signals generally and have found
market penetration to be more difficult. Legislative,
regulatory and technological developments may result in
additional and significant competition, including competition
from proposed new wireless services such as local multipoint
distribution service ("LMDS") in the 28 GHz band and wireless
communications service in the 2.3 GHz band. Pursuant to
legislation enacted in 1996, Local Exchange Carriers ("LECs")
to provide video service in their telephone service areas.
Under existing FCC rules, LECs may provide "video dialtone"
service, thereby allowing LECs to make available to multiple
service providers, on a nondiscriminatory common carrier basis,
a basic platform that will permit end users to access video
program services provided by others. Many actual and potential
competitors have greater financial, marketing and other
resources than the Debtor. There can be no assurance that the
Debtor will be able to compete successfully with existing
competitors or new entrants in the market for subscription
television services.
b. HIGH-SPEED DATA/INTERNET COMPETITION.
------------------------------------
In the Internet access/high-speed data market for
business and/or MDU customers, Wireless experiences competition
from numerous types of service providers, including traditional
ISPs, inter-exchange carriers, local telephone companies and
hard-wire cable television companies.
The competition for Internet access and high-speed
data transmission services to small to mid-size businesses
generally falls into three categories: national, regional and
local competitors. National competitors include inter-exchange
carriers such as AT&T, MCI and Sprint, and national ISPs such
as America On Line, Digex, PSINet and UUNet. The services
offered by national competitors generally range from dial-up-
14.4 Kbps to a dedicated DS-3 (45 mbps) connection. Some
competitors have added Asynchronous Digital Subscriber Lines
("ADSL") to their service offering. ADSL can achieve higher
data speeds (1.5 mbps to 8.4 mbps) than previously possible
over the existing copper wire infrastructure found in most
local telephone lines. Regional competitors include RBOCs and
regional ISPs that generally offer services that range from
dial-up-14.4 Kbps to dedicated T-I (1.5 mbps) connections.
Local competitors include local exchange carriers, multi-system
hard-wire cable operators and local ISPs. The services offered
by local competitors generally range from dial-up 14.4 Kbps to
a dedicated T-I connection. Local providers generally
aggregate or over-subscribe local traffic onto access lines
which are connected to a regional or national provider.
Accordingly, these local providers typically target consumers,
as opposed to businesses.
Wireless also faces intense competition from other
providers of data transmission services, and will face
competition if it implements telephony transmission services on
a commercial basis. Because MMDS spectrum has not
traditionally been utilized to deliver such alternative
services, consumer acceptance of such services delivered via
MMDS technology is unknown at this time. Many of the existing
providers of data transmission and telephony services, such as
long distance and regional telephone companies, have long-
standing relationships with their customers, have significantly
greater financial and other resources than Wireless and have
the ability to subsidize competitive services with revenues
from a variety of other services. Accordingly, there can be no
assurance that Wireless will be able to compete successfully
against other providers of such services, or that Wireless will
be able to achieve profitability from such services in future
years.
5. GOVERNMENT REGULATION.
a. GENERAL.
-------
The wireless cable industry is extensively regulated
by the FCC. The FCC regulates, among other things, the
issuance, assignment and modification of licenses necessary for
the Debtor to operate wireless cable systems and its WarpOne
product, certain commercial terms of the Debtor's ITFS capacity
lease agreements, the technical parameters of the Debtor's
WarpOne product and the time afforded license holders to
construct their facilities. The FCC imposes fees for certain
applications and licenses and has the authority, in certain
circumstances, to revoke and cancel licenses and impose
monetary fines for violations of its rules. In addition, FCC
licenses must be renewed every ten years and, while such
renewals generally have been granted on a routine basis in the
past, there is no assurance that licenses will continue to be
renewed routinely in the future. The failure of the Debtor's
channel lessors to renew their respective licenses or of the
FCC to grant such extensions could have a material adverse
effect on the Debtor.
No assurance can be given that new regulations will
not be imposed or that existing regulations will not be changed
in a manner that could have a material adverse effect on the
wireless cable industry as a whole and on the Debtor in
particular. In addition, wireless cable operators and channel
license holders are subject to regulation by the Federal
Aviation Administration ("FAA") with respect to the
construction, marking and lighting of transmission towers and
to certain local zoning regulations affecting the construction
of towers and other facilities. There also may be restrictions
imposed by local authorities, neighborhood associations and
other similar organizations limiting the use of certain types
of reception equipment used by the Debtor. Future changes in
the foregoing regulations or any other regulations applicable
to the Debtor could have a material adverse effect on the
Debtor's results of operations and financial condition.
b. FCC APPROVAL; TRANSFER OF CONTROL APPLICATIONS.
----------------------------------------------
The FCC is required to grant prior approval of any
assignment or transfer of control involving an entity that
holds an FCC license. As a result of the reorganization
described herein, the Debtor will be required to obtain FCC
approval of the transfer of control of the BTA authorizations
and channel licenses held directly or indirectly by Wireless to
the holders of the New Common Stock.
Debtor has filed or shortly will file the
applications for the FCC's consent to such transfer of control
(the "FCC Applications"). Once the FCC Applications have been
accepted for filing by the FCC and notice of the proposed
transfer has been published in the FCC's public notices, there
is a 30-day period, during which time interested parties may
file comments on or petitions to deny the FCC Applications.
During the approval process, the FCC will examine the FCC
Applications to determine, among other things, whether the
prospective owners of five percent (5%) or more of the voting
securities of Reorganized Wireless are qualified to hold an
attributable interest in, or control, the authorizations at
issue. During this process, the FCC will place particular
emphasis on determining the existence of any issues relating to
alien ownership and cable cross-ownership by any person or
entity holding an attributable interest. Generally, transfer
of control applications are granted within two to three months
of filing. Because of the inherent uncertainties in the
application process (e.g. a challenge to the FCC Applications
and composition of ownership of voting securities), there can
be no assurance that the FCC Applications will be granted
within two to three months of their filing or at all.
c. BTA AUTHORIZATIONS; REPAYMENT OF BIDDING CREDIT
AND BTA NOTES.
------------------------------------------------
The Debtor and its subsidiaries acquired, or have
obligations to acquire, authorizations for 70 BTAs in the FCC's
auction that concluded in March 1996 at a cost of approximately
$37.2 million, including the Bidding Credit discussed below.{5}
See Section III.A.3., "General Information--Description and
History of Business - Significant Indebtedness." In the
auction, the Debtor qualified as a "designated entity" because
it was a "small business" under the FCC's regulations. As a
designated entity, the Debtor was entitled to (a) receive a
bidding credit ("Bidding Credit") of 15% of the total cost of
the BTAs, and (b) finance the payment for the BTAs under 10-
year installment promissory notes with 8.6% to 9.5% annual
interest rates (the "BTA Notes"). The total Bidding Credit
was approximately $5.6 million. In the event that Reorganized
Wireless ceases to qualify as a small business, the FCC may
require that one or more subsidiaries of Reorganized Wireless
(a) reimburse the FCC for up to 75% of the Bidding Credit plus
interest, and (b) make full payment of all unpaid principal and
interest accrued under the BTA Notes as of the date of the
transfer of control.
Applicable FCC regulations define a small business as
an entity that together with its affiliates has average annual
gross revenues that are not more than $40 million for the
preceding three calendar years, excluding increases in gross
revenues that result from operations, business development and
expanded service. Pursuant to the regulations, an entity would
be considered an "affiliate" of Reorganized Wireless if it (a)
directly or indirectly controls or has the power to control
Reorganized Wireless, (b) is directly or indirectly controlled
by Reorganized Wireless, (c) is directly or indirectly
controlled by a third party or parties that also controls or
has the power to control Reorganized Wireless, or (d) has an
identity of interest with Reorganized Wireless that is
sufficient to constitute affirmative or negative control. In
determining the issue of control, the FCC will examine, among
other things, the ownership of voting stock and other
securities (50% of voting securities is deemed to constitute
control), occupancy of director, officer or key employee
positions, contractual relationships such as voting trusts or
voting agreements and the identity of interests between and
among persons, such as members of the same family and persons
with common investments. If an entity is deemed to be an
"affiliate" of Reorganized Wireless, the average annual gross
revenues of such entity will be aggregated with those of
Wireless in determining whether the $40 million threshold is
exceeded.
Wireless currently expects that ownership of the New
Common Stock will be dispersed among a sufficient number of
separate and independent entities to prevent any one or more
entities from being deemed to "control" Reorganized Wireless
under FCC regulations. Additionally, although the Plan
contemplates that the initial Board of Directors of Reorganized
Wireless will be subject to the approval of the Unofficial
Noteholders' Committee and MLGAF, such persons are expected to
be unaffiliated with one another, subsequent members of the
Board of Directors will be elected by all stockholders at
annual meetings and day to day operations of the business will
be run by the existing management of the Debtor. Accordingly,
the Debtor does not believe that it will be required to
aggregate the revenues of any purported "affiliate." However,
the Debtor is unable to predict with absolute certainty the
composition of the ownership of the New Common Stock at the
time of filing the FCC Applications or thereafter and
accordingly, there can be no assurance that one or more
subsidiaries of Reorganized Wireless will not be required to
refund a significant amount of its Bidding Credit and pay in
full the BTA Notes.
d. INTERFERENCE ISSUES.
