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): August 5, 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 Incorporation) Identification No.)
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)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS.
On August 5, 1999, the Company filed a First Amended Plan of Reorganization
(the "Amended Plan of Reorganization") and a First Amended Disclosure Statement
(the "Amended Disclosure Statement") and certain other related documents with
the United States Bankruptcy Court for the district of Delaware(the "Bankruptcy
Court"). The Amended Plan of Reorganization is attached as Exhibit 99.1 hereto
and is incorporated herein by reference. The Amended Disclosure Statement is
attached as Exhibit 99.2 hereto and is incorporated herein by reference. The
Amended Plan of Reorganization and the Amended Disclosure Statement amend the
initial Plan of Reorganization and Disclosure Statement filed with the
Bankruptcy Court on or about March 15, 1999 and remain subject to further
revision and amendment as well as approval by the Bankruptcy Court. The
Amended Disclosure Statement has not been approved by the Bankruptcy Court for
use in the solicitation of acceptances of the Amended Plan of Reorganization
pursuant to Section 1125(b) of the Bankruptcy Code. Accordingly, the filing and
dissemination of the Amended 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
Amended Disclosure Statement contains adequate information. Dissemination of
the Amended Disclosure Statement is controlled by Bankruptcy Rule 3017.
The projected financial information to be included in the Amended
Disclosure Statement as well as certain statements made in the Amended Plan of
Reorganization and the Amended 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
Amended Disclosure Statement as well as, without limitation, Bankruptcy Court
approval of the Amended Disclosure Statement and any other needed approvals and
confirmation and consummation of the Amended Plan of Reorganization, 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, 1998, under the heading
"Cautionary Statements" in the Company's Form 10-Q for the quarter ended
March 31, 1999 and under the heading "Certain Risk Factors to be Considered"
in the Amended Disclosure Statement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
99.1 First Amended Plan of Reorganization dated August 5, 1999.
99.2 First Amended Disclosure Statement dated August 5, 1999.
<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: August 11, 1999 /s/ Thomas G. Noulles
-----------------------
Thomas G. Noulles
Senior Vice President and General Counsel
<PAGE>
EXHIBIT INDEX
EXHIBITS
(c) Exhibits.
99.1 First Amended Plan of Reorganization dated August 5, 1999.
99.2 First Amended Disclosure Statement dated August 5, 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 FIRST AMENDED 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: August 5, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS AND INTERPRETATIONS................................ 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. Other Old Senior Note Claims (Class 5)............................ 13
4.6. MCI WorldCom Claims and Interests (Class 6)....................... 13
4.7. Indemnity Claims (Class 7)........................................ 13
4.8. Old Common Stock Interests (Class 8).............................. 14
4.9. Other Equity Interests (Class 9).................................. 14
4.10. 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........................................ 15
6.1. Distributions..................................................... 15
6.2. Issuance of New Securities........................................ 15
6.3. Cash Payments by MCI WorldCom..................................... 15
6.4. Exit Financing.................................................... 15
6.5. Bankruptcy Incentive Compensation................................. 15
6.6. Cancellation of Existing Securities and Agreements................ 15
6.7. Corporate Action.................................................. 16
6.8. Restated Certificate of Incorporation............................. 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. Setoffs and Recoupment............................................ 18
7.8. Distributions After Effective Date................................ 18
7.9. Rights and Powers of Disbursing Agent............................. 18
7.10. Exculpation...................................................... 18
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....................... 19
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.................................... 20
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..................................... 22
11.5. Indemnification Obligations...................................... 23
11.6. Releases......................................................... 23
SECTION 12. WAIVER OF AVOIDANCE ACTION CLAIMS............................. 23
SECTION 13. RETENTION OF JURISDICTION..................................... 23
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................................. 25
14.6. Severability of Plan Provisions.................................. 25
14.7. Notices.......................................................... 26
14.8. Governing Law.................................................... 27
14.9. Binding Effect................................................... 28
<PAGE>
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 August 5, 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.
Aggregate Exercise Proceeds means the aggregate exercise price payable if all
of the Old Unexercised Options and Warrants were
to be exercised.
Aggregate Option and Warrant Shares means the number of shares of common stock of the
Debtor which the holders of Old Unexercised
Options and Warrants would be entitled to purchase
upon exercise of such options and warrants.
Alex. Brown means BT Alex. Brown, Inc. or any successor or
assign thereof.
Alex. Brown Stipulation means that certain stipulation among BT Alex.
Brown, the Debtor and the unofficial committee of
certain holders of Old Senior Notes dated as of
March 31, 1999.
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 $21.1 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 and MCI WorldCom.
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.
Indemnity Claim means a Claim 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 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.
MCI WorldCom means MCI WORLDCOM, Inc. and any subsidiaries or
affiliates thereof.
MCI WorldCom Claims and Interests means the Claims and Equity Interests held
directly or indirectly by MCI WorldCom, other than
a Claim of MCI WorldCom associated with the
Postpetition Financing.
MCI WorldCom Old Senior Notes means Old Senior Notes held directly or indirectly
by MCI WorldCom.
New Common Stock means the shares of common stock of Reorganized
Wireless to be issued and outstanding as of the
Effective Date.
Old Common Stock means the issued and outstanding common stock of
the Debtor other than such common stock as is
included among MCI WorldCom Claims and Interests.
Old Common Stock Interest means an Equity Interest represented by shares of
Old Common Stock and the Old Unexercised Options
and Warrants.
Old Common Stock Share Amount means an amount equal to (x) $22,611,110 plus the
Aggregate Exercise Proceeds divided by (y) the
number of shares of Old Common Stock plus the
Aggregate Option and Warrant Shares.
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 Unexercised Options and Warrants means the options and warrants to purchase shares
of the common stock of the Debtor (other than such
options and warrants as are included among MCI
WorldCom Claims and Interests) which (i) are
exercisable as of the Effective Date and (ii) have
an exercise price that is less than the amount
derived by dividing (x) $22,611,110 by (y) the
total number of issued and outstanding shares of
common stock of the Debtor (other than such stock
as is included among MCI WorldCom Claims and
Interests) assuming that all such options and
warrants have been exercised.
Other Equity Interest means an Equity Interest in the Debtor, including
warrants and options, other than an Old Common
Stock Interest.
Other Old Senior Notes means Old Senior Notes other than MCI WorldCom Old
Senior Notes.
Other Old Senior Note Claim means a Claim arising under or in connection with
the Other Old Senior Notes or the Old Indentures
in respect thereof.
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 August 5, 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 MCI WorldCom approved by
the Bankruptcy Court on July 20, 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.
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.
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 or MCI WorldCom
Claims and Interests.
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, MCI Claims
and Interests or a Secured Claim.
</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 treated in accordance with its
terms pursuant to section 6.4 hereof.
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 -- Other Old Senior Note Claims
Class 6 -- MCI WorldCom Claims and Interests
Class 7 -- Indemnity Claims
Class 8 -- Old Common Stock Interests
Class 9 -- 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 Other Old Senior Note Claims (Class 5).
On the Effective Date, each Other Old Senior Note Claim shall be
Allowed in the amount of outstanding principal plus accrued and unpaid
interest owed in respect thereof on the Effective Date, or accreted value
as of the Effective Date, as applicable. On the Effective Date, each
holder of an Allowed Other Old Senior Note Claim will be paid in full, in
Cash the amount of its Allowed Other Old Senior Note Claims. The Old
Senior Notes and any Equity Interests issued in connection therewith shall
be cancelled on the Effective Date.
4.6 MCI WorldCom Claims and Interests (Class 6)
Notwithstanding anything herein to the contrary, on the Effective
Date, in respect of the MCI WorldCom Claims and Interests and the Cash
payments required under section 6.3 hereof, MCI WorldCom shall receive only
the New Common Stock. MCI WorldCom Claims and Interests, including the MCI
WorldCom Old Senior Notes, shall be cancelled on the Effective Date.
4.7 Indemnity Claims (Class 7).
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.
4.8 Old Common Stock Interests (Class 8).
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, Cash in an amount equal to (i) in the case of a holder of
Old Common Stock, the number of shares of Old Common Stock multiplied by
the Old Common Stock Share Amount or (ii) in the case of a holder of an Old
Unexercised Option and Warrant, (x) the number of shares of common stock of
the Debtor which such Old Unexercised Option and Warrant entitled such
holder to purchase multiplied by the Old Common Stock Share Amount minus
(y) the aggregate exercise price payable under such Old Unexercised Option
and Warrant to purchase such number of shares of common stock. On the
Effective Date, the Old Common Stock and the Old Unexercised Options and
Warrants shall be cancelled.
4.9 Other Equity Interests (Class 9).
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.
4.10 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 Alex. Brown Stipulation, Alex Brown has agreed to
treatment of its Claim in the manner set forth therein; provided, however,
in lieu of the 50,000 shares of New Common Stock prescribed thereby, Alex.
Brown will receive $1,478,500 in Cash on the Effective Date.
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 (Other Old Senior Note Claims), Class 6 (MCI WorldCom
Claims and Interests), Class 7 (Indemnity Claims), and Class 8 (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 9 (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 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 1000 shares of New Common Stock by Reorganized
Wireless is hereby authorized without further act or action under
applicable law, regulation, order or rule.
6.3 Cash Payments by MCI WorldCom.
On the Effective Date, MCI WorldCom shall pay to the Debtor such Cash
as is necessary to make the Cash distributions and any other Cash payments
required hereunder. Following the Effective Date, Reorganized Wireless and
MCI WorldCom shall determine the terms and conditions for any repayment of
Cash paid by MCI WorldCom pursuant to this section 6.3.
6.4 Exit Financing.
The Postpetition Financing shall continue in effect in accordance with
its terms.
6.5 Bankruptcy Incentive Compensation.
On the Effective Date, Reorganized Wireless shall, subject to the
immediately following sentence, make Cash payments to the management of the
Debtor totaling $8,129,640 with the allocation of such amount to be
determined by the Debtor's existing Board of Directors. The Debtor's
existing Board of Directors in consultation with MCI WorldCom and with the
consent of the affected recipient may determine that a portion of the
payments to be made will be deferred.
6.6 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.
6.7 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 three members selected by MCI
WorldCom. The initial members of the Board of Directors of Reorganized
Wireless 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. On the Effective Date,
Reorganized Wireless shall enter into management contracts with the
officers of the Debtor on terms consistent with those set forth in the
Disclosure Statement.
6.8 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.
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 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.
7.8 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.
7.9 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.
7.10 Exculpation.
The Debtor, Reorganized Wireless, MCI WorldCom 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, the plan of
reorganization and disclosure statement filed on March 15, 1999, the
administration of the Plan or the property to be distributed under the Plan
or the Chapter 11 Case, 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 and the Chapter 11
Case.
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 10 Business Days prior to the commencement of the
hearing on approval of the Plan 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 who were not
a director or officer, respectively, at any time on or after 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 Confirmation Order, in form and substance reasonably
acceptable to the Debtor and MCI WorldCom, 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.
(b) An order shall have been entered by the Bankruptcy Court
estimating the Bondholder Litigation Claims and the Stockholder Litigation
Claims at zero.
(c) 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.
(d) 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).
(e) All other actions and all agreements, instruments or other
documents necessary to implement the terms and provisions hereof shall have
been effected, including the payment set forth in section 6.3 hereof.
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 MCI
WorldCom. 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
and MCI WorldCom).
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 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.
Notwithstanding the foregoing and without limiting its effect, on the
Effective Date, MCI WorldCom shall execute documents which will memorialize
these releases.
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 and MCI WorldCom
(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 MCI WorldCom.
