REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(as revised by Amendment No. 2)
Sand Creek Communications Company
(Exact name of registrant as specified in its charter)
Michigan
(State or other jurisdiction of incorporation or organization)
4813
(Primary Standard Industrial Classification Code Number)
38-3249559
(I.R.S. Employer Identification No.)
6525 Sand Creek Highway, P.O. Box 66, Sand Creek, Michigan 49279-0066
(517) 436-3130
(Name, address, including ZIP Code, and telephone number,
including area code, of registrant's principal executive officers)
Margie M. Gallatin, 6525 Sand Creek Highway, P.O. Box 66, Sand Creek, Michigan
49279-0066, (517) 436-3130
(Name, address, including ZIP Code,
and telephone number, of agent for service)
Approximate date of commencement of proposed sale of the
securities to the public: December 31, 1995.
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is compliances
with General Instruction G, check the following box. [ ]
Calculation of Registration Fee
Title of each Amount to Proposed Proposed Amount
class of be maximum maximum of
securities to registered offering aggregate registration
be registered price per offering fee
unit price
Common Stock 124,000 $19.44 $2,409,657 $830.92
The registration fee is calculated pursuant to 17 CFR Section 230.457(f)(2)
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission acting
pursuant to said section 8(a), may determine.
CROSS REFERENCE SHEET
Item No. Description Page of Printed Prospectus
1. Item 501 Outside front cover
2. Item 502 Inside front cover
3. Risk Factors 8
4. Terms of Transaction 10-18
5. Proforma Financials 19
6. Material Contracts with Company
Being Acquired N/A
7. Additional Information Required
by Persons Deemed Underwriters N/A
8. Interests of Named Experts and Counsel N/A
9. Disclosure of SEC Position on
Indemnification for Security
Liability Act 39, 50-51
10. Information with Respect to S-3
Registrants N/A
11. Incorporation of Certain Information
by Reference N/A
12. Information with Respect to
S-2 or S-3 Registrants N/A
13. Incorporation of Certain Information
by Reference N/A
14. Information with Respect to Registrants
Other Than S-2 or S-3 48-51
15. Information Respect to S-3 Companies N/A
16. Information with Respect to S-2 or
S-3 Companies N/A
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies 22-48
18. Information if Proxies, Consents or
Authorizations are to be Solicited
in an Exchange Offer 9, 10, 19-22, 37
19. Information if Proxies, Consents or
Authorizations are not to be Solicited N/A
20. Indemnification of Directors and Officers 39, 50-51
21. Exhibits and Financial Disclosure
Schedule Exhibits
PROXY STATEMENT SAND CREEK TELEPHONE COMPANY
PROSPECTUS FOR SAND CREEK COMMUNICATIONS COMPANY COMMON STOCK
6525 Sand Creek Highway, P.O. Box 66, Sand Creek, MI 49279-0066
(517) 436-3130
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is being
furnished to the holders of the Common Stock ("Shareholders") of Sand Creek
Telephone Company ("Sand Creek") in connection with the solicitation of
proxies by the Sand Creek Board of Directors ("Sand Creek Board") for use at
the Special Meeting of Sand Creek Shareholders (including any adjournments
or postponements thereof) to be held on Saturday, December 2, 1995. At
the Special Meeting, the Shareholders of the Sand Creek Common Stock, $10 par
value per share, ("Sand Creek Common Stock"), will be asked to approve the
Agreement and Plan of Share Exchange, attached as Appendix A hereto ("Plan of
Share Exchange"). This Proxy Statement/Prospectus relates to the proposed
exchange of Sand Creek Common Stock for Common Stock of Sand Creek
Communications Company ("SCCC") pursuant to the Plan of Share Exchange and
certain transactions contemplated thereby (the Plan of Share Exchange and
contemplated transactions together referred to as the "Share Exchange").
Upon the effectiveness of the Share Exchange, each outstanding share of
Sand Creek Common Stock will be exchanged for three shares of Common Stock of
SCCC, no par value per share, ("SCCC Common Stock") and Sand Creek will become
a subsidiary of SCCC.
The Share Exchange will not take place unless approved by the requisite
vote of the Shareholders of Sand Creek. See "THE SPECIAL MEETING - Vote
Required." The Sand Creek Board believes the proposed Share Exchange will
provide substantial benefit to Sand Creek and its Shareholders by providing
flexibility for Sand Creek and SCCC to deal with increased competition,
facilitating initiatives into new areas of business and providing additional
flexibility for financing. The Sand Creek Board recommends approval of the
Plan of Share Exchange.
SHAREHOLDERS HAVE DISSENTERS RIGHTS. SHAREHOLDERS DESIRING TO EXERCISE
SUCH RIGHTS MUST FILE A WRITTEN NOTICE PRIOR TO THE SPECIAL MEETING AND
REFRAIN FROM VOTING THEIR SHARES IN FAVOR OF THE SHARE EXCHANGE. SEE
"DISSENTERS RIGHTS".
A Registration Statement on Form S-4 has been filed with the Securities
and Exchange Commission covering the shares of the SCCC Common Stock issuable
in connection with the Share Exchange. This Proxy Statement/Prospectus also
constitutes a prospectus of SCCC with respect to up to 124,000 shares of SCCC
Common Stock issuable to Shareholders of Sand Creek in the Share Exchange.
Upon consummation of the Share Exchange, each outstanding share of Sand Creek
Common Stock, except those as to which dissenters rights are exercised, will
be converted into three shares of SCCC Common Stock. See "SHARE EXCHANGE -
Consideration".
Neither Sand Creek's nor SCCC's Common Stock is actively traded, and
there is no established public trading market for such shares. SCCC does not
plan on listing SCCC Common Stock for trading on any exchange or market system.
SEE "RISK FACTORS" HEREIN FOR A DISCUSSION OF VARIOUS MATERIAL RISKS
RELATING TO THE SHARE EXCHANGE.
SAND CREEK COMMUNICATIONS COMPANY'S SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is November 1, 1995.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to Shareholders of Sand Creek on or about November 10,
1995.
You are advised to retain this Proxy Statement/Prospectus for future
reference.
[Prospectus, Cover Page]
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION TO OR MAKE
ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND PROXY
STATEMENT IN CONNECTION WITH THE OFFERING HEREBY MADE, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY SAND CREEK OR SCCC. THIS
PROSPECTUS/ PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OR THE
SOLICITATION OF A PROXY IN ANY JURISDICTION OR FROM ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF SCCC OR SAND CREEK
SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO SUCH DATE.
AVAILABLE INFORMATION
This Prospectus/Proxy Statement incorporates documents by reference
which are not presented herein or delivered herewith. These documents are
available from SCCC, and SCCC has filed with the Securities and Exchange
Commission (the "Commission"), a registration Statement on Form S-4 (together
with any exhibits and amendments thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the SCCC Common Stock to be issued pursuant to the Share Exchange. As
permitted by the rules and regulations of the Commission, this Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto. Such additional information
may be inspected and copied at the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, at
prescribed rates. Statements contained in this Proxy Statement/Prospectus or
in any document incorporated in this Proxy Statement/Prospectus by reference
as to the contents of any contract or other document referred to herein or
therein are not necessarily complete and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement or such other document, each such statement being
qualified in all respects by such reference. For such further information,
reference is made to the Registration Statement.
Neither Sand Creek nor SCCC is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended and consequently do not
file reports, proxy statements or other information with the Commission. Sand
Creek and SCCC will each provide its Shareholders annual reports which contain
financial information that has been compiled, but not examined or reported
upon, by an independent or certified public accountant.
SCCC undertakes to provide without charge to each person, including any
beneficial owner to whom a copy of this Prospectus/Proxy Statement has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents which have been or may be incorporated in this
Prospectus/Proxy Statement by reference, other than exhibits to such
documents. Requests for such copies should be directed to Secretary, Sand
Creek Communications Company, Inc., 6525 Sand Creek Highway, P.O. Box 66, Sand
Creek, Michigan 49279-0066, telephone number (517) 436-3130.
In order to ensure timely delivery of copies of such documents, any
request should be made by November 24, 1995.
See back cover for Table of Contents.
[Prospectus, page 2]
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. As this summary is necessarily incomplete,
reference is made to, and this summary is qualified in its entirety by, the
more detailed information contained or incorporated by reference in this Proxy
Statement/Prospectus and the Exhibits hereto. Shareholders are urged to read
this Proxy Statement/Prospectus and the Exhibits hereto in their entirety.
Certain capitalized terms which are used but not defined in this summary are
defined elsewhere in this Proxy Statement/Prospectus.
I. THE SPECIAL MEETING
A. MEETING. A special meeting of the Shareholders of Sand Creek will be
held on Saturday, December 2, 1995 at Sand Creek Community Church, East
Street, Sand Creek, Michigan at 1:00 p.m. (referred to hereafter as the
"Special Meeting").
B. PURPOSE OF MEETING. The purpose of the Special Meeting is to consider
and vote upon a proposal to approve the Plan of Share Exchange, attached as
Appendix A, upon the effectiveness of which SCCC will acquire all of the
issued and outstanding Sand Creek Common Stock, and each Shareholder of Sand
Creek will become a Shareholder of SCCC, the transactions contemplated
thereby, and such other matters as may properly be brought before the
Special Meeting. See "SPECIAL MEETING - Purpose of Special Meeting".
C. RECORD DATE AND ELIGIBLE VOTERS. The Record Date for the Sand Creek
Special Meeting is November 12, 1995. Only Shareholders of record of Sand
Creek at the close of business on such date are entitled to notice of, and
to vote at, the Sand Creek Special Meeting. As of the date hereof, there
were 41,299 1/3 shares of Sand Creek Common Stock issued and outstanding and
154 Shareholders of record. See "SPECIAL MEETING - Eligible Voters".
D. SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS. As of the date hereof,
directors and executive officers of Sand Creek and their affiliates were
beneficial owners of 3823.33 shares or approximately 9.3% of the outstanding
shares of Sand Creek Common Stock. Such directors and executive officers
have indicated that they intend to vote such shares of Sand Creek Common
Stock FOR approval and adoption of the Plan of Share Exchange.
E. VOTING AND PROXIES. At the Special Meeting, Shareholders of Sand
Creek may vote either in person or by proxy. Sand Creek is soliciting your
proxy to vote in favor of the Plan of Share Exchange. To vote by proxy, a
proxy must be in writing and filed with the Sand Creek Secretary prior to
the Special Meeting. A proposed proxy form is enclosed. For instructions on
voting by proxy, using the enclosed proxy form, and revoking a proxy: see
"SPECIAL MEETING - Voting and Proxies".
F. VOTE REQUIRED. Twenty-five (25%) percent of the common stock issued
and outstanding by the record holders thereof, in person or by proxy, shall
constitute a quorum at any meeting of the Shareholders. To be approved,
the Plan of Share Exchange must be approved by the affirmative vote of the
holders of a majority of the outstanding shares of Sand Creek Common Stock.
Abstentions and non-votes will have the same effect as a vote against
approval of the Share Exchange. See "SPECIAL MEETING - Vote Required".
G. OTHER BUSINESS. At the time this Proxy Statement went to press, Sand
Creek knew of no matters constituting a proper subject for action by the
Shareholders which would be presented at the Special Meeting, other than the
approval of the Plan of Share Exchange. If any other matters are properly
presented at the Special Meeting, the persons named in the proxies will vote
upon them in accordance with their best judgment.
H. FUTURE SHAREHOLDER PROPOSALS. Any Shareholder proposals intended for
consideration at the 1996 Annual Meeting of Shareholders must be received by
Sand Creek (or, if the Share Exchange shall have previously become effective,
by SCCC) by April 5, 1996.
[Prospectus, page 3]
II. THE COMPANIES.
A. SAND CREEK. Sand Creek was organized under the laws of the State of
Michigan in 1907. Sand Creek is a public utility which provides local
exchange, long distance, directory advertising, billing and collection, and
access to toll networks services in its Sand Creek Exchange located in
portions of Lenawee County in and around the municipality of Sand Creek,
Michigan. Sand Creek is now and after the Share Exchange will continue to be
subject to regulation by the Michigan Public Service Commission ("MPSC").
Such restrictions impact, among other things, the rates Sand Creek may charge
its customers for telephone service, and the rates of return Sand Creek may
earn. In addition, Sand Creek and its subsidiary, SCCC, are subject to the
MPSC regulations relating to transactions by a telephone company and its
affiliates. Sand Creek holds a 22.5% limited partnership interest in Cass
Cellular Limited Partnership, which owns 55.62% of Michigan RSA #9 Limited
Partnership, which conducts cellular telephone operations. Cass Cellular
Limited Partnership's cellular telephone operations are not subject to
regulation under current law by the MPSC. Sand Creek's principal executive
offices are located at 6525 Sand Creek Highway, Sand Creek, Michigan, and
the telephone number at such address is (517) 436-3130. See "SAND CREEK".
B. SAND CREEK COMMON STOCK. Sand Creek has authorized only one class of
common stock, all of which have equal dividend, voting and liquidation
rights. The Bylaws of Sand Creek and Board resolutions have imposed some
restrictions on the transferability of such shares. Except for transactions
involving immediate family members, Shareholders desiring to sell Common
Stock shall first present it to Sand Creek for sale. Sand Creek has a 60-day
period to exercise its right of first refusal. If Sand Creek does not
exercise such right, the Shareholder may sell to any party meeting
Shareholder requirements established pursuant to the Bylaws. The
Board has adopted the following restrictions on eligible Shareholders: First
Priority: Residents of service area; Second Priority: Immediate family
members of residents of service area; Third Priority: Michigan residents
within 50 miles of Sand Creek service area; Fourth Priority: Exiting
Shareholder residing outside service area and other individuals outside
service area who have a legitimate interest in service area. There are some
provisions in Sand Creek Bylaws which limit any one person's ownership of
Common Stock to no more than 12.5% of such stock. See "SHARE EXCHANGE -
Comparison of SCCC and Sand Creek Common Stock."
C. SCCC. SCCC was incorporated as a Michigan corporation in 1995 as a
wholly-owned subsidiary of Sand Creek for the purpose of becoming the new
parent holding company if the Share Exchange is approved and consummated.
SCCC is authorized to engage in any business permitted by Michigan law, and
has not yet engaged in any significant business activities. SCCC will not
be subject to MPSC regulation under current law. SCCC's principal executive
offices are located at 6525 Sand Creek Highway, Sand Creek, Michigan, and the
telephone number at such address is (517) 436-3130. See "SCCC".
D. SCCC COMMON STOCK. SCCC has authorized only one class of common
stock, all of the shares of which have equal dividend, voting rights and
liquidation rights. The Bylaws of SCCC and Board resolutions have imposed
some restrictions on the transferability of such shares, which restrictions
are the same as currently upon the holders of Sand Creek Common Stock, except
that there are provisions in SCCC Bylaws which limit any one person's
ownership of Common Stock to no more than 8% of such stock. See "SHARE
EXCHANGE - Comparison of SCCC and Sand Creek Common Stock."
E. MARKET PRICES. Neither Sand Creek Common Stock nor SCCC Common Stock
is traded in any established public market. SCCC shares, all of which are owned
by Sand Creek, have never traded. There is no established market and no
public information with respect to the market price of Sand Creek Common
Stock. There are occasional direct sales by Shareholders of which the
management of Sand Creek is aware. From December 31, 1992 through the date
hereof there were, so far as management knows, 85 sales of the Common Stock
of Sand Creek. These sales involved 5,707.33 shares. During this period,
the highest reported price paid for Sand Creek Common Stock was $58.00 per
share, and the lowest price was $36.66 per share.
III. AGREEMENT AND PLAN OF SHARE EXCHANGE.
A. BACKGROUND AND REASONS FOR SHARE EXCHANGE. Over the past several
years, Sand Creek has considered establishing a holding company structure
consisting of a holding company and one or more operating subsidiaries. The
reasons for establishing such a corporate structure include the following:
First, Sand Creek is a public
[Prospectus, page 4]
utility that provides telephone services subject to the regulation of the
MPSC. The activities of SCCC and Cass Cellular Limited Partnership, however,
are not subject to regulation by the MPSC. Because SCCC is currently a
subsidiary of Sand Creek and the limited partnership interest in Cass
Cellular Limited Partnership is owned by Sand Creek, distributions of SCCC
and Cass Cellular Limited Partnership earnings to individual Shareholders of
Sand Creek must flow through Sand Creek. In addition, the MPSC is able to
review the non-regulated activities of Sand Creek on a special basis as a
result of receiving a Special Report prepared for the MPSC by Sand Creek.
Consequently, the MPSC is able to indirectly regulate the activities of
SCCC and Cass Cellular Limited Partnership through the regulation of Sand
Creek. Since Sand Creek is a regulated entity, the flow-through of earnings
from SCCC and Cass Cellular Limited Partnership to Sand Creek Shareholders
are subject to regulation by the MPSC. The Sand Creek Board believes the
Share Exchange will reduce the regulation by the Michigan Public Service
Commission of the non-telephone company related assets and activities,
reduce administration and other expenses, provide flexibility to deal with
increased competition, facilitate diversification into non-utility business
and provide additional flexibility for financing. In addition, Shareholders
who receive SCCC Common Stock in exchange for their Sand Creek Common Stock
will, in general, not recognize income on the exchange. A step in
establishing a holding company structure is a Share Exchange in which SCCC,
an existing subsidiary of Sand Creek, would become the parent corporation, and
Sand Creek would become a wholly-owned subsidiary of SCCC. Later, additional
subsidiaries of SCCC could be created with respect to (i) any existing
operation of SCCC; or (ii) any new or additional businesses which SCCC
undertakes. See "SHARE EXCHANGE - Background".
B. FORM OF SHARE EXCHANGE. SCCC (the current subsidiary) would become
the parent corporation, and Sand Creek (the current parent) would become a
subsidiary of SCCC. Pursuant to the Plan of Share Exchange, Sand Creek
Shareholders who do not effectively exercise dissenters' rights will
exchange all of their Sand Creek Common Stock for Common Stock of SCCC. The
currently outstanding share of SCCC Common Stock held by Sand Creek will be
cancelled. As a result of the Share Exchange, Sand Creek will become a
wholly owned subsidiary of SCCC. Sand Creek will continue to operate as a
separate telephone company in Sand Creek, Michigan, with the same
directors, officers and employees. See "SHARE EXCHANGE - Form of Exchange."
C. CONSIDERATION. Upon consummation of the Share Exchange, but subject
to the provisions of the Plan of Share Exchange with respect to shares for
which dissenters' rights have been perfected ("Dissenting Shares"), each
outstanding share of Sand Creek Common Stock will be exchanged for three (3)
shares of SCCC Common Stock. Each share of SCCC's Common Stock shall have
the same rights and be subject to the same provisions as every other share of
SCCC Common Stock. The increase in the number of shares is designed to put
a Shareholder's holdings in a more convenient form for sale, transfer or
gifting and to eliminate fractional shares. Following the Share Exchange, the
Shareholders of Sand Creek immediately prior to the Share Exchange who do not
perfect dissenters' rights will own 100% of the outstanding SCCC Common
Stock, which in turn will own 100% of the outstanding Sand Creek Common
Stock. See "SHARE EXCHANGE - Consideration".
D. RECOMMENDATION OF THE BOARD OF DIRECTORS OF SAND CREEK. Sand Creek
Board believes that the Share Exchange is in the best interest of Sand Creek
and its Shareholders. The Sand Creek Board unanimously approved the Plan of
Share Exchange and recommends that Sand Creek Shareholders vote FOR the
approval and adoption of the Plan of Share Exchange. See "SHARE EXCHANGE -
The Sand Creek Board's Recommendation".
E. REGULATORY APPROVALS AND OTHER CLOSING CONDITIONS. The obligations
of Sand Creek and SCCC to consummate the Share Exchange are subject to the
approval of the Plan of Share Exchange by Sand Creek's Shareholders. Sand
Creek has received the opinion of its legal counsel that no approval is
required of the Michigan Public Service Commission or any other governmental
body or administrative agency for consummation of the transactions
contemplated by the Plan of Share Exchange. The obligation of Sand Creek and
SCCC to consummate the Share Exchange is also contingent on there being not
more than 8,259 shares held by Sand Creek Shareholders who perfect
dissenters' rights with respect to the Plan of Share Exchange. See
"SHARE EXCHANGE - Regulatory Approvals and Other Closing Conditions".
F. EFFECTIVE TIME OF THE SHARE EXCHANGE. The Share Exchange will become
effective on the date of filing with the Michigan Department of Commerce,
Corporations and Securities Bureau, the Certificate of Share Exchange to be
submitted by Sand Creek and SCCC (the "Effective Date"). Unless Sand Creek and
SCCC otherwise
[Prospectus, page 5]
agree, the Share Exchange will be effective on the last business day
of the month in which the last of all of the conditions to the Share Exchange
have been satisfied or waived. See "SHARE EXCHANGE - Effective Time".
G. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The Share Exchange is
intended to be a "tax-free reorganization" for federal income tax purposes,
with the following principal federal income tax consequences:
1. A holder of Sand Creek Common Stock who receives SCCC Common Stock
pursuant to the Share Exchange should not recognize any gain or loss with
respect to the transaction. The basis of the Shareholder in the Sand Creek
Common Stock would carry through as the basis of such Shareholder in the SCCC
Common Stock received in the Share Exchange.
2. A holder of Sand Creek Common Stock who perfects dissenters' rights
under Michigan law will be treated as if such Shareholder's shares were
redeemed. Such Shareholder will be taxed on any gain realized as a result of
such redemption and such gain should be treated as a capital gain.
The foregoing is not intended to be legal or tax advice. The foregoing and
discussion below is based upon the opinion of counsel, Ronald W. Bloomberg,
Loomis, Ewert, Parsley, Davis & Gotting, P.C. Each Shareholder should
consult with his or her own tax advisor concerning the applicable federal,
state and local tax consequences of the Plan of Share Exchange. See "SHARE
EXCHANGE - Certain Federal Income Tax Consequences."
H. EXPENSES. All fees and expenses incurred in connection with the Share
Exchange will be allocated between Sand Creek and SCCC in accordance with
generally accepted accounting principles, consistently applied.
I. AMENDMENT, WAIVER AND TERMINATION. The Plan of Share Exchange may be
amended at any time before or after its approval by Sand Creek's
Shareholders, subject to applicable law. Subject to certain exceptions,
either party may waive compliance with, among other things, any of its
conditions to consummate the Share Exchange. The Plan of Share Exchange may
be terminated at any time prior to the Effective Date by mutual consent of
the parties, or by either party if the Board of Directors of either Sand
Creek or SCCC determine that consummation of the Share Exchange is not
in the best interests of the respective corporations. See "SHARE EXCHANGE -
Termination."
J. PROCEDURES FOR OBTAINING SCCC STOCK CERTIFICATES. Within a reasonable
time after the Effective Date, SCCC will send to each Sand Creek Shareholder
a form of letter of transmittal and instruction for use in effecting the
exchange of their certificates for shares of SCCC Common Stock. Sand Creek
Shareholders should NOT forward Sand Creek Stock certificates with the
enclosed proxy until they received transmittal forms. See "SHARE EXCHANGE -
Exchange of Stock Certificates".
K. DISSENTERS' RIGHTS. By complying with various pre- and post-effective
procedures that are required by Michigan law and described under "Dissenting
Shareholder's Rights", Shareholders of Sand Creek will have the right to
dissent to the Share Exchange, in which event, if the Share Exchange is
consummated, they will be entitled to receive in cash the fair value of their
respective shares of Sand Creek Common Stock, as determined by a judicial
appraisal. The exercise of these rights may result in a judicial
determination that the fair value of a dissenting Shareholder's shares is
higher or lower than the value of the consideration payable to the
non-dissenting Shareholders in connection with this transaction. See
"SHARE EXCHANGE - Rights of Dissenting Shareholders."
L. POST-EXCHANGE DIVIDEND POLICY. SCCC and Sand Creek currently expect
that after the Share Exchange, SCCC will pay aggregate dividends on the SCCC
Common Stock comparable to the current dividends Sand Creek pays on the Sand
Creek Common Stock, although such future dividends will depend upon future
financial results and legal and regulatory requirements and there can be no
assurance as to any future dividends. SCCC will be a legal entity separate
and distinct from its various subsidiaries. As a holding company with no
significant operations of its own, the principal sources of SCCC's funds will
be dividends and other distributions from its subsidiaries, borrowings, and
sales of equity. After the Share Exchange, MPSC approval, under existing
law, of dividends by Sand Creek is not required. Although the MPSC does not
directly regulate dividend levels, it may be able, after the Share Exchange,
to regulate dividends indirectly to the extent such dividends have any
effect on determining just and reasonable rates. The rights of SCCC and
consequently its shareholders, to participate in any distribution of assets of
any of its subsidiaries is subject to prior claims of creditors, if any, of
such subsidiary (except to the extent claims of SCCC in its capacity as a
[Prospectus, page 6]
creditor are recognized.) SCCC does not expect that any regulatory and/or
contractual restrictions applicable to SCCC or it subsidiaries will
significantly affect the operations of SCCC or its subsidiaries or impair the
ability of SCCC to pay dividends on SCCC Common Stock after the Share
Exchange. See "SHARE EXCHANGE-Post-Exchange Dividend Policy."