-------------------
In each market in which the Debtor provides wireless
cable service and/or Internet access and high-speed data
transmission services the Debtor uses some or all of the 33 MDS
channels and ITFS channels that are licensed for that market by
the FCC. Under current FCC regulations, a wireless cable
operator may install receive-site equipment and serve any point
where its signal can be received. Interference from other
wireless cable systems can limit the ability of a wireless
cable system to serve any particular point. In licensing ITFS
and MDS stations, a primary concern of the FCC is avoiding
situations where proposed station signals are predicted to
cause interference to the reception of previously licensed
station signals. The Debtor's business plan involves moving
the authorized transmitter sites of various of its MDS and ITFS
licensed stations and obtaining the grant of licenses for new
stations that the Debtor will use in order to optimize the
coverage of its broadcast signal. The FCC's interference
protection standards may make one or more of these proposed
relocations or new grants unavailable, in which event it may be
necessary to negotiate interference agreements with the
licensees of the stations which would otherwise block such
relocations or grants. There can be no assurance that the
Debtor will be able to obtain necessary interference agreements
with terms acceptable to the Debtor, in which event the Debtor
may have to curtail or modify operations in one or more of its
markets, which could have a material adverse effect on the
Debtor.
6. DEPENDENCE ON CHANNEL LEASES; NEED FOR LICENSE
EXTENSIONS; LOSS OF LICENSES BY LESSORS.
The Debtor is dependent on leases with unaffiliated
third parties for a substantial portion of its wireless cable
channel rights. The Debtor's channel leases typically cover
four ITFS channels and/or one to four MDS channels each. The
remaining initial terms of most of the Debtor's channel leases
are approximately five to ten years. However, in the event an
ITFS or MDS license is not renewed or is otherwise terminated
prior to the end of the lease term, the authorization will no
longer be valid, and the Debtor will have no rights under its
lease to transmit on channels that are subject to such
nonrenewed or terminated license. Existing ITFS licenses have
varying expiration dates depending on the date of initial grant
of such licenses by the FCC and will expire at the end of the
current license term unless renewed. MDS licenses generally
will expire on May 1, 2001 unless renewed.
The Debtor has a lease with Mississippi EdNet
Institute, Inc. ("EdNet") for the commercial use of 20 ITFS
channels in each of its markets in the state of Mississippi
(the "EdNet Agreement"). The term of the EdNet Agreement is 10
years from the date of issuance of certain construction
permits, each of which was granted in 1992. The Debtor
anticipates that, pursuant to the EdNet Agreement, the lease
term will terminate on or about April 1, 2002, unless renewed
prior thereto. The commercial use of these channels represents
the majority of the Debtor's channels in Mississippi and the
termination of, or inability to renew, the EdNet Agreement
would have a material adverse effect on the Debtor's operations
in its Mississippi markets.
7. DEPENDENCE ON PROGRAM SUPPLIERS.
The Debtor is dependent on fixed-term contracts with
various program suppliers such as CNN, ESPN and HBO. Although
the Debtor has no reason to believe that any such contracts
will be canceled or will not be renewed upon expiration, if
such contracts are canceled or not renewed, the Debtor will
have to seek program material from other sources. There can be
no assurance that other program material will be available to
the Debtor on acceptable terms or at all or, if so available,
that such material will be acceptable to the Debtor's
subscribers.
8. DEPENDENCE ON DIRECTV CONTRACTS.
Due to the lower costs associated with offering the
DIRECTV product relative to the Debtor's traditional wireless
cable product, in its revised business plan the Debtor has
shifted the focus of its sales and marketing efforts to
emphasize sales of the DIRECTV service. See III.A.1., "General
Information -- Description and History of Business --
Business." In order to provide such service, the Debtor is
dependent on contracts with DIRECTV that give Debtor the right
to market DIRECTV to certain SFU and MDU customers. Although
the Debtor has no reason to believe that any such contracts
will be canceled or will not be renewed upon expiration, if
such contracts are canceled or not renewed, such cancellation
or nonrenewal could have a material adverse effect on the
Debtor.
9. PHYSICAL LIMITATIONS OF SIGNAL TRANSMISSION.
Reception of wireless cable programming or the use of
the Debtor's channel authorizations to provide Internet and
high-speed data transmission service requires a direct,
unobstructed LOS from the headend to the subscriber's receive-
site antenna. Therefore, in communities with tall trees, hilly
terrain, tall buildings or other obstructions in the
transmission path, signal transmission can be difficult or
impossible to receive at certain locations, and the Debtor is
not able to supply service to all potential cable subscribers
or Internet or high-speed data transmission customers. While
in certain instances the Debtor employs low power repeaters to
overcome LOS obstructions, there can be no assurance that it
will be able to secure the necessary FCC authorizations for
such additional repeaters as may be necessary to achieve the
desired signal coverage. In addition to limitations resulting
from terrain, in limited circumstances extremely adverse
weather can damage transmission and receive-site antennae, as
well as other transmission equipment.
10. DIFFICULTIES AND UNCERTAINTIES OF A NEW INDUSTRY.
Wireless cable is a new industry with a short
operating history. Potential investors should be aware of the
difficulties and uncertainties that are normally associated
with new industries, such as lack of consumer acceptance,
difficulty in obtaining financing, increasing competition,
advances in technology and changes in laws and regulations.
There can be no assurance that the wireless cable industry will
develop or continue as a viable or profitable industry.
11. CHANGES IN TECHNOLOGY.
The subscription television and telecommunications
services industries in general are subject to rapid and
significant changes in technology such as LMDS, digital
compression, ADSL and fiber optic networks. These changes may
increase competitive pressures on Reorganized Wireless or
require capital investments by Reorganized Wireless (to remain
competitive) in excess of its available resources. Because of
the rapid and high level of technological change in the
industry, the effect of technological changes on the businesses
of Reorganized Wireless cannot be predicted with any certainty.
12. SIGNIFICANT HOLDERS.
Upon the consummation of the Plan, certain holders of
Claims will receive distributions of shares of the New Common
Stock representing in excess of five percent of the outstanding
shares of the New Common Stock. See Section VII.F.,
"Management of Reorganized Debtor -- Post-Effective Date
Security Ownership of Certain Owners." If holders of
significant numbers of shares of New Common Stock were to act
as a group, such holders may be in a position to control the
outcome of actions requiring stockholder approval, including
the election of directors. This concentration of ownership
could also facilitate or hinder a negotiated change of control
of Reorganized Wireless and, consequently, impact upon the
value of the New Common Stock.
Further, the possibility that one or more of the
holders of significant numbers of shares of New Common Stock
may determine to sell all or a large portion of their shares of
New Common Stock in a short period of time may adversely affect
the market price of the New Common Stock.
13. LACK OF ESTABLISHED MARKET FOR NEW COMMON STOCK.
The New Common Stock will be issued to holders of the
Allowed Old Senior Note Claims and the holders of Allowed Old
Common Stock Interests, some of whom may prefer to liquidate
their investment rather than to hold it on a long-term basis.
There is currently no trading market for the New Common Stock
(such as the Nasdaq Stock Market or a national or regional
stock exchange) nor is it known whether or when one would
develop. Further, there can be no assurance to the degree of
price volatility in any such particular market. While the Plan
was developed based on an assumed reorganization value of
$13.51 per share of the New Common Stock, such valuation is not
an estimate of the price at which the New Common Stock may
trade in the market. The Debtor has not attempted to make any
such estimate in connection with the development of the Plan.
No assurance can be given as to the market prices that will
prevail following the Effective Date.
14. DIVIDEND POLICIES.
Reorganized Wireless does not anticipate paying any
dividends on the New Common Stock in the foreseeable future.
In addition, the covenants in any future financing facility to
which Reorganized Wireless may be a party may limit the ability
of Reorganized Wireless to pay dividends. Certain
institutional investors may only invest in dividend-paying
equity securities or may operate under other restrictions which
may prohibit or limit their ability to invest in New Common
Stock.
15. PREFERRED STOCK; CERTAIN PROVISIONS OF THE CHARTER
AND BY-LAWS AND THE DGCL.
The Charter of Reorganized Wireless will provide for
"blank check" authorization for the issuance of Preferred
Stock. Until such time (if any) as the Board of Directors of
Reorganized Wireless determines that Reorganized Wireless
should issue Preferred Stock and establishes the respective
rights of the holders of one or more series thereof, it is not
possible to state the actual effect of authorization of the
Preferred Stock upon the right of holders of New Common Stock.