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
and
Bryan Cave LLP
211 North Broadway, Suite 3600
St. Louis, Missouri 63012-2750
Attn: Gregory D. Willard, Esq.
Telephone: (314) 259-2000
Telecopier: (314) 259-2020
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.
<PAGE>
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
and assigns, including, without limitation, Reorganized Wireless.
Dated: August __, 1999
Respectfully submitted,
Wireless One, Inc.
By:____________________________________
Name: Henry G. Schopfer, III
Title: Executive Vice President, Chief
Financial Officer and Secretary
<PAGE>
INDEX OF EXHIBIT
EXHIBIT 1 - Restated Certificate of Incorporation of Reorganized Wireless
EXHIBIT 1
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 (the "Delaware General Corporation
Law") and, pursuant to such provisions, 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 Delaware General Corporation Law.
<PAGE>
ARTICLE IV
The total number of shares of capital stock that the Corporation
shall have authority to issue is 1,000, par value $.01 per share. No non-
voting equity securities of the Corporation shall be issued by the
Corporation.
ARTICLE V
All corporate powers of the Corporation shall be exercised by or
under the direction of the Board of Directors except as otherwise provided
herein or by applicable law. In furtherance and not in limitation of the
powers conferred by law, the Board of Directors is expressly authorized:
(i) to adopt, amend or repeal By-laws of the Corporation,
subject to the right of the stockholders of the Corporation entitled
to vote with respect thereto to adopt, amend or repeal By-laws made by
the Board of Directors; and
(ii) from time to time to determine whether and to what
extent, at what time and place, and under what conditions and
regulations the accounts and books of the Corporation, or any of them,
shall be open to the inspection of any stockholder; and no stockholder
shall have any right to inspect any account or book or document of the
Corporation except as provided by applicable law or the By-laws of the
Corporation or as authorized by resolution of the stockholders or
Board of Directors of the Corporation.
ARTICLE VI
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of
fiduciary duty by such director as a director; provided, however, that the
foregoing shall not be deemed to eliminate or limit the liability of a
director to the extent provided by applicable law (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from
which the director derived an improper personal benefit. This provision is
not intended to eliminate or narrow any defenses to or protection against
liability otherwise available to directors of the Corporation. No
amendment to or repeal of this ARTICLE VI shall apply to or have any effect
on the liability or alleged liability of any director of the Corporation
for or with respect to any acts or omissions of such director occurring
prior to such amendment.
<PAGE>
IN WITNESS WHEREOF, the undersigned, for the purpose of amending
and restating the Corporation's Certificate of Incorporation pursuant to
the General Corporation Law of the State of Delaware, does make this
Restated Certificate of Incorporation on ______________, 1999.
WIRELESS ONE, INC.
By:___________________________________
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
_____________________________________
In re:
CHAPTER 11
WIRELESS ONE, INC.,
Case No. 99-295 (PJW)
Debtor.
_____________________________________
DEBTOR'S FIRST AMENDED 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
August 5, 1999
THIS PROPOSED FIRST AMENDED DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE
BANKRUPTCY COURT FOR USE IN THE SOLICITATION OF ACCEPTANCES OF THE FIRST
AMENDED PLAN DISCLOSED PURSUANT TO SECTION 1125(B) OF THE BANKRUPTCY CODE.
ACCORDINGLY, THE FILING AND DISSEMINATION OF THIS PROPOSED FIRST AMENDED
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
FIRST AMENDED DISCLOSURE STATEMENT CONTAINS ADEQUATE INFORMATION.
DISSEMINATION OF THIS PROPOSED FIRST AMENDED DISCLOSURE STATEMENT IS CONTROLLED
BY BANKRUPTCY RULE 3017.
<PAGE>
TABLE OF CONTENTS
PAGE
I. INTRODUCTION...................................................... 1
A. Holders of Claims and Equity Interests Entitled to Vote..... 3
B. Voting Procedures........................................... 4
C. Confirmation Hearing........................................ 5
II. OVERVIEW OF THE FIRST AMENDED PLAN................................ 6
III. GENERAL INFORMATION............................................... 8
A. Description and History of Business......................... 8
1. Business.................................................. 8
2. History................................................... 11
3. Significant Indebtedness.................................. 11
4. Selected Historical Financial Data........................ 12
B. Events Leading to the Commencement of the Chapter 11 Case... 13
IV. EVENTS DURING THE CHAPTER 11 CASE................................. 15
A. Continuation of Business; Stay of Litigation................ 15
B. First Day Orders............................................ 15
C. Statutory Committee......................................... 16
D. Debtor in Possession Financing.............................. 16
E. Alex. Brown Stipulation..................................... 18
F. Planned Asset Dispositions.................................. 18
G. New Postpetition Financing.................................. 19
H. Extension of the Debtor's Exclusive Period to File, and Solicit
Acceptances of a Plan of Reorganization.................. 20
I. Bar Date for Filing Proofs of Claim and Interest............ 22
V. THE FIRST AMENDED PLAN OF REORGANIZATION.......................... 23
A. Classification and Treatment of Claims and Equity Interests. 23
1. Administrative Expense Claims............................. 23
2. Priority Tax Claims....................................... 24
3. Class 1 - Priority Non-Tax Claims......................... 24
4. Class 2 - Secured Claims.................................. 25
5. Class 3 - BTA Installment Note Claims..................... 25
6. Class 4 - Unsecured Claims................................ 25
7. Class 5 - Other Old Senior Note Claims.................... 26
8. Class 6 -- MCI WorldCom Claims and Interests.............. 26
9. Class 7 - Indemnity Claims................................ 26
10. Class 8 - Old Common Stock Interests..................... 26
11. Class 9 - Other Equity Interests......................... 27
12. Alternative Treatment for Holders of Allowed Claims or
Equity Interests........................................ 27
B. New Common Stock to be Issued Under the First Amended Plan.. 27
C. Means of Implementation..................................... 27
1. Distributions............................................. 27
2. Issuance of New Securities................................ 28
3. Cash Payments by MCI WorldCom............................. 28
4. Exit Financing............................................ 28
5. Bankruptcy Incentive Compensation......................... 28
6. Cancellation of Existing Securities and Agreements........ 28
7. Corporate Action.......................................... 28
8. Restated Certificate of Incorporation..................... 29
D. Provisions Governing Distributions.......................... 29
1. Date of Distributions..................................... 29
2. Disbursing Agent.......................................... 29
3. Surrender of Instruments.................................. 30
4. Compensation of Professionals............................. 30
5. Delivery of Distributions................................. 30
6. Manner of Payment Under the First Amended Plan............ 31
7. Setoffs and Recoupment.................................... 31
8. Distributions After Effective Date........................ 31
9. Rights and Powers of Disbursing Agent..................... 31
a. Powers of the Disbursing Agent....................... 31
b. Expenses Incurred on or After the Effective Date..... 31
10. Exculpation............................................... 31
E. Resolution of Disputed Claims and Interests.................... 32
F. Executory Contracts and Unexpired Leases....................... 33
1. Assumption and Rejection of Executory Contracts and
Unexpired Leases........................................ 33
2. Amendments to Schedule; Effect of Amendments.............. 33
3. Bar to Rejection Damage Claims............................ 33
4. Certain Indemnification Obligations....................... 34
G. Conditions to Confirmation and Effective Date.................. 34
H. Effect of Confirmation......................................... 35
1. Vesting of Assets......................................... 35
2. Binding Effect............................................ 35
3. Discharge of Debtor....................................... 35
4. Term of Injunctions or Stays.............................. 35
5. Indemnification Obligations............................... 35
6. Releases.................................................. 36
I. Waiver of Certain Claims....................................... 36
J. Retention of Jurisdiction by the Bankruptcy Court.............. 37
K. Summary of Other Provisions of the First Amended Plan.......... 37
1. Payment of Statutory Fees................................. 38
2. Retiree Benefits.......................................... 38
3. Administrative Expenses Incurred After the Confirmation
Date.................................................... 38
4. Section 1125(e) of the Bankruptcy Code.................... 38
5. Compliance with Tax Requirements.......................... 38
6. Severability of Plan Provisions........................... 39
7. Governing Law............................................. 39
VI. CONFIRMATION AND CONSUMMATION PROCEDURE........................... 39
A. Solicitation of Votes.......................................... 39
B. The Confirmation Hearing....................................... 40
C. Confirmation................................................... 41
1. Acceptance................................................ 41
2. Unfair Discrimination and Fair and Equitable Tests........ 41
a. Secured Creditors.................................... 41
b. Unsecured Creditors.................................. 42
c. Equity Interests..................................... 42
3. Feasibility............................................... 42
a. Capacity of MCI WorldCom to Make Required Plan
Payments.......................................... 42
b. Financial Projections................................ 42
c. Business Strategy -- Overview........................ 43
d. Subscription Video................................... 44
e. WarpOne -- High-Speed Data/Internet.................. 44
f. Additional Financing................................. 45
4. Best Interests Test....................................... 45
D. Consummation................................................... 47
VII. MANAGEMENT OF REORGANIZED DEBTOR.................................. 47
A. Board of Directors and Management.............................. 47
1. Composition of the Board of Directors..................... 47
2. Identity of Officers...................................... 47
B. Compensation of Executive Officers............................. 48
C. Management Contracts........................................... 49
D. Bankruptcy Incentive Compensation.............................. 49
E. Other Compensation Plans....................................... 50
VIII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS TO THE NEW
COMMON STOCK TO BE DISTRIBUTED UNDER THE FIRST AMENDED PLAN..... 50
IX. REORGANIZATION VALUES........................................... 51
X. CERTAIN RISK FACTORS TO BE CONSIDERED........................... 52
A. Projected Financial Information................................ 52
B. Hart-Scott-Rodino Act Requirements............................. 52
XI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE FIRST AMENDED
PLAN............................................................ 53
A. Introduction................................................... 53
B. Federal Income Tax Consequences to the Debtor.................. 53
1. Cancellation of Indebtedness and Reduction of Tax
Attributes.............................................. 53
2. Section 382 Limitations on NOLs........................... 55
3. Section 269 Limitation on NOLs............................ 56
C. Federal Income Tax Consequences to Holders of Other Old Senior
Notes (Class 5).............................................. 57
D. Federal Income Tax Consequences to MCI WorldCom (Class 6)...... 58
E. Federal Income Tax Consequences to Holders of Old Common Stock
Interests (Class 8).......................................... 59
F. Federal Income Tax Consequences to Holders of Other Claims..... 59
G. Accrued Interest and Original Issue Discount................... 59
H. Backup Withholding and Information Reporting................... 60
XII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE FIRST AMENDED
PLAN............................................................ 61
A. Liquidation Under Chapter 7.................................... 61
B. Alternative Plan of Reorganization............................. 61
XIII. CONCLUSION AND RECOMMENDATION................................... 63
<PAGE>
INDEX OF EXHIBITS
EXHIBIT A - First Amended 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 First Amended
Plan
EXHIBIT C - Wireless One, Inc. Form 10-K for the Year ended December 31,
1998 and Form 10-Q for the Quarter ended March 31, 1999
EXHIBIT D - Projected Financial Information [TO BE PROVIDED]
EXHIBIT E - Liquidation Analysis [TO BE PROVIDED]
<PAGE>
GLOSSARY
<TABLE>
<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.
Aggregate Exercise Proceeds means the aggregate exercise price payable if all
of the Old Unexercised Options and Warrants were
to be exercised.
Aggregate Option and Warrant Shares means the number of shares of common stock of the
Debtor which the holders of Old Unexercised
Options and Warrants would be entitled to purchase
upon exercise of such options and warrants.
