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):
February 10, 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 39208
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
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). The
Company is operating its business as a debtor-in-possession
under the Bankruptcy Code. Pursuant to the requirements of the
Bankruptcy Code and applicable bankruptcy rules, the Company
will be required to file periodic operating reports with the
office of the United States Trustee. Such reports will be
publicly available on file with the Clerk of the Bankruptcy
Court.
On February 11, 1999, the Company issued the press
release attached as Exhibit 99.1 hereto and incorporated by
reference herein. The petition was filed after agreement was
reached with certain holders of the Company's two series of
unsecured senior notes. That agreement contemplates
restructuring in accordance with the Restructuring Term Sheet
attached as Exhibit 99.2 hereto, which is incorporated by
reference herein. In addition, the Company announced that at
the time of filing its petition for reorganization it will seek
approval of a proposed agreement providing for debtor-in-
possession financing. A Summary of Terms describing the
material terms of that proposed agreement is attached as
Exhibit 99.3 hereto and incorporated by reference herein.
ITEM 5. OTHER EVENTS.
The supplier of the modems for the Company's high speed
internet product has notified its customers, including the
Company, 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 Company has made arrangements with the supplier
for the shipment of sufficient modems to meet the Company's
projected needs through August 1999. The Company intends to
work with the supplier or to pursue other ways to resolve long-
term supply needs.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(c) Exhibits.
99.1 Press Release dated February 11, 1999.
99.2 Restructuring Term Sheet
99.3 DIP Facility - Summary of Terms
<PAGE>
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: February 11, 1999 /s/ Henry M. Burkhalter
---------------------------
Henry M. Burkhalter
Chief Executive Officer
EXHIBIT INDEX
EXHIBITS
(c) Exhibits.
99.1 Press Release dated February 11, 1999.
99.2 Restructuring Term Sheet
99.3 DIP Facility - Summary of Terms
CONTACT: Sean Flynn
Gavin Anderson & Co.
212-373-0230
WIRELESS ONE TO IMPLEMENT RESTRUCTURING AGREEMENT THROUGH
PRENEGOTIATED PLAN OF REORGANIZATION
Video and Data Services and Payment of Employees and Vendors,
Will Continue as Normal
JACKSON, MISS., Feb. 11, 1999 - Wireless One, Inc. (OTC Bulletin Board
- - WIRL) announced today that it has reached an agreement (the
"Bondholders Agreement") for a financial reorganization with certain
holders of its two series of unsecured senior notes (collectively, the
"Senior Notes"), including the members of the unofficial ad hoc
committee of holders of the Senior Notes (the "Committee"). Pursuant
to the Bondholders Agreement, Wireless One will file a voluntary
petition today under Chapter 11 of the U.S. Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware in
Wilmington (the "Court").
Under the plan contemplated by the Bondholders Agreement,
Wireless One will eliminate the approximately $327 million of
indebtedness represented by the Senior Notes, allowing it to continue
operations on a stronger financial footing.
Concurrently, Wireless One announced that at the time of filing
it will seek Court approval of a proposed agreement providing for
approximately $18.9 million in debtor-in-possession ("DIP") financing.
Proceeds of the DIP financing will be used to refinance approximately
$14.9 million of principal, interest and related fees on outstanding
notes that the DIP lender had purchased under a pre-petition Senior
Secured Discretionary Note Facility, to pay certain transaction costs
and expenses, and to finance the Company's business plan during the
bankruptcy proceedings.
Henry Burkhalter, president and chief executive officer of
Wireless One, said the Company expects to continue to provide
uninterrupted service to its video and data subscribers and customers
and continue to pay its employee salary, wages and benefits throughout
the reorganization process. The Company stated that it will seek
immediate Court approval to pay prepetition debt owed to trade
creditors who continue to do business with the Company on the same
terms that they did prior to the filing of the petition.
- more -
"Since we began to work on restructuring our finances last year,
our objective has always been to limit the impact on our operations,"
Burkhalter said. "Filing with a prenegotiated agreement under Chapter
11 allows Wireless One both the stability to effectively restructure
its finances and the capacity to continue normal operations and emerge
a stronger, more viable Company."