The effects of such issuance could include, however: (i)
reduction of the amount of Cash otherwise available for payment
of dividends on New Common Stock if dividends are also payable
on the Preferred Stock, (ii) restrictions on dividends on New
Common Stock if dividends on the Preferred Stock are in
arrears, (iii) dilution of the voting power of New Common Stock
(if the Preferred Stock has voting rights (including, without
limitation, votes pertaining to the removal of directors)) and
(iv) restriction of the rights of holders of New Common Stock
to share in the assets of Reorganized Wireless upon liquidation
until satisfaction of any liquidation preference granted to the
holders of Preferred Stock. In addition, so called "blank
check" preferred stock may be viewed as having possible anti-
takeover effects, if it were used to make a third party's
attempt to gain control of Reorganized Wireless more difficult,
time consuming or costly.
The Charter and by-laws of Reorganized Wireless and
the DGCL contain provisions which may have the effect of
delaying, deterring or preventing a future takeover or change
in control of Reorganized Wireless unless such takeover or
change in control is approved by the Board of Directors of
Reorganized Wireless. Such provisions may also render the
removal of directors and management more difficult. The
Charter and by-laws provide for, among other things, removal of
directors only for cause and only by the affirmative vote of
the holders of a majority of the voting power of the then
outstanding voting capital stock of Reorganized Wireless,
voting together as a single class, exclusive authority of the
Board of Directors to fill vacancies on the Board of Directors
(other than in certain limited circumstances), certain advance
notice requirements for stockholder nominations of candidates
for election to the Board of Directors and certain other
stockholder proposals, restrictions on who may call a special
meeting of stockholders and a prohibition on stockholder action
by written consent. Amendments to certain provisions in the
Charter require the affirmative vote of the holders of at least
80% of the total votes eligible to be cast in the election of
directors, voting together as a single class. The DGCL also
contains provisions preventing certain stockholders from
engaging in business combinations with the Reorganized
Wireless, subject to certain exceptions.
16. PENDING LITIGATION.
The Debtor does not believe that there is any ongoing
material litigation.
17. YEAR 2000 COMPLIANCE.
The Year 2000 computer issue concerns the ability of
computer systems and other equipment containing embedded
microchip technology to distinguish the year 2000 from the year
1900. Many experts fear that this programming problem could
render computer systems and such other equipment around the
globe inoperable. The potential Year 2000 risks to the Debtor
include disruptions or failures within the Debtor's operations
and products, as well as within the operations and products of
its suppliers and other key business partners. Because of the
indirect effect of third parties, an accurate assessment and
prediction of the impact of the Year 2000 issue on the Debtor
is difficult.
The Debtor is currently implementing plans to address
both the internal and external Year 2000 issues. Internally,
these plans encompass an assessment of all major computer
systems in use by the Debtor. The Debtor has already completed
a significant upgrade to Year 2000 compliant software and
hardware in conjunction with its 1996 merger. The Debtor
currently anticipates it will have assessed and remedied all
critical areas of its own operations by June 30, 1999, and that
it will internally certify the readiness of these critical
areas by June 30, 1999. The Debtor's risk assessment processes
associated with critical suppliers, and other key business
partners, include analyzing responses to questionnaires
previously solicited and, if necessary, performing onsite
interviews. The Debtor is dependent upon the internal self-
assessments of key business partners regarding their own Year
2000 issues. The Debtor intends to develop contingency plans
based primarily on these assessment results. Despite the
Debtor's efforts to identify and remedy its own internal Year
2000 problems as well as those of critical third parties, no
assurance can be given that all such problems will be
identified or adequately remedied, or that Year 2000 problems
within its own systems and products or within those of third
parties will not have a material adverse effect on the
financial condition and results of operations of the Debtor.
B. HART-SCOTT-RODINO ACT REQUIREMENTS.
----------------------------------
The receipt of New Common Stock by holders of Old Senior
Note Claims may be subject to the notification and waiting
period requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, 15 U.S.C. Sect. 18a (the "HSR Act").
Such holders should consult with their legal advisor to
determine whether an HSR Act notification must be filed with
the Federal Trade Commission and the Antitrust Division of the
Department of Justice prior to receipt by such holders of
shares of New Common Stock pursuant to the Plan. The Company
will cooperate by making any filings required of it in
connection with acquisitions of New Common Stock that are
reportable under the HSR Act. No New Common Stock will be
issued to any holder of an Old Senior Note Claim in connection
with the Plan if receipt of such is subject to the notification
and waiting period requirements of the HSR Act until such
requirements have been satisfied and any applicable waiting
periods have either expired or been terminated.
XI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
A. INTRODUCTION.
------------
The following discussion summarizes the material federal
income tax consequences expected to result from the
consummation of the Plan. This discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended
(the "Tax Code"), applicable Treasury Regulations, judicial
authority and current administrative rulings and pronouncements
of the Internal Revenue Service (the "Service"). There can be
no assurance that the Service will not take a contrary view,
and no ruling from the Service has been or will be sought.
Legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify
the statements and conclusions set forth herein. Any such
changes or interpretations may or may not be retroactive and
could affect the tax consequences to holders, the Debtor and
Reorganized Wireless. It cannot be predicted at this time
whether any tax legislation will be enacted or, if enacted,
whether any tax law changes contained therein would affect the
tax consequences to holders, the Debtor and Reorganized
Wireless.
The following summary is for general information only. The
tax treatment of a holder may vary depending upon such holder's
particular situation. This discussion assumes that holders of
Old Senior Notes and Old Common Stock have held such property
as "capital assets" within the meaning of Section 1221 of the
Tax Code (generally, property held for investment) and will
also hold the New Common Stock and New Warrants as "capital
assets." This summary does not address all of the tax
consequences that may be relevant to a holder, nor does it
address the federal income tax consequences to holders subject
to special treatment under the federal income tax laws, such as
brokers or dealers in securities or currencies, certain
securities traders, tax-exempt entities, financial
institutions, insurance companies, foreign corporations,
holders who are not citizens or residents of the United States,
holders that hold the Old Senior Notes or Old Common Stock as a
position in a "straddle" or as part of a "synthetic security,"
"hedging," "conversion" or other integrated instrument, holders
that have a "functional currency" other than the United States
dollar and holders that have acquired the Old Senior Notes or
Old Common Stock in connection with the performance of
services. EACH HOLDER SHOULD CONSULT ITS TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO IT OF THE PLAN, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX
LAWS.
B. FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTOR.
---------------------------------------------
1. CANCELLATION OF INDEBTEDNESS AND REDUCTION OF TAX
ATTRIBUTES.
The Debtor generally will realize cancellation of
indebtedness ("COI") income to the extent that the fair market
value of the New Common Stock received by holders of Old Senior
Notes is less than the adjusted issue price (plus the amount of
any accrued but unpaid interest) of such Old Senior Notes
discharged thereby. The adjusted issue price of the Old Senior
Notes should be equal to their issue price, increased by the
amount of original issue discount ("OID") accrued thereon,
reduced by the amount of any payments previously made thereon
that were not payments of qualified stated interest. Under
Section 108 of the Tax Code, however, COI income will not be
recognized if the COI income occurs in a case brought under the
Bankruptcy Code, provided the taxpayer is under the
jurisdiction of a court in such case and the cancellation of
indebtedness is granted by the court or is pursuant to a plan
approved by the court. Accordingly, because the cancellation
of the Debtor's indebtedness will occur in a case brought under
the Bankruptcy Code, the Debtor will be under the jurisdiction
of the court in such case and the cancellation of the Old
Senior Notes will be pursuant to the Plan, the Debtor will not
be required to recognize any COI income realized as a result of
the implementation of the Plan.
Under Section 108(b) of the Tax Code, however, a
taxpayer is required to reduce certain tax attributes,
including its net operating losses and loss carryforwards
("NOLs") (and certain other losses, credits and carryforwards,
if any) and tax basis in assets (but not below the amount of
liabilities remaining immediately after the discharge of
indebtedness), in an amount equal to the amount of COI income
excluded from income as described in the preceding paragraph
(subject to certain modifications). A taxpayer may elect under
Section 108(b)(5) of the Tax Code (the "Section 108(b)(5)
Election") to avoid the prescribed order of attribute reduction
(which begins first with NOLs for the taxable year of the
discharge and NOL carryovers to such taxable year) and instead
reduce the basis of depreciable property first. The Section
108(b)(5) Election will extend to and reduce the basis of the
stock of any subsidiary of the taxpayer if such subsidiary
consents to a concomitant reduction in the basis of its
depreciable property. If the taxpayer makes a Section
108(b)(5) Election, the limitation prohibiting the reduction of
asset basis below the amount of its remaining undischarged
liabilities does not apply to the basis reduction resulting
from the Section 108(b)(5) Election. The Debtor has not yet
determined whether it will make the Section 108(b)(5) Election.