M. COMPARISON OF SAND CREEK AND SCCC COMMON STOCK. Upon effectiveness of
the Share Exchange, holders of Sand Creek Common Stock will become holders of
SCCC Common Stock. The rights of holders of SCCC Common Stock will differ
from the rights of holder of Sand Creek Common Stock primarily in that SCCC
will have approximately 36,102 authorized and unissued shares of Common Stock
(approximately 27,402 shares more than the presently authorized but unissued
shares of Sand Creek Common Stock); and the issuance of additional authorized
shares of SCCC Common Stock will not require MPSC approval. Also, the amount
of shares of SCCC Common Stock any shareholder may own has been reduced from
12.0% (for Sand Creek) to 8.0% (for SCCC). See "SHARE EXCHANGE -Comparison of
Sand Creek and SCCC Common Stock".
N. SELECTED FINANCIAL INFORMATION. The following table sets forth
selected financial information with respect to Sand Creek on a consolidated
basis, which includes its wholly owned subsidiary SCCC. If the Share
Exchange is consummated, the following table (except for the "dividend per
share" line, which does not reflect the additional shares of common stock to
be issued) would constitute the financial data for SCCC, on a consolidated,
pro forma, basis giving effect to the Share Exchange. Such financial
information is derived from Sand Creek's financial statements. See
"INFORMATION ABOUT SAND CREEK - Financial Statements."
<TABLE>
Sand Creek Telephone Company
Selected Financial Data
As of December 31
<CAPTION>
6 Months
Ended June 30
1994 1993 1992 1991 1990 1995 1994
(Audited) (Audited) (Audited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net operating revenue $ 462,643 $ 505,446 $ 369,892 $ 256,930 $258,450 $ 208,785 $ 200,418
Net income before
cumulative change in
accounting principle $ 354,758 $ 348,841 $ 206,019 $ 149,031 $114,482 $ 198,829 $ 153,906
Net income per share
before cumulative
effect of change in
accounting principle $ 8.58 $ 8.56 $ 5.08 $ 3.69 $ 2.75 $ 4.78 $ 3.74
Cumulative effect of
change in accounting
principle $ -0- $ 31,746 $ -0- $ -0- $ -0- $ -0- $ -0-
Cumulative effect per
share of change in
accounting principle $ -0- $ 0.78 $ -0- $ -0- $ -0- $ -0- $ -0-
Net income $ 354,758 $ 380,587 $ 206,019 $ 149,031 $ 114,482 $ 198,829 $ 153,906
Net income per share $ 8.58 $ 9.34 $ 5.08 $ 3.69 $ 2.75 $ 4.78 $ 3.74
Total Assets $2,653,999 $2,458,967 $2,164,697 $1,958,005 $1,805,852 $2,687,676 $2,465,464
Long-term debt $ -0- $ 63,889 $ 97,220 $ 127,945 $ 159,985 $ -0- $ 15,829
Dividends per share $ 2 $ 1 $ 1 $ 1 $ 1 $ 1 $ 1
</TABLE>
[Prospectus, page 7]
RISK FACTORS
Shareholders of Sand Creek should consider the following factors in
determining whether to vote in favor of the proposal to approve the Plan of
Share Exchange and to acquire the SCCC Stock offered by this Proxy
Statement/Prospectus.
A. LIMITED HISTORY OF SCCC. Although Sand Creek has been operating for
over 80 years, SCCC was incorporated in 1995. SCCC has no history of
operating as a separate company. There can be no assurances that SCCC will
be able to operate profitably, since its revenues will be derived from a
combination of dividends from Sand Creek and from other investments and/or
operations, currently principally relating to cellular operations. Because
of SCCC's limited history, it is difficult to anticipate future operating
results.
B. RESTRICTIONS ON TRANSFERABILITY. Resales of SCCC Common Stock by
affiliates of Sand Creek will be restricted under the provision of the
Securities Act of 1933, as amended ("Securities Act") and the regulations
promulgated thereunder. In addition, both Sand Creek and SCCC Common Stock
are subject to certain other restrictions on transfer set forth in their
respective bylaws. See "SHARE EXCHANGE - Resales of SCCC Common Stock", for
information on additional transfer restrictions.
C. ABSENCE OF MARKET FOR COMMON STOCK. There has not been an active
public market for the Common Stock of Sand Creek or SCCC. The Common Stock
of SCCC acquired in the Share Exchange will not be listed for trading on any
exchange; consequently, no assurance can be given that there will be any
active trading market for the SCCC Common Stock.
D. DIVERSIFICATION. The proposed Share Exchange will facilitate
selective diversification into certain non-utility businesses which will not
be subject to regulation by state and federal agencies regulating public
utilities and which may involve competitive and other factors not previously
experienced by Sand Creek. Diversification involves risks and there can be no
assurance that any new businesses will be successful or, if unsuccessful,
that they will not have a direct or indirect adverse effect on SCCC. Losses
incurred by any such businesses will not be recoverable in utility rates.
E. REDUCED LEVEL OF REGULATORY OVERSIGHT. The MPSC regulates significant
portions of the business of Sand Creek, including licensing, construction,
operation, sale and acquisition. Rates and rates of return are subject to
regulation. While the MPSC is moving toward reducing the level of regulation
relating to Local Exchange Carrier operation, coincident with this movement is
a movement to introduce and encourage competition. In addition, regulatory
initiatives have explored reduction of certain support mechanisms designed to
ensure quality affordable basic local exchange service. There is no
assurance that the impact of these initiatives toward reduced regulation and
increased competition will not have a material adverse effect on Sand Creek
and its operations, and thus Sand Creek's ability to pay dividends to SCCC.
The consummation of the Share Exchange will serve to remove regulatory
oversight of those assets and activities that are not related to the
operation of Sand Creek's regulated telephone business ("non-telephone
assets"). Consequently, Shareholders will not have the assurances
that they might otherwise have if those non-telephone assets were subject to
review by the MPSC. These assurances include MPSC review of the use, sale,
and transfer of the non-telephone assets, as well as review by the MPSC of
an annual report and financial records relating to the non-telephone assets.
F. HOLDING COMPANY STRUCTURE. After the Share Exchange, SCCC will be the
holding company for Sand Creek, with no significant operations of its own.
Its principal source of funds will be dividends from its subsidiaries.
Consequently, any regulatory restrictions imposed upon the subsidiaries'
ability to pay dividends to its shareholder would restrict SCCC's ability to
pay dividends to the holders of SCCC Common Stock. In addition, the rights
of SCCC, and consequently its Shareholders, to participate in any
distribution of assets of any of its subsidiaries is subject to prior claims
of creditors, if any, of any such subsidiary.
G. ADDITIONAL AUTHORIZED SHARES. Following the Share Exchange SCCC will
have approximately 36,102 authorized and unissued shares of Common Stock
(27,402 shares more than the presently authorized but unissued Sand Creek
Common Stock). The authorized but unissued SCCC Common Stock may be issued
from time to time upon such terms and for such consideration as may be
determined by the Board of Directors of SCCC and without further action by
the MPSC or by the Shareholders of SCCC. Such shares may be issued for
financing acquisitions, possible future employee benefit plans, stock splits,
stock dividends and other purposes which could include action which may have
the effect of discouraging takeover proposals for SCCC.
[Prospectus, page 8]
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to Sand Creek
Shareholders in connection with the solicitation of proxies by the Sand Creek
Board for use at the Special Meeting to be held at the time and place
specified in the accompanying Notice of Special Meeting of Shareholders, and
any adjournments or postponements thereof. This Proxy Statement/Prospectus
of Special Meeting is first being mailed to Shareholders of Sand Creek on or
about November 10, 1995.
THE SPECIAL MEETING
I. SPECIAL MEETING - PURPOSE OF SPECIAL MEETING
The purpose of the Special Meeting, as set forth in the attached Notice of
Special Meeting, is to consider and vote on a proposed Plan of Share Exchange
between Sand Creek and SCCC, attached as Appendix A hereto and more fully
described herein, and such other matters as may properly be brought before
the Special Meeting. The effect of approval of the Plan of Share Exchange
will be the exchange of each non-dissenting share of Sand Creek Common Stock
for three (3) shares of SCCC Common Stock. Sand Creek would then continue to
do business as a wholly-owned subsidiary of SCCC.
II. SPECIAL MEETING - ELIGIBLE VOTERS
Only holders of record of Sand Creek Common Stock, at the close of business
on November 12, 1995, are entitled to notice of and to vote at the Special
Meeting. As of the date hereof, there were 41,299 1/3 shares outstanding and
154 Shareholders of Record. As of the date hereof, SCCC directors and
executive officers (who are also the directors and executive officers of Sand
Creek) and their affiliates were beneficial owners of 3,823 1/3 shares or
approximately 9.3% of the outstanding shares of Sand Creek Common Stock.
Such directors and executive officers have indicated that they intend to vote
such shares of Sand Creek Common Stock FOR approval and adoption of the Plan
of Share Exchange.
III. SPECIAL MEETING - VOTING AND PROXIES
Each record holder of Sand Creek Common Stock as of the Record Date is
entitled to vote in person or by proxy on all matters properly to come before
the Special Meeting. Any proxy given to a person must be in writing and
filed with Sand Creek's Secretary prior to the Special Meeting.
A proxy, in the enclosed form, which is properly executed, duly returned to
the Secretary of Sand Creek and not revoked will be voted in accordance with
the instructions contained therein. If no specification is indicated on the
proxy, the shares represented thereby will be voted FOR approval of the Plan
of Share Exchange. If any other matters are properly presented at the Special
Meeting for consideration, including, among other things, consideration of a
motion to adjourn the Special Meeting to another time and/or place
(including, without limitation, for the purpose of soliciting additional
proxies), the persons named in the relevant form of proxy enclosed herewith
and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment, (except in cases in which the Proxy is
to be voted against the Share Exchange, in which case, the Proxy will
not be voted in favor of adjourning the Special Meeting). Sand Creek does not
have any knowledge of any matters to be presented at the Special Meeting
other than those matters referred to and described herein. Execution of a
proxy given in response to this solicitation will not affect a Shareholder's
right to attend the Meeting and to vote in person. Presence at the Meeting
of a Shareholder who has signed a proxy does not in itself revoke a proxy. A
Shareholder may revoke a proxy at any time prior to its exercise by filing
with Secretary of Sand Creek, 6525 Sand Creek Highway, Sand Creek, Michigan,
a duly executed revocation, or a proxy bearing a later date, or by voting in
person at the Special Meeting.
IV. SPECIAL MEETING - VOTE REQUIRED
Sand Creek's bylaws provide that the holders of 25% of the issued and
outstanding Sand Creek Common Stock must attend the Special Meeting in person
or be duly represented by proxy for a quorum to be properly constituted at
such
[Prospectus, page 9]
meeting. The Michigan Business Corporation Act ("MBCA") requires that the
Plan of Share Exchange be approved by the affirmative vote of the holders of
a majority of the outstanding shares of Sand Creek Common Stock.
V. SPECIAL MEETING - SOLICITATION OF PROXIES
Sand Creek will bear the cost of the solicitation of proxies from its
Shareholders. In addition to solicitation by mail, the directors, officers
and employees of Sand Creek may solicit proxies from Shareholders by
telephone or telegram or in person. Such persons will not be additionally
compensated, but will be reimbursed for reasonable out-of-pocket expenses
incurred in connection with such solicitation. Arrangements will also be
made with nominees, fiduciaries and other custodians, for the forwarding of
solicitation materials to the beneficial owners of shares held of record by
such persons.
VI. SPECIAL MEETING - FAILURE TO APPROVE SHARE EXCHANGE
If the Share Exchange is not approved, management intends that the current
corporate structure and business of Sand Creek will continue.
THE SHARE EXCHANGE
Consummation of the Share Exchange will be effected in accordance with the
terms and conditions set forth in the Plan of Share Exchange. The following
brief description of the Share Exchange does not purport to be complete, and
is qualified in its entirety by reference to the Plan of Share Exchange, a
copy of which is attached hereto as Appendix A, and is incorporated herein by
reference.
For a description of the rights of Shareholder to dissent from the Plan of
Share Exchange under Michigan law, see "Dissenting Shareholders' Rights".
Shareholders of Sand Creek who perfect their dissenters' rights under
Michigan law are occasionally referred to as "Dissenting Shareholders" and
all other Shareholders are occasionally referred to as "Non-Dissenting
Shareholders".
I. SHARE EXCHANGE - BACKGROUND
Over the past several years, Sand Creek has considered establishing a
holding company structure consisting of a holding company and one or more
operating subsidiaries. A step in establishing a holding company structure
is a Share Exchange in which SCCC, an existing subsidiary of Sand Creek,
would become the parent corporation, and Sand Creek would become a
wholly-owned subsidiary of SCCC. Later, additional subsidiaries could be
created with respect to (i) any existing operation of SCCC; or (ii) any new
or additional businesses which SCCC decided to undertake. The issuance of
SCCC Common Stock in connection with the Share Exchange is not to raise any
funds but to facilitate formation of the holding company.
Reasons for the establishment of a holding company structure include the
following:
A. REGULATORY SEPARATIONS. Sand Creek is a public utility that provides
telephone services subject to the regulation of the MPSC in accordance with
the provisions of Michigan law, including the Michigan Telecommunications Act,
1991 PA 179 ("MTA"). Among other things, Section 308 of the MTA grants the
MPSC authority to review the use, sale and transfer of a telecommunications
provider's assets used in the providing of basic local exchange service.
Section 308 is generally aimed at preventing cross-subsidies between
regulated and unregulated service.
Neither the activities of SCCC nor the Cass Cellular Limited Partnership,
however, are subject to direct regulation by the MPSC. Because SCCC is
currently a subsidiary of Sand Creek, distributions of its earnings to
individual Shareholders of Sand Creek must flow through Sand Creek. In
addition, the MPSC is able to review the non-regulated activities of Sand
Creek on an special basis as a result of receiving a special report prepared
for the MPSC by Sand Creek. Consequently, the MPSC is able to indirectly
regulate the activities of SCCC through the regulation of Sand Creek. Since
Sand Creek is a regulated entity, Sand Creek's holding of SCCC's stock and
the flow-through of earnings to Sand Creek Shareholders are subject to
regulation by the MPSC.
Section 401 of the MTA explicitly provides that the MPSC does not have
authority over cellular services such as those provided through Sand Creek's
limited partnership interest in Cass Cellular Limited Partnership, except as
otherwise
[Prospectus, page 10]
provided by the MTA. However, because the limited partnership interest in
Cass Cellular Limited Partnership is in the name of Sand Creek, distributions
of earnings to individual Shareholders of Sand Creek must flow through Sand
Creek. In addition, the MPSC is able to review the activities of Sand Creek
related to Cass Cellular Limited Partnership on an annual basis as a result
of receiving an annual report prepared for the MPSC by Sand Creek.
Consequently, the MPSC is able to indirectly regulate the cellular telephone
activities through the regulation of Sand Creek. Since Sand Creek is a
regulated entity, Sand Creek's holding of the limited partnership interest
and the flow-through of earnings to Sand Creek Shareholders are subject to
regulation by the MPSC.
The Share Exchange will facilitate the removal from MPSC regulation of as
much of the non-telephone company related activities of SCCC and Cass
Cellular Limited Partnership as possible. This will provide a less direct
connection between the regulated activities of Sand Creek and the unregulated
activities of SCCC and Cass Cellular Limited Partnership.
B. INCREASED FLEXIBILITY AND DIVERSIFICATION. The regulatory and
business climate in which Sand Creek is operating has undergone substantial
change in the past several years. Additional material changes can be
anticipated. These industry changes have included or may include changing
technologies and increased competition. The Sand Creek Board believes that
Sand Creek must protect its competitive position and enhance its ability to
pursue investment and business opportunities by establishing a corporate
structure able to adapt to the changing competitive environment. The Sand
Creek Board believes that industry changes may require development of
non-utility, unregulated businesses. Although other than as set forth
herein, Sand Creek currently has no specific plans to establish other non-
utility, unregulated business, such business, if and when developed, would
also primarily be carried out by corporate affiliates separate from Sand
Creek.
The Sand Creek Board is of the view that a holding company structure will
better facilitate the deployment of any portion of Sand Creek's earnings
which are not required for reinvestment in the utility business, as well as
the deployment of capital which might be raised by a non-utility holding
company for non-utility purposes. In the Board's view, the Share Exchange
will increase opportunities to diversify into businesses which will not be
regulated as public utilities. Financing alternatives may also be enhanced
as a result of engaging in a greater number of businesses. Diversification
that succeeds in promoting employment and commerce in the areas served by
Sand Creek may benefit Sand Creek and its customers, as well as the
Shareholders, in other ways. Diversification does, however, involve risks,
and there can be no assurance that any new businesses will be successful or,
if unsuccessful, that they will not have a direct or indirect adverse effect
on the holding company system as a whole despite the separations afforded by
the holding company structure. See "RISK FACTORS - Diversification" above.
C. CORPORATE SEPARATION. The holding company structure generally
insulates the utility customers of Sand Creek and the public holders of Sand
Creek's securities from the risks of the non-utility businesses by
segregating the non-utility businesses into separate corporations that will
be direct or indirect subsidiaries of the holding company and not of Sand
Creek. Because non-utility businesses of the holding company will be
conducted through separate subsidiaries, any liabilities incurred by those
subsidiaries will generally not constitute liabilities of Sand Creek. The
corporate separation also insures that all costs of a particular
non-utility subsidiary will be charged to that subsidiary and not allocated
to any utility subsidiary. Thus, the corporate structure and the regulatory
requirements provide for the insulation of customers of Sand Creek from risks
of the non-utility businesses. Any benefits or detriments which result from
the Share Exchange and consequent segregation of the utility and non-utility
businesses will flow to the security holders of SCCC. See "RISK FACTORS -
Holding Company Structure" above. After the Share Exchange, the separate
financial statements prepared for Sand Creek will not reflect the non-utility
businesses which may be owned by non-utility subsidiaries of SCCC. The
consolidated financial statements of SCCC will not reflect the financial
condition of any group of subsidiaries taken separately but will reflect the
overall operations of all subsidiaries, including Sand Creek.
D. FINANCINGS. The holding company structure is intended to afford
additional flexibility for maintaining the capital ratios of Sand Creek at
levels determined to be appropriate by regulatory authorities. This ability
to adjust the components of the capital structure of Sand Creek will help
Sand Creek maintain stable utility rates. One component of utility rates is
cost of capital. Equity capital is the most expensive type of capital and if
the equity component of a utility's capital structure is too high it may
result in increasing pressure to raise rates. If the equity component is too
low it may result in increases in the cost of debt because of increased
leverage and risk which will also tend to increase rates.
[Prospectus, page 11]
Under the holding company structure, capital ratios of Sand Creek would be
subject to adjustment from time to time through dividends to, or equity
investments from, SCCC.
Financing alternatives are expected to be improved by the holding company
structure in that the planning of financings best suited to the particular
needs and circumstances of the separate businesses should be facilitated. It
is contemplated that in the normal course SCCC, in addition to receiving
dividends from its subsidiaries, will obtain funds though debt or equity
financings, that Sand Creek will obtain funds through its own financings
(which may include the issuance of additional debt such as first mortgage
bonds or preferred stock, as well as the issuance of additional shares of
Sand Creek Common Stock to SCCC, the businesses owned by non-utility
affiliates, or from their own outside financings). Any financings will
depend on the financial and other conditions of the entities involved and on
market conditions.
The Sand Creek Board intends that the utility operations of Sand Creek will
continue to constitute the predominant activity of the holding company system
for the foreseeable future and that there be no capital impairment of Sand
Creek and no adverse effect on Sand Creek's levels of service as a result of
the Share Exchange.
E. REDUCED ADMINISTRATIVE EXPENSES. The Share Exchange will result in
reduced administrative expenses. The MPSC's review of Sand Creek's financial
records will no longer require Sand Creek to provide the MPSC with
information concerning subsidiaries and limited partnership interests.
The holding company structure will also make clearer the separation between
rate-base and non-rate base assets. Consequently, it is anticipated that
Sand Creek will be able to avoid legal and accounting fees in dealing with
the MPSC, and will reduce administrative delay and expense with regard to
unregulated activities.
F. RATE REGULATION. The MPSC possesses statutory authority to determine
whether Sand Creek's rates are just and reasonable. In doing so, the MPSC
asserts that a company's earnings can be considered for rate-making purposes.
Thus, under the present corporate structure, the profitability of SCCC and
Cass Cellular Limited Partnership increases Sand Creek's regulatory burden
in rate cases. The proposed restructuring will create a structure that will
clearly separate regulated from unregulated activities and enhance Sand
Creek's ability to respond to regulatory oversight. The MTA regulates
transactions between a regulated provider and its affiliates only to the
extent that such transactions have an impact on regulated activities. Since
SCCC is engaged in non- MPSC regulated activities, the MTA exempts them from
MPSC oversight when they are not subsidiaries of Sand Creek.
G. LACK OF MATERIAL NEGATIVE IMPACTS. The Sand Creek Board believes that
there are no material negative impacts of elimination of MPSC regulatory
oversight of the non- telephone business operations of SCCC. The Board
believes that there will be no material adverse effect of the reorganization
other than the elimination of MPSC oversight of non-regulated activities.
The Board believes that Sand Creek will continue to qualify for commercial
financing, if outside financing is required, after the Share Exchange.
H. TAX-FREE REORGANIZATION. The expectation is the Share Exchange will
be a tax-free transaction to the Shareholders and the two companies.
II. SHARE EXCHANGE - THE SAND CREEK BOARD'S RECOMMENDATION.
The Board of Directors of Sand Creek has unanimously determined that a
Share Exchange is in the best interests of the Shareholders of Sand Creek,
and has approved the Plan of Share Exchange and the transactions contemplated
thereby. In reaching their determination, the Sand Creek Board consulted with
its legal counsel with respect to the legal duties of the Board. The Sand
Creek Board also consulted with its outside independent accountants with
respect to regulatory matters, the general terms, the timing, reporting and
cost considerations of the Share Exchange, the Plan of Share Exchange and
issues related thereto, and with its senior management. The Board considered
a number of factors, including the ones discussed above but did not assign
any specific nor relative weight to any particular factor.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST A MAJORITY OF THE
OUTSTANDING COMMON STOCK OF SAND CREEK IS REQUIRED FOR THE APPROVAL OF THE
PLAN OF SHARE EXCHANGE. THE PLAN WILL NOT BECOME EFFECTIVE, AND THE SHARE
EXCHANGE WILL NOT TAKE
[Prospectus, page 12]
PLACE UNLESS SUCH APPROVAL IS OBTAINED. ABSTENTIONS AND NON-VOTES WILL HAVE
THE SAME EFFECT AS VOTES AGAINST APPROVAL OF THE PLAN.
THE BOARD RECOMMENDS APPROVAL OF THE PLAN AND URGES EACH HOLDER OF SAND
CREEK COMMON STOCK TO VOTE "FOR" APPROVAL OF THE PLAN. PROXIES WHICH ARE
EXECUTED BUT DO NOT INDICATE HOW THE PROXIES ARE TO BE VOTED ON THE PLAN WILL
BE VOTED "FOR" APPROVAL OF THE PLAN.
III. SHARE EXCHANGE - FORM OF EXCHANGE.
SCCC is currently a wholly-owned subsidiary of Sand Creek. Sand Creek and
SCCC have entered into a Plan of Share Exchange, subject to Shareholder
approval. The Share Exchange will be three (3) shares of Common Stock (no
par value) of SCCC for every one (1) share of Common Stock ($10 par value) of
Sand Creek. Following the consummation of the Plan of Share Exchange, the
share of Common Stock of SCCC owned by Sand Creek will be cancelled. As a
result of the foregoing, SCCC will hold all of the outstanding Common Stock
of Sand Creek, and Sand Creek will become a wholly-owned subsidiary of SCCC.
Assuming redemption of no more than a nominal number of shares of
unaffiliated persons who dissent, there will be no material change in Sand
Creek's Shareholder's relative equity ownership interest in the underlying
Sand Creek assets. After the Share Exchange, Sand Creek will continue to do
business as a separate telephone company under its corporate charter, and
under the name of Sand Creek.
A diagram of the steps involved is set forth below.