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 $21.1 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
First Amended 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 a plan of
reorganization under chapter 11 of the Bankruptcy
Code, as such hearing may be adjourned or
continued from time to time.
Confirmation Order means the order of the Bankruptcy Court confirming
a plan of reorganization under chapter 11 of the
Bankruptcy Code, which shall be in a form
reasonably acceptable to the Debtor and MCI
WorldCom.
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 First
Amended Plan.
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 First Amended
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.
Indemnity Claim means a Claim of a director or officer of the
Debtor who was not a director or officer,
respectively, at any time on or after August 1,
1998 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.
MCI WorldCom means MCI WORLDCOM, Inc. and any subsidiaries or
affiliates.
MCI WorldCom Claims and Interests means the Claims and Equity Interests held
directly or indirectly by MCI WorldCom, other than
a Claim of MCI WorldCom associated with the New
Postpetition Financing.
MCI WorldCom Old Senior Notes means Old Senior Notes held directly or indirectly
by MCI WorldCom.
New Common Stock means the shares of common stock of Reorganized
Wireless to be issued and outstanding as of the
Effective Date.
Old Common Stock means the issued and outstanding common stock of
the Debtor other than such common stock as is
included among MCI WorldCom Claims and Interests.
Old Common Stock Interest means an Equity Interest represented by shares of
Old Common Stock and the Old Unexercised Options
and Warrants.
Old Common Stock Share Amount means an amount equal to (x) $22,611,110 plus the
Aggregate Exercise Proceeds divided by (y) the
number of shares of Old Common Stock plus the
Aggregate Option and Warrant Shares.
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 Unexercised Options and Warrants means the options and warrants to purchase shares
of the common stock of the Debtor (other than such
options and warrants as are included among MCI
WorldCom Claims and Interests) which are (i)
exercisable as of the Effective Date and (ii) have
an exercise price that is less than the amount
derived by dividing (x) $22,611,110 by (y) the
total number of issued and outstanding shares of
common stock of the Debtor (other than such stock
as is included among MCI WorldCom Claims and
Interest) assuming that all such options and
warrants have been exercised.
Other Equity Interest means an Equity Interest in the Debtor, including
warrants and options, other than an Old Common
Stock Interest.
Other Old Senior Notes means Old Senior Notes other than MCI WorldCom Old
Senior Notes.
Other Old Senior Note Claim means a Claim arising under or in connection with
the Other Old Senior Notes or the Old Indentures
in respect thereof.
Petition Date means February 11, 1999, the date on which the
Debtor commenced the Chapter 11 Case.
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.
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 a plan of
reorganization under chapter 11 of the Bankruptcy
Code.
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 First Amended 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.
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 or MCI WorldCom
Claims and Interests.
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, MCI WorldCom
Claims and Interests or a Secured Claim.
</TABLE>
<PAGE>
I. INTRODUCTION
Wireless One, Inc., a Delaware corporation ("Wireless" or the
"Debtor"), submits this Disclosure Statement dated August 5, 1999 (the
"First Amended 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 First Amended Plan of
Reorganization under Chapter 11 of the Bankruptcy Code dated August 5, 1999
(the "First Amended 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 First Amended 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 First Amended
Plan.
On March 15, 1999, the Debtor filed a proposed plan of reorganization
(the "Original Plan") and proposed disclosure statement (the "Original
Disclosure Statement") with the Bankruptcy Court. The Original Plan
reflected the terms of an agreement that had been reached with the
Unofficial Noteholders' Committee (as defined below) and certain other
large holders of the Debtor's Old Senior Notes. The Original Plan assumed
that the enterprise value of Reorganized Wireless was approximately $160
million. Under the terms of the Original Plan, holders of the Debtor's Old
Senior Notes would have received their pro rata share of 95.5% of the
equity of Reorganized Wireless, and holders of the Debtor's Old Common
Stock would have received their pro rata share of approximately 4% of the
equity of Reorganized Wireless, plus warrants to purchase an additional 10%
(on a fully diluted basis) of the equity of Reorganized Wireless at an
exercise price of $29.57 per share. Additionally, the Original Plan
provided that all other creditors of the Debtor (other than holders of
certain indemnity claims), including the holders of the Debtor's BTA
Installment Notes, were to be unimpaired.
Subsequent to the filing of the Original Plan, certain events took
place in the Debtor's industry which indicated that the total enterprise
value of the Debtor had dramatically increased. (For a more detailed
description of these events, see Section IV.H., "Events During the Chapter
11 Case -- Extension of the Debtor's Exclusive Period to File and Solicit
Acceptances of a Plan of Reorganization".) Additionally, subsequent to the
filing of the Original Disclosure Statement and the Original Plan, MCI
WorldCom informed the Debtor that it had purchased a significant amount of
the Debtor's Old Senior Notes. In May 1999, the Debtor came to believe
that certain provisions of the Original Plan may be inappropriate given the
changes in the Debtor's industry. Accordingly, the Debtor did not seek
approval of the Original Disclosure Statement or the Original Plan and
instead determined to amend the Original Plan and Original Disclosure
Statement.
The Debtor and MCI WorldCom have negotiated the terms of the proposed
First Amended Plan, which is based on an assumed total enterprise value of
$420 million. Compared to the Original Plan, the Debtor believes that the
First Amended Plan offers significantly greater returns to holders of the
Debtor's Old Senior Notes and Old Common Stock than the Original Plan. The
First Amended Plan proposes to distribute 100% of the equity of Reorganized
Wireless to MCI WorldCom in respect of its Old Senior Notes and the cash
needed to fund the distributions described below. Holders of Old Senior
Notes other than MCI WorldCom will receive a cash payment of the principal
amount and accrued interest as of the Effective Date of the First Amended
Plan, or the accreted value as of the Effective Date of the Original Plan,
as applicable. Under the First Amended Plan, holders of the Debtor's Old
Common Stock (and holders of certain exercisable options and warrants) will
receive their pro rata share of approximately $22.6 million (less the
exercise price in the case of the options and warrants). All classes of
creditors that were to be rendered unimpaired under the Original Plan will
be rendered unimpaired under the First Amended Plan as well.
Attached as Exhibits to this First Amended Disclosure Statement are
copies of the following:
* The First Amended Plan (Exhibit A);
* Order of the Bankruptcy Court dated _________ __, 1999 (the
"Disclosure Statement Order"), among other things, approving this First
Amended Disclosure Statement and establishing certain procedures with
respect to the solicitation and tabulation of votes to accept or reject the
First Amended Plan (Exhibit B);
* Wireless One, Inc. Form 10-K for the Year ended December 31, 1998
and Form 10-Q for the Quarter ended March 31, 1999 (Exhibit C);
* Projected Financial Information (Exhibit D) [TO BE PROVIDED]; and
* Liquidation Analysis (Exhibit E) [TO BE PROVIDED].
In addition, a ballot for the acceptance or rejection of the First Amended
Plan is enclosed with the First Amended Disclosure Statement submitted to
the holders of Claims and Equity Interests that the Debtor believes may be
entitled to vote to accept or reject the First Amended Plan.
On _________ __, 1999, after notice and a hearing, the Bankruptcy
Court approved this First Amended 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 First Amended Plan. APPROVAL OF THIS FIRST AMENDED DISCLOSURE
STATEMENT DOES NOT, HOWEVER, CONSTITUTE A DETERMINATION BY THE BANKRUPTCY
COURT AS TO THE FAIRNESS OR MERITS OF THE FIRST AMENDED 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 First Amended Plan and for filing
objections to confirmation of the First Amended 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 First Amended Plan
should read the First Amended Disclosure Statement, the First Amended Plan,
the Disclosure Statement Order and the instructions accompanying the
ballots in their entirety before voting on the First Amended 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 First Amended
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 (Other Old Senior Note Claims), 6 (MCI WorldCom Claims and
Interests) 7 (Indemnity Claims) and 8 (Old Common Stock Interests) of the
First Amended 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 First Amended Plan. Holders of Claims and
Equity Interests in those Classes are entitled to vote to accept or reject
the First Amended Plan. Classes 1 (Priority Non-Tax Claims), 2 (Secured
Claims), 3 (BTA Installment Note Claims) and 4 (Unsecured Claims) are
unimpaired under the First Amended Plan and the holders of Claims in those
Classes are conclusively presumed to have accepted the First Amended Plan.
Class 9 (Other Equity Interests) are impaired and are not retaining any
property or receiving any distribution under the First Amended Plan.
Accordingly, holders of Equity Interests in this Class are deemed to have
rejected the First Amended Plan. Therefore, the Debtor is soliciting
acceptances only from holders of Allowed Claims in Classes 5, 6 and 7 and
holders of Allowed Equity Interests in Class 8.
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. The Bankruptcy Code
defines "acceptance" of a plan by a class of interests (such as equity
security holders) as acceptance by interest holders in that class that hold
at least two-thirds in amount of the allowed interests that cast ballots
for acceptance or rejection of the plan. For a complete description of the
requirements for confirmation of the First Amended Plan, see Section VI.,
"Confirmation and Consummation Procedure."
If a Class of Claims or Equity Interests rejects the First Amended
Plan or is deemed to reject the First Amended Plan, the Debtor has the
right to request confirmation of the First Amended 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 First Amended
Plan votes to reject the First Amended Plan, the Debtor will request
confirmation of the First Amended Plan over the rejection of the First
Amended Plan by such Class or Classes. The determination as to whether to
seek confirmation of the First Amended 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 First Amended
Plan, a ballot is enclosed for the purpose of voting on the First Amended
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
FIRST AMENDED 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 FIRST AMENDED SHALL BE
DEEMED TO CONSTITUTE AN ACCEPTANCE OF THE FIRST AMENDED 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 First Amended Plan.
Pursuant to the First Amended Disclosure Statement Order, the
Bankruptcy Court set __________ __, 1999 as the record date for voting on
the First Amended Plan. Accordingly, only holders of record as of
__________ __, 1999 that are otherwise entitled to vote under the First
Amended Plan will receive a ballot and may vote on the First Amended Plan.
If you are a holder of a Claim or Equity Interest entitled to vote on
the First Amended Plan and did not receive a ballot, received a damaged
ballot or lost your ballot, or if you have any questions concerning the
First Amended Disclosure Statement, the First Amended Plan or the
procedures for voting on the First Amended 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 First Amended 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 FIRST AMENDED DISCLOSURE STATEMENT
ARE MADE AS OF THE DATE HEREOF UNLESS ANOTHER TIME IS SPECIFIED HEREIN, AND
THE DELIVERY OF THIS FIRST AMENDED 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 FIRST AMENDED DISCLOSURE STATEMENT IN ITS ENTIRETY, INCLUDING THE
FIRST AMENDED PLAN, PRIOR TO VOTING ON THE FIRST AMENDED PLAN.
FOR THE CONVENIENCE OF HOLDERS OF CLAIMS AND EQUITY INTERESTS, THIS
FIRST AMENDED DISCLOSURE STATEMENT SUMMARIZES THE TERMS OF THE FIRST
AMENDED PLAN, BUT THE FIRST AMENDED PLAN ITSELF QUALIFIES ALL SUMMARIES.