The Bondholders Agreement contemplates that the Company will file
and seek approval of a plan of reorganization under which the holders
of the Senior Notes would receive 96 percent of the outstanding common
stock of the reorganized company in exchange for cancellation of the
Senior Notes. Existing stockholders of the Company would receive, in
exchange for the cancellation of the existing common stock of the
Company, 4 percent of the common stock of the reorganized Company,
together with warrants to purchase 10 percent of the new common stock
on a fully diluted basis.
Under the Bondholders Agreement, a new employee stock option plan
would be adopted and certain employees would be provided with other
incentives to complete the reorganization and work to increase the
Company's enterprise value after completion of the reorganization.
The Company stated that it expects to file a plan of
reorganization and a disclosure statement reflecting the terms of the
Bondholders Agreement as soon as possible. The noteholders who have
signed the Bondholders Agreement have represented to the Company that
they hold an aggregate of approximately 46 percent of the outstanding
Senior Notes. In addition, the Company stated that it has had
discussions with certain other noteholders and expects that additional
holders of approximately an aggregate of seven percent of the
outstanding Senior Notes will agree to the terms of the Bondholders
Agreement, which would bring the total amount of Senior Notes subject
to the Bondholders Agreement to approximately 53 percent of the
outstanding Senior Notes. Confirmation of a plan of reorganization
will be subject to approval of the Court and will require, among other
things, approval of the plan by a majority of the voting noteholders
who must hold at least two-thirds in amount of the claims represented
by the Senior Notes. Completion of the reorganization will also
require consent of the F.C.C.
The Bondholders Agreement assumes that certain asset dispositions
will be made or additional financing will be obtained, subject to
Committee and Court approval, in order to repay the DIP financing and
provide the Company with adequate working capital after its emergence
from bankruptcy. The Company has no agreements providing for any
asset dispositions or financing, and there can be no assurance that
any such dispositions will occur or that such financing will be
available.
The agreements relating to the DIP financing are publicly
available through the Court. Term sheets summarizing the terms of the
plan of reorganization contemplated under the Bondholders Agreement
and the terms of the DIP financing, and certain other information,
will be contained in a Current Report on Form 8-K filed by the Company
with the Securities and Exchange Commission.
- more -
WIRELESS ONE, INC.
Wireless One, Inc., a Broadband Wireless Access provider, owns,
develops and operates wireless video and data systems in eleven
contiguous states in the Southeast U.S. The Company's exclusive
licenses in the Multi-point Multi-channel Distribution System ("MMDS")
and Wireless Communications Spectrum ("WCS") allow them to reach an
estimated 7,700,000 households and 700,000 businesses in 67 markets.
The Company currently has over 104,000 subscribers.
The Company provides wireless service to single family homes,
multiple dwelling properties, educational institutions and small to
medium businesses. The Company has a marketing alliance with
DIRECTV<O`> that enables it to provide expanded programming via Direct
Broadcast Satellite signal to single family homes and multiple
dwelling properties. In addition, the Company owns a 50 percent
interest in a joint venture, Wireless One of North Carolina, L.L.C.,
that holds exclusive MMDS and WCS licenses in 13 North Carolina
markets covering an additional 3,000,000 households and 290,000
businesses.
FORWARD-LOOKING STATEMENTS
Certain statements made in this press release, 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. 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, without
limitation, Court approval of any plan of reorganization and of the
proposed DIP financing and any other needed approvals, execution of
the proposed agreement providing for DIP financing and the
satisfaction of the conditions set forth in that agreement, including
conditions to the availability of funds outlined in the term sheet
attached to the Company's Form 8-K referred to above, 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, the
possible need for additional DIP financing if the Company's emergence
from bankruptcy is delayed, the future amount of the Company's
negative cash flow, the future results of the Company's operations,
resolution of the Company's supply needs for modems used in the
Company's high-speed product, business opportunities that may be
presented to and pursued by the Company, changes in laws or
regulations, uncertainty of the Company's ability to obtain FCC
authorizations, competition, regulatory restrictions, physical
limitations of wireless cable transmission, changes in general
business and economic conditions in the Company's operation regions
- more -
and issues arising from Year 2000 information technology issues, 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 and under the heading "Cautionary Statements"
in the Company's Form 10-Q for the quarter ended September 30, 1998.
# # #
EDITORS NOTE: More information about Wireless One is available on the
Internet at www. wirelessone.com.