STEP 1: CURRENT ORGANIZATION
Shareholders
Sand Creek Telephone Company
Cass Cellular Sand Creek
Limited Partnership* Communications Company
[Entities shown in boxes; vertical lines show ownership]
STEP 2: SHARE EXCHANGE BETWEEN SAND CREEK SHAREHOLDERS AND SCCC
Shareholder
Sand Creek Telephone Company
Shares of Sand Shares of Sand
Creek Telephone Creek Communications
Co. Common Stock Co. Common Stock
Cass Cellular Sand Ceek
Limited Partnership* Communications Company
[Entities shown in boxes; vertical lines show ownership. Arrows drawn
to show (i) shares of Sand Creek Communications Company Common Stock going
from SCCC to "Shareholders" and (ii) shares of Sand Creek Telephone Company
Common Stock going froom "Shareholders" to Sand Creek Communications Company.]
STEP 3: FINAL STRUCTURE
Shareholders
Sand Creek Communications Company
Sand Creek Telephone Company
Cass Cellular
Limited Partnership*
[Entities shown in boxes; vertical lines show ownership]
* Sand Creek owns a 22.5% limited partnership interest in Cass
Cellular Limited Partnership
[Prospectus,page 13]
IV. SHARE EXCHANGE - CONSIDERATION
Upon consummation of the Share Exchange, each outstanding share of Sand
Creek Common Stock will be exchanged (subject to the provisions with respect
to shares for which dissenters' rights have been perfected, described under
"Rights of Dissenting Shareholders" below) into three (3) shares of SCCC
Common Stock.
The Shareholders of Sand Creek will own 100% of the outstanding SCCC Common
Stock following consummation of the Share Exchange.
V. SHARE EXCHANGE - REGULATORY APPROVALS AND OTHER CLOSING CONDITIONS.
The obligation of Sand Creek and SCCC to consummate the Plan of Share
Exchange is conditioned upon (i) the affirmative vote of Shareholders owning
at least a majority of the shares of Sand Creek Common Stock, and
(ii) Dissenting Shareholders holding fewer than 8,281 of the issued and
outstanding shares of Sand Creek. MPSC approval of the Share Exchange is not
required. The MPSC possesses the authority to approve the issuance of
securities by Sand Creek pursuant to the Uniform Utilities Securities Act,
MCL 460.301, et seq., and the MPSC's Rules of Practice and Procedure, Rules
603 and 605. This transaction, however, does not require Sand Creek to issue
new securities, but, rather, involves the exchange of securities.
The MTA contains no provision explicitly giving the MPSC approval power
over this type of transaction. The MPSC will likely investigate and may
otherwise regulate aspects of the transaction. In light of past MPSC
practice, the MPSC staff will expect to be notified of the transaction and
may even believe that notification is required under Section 308(3) of the
MTA.
It is the opinion of Sand Creek counsel, Ronald W. Bloomberg, Loomis,
Ewert, Parsley, Davis & Gotting, P.C., that the MPSC has no jurisdiction or
authority to approve or disapprove the Share Exchange. Counsel's opinion is
based on its review of the provisions of the Michigan Telecommunications Act
("MTA") and the September 11, 1992 MPSC Order in Case No. U-10123. In that
case, GTE applied for authority to transfer certain assets to facilitate a
corporate reorganization affecting its operations. The MPSC held that the
law did not require approval, but merely required notification of asset
transfers under Section 308(3). In the spirit of cooperation, Sand Creek
intends to notify the MPSC of the Share Exchange when it takes place. If
Section 308(3) were applicable, it would require notification only when
transfer take place and would not require prior notification. Thus, after
approval of the Share Exchange by Shareholders, Sand Creek will notify the
MPSC as a matter of courtesy.
Sand Creek has also reserved the right to abandon the Share Exchange if it
deems the Plan of Share Exchange to not be in the best interest of its
Shareholders. Among the conditions to closing is a determination by the Board
of Directors that the claims of Dissenting Shareholders would not have an
adverse impact on Sand Creek or SCCC.
VI. SHARE EXCHANGE - EFFECTIVE TIME.
The Share Exchange will become effective on the date of filing with the
Michigan Department of Commerce, Corporations and Securities Bureau, of the
Certificate of Share Exchange to be submitted by Sand Creek and SCCC. Unless
the Sand Creek Board determine a different time, the closing of the Share
Exchange will take place on the last day of the month in which all conditions
precedent to the Share Exchange have been satisfied or waived.
VII. SHARE EXCHANGE - EXCHANGE OF STOCK CERTIFICATES.
With a reasonable time after the Effective Time, SCCC will send to each
Sand Creek Shareholder a form of letter of transmittal (which will specify
that delivery will be effected, and risk of loss and title to certificates
for shares of Sand Creek Common Stock will pass, only upon proper delivery of
such certificates to SCCC) and instructions for use in effecting the exchange
of the certificates for shares of SCCC Common Stock.
SAND CREEK SHAREHOLDERS SHOULD NOT RETURN THEIR STOCK CERTIFICATES WITH THE
ENCLOSED PROXY OR UNTIL THEY HAVE RECEIVED TRANSMITTAL FORMS.
[Prospectus, page 14]
Until the certificates representing Sand Creek Common Stock are surrendered
for exchange after the consummation of the Share Exchange, holders of such
certificates will not be paid dividends or other distributions with respect
to the shares of SCCC Common Stock with which such shares of Sand Creek
Common Stock are being exchanged. When such certificates are surrendered,
any such unpaid dividends or other distributions will be paid (without
interest) with respect to the number of shares of SCCC Common Stock
represented by such certificates. Holders of unsurrendered certificates
shall not be entitled to vote after the Effective Time at any meeting of SCCC
Shareholders until they have exchanged their certificates.
VIII. SHARE EXCHANGE - COMPARISON OF SCCC AND SAND CREEK COMMON STOCK.
A. GENERAL. In the event the Share Exchange is consummated and Sand
Creek becomes a wholly-owned subsidiary of SCCC, Shareholders of Sand Creek
whose shares of Sand Creek Common Stock are exchanged for shares of SCCC
Common Stock will become Shareholders of SCCC. The rights of SCCC
Shareholders are governed by the SCCC Articles of Incorporation and Bylaws
(collectively, SCCC Charter Documents") and the Michigan Business Corporation
Act, as amended ("MBCA"). Currently, the rights ofSand Creek Shareholders
are governed by the Articles of Incorporation and Bylaws of Sand Creek
(collectively, "Sand Creek Charter Documents") the Telephone Act of 1913,
as amended ("Telephone Act"), the Uniform Utilities Securities Act, as amended
("UUSA") and the MBCA.
There are minor differences between the SCCC Charter Documents and the
Sand Creek Charter Documents which affect Shareholders' rights. Certain
differences between the rights of holders of SCCC Common Stock and the rights
of holders of Sand Creek Common Stock are described and summarized below.
The following discussion is notintended to be relied upon as an exhaustive
list or a detailed description of such differences and is not intended to
constitute a detailed comparison or description of the provisions of the SCCC
Charter Documents, the Sand Creek Charter Documents, the MBCA, the Telephone
Act or the UUSA. The following discussion is qualified in its entirety be
reference to the SCCC Charter Documents, the Sand Creek Charter Documents,
the MBCA, the Telephone Act and the UUSA, and holders of Sand Creek
Common Stock are referred to the complete text of such documents, agreements
and laws.
B. AUTHORIZED STOCK. The SCCC Articles of Incorporation authorize
160,000 shares of SCCC Common Stock without par value. As of August 31,
1995, one (1) shares of SCCC Common Stock was issued, outstanding and fully
paid. The holders of SCCC Common Stock are entitled to receive, ratably,
all dividends and distributions. No right of redemption or conversion
exists with respect to the SCCC Common Stock. Shareholders of SCCC do not
have any preemptive rights with respect to any of the authorized but
unissued shares of SCCC Common Stock. No options to purchase SCCC Common
Stock are outstanding or to be created in connection with the Share
Exchange. After the Share Exchange, SCCC will have approximately 36,102
authorized but unissued shares of Common Stock (approximately 27,402 shares
more than the authorized but unissued shares of Sand Creek Common Stock).
Authorized but unissued shares of SCCC Common Stock may be issued from time
to time upon such terms and for such consideration as may be determined by
the SCCC Board of Directors. Although there are no plans for SCCC to issue
additional SCCC Common Stock subsequent to the completion of the Share
Exchange, the SCCC Board believes that it is in the best interest of SCCC to
have additional shares of SCCC Common Stock available to be issued without
further Shareholder action, if, at some time in the future, it is deemed
to be desirable to issue additional shares for financing, acquisitions,
possible future employee benefit plans, stock splits, stock dividends and
other purposes.
The Sand Creek Articles of Incorporation authorize 50,000 shares of $10.00
par value Common Stock, of which 41,299 1/3 were outstanding as of September 15,
1995. Currently, no shares are issuable pursuant to the exercise of warrants or
options or in conversion of any other securities. The holders of Sand Creek
Common Stock are entitled to receive, ratably, all dividends and
distributions. Sand Creek Shareholders have no preemptive, redemption or
conversion rights except as may be provided by law.
C. UUSA. Sand Creek is subject to the UUSA, which regulates the issuance
of stocks, bonds and other evidences of indebtedness by public utilities,
including telephone companies. Under the UUSA, Sand Creek must obtain the
approval of the MPSC before issuing its stocks, bonds or other evidences of
indebtedness. SCCC is not subject to the restrictions on the issuance of
stocks and bonds imposed by the UUSA.
[Prospectus, page 15]
D. ANTI-TAKEOVER PROVISIONS. Sand Creek is currently subject to the
Michigan "Fair Price" statute (Chapter 7A of the MBCA). After the Share
Exchange, SCCC will be subject to Chapter 7A, but not Sand Creek. This is
due to the fact that only corporations with more than 100 shareholders are
subject to Chapter 7A. Chapter 7A applies to certain "business combinations,"
such as mergers, sales of assets, issuance of equity securities and a
liquidation, recapitalization or reorganization, involving an "interested
shareholder" (generally, the holder of 10% or more of a class of a
corporation's voting stock). The approval of holders of 90% of each class of
the corporations' outstanding voting stock and the approval of the holder
of two-thirds of the outstanding stock of each such class other than shares
beneficially owned by the interested shareholder is required to approve a
business combination that meets certain price, form of consideration and
procedural requirements designed to make the transaction fair to all
shareholder or to a transaction that the Board of Directors has approved with
respect to a particular interested shareholder prior to the interested
shareholder becoming an interested shareholder.
Sand Creek is subject to the Michigan "Control Share Acquisition" statute
(Chapter 7B of the MBCA). After the Share Exchange, SCCC will be subject to
Chapter 7B, but not Sand Creek. This is due to the fact that only
corporations with more than 100 shareholders are subject to Chapter 7B.
Chapter 7B does not apply to the Share Exchange because reorganizations, such
as the Share Exchange, effected pursuant to the MBCA are exempt from
Chapter 7B. Generally, Chapter 7B provides that a person or an entity that
acquires "control shares" in a control share acquisition may vote the control
shares on any matter only if a majority of all shares entitled to vote
thereon and of all non-"interested shares" entitled to vote thereon approve
such voting rights. "Interested shares" are defined generally as those
shares beneficially owned by officers of the corporation, employee
directors of the corporation and the person or entity making the control share
acquisition. "Control shares" are defined generally as shares that when added
to shares already owned by a person or entity would give the person or entity
voting power in the election of directors within any of the three thresholds:
one-fifth, one-third or a majority of all voting power. The effect of the
statute is to condition the acquisition of voting control of a Michigan
corporation on the approval of a majority of its disinterested shareholders.
The foregoing provisions of Chapter 7A and 7B of the MBCA that will apply
to SCCC after the Share Exchange may have a depressive effect on the market
price of SCCC's Common Stock because they may render more difficult an
attempt to take control of SCCC. If SCCC does not wish to be subject to
Chapter 7A, the board of directors of SCCC may, by resolution, exempt a
business combination involving a particular interested shareholder, at any
time prior to the time the interested shareholder attained the status.
Similarly, SCCC may "opt-out" of Chapter 7B by amending its articles or
bylaws to provide that Chapter 7B shall not apply to control share
acquisitions of the company.
E. RESTRICTIONS ON OWNERSHIP AND TRANSFER. The Bylaws of Sand Creek
restrict any Shareholder from owning more than 12.5% of the outstanding
Common Stock. The Bylaws of SCCC restrict any one person from owning more
than 8% of its outstanding Common Stock. Sand Creek and SCCC can enforce
these Bylaws through exercise of their rights of first refusal on transfers
of Common Stock outside of immediate family members. Also in the event of a
transfer between immediate family members in violation of such Bylaws, the
Bylaws of both companies provide that the company shall purchase
such Common Stock. The Bylaws also permit the companies to issue additional
shares of Common Stock to remedy a violation.
The Bylaws of both Sand Creek and SCCC authorize the Boards of Directors to
set limits on the persons and corporations to whom stock can be sold. The
Sand Creek Board and SCCC Board have adopted policies pursuant to such
Bylaws. See "Summary -II. The Companies - B. Sand Creek Common Stock", above.
These policies are identical with the exception that the Common Stock
Transfer Policies of SCCC include current directors, officers and employees
of SCCC in the same category as persons residing in Sand Creek's service
area. Also, both the SCCC and Sand Creek Bylaws provide SCCC and Sand Creek,
respectively, a right of first refusal in connection with potential sales of
Common Stock other than transactions involving immediate family members.
IX. SHARE EXCHANGE - ACCOUNTING TREATMENT.
Upon approval of the Plan of Share Exchange, any amounts paid to dissenting
shareholders, as stipulated in section 450.761-450.774 of the Michigan
Business Corporation Act, will be charged to corporate equity. Each
remaining share of Sand Creek will be exchanged for three new shares of SCCC.
Concurrently, the current outstanding share of SCCC, owned by Sand Creek,
will be retired.
[Prospectus, page 16]
X. SHARE EXCHANGE - CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following summary describes the material federal income tax
consequences of the Share Exchange to the Sand Creek Shareholders who are
citizens or residents of the United States and who held their shares of Sand
Creek Common Stock as capital assets. It does not discuss all the tax
consequences that may be relevant to Sand Creek Shareholders entitled to
special treatment under the Internal Revenue Code of 1986, as amended
(the "Code") (including, without limitation, insurance companies, dealers in
securities, certain retirement plans, financial institutions, tax exempt
organizations or foreign persons). In addition, the summary does not address
the state, local or foreign tax consequences of the Share Exchange.
The Share Exchange is intended to be a "tax free reorganization" for
Federal income tax purposes under the Code. The following will be the
principal federal income tax consequences of the Share Exchange assuming it
is treated as a "tax free reorganization":
1. No gain or loss will be recognized by Sand Creek or SCCC as a result
of the Share Exchange.
2. No gain or loss will be recognized by Sand Creek's or SCCC's
Shareholders as a result of the Share Exchange, except as described in
paragraph 6 below.
3. The Share Exchange will not result in a change in the basis of the
assets of either Sand Creek or SCCC.
4. The basis for tax purposes of the shares of SCCC Common Stock received
by a holder of Sand Creek Common Stock pursuant to the Share Exchange will
be the same as the basis for such Shareholder's Sand Creek Common Stock
surrendered in exchange therefor.
5. A Sand Creek Shareholder's holding period with respect to the shares
of SCCC Common Stock received by such Shareholder as a result of the
Share Exchange will include the period for which he or she held the shares
of Sand Creek Common Stock which were converted into such shares of SCCC
Common Stock, provided that such shares of Sand Creek Common Stock
were held as a capital asset on the Effective Date.
6. Under current IRS rulings, any Dissenting Shareholder will be treated
as if such Shareholder's shares were redeemed. Under current IRS rulings,
such Dissenting Shareholder should recognize gain to the extent that the
cash the Shareholder receives for the Sand Creek shares exceeds the tax
basis (or loss to the extent the tax basis exceeds the amount received), and
such gain (or loss) should be a capital gain (or loss), provided that the
Sand Creek shares were held as a capital asset by the Dissenting
Shareholder. However, if a redemption fails to qualify for exchange treatment
under Section 302(b) of the Code (considering the attribution rules of
Section 318 thereof) because the Shareholder's interest is not sufficiently
reduced, a risk exists that some or all of the cash received by a Dissenting
Shareholder will be treated as a taxable dividend to such Shareholder.
Under the Code, in order for the Share Exchange to constitute a tax-free
reorganization, the Sand Creek Common Stock must be converted into an amount
of SCCC Common Stock that at the Effective Time equals at least 80% of the
aggregate value that all of the Sand Creek Shareholders receive. Thus, the
tax-free reorganization may be jeopardized if the cash payable to Dissenting
Shareholders would exceed 20% of the aggregate value of the total
consideration that all of the Sand Creek Shareholders receive at the
Effective Time. For IRS ruling purposes, in order for the Share Exchange to
constitute a tax-free reorganization, the amount of SCCC Stock received by
Sand Creek Shareholders in connection with the Share Exchange must be at
least 50% of the aggregate value of the consideration paid to all Shareholders
in connection with the share exchange. SCCC Common Stock received in the
Share Exchange will not be counted toward the 50% threshold if the recipient
disposes of such stock and such recipient had an intention to dispose of SCCC
Common Stock on the Effective Date. The disposition of SCCC Common Stock
within two years of the Effective Date may evidence that the Shareholder had
an intention to dispose of such stock on the Effective Date.
[Prospectus, page 17]
The tax discussion set forth above is included for general information and
is based upon present law and the opinion of counsel, Ronald W. Bloomberg,
Loomis, Ewert, Parsley, Davis & Gotting, P.C., which opinion has been
delivered to SCCC and is an exhibit to the Registration Statement. The tax
consequences of the Share Exchange will depend in large part on the facts and
circumstances applicable to each Shareholder and upon an evaluation of facts
and events that will occur in the future. As a result, the particular tax
consequences to a Shareholder cannot be predicted with certainty and all the
foregoing is subject to change and any such changes could affect the
continuing validity of this discussion. Therefore, each Shareholder is urged
to consult with his or her own tax advisor regarding the tax consequences of
the Share Exchange. With regard to the tax consequences under the laws of
states or local governments or of any other jurisdiction, no information or
opinion is provided herein, and Shareholders are urged to consult, and should
rely upon, their own tax advisors.
XI. SHARE EXCHANGE - MANAGEMENT AND OPERATIONS AFTER THE SHARE EXCHANGE.
After the Share Exchange, Sand Creek will be a wholly owned subsidiary of
SCCC and will have a Board of Directors consisting of those persons serving as
directors of Sand Creek immediately prior to the Share Exchange. SCCC will
continue to operate with its current Board of Directors, which is identical
to the Board of Directors of Sand Creek. After the Share Exchange, it is
anticipated that (i) SCCC, as the parent company, will operate with SCCC's
current executive officers (although some changes may be made to take account
of the new holding company structure), and (ii) Sand Creek will operate with
its current executive officers and employees.
XII. SHARE EXCHANGE - RESALE OF SCCC COMMON STOCK; RESTRICTIONS ON TRANSFER.
The shares of SCCC Common Stock to be issued in the Share Exchange will be
registered under the Securities Act and will be transferable under the
Securities Act, except for shares issued to any Shareholder who may be deemed
to be an "affiliate" of Sand Creek for purposes of Rule 145 under the
Securities Act. Affiliates may not sell their shares of SCCC Common Stock
acquired in connection with the Share Exchange except pursuant to an
effective registration statement under the Securities Act covering such
shares or in compliance with Rule 145 or another applicable exemption from
the registration requirements of the Securities Act. Persons who may be
deemed to be affiliates of Sand Creek generally include individuals or
entities that control, are controlled by or under common control with
Sand Creek, and may include certain officers and directors of Sand Creek as
well as principal Shareholders of Sand Creek.
XIII. SHARE EXCHANGE - EXPENSES
Regardless of whether the Plan of Share Exchange is consummated, the fees
and expenses in connection with the Plan will be paid by Sand Creek.
XIV. SHARE EXCHANGE - POST SHARE EXCHANGE DIVIDEND POLICY.
SCCC and Sand Creek currently expect that after the Share Exchange, SCCC
will pay dividends on the SCCC Common Stock comparable to the current
dividends Sand Creek pays on the Sand Creek Common Stock, although such
future dividends will depend upon future financial results and legal and
regulatory requirements and there can be no assurance as to any future
dividends. SCCC will be a legal entity separate and distinct from its
various subsidiaries. As a holding company with no significant
operations of its own, the principal sources of SCCC 's funds will be
dividends and other distributions from its subsidiaries, borrowings and
sales of equity. The rights of SCCC and consequently its Shareholders, to
participate in any distribution of assets of any of its subsidiaries is
subject to prior claims of creditors, if any, of such subsidiary (except to
the extent claims of SCCC in its capacity as a creditor are recognized).
SCCC does not expect that any regulatory and/or contractual restrictions
applicable to SCCC or its subsidiaries will significantly affect the
operations of SCCC or its subsidiaries or impair the ability of SCCC to
pay dividends on SCCC Common Stock after the Share Exchange.
[Prospectus, page 18]
XV. CAPITALIZATION
The historical capitalization of Sand Creek and SCCC and the pro forma
capitalization of Sand Creek and SCCC after giving effect to the proposed
Share Exchange (assuming no dissenters rights exercised) are summarized as
follows:
<TABLE>
<CAPTION> Paid-In Retained Total
# Of Shares Capital Stock Capital Earnings Equity
<S> <C> <C> <C> <C> <C>
Sand Creek
Balance @ 06-30-95 41,405 1/3 414,053 34,570 1,961,034 2,409,657
2. Stock Redemption (41,405 1/3) (414,053) (34,570) 448,623 -0-
3. Stock Issuance 41,405 1/3 414,053 (414,053) -0-
Proforma
post-exchange 41,405 1/3 414,053 -0- 1,995,604 2,409,657
SCCC
Balance @ 06-30-95 1 1,000 -0- -0- 1,000
1. Stock Redemption (1) (1,000) (1,000)
2. Stock Issuance 124,216 1,242,160 (1,242,160) -0-
3. Stock Acquisition 2,409,657 2,409,657
Proforma
Post Exchange 124,216 1,242,160 -0- 1,167,497 2,409,657
</TABLE>
1. Sand Creek redeems its share of stock in SCCC.
2. Sand Creek shareholders redeem each of their shares of Sand Creek stock in
exchange for 3 shares of SCCC stock.
3. Sand Creek issues 100% of its stock to SCCC.
DISSENTING SHAREHOLDERS' RIGHTS
Each Shareholder of Sand Creek has the right to dissent from the Share
Exchange and receive the fair value of such shares of Sand Creek Common Stock
in cash if the Shareholder follows the procedures required under Section
450.761-450.774 of the Michigan Business Corporation Act ("MBCA") set forth
in Appendix B, the material provisions of which are summarized below.
The MCBA provides that a Shareholder of Sand Creek who does not vote in
favor of the Plan of Share Exchange and who has given notice in writing to
Sand Creek before the vote is taken that the Shareholder dissents from the
Plan of Share Exchange and intends to demand payment for his or her shares,
and who then takes the steps necessary to perfect dissenters' rights, shall
be entitled to receive in cash the fair value of all shares of Sand Creek
Common Stock held by such Shareholder if and when the Share Exchange is
consummated. Set forth below is a summary of the procedures relating to the
exercise of Dissenting Shareholders' rights provided by the MCBA. This
summary does not purport to be complete, and is qualified in its entirety
by reference to Sections 761 through 774 of the MCBA, which have been
attached hereto as Appendix B.
I. DISSENTERS' RIGHTS - Procedure to Perfect
Each Sand Creek Shareholder who follows the procedures set forth in Section
761 through 774 of the MCBA may receive a cash payment equal to the fair
value of his or her shares of Sand Creek Common Stock determined as of the
[Prospectus, page 19]
day immediately preceding the Special Meeting, excluding any depreciation or
appreciation in anticipation of the Share Exchange, unless such exclusion
would be inequitable. Unless a Shareholder follows all of the procedures
set forth in Sections 761 through 774, he or she will forfeit the right to
dissent. To assert dissenters' rights, a Shareholder must:
A. Prior to the Special Meeting, deliver to Sand Creek a written
objection to the Plan of Share Exchange, including a statement of the
Shareholder's intent to demand payment for his or her shares if the Share
Exchange is consummated.
B. Refrain from voting the shares owned by the Shareholder in favor of
the Plan of Share Exchange.
C. Demand payment and deposit his or her shares prior to the Due Date
described below (not more than 60 days nor less than 30 days after the
dissenter's notice is sent by Sand Creek).
Written objections must be signed by the Shareholder of record and include
the Shareholder's present address to which notice of approval of the Plan of
Share Exchange will be delivered. Any Shareholder not filing a written
objection as required will forfeit his or her right to dissent; a vote
against the Plan of Share Exchange is not a substitute for filing the
written objection with Sand Creek.