Although the matter is not entirely free from doubt, any
reduction in tax attributes should occur on a separate company
basis even though the Debtor and its subsidiaries file a
federal consolidated income tax return. Thus, although not
entirely free from doubt, because the Old Senior Notes are
obligations of the Debtor, only the Debtor's separate company
tax attributes should have to be reduced pursuant to
Section 108(b) of the Tax Code.
The Debtor anticipates that at the Effective Date its
consolidated group will have a consolidated NOL carryforward
from its tax years preceding 1998 of approximately $125
million. In addition, the Debtor believes that its
consolidated group generated an additional consolidated NOL in
its 1998 tax year (of approximately $50 - $100 million) and may
generate an additional NOL for the portion of its 1999 tax year
preceding the Effective Date. However, the amount of 1998 or
1999 NOLs (if any) will not be determined by the Debtor until
it prepares its tax returns for such periods. In addition, any
NOLs are subject to audit and possible challenge by the Service
and thus may ultimately vary from any specific amounts
indicated herein. As a result of the application of
Section 108(b) of the Tax Code (and assuming a Section
108(b)(5) Election will not be made), the Debtor believes that
most, if not all, of the Debtor's NOLs (and certain other
losses, credits and carryforwards, if any) will be eliminated
after consummation of the Plan. In addition, Reorganized
Wireless may be required to reduce its tax basis in its assets
as of the beginning of the taxable year following consummation
of the Plan (but not below the amount of liabilities remaining
immediately after the consummation of the Plan) to the extent
that the Debtor's COI income exceeds the amount of NOLs and any
other losses, credits and carryovers so reduced (subject to
certain modifications).
2. SECTION 382 LIMITATIONS ON NOLS.
Under Section 382 of the Tax Code, if a corporation
with NOLs (a "Loss Corporation") undergoes an "ownership
change," the use of such NOLs (and certain other tax
attributes) will generally be subject to an annual limitation
as described below. In general, an "ownership change" occurs
if the percentage of the value of the Loss Corporation's stock
owned by one or more direct or indirect "five percent
shareholders" has increased by more than 50 percentage points
over the lowest percentage of that value owned by such five
percent shareholder or shareholders at any time during the
applicable "testing period" (generally, the shorter of (i) the
three-year period preceding the testing date or (ii) the period
of time since the most recent ownership change of the
corporation).
A Loss Corporation's use of NOLs (and certain other
tax attributes) after an "ownership change" will generally be
limited annually to the product of the long-term tax-exempt
rate (published monthly by the Service) and the value of the
Loss Corporation's outstanding stock immediately before the
ownership change (excluding certain capital contributions) (the
"Section 382 Limitation"). However, the Section 382 Limitation
for a taxable year any portion of which is within the five-year
period following the Effective Date will be increased by the
amount of any "recognized built-in gains" for such taxable
year. The increase in a year cannot exceed the "net unrealized
built-in gain" (if such gain exists immediately before the
"ownership change" and exceeds a statutorily-defined threshold
amount) reduced by recognized built-in gains from prior years
ending during such five-year period. In addition, any
"recognized built-in losses" for a taxable year any portion of
which is within the five-year period following the Effective
Date will be subject to limitation in the same manner as if
such loss was an existing NOL to the extent such recognized
built-in losses do not exceed the "net unrealized built-in
loss" (if such loss exists immediately before the "ownership
change" and exceeds a statutorily-defined threshold amount)
reduced by recognized built-in losses for prior taxable years
ending during such five-year period. At this time, the Debtor
is unable to predict whether it will have a "net unrealized
built-in gain" or a "net unrealized built-in loss" that will
exceed the statutorily-defined threshold amount at the
Effective Date. NOLs not utilized in a given year because of
the Section 382 Limitation remain available for use in future
years until their normal expiration dates. To the extent that
a Loss Corporation's Section 382 Limitation in a given year
exceeds its taxable income for such year, that excess will
increase the Section 382 Limitation in future taxable years.
Finally, if Reorganized Wireless does not continue the Debtor's
historic business or use a significant portion of the Debtor's
business assets in a new business for two years after the
"ownership change," the Section 382 Limitation would be zero
(except as increased by recognized built-in gains, as described
above).
Two alternative bankruptcy exceptions for Loss
Corporations undergoing an ownership change pursuant to a
bankruptcy proceeding are provided for in the Tax Code. The
first exception, Section 382(1)(5) of the Tax Code, applies
where qualified (so-called "old and cold") creditors of the
debtor receive at least 50% of the vote and value of the stock
of the reorganized debtor in a case under the Bankruptcy Code.
Under this exception, a debtor's pre-change NOLs are not
subject to the Section 382 Limitation but are instead reduced
by the amount of any interest deductions allowed during the
three taxable years preceding the taxable year in which the
ownership change occurs, and during the part of the taxable
year prior to and including the effective date of the
bankruptcy reorganization, in respect of the debt converted
into stock in the reorganization. Moreover, if this exception
applies, any further ownership change of the debtor within a
two-year period will preclude the debtor's utilization of any
pre-change losses at the time of the subsequent ownership
change against future taxable income.
An "old and cold" creditor includes a creditor who
has held the debt of the debtor for at least eighteen months
prior to the date of the filing of the case or who has held
"ordinary course indebtedness" at all times it has been
outstanding. However, any debt owned immediately before an
ownership change by a creditor who does not become a direct or
indirect 5% shareholder of the reorganized debtor generally
will be treated as always having been owned by such creditor,
except in the case of any creditor whose participation in
formulating the plan of reorganization makes evident to the
debtor that such creditor has not owned the debt for such
period. The Debtor has not yet determined whether it is
eligible for the Section 382(l)(5) exception.
The second bankruptcy exception, Section 382(1)(6)
of the Tax Code, requires no reduction of pre-ownership change
NOLs but provides relief in the form of a relaxed computation
of the Section 382 Limitation. In that regard,
Section 382(1)(6) of the Tax Code provides that the value of
the Loss Corporation's outstanding stock for purposes of
computing the Section 382 Limitation will be increased to
reflect the cancellation of indebtedness in the bankruptcy case
(but the value of such stock as adjusted may not exceed the
value of the Debtor's gross assets immediately before the
ownership change (subject to certain adjustments)).
The Plan should trigger an ownership change of the
Debtor's consolidated group on the Effective Date. Even if the
Debtor determines that it qualifies for the Section 382(1)(5)
exception, the Debtor may decide to elect (at the time it files
its tax return for the tax year that includes the Effective
Date) to utilize the Section 382(1)(6) exception due to the
significant reduction of NOLs and tax credits that would be
required by Section 382(1)(5) of the Tax Code. In such event,
Reorganized Wireless's use of pre-ownership change NOLs and
certain other tax attributes (if any), to the extent remaining
after the reduction thereof as a result of the cancellation of
indebtedness of the Debtor, will be limited and generally will
not exceed each year the product of the long-term tax-exempt
rate and the value of Reorganized Wireless's stock increased to
reflect the cancellation of indebtedness pursuant to the Plan.
C. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF OLD SENIOR
NOTES (CLASS 5).
--------------------------------------------------------
1. EXCHANGE OF OLD SENIOR NOTES FOR NEW COMMON STOCK.
Whether the exchanges of the 1995 Senior Notes for
New Common Stock and the 1996 Senior Discount Notes for New
Common Stock pursuant to the Plan will be nontaxable
recapitalizations under the Tax Code will depend in part upon
whether the 1995 Senior Notes and the 1996 Senior Discount
Notes are considered to be "securities" within the meaning of
the provisions of the Tax Code governing reorganizations. The
test as to whether a debt instrument is a "security" involves
an overall evaluation of the nature of the debt instrument,
with the term of the debt instrument usually regarded as one of
the most significant factors. Generally, debt instruments with
a term of five years or less have not qualified as
"securities," whereas debt instruments with a term of ten years
or more generally have qualified as "securities."
Although the treatment of the 1995 Senior Notes and
the 1996 Senior Discount Notes is not entirely certain because
the stated terms of such instruments are less than ten years,
both the 1995 Senior Notes and the 1996 Senior Discount Notes
should be treated as "securities" for federal income tax
purposes. Accordingly, the exchanges of the Old Senior Notes
for New Common Stock should constitute recapitalizations for
federal income tax purposes and, as a result, exchanging
holders should not recognize any gain or loss (except to the
extent the New Common Stock is attributable to accrued but
unpaid interest (including OID) on the Old Senior Notes, which
generally would be taxable to a holders as ordinary income (see
"Accrued Interest" below)). A holder's tax basis in New Common
Stock will be equal to the holder's adjusted tax basis in the
Old Senior Notes exchanged therefor. A holder's tax basis in
an Old Senior Note will generally be equal to its cost,
increased by any OID or market discount (see below) previously
included in income by the holder, and decreased by any
amortized bond premium and by any payments reflecting principal
or OID received with respect to such Old Senior Note. The
holder's holding period for the New Common Stock will include
the holder's holding period for the Old Senior Notes exchanged
therefor.