EXHIBIT 99.2
RESTRUCTURING TERM SHEET
GENERAL RESTRUCTURING TERMS
SUMMARY OF TERMS{1}
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DIP FACILITY
Estimated Amount: Repaid with proceeds from the sale of
$18.125 million plus interest certain assets (the "Planned Asset
Dispositions"). The Planned Asset
Dispositions shall be reasonably acceptable
to the Unofficial Committee of Noteholders
(or any successor statutory committee) (the
"Committee") and subject to court approval.
The Planned Asset Dispositions are
anticipated to be completed by April 30,
1999 and, after repayment of DIP claims,
the Company expects to have sufficient cash
available to fund ongoing working capital
requirements upon exit from bankruptcy.
In the event the Company is unable to
complete the Planned Asset Dispositions on
terms that would enable it to reorganize as
a stand-alone entity, it would obtain exit
financing reasonably acceptable to the
Committee to repay the debtor in possession
facility and provide working capital for
operations.
BTA NOTES Reinstated.
Estimated Amount:$24.9 million
SENIOR NOTES AND An exchange of the existing Senior Notes
SENIOR DISCOUNT NOTES (including any accrued but unpaid interest
Estimated Accrued Value: payable on the notes) and Senior Discount
$327 million Notes (at the accreted value) and all
including interest payable claims and causes of action arising
therefrom or in connection therewith for
96% of the Reorganized Equity on a primary
basis (subject to dilution only in
accordance with the terms hereof).
OTHER PRE-PETITION Reinstated or Paid in Full
UNSECUREDINDEBTEDNESS
Estimated Amount: $7-10 million
COMMON STOCK 4% of the Reorganized Equity on a primary
basis (subject to dilution only in
accordance with the terms hereof) and 5
year warrants to purchase 10% of the
Reorganized Equity on a fully diluted basis
at an exercise price that equates to a
total equity value for Reorganized Wireless
One equal to the accreted value of the
Senior Discount Notes and the principal and
accrued but unpaid interest on the Senior
Notes as of the date of filing of the
Company's Chapter 11 petition
(approximately $327 million). The exercise
price of the warrants will be reduced to
$250 million (the "Adjusted Strike Price")
in the event there is a change of control
of the Reorganized Equity within one year
of the effective date of the Company's
Chapter 11 plan of reorganization (the
"Plan"). The Warrants will have customary
anti-dilution provisions.
WARRANTS FOR COMMON STOCK Cancellation thereof and no distribution.
MANAGEMENT 5 year options to purchase 10 % of the
Reorganized Equity. Of these, Management
Options for 4% of the Reorganized Equity
will be awarded by the existing Board of
Directors or Compensation Committee upon
the effective date of the Plan at the
exercise price set forth on Exhibit A
(which is based upon Reorganization Value
of the equity). The remainder of the
Management Options will be awarded by the
Board of Directors of Reorganized Wireless
One at exercise prices and with a vesting
schedule to be determined by such Board.
Management Options awarded upon the
effective date of the Plan will vest one-
third as of the effective date of the Plan,
one-third on the second anniversary of such
effective date and one-third as of the
third anniversary of such effective date.
Notwithstanding the foregoing, all
Management Options will vest immediately
upon a change of control.
The Company and certain senior managers
will also execute management contracts on
terms summarized in Exhibit B attached.
Management will receive the bonuses
described in Exhibit B.
NEW BOARD OF DIRECTORS The new Board of Directors will consist of
seven directors, one of which shall be
Henry Burkhalter. The bondholders will
nominate six directors.
RELEASES AND INDEMNIFICATION The Plan proposed to be confirmed will
provide for (i) releases of Wireless One's
claims (including any derivative claims)
against Wireless One's officers and
directors, (ii) releases of Wireless One's
officers and directors by all of Wireless
One's creditors and interest holders, and
(iii) continuation of indemnification of
directors and officers to the extent
provided in Exhibit C and continuation of
directors' and officers' insurance for
Wireless One's officers and directors at
least at present level of coverage.
</TABLE>
**FOOTNOTES**
{1} CAPITALIZED TERMS USED HEREIN SHALL HAVE THE SAME MEANING AS IN THE
AGREEMENT CONCERNING VOTING. ANY CAPITALIZED TERMS NOT INCLUDED IN THE
AGREEMENT CONCERNING VOTING ARE DEFINED ON THE FOLLOWING PAGE.