If the Plan of Share Exchange is approved, Sand Creek will send a written
dissenter's notice within 10 days after the Special Meeting to all
Shareholders who satisfied the initial requirements described above. This
notice will (i) state where the payment demand must be sent and where and
when the stock certificates representing the Sand Creek Common Stock must be
deposited; (ii) inform Shareholders without certificates to what extent
transfers of Sand Creek Common Stock will be restricted after the payment
demand is received; (iii) supply a form of payment demand, which date must be
not less than thirty nor more than sixty days after the date the dissent
notice was delivered to the Shareholder; and (iv) establish a due date (the
"Due Date") by which Sand Creek must receive the payment demand. Before
the Due Date, a Dissenting Shareholder must deliver the payment demand,
certify whether he or she acquired beneficial ownership of the shares before
November 12, 1995 and deposit the stock certificates representing his or her
shares of Sand Creek Common Stock in accordance with the Notice (the
"Response Requirements"). A Dissenting Shareholder who demands payment and
deposits his or her stock certificates as required retains all other rights
of a Shareholder until such rights are cancelled or modified by the Share
Exchange. If a Dissenting Shareholder fails to comply with the Response
Requirements prior to the Due Date, the Shareholder forfeits his or her right
to dissent. A Shareholder may not dissent as to less of all of his or her
beneficially owned shares and a nominee or fiduciary may not dissent on
behalf of a beneficial owner as to less than all of the shares of Sand
Creek Common Stock held by such nominee or fiduciary for such beneficial
owner.
Except for "after acquired shares", which are discussed below, as soon as
the Share Exchange is completed or upon receipt of a payment demand, Sand
Creek will pay each dissenting Shareholder who complied with the Response
Requirements the amount Sand Creek estimates to be the fair market value of
the Sand Creek Common Stock, plus accrued interest. Such amount may be more
or less than the value of the consideration received by the Non-Dissenting
Shareholders in the Share Exchange. The payment will be accompanied by (i)
Sand Creek's most recent annual and interim financial statements; (ii) a
Statement of Sand Creek's estimate of the fair value of the Sand Creek Common
Stock; (iii) an explanation of how the interest is calculated:and (iv) a
statement of the Dissenting Shareholder's right to demand payment under
Section 772 of the MBCA (described below).
Sand Creek may elect to withhold payment from Dissenting Shareholders who
acquired their shares after November 12, 1995 and instead, estimate the fair
value of such shares, plus accrued interest, and offer to pay this amount to
each Dissenting Shareholder who agrees to accept it in full satisfaction of
his or her demand. Sand Creek will send with an offer, a statement of its
estimate of the fair value of the shares, an explanation of how interest is
calculated, and a statement of the dissenting Shareholders right to demand
payment under Section 772 of the MBCA.
Sand Creek Common Stock acquired after the date of the first announcement
to the news media or Sand Creek Shareholders of the terms of the Share
Exchange still qualify for dissenters' rights, but the holder of these shares
may receive different and somewhat less favorable treatment than those shares
acquired before such announcements. Sand Creek, at its election, may
withhold payment from a dissenter who holds "after-acquired" shares, at a
time when payment to other Shareholders is required. Should Sand Creek elect
to withhold payment, Sand Creek, after the Closing Date, will estimate the
fair market value of the dissenter's shares plus accrued interest and offer
to pay this amount to each dissenter who agrees to accept it in full
satisfaction. Along with its offer, Sand Creek will send a statement of
its estimate of the
[Prospectus, page 20]
fair value of the shares, an explanation of how accrued interest was
calculated, and a statement of the dissenter's right to make a supplemental
demand for payment if dissatisfied with the offer.
Under Section 772 of the MBCA, a Dissenting Shareholder may notify Sand
Creek in writing of the Shareholder's own estimate of the fair value of his
or her Sand Creek Common Stock, and the amount of interest due, and demand
payment of this estimate (less any payment made by Sand Creek to such
Shareholder) or reject Sand Creek's offer of payment and demand payment of
the fair value of his or her Sand Creek Common Stock, with interest, if
(i) the Dissenting Shareholder believes the amount paid or offered is less
than the value of his Sand Creek Common Stock or that the interest is
improperly calculated, (ii) Sand Creek fails to make payment to a Dissenting
Shareholder who held his or her Sand Creek Common Stock prior to November
12, 1995 within 60 days of the Due Date; or (iii) Sand Creek, having failed to
consummate the Share Exchange, fails to return the deposited stock
certificates within 60 days after the Due Date. The Dissenting Shareholder
will lose his right to demand payment unless the demand is submitted in
writing within 30 days after Sand Creek pays or offers payment for the
shares to the Dissenting Shareholder.
II. DISSENTERS RIGHTS - Court Proceedings
If the amount of payment remains unsettled, Sand Creek will, within 60 days
after receiving the Dissenting Shareholder's estimate of "fair value",
commence a proceeding in the Circuit Court for Lenawee County to determine
the fair value of the Dissenting Shareholder's Sand Creek Stock and accrued
interest. During the proceeding, the court may appoint an appraiser, whose
rights will be governed by the order of appointment, to receive evidence and
recommend a decision on the fair value of the Sand Creek Common Stock. All
parties to the proceeding will be bound by the Court's judgment as to the
fair value of the Sand Creek Common Stock. Each dissenter made a party to
the proceeding is entitled to judgment for the amount by which the court
determined fair value of the shares plus accrued interest exceeds the amount
paid by SCCC or, in the case of after-acquired shares for which payment
was not made, the total amount of the fair value plus accrued interest. If
Sand Creek does not timely file the proceeding, it must pay the amount
demanded to each Dissenting Shareholder whose demand remains unsettled.
The Court will determine the costs of an appraisal proceeding and will
assess such costs against Sand Creek, except that the Court may assess any
portion of such costs against any Dissenting Shareholder who has acted
arbitrarily, vexatiously, or not in good faith in demanding payment. The
expenses may include reasonable compensation and expenses of experts and
attorneys for the respective parties.
Pursuant to an agreement of the parties, the Court may alternatively
appoint a referee to determine the fair value. The referee's compensation
shall be agreed upon by the parties and allocated by the court between the
parties at the end of the proceeding. In addition to having the power to
examine the books and records of Sand Creek, the referee will allow the
parties to introduce evidence as to the value of the Sand Creek Common Stock.
The referee will then prepare and file a written report for the fair value of
the Sand Creek Common Stock held by the Dissenting Shareholders (the
"Referee's Report"). Within 45 days of being served a notice of the filing
of the Referee's Report, any party may serve written objections to the
Referee's Report upon the other party. The court may then hear motions on the
Referee's Report and may receive further evidence or adopt, modify, or
recommit it to the referee for instructions. Upon adoption of the Referee's
Report, judgment will be entered in the same manner as if the action had been
tried by a court and will be subject to review in the same manner as any
other judgment of the Court.
The exercise of dissenters' rights under the MBCA may result in a judicial
determination that the fair value of a Dissenting Shareholder's Sand Creek
Common Stock is higher or lower than the consideration payable to the
non-dissenting Shareholders in connection with the Share Exchange.
III. DISSENTER'S RIGHTS - Other Considerations
The MBCA provides that, in the absence of fraud or illegality, the right to
dissent is the only remedy provided to a Shareholder objecting to the Share
Exchange. Sand Creek's obligation to consummate the Share Exchange is subject
to the condition that the number of shares of Sand Creek Common Stock held by
Dissenting Shareholders will not exceed 8,259 shares.
[Prospectus, page 21]
A PROXY OR VOTE AGAINST THE SHARE EXCHANGE WILL NOT, BY ITSELF, BE REGARDED
AS A WRITTEN OBJECTION FOR PURPOSES OF ASSERTING DISSENTERS' RIGHTS.
THE ABOVE SUMMARY OF THE PROVISIONS REGARDING DISSENTERS' RIGHTS UNDER THE
MBCA IS QUALIFIED IN ITS ENTIRETY BY THE TEXT OF SECTIONS 450.761-450.774 OF
THE MBCA. THE TEXT OF SECTION 450.761-450.774 IS ATTACHED HERETO AS APPENDIX B.
SHAREHOLDERS OF SAND CREEK INTENDING TO EXERCISE DISSENTERS' RIGHTS ARE
URGED TO SEEK THE ADVICE OF COUNSEL. FAILURE TO COMPLY WITH ALL REQUIREMENTS OF
SECTIONS 450.761-450.774 OF THE MBCA WILL RESULT IN THE LOSS OF DISSENTERS'
RIGHTS.
INFORMATION ABOUT SAND CREEK
Sand Creek is a local exchange telephone company located in Sand Creek,
Michigan. Sand Creek was incorporated in 1907 pursuant to Act 129 of Public
Acts of 1883 of the State of Michigan. Sand Creek has 4 full-time employees
and 1 part-time employee. Sand Creek is not aware of any significant
dissatisfaction of its employees with their employment.
I. DESCRIPTION OF SAND CREEK'S BUSINESS
A. LOCAL TELEPHONE OPERATIONS. Sand Creek is primarily engaged in
providing (i) local exchange services; (ii) intra-Local Area Transport Area
("intra-LATA") access services; and (iii) network access services to
residential and business customers in Sand Creek's franchise service area in
and around Sand Creek, Michigan. Sand Creek operates approximately 1,117
access lines in its Sand Creek Exchange. Sand Creek offers equal access
service, which enables customers to access the primary long distance carrier
of their choice. Sand Creek serves approximately 1,117 subscribers. Over
90% of the lines are residential lines.
Sand Creek holds required licenses and franchises to conduct such
operations, which licenses and franchises do not have an expiration date.
The MPSC has authority to revoke the franchise under Michigan Public Act 179
of 1991, but such revocation would likely be in violation of federal law
unless: (i) the MPSC could show very substantial wrongdoing; or (ii) Sand
Creek was fully compensated for the fair market value of the franchise rights.
Sand Creek's local and intrastate operations are regulated by the MPSC.
These regulations cover, among other things, local rates, intrastate access
charges billed to interexchange and intra-LATA carriers, encumbrance and
disposition of utility properties, financing, and various accounting matters.
Due to recent changes in statutory law, the MPSC has recently ceased routine
regulation of depreciation rates; however, the MPSC may include depreciation
rates in any rate decision. The FCC regulates various matters relating to
interstate telephone service, including interstate access charges paid by
interexchange carriers to the National Exchange Carrier Association ("NECA")
access pool, to which Sand Creek belongs. Sand Creek intends to continue to
provide local telephone services in the future.
B. OTHER OPERATIONS. Cass Cellular Limited Partnership was formed in
1990 to manage and account for the interests of Deerfield Telephone Company,
Ogden Telephone Company, Sand Creek and Waldron Telephone Company in the
cellular operations of Rural Service Area (RSA) #9. Deerfield Telephone
Company transferred its interest in Cass Cellular Limited Partnership to its
holding company, D & P Communications, Inc. D & P Communications, Inc., is
the sole general partner, and a 22.5% limited partner in Cass Cellular Limited
Partnership. RSA #9 is comprised principally of the non-urban southern
counties of Michigan. The cellular franchise rights to RSA #9 were awarded
to the RSA #9 Limited Partnership by the Federal Communications Commission in
1990. Cass Cellular owns 56% of the partnership interests of RSA #9
Limited Partnership, Century Telephone owns 43% and Ameritech owns the
remaining 1%. Cass Cellular's 56% interest in RSA #9 is as a general partner.
Cass Cellular Limited Partnership usually meets three or four times a year
to discuss and approve proposed operational and construction budgets. The
partnership does not have any employees, property or activities other than
described above. The partnership currently has a $1,600,000 limit of
borrowing from St. Paul Bank for Cooperatives. Based upon current budgets,
the partnership will draw the remaining amount during 1995 to fund its share
of proposed construction. The partnership believes that additional lines of
borrowing are available at comparable rates and terms, if necessary.
[Prospectus, page 22]
Substantially all of the assets of Cass Cellular Limited Partnership are
represented by the investment in Michigan RSA #9. This investment amounted to
$1,146,013 and $1,956,177 at December 31, 1993 and 1994, respectively.
Revenues of the partnership consist solely of earnings from Michigan RSA #9
and patronage related to the loan from St. Paul Bank for Cooperatives.
Expenses consist primarily of loan interest and operational charges for legal
and audit fees.
The current market for cellular services is expected to grow and to
generate additional earnings and cash flow for the partnership. However, the
partnership does not plan to distribute any earnings in 1995 because of the
need to fund debt payments and additional construction. In addition, the
partnership is subject to competition from other cellular providers
(principally Cellular One) and the emergence of "personal communications
services" (PCS) as a viable technology. The principal methods of
competition are price and quality of service. It is expected that these
competitive forces will continue to make cellular service price sensitive
and thereby reduce the ability of Michigan RSA #9 to raise prices.
Sand Creek is also considering an investment in an entity which will
provide Internet access to persons in and around Sand Creek's service area.
Currently, persons in and around the service area use long-distance toll
calls to access such services. The contemplated entity would facilitate
access without the necessity of a toll call. The service is projected to be
available by the end of the first quarter of 1996. Funds for such
investment will come from retained earnings, and the current timetable is
for the initial investment to be made in late 1995 or early 1996.
C. PHYSICAL PROPERTY AND FACILITIES. Sand Creek owns facilities for
offices, equipment and remote line switches in and around Sand Creek,
Michigan. Sand Creek has approximately 160 route miles of line, serving
approximately 60 square miles. During 1994-95, Sand Creek acquired and
constructed its office building at 6525 Sand Creek Highway, Sand Creek,
Michigan. Sand Creek does not lease any real property or buildings.
Currently, there is no material amount of idle or unused property.
Sand Creek believes that its central office (switching) and outside plant are in
accordance with current industry standards and in good condition. Sand Creek
has sufficient capacity to serve its current and potential customers.
D. FINANCIAL INFORMATION.
Independent Auditor's Report
We have audited the accompanying balance sheets of Sand Creek Telephone
Company, as of December 31, 1994 and 1993, and the statements of income,
changes in stockholders' equity, and cash flows for the years ended December
31, 1994, 1993 and 1992. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sand Creek Telephone
Company as of December 31, 1994 and 1993, and the results of its operations
and its cash flows for the years ended December 31, 1994, 1993 and 1992, in
conformity with generally accepted accounting principles.
As discussed in Note 4 to the financial statements, Sand Creek Telephone
Company changed its method of accounting for income taxes in 1993.
McCartney and McIntyre, P.C.
June 21, 1995
Okemos, MI
[Prospectus, page 23]
<TABLE>
Sand Creek Telephone Company
Sand Creek, Michigan
Consolidated Balance Sheets
<CAPTION>
Unaudited Unaudited
December 31, December 31, June 30, June 30,
1994 1993 1995 1994
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash
Equivalents $ 598,156 $ 828,223 $ 293,923 $ 549,022
Due from sub-
scribers, net
of reserve for
uncollectibles 14,443 22,961 13,739 25,454
Accounts Receivable
Primarily inter-
exchange carriers 68,008 66,312 68,218 91,602
Note Receivable 50,000 -0- -0- -0-
Material and supplies
Inventory 6,491 10,920 9,620 18,556
Equipment held for
Resale 9,101 7,466 7,983 7,550
Prepaid taxes 5,956 -0- 137,864 8,862
Prepaid expenses 2,840 4,021 8,019 9,703
TOTAL CURRENT ASSETS $ 754,995 $ 939,903 $ 539,366 $ 710,749
Investments $ 270,678 $ 190,824 $ 369,253 $ 248,278
Plant, Property
and Equipment
Plant in Service $1,730,133 $2,054,025 $2,115,780 $2,057,819
Plant under
Construction 179,119 6,720 -0- 246,246
$1,909,252 $2,060,745 $2,115,780 $2,304,065
Less:
Accumulated
Depreciation 280,926 732,505 336,723 797,628
Net Plant,
Property and
Equipment $1,628,326 $1,328,240 $1,779,057 $1,506,437
TOTAL ASSETS $2,653,999 $2,458,967 $2,687,676 $2,465,464
</TABLE>
[The rest of this page is intentionally left blank.]
[Prospectus, page 24]
<TABLE>
<CAPTION> Unaudited Unaudited
December 31, December 31, June 30, June 30,
1994 1993 1995 1994
<S> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDER'S
EQUITY
Current Liabilities
Accounts Payable
Primarily inter-
exchange carriers $ 63,521 $ 120,561 $ 33,795 $ 128,038
Customer Deposits 3,939 3,961 4,089 4,692
Current Maturities
of long-term debt -0- 32,040 -0- 32,040
Income tax accrued 97,403 90,160 -0- 19,802
Other current
liabilities 1,915 3,660 4,708 2,740
TOTAL CURRENT
LIABILITIES $ 166,778 $ 250,382 $ 42,592 $ 187,312
Long-term Debt $ -0- $ 31,849 $ -0- $ 15,829
Deferred Taxes $ 218,088 $ 184,671 $ 235,427 $ 172,299
TOTAL LIABILITIES $ 384,866 $ 466,902 $ 278,019 $ 375,440
Shareholder's Equity
Capital Stock
$10 Par Value
Authorized 50,000
Shares; issued and
Outstanding:
12/31/94= 41,743 1/3 Shares
12/31/93= 41,611 2/3 Shares
06/30/95= 41,405 1/3 Shares
06/30/94= 41,343 1/3 Shares
$ 417,433 $ 416,117 $ 414,053 $ 413,433
Additional Paid-in
Capital 48,090 43,889 34,570 32,090
Retained Earnings 1,803,610 1,532,059 1,961,034 1,644,501
Total Stockholder's
Equity $2,269,133 $1,992,065 $2,409,657 $2,090,024
TOTAL LIABILITIES
AND STOCKHOLDER'S
EQUITY $2,653,999 $2,458,967 $2,687,676 $2,465,464
</TABLE>
The accompanying notes are an integral part of these financial statements.
[Prospectus, page 25]
<TABLE>
Statements of Cash Flows
<CAPTIONS>
Unaudited
For the Six Months
For the Years Ended December Ended
June 30
1994 1993 1992 1995 1994
<S> <C> <C> <C> <C> <C>
Operating Activities
Net Income $ 354,758 $ 380,587 $ 206,019 $ 198,829 $ 153,906
Adjustments to reconcile net
income to net cash flows from
operating activities:
Provision for losses on accounts
receivable (2,714) 2,602 (509) -0- -0-
Depreciation 130,685 128,152 101,517 55,797 65,123
Investment tax credit (5,988) (6,041) (6,058) (2,920) (2,994)
Cumulative effect of change in
accounting principle -0- (31,746) -0- -0- -0-
Provision for deferred taxes 39,405 (15,148) -0- 20,259 (9,378)
Gain on sale of land (5,730) -0- -0- -0- -0-
Partnership earnings (129,354) (37,822) -0- (94,075) (57,454)
Changes in Operating Assets and
Liabilities:
Due from subscribers/customers 11,232 (1,935) 1,679 704 (2,493)
Accounts receivable (1,696) (20,905) (7,452) (210) (25,290)
Inventories 2,794 7,187 (16,223) (2,011) (7,720)
Prepaid taxes (5,956) -0- 8,312 (131,908) (8,862)
Prepaid expenses 1,181 (422) 1,094 (5,179) (5,682)
Accounts payable (57,040) (57,200) 18,933 (29,726) 7,477
Customer deposits (22) 934 622 150 731
Income taxes accrued 7,243 54,967 35,193 (97,403) (70,358)
Other current liabilities (1,745) 1,944 (164) 2,793 (920)
Net Cash Provided By (Used In)
Operating Activities $ 337,053 $ 405,154 $ 342,963 (84,900) 36,086
Investing Activities
Purchase of property,
plant and equipment $(480,969) $ (65,809) $ (2,049) $(206,528) $(239,248)
Proceeds from sale of property 10,000 -0- -0- -0- -0-
Proceeds from note receivable -0- -0- -0- 50,000 -0-
Investment in partnership -0- (5,660) (2,250) (4,500) -0-
Distribution from partnership 49,500 -0- -0- -0- -0-
Net Cash Used in
Investing Activities $(421,469) $ (71,469) $ (4,299) $(161,028) $(239,248)
Financing Activities
Principal payments on
long-term debt $ (63,889) $ (33,331) $ (32,040) $ -0- $ (16,020)
Payment of cash dividends (83,207) (40,920) (41,029) (41,405) (41,464)
Proceeds from issuance of stock 59,115 68,366 62,207 -0- 29,115
Payment for retirement of stock (57,670) (28,143) (61,975) (16,900) (47,670)
Net Cash Used in Financing
Activities $(145,651) $ (34,028) $ (72,837) $(58,305) $ (76,039)
Increase (Decrease) in Cash and
Cash Equivalents $(230,067) $ 299,657 $ 265,827 $(304,233) $(279,201)
Cash and Cash Equivalents -
Beginning $ 828,223 $ 528,566 $ 262,739 598,156 828,223
Cash and Cash Equivalents -
Ending $ 598,156 $ 828,223 $ 528,566 $ 293,923 $ 549,022
</TABLE>
The accompanying notes are an integral part of these financial statements.
[Prospectus, page 26]
<TABLE>
<CAPTION>
Statements of Income
Unaudited
For the Six Months
For the Years Ended December Ended
June 30
1994 1993 1992 1995 1994
<S> <C> <C> <C> <C> <C>
Operating Revenues
Local Services $ 255,639 $ 273,464 $ 224,152 $ 135,940 $ 126,412
Access Revenue 639,483 627,405 461,020 270,688 276,639
Miscellaneous 61,688 83,380 58,493 38,245 23,201
Total Operating Revenues $ 956,810 $ 984,249 $ 743,665 $ 444,873 $ 426,252
Operating Expenses
Plant Specific $ 132,573 $ 149,118 $ 98,716 $ 68,855 $ 60,193
Plant Non-Specific:
Network and other 4,266 2,805 3,277 1,777 1,446
Depreciation 130,685 128,152 101,517 55,797 65,123
Customer Operations 119,247 97,708 90,777 56,253 56,428
Corporate Operations 107,396 101,020 79,486 53,406 42,644
Total Operating Expenses $ 494,167 $ 478,803 $ 373,773 $ 236,088 $ 225,834
Net Operating Revenue $ 462,643 $ 505,446 $ 369,892 $ 208,785 $ 200,418
Operating Taxes
Investment Tax Credits - Net $ (5,988) $ (6,041) $ (6,058) $ (2,920) $ (2,994)
Federal Income Taxes - Current 139,531 160,367 89,320 31,261 62,558
Federal Income Taxes - Deferred 21,338 (15,148) 27,563 20,259 (9,378)
Other Operating Taxes 47,916 44,833 40,278 25,050 38,346
Total Operating Taxes $ 202,797 $ 184,011 $ 151,103 $ 73,650 $ 88,532
Net Operating Income $ 259,846 $ 321,435 $ 218,789 $ 135,135 $ 111,886
Other Income and Expense
Interest Income 13,754 11,616 6,740 4,467 6,725
Special Charges (2,449) (200) (6,901) (1,137) 773
Gain on Sale of Land 5,730 -0- -0- -0- -0-
Partnership Earnings 129,354 37,822 -0- 94,075 57,454
Federal Income Taxes
- - Non-Operating (48,657) (16,809) (2,292) (33,504) (22,084)
Interest and Related Charges (2,820) (5,023) (10,317) (207) (848)
Net Income Before
Change in Accounting Principle$ 354,758 $ 348,841 $ 206,019 $ 198,829 $ 153,906
Cumulative Effect of
Change in Accounting Principle -0- 31,746 -0- -0- -0-
Net Income $ 354,758 $ 380,587 $ 206,019 $ 198,829 $ 153,906
Earnings per common share:
Net income before cumulative effect
of change in accounting principle
$ 8.58 $ 8.56 $ 5.08 $ 4.78 $ 3.74
Cumulative Effect of Change in
Accounting Principle -0- .78 -0- -0- -0-
Net Income Per Common Share $ 8.58 $ 9.34 $ 5.08 $ 4.78 $ 3.74
</TABLE>
The accompanying notes are an integral part of these financial statements.