If the 1995 Senior Notes or the 1996 Senior Discount
Notes were determined not to constitute "securities" for
federal income tax purposes, then an exchanging holder would
recognize gain or loss equal to the difference between the fair
market value of the New Common Stock received (except to the
extent the New Common Stock is attributable to accrued but
unpaid interest (including OID) on such Old Senior Notes, which
generally would be taxable to a holder as ordinary income (see
"Accrued Interest" below)) and the holder's adjusted tax basis
in such Old Senior Notes exchanged therefor. Any such gain or
loss would generally be long-term capital gain or loss (subject
to the market discount rules discussed below) if such Old
Senior Notes had been held for more than one year. In this
event, a holder's tax basis in the New Common Stock received
would be equal to its fair market value on the Effective Date,
and the holding period for the New Common Stock would begin on
the day immediately after the Effective Date.
The Tax Code generally requires holders of "market
discount bonds" to treat as ordinary income any gain realized
on the disposition of such bonds (including in certain non-
recognition transactions, such as a gift) to the extent of the
market discount accrued during the holder's period of
ownership. A "market discount bond" is a debt obligation
purchased at a market discount subject to a statutorily-defined
de minimis exception. For this purpose, a purchase at a market
discount includes a purchase after the original issue at a
price below the stated redemption price at maturity of the debt
instrument, or, in the case of a debt instrument issued with
OID, such as the 1995 Senior Notes and the 1996 Senior Discount
Notes, at a price below (i) its "issue price," plus (ii) the
amount of OID includible in income by all prior holders of the
debt instrument, minus (iii) all cash payments (other than
payments constituting qualified stated interest) received by
such previous holders.
A holder of a debt instrument acquired at a market
discount may elect to include the market discount in income as
the discount accrues, either on a straight line basis or, if
elected, on a constant interest rate basis. If a holder of a
market discount bond elects to include market discount in
income on a current basis, the foregoing rule with respect to
the recognition of ordinary income on a sale or other
disposition of such bond would not apply.
In the case of certain non-recognition transactions,
such as the exchange of the 1995 Senior Notes for the New
Common Stock and the exchange of the 1996 Senior Discount Notes
for the New Common Stock, special rules apply. Any accrued
(but unrecognized) market discount on the Old Senior Notes will
not have to be recognized as income on the Effective Date.
However, on a subsequent taxable disposition of the New Common
Stock received pursuant to the Plan, gain is treated as
ordinary income to the extent of market discount accrued prior
to the Effective Date.
2. NEW COMMON STOCK.
a. DIVIDENDS.
---------
A holder generally will be required to include in
gross income as ordinary dividend income the amount of any
distributions paid on the New Common Stock to the extent that
such distributions are paid out of Reorganized Wireless'
current or accumulated earnings and profits as determined for
federal income tax purposes. Distributions in excess of such
earnings and profits will reduce the holder's tax basis in its
New Common Stock and, to the extent such excess distributions
exceed such tax basis, will be treated as gain from a sale or
exchange of such New Common Stock. Corporate holders may be
entitled to a dividends received deduction (generally at a 70%
rate) with respect to distributions out of earnings and profits
and are urged to consult their tax advisors in this regard.
b. SALE OR OTHER TAXABLE DISPOSITIONS.
----------------------------------
Upon the sale or other disposition of New Common
Stock, a holder generally will recognize capital gain or loss
equal to the difference between the amount of Cash and fair
market value of any property received on the sale and such
holder's adjusted tax basis in the New Common Stock. Capital
gain or loss recognized upon the disposition of the New Common
Stock will be long-term if, at the time of the disposition, the
holding period for the New Common Stock exceeds one year.
However, pursuant to Section 108(e)(7) of the Tax
Code, a creditor that receives stock in exchange for debt is
required, to the extent that gain is recognized upon a
subsequent disposition of such stock, to "recapture" as
ordinary income any bad debt deductions taken by the creditor
with respect to such debt and any ordinary loss claimed by the
creditor upon the receipt of the stock in satisfaction of such
debt, reduced by any amount included in income upon the receipt
of the stock. In addition, as discussed above, if any Old
Senior Notes held by a holder has accrued (but unrecognized)
market discount at the Effective Date, then any gain recognized
by such holder upon the disposition of New Common Stock would
have to be treated as ordinary income to the extent of such
accrued market discount.
D. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF OLD COMMON
STOCK (CLASS 7).
--------------------------------------------------------
1. EXCHANGE OF OLD COMMON STOCK FOR NEW COMMON STOCK AND
NEW WARRANTS.
An exchange of Old Common Stock for New Common Stock
and New Warrants pursuant to the Plan should constitute a
recapitalization for federal income tax purposes and, as a
result, holders of Old Common Stock should not recognize any
gain or loss in the exchange. A holder's adjusted tax basis in
the Old Common Stock will be allocated between the New Common
Stock and New Warrants received in exchange therefor in
accordance with their respective fair market values on the
Effective Date. A holder's holding period for the New Common
Stock and New Warrants will include the holder's holding period
for the Old Common Stock.
2. NEW WARRANTS.
------------
a. SALE OR EXPIRATION.
Upon the sale or other taxable disposition of a New
Warrant, a holder generally will recognize gain or loss in an
amount equal to the difference between the amount of Cash and
the fair market value of property received therefor and the
holder's tax basis in the New Warrant. Such gain or loss would
be long-term capital gain or loss if the New Warrant had been
held for more than one year.
If a New Warrant expires without being exercised, the
holder will recognize a loss in an amount equal to its tax
basis in the New Warrant. Such loss will be a long-term
capital loss if the New Warrant had been held for more than one
year.
b. EXERCISE.
--------
The exercise of a New Warrant for cash will not be a
taxable event to the holder of the New Warrant (except to the
extent of cash, if any, received in lieu of fractional
interests in shares of New Common Stock). Upon such exercise,
the holder's tax basis in the New Common Stock obtained will be
equal to the sum of such holder's tax basis in the New Warrant
and the exercise price of the New Warrant. The holder's
holding period with respect to such New Common Stock will
commence on the day the New Warrant is exercised. The receipt
of cash (if any) in lieu of a fractional interest in a share of
New Common Stock will be taxable as if the fractional share of
New Common Stock had been issued and then redeemed for cash.
Accordingly, a holder will recognize gain or loss in an amount
equal to the difference between the amount of cash received for
the fractional interest and the holder's tax basis in the
fractional interest.
c. ADJUSTMENTS.
-----------
An adjustment to the exercise price or the conversion
ratio of the New Warrants, or the failure to make such
adjustments, may in certain circumstances result in
constructive distributions to the holders of the New Warrants
that could be taxable as dividends. In such event, a holder's
tax basis in the New Warrants should be increased by the amount
of any such dividend.
E. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF OTHER CLAIMS.
----------------------------------------------------------
A holder of a Claim in a class not discussed above will
generally recognize gain or loss equal to the amount of any
Cash received plus the fair market value of any other property
received with respect to its Claim (other than for accrued but
unpaid interest) less its adjusted basis in its Claim (other
than for accrued but unpaid interest). The character of such
gain or loss as long-term or short-term capital gain or loss or
as ordinary income or loss will be determined by a number of
factors, including (but not limited to) the tax status of the
holder, whether the Claim constitutes a capital asset in the
hands of the holder, whether the Claim has been held for more
than one year, whether the Claim was purchased at a discount,
and whether and to what extent the holder had previously
claimed a bad debt deduction or a worthless security deduction.
F. ACCRUED INTEREST AND ORIGINAL ISSUE DISCOUNT.
--------------------------------------------
Holders will be treated as receiving a payment of interest
to the extent that any Cash or other property received pursuant
to the Plan is attributable to accrued but unpaid interest
(including OID), if any, on such Claims. The extent to which
the receipt of Cash or other property should be attributable to
accrued but unpaid interest is unclear. The Debtor intends to
take the position that such Cash or property distributed
pursuant to the Plan will first be allocable to the principal
amount of a Claim and then, to the extent necessary, to any
accrued but unpaid interest thereon. However, it is possible
that the Service may take a contrary position. Each holder
should consult its own tax advisor regarding the determination
of the amount of consideration received under the Plan that is
attributable to interest (if any).
To the extent any property received pursuant to the Plan
is considered attributable to accrued but unpaid interest, a
holder will recognize ordinary income to the extent that the
value of such property exceeds the amount of such interest
previously taken into income by the holder and a holder's basis
in such property should be equal to the amount of interest
income treated as satisfied by the receipt of such property.
The holding period in such property should begin on the day
immediately after the Effective Date. A holder generally will
be entitled to recognize a loss to the extent any accrued
interest was previously included in its gross income and is not
paid in full.