1
<PAGE>
DEFINED TERMS
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<CAPTION>
<S> <C>
Reorganized Wireless One The Company, upon the effective date of
the Plan.
Reorganization Value
The theoretical total enterprise
valuation of Reorganized Wireless One
contained in the Company's Disclosure
Statement as approved by the Bankruptcy
Court estimated at $160 million.
Reorganized Equity The new common stock distributed pursuant
to the Plan on the effective date of the
Plan.
Management Options Issued to key senior managers subject to a
separate agreement to incentivize
management to complete the reorganization
and work to increase the Company's
enterprise value after completion of the
reorganization.
</TABLE>
2
<PAGE>
EXHIBIT A
PROPOSED CAPITALIZATION
AND REORGANIZATION VALUE
<TABLE>
<CAPTION>
Amount Number of
New Wireless Ones Capitalization in $ million Shares (000's)
- ------------------------------------------------------------------------------
<S> <C> <C>
BTA Notes $ 24.90 N/A
New Common Stock
Old Unsecured Bondholders $ 129.70 9,600
Old Common Stock Holders $ 5.40 400
-------- ------
Total Enterprise Value Upon Recognition $ 160.00 10,000
======== ======
</TABLE>
Warrants & Options
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Exercise Price
--------------
Options to Management
5 Year options to purchase 444,000 shares $ 13.51
5 Year options to purchase 666,000 shares To be determined by the New
Board of Directors
Warrants to Old Common Stock Holders $ 29.46
</TABLE>
THE ESTIMATES OF ENTERPRISE VALUE SET FORTH HEREIN REPRESENT
HYPOTHETICAL REORGANIZATION ENTERPRISE VALUES THAT WERE DEVELOPED SOLELY
FOR THE PURPOSE OF THE PLAN. SUCH ESTIMATES REFLECT COMPUTATIONS OF THE
ESTIMATED ENTERPRISE VALUE OF REORGANIZED WIRELESS ONE THROUGH THE
APPLICATION OF VARIOUS GENERALLY ACCEPTED VALUATION TECHNIQUES AND DO NOT
REFLECT OR CONSTITUTE APPRAISALS OF THE ASSETS OF THE COMPANY OR THE ACTUAL
MARKET VALUE OF THE COMPANY BECAUSE SUCH ESTIMATES ARE INHERENTLY
UNCERTAIN. NEITHER THE COMPANY NOR BT ALEX. BROWN ASSUMES RESPONSIBILITY
FOR THEIR ACCURACY.
3
<PAGE>
EXHIBIT B
SUMMARY OF MANAGEMENT CONTRACTS
<TABLE>
<CAPTION>
WIRELESS ONE MANAGEMENT Term Annual Salary
- ----------------------------------------------------------------------------
<S> <C> <C>
Henry Burkhalter, President & CEO 3 Years $300,000
Hank Schopfer, Executive Vice President, CFO and 2 Years $145,000
Secretary
Ernest Yates, Executive Vice President & COO 2 Years $220,000
Tom Noulles, Senior Vice President 2 Years $142,000
and General Counsel
</TABLE>
OTHER FEATURES
- --------------
Use of a company car or car allowance
1 year severance; 1 1/2 years on change of control
Annual performance bonus at the discretion of the new Board of Directors
Standard employee benefits such as health care
SUMMARY OF BONUSES
- ------------------
Retention and 1998 performance bonuses in an aggregate
amount of $400,000 to be paid on the effective date of the Plan to
employees employed by the Company as of such date and who do not have
employment agreements, to be allocated as determined by the existing
Board of Directors or Compensation Committee, which may delegate
authority to the CEO.
In addition, bonuses in an aggregate amount of $70,000 to
be paid on the effective date of the Plan to the employees listed
above, other than Mr. Burkhalter, who as of such date have employment
agreements with the Company and are employed by the Company, to be
allocated as determined by the existing Board of Directors or
Compensation Committee, which may delegate authority to the CEO.