IF ANY INCONSISTENCY EXISTS BETWEEN THE FIRST AMENDED PLAN AND THE FIRST
AMENDED DISCLOSURE STATEMENT, THE TERMS OF THE FIRST AMENDED PLAN ARE
CONTROLLING. THE FIRST AMENDED DISCLOSURE STATEMENT MAY NOT BE RELIED ON
FOR ANY PURPOSE OTHER THAN TO DETERMINE WHETHER TO VOTE TO ACCEPT OR REJECT
THE FIRST AMENDED 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 FIRST AMENDED PLAN ON THE DEBTOR
OR HOLDERS OF CLAIMS OR EQUITY INTERESTS. CERTAIN OF THE STATEMENTS
CONTAINED IN THIS FIRST AMENDED 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 FIRST AMENDED DISCLOSURE STATEMENT, "CERTAIN RISK
FACTORS TO BE CONSIDERED," BEFORE VOTING TO ACCEPT OR REJECT THE FIRST
AMENDED PLAN.
SUMMARIES OF CERTAIN PROVISIONS OF AGREEMENTS REFERRED TO IN THIS
FIRST AMENDED 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 FIRST AMENDED PLAN WILL ENABLE IT TO
SUCCESSFULLY REORGANIZE AND ACCOMPLISH THE OBJECTIVES OF CHAPTER 11 AND
THAT ACCEPTANCE OF THE FIRST AMENDED 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 FIRST AMENDED
PLAN.
After carefully reviewing this First Amended Disclosure Statement,
including the Exhibits, each holder of an Allowed Claim in Classes 5, 6 and
7 and each holder of an Allowed Equity Interest in Class 8 should vote on
the First Amended Plan.
II. OVERVIEW OF THE FIRST AMENDED PLAN
The following table briefly summarizes the classification and
treatment of Claims and Equity Interests under the First Amended Plan. The
recoveries set forth below are merely estimated recoveries based upon
various assumptions. For a discussion of the valuation of Reorganized
Wireless, see Section IX., "Reorganization Values."
<TABLE>
<CAPTION>
SUMMARY OF CLASSIFICATION AND TREATMENT
OF CLAIMS AND EQUITY INTERESTS UNDER THE FIRST AMENDED 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 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 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 Other Old Senior Note Claims Impaired; the Old Senior Notes 100%
shall be cancelled and holders on
the Record Date of Allowed Other
Old Senior Note Claims shall be
paid in full, in Cash the amount
of outstanding principal and
unpaid interest owed in respect
thereof on the Effective Date, or
accreted value as of the
Effective Date, as applicable.
6 MCI WorldCom Claims and Impaired; MCI WorldCom shall 92%{2}
Interests receive the New Common Stock
7 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.
8 Old Common Stock Interests Impaired; Old Common Stock $1.32 per share
Interests shall be cancelled and (less the
holders on the Record Date of exercise price in
Allowed Old Common Stock the case of
Interests shall receive a pro certain
rata share of $22,611,100 (less exercisable
the exercise price in the case of options and
certain options and warrants). warrants)
9 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 37 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.{3}
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, WGN, 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.{4} 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 connection with its high-
speed Internet access business, Wireless also offers technical support, e-
mail, Web hosting, domain name registration and maintenance and, through
independent contractors, Web design. Wireless also has an eCommerce
partnership with Netgateway, Inc. whereby Netgateway has created an
electronic mall at www.wirelessonemall.com. The mall allows businesses to
set up economical eCommerce "storefronts" to offer products and services
and gives consumers a convenient, no-charge and secure place to shop on the
Internet.
In total, the licenses of Wireless cover an estimated 11.2
million gross housing Units in 111 market areas (including the Debtor's
share of gross housing units covered by a 50% interest that it owns in a
limited liability company that holds channel rights to serve 13 markets in
North Carolina without existing operations). As of July 1, 1999 Wireless
had over 96,000 subscribers in the 37 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
July 1, 1999, Wireless employed approximately 400 persons.
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 have been 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 Merrill
Lynch Global Allocation Fund, Inc. ("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 Original
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 $21.1 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, 1998, December 31, 1997 and December 31, 1996
has been derived from the audited financial statements of Wireless. 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.
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------
1998 1997 1996
---------- ------------ ------------
(In thousands, except share data)
<S> <C> <C> <C>
Statement of operations data:
Revenues.................................................... $ 38,737 $ 34,580 $ 11,365
Operating expenses:
Systems operations......................................... 25,490 23,398 8,416
Selling, general and administrative........................ 25,405 28,318 15,559
Depreciation and amortization.............................. 40,377 35,741 11,626
----------- ----------- -----------
91,272 87,457 35,601
----------- ----------- -----------
Operating loss............................................. (52,535) (52,877) (24,236)
----------- ----------- -----------
Interest expense........................................... (46,015) (41,829) (28,088)
Interest income............................................ 1,124 4,711 8,147
Impairment of Long-Lived Assets............................ (26,270) ----- -----
----------- ----------- -----------
Gain on Sale of Investments................................ 1,000 ----- -----
----------- ----------- -----------
Other...................................................... (230) ----- -----
----------- ----------- -----------
Equity in losses of investee............................... (540) (445) (193)
----------- ----------- -----------
Total other expense (70,931) (37,563) (20,134)
----------- ----------- -----------
Loss before income taxes................................... 123,466 (90,440) (44,370)
Income tax benefit......................................... 5,200 1,300 4,700
----------- ----------- -----------
Net loss................................................... (118,266) (89,140) (39,670)
Preferred stock dividends and discount accretion........... ----- ----- -----
----------- ----------- -----------
Net loss applicable to common stock........................ $ (118,266) $ (89,140) $ (39,670)
=========== =========== ===========
Basic and diluted loss per
common share............................................... $ (6.99) $ (5.26) $ (2.65)
=========== =========== ===========
Basic and diluted weighted average common shares
outstanding................................................ 16,910,064 16,940,374 14,961,934
=========== =========== ===========
</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, Inc. as financial advisors
to review the business operations of Wireless, including its immediate working
capital needs. With the assistance of BT Alex. Brown, Inc. 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 an unofficial committee of
certain large holders of the Old Senior Notes (the "Unofficial Noteholders'
Committee"), whose members included 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 Original Plan. The basis of the Noteholders
Agreement was a complete conversion of the Old Senior Notes into the New Common
Stock. In addition, the Noteholders Agreement proposed to treat general
unsecured creditors of Wireless (other than the holders of the Old Senior
Notes) as unimpaired.
Subsequent to purchases by MCI WorldCom of Old Senior Notes, counsel for
the Unofficial Noteholders' Committee informed the Bankruptcy Court that its
members no longer held any Old Senior Notes and that the Unofficial
Noteholders' Committee would not be participating in the Chapter 11 Case.
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
First Amended 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 First Amended 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 "Original 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 Original Postpetition Financing, MLGAF provided 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
Original Postpetition Financing on February 12, 1999 (the "DIP Note"). The
aggregate amount of Original 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").
Amounts outstanding under the Original Postpetition Financing bore
interest at 15% per annum. The Original Postpetition Financing would have
terminated on the earliest to occur 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 Original
Postpetition Financing), (iii) the date of the redemption of the DIP Note by
Wireless and (iv) the Effective Date. The Original Postpetition Financing
provided for a "facility fee" of 5% per annum, to be paid by the Debtor. This
fee was due in advance for the first quarter and monthly in advance thereafter
and accrued interest at the interest rate accruing on the DIP Note from and
after the date due, and was payable on the Maturity Date.
Under the terms of the Original Postpetition Financing, all obligations of
the Debtor to the holder of the DIP Note were:
(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 Original Postpetition Financing contained substantially the same
affirmative and negative covenants as those contained in the Senior Secured
Facility. In addition, the Postpetition Financing provided 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 the Debtor 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 the Debtor is
permitted by Bankruptcy Court order to pay); (iii) the granting by the Debtor
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 Original
Postpetition Financing was not entered by the Bankruptcy Court within 30 days
after the Petition Date; (vii) any interim or final order approving the
Original 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 Petition Date which results in a Material Adverse Change (as defined
in the Original Postpetition Financing); (xi) after having been retained
pursuant to a final order, a financial consultant reasonably satisfactory to
the holder of the DIP Note shall cease for any reason (other than for reasons
unrelated to noncooperation by the Debtor) to be employed or otherwise retained
without the prior written consent of the holder of the DIP Note; and (xii) the
filing of a plan of reorganization that is not in form and substance reasonably
satisfactory to the holder of the DIP Note.
The Original Postpetition Financing was guaranteed by each of the direct
and indirect non-debtor subsidiaries that was a guarantor to the Senior Secured
Facility.
In April 1999, MLGAF assigned its interest in the DIP Note to MCI
WorldCom. As noted below, in June 1999 MCI WorldCom agreed to provide the
Debtor with new postpetition financing on terms more favorable to the Debtor
than the Original Postpetition Financing (the "New Postpetition Financing").
The New Postpetition Financing replaces and supersedes the Original
Postpetition Financing, as noted below.
E. ALEX. BROWN STIPULATION.
On March 25, 1998, the Debtor and BT Alex. Brown, Inc. (including any
successors or assigns, "Alex. Brown") entered into an agreement (the
"Engagement Letter") under the terms of which 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 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, 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 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 Alex. Brown have agreed to enter into
a stipulation setting forth a settlement of these claims (the "Alex. Brown
Stipulation"). The Bankruptcy Court approved the Alex. Brown Stipulation on
May 14, 1999.
The Alex. Brown Stipulation required Reorganized Wireless, on the
Effective Date of the Original Plan or as soon thereafter as practicable, to
(i) pay Alex. Brown $500,000 in cash and (ii) issue to Alex. Brown 50,000
shares of New Common Stock. This consideration would have been in full
satisfaction of Alex. Brown's claim under the Engagement Letter. In addition,
Alex. Brown has agreed to cooperate with the Debtor and the Debtor's
professionals in aid of confirmation of the Original 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.
MCI WorldCom has requested, and Alex. Brown has agreed to, alternate
treatment in lieu of distribution of the New Common Stock to Alex. Brown.
Under the First Amended Plan, Alex. Brown will receive Cash from MCI WorldCom
in the amount of $1,478,500 instead of 50,000 shares of New Common Stock plus
(as set forth in the Alex. Brown Stipulation) $500,000 for a total of
$1,978,500.
F. PLANNED ASSET DISPOSITIONS.
During the pendency of the Chapter 11 Case, Wireless and/or its
subsidiaries has sold and 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 has sold a hardwire cable system (as
contrasted to the Debtor's core business of wireless cable) in Huntsville,
Alabama. The sale of this system was approved by the Bankruptcy Court on May
25, 1999. This sale yielded proceeds of $750,000 for the Debtor.
In addition, pursuant to certain limited liability company organizational
documents and other agreements, Wireless One of North Carolina, LLC, a limited
liability company in which the Debtor holds 50% of the membership interests,
received from a subsidiary of the Debtor certain FCC licenses and has taken on
certain debt obligations associated therewith. The Debtor, through its
subsidiary, has received the sum of $714,300 for its participation in this
transaction. This transaction was approved by the Bankruptcy Court on May 11,
1999.
The Debtor may also seek to sell certain transmission towers used by the
Debtor to transmit its signals and will arrange with any proposed purchaser to
lease only the space that the Debtor needs on these towers. In addition, the
Debtor will be seeking to sell excess inventory of customer premises equipment
("CPE"), including reception antennas and decoding boxes. The Debtor may
identify and seek to sell other assets in certain markets during the Chapter 11
Case. Any further Planned Asset Dispositions will be the subject of motions
filed with the Bankruptcy Court seeking such approval as may be necessary under
the Bankruptcy Code.
G. NEW POSTPETITION FINANCING.
During the course of the Chapter 11 Case, the Debtor actively solicited
proposals from alternate lenders to provide financing on terms more favorable
than those contained in the Original Postpetition Financing described above.