G. INFORMATION REPORTING AND BACKUP WITHHOLDING.
--------------------------------------------
A holder of New Common Stock or New Warrants may be
subject to backup withholding at the rate of 31% with respect
to dividends paid on, and gross proceeds from a sale of, the
New Common Stock or New Warrants unless (i) such holder is a
corporation or comes within certain other exempt categories
and, when required, demonstrates this fact or (ii) provides a
correct taxpayer identification number, certifies as to no loss
of exemption from backup withholding and complies with
applicable requirements of the backup withholding rules. A
holder of New Common Stock or New Warrants who does not provide
a correct taxpayer identification number may be subject to
penalties imposed by the Service. Amounts withheld under the
backup withholding rules may be credited against a holder's tax
liability, and a holder may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing
the appropriate claim for refund with the Service.
Reorganized Wireless will report to holders of the New
Common Stock and New Warrants and to the Service the amount of
any "reportable payments" on, and any amount withheld with
respect to, New Common Stock and New Warrants during the
calendar year.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES IS FOR GENERAL INFORMATION PURPOSES ONLY AND IS
NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER SHOULD CONSULT ITS
OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE
PLAN AND THE CONTINUING OWNERSHIP AND DISPOSITION OF THE NEW
COMMON STOCK AND THE NEW WARRANTS AND THE APPLICATION OF STATE,
LOCAL AND FOREIGN TAX LAWS. NEITHER THE DEBTOR NOR ITS
PROFESSIONALS SHALL HAVE ANY LIABILITY TO ANY PERSON OR HOLDER
ARISING FROM OR RELATED TO THE FEDERAL, STATE, LOCAL OR FOREIGN
TAX CONSEQUENCES OF THE PLAN OR THE FOREGOING DISCUSSION.
XII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN
If the Plan is not confirmed and consummated, the Debtor's
alternatives include (i) liquidation of the Debtor under
chapter 7 of the Bankruptcy Code and (ii) the preparation and
presentation of an alternative plan or plans of reorganization.
A. LIQUIDATION UNDER CHAPTER 7.
---------------------------
If no chapter 11 plan can be confirmed, the Chapter 11
Case may be converted to a case under chapter 7 of the
Bankruptcy Code in which a trustee would be elected or
appointed to liquidate the assets of the Debtor. A discussion
of the effect that a chapter 7 liquidation would have on the
recovery of holders of Claims and Equity Interests is set forth
in Section VI.C.4., "Confirmation and Consummation Procedure --
Confirmation -- Best Interests Test." The Debtor believes that
liquidation under chapter 7 would result in (i) smaller
distributions being made to creditors than those provided for
in the Plan because of the additional administrative expenses
involved in the appointment of a trustee and attorneys and
other professionals to assist such trustee, (ii) additional
expenses and claims, some of which would be entitled to
priority, which would be generated during the liquidation and
from the rejection of leases and other executory contracts in
connection with a cessation of the Debtor's operations and
(iii) the failure to realize the greater, going concern value
of the Debtor's assets.
B. ALTERNATIVE PLAN OF REORGANIZATION.
----------------------------------
If the Plan is not confirmed, the Debtor or any other
party in interest could attempt to formulate a different plan
of reorganization. Such a plan might involve either a
reorganization and continuation of the Debtor's business or an
orderly liquidation of its assets. With respect to an
alternative plan, the Debtor has explored various other
alternatives in connection with the extensive negotiation
process involved in the formulation and development of the
Plan. In addition, by a letter to the Debtor dated February
25, 1999 (the "Heartland Letter"), Heartland Wireless
Communications, Inc. ("Heartland"), a holder of approximately
20% of the Old Common Stock, requested consideration of an
alternate plan of reorganization for the Debtor. A copy of the
Heartland Letter is attached hereto as Exhibit F. The
principal features of the plan proposed in the Heartland Letter
are (i) the merger of the Debtor into Heartland, (ii) receipt
by holders of the Old Senior Notes of 27% of the common stock
of the entity created by such merger ("Newco") and (iii)
receipt by the holders of Old Common Stock of 1.08% of the
common stock of Newco and five-year warrants to purchase 2.7%
of the outstanding shares of Newco common stock at exercise
price that is consistent with the proposed exercise price in
this Plan (adjusted to reflect the merger of the Debtor and
Heartland). The Debtor has considered the plan proposed in the
Heartland Letter and believes that the Plan described herein
is, on the whole, more favorable to the creditors and equity
security holders of the Debtor. The Debtor bases this
conclusion in part upon its belief that the plan proposed in
the Heartland Letter ascribes less value to the Debtor and its
business, relative to that value of Heartland and its business
set forth in bankruptcy court filings in Heartland's chapter 11
case, than is warranted based upon the valuation described
herein. Accordingly, the recoveries made available to
creditors and equity securities holders under the plan proposed
in the Heartland Letter would be less favorable than those
provided for in the Plan described herein.
The Debtor believes that the Plan enables the Debtor to
successfully and expeditiously emerge from chapter 11,
preserves its business and allows creditors to realize the
highest recoveries under the circumstances. In a liquidation
under chapter 11 of the Bankruptcy Code, the assets of the
Debtor would be sold in an orderly fashion over a more extended
period of time than in a liquidation under chapter 7 and a
trustee need not be appointed. Accordingly, creditors would
receive greater recoveries than in a chapter 7 liquidation.
Although a chapter 11 liquidation is preferable to a chapter 7
liquidation, the Debtor believes that a liquidation under
chapter 11 is a much less attractive alternative to creditors
because a greater return is provided for in the Plan to
creditors.
**FOOTNOTES**
{1} This table is only a summary of the classification and treatment of
Claims and Equity Interests under the Plan. Reference should be made to the
entire Disclosure Statement and the Plan for a complete description of the
classification and treatment of Claims and Equity Interests.
{2} Wireless leases many of its licenses from educational institutions.
The Debtor pays for these licenses and also provides the educational
institutions with air time on its channels.
{3} Wireless has found that the DIRECTV arrangement also results in a cost
savings for Wireless because the DIRECTV product needs less repair, as the
satellites and reception equipment DIRECTV depends on are immune from or
resistant to weather conditions that occasionally damage Wireless's
transmission and reception equipment.
{4} The Debtor believes that other entities which may be affiliated with
the entities set forth herein will also beneficially own New Common Stock as
of the Effective Date (although the percentage of such ownership will be
less than 5% for each of such entities).
{5} The Debtor was also the winning bidder in auctions for two additional
BTAs, the authorizations for which have not yet been issued. The aggregate
bid amount was approximately $640,000 for such additional BTAs and the
Debtor received a Bidding Credit equal to $96,400.
XIII. CONCLUSION AND RECOMMENDATION
The Debtor believes that confirmation and implementation
of the Plan is preferable to any of the alternatives described
above because it will provide the greatest recoveries to
holders of Claims. In addition, other alternatives would
involve significant delay, uncertainty and substantial
additional administrative costs. The Debtor urges holders of
impaired Claims and Equity Interests entitled to vote on the
Plan to vote to accept the Plan and to evidence such acceptance
by returning their ballots so that they will be received not
later than __:__ _.m., Eastern Time, on _________ __,1999.
Dated: March ___, 1999
WIRELESS ONE, INC., a Delaware
corporation
By:___________________________
Name: Henry G. Schopfer, III
Title: Executive Vice President,
Chief Financial Officer
and Secretary
EXHIBIT A
SEE EXHIBIT 99.1
EXHIBIT B
Order of the Bankruptcy Court dated _____,__ 1999 among other
things, approving this Disclosure Statement and establishing
certain procedures with respect to the solicitation and
tabulation of votes to accept on reject the Plan.
EXHIBIT C
Wirelss One, Inc. Form 10-k from the year ended December
31, 1998 [TO BE PROVIDED]
EXHIBIT D
PROJECTED FINANCIAL INFORMATION
WIRELESS ONE, INC.
ASSUMPTIONS TO THE FINANCIAL PROJECTIONS
Wireless One's business plan is to exploit the value of its
broadband spectrum over time by the delivery of video, data, and
potentially voice transmission services. Wireless One has not conducted
tests nor completed an evaluation of equipment and other technical issues
involving telephony and, therefore, projections are based strictly on
video and data transmission services.
The projections include results of operations from the Company's 39
operating markets and include capital costs and the results of operations from
the launch of data services in an additional 18 markets, 14 of which currently
have video operations. These projections do not include the capital costs
associated with or the results of operations from the launch of any of the
additional 24 markets in which Wireless One has channel rights and/or BTA
authorizations.
The projections assume an Effective Date of June 30, 1999 and
therefore include the six months ended December 31, 1999 and the years ending
December 31, 2000, 2001, and 2002.
1. VIDEO REVENUES - Wireless One estimates that there are
approximately 3.5 million households in its operating markets; 2.8 million
of which are within line-of-site (LOS) of Wireless One's transmission
facilities. The Company further estimates that 75% of these households
are single family unit (SFU) and 25% are multiple dwelling units (MDU).