[Prospectus,page 27]
<TABLE>
Statement of Changes in Stockholders' Equity
For the Years Ended December 31, 1992, 1993, and 1994
<CAPTION>
Additional Total
Number of Capital Paid In Retained Stockholders'
Shares Stock Capital Earnings Equity
<S> <C> <C> <C> <C> <C>
Balance January 1, 1992 40,578 2/3 $ 405,787 $ 13,764 $ 1,027,402 $1,446,953
Net Income 206,019 206,019
Capital stock dividend -
Cash ($1.00 per share) (41,029) (41,029)
Capital stock redeemed (1,690) (16,900) (45,075) (61,975)
Capital stock issued 1,698 16,980 45,227 62,207
Balance December 31, 1992 40,586 2/3 $ 405,867 $ 13,916 $ 1,192,392 $1,612,175
Net Income 380,587 380,587
Capital stock dividend -
Cash ($1.00 per share) (40,920) (40,920)
Capital stock redeemed (740) (7,400) (20,743) (28,143)
Capital stock issued 1,765 17,650 50,716 68,366
Balance December 31, 1993 41,611 2/3 $ 416,117 $ 43,889 $ 1,532,059 $1,992,065
Net Income 354,758 354,758
Capital stock dividend -
Cash ($2.00 per share) (83,207) (83,207)
Capital stock redeemed (1,283 1/3) (12,834) (44,836) (57,670)
Capital stock issued 1,415 14,150 49,037 63,187
Balance December 31, 1994 41,743 1/3 $ 417,433 $ 48,090 $ 1,803,610 $2,269,133
</TABLE>
<TABLE>
Statements of Changes in Stockholders' Equity
For the Six Months Ended June 30, 1995 and 1994
<CAPTION>
Additional Total
Number of Capital Paid In Retained Stockholders'
Shares Stock Capital Earnings Equity
<S> <C> <C> <C> <C> <C>
Balance January 1, 1995 41,743 1/3 $ 417,433 $ 48,090 $ 1,803,610 $2,269,133
Net Income 198,829 198,829
Capital stock dividend -
Cash ($1.00 per share) (41,405) (41,405)
Capital stock redeemed (338) (3,380) (13,520) (16,900)
Balance at June 30, 1995 41,405 1/3 $ 414,053 $ 34,570 $ 1,961,034 $2,409,657
Balance at January 1,1994 41,611 2/3 $ 416,117 $ 43,889 $1,532,059 $ 1,992,065
Net Income 153,906 153,906
Capital stock dividend -
Cash ($1.00 per share) (41,464) (41,464)
Capital stock redeemed (1,143 1/3) (11,434) (36,236) (47,670)
Capital stock issued 875 8,750 24,437 33,187
Balance at June 30, 1994 41,343 1/3 $ 413,433 $ 32,090 $ 1,644,501 $2,090,024
</TABLE>
The accompanying notes are an integral part of these financial statements.
[Prospectus, page 28]
Notes to Financial Statements For the Years
Ended December 31, 1994, 1993 and 1992
1. Summary of Significant Accounting Policies
Sand Creek Telephone Company ("Company") is located in Lenawee County, in
the State of Michigan. The Company provides local exchange service and
access to the toll network. The Company grants credit to customers,
substantially all of whom are local residents. The Company also grants
credit to Interexchange Carriers for access to the toll network.
The Company does not require collateral from either the customers or
telecommunications providers. Accordingly, failure to collect on these
accounts would result in a direct loss of the amounts uncollected. However, a
portion of these losses would be recoverable through the settlement process
described below. The Company generally does not hold financial investments
with off balance sheet credit risk.
The accounting records of the Company are maintained in accordance with the
Uniform System of Accounts for Class A and B Telephone Companies prescribed by
the Michigan Public Service Commission, which conform to generally accepted
accounting principles.
The reserve for uncollectible accounts was $5,276 for 1994 and $7,990 for
1993, respectively.
Inventory consists of materials and supplies for additions and maintenance
of the telephone plant and telephone equipment held for resale. Inventory is
priced at the lower of cost or market on a first-in first-out basis.
Cash and cash equivalents includes cash and short-term, highly-liquid
investments with original maturities of three months or less.
The Company paid, on a cash basis, interest in the amount of $3,951, $6,230
and $10,317 and income taxes in the amount of $165,000, $125,079 and $52,000 in
1994, 1993 and 1992, respectively. The Company also exchanged land for stock
in the amount of $4,072 in 1994. Other 1994 non-cash investing activities
include trade in of equipment for $25,000 and a note receivable from a related
party for $50,000 for the sale of land and a building.
The Company's cash accounts are subject to the FDIC insurance limit of
$100,000. In the normal course of business, the Company's cash accounts may
exceed this limit. At December 31, 1994, cash account balances exceeded this
limit by approximately $50,000.
The Company provides access services to common (long distance) carriers to
access the exchange of the Company. The Company receives settlements for
providing access service from the Michigan Exchange Carriers Association
(Intrastate) and the National Exchange Carrier Association (Interstate).
Both access revenues and local service revenues are recognized when earned,
regardless of the period in which they are billed.
The Company recorded true-ups of prior years' estimated access settlements
that increased income by $110,806 and $94,205 for 1994 and 1993,
respectively, and decreased income by $3,645 in 1992.
2. Plant, Property and Equipment
Additions to telephone plant and replacements of significant units of
property are capitalized at their original cost. When telephone plant is
retired, its cost is removed from the asset account and charged against the
depreciation reserve together with any related salvage and removal costs.
No gains or losses are recognized in connection with routine retirements of
depreciable telephone property.
[Prospectus, page 29]
Depreciation is provided under the straight-line method for accounting
purposes by the application of rates, based on the estimated service lives
of the various classes of depreciable telephone property. Such provisions
were equivalent to an annual rate of 7.6%, 6.2% and 5.0% of the average cost
of depreciable telephone plant in service for 1994, 1993 and 1992,
respectively. Depreciation expense recorded in 1994, 1993 and 1992 was
$130,685, $128,152 and $101,517, respectively.
<TABLE>
<CAPTION>
The balances of the major classes of plant in service as of December 31 are
as follows:
1994 1993
<S> <C> <C>
Land $ 19,683 $ 2,405
Vehicles 24,987 24,987
Work equipment 57,876 58,397
Building 42,832 108,817
Office furniture and
equipment 8,695 14,768
Computers 24,272 31,444
Central office equipment 461,636 734,840
Paystations 3,627 3,627
Buried cable and drops 1,086,525 1,074,740
Total $1,730,133 $2,054,025
</TABLE>
3. Long-Term Debt
The Company had a note payable to the Adrian State Bank for a 15-year term
at an interest rate of 7.0% at December 31, 1993. At December 31, 1993, the
balance on this note was $63,889. This balance was repaid in full during
1994.
4. Income Taxes
For financial reporting purposes, the Company computes federal income tax
by applying the statutory rate to all its taxable income.
<TABLE>
Total income tax expense for the years ended December 31, 1994, 1993 and
1992 was allocated as follows:
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Income tax expense before
cumulative effect of change
in accounting principle $203,538 $155,987 $113,117
Cumulative effect of change
in accounting principle -0- (31,746) -0-
Total income tax expense in
the statement of income $203,538 $124,241 $113,117
</TABLE>
[Prospectus, page 30]
<TABLE>
Income tax expense attributable to income before the cumulative effect of
a change in accounting principle is composed of the following:
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Federal
Current $182,200 $171,135 $ 85,554
Deferred 21,338 (15,148) 27,563
$203,538 $155,987 $113,117
</TABLE>
For the years ended December 31, 1994, 1993 and 1992, deferred taxes were
provided for certain temporary differences between the book basis and tax
basis of assets and liabilities (principally property, plant and equipment
due to depreciation differences). Investment tax credits resulting from
investments in telephone plant and equipment prior to January 1, 1986, have
been deferred and amortized to income over the service lives of the related
property.
<TABLE>
The following table reconciles the statutory federal income tax expense to
the effective federal income tax benefit.
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Federal income tax expense at
statutory rate of 34% $189,821 $171,642 $108,506
Amortization of investment tax credits (5,988) (6,041) (6,058)
Other, net 19,705 (9,614) 10,669
$203,538 $155,987 $113,117
</TABLE>
<TABLE>
The detail of the net deferred tax liability is as follows:
<CAPTION>
1994 1993
<S> <C> <C>
Depreciation $150,553 $111,148
Investment tax credits 67,535 73,523
Total deferred tax liabilities $218,088 $184,671
</TABLE>
In 1993, the Company elected to adopt Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." SFAS 109
requires an asset and liability approach for financial accounting and
reporting of income taxes. The cumulative effect of this change in accounting
principle is $31,746 and is presented separately in the statement of income.
5. Investments
Investments of $270,678, $190,824 at 1994 and 1993, consist of the
Company's basis in Cass Cellular Limited Partnership. This investment
represents a 22.5% limited partner interest which is recorded on the equity
method. Cass Cellular, in turn, owns approximately 56% of the limited
partnership which has the cellular rights for RSA #9, an area along the
southern border of Michigan. The difference between the carrying value and
the underlying equity in the net assets of Cass Cellular of $141,556 is due
primarily to the Company's initial cost to acquire the cellular rights for
RSA #9. There is not a readily determinable market price for this investment.
However, management believes its value to be at least equivalent
to book value based upon historical sales of other cellular properties.
[Prospectus, page 31]
<TABLE>
<CAPTION>
Summarized information of Cass Cellular is as follows:
1994 1993 1992
<S> <C> <C> <C>
Total Assets $2,197,232 $1,175,806 $756,715
Investment in RSA #9 1,956,177 1,146,013 743,307
Total Liabilities 1,623,361 963,590 709,095
Bank Loans 1,232,077 943,293 693,328
Partners' Equity 573,871 212,216 47,620
Net Income 574,905 154,096 50,432
Total Revenues 684,707 227,522 109,291
Equity in Earnings of
Investee Partnership 671,114 219,160 108,348
Total Expenses 109,802 73,426 58,859
Interest Expense 92,841 62,772 44,239
</TABLE>
6. Retirement Plan
During 1994 the Company established a cash or deferred arrangement (401(K)
plan) which is available to all employees of the Company. During 1994 the
Company contributed 10% of each employee's salary to the plan which amounted
to $15,108. During 1993 and 1992 the Company contributed an amount equal to
10% of each employees wages into an Individual Retirement Account (IRA) for
the employee. The amount of expense recognized for the years ended December
31, 1993 and 1992, under this arrangement was $12,355 and $10,992,
respectively.
7. Commitments
The Company has a purchase commitment of approximately $179,000 for the
construction of a new office building. Construction on this building was
completed in March of 1995.
8. Reclassification
Certain account balances have been reclassified to conform to current
account classifications.
Notes to Financial Statements for Six-Month
Periods Ending June 30, 1994 and June 30, 1995
1. General
These unaudited interim financial statements as of June 30, 1995 and 1994
and for the six months ended June 30, 1995 and 1994 reflect all adjustments
which are,in the opinion of management, necessary to provide a fair
statement of the results for the interim periods presented. All adjustments
made are of a normal and recurring nature.
2. Accounting Changes
SFAS 106, "Employer's Accounting for Postretirement Benefits Other Than
Pensions", became effective during the first quarter of 1995. SFAS 106
requires the accrual of certain postretirement benefits during the years that
the employee performs service rather than a "pay-as-you-go" approach. The
effect of this statement is not material to Sand Creek's financial
statements. Therefore, no adjustment has been recorded.
[Prospectus, page 32]
II. SAND CREEK'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion and analysis of Sand Creek Telephone Company's financial
condition and results of operations should be read in conjunction with the
financial statements of Sand Creek Telephone Company included above.
Background
As shown in the statements above, Sand Creek derives its revenues from
providing (i) local telephone service, (ii) network access services, and
(iii) other related services. Local service revenues are derived from
providing regulated local exchange telephone services in Sand Creek's
licensed service area and other deregulated customer services. Network
access revenues relate to services provided by Sand Creek to interexchange
carriers (which provide intrastate and interstate long-distance services) in
connection with the completion of long-distance telephone calls. Interstate
network access revenues are received by Sand Creek through a pooling
arrangement administered by the National Exchange Carrier Association
(NECA), which receives access charges billed by Sand Creek and other
participating local exchange carriers to interstate long-distance carriers
for their use of the local network to complete long-distance calls. The
charges to the long-distance carriers are based on tariffed access rates that
are filed by NECA on behalf of Sand Creek and other participating local
exchange carriers and that are subject to FCC approval. Sand Creek derives
intrastate network access revenues through a pooling arrangement administered
by the Michigan Exchange Carriers Association (MECA). Sand Creek's other
revenues primarily consist of billing and collection services for
interexchange carriers and directory revenues.
Six Months Ended June 30, 1995 Compared to Six Months Ended June 30, 1994
Results of Operations
Net income for the six months ended June 30, 1995, increased approximately
$45,000 from net income for the six months ended June 30, 1994. An increase
in operating revenue of $18,000 was offset by an increase in operating
expenses of $10,000 resulting in an $8,000 increase in net operating revenue.
The decrease in operating taxes of approximately $15,000 was offset by the
increase in non-operating taxes of $11,000. Additionally, net income was
enhanced by increased partnership earnings of $37,000 and reduced by a
decrease in other income and expense of $4,000, primarily due to a decrease of
approximately $2,300 in interest income..
Operating Revenues and Expenses. Local service revenues increased by
approximately $9,000 primarily due to higher levels of deregulated sales in
1995 (e.g.telephones and related equipment). Rates charged for local service
regulated by the MPSC did not change. Access revenue is based on a rate of
return for the cost of providing access to the toll network. The final
settlement amounts take several years to finalize. In the interim, estimates
are booked and true-ups recorded based upon a change in estimate or the final
access revenue settlement. An increase in interstate access revenues of
approximately $18,000 in 1995 was offset by decreased intrastate access
settlements of $10,000, the result of a decreased rate of return, and access
revenue reductions due to a decrease in prior period true-ups of
approximately $14,000. It should be noted that the interstate pool is
experiencing excess earnings which may require adjustments to revenues which
have been received to date. Based on information available, management
anticipates any such adjustments will be a reduction in revenues of less than
$10,000. Miscellaneous revenues for the six months ended June 30, 1994,
included adjustments to previous accruals which reduced revenue by
approximately $12,000. Additionally, an increase in billing and collection
revenue of $2,000 and a reduction of uncollectible revenue of $2,000 was
offset by a reduction of directory advertising revenue of $1,000.
Operating expenses increased by approximately $10,000. This is the result of
increased payroll expense mainly affecting plant specific and corporate
operations of approximately $19,000. This increase was offset by a decrease
in depreciation expense of $9,000 due to the retirement of the old switching
equipment in late 1994. The Company is currently in the process of conducting
a study of the remaining service lives of their property, plant and
equipment. As a result of this study new estimated depreciation rates will
be implemented in either late 1995 or January 1, 1996. It is currently
[Prospectus, page 33]
projected that when the new depreciation rates are implemented that annual
depreciation expense will increase approximately $30,000.
Taxes. Operating taxes are down due to a reduction in state property tax of
approximately $7,500, as well as, adjustments of approximately $10,000 of
prior federal income tax accruals. Additionally, the difference in the
allocation between current and deferred federal income tax expense is
due to the addition of the new switch in late 1994 and the new building in
1995. Adjustments to prior federal tax accruals are the primary reconciling
factor between the statutory and the effective federal tax rates.
Non-operating federal income tax is up due to higher levels of partnership
earnings.
Partnership Earnings. Partnership earnings increased by approximately $37,000
due to improved performance of Sand Creek's investment in Cass Cellular
Limited Partnership. The Company holds a 22.5% limited partnership interest
in Cass Cellular Limited Partnership. Cass Cellular provides cellular
telephone service in an area along the Southern border of Michigan. This is a
key traffic corridor experiencing substantial roaming traffic. It is
anticipated that Cass Cellular will experience continued growth in revenue
and profits. However, Cass Cellular is subject to competition from other
cellular providers and the emergence of personal communications services as
a viable technology.
Interest Expense. The reduction in interest expense is due to the pay-off of
the bank loan.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Results of Operations
Net income before cumulative effect of a change in accounting principle during
1994 increased $6,000 to $355,000 from $349,000 in 1993. Net operating
revenue was down $43,000 while federal income taxes and other operating taxes
were up $51,000. This was offset by partnership earnings that were up
$92,000 and other income, principally an increase fo approximately $2,000 in
interest income plus approximately 6,000 gain on the sale of land, less
interest and other expenses, was up $8,000.
Net income for the year ended December 31, 1993 includes approximately $32,000
that represents the cumulative effect of a change in accounting principle
related to the adoption of Statement of Financial Accounting Standards
No. 109("SFAS 109"), "Accounting for Income Taxes." SFAS 109 required a
change from the deferred accounting method required under Accounting
Principles Board Opinion No. 11 to an asset and liability approach for
financial accounting and reporting for income taxes.
Operating Revenues and Expenses. Revenues decreased approximately $27,000 in
1994 compared to 1993. Local service revenue decreased $18,000 due to less
sales of deregulated items (e.g. telephones and related equipment). Rates
for local service regulated by the MPSC did not change. Access revenue is
based on a rate of return for the cost of providing access to the toll
network. The final settlement amounts take several years to finalize. In
the interim, estimates are booked andtrue-ups recorded based upon a change
in estimate or the final access revenue settlement. Access revenues increased
$12,000 in 1994 compared to 1993 due to increased revenues of approximately
$6,000 from true-ups of prior years' settlements and increased minutes of
use resulting in increased revenues of approximately $6,000 from settlements
from both the interstate and intrastate access pools. Miscellaneous revenue
decreased $21,000 from 1994 to 1993 due to $6,000 less directory advertising,
$5,000 less billing and collection revenue and $10,000 less other operating
revenue.
Operating expenses increased approximately $15,000 for the year ended December
31, 1994 compared to the year ended December 31, 1993. This increase was
primarily the result of a $15,000 decrease in plant specific which is
primarily the cost of plant maintenance and a $28,000 increase in customer
and corporate operations costs due to more time spent and an increase in
payroll costs.
Depreciation increased approximately $3,000 from $128,000 to $131,000.
Depreciation rates used in 1993 and 1994 remained constant and there was only
a minor change in the balance in plant in service until the fourth quarter
of 1994. The Company is currently in the process of conducting a study of
the remaining service lives of their property, plant and
[Prospectus, page 34]
equipment. As a
result of this study new estimated depreciation rates will be implemented in
either late 1995 or January 1, 1996. It is currently projected that, when
the new depreciation rates are implemented, annual depreciation expense
will increase approximately $30,000.
Interest Expense. Interest expense decreased by $2,000 in 1994 compared to
1993 as a result of reduced amounts in average debt outstanding.
Federal Income Tax Expense. Federal income tax expense, without consideration
of the cumulative effect of the implementation of SFAS 109, increased $48,000.
This is due principally to increased taxes of approximately $18,000 due to
higher levels of taxable income and approximately $30,000 of adjustments to
previously booked income tax accruals.
See previous discussion regarding the implementation of SFAS 109 for
additional information on this accounting change.
Inflation. The effects of increased costs are mitigated by the ability to
recover such costs through the rate-making process for local services or
through recovery from NECA or MECA through the pooling process. Although
the State of Michigan no longer monitors rate of return, a process does
exist that would permit Sand Creek to apply for rate increases if this was
deemed necessary.
Liquidity and Capital Resources
During 1994 and 1993, Sand Creek's primary source of funds were cash flows
provided by operating activities.
Net cash provided by operating activities for 1994 and 1993 were $337,000 and
$405,000 respectively. For additional information, see "Results of
Operations."
Net cash used in investing activities was $421,000 in 1994 compared to $71,000
in 1993. The majority of this increase of $350,000 was due to an increase in
expenditures for plant, land and equipment of $415,000, net of a $50,000
distribution from the Company's interest in Cass Cellular Limited Partnership.
Net cash used in financing activities increased $112,000 in 1994 to $146,000
from $34,000 in 1993. This increase resulted from a decrease in net cash
provided by stock sales of $39,000 augmented by an increase in principal
payments on long-term debt of $31,000 and an increase of $42,000 in the
amount of dividends paid.
Sand Creek's known capital expenditures for the next 12 months and beyond are
approximately $191,500 and the expected source of future capital for such
expenditures is retained earnings. Management believes that Sand Creek's
liquidity is adequate to meet its projected capital and other needs for the
next twelve months and beyond. There is currently no projected need for
cash that would require borrowing from outside sources.
Accounting Changes. SFAS 106, "Employer's Accounting for Postretirement
Benefits Other than Pensions" became effective for Sand Creek during the
first quarter of 1995. SFAS 106 requires the accrual of certain benefits
during the years that the employee performs the service rather than a
"pay-as-you-go" approach. The effect of this statement was not material to
Sand Creek's financial statements.
Year Ended December 31, 1993 Compared to Year Ended December 31, 1992
Results of Operations
Net income before cumulative effect of a change in accounting principle during
1993 increased $143,000 to $349,000 from $206,000 in 1992. An increase in net
operating revenue of $135,000 was recorded while federal income taxes and other
operating taxes were up $47,000. This was offset by partnership earnings of
$38,000 and an increase in other income, less interest and other expenses of
$17,000.
[Prospectus, page 35]
Operating Revenues and Expenses. Revenues increased approximately $241,000 in
1993 compared to 1992. Local service revenue increased $50,000 primarily due to
increased sales of deregulated equipment (telephones and related equipment).
Rates for local service regulated by the MPSC did not change. Access and toll
revenues increased $166,000 in 1993 compared to 1992 primarily due to an
$98,000 adjustment to estimated prior years settlements and increased minutes
of use resulting in an increase of approximately $68,000 in settlements from
both the interstate and intrastate access pools. Access revenue is
based on a rate of return for the cost of providing access to the toll
network. The final settlement amounts take several years to finalize. In the
interim, estimates are booked and true-ups recorded based upon a change in
estimate or the final access revenue settlement. Miscellaneous revenue
increased $25,000 due primarily to increased billing and collection revenue.
Operating expenses, exclusive of depreciation, increased approximately $78,000
for the year ended December 31, 1993 compared to the year ended December 31,
1992. This increase was primarily the result of $58,000 of additional
deregulated expense and $12,000 of additional customer service cost and
$8,000 of additional accounting cost.
Depreciation increased approximately $27,000 primarily as a result of
increased plant in service. The Company is currently in the process of
conducting a study of the remaining service lives of their property, plant
and equipment. As a result of this study, new estimated depreciation rates
will be implemented in either late 1995 or January 1, 1996. It is currently
projected that, when the new depreciation rates are implemented, annual
depreciation expense will increase approximately $30,000.
Interest Expense. Interest expense decreased by $5,000 to $5,000 in 1993 as a
result of reduced amounts in debt outstanding.
Income Tax Expense. Income tax expense increased $43,000, of which $63,000
is due principally to higher levels of taxable income, which was offest by
approximately $20,000 of reductions of prior years tax accruals.
Inflation. The effects of increased costs are mitigated by the ability to
recover such costs through the rate-making process for local services or
through recovery from NECA or MECA through the pooling process. Although the
State of Michigan no longer monitors rate of return, a process does exist
that would permit Sand Creek to apply for rate increases if this was deemed
necessary.
Liquidity and Capital Resources
During 1993 and 1992, Sand Creek's primary source of funds were cash flows
provided by operating activities.
Net cash provided by operating activities for 1993 and 1992 was $405,000 and
$343,000 respectively. For additional information, see "Results of
Operations."
Net cash used in investing activities was $71,000 in 1993 compared to $4,000
in 1992. This increase of $67,000 was due primarily to an increase in
expenditures for property, plant and equipment.
Net cash used in financing activities decreased $39,000 in 1993 to $34,000
from $73,000 in 1992. This decrease resulted primarily from a decrease in
net cash provided by stock sales.
Accounting Changes. See "Year Ended December 31, 1994 Compared to Year Ended
December 31, 1993 - Accounting Changes."
This discussion and analysis of Sand Creek's financial condition and
results of operations should be read in conjunction with the financial
statements of Sand Creek included elsewhere herein.
[Prospectus, page 36]
III. SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT.
As of the date hereof, there were outstanding 41,299 1/3 shares of Sand
Creek Common Stock, $10 par value, the only class of capital stock of Sand
Creek. The following table shows the number of shares of Sand Creek Common
Stock owned of record or beneficially as of the date hereof by (i) each
person known by Sand Creek to own beneficially 5% or more of the outstanding
Sand Creek Common Stock; (ii) each of Sand Creek's directors and executive
officers; and (iii) all directors and executive officers of Sand Creek as a
group. Beneficial ownership has been determined in accordance with
Rule 13d-3 promulgated under the Exchange Act.
<TABLE>
<CAPTION>
Amount and Nature
Name of of Beneficial
Beneficial Owner* Address Ownership Percent
<S> <C> <C> <C>
Irene M. or Douglas 708 N. Main St. 3,200 7.7%
Clapper Adrian, MI
Robert E. Hinsdale 4732 Livesay Road 1,494 3.6
Sand Creek, MI
Gustav A. Leu 6254 Demings Lake Road 780 1.9
Sand Creek, MI
Lawrence Wilt 2545 Harwood Road 680 1.6
Sand Creek, MI
Richard Simpkins 5475 Bryant Road 130 0.3
Sand Creek, MI
Harvey Souders** 3464 W. Carleton Road 520 1.3
Adrian, MI
Margie M. Gallatin P.O. Box 24 219.33 0.5
Sand Creek, MI
Directors and Executive 3,823.33 9.3%
Officers as a Group
_______________________
</TABLE>
* The shares shown in the table include all shares the named shareholders
may be deemed to own beneficially, including shares held by spouses, minor
children, relatives sharing the home of such shareholder, entities
controlled by such shareholder, or trusts of which such persons are trustees
or beneficiaries.