In particular, the Debtor sought additional funds for the conduct of its
business from a facility that would continue to be available after the
confirmation of a plan of reorganization. As a result of this search, in May
1999, the Debtor received a proposal for such financing from an alternate
lender. MCI WorldCom subsequently indicated that it would be willing to
provide a similar facility to the Debtor on more favorable terms. Between June
18 and June 22, 1999, MCI WorldCom and the alternate lender participated in an
auction procedure approved by the Bankruptcy Court to determine which
prospective lender would provide financing to the Debtor on the most favorable
terms. As a result of the auction and with the approval of the Bankruptcy
Court, the Debtor entered into a commitment letter providing for a new
postpetition facility from MCI WorldCom on terms more favorable than the
Original Postpetition Financing. The Debtor received the approval of the
Bankruptcy Court to enter into the New Postpetition Financing on July 20, 1999,
and the New Post petition Financing was consummated on July 21, 1999.
Under the terms of the New Postpetition Financing, MCI WorldCom provided
to the Debtor a term loan in the aggregate principal amount of $36.05 million,
which will convert to an exit facility upon the consummation of the Debtor's
plan of reorganization. This principal amount includes (i) approximately $20
million of indebtedness under the Original Postpetition Financing, and (ii) a
commitment fee of $360,500 (equivalent to 1% of the aggregate amount of the New
Postpetition Financing) due to MCI WorldCom in connection with the New
Postpetition Financing. Claims and liens of MCI WorldCom to secure the
indebtedness under the New Postpetition Facility shall be afforded the same
priority status as those claims under the Original Postpetition Financing. The
terms and conditions of the New Postpetition Financing are substantially
similar to those of the Original Postpetition Financing, except as detailed
below.
The New Postpetition Financing will terminate on the earliest to occur of
(i) July 23, 2001; or (ii) the date of substantial consummation of a plan of
reorganization for the Debtor which has not been approved by MCI WorldCom,
provided, however, that MCI WorldCom shall not have any approval rights with
respect to the allocation of the equity of Reorganized Wireless.
Amounts outstanding under the New Postpetition Financing will bear
interest at 10% per annum, which shall, at the option of the Debtor, be payable
quarterly in arrears, or accrue (i.e., pay-in-kind) monthly in arrears.
The New Postpetition Financing contains similar affirmative and negative
covenants as those required by the Original Postpetition Financing. In
addition, the New Postpetition Financing provides for certain other
requirements customary for an exit financing facility, such as financial
covenants related to minimum gross revenue and EBITDA, tested both quarterly
and cumulatively, as well as certain other bankruptcy related defaults, such as
(i) the granting of any other superpriority claim or lien which is senior to or
pari passu with those granted with respect to the New Postpetition Financing in
the chapter 11 case; (ii) the order approving the New Postpetition Financing is
stayed, modified, reversed or vacated; (iii) the Bankrutpcy Court enters an
order granting relief from the automatic stay so as to allow the holder of a
security interest to proceed against any asset of the Debtor having a book
value equal to or exceeding $100,000 in the aggregate; (iv) a plan of
reorganization is confirmed that does not provide for the full payment in cash
of the Debtor's obligations under the New Postpetition Financing on the
Maturity Date; (v) an order shall be entered which dismisses the case and does
not provide for payment in full in cash of the Debtor's obligations under the
New Postpetition Facility; and (vi) the Debtor shall take any action, including
the filing of an application in support of any of the foregoing, or any person
other than the Debtor shall do so and such application is not contested in good
faith by the Debtor and the relief requested is granted in an order that is not
stayed pending appeal.
Each of the Debtor's wholly-owned, direct and indirect subsidiaries is
also a borrower under the New Postpetition Financing.
H. EXTENSION OF THE DEBTOR'S EXCLUSIVE PERIOD TO FILE, AND SOLICIT
ACCEPTANCES OF A PLAN OF REORGANIZATION.
In May 1999, in order to assess significant changes within the wireless
cable industry, the Debtor filed a motion with the Bankruptcy Court seeking an
extension of the time period in which the Debtor retains the exclusive right to
file and solicit acceptance for a plan of reorganization. In April 1999,
several transactions took place in the Debtor's industry which had a
significant effect on the valuation of companies in the wireless cable
industry. Three of the four companies which were selected in January of 1999
by the Debtor's prepetition investment bankers as comparable public companies
to the Debtor were purchased by either Sprint Corporation ("Sprint") or MCI
WorldCom at the end of April and the beginning of May of this year.{5} A
nonpublic company in the Debtor's industry, the Videotron Group, which was also
included in the investment banker's valuation analysis of the Debtor, was
purchased in May of this year by Sprint.
The Debtor believes that the assumptions which underlie the Original Plan
are now outdated in light of those events. At the time of the commencement of
the Chapter 11 Case, the Original Plan was premised upon a total enterprise
value for the Debtor of approximately $160 million. This valuation, performed
by the Debtor's prepetition investment banker, used standard techniques which
rely on the value of companies similar to the Debtor in the same industry. The
Debtor had come to believe that the purchase of certain other entities in the
wireless cable industry had a significant effect upon the valuations of the
purchased entities. For example, under a common method of comparing values of
companies in this industry (total enterprise value per line-of-sight ("LOS")
housing unit{6}), the acquisition of People's Choice Television, Inc. ("PCTV")
by Sprint yields a total enterprise value per LOS housing unit of $58.22.{7}
As of February 1, 1999, based upon the stock price at that time, PCTV had a
total enterprise value per LOS housing unit of $5.49. The acquisition by MCI
WorldCom of CAI Wireless, a company that emerged from bankruptcy in October of
1998, resulted in a total enterprise value per LOS housing unit of $53.64.{8}
This compares to a total enterprise value per LOS housing unit of $8.34 on
February 1, 1999 based upon the stock price of CAI Wireless at that time.{9}
Sprint's acquisitions of American Telecasting, Inc. and the Videotron Group
have been made at prices that impute similar total enterprise values per LOS
housing unit.
The only public company of those viewed as comparable to the Debtor that
has not been purchased by Sprint or MCI is Nucentrix Broadband Networks, Inc.
(formerly known as Heartland Wireless Communications, Inc.) ("Nucentrix").
However, the increase in the stock price of Nucentrix in the weeks following
the effective date of its plan of reorganization results in a similar increase
in total enterprise value per LOS housing unit. Under Nucentrix's plan of
reorganization, the stock of the reorganized company had an assumed range of
value of between $12 and $17 per share.{10} After the effective date of
Nucentrix's plan of reorganization in April 1999, the stock price rose, within
only a week and a half, from the opening trade of $14.75 to a closing price of
$33.93. As of July 31, 1999, the stock price of Nucentrix yields a total
enterprise value per LOS housing unit of $38.17.{11}
Because of the events noted above, in May 1999 the Debtor came to believe
that the underlying notions upon which the Original Plan was based had changed
dramatically. The Debtor believed that, because it was possible or even likely
that the value of the Debtor was in excess of the amount owed to its creditors,
the provisions of the Original Plan may have been inappropriate.
The Debtor determined that it would require time to understand fully the
effect of these industry developments on its business and, if necessary, craft
a revised plan of reorganization. (The First Amended Plan and First Amended
Disclosure Statement are the result of the Debtor's efforts to take the
industry developments into account.) In May 1999, therefore, the Debtor
requested an adjournment of its scheduled hearing on approval of the Original
Disclosure Statement, and filed a motion seeking an extension of the time
period in which the Debtor retained the exclusive right to file a plan of
reorganization. The Bankruptcy Court approved the extension of the time period
in which the Debtor retained the exclusive right to file a plan of
reorganization on July 20, 1999. The Debtor's exclusive period to file a plan
of reorganization now expires on October 31, 1999, if not further extended by
order of the Bankruptcy Court.
I. BAR DATE FOR FILING PROOFS OF CLAIM AND INTEREST.
On May 27, 1999, the Debtor filed a motion with the Bankruptcy Court
requesting that the Bankruptcy Court set July 23, 1999 as the bar date for
filing proofs of claim and proofs of interest. The Bankruptcy Court granted
the requested relief on June 4, 1999 (the "Bar Date Order"). Under the terms
of the Bar Date Order, any creditor or equity securityholder which did not file
a proof of claim or interest before July 23, 1999, except as noted below, would
be barred from asserting a claim or interest in any amount exceeding the amount
set forth in the Debtor's schedules (and not listed as contingent, unliquidated
or disputed). In accordance with the requirements of the Bankruptcy Code and
the Bar Date Order, the Debtor published notice of the Bar Date Order in The
Wall Street Journal and the Jackson Clarion-Ledger and mailed notice of the
requirements of the Bar Date Order and the amount and nature of any claim or
interest scheduled for the recipient of the notice to all scheduled and known
potential creditors and equity security holders.
By request of the Debtor, the Bankruptcy Court entered an order on July
29, 1999 providing that holders of Equity Interests will be allowed an
additional thirty days from the mailing of an amended notice of the Bar Date
Order to file a Proof of Interest, in order to avoid any possible prejudice
that may have resulted from any delay in filing a list of such holders of
Equity Interests. In addition, the United States Government has filed a motion
with the Bankruptcy Court seeking an extension of the time for federal
governmental units to file a proof of Claim until August 10, 1999. The Debtor
does not plan to oppose this motion.
V. THE FIRST AMENDED PLAN OF REORGANIZATION
The Debtor believes that (i) through the First Amended Plan, creditors
will obtain a substantially greater recovery from the estate of the Debtor than
under the Original Plan and than the recovery which would be available if the
assets of the Debtor were liquidated under chapter 7 of the Bankruptcy Code and
(ii) the First Amended Plan will afford the Debtor the opportunity and ability
to continue in business as a viable going concern.
The First Amended Plan is annexed hereto as Exhibit A and forms a part of
this First Amended Disclosure Statement. The summary of the First Amended Plan
set forth below is qualified in its entirety by reference to the more detailed
provisions set forth in the First Amended 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 treated in accordance with its
terms pursuant to Section 6.4 of the First Amended Plan.
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 the
Debtor 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 First Amended 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
First Amended 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 First Amended 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 First Amended 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 - OTHER OLD SENIOR NOTE CLAIMS
Class 5 consists of all Allowed Other Old Senior Note Claims. Class
5 is impaired. Pursuant to the First Amended Plan, on the Effective Date or as
soon as practicable thereafter, holders of Allowed Other Old Senior Note Claims
on the Record Date will be paid in full in cash the amount of their Allowed
Other Old Senior Notes Claims. The Old Senior Notes and any Equity Interests
issued in connection therewith will be cancelled on the Effective Date.
Accordingly, under the First Amended Plan, holders in Class 5 of
Allowed 1995 Senior Note Claims will receive in Cash the amount of outstanding
principal plus accrued and unpaid interest in respect thereof as of the
Effective Date and holders of Allowed 1996 Senior Discount Note Claims will
receive in Cash the accreted value of such notes as of the Effective Date. The
Debtor estimates that such cash payments will be $3.9 million including
interest in respect of the Class 5 1995 Senior Note Claims and $12.0 million in
respect of Class 5 1996 Senior Discount Note Claims (assuming an Effective Date
of September 30, 1999).
8. CLASS 6 -- MCI WORLDCOM CLAIMS AND INTERESTS
Class 6 consists of the MCI WorldCom Claims and Interests. Class 6
is impaired. Pursuant to the First Amended Plan, on the Effective Date, in
respect of the MCI WorldCom Claims and Interests and the Cash payments required
under the First Amended Plan, MCI WorldCom will receive 100% of the New Common
Stock. MCI WorldCom Claims and Interests, including the MCI WorldCom Old
Senior Notes, will be cancelled on the Effective Date.