Much of Wireless One's growth in the video segment will be
derived through its long-term cooperative marketing agreement with DIRECTV,
Inc., a digital satellite programming provider. The DIRECTV Agreement
provides for activation, equipment and marketing subsidies, as well as, a
recurring revenue sharing provision. The positive impact of these
subsidies on both revenue and capital expenditures has been reflected in
the projections.
2. SFU - The projections assume a dual product offering
consisting of Wireless One analog (MMDS) and DIRECTV digital programming
service. Based on a revised strategic plan, the Company has shifted its
sales and marketing focus to emphasize DIRECTV SFU service and to de-
emphasize it's traditional SFU wireless MMDS service. Due to this new
marketing focus, the projections reflect a gradual decline in the SFU MMDS
subscriber base through 2002. This decline is projected to be more than
offset by the anticipated growth in DIRECTV SFU customers. This strategy
will allow Wireless One to expand its SFU customer base at a lower capital
cost, while reducing operating costs, such as programming costs, channel
leases, and payroll.
The average recurring revenue per SFU MMDS subscriber is forecast
to be $34.80 per month in 1999. Price increases have been projected in
2000 through 2002 to offset an expected 4% yearly increase in programming
costs. Monthly recurring revenue from DIRECTV customers is forecast to be
$17.02 in 1999, including a monthly rental fee, revenue sharing and
other fees. Recurring revenue from DIRECTV customers have been projected
to decrease slightly by 1%/ year through 2002.
3. MDU - The projections contemplate expanding the penetration
into residential MDU's and improving margins on existing MDU contracts by
offering DIRECTV in addition to Wireless One's local and premium MMDS
channels. Growth in the MDU business segment is projected to include
subscribers located in individually billed apartments, bulk billed
apartments, hotels, hospitals, and universities. Each type of MDU has
specific monthly revenues that range from $4 per unit for hotels up to $33
per unit for individually billed apartments by 2002.
4. DATA REVENUES - Wireless One presently offers retail and
wholesale services in three markets. The projections assume launching 18
additional data markets beginning in January 2000, at a rate of one market
every other month through December 2002. Data sales will primarily target
small to mid-size businesses currently not served by high-speed data
services. In addition, the projections include product offerings focused
on home offices, teleworkers of large corporations and educational
institutions. Due to on-going research and evaluation of market potential,
the projections do not include potential data revenues generated from the
SFU or MDU residential consumer.
Monthly base prices are tiered based on the type of customer,
length of contract, and speed of service. Business prices range from $200
to $1,250/month and teleworker prices are projected at $140/month. Monthly
base prices are projected to decrease 5% per year due to anticipated
increased competition.
5. EXPENSES - As discussed above, programming expenses for
video services, which are included in System Operations, are projected to
increase 4% per year. Variable expenses have been projected based on the
number of subscribers in any given period and inflation adjusted historical
costs. Other operating expenses have been forecast based on detailed
expense categories to reflect wage increases, the benefits of future labor
and certain other operating efficiencies and minimal inflation increases.
Interest expense primarily includes amounts related to the Company's BTA
debt and capital leases.
6. INCOME TAXES - Reorganized Wireless One is not expected to
generate material current taxable income in the years presented and is
assumed to carry forward a significant portion of the NOLs. The
predecessor company NOLs (subject to certain limitations) plus post-
petition NOLs are projected to offset all tax expense and taxes payable of
the Company during this projection period and beyond.
7. CAPITAL EXPENDITURES - The majority of capital expenditures
included in the projections are the result of additional subscriber growth
in the SFU and MDU video segment and costs associated with future market
launches and subscriber growth in the Data business. Equipment costs
included in the projections for the SFU and MDU video segment assume
relatively little change through 2002, while the cost of data equipment is
expected to decline 5% annually. Efficiencies in labor and overhead
relating to installations have been included for both video and data.
8. EBITDA is defined for purposes of these projections as
earnings before interest, taxes, depreciation, and amortization and
reorganization expenses. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to service and/or incur
debt. It should be noted, however, EBITDA is not a financial measure
determined under generally accepted accounting principles and should not be
considered as an alternative to net income as a measure of operating
results or an alternative to cash flows as a measure of funds available for
discretionary or other liquidity purposes.
9. FRESH START ACCOUNTING - The projections have been prepared
using the basic principles of "fresh start" accounting. These principles
are contained in the SOP 90-7 "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code." Under "fresh start" accounting
principles, Wireless One will determine the reorganization value of the
reorganized Wireless One at the Effective Date. This value will be
allocated, based on estimated fair market values, to specific tangible or
intangible assets.
Accounting rules require that as soon as impairment of assets is
known and quantifiable, the Company must record this impairment in its
current financial statements. While currently under a comprehensive review
to determine if an asset impairment exists, the projections reflect an
impairment charge of $20.0 million in the predecessor company's June 30,
1999 financials statements in connection with the write-down of equipment
and certain leased license investments in undeveloped, non-strategic
markets. The projections also include an additional asset impairment on
the Effective Date of the reorganization reflecting principals of fresh
start accounting.
10. CASH FLOW - The projections reflect negative cash flow in
2000 and 2001. Wireless One is currently evaluating and will continue to
evaluate additional sources of capital prior to the Effective Date. The
projections and associated summary financials reflect future financing
requirements as non-interest bearing long-term debt.
Consolidated Statement of Cash Flows
<TABLE> Six Months
<CAPTION> Ended
(000's) December 31 Years Ended December 31,
-------------- ------------------------------
<S> <C> <C> <C> <C>
1999 2000 2001 2002
OPERATIONS
EBITDA 362 2,885 13,358 31,930
Cash Interest (net) (1,244) (3,021) (1,644) (1,403)
Change in Working Capital (456) (758) (585) (987)
-------- -------- --------- ---------
CASH FROM OPERATIONS (1,338) (894) 11,129 29,540
-------- -------- --------- ---------
INVESTING (CAPITAL EXPENDITURES)
Video (64) (5,555) (5,958) (7,227)
Data (715) (6,108) (7,115) (8,315)
Sale of Assets 3,000 - - -
ITFS/Other (1,889) (988) (1,038) (1,090)
-------- -------- --------- ---------
TOTAL CAPITAL EXPENDITURES 332 (12,651) (14,111) (16,632)
-------- -------- --------- ---------
FINANCING
Reorganization Cost (440) - - -
Future Financing 2,568 16,968 5,459 (10,190)
Payments on BTA Debt (1,358) (3,423) (2,477) (2,718)
-------- -------- --------- ---------
CASH USED IN FINANCING 770 13,545 2,982 (12,908)
-------- -------- --------- ---------
CHANGE IN CASH (236) - - -
CASH - BEGINNING OF PERIOD 236 - - -
-------- -------- --------- ---------
CASH - END OF PERIOD - - - -
======== ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Reorganized
Predecessor Company
----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(000's) As of Fresh As of
June 30, Start June 30, As of December 31,
1999 Entries 1999 1999 2000 2001 2002
---- ------- -------- ----- ---- ---- ----
ASSETS
CURRENT ASSETS
Cash & Equivalents 236 - 236 - - - -
Subscriber Receivables, net 1,567 - 1,567 1,788 2,888 4,744 7,299
Other 2,135 - 2,135 2,135 2,135 2,135 2,135
----------- -------- -------- ------- ------- ------- -------
Total Current Assets 3,938 - 3,938 3,923 5,023 6,879 9,434
Systems & Equipment, net 68,994 (5,000) 63,994 50,551 30,473 40,852 50,978
License & Leased License
Investment, net 121,377 (15,642) 105,735 103,260 98,760 94,260 89,760
Other 15,667 (10,635) 5,032 5,032 5,032 5,032 5,032
----------- -------- --------- -------- -------- -------- --------
TOTAL ASSETS 209,976 (31,277) 178,699 162,766 139,288 147,023 155,204
=========== ======== ========= ======== ======== ======= ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable & Accrued Expenses 8,698 - 8,698 8,026 8,370 9,642 11,208
Accrued Interest 15,012 (13,812) 1,200 1,200 - -
Notes Payable 19,956 - 19,956 - - - -
Current Portion of Long-Term Debt 3,278 - 3,278 3,075 2,129 2,370 2,634
----------- -------- --------- -------- -------- -------- --------
Total Current Liabilities 46,944 (13,812) 33,132 12,301 10,499 12,012 13,842
Long-Term Debt 344,410 (325,890) 18,520 17,365 14,888 12,169 9,187
Future Financing - - - 22,523 39,491 44,950 34,760
----------- -------- --------- -------- -------- -------- --------
TOTAL LIABILITIES 391,354 (339,702) 51,652 52,189 64,878 69,131 57,789
STOCKHOLDERS' EQUITY (181,378) 308,425 127,047 110,577 74,410 77,892 97,415
----------- -------- --------- -------- -------- -------- --------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY 209,976 (31,277) 178,699 162,766 139,288 147,023 155,204
=========== ======== ========= ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statement of Operations
Six Months Ended
(000's) December 31, Years Ended December 31,
<S> <C> <C> <C> <C>
1999 2000 2001 2002
---- ---- ---- ----
REVENUE
Video $ 19,225 $ 42,411 $ 54,183 $ 69,762
Internet 1,476 6,731 14,137 25,908
----------- ---------- ----------- ----------
TOTAL REVENUE 20,701 49,142 68,320 95,670
EXPENSES
Programming Costs 5,197 10,433 11,470 13,655
System Operations 7,041 16,325 18,715 22,337
Sales & Marketing 1,086 2,635 4,150 4,956
General & Administrative 5,692 14,608 18,280 20,349
Corporate Overhead 1,324 2,256 2,347 2,443
----------- ---------- ----------- ----------
TOTAL EXPENSE 20,340 46,257 54,962 63,740
EARNINGS BEFORE INTEREST,
TAXES, DEPRECIATION &
AMORTIZATION "EBITDA" 362 2,885 13,358 31,930
INTEREST EXPENSE 1,244 1,821 1,644 1,403
DEPRECIATION & AMORTIZATION 18,361 37,230 8,232 11,005
OTHER (2,775) - - -
----------- ---------- ----------- ----------
INCOME BEFORE TAXES (16,469) (36,166) 3,482 19,522
INCOME TAX EXPENSE - - - -
----------- ---------- ----------- ----------
NET INCOME $ (16,469) $ (36,166) $ 3,482 $ 19,522
============ =========== =========== ===========
</TABLE>
EXHIBIT E
LIQUIDATION ANALYSIS [TO BE PROVIDED]
EXHIBIT F
Letter dated February 25, 1999 from Heartland Wireless
Communications, Inc. to the Debtor regarding a proposed
Alternate plan of reorganization.