** Deemed pursuant to Rule 13d-3 of the Exchange Act of 1934 to be the
beneficial owner of shares owned by Sand Creek Community Church.
IV. MANAGEMENT
The names, addresses, ages and principal occupations of the directors and
executive officers of Sand Creek are as follows:
Robert E. Hinsdale, 4732 Livesay Road, Sand Creek, Michigan, 71, has been
a Director since 1953. His current term ends in 1998. He is retired. He has
since 1986 been and currently is the President of Sand Creek, and the
President and a Director of SCCC, and an officer of Sand Creek Community
Church.
[Prospectus, page 37]
Gustav Leu, 6254 Demings Lake Road, Clayton, Michigan, 76, has been a
Director since 1977. His current term ends in 1997. He is a retired printer.
He has since 1990 been and currently is the Secretary of Sand Creek. He
is a Director and Secretary of SCCC.
Lawrence A. Wilt, 2545 Harwood Road, Sand Creek, Michigan, 56, has been a
Director since 1984. His current term ends in 1997. He is a farmer/dairy
operator. He has since 1986 been and currently is the Vice President of
Sand Creek. He is a Director and Vice President of SCCC.
Richard Simpkins, 5475 Bryant Road, Sand Creek, Michigan, 43, has been a
Director since 1991. His current term ends in 1996. He is a farmer and a
mechanic. He is also a Director of SCCC.
Harvey F. Souders, 3464 W. Carleton Road, Adrian, Michigan, 52, has been a
Director since 1995. His current term ends in 1998. He is a Vice President
of Bank of Lenawee. He is also a Director of SCCC and the President of Sand
Creek Community School.
Margie M. Gallatin, P.O. Box 24, Sand Creek, Michigan, 51, has since 1991
been and currently is the Treasurer of Sand Creek. She is the General Office
Manager for Sand Creek. She is the Treasurer of SCCC.
Each Director was paid fees of $1,250.00 during 1994.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Other Annual Total
Name/Position Year Salary Compensation Compensation
<S> <C> <C> <C> <C>
Robert E. Hinsdale 1994 $ 4,158 $ 1,250 $ 5,408
President/Director 1993 4,158 1,250 5,408
1992 4,158 1,250 5,408
Gustav Leu 1994 $ 4,158 $ 1,250 $ 5,408
Secretary/Director 1993 4,158 1,250 5,408
1992 4,158 1,250 5,408
Lawrence A Wilt 1994 $ -0- $ 1,250 $ 1,250
Vice President/Director 1993 -0- 1,250 1,250
1992 -0- 1,250 1,250
Margie Gallatin 1994 $42,587 $ -0- $42,587
Treasurer 1993 31,871 4,515 36,386
1992 30,354 4,300 34,654
Neil Pearcy 1994 $47,525 $ -0- $47,525
Plant Manager 1993 40,233 5,699 45,923
1992 38,317 5,428 43,715
John Griffith 1994 $37,648 $ -0- $37,648
Assistant Plant Manager 1993 31,871 4,615 36,486
1992 30,354 4,300 34,654
</TABLE>
[Prospectus, page 38]
V. LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The MBCA permits Michigan corporations to limit the personal liability of
directors for the breach of their fiduciary duty. Sand Creek's Articles of
Incorporation provide, consistent with the MCBA, that a director of Sand Creek
shall not be personally liable to Sand Creek or its Shareholders for monetary
damages for breach of the director's fiduciary duty. However, it does not
eliminate or limit the liability of a director for any of the following:
(1) a breach of the director's duty of loyalty to Sand Creek or its
Shareholders; (2) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (3) unlawful loans to
directors, officers and employees; (4) a transaction from which the director
derives an improper personal benefit; and (5) an act or omission occurring
before the effective date of the provision limiting liability. As a
result of the inclusion of such a provision, Shareholders of Sand Creek may
be unable to recover monetary damages against directors for actions taken by
them which constitute negligence or gross negligence or which are in
violation of their fiduciary duties, although it may be possible to obtain
injunctive or other equitable relief with respect to such actions. If
equitable remedies are found not to be available to Shareholders in any
particular case, Shareholders may not have any effective remedy against the
challenged conduct. The MBCA also permits Michigan corporations to indemnify
directors and officers for expenses incurred as a result of a proceeding
brought against a person by reason of the fact that such person is
or was an officer and/or director, provided that specified standards are
satisfied. Sand Creek Bylaws authorize indemnification of officers and
directors. Sand Creek believes that such indemnification will assist
Sand Creek in continuing to attract and retain talented directors and
officers in light of the growing risk of litigation directed against
directors and officers of corporations.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or person controlling Sand Creek
pursuant to the foregoing provisions, Sand Creek has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
VI. LEGAL PROCEEDINGS
Other than ordinary, routine litigation incidental to its business, Sand
Creek is not involved any material pending litigation.
VII. DIVIDENDS ON AND MARKET PRICES OF SAND CREEK COMMON STOCK
No established trading market exists with respect to shares of Sand Creek
Common Stock. As of the date hereof, there were 154 holders of Sand Creek
Common Stock. There are occasional direct sales by Sand Creek Shareholders
of which the management of Sand Creek is aware. From January 1, 1993 through
the date hereof there were, so far as Sand Creek management knows, 85 sales
of the Common Stock of Sand Creek. These sales involved 5,707.33 shares.
The prices were reported to management in each of these transactions.
During this period, the highest reported price paid for Sand Creek stock was
$58.00 per share, and the lowest price was $36.66 per share. The following
is a summary of all known transfers by sale since January 1, 1993.
[Prospectus, page 39]
<TABLE>
<CAPTION>
Number of Number of High Low
Date Sales Shares Price Price
<S> <C> <C> <C> <C>
1993:
First Quarter 2 390 $36.66 $36.66
Second Quarter 20 963 $36.66 $36.66
Third Quarter -0- -0- $-0- $-0-
Fourth Quarter 35 1,152 $40.72 $40.72
1994:
First Quarter 8 1,473.33 $40.72 $40.72
Second Quarter 8 485 $40.72 $40.72
Third Quarter 9 800 $50.00 $50.00
Fourth Quarter -0- -0- -0- -0-
1995:
First Quarter 1 230 $50.00 $50.00
Second Quarter 1 108 $50.00 $50.00
Third Quarter 1 106 $58.00 $58.00
Latest Available Information: $58.00* $58.00*
</TABLE>
* Price set by Board of Directors for purchases and sales by Sand Creek after
June 30, 1995, pursuant to Sand Creek Common Stock Transfer Policies.
Sand Creek declared and paid per share cash dividends with respect to Sand
Creek Stock as follows since December 31, 1992:
<TABLE>
<CAPTION>
Date Amount per Share
<S> <C>
June 1, 1993 $1.00
June 1, 1994 $1.00
December 20, 1994 $1.00
June 1, 1995 $1.00
</TABLE>
VIII - CASS CELLULAR LIMITED PARTNERSHIP FINANCIAL STATEMENTS:
Sand Creek has a limited partnership interest in Cass Cellular Limited
Partnership. The following are the audited financial statements for Cass
Cellular Limited Partnership.
General and Limited Partners
Cass Cellular Limited Partnership
Petersburg, Michigan.
Independent Auditor's Report
We have audited the accompanying balance sheets of Cass Cellular Limited
Partnership as of December 31, 1994 and 1993, and the related statements of
income, partner's capital and cash flows for the years ended December 31,
1994, 1993, and 1992. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express the opinion
of these financial statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by
[Prospectus, page 40]
management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The Partnership has recorded its investments in Michigan RSA #9 Limited
Partnership on the equity method of accounting. Statement of Financial
Accounting Standards No. 94 requires the consolidation of all majority-owned
enterprises. Cass Cellular Limited Partnership owns 55.62% of Michigan
RSA #9 Limited Partnership as a general partner. If Michigan RSA #9 Limited
Partnership had been consolidated, assets and liabilities would have
increased by $2,242,000, $1,322,000, and $819,000 at December 31, 1994,
1993, and 1992, respectively.
In our opinion, except for the effects of not consolidating Michigan RSA #9
as discussed in the preceding paragraph, the financial statements referred
to above present fairly, in all material respects, the financial position of
Cass Cellular Limited Partnership at December 31, 1994, 1993 and 1992 and
the results of its operations and cash flows for the years then ended in
conformity with generally accepted accounting principles.
McCartney and McIntyre, P.C.
March 13, 1995
Okemos, Michigan
[Prospectus, page 41]
<TABLE>
Cass Cellular Limited Partnership
Balance Sheet
As of December 31, 1994 and 1993
<CAPTION>
ASSETS
1994 1993
<S> <C> <C>
Current Assets
Cash and Cash Equivalents $ 198,741 $ 7,725
Total Current Assets $ 198,741 $ 7,725
Noncurrent Assets
Investments in RSA #9 $1,956,177 $1,146,013
St. Paul Bank - Class
C Stock 26,285 15,554
Allocated Patronage - St.
Paul Bank 16,029 6,514
Total Noncurrent Assets $1,998,491 $1,168,081
Total Assets $2,197,232 $1,175,806
LIABILITIES AND PARTNERS' EQUITY
1994 1993
Current Liabilities
Accounts Payable $ 3,382 $ 2,375
Accrued Expenses 31,902 17,922
Current Portion - Bank Loan 356,000 -0-
Total Current Liabilities $ 391,284 $ 20,297
Noncurrent Liabilities
Bank Loan, net of Current
Portion $1,232,077 $ 943,293
Total Liabilities $1,623,361 $ 963,590
Partners' Equity $ 573,871 $ 212,216
Total Liabilities And
Partners' Equity $2,197,232 $1,175,806
</TABLE>
The accompanying notes are an integral part of these financial
statements.
[Prospectus, page 42]
<TABLE>
Cass Cellular Limited Partnership
Statements of Income
As of December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Revenues
RSA #9 Operations $ 671,114 $ 219,160 $ 108,348
Patronage 13,593 8,362 943
Total Revenues $ 684,707 $ 227,522 $ 109,291
Expenses
Interest Expense $ 92,841 $ 62,772 $ 44,239
Legal and Accounting 14,786 9,218 13,659
Other 2,175 1,436 961
Total Expenses $ 109,802 $ 73,426 $ 58,859
Net Income $ 574,905 $ 154,096 $ 50,432
</TABLE>
The accompanying notes are an integral part of these financial
statements.
[Prospectus, page 43]
<TABLE>
CASS CELLULAR LIMITED PARTNERSHIP
Statement of Partners' Equity
For The Years Ended December 31, 1993 and 1992
<CAPTION>
Gen. Ptr. Limited Partners
Sand
Ogden Creek Waldron
D & P D & P Telephone Telephone Telephone
Total Comm. Comm. Company Company Company
100% 10% 22 1/2% 22 1/2% 22 1/2% 22 1/2%
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1,
1992 $(26,433) $ (2,645) $ (5,947) $ (5,947) $ (5,947) $ (5,947)
Contributions 25,871 2,587 5,821 5,821 5,821 5,821
Contributions
Receivable (2,250) (2,250)
Allocation
of Partnership
Income 50,432 5,044 11,347 11,347 11,347 11,347
Balance at
December 31,
1992 $ 47,620 $ 4,986 $ 11,221 $ 11,221 $ 8,971 $ 11,221
Contributions 17,250 1,500 3,375 3,375 5,625 3,375
Contributions
Receivable (6,750) (3,375) (3,375)
Allocation of
Partnership
Income 154,096 15,408 34,672 34,672 34,672 34,672
Balance at
December 31,
1993 $212,216 $ 21,894 $ 49,268 $ 49,268 $ 45,893 $ 45,893
</TABLE>
The accompanying notes are an integral part of these financial
statements.
[Prospecus, page 44]
<TABLE>
CASS CELLULAR LIMITED PARTNERSHIP
Statement of Partners' Equity
For The Years Ended December 31, 1994 and 1993
<CAPTION>
Gen. Ptr. Limited Partners
Sand
Ogden Creek Waldron
D & P D & P Telephone Telephone Telephone
Total Comm. Comm. Company Company Company
100% 10% 22 1/2% 22 1/2% 22 1/2% 22 1/2%
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1,
1993 $ 47,620 $ 4,986 $ 11,221 $ 11,221 $ 8,971 $ 11,221
Contributions 17,250 1,500 3,375 3,375 5,625 3 ,375
Contributions
Receivable (6,750) (3,375) (3,375)
Allocation of
Partnership
Income 154,096 15,408 34,672 34,672 34,672 34,672
Balance at
December 31,
1993 $212,216 $ 21,894 $ 49,268 $ 49,268 $ 45,893 $ 45,893
Contributions 6,750 3,375 3,375
Distributions (220,000) (22,000) (49,500) (49,500) (49,500) (49,500)
Allocation of
Partnership
Income 574,905 57,489 129,354 129,354 129,354 129,354
Balance at
December 31,
1994 $573,871 $ 57,383 $129,122 $129,122 $129,122 $129,122
</TABLE>
The accompanying notes are an integral part of these financial
statements.
[Prospectus, page 45]
<TABLE>
Cass Cellular Limited Partnership
Statements of Cash Flows
As of December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Operations:
Net Income $ 574,905 $ 154,096 $ 50,432
Non-Cash Items:
RSA #9 Earnings (671,114) (219,160) (108,348)
Allocated Patronage (9,515) (5,854) (660)
Operating Accounts:
Accounts Payable 1,007 629 1,746
Accrued Expenses 13,980 3,901 8,758
Cash Used in Operations $ (90,737) $ (66,388) $ (48,072)
Investing:
Investment in RSA #9 $ (556,200) $(183,546) $(186,883)
Distributions from RSA #9 417,150 -0- -0-
Investment in Class C Stock (10,731) (8,176) (6,378)
Cash Used in Investing
Activities $ (149,781) $(191,722) $(193,261)
Financing:
Loan Proceeds $ 644,784 $ 249,965 $ 221,227
Partner Distributions (220,000) -0- -0-
Partner Contributions 6,750 10,500 23,621
Cash Provided By
Financing Activities $ 431,534 $ 260,465 $ 244,848
Increase in Cash $ 191,016 $ 2,355 $ 3,515
Cash and Cash Equivalents
Beginning of Year 7,725 5,370 1,855
Cash and Cash Equivalents
End of Year $ 198,741 $ 7,725 $ 5,370
</TABLE>
The accompanying notes are an integral part of these financial
statements.
[Prospectus, page 46]
Cass Cellular Limited Partnership
Notes to Financial Statements
1. Summary of Accounting Policies
General:
Cash Cellular Limited Partnership was formed to invest in and manage the
cellular rights of its partners in the Rural Service Area (RSA) #9 cellular
territory, which consists primarily of the lower tier of counties within the
State of Michigan.
The partnership members are as follows:
<TABLE>
<CAPTION>
<S> <C>
D & P Communications, Inc.
As General Partner 10.0%
As Limited Partner 22.5%
Ogden Telephone Company - As Limited Partner 22.5%
Sand Creek Telephone Company - As Limited Partner 22.5%
Waldron Telephone Company - As Limited Partner 22.5%
Total 100.0%
</TABLE>
Investment in RSA #9
The Partnership records its investment in Michigan RSA #9 Limited Partnership
on the equity method of accounting. Accordingly, the investment account is
increased for contributions to and earnings from Michigan RSA #9 Limited
Partnership and decreased for distributions and losses received.
Income Taxes:
No federal income effects of partnership activities are reflected in the
financial statements because such taxes are the responsibility of the
individual partners of Cass Cellular.
Cash Flows:
For cash flow purposes, cash consists of demand deposits and items with
maturities of less than three months. For the years ended December 31,
1994, 1993, and 1992, Cass Cellular Limited Partnership paid cash for
interest of $78,861, $59,739, and $30,218, respectfully.
2. Investment in Michigan RSA #9
The Partnership owns 55.62% of Michigan RSA #9 Limited Partnership (RSA #9).
RSA #9 provides cellular service within the service area determined by the
Federal Communications Commission. RSA #9 is operated by Century Cellunet,
Inc., a wholly-owned subsidiary of Century Telephone Enterprises, Inc. Century
Cellunet also owns 43.38% of RSA #9. The remaining 1% is owned by Ameritech.
Currently, there are nine sites operational within the cellular service area.
In addition, the members of RSA #9 have approved additional sites to be
constructed during 1995. The construction costs for these sites along with
additional equipment for existing sites are expected to approximate
$2,485,000. Cass Cellular's portion of these costs would be approximately
$1,382,000. These amounts will be funded principally through additional
borrowings.
[Prospectus, page 47]
3. Class C Stock
Class C stock represents amounts purchased from The St. Paul Bank for
Cooperatives as a condition of obtaining financing (see Note 4). The stock
is recorded at cost. There is no established market value for the stock;
however, management believes that based upon an evaluation of the underlying
assets, that the redemption value is at least equal to cost. This stock is
not redeemable during the life of the loan and is, therefore, classified as
noncurrent.
4. Loans Payable
Loans payable represent amounts advanced by The St. Paul Bank for Cooperatives
under a $1,600,000 note. Unadvanced funds under this note are approximately
$11,923 at December 31, 1994. This note bears interest at a variable rate
(9.7% at December 31, 1994).
In March of 1995, Cass Cellular Limited Partnership negotiated an increase in
this loan of $2,500,000, for a total loan of $4,100,000. Payments are
scheduled to begin quarterly in 1995. The loan matures on December 31, 2001,
with any unpaid principal due at that time. Principal payments for the next
five years, adjusted for the additional borrowing described above, are
approximately as follows:
<TABLE>
<CAPTION>
<S> <C>
1995 $356,000
1996 391,000
1997 430,000
1998 473,000
1999 521,000
</TABLE>
The loan contains covenants which, among other things, restricts distributions
to the partners and mandates certain financial ratios. In addition,
substantially all assets of the Partnership are pledged as collateral for
the loans.
5. Concentration of Cash
At December 31, 1994, the Partnership had cash balances of $98,741, on deposit
with a local bank, in excess of Federal insurance limits.
INFORMATION ABOUT SCCC
I. DESCRIPTION OF SCCC BUSINESS
A. HOLDING COMPANY OPERATIONS. SCCC is a for-profit corporation,
incorporated in 1995 under the laws of the state of Michigan to engage in
various business activities. The incorporator was Ronald W. Bloomberg.
SCCC has not actively engaged in the transaction of any business but was
incorporated for the purpose of establishing a holding company. The mailing
address and telephone number of the principal executive offices is 6525 Sand
Creek Highway, P.O. Box 66, Sand Creek, Michigan 49279-0066, (517)436-3130.
SCCC does not have any employees and does not intend as of this time to have
employees other than officers necessary for it to function as a holding
company.
B. PHYSICAL PROPERTY AND FACILITIES. Currently SCCC does not own or utilize
any physical property or facilities.
C. FINANCIAL INFORMATION.
The following is the financial data for SCCC. No income or cash flow
statement is included because SCCC is an inactive company without an
operating history:
[Prospectus, page, 48]
Independent Auditor's Report
We have audited the accompanying balance sheet of Sand Creek Communications
Company, as of June 30, 1995. This financial statement is the responsibility
of the Company's management. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance sheet.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the balance
sheet provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Sand Creek Communications
Company as of June 30,1995, in conformity with generally accepted accounting
principles.
McCartney and McIntyre, P.C.
Okemos, Michigan
October 30, 1995
<TABLE>
Sand Creek Communications Company
Balance Sheet
As Of June 30, 1995
<CAPTION>
<S> <C>
Assets
Cash $1,000
Total Current Assets: $1,000
Stockholder's Equity
Common Stock, 160,000 shares
authorized, issued and oustanding,
1 share $1,000
Total Stockholder's Equity: $1,000
</TABLE>
The accompanying notes are an integral part of this financial statement.
Notes to June 30, 1995 Balance Sheet
1. Sand Creek Communications Company (SCCC) is a wholly-owned subsidiary of
Sand Creek Telephone Company and was formed in 1995. To date, the Company
has not conducted any operations.
2. The accounting records of SCCC are maintained in accordance with generally
accepted accounting principles.
[Prospectus, page 49]
II. SCCC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AS A
RESULT OF OPERATIONS.
This discussion and analysis of SCCC's financial condition and results of
operations should be read in conjunction with the financial statements of SCCC
included elsewhere herein.
Currently, and pending the Share Exchange, SCCC has a minimum level of
liquid capital and capital resources and no material commitments for capital
expenditures. Following the Share Exchange, as a holding company with no
significant operations of its own, the principal source of SCCC's funds will
be dividends and other distributions from its subsidiaries, borrowings and
sales of equity. It is contemplated that in the normal course SCCC, in
addition to receiving dividends from its subsidiaries, will obtain funds
though debt or equity financings. Any financings will depend on the
financial and other conditions of SCCC and on market conditions.
III. SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT.
SCCC Common Stock is the only class of capital stock of SCCC. SCCC has
160,000 authorized shares of Common Stock. As of the date hereof, there was
outstanding one (1) share of SCCC Common Stock, which is owned by Sand Creek
and fully paid. Following the effective date of the Share Exchange, the then
holders, as of the Record Date, of Sand Creek Common Stock which do not
perfect dissenters' rights will become holders of SCCC Common Stock. Their
respective ownership interests may change in light of the number of Sand
Creek Shareholders who perfect dissenter's rights. If no Shareholder
perfects his right to dissent, the ownership interests in SCCC Common Stock
will be the same as the ownership interests of Sand Creek discussed above.
IV. MANAGEMENT.
The Directors and Executive Officers of SCCC are the same as the Directors
and Executive Officers as Sand Creek. Information as to their addresses,
ages, principal occupations and terms are set forth above with regard to
Sand Creek. The term of each director for SCCC expires at the same time as
his term as director of Sand Creek. SCCC has not paid any compensation or
fees to its directors or officers.
V. LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The MBCA permits Michigan corporations to limit the personal liability of
directors for the breach of their fiduciary duty. SCCC's Articles of
Incorporation provide, consistent with the MCBA, that a director of SCCC
shall not be personally liable to SCCC or its Shareholders for monetary
damages for breach of the director's fiduciary duty. However, it does not
eliminate or limit the liability of a director for any of the following:
(1) a breach of the director's duty of loyalty to SCCC or its Shareholders;
(2) acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law; (3) unlawful loans to directors,
officers and employees; (4) a transaction from which the director derives
an improper personal benefit; and (5) an act or omission occurring before the
effective date of the provision limiting liability. As a result of the
inclusion of such a provision, Shareholders of SCCC may be unable to recover
monetary damages against directors for actions taken by them which constitute
negligence or gross negligence or which are in violation of their fiduciary
duties, although it may be possible to obtain injunctive or other equitable
relief with respect to such actions. If equitable remedies are found not to
be available to Shareholders in any particular case, Shareholders may not
have any effective remedy against the challenged conduct.
The MBCA also permits Michigan corporations to indemnify directors and
officers for expenses incurred as a result of a proceeding brought against a
person by reason of the fact that such person is or was an officer and/or
director, provided that specified standards are satisfied. SCCC Bylaws
authorize indemnification of officers and directors, in the same manner as
the Bylaws of Sand Creek. SCCC believes that such indemnification will
assist SCCC in continuing to attract and retain talented directors and officers
in light of the growing risk of litigation directed against directors and
officers of corporations.
[Prospectus, page 51]
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or person controlling SCCC pursuant
to the foregoing provisions, SCCC has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is therefore unenforceable.
VI. LEGAL PROCEEDINGS
Other than ordinary routine litigation incidental to the business of SCCC,
there is not any material pending litigation.
VII. DIVIDENDS ON AND MARKET PRICES OF SCCC COMMON STOCK.
No established trading market exists with respect to shares of SCCC Common
Stock. As of the date hereof, there was one holder (i.e. Sand Creek) of SCCC
Common Stock. No dividends have been declared or paid with respect to SCCC
Common Stock.
LEGAL MATTERS
Certain legal matters including the legality of the issuance of SCCC Common
Stock, in connection with the transactions contemplated by the Share Exchange
have been passed upon by Loomis, Ewert, Parsley, Davis & Gotting, P.C.,
232 S. Capitol Avenue, Suite 1000, Lansing, Michigan.
EXPERTS
The balance sheets of Sand Creek as of December 31, 1994 and 1993, and the
statements of income, changes in stockholders' equity, and cash flows for the
years ended December 31, 1994, 1993, and 1992 have been audited by
McCartney and McIntyre, P.C., Okemos, Michigan, and their report was dated
on June 21, 1995.