The Debtor believes that MCI WorldCom holds Old Senior Notes with a
value of $341.1 million as of the Effective Date (including accrued and unpaid
interest in the case of the 1995 Senior Notes and the accreted value of the
1996 Senior Discount Notes as of such date). Additionally, MCI WorldCom will
fund all payments contemplated by the First Amended Plan.
9. CLASS 7 - INDEMNITY CLAIMS
Class 7 consists of all Allowed Indemnity Claims. Class 7 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 First Amended Plan only, the value of
each Allowed Indemnity Claim will be deemed to be $1.
10. CLASS 8 - OLD COMMON STOCK INTERESTS
Class 8 consists of all Allowed Old Common Stock Interests. Class 8
is impaired. Pursuant to the First Amended Plan, on the Effective Date or as
soon as practicable thereafter, holders of Allowed Old Common Stock Interests
on the Record Date will receive Cash in an amount equal to (i) in the case of a
holder of Old Common Stock, the number of shares of Old Common Stock multiplied
by the Old Common Stock Share Amount or (ii) in the case of a holder of an Old
Unexercised Option and Warrant, (x) the number of shares of common stock of the
Debtor which such Old Unexercised Option and Warrant entitled such holder to
purchase multiplied by the Old Common Stock Share Amount minus (y) the
aggregate exercise price payable under such Old Unexercised Option and Warrant
to purchase such number of shares of Common Stock. The Old Common Stock and
any Equity Interests issued in connection therewith or otherwise related
thereto and the Old Unexercised Options and Warrants will be cancelled on the
Effective Date.
Accordingly, under the First Amended Plan, holders of Allowed Old
Common Stock Interests will receive approximately $1.32 per share of common
stock of the Debtor (less the exercise price of the warrants and options in the
case of holders of Old Unexercised Options and Warrants).
11. CLASS 9 - OTHER EQUITY INTERESTS
Class 9 consists of all Other Equity Interests. Class 9 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.
12. 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 First Amended 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
First Amended Plan.
As set forth above, Alex. Brown has agreed, pursuant to the Alex.
Brown Stipulation and the First Amended Plan, 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 Alex. Brown under the First Amended Plan.
B. NEW COMMON STOCK TO BE ISSUED UNDER THE FIRST AMENDED PLAN.
Pursuant to the First Amended Plan, on the Effective Date, all Equity
Interests will be cancelled. On the Effective Date, Reorganized Wireless will
distribute 1,000 shares of New Common Stock to MCI WorldCom.
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 and
Cash as provided in Section 4 of the First Amended Plan. Disputed Claims shall
be resolved in accordance with Section 8 of the First Amended 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 First
Amended Plan.
2. ISSUANCE OF NEW SECURITIES.
The issuance of 1000 shares of New Common Stock by Reorganized
Wireless is authorized under the First Amended Plan without further act or
action under applicable law, regulation, order or rule.
3. CASH PAYMENTS BY MCI WORLDCOM.
On the Effective Date, MCI WorldCom shall pay to the Debtor such Cash
as is necessary to make the Cash distributions and any other Cash payments
required under the First Amended Plan. Following the Effective Date,
Reorganized Wireless and MCI WorldCom shall determine the terms and conditions
for any repayment of cash paid by MCI WorldCom pursuant to Section 6.3 of the
First Amended Plan.
4. EXIT FINANCING.
The New Postpetition Financing will continue in effect in accordance
with its terms.
5. BANKRUPTCY INCENTIVE COMPENSATION.
On the Effective Date, Reorganized Wireless will, subject to the
immediately following sentence, make Cash payments to the management of the
Debtor totaling $8,129,640 with the allocation of such amount to be determined
by the Debtor's existing Board of Directors. The Debtor's existing Board of
Directors in consultation with MCI WorldCom and with the consent of the
affected recipient may determine that a portion of the payments to be made will
be deferred.
6. 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 First Amended Plan in respect of Claims and Equity
Interests.
7. 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 initial Board of Directors of Reorganized Wireless will consist
of three members selected by MCI WorldCom. The initial members of the Board of
Directors of Reorganized Wireless will 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 will be disclosed in the First Amended Disclosure
Statement or an amendment or supplement to the First Amended 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. On the Effective Date, Reorganized
Wireless shall enter into management contracts with the officers of the Debtor
on terms consistent with those set forth in Section VII hereof.
8. 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.
D. PROVISIONS GOVERNING DISTRIBUTIONS.
1. DATE OF DISTRIBUTIONS.
Any distributions and deliveries to be made under the First Amended
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 First Amended 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 First Amended 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 First Amended
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 First Amended 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 FIRST AMENDED PLAN.
At the option of the Disbursing Agent, any Cash payment to be made
under the First Amended Plan may be made by a check or wire transfer or as
otherwise required or provided in applicable agreements.
7. 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 First
Amended 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.
8. 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.
9. 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 First Amended 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 First
Amended Plan, or as deemed by the Disbursing Agent to be necessary and proper
to implement the provisions of the First Amended 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.
10. EXCULPATION.
The Debtor, Reorganized Wireless, MCI WorldCom, 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 Original Plan, Original Disclosure
Statement, the First Amended Disclosure Statement, the First Amended Plan, the
solicitation of votes for and the pursuit of confirmation of the First Amended
Plan, the consummation of the First Amended Plan, the administration of the
First Amended Plan or the property to be distributed under the First Amended
Plan or the Chapter 11 Case, 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 First Amended Plan and the Chapter 11
Case.
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 First Amended 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 First Amended Plan.
Pursuant to Bankruptcy Rule 3018(a), a Disputed Claim will not be counted
for purposes of voting on the First Amended 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 First Amended 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 First Amended Plan filed
by the Debtor on or before 10 Business Days prior to the commencement of the
hearing on approval of the First Amended Plan 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 First Amended Plan or (iv) is otherwise assumed pursuant to
the First Amended Plan. Each executory contract and unexpired lease listed on
Schedule 9.1 to the First Amended 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 First Amended
Plan and (ii) executory contracts or unexpired leases appurtenant to the
premises listed on Schedule 9.1 to the First Amended 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 First Amended 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 First
Amended 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 First Amended 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 First Amended 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 First
Amended 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 who were not a director or
officer, respectively, at any time on or after August 1, 1998 shall be deemed
to be, and shall be treated as though they are, executory contracts that are
rejected under the First Amended Plan. Any Claims arising from such rejection
shall be treated as Indemnity Claims under Section 4.6 of the First Amended
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 Confirmation Order, in form and substance reasonably
acceptable to the Debtor and MCI WorldCom 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.
b. An order shall have been entered by the Bankruptcy Court
estimating the Bondholder Litigation Claims and the Stockholder Litigation
Claims at zero.
c. All Unsecured Claims shall have become Allowed Claims,
Disallowed Claims or estimated for distribution purposes under the First
Amended 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.
d. The Debtor shall have received approval from the 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 subsidiaries.
e. All other actions and all agreements, instruments or other
documents necessary to implement the terms and provisions of the First Amended
Plan shall have been effected, including the payment set forth in section 6.3
of the First Amended Plan.
Each of the conditions specified above may be waived, in whole or in part,
by the Debtor, with the prior written consent of MCI WorldCom. 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 and MCI WorldCom).
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 First Amended 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 First Amended 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 First Amended Plan and whether or not such
holder has accepted the First Amended Plan.
3. DISCHARGE OF DEBTOR.
Except to the extent otherwise provided in the First Amended Plan,
the treatment of all Claims against or Equity Interests in the Debtor under the
First Amended 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 First Amended 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 First
Amended Plan. Except as otherwise provided in the First Amended 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 shall survive confirmation of the First Amended Plan, remain
unaffected thereby and not be discharged.
The Debtor's by-laws and certificate of incorporation both (i)
provide that no director shall be liable to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director to the fullest
extent permitted by the DGCL and (ii) provide for indemnification of each
person made a party or threatened to be made a party to any action, suit or
proceeding by reason of the fact that such person is or was a director or
officer of the corporation against all expense, liability and loss reasonably
incurred or suffered in connection therewith to the fullest extent authorized
by the DGCL. Section 145 of the DGCL provides, among other things, that a
corporation shall have power to indemnify a person who is or was a director or
officer of the corporation against expenses, judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
any action, suit or proceeding to which such person is or is threatened to be
made a party, if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the person's conduct was unlawful.
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 First Amended 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 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 First Amended Plan. The Debtor believes
that the foregoing releases may be permissible under the Bankruptcy Code;
nonetheless, some courts have reached contrary conclusions.
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 First Amended 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 First Amended Plan to the
extent authorized by section 1142 of the Bankruptcy Code; (vii) to consider any
amendments to or modifications of the First Amended 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 the First Amended 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 First Amended 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 First
Amended Plan; and (xiv) to enter a final decree closing the Chapter 11 Case.
K. SUMMARY OF OTHER PROVISIONS OF THE FIRST AMENDED PLAN.
The following paragraphs summarize certain other significant provisions of
the First Amended Plan. The Plan should be referred to for the complete text
of these and other provisions of the First Amended 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 First Amended 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 First Amended Plan in good faith and in compliance
with the applicable provisions of the Bankruptcy Code. The Debtor and MCI
WorldCom (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 First Amended 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 First
Amended Plan or the offer and issuance of securities under the First Amended
Plan.
5. COMPLIANCE WITH TAX REQUIREMENTS.
In connection with the consummation of the First Amended 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 First Amended 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 First Amended 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
First Amended 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 First Amended Plan shall require the
consent of the Debtor and MCI WorldCom.
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 First Amended 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 First Amended 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 (MCI WorldCom Claims and Interests),
7 (Indemnity Claims) and 8 (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 First Amended 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
First Amended 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 9 (Other Equity Interests) will not
retain property or receive distributions under the First Amended Plan on
account of such Equity Interests and the holders of such Equity Interests are
deemed to have rejected the First Amended 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 First Amended
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.
Bryan Cave LLP
Suite 3600
211 North Broadway
St. Louis, Missouri 63102-2750
Attn: Gregory D. Willard, Esq.
Objections to confirmation of the First Amended Plan are governed by Bankruptcy
Rules 3015 and 9014.
C. CONFIRMATION.
At the Confirmation Hearing, the Bankruptcy Court will confirm the First
Amended 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, 7 and 8 of the First Amended Plan are impaired under
the First Amended Plan and are entitled to vote to accept or reject the First
Amended Plan. The Debtor reserves the right to seek nonconsensual confirmation
of the First Amended Plan with respect to any Class of Claims or Equity
Interests that is entitled to vote to accept or reject the First Amended Plan
if such Class rejects the First Amended Plan.
2. UNFAIR DISCRIMINATION AND FAIR AND EQUITABLE TESTS.
To obtain nonconsensual confirmation of the First Amended Plan, it
must be demonstrated to the Bankruptcy Court that the First Amended 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 First Amended 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 First Amended
Plan.
c. EQUITY INTERESTS.
Either (i) each holder of an equity interest will receive or retain
under the First Amended 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 First Amended Plan.
The Debtor believes that the First Amended Plan and the treatment of
all Classes of Claims and Equity Interests under the First Amended Plan satisfy
the foregoing requirements for nonconsensual confirmation of the First Amended
Plan.
3. FEASIBILITY.
a. CAPACITY OF MCI WORLDCOM TO MAKE REQUIRED PLAN PAYMENTS.