February 25, 1999
CONFIDENTIAL
Mr. Hans J. Sternberg VIA FACSIMILE 504-926-6292 AND
Chairman of the Board UPS OVERNIGHT DELIVERY
Wireless One, Inc.
c/o Starmont Life Insurance Co.
5551 Corporate Blvd.
Suite 2G
Baton Rouge, LA 70808-2566
Mr. Henry M. Burkhalter VIA FACSIMILE 601-932-2823 AND
President and CEO UPS OVERNIGHT DELIVERY
Wireless One, Inc.
1080 River Oaks, Suite A150
Jackson, MS 39208
Mr. Arnold L. Chavkin VIA FACSIMILE 212-622-3750 AND
Chairman, Restructuring Committee UPS OVERNIGHT DELIVERY
Wireless One, Inc.
c/o Chase Capital Partners
380 Madison Avenue
12th Floor
New York, NY 10017
Gentlemen:
Heartland Wireless Communication, Inc. ("Heartland") hereby requests your
consideration of an alternative Plan of Reorganization (the "New Plan") of
Wireless One, Inc. ("Wireless One"), the material terms and conditions of
which are set forth in the attached Term Sheet, in lieu of the plan of
reorganization contemplated by the term sheet attached to the report on
Form 8-K filed by Wireless One with the SEC on February 11, 1999 (the
"Existing Plan").
The New Plan contemplates a combination of Heartland and Wireless One.
Heartland believes that a combined entity offers stakeholders of Wireless
One a better opportunity to maximize the value of their economic interests
in Wireless One compared to the Existing Plan, which appears to risk
erosion of the value of the estate through the sale of assets in an
undervalued market. We also believe that the combined entity would have
the scale and larger multi-regional presence necessary to access capital
markets and/or strategic investment for funding the combined entity's
projected revenue stream without requiring the sale of strategic assets at
below market prices. Finally, we estimate that the reduced overhead
savings of the combined entity would be significant, resulting in
additional stakeholder value.
The proposed exchange ratio is based on a range of relative line of sight
and subscriber valuations of the two companies, adjusted for net cash of
Heartland (post-reorganization), net debt of Wireless One (post-
reorganization), and short-term cash requirements of Wireless One (pre and
post-reorganization). The resulting proposed ownership by current Wireless
One stakeholders represents the high end of these valuations.
As you may know, confirmation of Heartland's Plan of Reorganization is
currently set for March 15, 1999. Barring unforeseen delays, we currently
expect Heartland's Plan to be effective by March 31, 1999.
Please let me know by the end of business on March 3, 1999 if Wireless One
will allow Heartland to co-propose the New Plan, and how quickly due
diligence on the proposed combination may commence.
Sincerely,
Carroll D. McHenry
Chairman of the Board
cc (w/attach): Mr. Barry W. Ridings VIA FACSIMILE (212) 237-2232 AND
BT Alex Brown UPS OVERNIGHT DELIVERY
1290 Ave. of the Americas,
10th Floor
New York, NY 10104
Mr. Kenneth A. Buckfire VIA FACSIMILE (212) 969-7971 AND
Wasserstein Perella & Co. UPS OVERNIGHT DELIVERY
31 West 52nd Street
New York, NY 10019-6913
Messrs. Sternberg, Burkhalter and Chavkin
February 25, 1999
Page 2
TERM SHEET
FEBRUARY 25, 1999
This Term Sheet is a nonbinding summary of a proposed transaction between
Heartland Wireless Communications, Inc ("Heartland") and Wireless One, Inc.
("Wireless One"). Legal obligations between the parties shall only be
those obligations set forth in definitive written agreements approved and
executed by the parties and shall only arise when such agreements are
executed, delivered and approved. Nothing contained herein shall
constitute an offer to purchase, sell or exchange any securities.
<TABLE>
<CAPTION>
<S> <C>
Form of Transaction: The transaction will be structured as a
merger of Wireless One with and into
reorganized Heartland, implemented through
the New Plan. The combined entity is
referred to as "Newco."
DIP Facility: Wireless One's existing DIP Facility will be
replaced with a senior secured credit facility to
be agreed upon between Newco and Merrill Lynch
Global Allocation Fund or an alternative lender.
BTA Notes: Wireless One's BTA Notes will be reinstated.
1995 Senior Notes and 1996
Senior Discount Notes: Wireless One's existing $150 million aggregate
principal amount of 1995 Senior Notes (plus any
accrued and unpaid interest through the effective
date of the New Plan) and $172.3 million (accreted
value at February 1, 1999) 1996 Senior Discount
Notes (plus any accreted value thereon through the
effective date of the New Plan) and all related
claims and causes of action, will be exchanged for
27% of the outstanding shares of common stock of
Newco.
Other Prepetition Unsecured
Indebtedness: To be determined, pending completion of due
diligence.
Common Stock: Wireless One's existing common stock will be
canceled and the former holders thereof will be
entitled to receive 1.08% of the outstanding
shares of common stock of Newco, plus five-year
warrants to purchase 2.7% of the outstanding
shares of common stock of Newco, at an exercise
price that is consistent with the proposed
exercise price in the Existing Plan, adjusted to
reflect the business combination described herein.
If there is a change of control of Newco within
one year of the effective date of the New Plan,
the exercise price will be reduced consistent with
the reduction in the Existing Plan, adjusted to
reflect the business combination described herein.
The warrants will have customary anti-dilution
provisions.
Warrants and Options
for Common Stock: All outstanding warrants and options to acquire
Wireless One common stock will be canceled with no
distribution.
Management: Compensation and incentive plans for the
benefit of management and key employees of
Wireless One who remain with Newco will be
established to properly compensate and align
the interests of such persons with
stakeholders of Newco. Employment contracts
with members of Wireless One management who
will not remain with Newco will be rejected
and allowed rejection claims which will be
treated as other general unsecured claims.
Board of Directors: The initial Board of Directors of Newco will
consist of the same members of the Board of
Directors of reorganized Heartland.
Releases and Indemnification: Same as in Existing Plan.
Registration Rights: Persons deemed to be affiliates of Newco will
receive registration rights with respect to their
Newco common stock on terms and conditions
customary and usual for transactions of this type.
Conditions Precedent: The transaction will be subject to and conditioned
upon, among other things: (a) confirmation of
Heartland's Plan of Reorganization; (b) approval
of the Bankruptcy Court(s) having jurisdiction
over Heartland and Wireless One; (c) completion of
due diligence satisfactory to Heartland; (d)
approval of the transaction by all required
parties, including the Board of Directors of
reorganized Heartland; (e) expiration or early
termination of any applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act;
(f) filing of the New Plan with the Bankruptcy
Court on or before March 31, 1999 ("Plan Filing
Date"); (g) execution of a definitive Merger
Agreement within 15 days after the Plan Filing
Date; and (h) refinancing of the Wireless One DIP
facility on or before the effective date of the
New Plan.
</TABLE>