4
<PAGE>
EXHIBIT C
INDEMNIFICATION
Subject to the occurrence of the effective date of the Plan, the
obligations of the Company, 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
Company on or after August 1, 1998, respectively, against any claims
or causes of action as provided in the Company's certificate of
incorporation, bylaws, applicable state law or contract, insofar as
any such claims or causes of action arise out of acts or omissions
occuring on or after August 1, 1998, shall survive confirmation of
the Plan, remain unaffected thereby and not be discharged
5
EXHIBIT 99.3
DIP FACILITY
SUMMARY OF TERMS
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE DEBTOR-IN-
POSSESSION ("DIP") FINANCING FACILITY PROPOSED TO BE PROVIDED BY MERRILL LYNCH
GLOBAL ALLOCATION FUND TO WIRELESS ONE, INC. COMPLETE COPIES OF THE AGREEMENTS
PROVIDING FOR THE DIP FACILITY ARE AVAILABLE THROUGH THE U.S. BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE.
<TABLE>
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BORROWER Wireless One, Inc.
PURCHASER Merrill Lynch Global Allocation Fund
("MLGAF")
GUARANTORS All material Subsidiaries
AMOUNT $18,125,000 plus all accrued interest
on the Discretionary Notes
(the "Existing Notes") issued under the
September 4, 1998 MLGAF Discretionary
Note Purchase Agreement (the "Existing
Note Purchase Agreement"); PROVIDED,
HOWEVER, that only approximately
$2,000,000 in excess of the Existing
Notes will be available to the Company
until such time as a final order has
been entered approving the retention of
a third party consultant acceptable to
the Purchaser
PURPOSE To (i) refinance the Existing Notes
issued under the Existing Note Purchase
Agreement in an aggregate principal
amount of $13,500,000, as well as a
$625,000 facility fee and accrued
interest due to the Purchaser in
connection with the Existing Notes,
(ii) pay certain transaction costs and
expenses, and (iii) finance the
Company's Business Plan
MATURITY The earliest of (i) the 6 month
anniversary of the Petition Date,
(ii) redemption of the Notes by the
Company, (iii) an Event of Default, or
(iv) the effective date of
reorganization
INTEREST 15% per annum payable at maturity
PRIORITY AND SECURITY Superpriority claim, and a perfected
lien on all existing and future assets
of the Borrower and the Guarantors
(including the stock of the
subsidiaries of the Borrower and the
Guarantor), which will be a first
priority lien to the extent any of such
assets are not otherwise encumbered
by a lien, or a subordinated lien
subject to any existing liens (in each
case in accordance with Sections 364(c)
(1), (2) and (3) of the U.S. Bankruptcy
Code), subject in each case to: (x)
following the occurrence of an event of
default under the Debtor-in-Possession
facility, the payment of professional
fees and disbursements allowed by order
of the Bankruptcy Court incurred by the
Company or the Unofficial Noteholders'
Committee of up to $500,000 (in
addition to compensation previously
awarded by order of the Bankruptcy
Court) and (ii) the payment of fees
pursuant to 28 U.S.C. Section 1930 and
any fees payable to the Clerk of the
Bankruptcy Court
FACILITY FEE 5% per annum of the principal amount of
the Debtor-In-Possession facility, due
quarterly in advance for the first
quarter and due monthly in advance
thereafter, in each case, payable at
maturity
MANDATORY PREPAYMENT At par plus accrued interest upon
receipt of net cash proceeds from (i)
the issuance of additional debt or
equity permitted under the note
purchase documentation, (ii) certain
extraordinary non-recurring, non-
operating receipts not used in
accordance with the Business Plan, and
(iii) proceeds from asset dispositions
not permitted by the Debtor-In-
Possession facility
OPTIONAL REDEMPTION At whole or in part at 100% of the
principal plus accrued interest
CONDITIONS PRECEDENT (i) Receipt by the Purchaser of the
Business Plan, including weekly and
monthly cash flow and financial
projections, covering the Chapter 11
period, (ii) retention of a third party
consultant acceptable to the Purchaser
to provide financial reporting and
management assistance to the Borrower,
and (iii) other conditions that are
usual and customary for a Debtor-In-
Possession facility
REPRESENTATIONS AND WARRANTIES Absence of any material adverse changes
in the business, and other represen-
tations and warranties customary for a
Debtor-In-Possession facility of this
type
COVENANTS / EVENTS OF DEFAULT Those appropriate in the context of the
proposed Debtor-In-Possession
financing and substantially similar to
those set forth in the Existing Note
Purchase Agreement (applicable to the
Borrower and its subsidiaries), and
others appropriate, in the judgment of
the Purchaser, including the filing
within 45 days subsequent to the
Closing Date of a Plan of
Reorganization acceptable to the
Purchaser
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