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 First Amended Plan
meets this requirement, Wireless has reviewed the capacity of MCI WorldCom to
meet its obligations under the First Amended Plan. The Debtor believes that
MCI WorldCom has more than sufficient capacity to make the payments required
under the Plan. According to filings with the Securities and Exchange
Commission, as of March 31, 1999, MCI WorldCom had cash of $775 million, liquid
assets of $6.5 billion and total assets of $85.9 billion and liabilities of
$39.5 billion, of which $18.1 billion were current liabilities. Furthermore,
for the quarter ended March 31, 1999, MCI WorldCom had net income, after
extraordinary items, taxes and mandatory distributions, of $709 million and
positive operating cash flow of $1.9 billion. The market capitalization of MCI
WorldCom, as of August 2, 1999, was estimated to be approximately $153.5
billion, based on approximately 1.86 billion shares of common stock outstanding
(market capitalization estimates are based on the number of shares outstanding,
multiplied by the closing per share market price reported).
b. FINANCIAL PROJECTIONS.
The Debtor has also prepared projections of its financial performance
for each of the three fiscal years following the year of confirmation of the
First Amended 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.
The financial information and projections appended to the First
Amended Disclosure Statement include for two months ending December 31, 1999
and each of the three years ending December 31, 2000 through 2002:
* Pro Forma Balance Sheet of Reorganized Wireless as of October
31, 1999;
* Projected Balance Sheets of Reorganized Wireless for each of the
years December 31, 1999 through 2002;
* Projected Income Statements of Reorganized Wireless for the two
months ending December 31, 1999 and for each of the years ending December 31,
2000 through 2002; and
* Projected Cash Flow Statements of Reorganized Wireless for the
two 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 First Amended Plan will be confirmed by the Bankruptcy
Court and, for projection purposes, that the Effective Date under the First
Amended Plan and the initial distributions thereunder take place as of October
31, 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., "Certain Risk
Factors to be Considered -- Projected Financial Information." All holders of
Claims and Equity Interests that are entitled to vote to accept or reject the
First Amended Plan are urged to examine carefully all of the assumptions on
which the Financial Projections are based in evaluating the First Amended Plan.
c. BUSINESS STRATEGY -- OVERVIEW.
While Wireless is continuing its business as a wireless cable
operator and will continue to exploit its DIRECTV agreements, its primary long-
term business strategy is to expand the use of its spectrum through the
delivery of digital broadband (i.e., high-capacity) wireless access (commonly
known as "BWA") services such as two-way high-speed Internet access, data
transmission and Internet Protocol telephony services. 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 overall sales and marketing focus to its DIRECTV and BWA services,
and the focus of its subscription video products to emphasize sales to MDU
customers 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, 24 of which Wireless is evaluating to
determine whether return on these assets can be maximized either by using them
to deliver its Warp One product or by a sale of some or all of its license
rights for these markets.
d. 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.
e. 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.
f. 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 First Amended Plan requires that each holder of a Claim or
Equity Interest either (i) accept the First Amended Plan or (ii) receive or
retain under the First Amended 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 First Amended 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 First Amended 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 First Amended 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 First Amended 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 First Amended Plan will be consummated on the Effective Date. The
Effective Date of the First Amended Plan is the first Business Day following
the date on which the conditions precedent to the effectiveness of the First
Amended Plan, as set forth in Section 10.1 thereof are satisfied or waived.
For a more detailed discussion of the conditions precedent to the First Amended
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 First Amended 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 three members whose names and affiliations will be disclosed at or prior to
the Confirmation Hearing. MCI WorldCom will nominate these directors. 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.......... 52 Senior Vice President and General
Counsel
</TABLE>
Henry Burkhalter became Chief Executive Officer of the Debtor in May
1997. Mr. Burkhalter became a director of the Company in April 1996 and
President of theDebtor and Vice Chairman of the Board upon consummation of the
Debtor'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 Debtor 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. 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.
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 the Debtor 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 (or 1 1/2 years of
severance pay upon a change of control, which includes the acquisition of
Wireless by MCI WorldCom pursuant to the First Amended Plan), annual
performance bonuses at the discretion of the Board of Directors of Reorganized
Wireless and standard employee benefits such as health care. A portion of the
Bankruptcy Incentive Compensation, as defined below, may be paid to such
officers as a signing bonus and/or retention incentive.
D. BANKRUPTCY INCENTIVE COMPENSATION.
In connection with the Original Plan, it was proposed that the Debtor or
Reorganized Wireless adopt a share incentive plan that was intended to provide
incentive to management, key employees and consultants of the Debtor to achieve
and expedite the Debtor's reorganization, contingent upon their continued
employment, by providing such persons with options to acquire shares of New
Common Stock of Reorganized Wireless. Under the Original Plan, such persons
were to receive 5-year options to purchase an aggregate of 1,110,000 shares of
New Common Stock. The terms of these options were negotiated with the
Unofficial Noteholders' Committee. As discussed below, these options would
have had significant value as of the Effective Date and provided a significant
incentive to members of management to remain with the Debtor and render their
best efforts on behalf of the Debtor during the pendency of the Chapter 11
Case.
Pursuant to negotiations with MCI WorldCom, under the First Amended Plan,
the options contemplated by the Original Plan will not be delivered, since MCI
WorldCom's objective is to own 100% of Reorganized Wireless without any
outstanding options. However, MCI WorldCom has emphasized the importance and
value to it of retaining the services of management through the period of the
reorganization. Accordingly, as a result of negotiations with MCI WorldCom and
representatives of management, the persons who would have received options to
purchase shares of common stock of Reorganized Wireless under the Original
Plan, as determined by the Debtor's existing Board of Directors, will receive
cash payments aggregating $8,129,640 (the "Bankruptcy Incentive Compensation")
to be funded by MCI WorldCom on the Effective Date. The Bankruptcy Incentive
Compensation is in lieu of the 1,110,000 options that were to have been granted
under the Original Plan, including the 444,000 options that would have been
granted on the Effective Date (the "Effective Date Options") and the 666,000
options that were to have been granted by the Board of Directors of Reorganized
Wireless (the "Subsequent Options"). The Debtor believes that the fair market
value of the Effective Date Options would not have been less than, and may have
significantly exceeded, the amount of the Bankruptcy Incentive Compensation.
Moreover, although the value of the Subsequent Options is uncertain since the
terms of these options were to be established by the Board of Directors of
Reorganized Wireless, the Debtor believes that it is reasonable to assume that
the Subsequent Options would have had significant additional value.
The Bankruptcy Incentive Compensation is intended to compensate management
for the elimination of the options contemplated by the Original Plan and for
services rendered through the Chapter 11 Case including efforts to maximize the
value of the Debtor's business and negotiation of improved terms for creditors
and shareholders provided in the First Amended Plan as compared to the Original
Plan. The Debtor's existing Board of Directors, in consultation with MCI
WorldCom and with the consent of the affected recipient of Bankruptcy Incentive
Compensation, may determine that a portion of the payments to such recipient
will be deferred.
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.
VIII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS
TO THE NEW COMMON STOCK TO BE DISTRIBUTED UNDER THE FIRST AMENDED PLAN
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 and other
available exemptions, the New Common Stock to be issued on the Effective Date
to MCI WorldCom will not require registration under the 1933 Act or any state
securities or "blue sky" laws. However, MCI WorldCom may not resell any shares
of New Common Stock without registration under the 1933 Act or any applicable
securities or "blue sky" laws unless an exemption from such registration is
available.
Pursuant to the First Amended Plan, the certificate evidencing the shares
of New Common Stock received by MCI WorldCom 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.
IX. REORGANIZATION VALUES
In conjunction with formulating the Original 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
Alex. Brown to prepare such a valuation. As set forth in the Original
Disclosure Statement, Alex. Brown estimated the total enterprise value of
Reorganized Wireless at approximately $160 million. Following the Petition
Date several acquisition transactions in the industry occurred which indicated
that this analysis should be reconsidered. See Section IV.H. "Events During
the Chapter 11 Case -- Extension of the Debtor's Exclusive Period to File and
Solicit Acceptances of a Plan of Reorganization." Alex. Brown analyzed these
transactions and their effect on the total enterprise value of Reorganized
Wireless.
In particular, Alex. Brown analyzed the purchase of American Telecasting,
Inc., PCTV, and Wireless Holdings by Sprint and the purchase of CAI Wireless by
MCI WorldCom. The analysis was based upon a common method of comparing values
of companies in the Debtor's industry -- total enterprise value per LOS housing
unit. These transactions indicated that there had been a dramatic increase in
the total enterprise value per LOS housing unit in the industry since the
completion of the prepetition valuation. As part of their analysis, Alex.
Brown also considered the increase in the trading price of the stock of another
company similar to the Debtor -- Nucentrix. After Nucentrix emerged from
bankruptcy in April of 1999, its stock price increased from an initial trading
price of $14.75 per share to a price of $27.75 per share as of July 31, 1999.
This increase in price of Nucentrix's common stock demonstrated an increase in
total enterprise value per LOS housing unit for that company similar to those
shown by the acquisition transactions.
With this information, the Debtor negotiated the terms of the First
Amended Plan with MCI WorldCom. The First Amended Plan, which embodies the
terms resulting from those negotiations, is based upon a total enterprise value
per LOS housing unit which is consistent with the analysis described above.
The First Amended Plan as described herein is based upon an assumed total
enterprise value of $420 million and a total enterprise value per LOS housing
unit of $46.03.
X. CERTAIN RISK FACTORS TO BE CONSIDERED
A. PROJECTED FINANCIAL INFORMATION.
The Projected Financial Information included in this First Amended
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 First Amended 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.
B. HART-SCOTT-RODINO ACT REQUIREMENTS.
The receipt of New Common Stock by MCI WorldCom is 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"). The Debtor
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 in connection with the First Amended 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 FIRST AMENDED 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, Old Common Stock and Old
Unexercised Options and Warrants have held such property as "capital assets"
within the meaning of Section 1221 of the Tax Code (generally, property held
for investment). 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, Old Common Stock or
Old Unexercised Options and Warrants 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, Old Common
Stock or Old Unexercised Options and Warrants in connection with the
performance of services. Holders subject to any such special treatment should
contact their own tax advisors regarding the tax consequences of the Plan.
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 amount of Cash and the fair market value
of the New Common Stock received by holders of Old Senior Notes and any other
indebtedness is less than the adjusted issue price (plus the amount of any
accrued but unpaid interest) of such Old Senior Notes and other indebtedness
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 (the "Bankruptcy Exception"). Accordingly,
because any 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 and any
other indebtedness 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, a taxpayer that does not
recognize COI income under the Bankruptcy Exception is required to reduce
certain tax attributes, including, without limitation, its net operating losses
and loss carryforwards ("NOLs") and its tax basis in its assets (but not below
the amount of liabilities remaining immediately after the discharge of
indebtedness), in an amount generally equal to the amount of COI income
excluded from income under the Bankruptcy Exception. Such 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 and
other indebtedness discharged by the Plan will be 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 has reported the following NOLs on its consolidated
federal income tax returns:
1993 $ 15,871
1994 2,271,043
1995 6,304,051
1996 43,694,441
1997 70,811,317
----------
$123,096,723
In addition, the Debtor believes that its consolidated group
generated an additional consolidated NOL in its 1998 tax year of approximately
$70 - $80 million and will probably 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, the Debtor believes that a
portion of its NOLs (less than $50,000,000) are subject to certain pre-existing
usage limitations under Section 382 of the Code and the consolidated return
SRLY rules provided in Treasury Regulations. Furthermore, 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 some of its NOLs will be eliminated
after consummation of the Plan.
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). The Plan should trigger an ownership change of the Debtor's
consolidated group on the Effective Date.