The balance sheets of Cass Cellular Limited Partnership as of December 31,
1994 and 1993, and the statements of income, changes in partners' equity, and
cash flows for the years ended December 31, 1994, 1993 and 1992 have been
audited by McCartney and McIntyre, P.C. and their report was dated on March
13, 1995.
The balance sheets of Sand Creek as of June 30, 1995 and 1994, and the
statements of income, changes in stockholders' equity, and cash flows for
the six months ended June 30, 1995 and 1994 have been compiled by McCartney
and McIntyre, P.C. without audit or review and they do not express an opinion
on their report dated August 14, 1995.
The balance sheet of Sand Creek Communications Company as of June 30, 1995
has been audited by McCartney and McIntyre, P.C. and their report was dated
on October 30, 1995.
[PROXY BEGIN APPENDIX A]
AGREEMENT AND PLAN OF SHARE EXCHANGE
THIS AGREEMENT AND PLAN OF SHARE EXCHANGE ("Agreement") is
dated as of ________, 1995 by and between SAND CREEK TELEPHONE COMPANY
("Sand Creek"), a Michigan corporation and SAND CREEK COMMUNICATIONS
COMPANY ("SCCC"), a Michigan corporation.
W I T N E S E T H
WHEREAS, Sand Creek is a Michigan corporation, and has an
authorized capitalization consisting of 50,000 shares of common stock,
$10.00 par value, of which 41,299 1/3 shares are issued and
outstanding on the date hereof; and
WHEREAS, SCCC is a Michigan corporation, and has an
authorized capitalization consisting of 160,000 shares of Common
Stock, no par value, of which one (1) share is issued and outstanding
on the date hereof; and
WHEREAS, SCCC is presently a wholly-owned subsidiary of Sand
Creek; and
WHEREAS, the Boards of Directors of Sand Creek and SCCC deem
it advisable for SCCC to acquire all of the issued and outstanding
stock of Sand Creek in a Share Exchange under the provisions of the
Michigan Business Corporation Act, such that Sand Creek will become a
wholly-owned subsidiary of SCCC, and each of the current shareholders
of Sand Creek, (except those perfecting dissenters' rights) will
become a shareholder of SCCC; and
WHEREAS, the Share Exchange, to be effective, must be
approved by the affirmative vote of the holders of a majority of the
issued and outstanding stock of Sand Creek;
WHEREAS, the respective Boards of Directors of Sand Creek
and SCCC have, by resolutions duly adopted, approved this Agreement
and directed that it be executed by the undersigned officers and that
it be submitted to a vote of their respective shareholders;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the
parties hereto agree that SCCC shall acquire in a Share Exchange all
of the issued and outstanding stock of Sand Creek, and that the terms
and conditions of such Share Exchange, the mode of carrying it out,
and the manner of converting and exchanging shares shall be as
follows:
1. THE SHARE EXCHANGE
1.1 Effective Time. Subject to, and in accordance with the
provisions of this Agreement, upon the satisfaction of all
conditions precedent to the consummation of the transactions
contemplated by the Share Exchange, Sand Creek and SCCC
shall sign and file with the Michigan Department of
Commerce, Corporations and Securities Bureau, a Certificate
of Share Exchange. The Share Exchange shall become
effective as of the close of business on the effective date
of said Certificate of Share Exchange. ("Effective Time").
1.2 Actions of Sand Creek and SCCC. Prior to and after the
Effective Time, Sand Creek and SCCC shall take all such
actions as may be necessary or appropriate to effect the
Share Exchange. In this connection, SCCC shall issue the
shares of SCCC stock to which the holders of Sand Creek
stock shall be entitled to receive as provided in Article 2
hereof. In case at any time after the Effective Time, any
further action is necessary or desirable to carry out the
purposes of this Agreement, the Officers and Directors of
Sand Creek and SCCC shall take all such further action.
[PROXY APPENDIX A, PAGE 1]
2. TERMS OF EXCHANGE OF SHARES
2.1 Exchange and Conversion of Sand Creek Shares. At the
Effective Time, each share of common stock of Sand Creek
issued and outstanding, excluding Dissenting Shares, shall
be automatically by virtue of the exchange, exchanged for
and converted into three (3) fully paid and nonassessable
shares of common stock of SCCC, which shall thereupon be
validly issued, fully paid and nonassessable, except as
otherwise required by law. Each such share of Sand Creek
stock will thereupon be owned by SCCC.
2.2 Cancellation of SCCC Shares. Each share of common stock of
SCCC issued and outstanding immediately prior to the
Effective Time shall be cancelled.
2.3 Surrender and Exchange of Sand Creek Certificates.
Following the Effective Time, each holder of an outstanding
certificate theretofore representing shares of Sand Creek
common stock, excluding Dissenting Shares, shall surrender
the same to SCCC for cancellation or transfer, and each such
holder or transferee of such surrendered shares shall be
entitled to receive a certificate representing three (3)
shares of SCCC common stock for each one (1) share of Sand
Creek common stock represented by the stock certificate
surrendered. The stock transfer books for Sand Creek common
stock shall be deemed to be closed on the Effective Time,
and no transfer of shares of Sand Creek common stock
outstanding immediately prior to the Effective Time shall
thereafter be made on such books. Following the Effective
Time, the holders of certificates representing Sand Creek
common stock outstanding immediately before the Effective
Time shall cease to have any rights with respect to stock of
Sand Creek, and their sole rights shall be with respect to
the SCCC common stock to which their shares of Sand Creek
common stock shall have been converted in the Share
Exchange. Within a reasonable time after the Effective
Time, SCCC will send to each Sand Creek Shareholder a form
of letter of transmittal (which will specify that delivery
will be effected, and risk of loss and title to certificates
for shares of Sand Creek Common Stock will pass, only upon
proper delivery of such certificates to SCCC) and
instructions for use in effecting the exchange of the
certificates for shares of SCCC Common Stock. Until the
certificates representing Sand Creek Common Stock are
surrendered for exchange after the consummation of the Share
Exchange, holders of such certificates will not be paid
dividends or other distributions with respect to the shares
of SCCC Common Stock with which such shares of Sand Creek
Common Stock are being exchanged. When such certificates
are surrendered, any such unpaid dividends or other
distributions will be paid (without interest) with respect
to the number of shares of SCCC Common Stock represented by
such certificates. Holders of unsurrendered certificates
shall not be entitled to vote after the Effective Time at
any meeting of SCCC until they have exchanged their
certificates. All shares of SCCC Common Stock issued upon
exchange of shares of Sand Creek Common Stock shall be
deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Sand Creek Common Stock.
If any certificate representing shares of SCCC Common Stock
is to be issued in a name other than that of the registered
holder of the certificate formerly representing shares of
Sand Creek Common Stock presented for transfer, it shall be
a condition of issuance that (i) the certificate so
surrendered shall be properly endorsed or accompanied by a
stock power and shall otherwise be in proper form for
transfer and (ii) the person requesting such issuance shall
pay to SCCC any transfer or other taxes required by reason
of issuance of certificates representing SCCC Common Stock
in a name other than that of the registered holder of the
certificate presented, or establish to the satisfaction of
SCCC that such taxes have been paid or are not applicable.
2.4 No fractional shares of SCCC shall be issued as part of the
Share Exchange.
3. ARTICLES OF INCORPORATION AND BYLAWS
3.1 Continued Effectiveness. From and after the Effective Time,
and until thereafter amended as provided by law, the
Articles of Incorporation and Bylaws of Sand Creek, as
amended, and
[PROXY APPENDIX A,PAGE 2]
the Articles of Incorporation and Bylaws of
SCCC, as amended, shall continue to be effective.
3.2 Continued Corporate Existence. From and after the Effective
Time, Sand Creek and SCCC shall continue their separate
corporate existence and identity, and nothing in this
Agreement shall be construed as effecting any transfer of
any asset or liability, nor as effecting any merger or
consolidation of Sand Creek and SCCC.
4. DIRECTORS AND OFFICERS
4.1 Sand Creek Directors and Officers. The persons who are
directors and officers of Sand Creek immediately prior to
the Effective Time shall continue as directors and officers
of Sand Creek for the remainder of their terms. If, at or
following the Effective Time, a vacancy should occur in the
Board of Directors or in the position of any officer of Sand
Creek, such vacancy may be filled in the manner provided in
the Bylaws of Sand Creek.
4.2 SCCC Directors and Officers. The persons who are directors
and officers of SCCC immediately prior to the Effective Time
shall continue as directors and officers of SCCC for the
remainder of their terms. If, at or following the Effective
Time, a vacancy should occur in the Board of Directors or in
the position of any officer of SCCC, such vacancy may be
filled in the manner provided in the Bylaws of SCCC.
5. DISSENTER'S RIGHTS
5.1 Statutory Rights. Shareholders who dissent from the
Agreement and Plan of Share Exchange have the Dissenters'
Rights as provided in Sections 761-774 of the Michigan
Business Corporation Act.
5.2 Restriction on Transfer of Dissenting Shares Without
Certificates. No transfer of shares without certificate
shall be permitted with respect to any shares as to which
payment demand is received until the plan of share exchange
is consummated or the transfer restrictions are released
pursuant to Section 770 of the Michigan Business Corporation
Act.
5.3 Time for Payment Demand. The date by which Sand Creek must
receive any payment demand shall be thirty (30) days after
the Dissenter's Notice is delivered.
6. CONDITIONS TO THE SHARE EXCHANGE
6.1 Conditions Precedent. Consummation of the Share Exchange is
subject to the satisfaction or waiver by both parties of the
following conditions:
6.1.1 Shareholder Approval. This Agreement and Plan of
Share Exchange shall have received the approval of
shareholders representing a majority of the issued
and outstanding shares of common stock of Sand
Creek, to the extent required by the Michigan
Business Corporation Act and by the Articles of
Incorporation and Bylaws of Sand Creek.
6.1.2 Lack of Dissent. In addition to the majority
approval required by Section 6.1.1, Shareholders
representing not more than twenty percent (20%) of
the issued and outstanding shares of common stock
of Sand Creek shall have delivered to Sand Creek
before the vote is taken written notice of their
intention to demand payment for their shares if
the Agreement and Plan of Share Exchange is
approved.
6.1.3 Registration Statement. A registration statement
or registration statements relating to the shares
of SCCC Common Stock to be issued as a result of
the Exchange shall be effective under the
Securities Act of 1933, as amended, and shall not
be the subject of any "Stop order".
[PROXY APPENDIX A, PAGE 3]
6.1.4 Consents and Approvals. Sand Creek and SCCC shall
have received any and all consents, approvals and
withholding of objections that are necessary for
the closing of the transactions contemplated by
this Agreement in form and substance satisfactory
to Sand Creek and SCCC.
6.1.5 Legal Opinions. Sand Creek and SCCC shall have
received legal opinions in form and substance
satisfactory to Sand Creek and SCCC that are
necessary or appropriate for the consummation of
the Share Exchange and all other transactions
contemplated thereby.
6.1.6 Litigation. There shall be no litigation,
proceedings or actions pending or threatened
concerning the Share Exchange which, in the
judgment of the Boards of Directors of Sand Creek
or SCCC renders consummation of the Share Exchange
inadvisable.
6.2 Certificate of Share Exchange After all conditions
precedent to the closing of the transactions contemplated by
the Share Exchange have occurred, Sand Creek and SCCC shall
execute and file a Certificate of Share Exchange.
7. TERMINATION
7.1 Termination This Agreement may be terminated and the Share
Exchange and other transactions herein provided for
abandoned at any time before the Effective Time, whether
before or after approval of this Agreement by the
shareholders of Sand Creek, by the parties hereto, by mutual
consent of their respective Boards of Directors, if such
Boards of Directors determine for any reason that the
consummation of the transaction provided for herein would
for any reason be inadvisable, or that any regulatory or
other consents or approvals deemed necessary or advisable by
such Boards of Directors have not been obtained within a
reasonable time after approval by the shareholders.
8. MISCELLANEOUS
8.1 Amendment, Modification and Waiver. The parties hereto, by
mutual consent of their respective Boards of Directors, may
amend, modify or supplement this Agreement or waive any
condition set forth in Article 6 hereof, in such manner as
may be agreed upon by them in writing, at any time before or
after approval of this Agreement by the common shareholders
of Sand Creek; Provided, however, that no such amendment,
modification or waiver shall, in the sole judgement of the
Board of Directors of Sand Creek, materially and adversely
affect the rights of the shareholders of Sand Creek.
8.2 Deferral of Effective Time. Consummation of the Share
Exchange may be deferred by the Board of Directors of Sand
Creek or any authorized officer of Sand Creek for a
reasonable period, if the Board or officer determines that
such deferral would be in the best interests of Sand Creek
or its Shareholders.
8.3 Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall be deemed
to be an original, and such counterparts shall constitute
but one and the same instrument.
8.4 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of
Michigan.
[PROXY APPENDIX A, PAGE 4]
IN WITNESS WHEREOF, the Parties have executed this Agreement
on the date first recited above pursuant to due authorization.
SAND CREEK TELEPHONE COMPANY
By:/s/
/s/
Witness Robert E. Hinsdale
Its: President
SAND CREEK COMMUNICATIONS COMPANY
By: /s/
/s/
Witness Lawrence Wilt
Its: Vice President
[PROXY APPENDIX A, PAGE 5]
[PROXY BEGIN APPENDIX B]
MICHIGAN BUSINESS CORPORATION ACT
CHAPTER 7
SUBCHAPTER A
MCLA 450.1761 As used in sections 762 to 774:
(a) "Beneficial shareholder" means the person who is a
beneficial owner of shares held by a nominee as the record
shareholder.
(b) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving
corporation by merger of that issuer.
(c) "Dissenter" means a shareholder who is entitled to
dissent from corporate action under section 762 and who
exercises that right when and in the manner required by
sections 764 through 772.
(d) "Fair value", with respect to a dissenter's shares, means
the value of the share immediately before the effectuation of
the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the
corporate action unless exclusion would be inequitable.
(e) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average
rate currently paid by the corporation on its principal bank
loans or, if none, at a rate that is fair and equitable under
all the circumstances.
(f) "Record shareholder" means the person in whose name
shares are registered in the records of a corporation or the
beneficial owner of shares to the extent of the rights granted
by a nominee certificate on file with a corporation.
(g) "Shareholder" means the record or beneficial shareholder.
MCLA 450.1762
(1) A shareholder is entitled to dissent from, and obtain payment
of the fair value of his or her shares in the event of, any of the
following corporate actions:
(a) Consummation of a plan of merger to which the corporation
is a party if shareholder approval is required for the merger
by section 703a or the articles of incorporation and the
shareholder is entitled to vote on the merger, or the
corporation is a subsidiary that is merged with its parent
under section 711.
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan.
(c) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other
than in the usual and regular course of business, if the
shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution but not including a sale
pursuant to court order.
(d) An amendment of the articles giving rise to a right to
dissent pursuant to section 621.
(e) A transaction giving rise to a right to dissent pursuant
to section 754.
(f) Any corporate action taken pursuant to a shareholder vote
to the extent the articles, bylaws, or a resolution of the
board provides that voting or nonvoting shareholders are
entitled to dissent and obtain payment for their shares.
(g) The approval of a control share acquisition giving rise
to a right to dissent pursuant to section 799.
(2) Unless otherwise provided in the articles, bylaws, or a
resolution of the board, a shareholder may not dissent from any of the
following:
(a) Any corporate action set forth in subsection (1)(a) to
(e) as to shares which are listed on a national securities
exchange or held of record by not less than 2,000 persons on
the record date fixed to determine the shareholders entitled
to receive notice of and to vote at the meeting of
shareholders at which the corporate action is to be acted
upon.
(b) A transaction described in subsection (1)(a) in which
shareholders receive cash or shares that satisfy the
requirements of subdivision (a) or any combination thereof.
(c) A transaction described in subsection (1)(b) in which
shareholders receive cash or shares that satisfy the
requirements of subdivision (a) or any combination thereof.
[PRXY APPENDIX B, PAGE 1]
(d) A transaction described in subsection (1)(c) which is
conducted pursuant to a plan of dissolution providing for
distribution of substantially all of the corporation's net
assets to shareholders in accordance with their respective
interests within 1 year after the date of transaction, where
the transaction is for cash or shares that satisfy the
requirements of subdivision (a) or any combination thereof.
(3) A shareholder entitled to dissent and obtain payment for his
or her shares pursuant to subsection (1)(a) to (e) may not challenge the
corporate action creating his or her entitlement unless the action is
unlawful or fraudulent with respect to the shareholder or the
corporation.
(4) A shareholder who exercises his or her right to dissent and
seek payment for his or her shares pursuant to subsection (1)(f) may not
challenge the corporate action creating his or her entitlement unless
the action is unlawful or fraudulent with respect to the shareholder or
the corporation.
MCLA 450.1763
(1) A record shareholder may assert dissenter's rights as to fewer
than all the shares registered in his or her name only if he or she
dissents with respect to all shares beneficially owned by any 1 person
and notifies the corporation in writing of the name and address of each
person on whose behalf he or she asserts dissenters' rights. The rights
of a partial dissenter under this subsection are determined as if the
shares as to which he or she dissents and his or her other shares were
registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to
shares held on his or her behalf only if all of the following apply:
(a) He or she submits to the corporation the record
shareholder's written consent to the dissent not later than
the time the beneficial shareholder asserts dissenters'
rights.
(b) He or she does so with respect to all shares of which he
or she is the beneficial shareholder or over which he or she
has power to direct the vote.
MCLA 450.1764
(1) If proposed corporate action creating dissenters' rights under
section 762 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to
assert dissenters' rights under this act and shall be accompanied by a
copy of sections 761 to 774.
(2) If corporate action creating dissenters' rights under section
762 is taken without a vote of shareholders, the corporation shall
notify in writing all shareholders entitled to assert dissenters' rights
that the action was taken and send them the dissenters' notice described
in section 766. A shareholder who consents to the corporate action is
not entitled to assert dissenters' rights.
MCLA 450.1765
(1) If proposed corporate action creating dissenters' rights under
section 762 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights must deliver to the
corporation before the vote is taken written notice of his or her intent
to demand payment for his or her shares if the proposed action is
effectuated and must not vote his or her shares in favor of the proposed
action.
(2) A shareholder who does not satisfy the requirements of
subsection (1) is not entitled to payment for his or her shares under
this act.
MCLA 450.1766
(1) If proposed corporate action creating dissenters' rights under
section 762 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who
satisfied the requirements of section 765.
(2) The dissenters' notice must be sent no later than 10 days
after the corporate action was taken, and must provide all of the
following:
[PROXY APPENDIX B, PAGE 2]
(a) State where the payment demand must be sent and where and
when certificates for shares represented by certificates must
be deposited.
(b) Inform holders of shares without certificates to what
extent transfer of the shares will be restricted after the
payment demand is received.
(c) Supply a form for the payment demand that includes the
date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action and
requires that the person asserting dissenters' rights certify
whether he or she acquired beneficial ownership of the shares
before the date.
(d) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than 30 nor more
than 60 days after the date the subsection (1) notice is
delivered.
MCLA 450.1767
(1) A shareholder sent a dissenter's notice described in section
766 must demand payment, certify whether he or she acquired beneficial
ownership of the shares before the date required to be set forth in the
dissenters' notice pursuant to section 766(2)(c), and deposit his or her
certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his or her
share certificates under subsection (1) retains all other rights of a
shareholder until these rights are canceled or modified by the taking of
the proposed corporate action.
(3) A shareholder who does not demand payment or deposit his or
her share certificates where required, each by the date set in the
dissenters' notice, is not entitled to payment for his or her shares
under this act.
MCLA 450.1768
(1) The corporation may restrict the transfer of shares without
certificates from the date the demand for their payment is received
until the proposed corporate action is taken or the restrictions
released under section 770.
(2) The person for whom dissenters' rights are asserted as to
shares without certificates retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the
proposed corporation action.
MCLA 450.1769
(1) Except as provided in section 771, within 7 days after the
proposed corporate action is taken or a payment demand is received,
whichever occurs later, the corporation shall pay each dissenter who
complied with section 767 the amount the corporation estimates to be the
fair value of his or her shares, plus accrued interest.
(2) The payment must be accompanied by all of the following:
(a) The corporation's balance sheet as of the end of a fiscal
year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of
changes in shareholders' equity for that year, and if
available the latest interim financial statements.
(b) A statement of the corporation's estimate of the fair
value of the shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter's right to demand payment
under section 772.
MCLA 450.1770
(1) If the corporation does not take the proposed action within 60
days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates
and release the transfer restrictions imposed on shares without
certificates.
[PROXY APPENDIX B, PAGE 3]
(2) If after returning deposited certificates and releasing
transfer restrictions, the corporation takes the proposed action, it
must send a new dissenters' notice under section 766 and repeat the
payment demand procedure.
MCLA 450.1771
(1) A corporation may elect to withhold payment required by
section 769 from a dissenter unless he or she was the beneficial owner
of the shares before the date set forth in the dissenters' notice
pursuant to section 766(2)(c).
(2) To the extent the corporation elects to withhold payment under
subsection (12), after taking the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall
offer to pay this amount to each dissenter who shall agree to accept it
in full satisfaction of his or her demand. The corporation shall send
with its offer a statement of its estimate of the fair value of the
shares, an explanation of how the interest was calculated, and a
statement of the dissenter's right to demand payment under section 772.
MCLA 450.1772
(1) A dissenter may notify the corporation in writing of his or
her own estimate of the fair value of his or her shares and amount of
interest due, and demand payment of his or her estimate, less any
payment under section 769, or reject the corporation's offer under
section 771 and demand payment of the fair value of his or her shares
and interest due, if any 1 of the following applies:
(a) The dissenter believes that the amount paid under section
769 or offered under section 771 is less than the fair value
of his or her shares or that the interest due is incorrectly
calculated.
(b) The corporation fails to make payment under section 769
within 650 days after the date set for demanding payment.
(c) The corporation, having failed to take the proposed
action, does not return the deposited certificates or release
the transfer restrictions imposed on shares without
certificates within 60 days after the date set for demanding
payment.
(2) A dissenter waives his or her right to demand payment under
this section unless he or she notifies the corporation of his or her
demand in writing under subsection (1) within 30 days after the
corporation made or offered payment for his or her shares.
MCLA 450.1773
(1) If a demand for payment under section 772 remains unsettled,
the corporation shall commence a proceeding within 60 days after
receiving the payment demand and petition the court to determine the
fair value of the shares and accrued interest. If the corporation does
not commence the proceeding within the 60-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the circuit
court of the county in which the corporation's principal place of
business or registered office is located. If the corporation is a
foreign corporation without a registered office or principal place of
business in this state, it shall commence the proceeding in the county
in this state where the principal place of business or registered office
of the domestic corporation whose shares are to be valued was located.
(3) The corporation shall make all dissenters, whether or not
residents of this state, whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties shall be
served with a copy of the petition. Nonresidents may be served by
registered or certified mail or by publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is
commenced under subsection (2) is plenary and exclusive. The court may
appoint 1 or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have
the powers described in the order appointing them, or in any amendment
to it. The dissenters are entitled to the same discovery rights as
parties in other civil proceedings.
[PROXY APPENDIX B, PAGE 4]
(5) Each dissenter made a party to the proceeding is entitled to
judgment for the amount, if any, by which the court finds the fair value
of his or her shares, plus interest, exceeds the amount paid by the
corporation or for the fair value, plus accrued interest, of his or her
after-acquired shares for which the corporation elected to withhold
payment under section 771.
MCLA 450.1773a
(1) In a proceeding brought pursuant to section 773, the court
may, pursuant to the agreement of the parties, appoint a referee
selected by the parties and subject to the approval of the court. The
referee may conduct proceedings within the state, or outside the state
by stipulation of the parties with the referee's consent, and pursuant
to the Michigan court rules. The referee shall have powers that
include, but are not limited to, the following:
(a) To hear all pretrial motions and submit proposed orders
to the court. In ruling on the pretrial motion and proposed
orders, the court shall consider only those documents,
pleadings, and arguments that were presented to the referee.
(b) To require the production of evidence, including the
production of all books, papers, documents, and writings
applicable to the proceeding, and to permit entry upon
designated land or other property in the possession or control
of the corporation.
(c) To rule upon the admissibility of evidence pursuant to
the Michigan rules of evidence.
(d) To place witnesses under oath and to examine witnesses.
(e) To provide for the taking of testimony by deposition.
(f) To regulate the course of the proceeding.