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 in effect on the Effective Date (as published
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 so-called "old and cold" creditors of the debtor receive at least
50% of the voting power and value of the stock of the reorganized debtor. 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 bankruptcy
case or who has held "ordinary course indebtedness" at all times it has been
outstanding. Because MCI WorldCom is not an "old and cold" creditor and will
receive all of the New Common Stock pursuant to the Plan, the Section 382(l)(5)
exception should not be available.
The second bankruptcy exception, Section 382(1)(6) of the Tax Code,
permits the value of the Loss Corporation's outstanding stock, for purposes of
computing the Section 382 Limitation, to be based on the value of the Loss
Corporation's outstanding stock immediately after the ownership change, thereby
reflecting, among other things, increases in stock value attributable to the
conversion of debt into stock (but the value of such stock as adjusted
generally may not exceed the value of the Debtor's gross assets immediately
before the ownership change). Thus, as a result of the Plan, 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 COI of the Debtor, will be limited and generally will not exceed, in any
year, the product of the long term tax exempt rate and the value of Reorganized
Wireless's stock as adjusted pursuant to Section 382(l)(6).
3. SECTION 269 LIMITATION ON NOLS.
In general, Section 269 of the Tax Code grants the Service the power
to disallow any deduction, credit or allowance (including the utilization of
NOLs and other tax attributes) following the acquisition of control of a
corporation by any person or persons for the principal purpose of avoiding or
evading federal income taxes. Application of Section 269 of the Tax Code
depends on an evaluation of the facts and circumstances, including an
evaluation of whether the acquiror carries on more than an insignificant amount
of the acquired corporation's active trade or business. In the event that MCI
WorldCom continues to operate the Debtor's business (or a substantial portion
thereof), Section 269 should not apply to MCI WorldCom's acquisition of the New
Common Stock.
C. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF OTHER OLD SENIOR NOTES
(CLASS 5).
Holders exchanging Other Old Senior Notes for Cash will generally
recognize gain or loss in an amount equal to the difference between (i) the
amount of Cash received for such Old Senior Notes (except to the extent the
Cash received is attributable to accrued but unpaid interest on such Old Senior
Notes, which generally would be taxable to a holder as ordinary income (see
"Accrued Interest and Original Issue Discount" below)) and (ii) the holder's
adjusted tax basis in the Old Senior Notes. Generally, a holder's adjusted tax
basis for an Other Old Senior Note will be equal to the cost of the Old Senior
Note to such holder, increased by any OID or market discount (see below)
previously included in income by the holder, less payments (other than payments
of qualified stated interest) received on the Old Senior Note, and less any
amortized bond premium previously deducted from gross income by the holder.
Such gain or loss generally will be long-term capital gain or loss
(subject to the market discount rules discussed below) if the holder had held
the Other Old Senior Notes for more than one year. Holders should consult
their own tax advisors with respect to applicable tax rates and netting rules
for capital gains and losses. Certain limitations exist on the deduction of
capital losses by both corporate and noncorporate taxpayers.
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 Other Old Senior
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 of 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.
D. FEDERAL INCOME TAX CONSEQUENCES TO MCI WORLDCOM (CLASS 6).
Whether the exchange of the MCI WorldCom Old Senior Notes for New Common
Stock pursuant to the Plan will be a nontaxable recapitalization under the Tax
Code will depend in part upon whether the MCI WorldCom Old Senior 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 MCI WorldCom Old Senior 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 held by
MCI WorldCom should be treated as "securities" for federal income tax purposes.
Accordingly, the exchange of the MCI WorldCom Old Senior Notes for New Common
Stock should constitute a recapitalization for federal income tax purposes and,
as a result, MCI WorldCom should not recognize any gain (except to the extent
the New Common Stock is attributable to accrued but unpaid interest on the MCI
WorldCom Old Senior Notes, which generally would be taxable to MCI WorldCom as
ordinary income (see "Accrued Interest and Original Issue Discount" below)).
MCI WorldCom's tax basis in the New Common Stock exchanged for MCI WorldCom Old
Senior Notes should be equal to its adjusted tax basis in the MCI WorldCom Old
Senior Notes (and, possibly, MCI WorldCom's tax basis in any Old Unexercised
Options and Warrants and Old Common Stock held on the Effective Date). MCI
WorldCom's tax basis in an MCI WorldCom Old Senior Note will generally be equal
to its cost, increased by any OID or market discount (see below) previously
included in income by MCI WorldCom, less payments (other than payments of
qualified stated interest) received on the Old Senior Note, and less any
amortized bond premium previously deducted from gross income. MCI WorldCom's
holding period for the New Common Stock will include its holding period for the
MCI WorldCom Old Senior Notes exchanged therefor. MCI WorldCom's tax basis in
the New Common Stock issued to MCI WorldCom for Cash will be equal to the
amount of Cash paid therefor.
If either (or both) the 1995 Senior Notes or the 1996 Senior Discount
Notes exchanged by MCI WorldCom were determined not to constitute "securities"
for federal income tax purposes (the "Non-Security Old Senior Notes"), then MCI
WorldCom 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 on such Non-
Security Old Senior Notes, which generally would be taxable to MCI WorldCom as
ordinary income (see Section XI.G. " -- Accrued Interest and Original Issue
Discount")) and MCI WorldCom's adjusted tax basis in such Non-Security 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 Non-Security Old Senior Notes had been held for more than one
year. MCI WorldCom's tax basis in the New Common Stock received in exchange
for a Non-Security Old Senior Note 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.
Any accrued (but unrecognized) market discount on the MCI WorldCom 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 will be treated as ordinary income to the extent of
market discount accrued prior to the Effective Date. See Section XI.C. " --
Federal Income Tax Consequences for Holders of Other Old Senior Notes (Class
5)" for a discussion of the market discount rules under the Tax Code.
E. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF OLD COMMON STOCK INTERESTS
(CLASS 8).
Holders exchanging Old Common Stock Interests (other than any such
Interests received in connection with the performance of services) for Cash
will generally recognize gain or loss in an amount equal to the amount of Cash
received less the holder's adjusted tax basis in the Old Common Stock Interest.
A holder should generally recognize long-term capital gain or loss if the
holder held the Old Common Stock Interest for more than one year. Holders
should consult their own tax advisors with respect to applicable tax rates and
netting rules for capital gains and losses. Certain limitations exist on the
deduction of capital losses by both corporate and noncorporate taxpayers
F. 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.
G. 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, except
to the extent that a holder has previously included such accrued interest
(including OID) in income. 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.
It is possible, however, 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.
H. BACKUP WITHHOLDING AND INFORMATION REPORTING.
Holders of Old Senior Notes may be subject to backup withholding at the
rate of 31% with respect to the receipt of New Common Stock, Cash or other
property received pursuant to the Plan, unless such holder (1) is a corporation
or comes within certain other exempt categories and, when required,
demonstrates this fact or (2) provides a correct taxpayer identification number
("TIN") on Form W-9, certifies as to no loss of exemption from backup
withholding and complies with applicable requirements of the backup withholding
rules. An otherwise exempt holder may be subject to backup withholding if,
among other things, the holder (i) fails to properly report payments of
interest and dividends or (ii) in certain circumstances, has failed to certify,
under penalty of perjury, that such holder has furnished a correct TIN.
Holders that do not provide a correct TIN may also be subject to penalties
imposed by the Service.
Backup withholding is not an additional tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of federal
income taxes, 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.
The Debtor may be obligated to provide information statements to the
Service and to holders who receive Cash and/or New Common Stock pursuant to the
Plan reporting the payment of Cash and/or New Common Stock (except with respect
to holders that are exempt from the information reporting rules, such as
corporations).
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 FIRST AMENDED PLAN 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 FIRST AMENDED PLAN OR THE FOREGOING DISCUSSION.
XII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE FIRST AMENDED PLAN
If the First Amended 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 First Amended 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 First Amended 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 First Amended Plan. In addition, by a letter to the
Debtor dated February 25, 1999 (the "Heartland Letter"), Nucentrix, a holder of
approximately 20% of the Old Common Stock, requested consideration of an
alternate plan of reorganization for the Debtor. The principal features of the
plan proposed in the Heartland Letter are (i) the merger of the Debtor into
Nucentrix, (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 Nucentrix). The Debtor
believes that the proposal by Nucentrix has expired. In any event, however,
the Debtor did consider the plan proposed in the Heartland Letter and believes
that the Original Plan and the First Amended Plan described herein are, 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 Nucentrix and its business set forth in
bankruptcy court filings in Nucentrix's chapter 11 case, than is warranted
based upon the original valuation set forth in the Original Disclosure
Statement and the valuation described herein. Accordingly, the recoveries made
available to creditors and equity securities holders under the plan proposed in
the Heartland Letter are less favorable than those provided for in the Original
Plan and the First Amended Plan described herein.
The Debtor believes that the First Amended 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 First Amended Plan to creditors.
XIII. CONCLUSION AND RECOMMENDATION
The Debtor believes that confirmation and implementation of the First
Amended 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 First Amended Plan to vote to
accept the First Amended 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: August ___, 1999
WIRELESS ONE, INC., a Delaware corporation
By:________________________________________
Name: Henry G. Schopfer, III
Title: Executive Vice President, Chief Financial
Officer and Secretary
**FOOTNOTES**
{1} This table is only a summary of the classification and treatment of
Claims and Equity Interests under the First Amended Plan. Reference should be
made to the entire First Amended Disclosure Statement and the First Amended
Plan for a complete description of the classification and treatment of Claims
and Equity Interests.
{2} Based upon an assumed total enterprise value of $420 million.
{3} 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.
{4} 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.
{5} In the valuation performed in January of 1999, four public companies were
selected as comparable. In a transaction consummated December 2, 1998, CAI
Wireless became the owner of 94% of the outstanding stock of CS Wireless
Systems, Inc, another company in the Debtor's industry. Subsequently, MCI
WorldCom announced that it had entered into a merger agreement with CAI
Wireless Systems, Inc. on April 26, 1999.
{6} Generally, companies in the wireless cable industry have reported the
estimated number of gross housing units which are capable of receiving their
signals as line-of-sight housing units. Enterprise value per LOS housing unit
is thus one measure of expressing value in the wireless cable industry.
Although the Debtor believes, for a variety of reasons, that the number of
gross housing units is a more meaningful statistic than LOS housing units, the
LOS numbers for these transactions serve to demonstrate the dramatically higher
valuations in the wireless cable industry.
{7} This estimate is based on an estimated total enterprise value of $454
million and an estimated 7.8 million LOS housing units, as disclosed in PCTV's
filings with the Securities and Exchange Commission.
{8} This derivation is based on a combined estimated total enterprise value
of $1.027 billion and 19.2 million estimated LOS housing units for CAI Wireless
and CS Wireless Systems, Inc.
{9} Based upon the disclosure statement of CAI Wireless dated June 30, 1998,
CAI Wireless estimated a hypothetical post-reorganization total enterprise
value per LOS housing unit of $22.71. This hypothetical post-reorganization
total enterprise was subject to a number of assumptions which, as of February
1, 1999, had not come to pass. The calculation of hypothetical post-
reorganization enterprise value per LOS housing unit is based on the estimated
total enterprise value for CAI Wireless of $293 million and an estimated 12.9
million housing units for CAI Wireless (without including CS Wireless Systems,
Inc.), as set forth in the disclosure statement of CAI Wireless dated June 30,
1998.
{10} Warrants were also issued under the Nucentrix's plan of reorganization
with an exercise price of $27.53. These warrants were "in the money" within
one week of the day that the stock of Nucentrix began trading.
{11} This calculation is based upon an estimated total enterprise value of
$268 million and an estimated 7.1 million LOS housing units, as disclosed in
Nucentrix's filings with the Securities and Exchange Commission.