(g) To issue subpoenas, when a written request is made by any
of the parties, requiring the attendance and testimony of any
witness and the production of evidence including books,
records, correspondence, and documents in the possession of
the witness or under his or her control, at a hearing before
the referee or at a deposition convened pursuant to
subdivision (e). In case of a refusal to comply with a
subpoena, the party on whose behalf the subpoena was issued
may file a petition in the court for an order requiring
compliance.
(2) The amount and manner of payment of the referee's compensation
shall be determined by agreement between the referee and the parties,
subject to the court's allocation of compensation between the parties at
the end of the proceeding pursuant to equitable principles,
notwithstanding section 774.
(3) The referee shall do all of the following:
(a) Made a report and reporter's transcript of the
proceeding.
(b) Prepare a report, including proposed findings of fact and
conclusions of law, and a recommended judgment.
(c) File the report with the court, together with all
original exhibits and the reporter's transcript of the
proceeding.
(4) Unless the court provides for a longer period, not more than
45 days after being served with notice of the filing of the report
described in subsection (3), any party may serve written objections to
the report upon the other party. Application to the court for action
upon the report and objections to the report shall be made by motion
upon notice. The court, after hearing, may adopt the report, may
receive further evidence, may modify the report, or may recommit the
report to the referee with instructions. Upon adoption of the report,
judgment shall be entered in the same manner as if the action had been
tried by the court and shall be subject to review in the same manner as
any other judgment of the court.
MCLA 450.1774
(1) The court in an appraisal proceeding commenced under section
773 shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the
court. The court shall assess the costs against the corporation, except
that the court may assess costs against all or some of the dissenters,
in amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under section 772.
[PROXY APPENDIX B, PAGE 5]
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable
in the following manner:
(a) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of sections 764
through 772.
(b) Against either the corporation or a dissenter, in favor
of any other party, if the court finds that the party against
whom the fees and expenses are assessed acted arbitrarily,
vexatiously, or not in good faith with respect to the rights
provided by this act.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly
situated, and that the fees for those services should not be assessed
against the corporation, the court may award to those counsel reasonable
fees paid out of the amounts awarded the dissenters who were benefited.
[PROXY APPENDIX B, PAGE 6]
[PROXY BEGIN BACK COVER]
TABLE OF CONTENTS
PROSPECTUS PAGE
AVAILABLE INFORMATION........................................... 2
SUMMARY....................................................... 3
I. THE SPECIAL MEETING...................................... 3
II. THE COMPANIES..............................................4
III. AGREEMENT AND PLAN OF SHARE EXCHANGE................ 4
RISK FACTORS.................................................... 8
A. LIMITED HISTORY OF SCCC.......................... 8
B. RESTRICTIONS ON TRANSFERABILITY..................... 8
C. ABSENCE OF MARKET FOR COMMON STOCK.............. 8
D. DIVERSIFICATION....................................... 8
E. REDUCED LEVEL OF REGULATORY OVERSIGHT........... 8
F. HOLDING COMPANY STRUCTURE....................... 8
G. ADDITIONAL AUTHORIZED SHARES........................ 8
INTRODUCTION......................................................9
THE SPECIAL MEETING........................................... 9
I. SPECIAL MEETING - PURPOSE OF SPECIAL MEETING........ 9
II. SPECIAL MEETING - ELIGIBLE VOTERS................ 9
III. SPECIAL MEETING - VOTING AND PROXIES................ 9
IV. SPECIAL MEETING - VOTE REQUIRED...................... 9
V. SPECIAL MEETING - SOLICITATION OF PROXIES............ 10
VI. SPECIAL MEETING - FAILURE TO APPROVE SHARE EXCHANGE....10
THE SHARE EXCHANGE............................................. 10
I. SHARE EXCHANGE - BACKGROUND........................ 10
II. SHARE EXCHANGE - THE SAND CREEK BOARD'S
RECOMMENDATION................................... 12
III. SHARE EXCHANGE - FORM OF EXCHANGE.................... 13
IV. SHARE EXCHANGE - CONSIDERATION...................... 14
V. SHARE EXCHANGE - REGULATORY APPROVALS AND OTHER
CLOSING CONDITIONS.............................. 14
VI. SHARE EXCHANGE - EFFECTIVE TIME..................... 14
VII. SHARE EXCHANGE - EXCHANGE OF STOCK CERTIFICATES...... 14
VIII.SHARE EXCHANGE - COMPARISON OF SCCC AND SAND CREEK
COMMON STOCK................................... 15
IX. SHARE EXCHANGE - ACCOUNTING TREATMENT............. 16
X. SHARE EXCHANGE - CERTAIN FEDERAL INCOME TAX
CONSEQUENCES.................................... 17
XI. SHARE EXCHANGE - MANAGEMENT AND OPERATIONS AFTER
THE SHARE EXCHANGE............................. 18
XII. SHARE EXCHANGE - RESALE OF SCCC COMMON STOCK;
RESTRICTIONS ON TRANSFER....................... 18
XIII.SHARE EXCHANGE -EXPENSES............................. 18
XIV. SHARE EXCHANGE - POST SHARE EXCHANGE DIVIDEND
POLICY........................................... 18
XV. CAPITALIZATION........................................ 19
DISSENTING SHAREHOLDERS' RIGHTS............................ 19
INFORMATION ABOUT SAND CREEK................................... 22
I. DESCRIPTION OF SAND CREEK'S BUSINESS............... 22
II. SAND CREEK'S MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.. 33
III. SECURITY OWNERSHIP OF CERTAIN OWNERS AND
MANAGEMENT........................................ 37
IV. MANAGEMENT.......................................... 37
V. LIABILITY AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS........................................... 39
VI. LEGAL PROCEEDINGS................................ 39
VII. DIVIDENDS ON AND MARKET PRICES OF SAND CREEK COMMON
STOCK............................................ 39
VIII.CASS CELLULAR LIMITED PARTNERSHIP FINANCIAL
STATEMENTS....................................... 40
INFORMATION ABOUT SCCC........................................ 48
I. DESCRIPTION OF SCCC BUSINESS......................... 48
II. SCCC MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AS A RESULT OF OPERATIONS............... 50
III. SECURITY OWNERSHIP OF CERTAIN OWNERS AND
MANAGEMENT........................................ 50
IV. MANAGEMENT.......................................... 50
V. LIABILITY AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS.......................................... 50
VI. LEGAL PROCEEDINGS................................. 51
VII. DIVIDENDS ON AND MARKET PRICES OF SCCC COMMON
STOCK........................................... 51
LEGAL MATTERS.............................................. 51
EXPERTS...................................................... 51
AGREEMENT AND PLAN OF SHARE EXCHANGE.........................APPENDIX A
MICHIGAN BUSINESS CORPORATION ACT PROVISIONS.................APPENDIX B
[END OF PROXY]
REGISTRATION STATEMENT PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to MCL 450.1209 and the Articles of Incorporation of Sand Creek
Telephone Company ("Sand Creek") and Sand Creek Communications Company
("SCCC"), a director of Sand Creek and SCCC is not personally liable to
the respective corporation or its shareholders for monetary damages for
a breach of a director's fiduciary duties except for:
(i) a breach of the director's duty of loyalty;
(ii) acts or omissions not in good faith or that involve intentional
misconduct or knowing violation of law;
(iii) a violation of MCL 450.1551(1);
(iv) a transaction from which the director derives an improper personal
benefit.
Pursuant to the Michigan Business Corporation Act and the bylaws of
Sand Creek and SCCC, an officer or director of Sand Creek and SCCC,
respectively, is entitled to indemnification against expenses (including
attorney fees) actually and reasonably incurred by him/her in connection
with a successful defense on the merits or otherwise of any action,
suit, or proceeding by reason of the fact that he/she is or was a
director or officer of the corporation. Each corporation is required to
indemnify any person who was or is a party or is threatened to be made
a party in any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, or otherwise by reason of the fact
that he/she is or was a director or officer of the corporation against
expenses (including attorney fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred if he/she acted in good
faith and in a manner he/she reasonably believed to be in or not opposed
to the best interests of the corporation or its shareholders, and with
respect to any criminal action or proceeding, had no reasonable cause to
believe his/her conduct was unlawful, except that in an action by or in
the right of the corporation, no indemnification shall be made if he/she
is adjudged liable for negligence and/or misconduct in performance of
his/her duties to the corporation unless a court determines he/she is
fairly and reasonably entitled to indemnification. Each corporation is
authorized by statute and bylaw, but not required, to purchase and
maintain insurance covering such expenses and liability. Each
corporation is authorized, but not required, to pay the expenses above
in advance of a final disposition of such action, suit, or proceeding if
(i) the person furnishes the corporation a written affirmation of
his/her good faith belief that he/she has met the applicable standard of
conduct set forth above; (ii) the person furnishes the corporation a
written undertaking, executed personally or on his/her behalf, to repay
the advance if it is ultimately determined that he or she did not meet
the standard of conduct, which undertaking is an unlimited general
obligation of such person; and (iii) a determination is made that the
facts then known to those making the determination would not preclude
indemnification.
ITEM 21: Exhibits and Financial Statements Schedules.
See Exhibits hereto.
ITEM 22: Undertakings.
(a) The undersigned registrant hereby undertakes as follows: That
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information called for by
any other item of the applicable form.
The undersigned registrant undertakes that every prospectus (i)
that is filed pursuant to paragraph (h)(1) immediately proceeding, or
(ii) that purports to meet the requirements of section 10(a), (3) of the
Act and is used in conjunction with an offering of security subject to
Rule 415 (230.415 of this chapter), will be filed as part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any
liability under Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be an initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrant hereby undertakes the supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired therein, that was not the
subject of or included in the registration statement when it became
effective.
Signatures.
Pursuant to the requirement of the Securities Act, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Sand
Creek, State of Michigan, on November 1, 1995.
Sand Creek Communications Company
By: /S/ Robert hinsdale
Robert Hinsdale, President
Pursuant to the requirements of the Securities Act of 1933, this
amended registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/Robert Hinsdale Date: November 1, 1995
Robert Hinsdale
Director, Sand Creek Communications Company
/s/ Gustav Leu Date: November 1, 1995
Gustav Leu
Secretary/Director, Sand Creek Communications Company
/s/ Lawrence Wilt Date: November 1, 1995
Lawrence Witt
Vice President/Director, Sand Creek Communications Company
/s/ Richard Simpkins Date: November 1, 1995
Richard Simpkins
Director, Sand Creek Communications Company
/s/ Harvey Souders Date: November 1, 1995
Harvey Souders
Director, Sand Creek Communications Company
/s/ Margie M. Gallatin Date:November 1, 1995
Margie M. Gallatin
Treasurer, Sand Creek Communications Company
Sand Creek Telephone Company
By: /s/ Robert Hinsdale Date:November 1, 1995
Robert Hinsdale
President/Director
EXHIBIT INDEX
Exhibit No. Description Page
1 Underwriting Agreement Not Applicable
2 Agreement and Plan of Share Exchange Prospectus, Appendix A
3 (i) Articles of Incorporation ----------
(ii) Bylaws ----------
4 Instrument Defining the Rights of Security
Holders Including Indentures ----------
5 Opinion re: Legality ----------
6 Description Opinion re: Discount of
Capital Shares Not Applicable
7 Opinion on liquidation preference Not Applicable
8 Description Opinion re: Tax Matters ----------
9 Description Voting Trust Agreement Not Applicable
10 Description Material Contract ----------
(i) Cass Cellular Limited Partnership
Agreement ----------
(ii) First Amended to Cass Cellular Limited
Partnership Agreement ----------
11 Statement re: Computation of Per Share Earnings----------
12 Description Statement re: Computation of
Ratios Not Applicable
13 Annual Reports of Security Holders Not Applicable
14 Material Foreign Patents Not Applicable
15 Description Letter re: Unaudited Interim
Financial Statements See Exhibit 23
16 Letter re: Changes in Certifying Accountant Not Applicable
17 Letter re: Director Resignation Not Applicable
18 Letter re: Change in Accounting Principle Not Applicable
19 Report furnished to Security Holders Not Applicable
20 Other Documents or Statements to
Security Holders Not Applicable
21 Subsidiaries of the Registrant Not Applicable
22 Published Reports Regarding Matters
Submitted to Vote of Security Holders Not Applicable
23 Consent of Experts and Counsel ----------
24 Power of Attorney Not Applicable
25 Statement of Eligibility of Truste Not Applicable
26 Invitation for Competitive Bids Not Applicable
27 Financial Status Schedule ----------
28 Information from Reports Furnished to
State Insurance Regulatory Authorities Not Applicable
99 Form of Proxy ----------
Form of Notice of Meeting ----------
Financial Schedule 210.12-09 ----------
EXHIBIT 2
AGREEMENT AND PLAN OF SHARE EXCHANGE
SEE PROSPECTUS, APPENDIX A
ARTICLES OF INCORPORATION
For Use by Domestic Profit Corporations
Corporate Identification Number 300-853
Pursuant to the provisions of Act 284, Public Acts of 1972,
the undersigned corporation executes the following Articles:
ARTICLE I
The name of the corporation is Sand Creek Communications Company.
ARTICLE II
The purpose or purposes for which the corporation is formed is to
engage in any activity within the purposes for which corporations
may be formed under the Business Corporation Act of Michigan.
ARTICLE III
The total authorized shares:
1. Common Shares: One Hundred Sixty Thousand (160,000)
Preferred Shares: None
2. A statement of all or any of the relative rights, preferences
and limitations of the shares of each class is as follows: None.
ARTICLE IV
1. The address of the registered office is: 6525 Sand Creek
Highway, Sand Creek, Michigan 49279.
2. The mailing address of the registered office, if different
than above: 6525 Sand Creek Highway, P.O. Box 66, Sand Creek,
Michigan 49279-0066.
3. The name of the resident agent at the registered office is:
Margie M. Gallatin.
ARTICLE V
The name and address of the incorporator is as follows: Ronald
W. Bloomberg, 232 South Capitol Avenue, Suite 1000, Lansing,
Michigan 48933.
ARTICLE VI
When a compromise or arrangement or a plan of reorganization of
this corporation is proposed between this corporation and its
creditors or any class of them or between this corporation and
its shareholders or any class of them, a court of equity
jurisdiction within the state, on application of this corporation
or of a creditor or shareholder thereof, or on application of a
receiver appointed for the corporation, may order a meeting of
the creditors or class of creditors or of the shareholders or
class of shareholders to be affected by the proposed compromise
or arrangement or reorganization, to be summoned in such manner
as the court directs. If a majority in number representing 3/4
in value of the creditors or class of creditors, or if the
shareholders or class of shareholders to be affected by the
proposed compromise or arrangement or a reorganization, agree to
a compromise or arrangement or a reorganization of this
corporation as a consequence of the compromise or arrangement,
the compromise or arrangement and the reorganization, if
sanctioned by the court to which the application has been made,
shall be binding on all the creditors or class of creditors, or
on all the shareholders or class of shareholders and also on this
corporation.
ARTICLE VII
Any action required or permitted by the Act to be taken at an
annual or special meeting of shareholders may be taken without a
meeting, without prior notice, and without a vote, if consents in
writing, set forth the action so taken, are signed by the holders
of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take the action at
a meeting at which all shares entitled to vote on the action were
present and voted. The written consents shall bear the date of
signature of each shareholder who signs the consent. No written
consents shall be effective to take the corporation action
referred to unless, within 60 days after the record date for
determining shareholders entitled to express consent to or to
dissent from a proposal without a meeting, written consents dated
not more than 10 days before the record date and signed by a
sufficient number of shareholders to take the action are
delivered to the corporation. Delivery shall be to the
corporation's registered office, its principal place of business,
or an office or agent of the corporation having custody of the
minutes of the proceedings of its shareholders. Delivery made to
a corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to
shareholders who would have been entitled to notice of the
shareholder meeting if the action had been taken at a meeting and
who have not consented in writing.
ARTICLE VIII
A director of the Corporation shall not be personally liable to
the Corporation or its shareholders for monetary damages for
breach of the director's fiduciary duty. However, this Article
shall not eliminate or limit the liability of a director for any
of the following:
a. A breach of the director's duty of loyalty to the
Corporation or its shareholders.
b. Acts or omissions not in good faith or that involve
intentional misconduct or knowing violation of law.
c. A violation of Section 551(1) of the Michigan Business
Corporation Act.
d. A transaction from which the director derived an
improper personal benefit.
e. An act or omission occurring before the effective date
of this Article.
Any repeal or modification of this Article by the shareholders of
the Corporation shall not adversely affect any right or
protection of any director of the Corporation existing at the
time of, or for or with respect to, any breach of the director's
fiduciary duty occurring before such repeal or modification.
I, the incorporator, sign my name this 8th day of June, 1995.
/s/
Ronald W. Bloomberg
As Amended: __________
BYLAWS OF THE
SAND CREEK COMMUNICATIONS COMPANY
ARTICLE I
Meetings
Section 1. Place Of Meeting. Any or all meetings of the
shareholders, and of the Board of Directors, of this corporation
may be held anywhere within the State of Michigan, provided that no
meeting shall be held at a place other than the registered office,
except pursuant to bylaws or resolution adopted by the Board of
Directors.
Section 2. Annual Meeting Of Shareholders. The annual
meeting of the shareholders shall be held in each year on the first
Saturday in May, at 2:00 o'clock P.M., one of the purposes of which
shall be the election of a Board of Directors.
Section 3. Notice Of Annual Meeting Of Shareholders. At
least ten (10) days prior to the date fixed by Section 2 of this
article for the holding of the annual meeting of shareholders,
written notice of the time, place, and purposes of such meeting
shall be mailed, as hereinafter provided, to each shareholder
entitled to vote at such meeting.
Section 4. Delayed Annual Meeting. If, for any reason,
the annual meeting of the shareholders shall not be held on the day
hereinbefore designated, such meeting may be called and held as a
special meeting, and the same proceedings may be had thereat as at
an annual meeting, provided, however, that the notice of such
meeting shall be the same herein required for the annual meeting,
namely, not less than a ten (10) day notice.
Section 5. Order Of Business At Annual Meeting. The order
of business at the annual meeting of the shareholders shall be as
follows:
(a) roll call,
(b) reading notice and proof of mailing,
(c) report of president,
(d) report of secretary,
(e) report of treasurer,
(f) election of directors,
(g) transaction of other business mentioned in the notice,
and
(h) adjournment,
provided that, in the absence of any objections, the presiding
officer may vary the order of business at his discretion.
Section 6. Special Meetings Of Shareholders. A special
meeting of the shareholders may be called at any time by the
president, or by a majority of the Board of Directors, or by
shareholders entitled to vote upon not less than an aggregate of
fifty (50) percent of the outstanding shares of the corporation
having the right to vote at such special meeting. The method by
which such meeting may be called is as follows: upon receipt of a
specification in writing setting forth the date and objects of such
proposed special meeting, signed by the president, or by a majority
of the Board of Directors, or by shareholders as above provided,
the secretary of this corporation shall prepare, sign, and mail the
notices requisite to such meeting.
Section 7. Notice Of Special Meeting Of Shareholders. At
least three (3) days prior to the date fixed for the holding of any
special meeting of shareholders, written notice of the time, place,
and purposes of such meeting shall be mailed, as hereinafter
provided, to each shareholder entitled to vote at such meeting. No
business not mentioned in the notice shall be transacted at such
meeting.
Section 8. Organization Meeting Of Board. At the place of
holding the annual meeting of shareholders, and immediately
following the same, the Board of Directors as constituted upon
final adjournment of such annual meeting shall convene for the
purpose of electing officers and transacting any other business
properly brought before it, provided, that the organization meeting
in any year may be held at a different time and place than that
herein provided by consent of a majority of the directors of such
new Board.
Section 9. Regular Meetings Of Board. Regular meetings of
the Board of Directors shall be held not less frequently than once
in each three (3) months at such time and place as the Board of
Directors shall from time to time determine. No notice of regular
meetings of the Board shall be required.
Section 10. Special Meetings Of Board. Special meetings of
the Board of Directors may be called by the president at any time
by means of such written notice by mail of the time, place, and
purpose thereof to each director as the president in his discretion
shall deem sufficient, but action taken at any such meeting shall
not be invalidated for want of notice if such notice shall be
waived as hereafter provided. The President may call special
meetings of the Board by telephone provided that proper written
notice is sent to any director who cannot be reached by telephone,
and that the first action at the special Board meeting is a formal
waiver by the directors of written notice of the meeting.
Section 11. Notices And Mailing. All notices required to
be given by any provision of these bylaws shall state the authority
pursuant to which they are issued (as, "by order of the president,"
or "by order of the Board of Directors," or "by order of
shareholders," as the case may be) and shall bear the written or
printed signature of the secretary. Every notice shall be deemed
duly served when the same has been deposited in the United States
mail, with postage fully prepaid, plainly addressed to the sendee
at his, her, or its last address appearing upon the original or
duplicate stock ledger of this corporation at its registered office
in Michigan.
Section 12. Waiver Of Notice. Notice of the time, place,
and purpose of any meeting of the shareholders or the Board of
Directors may be waived by telegram, radiogram, cablegram, or other
writing, either before or after such meeting has been held.
ARTICLE II
Quorum
Section 1. Quorum Of Shareholders. Twenty-five percent
(25%) of the common stock issued and outstanding present by the
record holders thereof in person or by proxy shall constitute a
quorum at any meeting of the shareholders.
Section 2. Quorum Of Directors. A majority of the
directors shall constitute a quorum.
ARTICLE III
Voting, Elections And Proxies
Section 1. Who Entitled To Vote. Except as the articles
or an amendment or amendments thereto otherwise provide, each
shareholder of this corporation shall at every meeting of the
shareholders be entitled to one vote in person or by proxy for each
share of capital stock of this corporation held by such
shareholder, subject, however, to the full effect of the
limitations imposed by the fixed record date for determination of
shareholders set forth in Section 2 of this article.
Section 2. Record Date For Determination Of Shareholders.
Twenty (20) days preceding (a) the date of any meeting of
shareholders, (b) the date for the payment of any dividends, (c)
the date for the allotment of rights, (d) the date when any change
or conversion or exchange of capital stock shall go into effect is
hereby fixed as a record date for the determination of the
shareholders entitled to notice of, and to vote at, any such
meeting, or entitled to receive payment of any such dividend, or to
any such allotment, of rights, or to exercise the rights in respect
of any such change, conversion or exchange of capital stock, and in
such case such shareholders and only such shareholders as shall be
shareholders of record on the date so fixed shall be entitled to
such notice of, and to vote at, such meeting, or to receive payment
of such dividend, or to receive such allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any
transfer of any stock on the books of the corporation or otherwise
after any such record date fixed as aforesaid. Nothing in this
section shall affect the rights of a shareholder and his transferee
or transferor as between themselves.
Section 3. Proxies. No proxy shall be deemed operative
unless and until signed by the shareholder and filed with the
corporation. In the absence of limitation to the contrary
contained in the proxy, the same shall extend to all meetings of
the shareholders and shall remain in force three years from its
date and no longer.
Section 4. Inspectors Of Election. Whenever any person
entitled to vote at a meeting of the shareholders shall request the
appointment of inspectors, the chairman of the meeting shall
appoint not more than three inspectors who need not be
shareholders. If the right of any person to vote at such meeting
shall be challenged, the inspectors shall determine such right.
The inspectors shall receive and count the votes either upon an
election or for the decision of any question and shall determine
the result. Their certificate of any vote shall be prima facie
evidence thereof.
ARTICLE IV
Board Of Directors
Section 1. Number And Term Of Directors. The business,
property, and affairs of this corporation shall be managed by a
Board of Directors composed of five (5) members, who must be
shareholders. Each director shall hold office for a term of three
years and until his successor is elected and qualified. Elections
of directors shall be organized in three-year cycles so that two
directors are elected to their terms in each of the first two years
of the cycle and one director elected in the third year of the
cycle.
Section 2. Vacancies. Vacancies in the Board of Directors
shall be filled by appointment made by the remaining directors.
Each so elected to fill a vacancy shall remain a director until his
successor has been elected by the shareholders, who may make such
election at their next annual meeting or at any special meeting,
duly called for that purpose, held prior thereto.
Section 3. Action By Unanimous Written Consent. If and
when the directors shall severally or collectively consent in
writing to any action to be taken by the corporation, such action
shall be as valid corporate action as though it had been authorized
at a meeting of the Board of Directors.
Section 4. Power To Elect Officers. The Board of
Directors shall elect from among their members a president and one
vice president. The Board shall also select a secretary-treasurer,
or secretary and treasurer, in its discretion, who need not be
members of the Board.
Section 5. Power To Appoint Other Officers And Agents.
The Board of Directors shall have power to appoint such other
officers and agents as the Board may deem necessary for transaction
of the business of the corporation.
Section 6. Removal Of Officers, Agents And Directors. Any
officer or agent may be removed by the Board of Directors whenever
in the judgment of the Board the business interest of the
corporation will be served thereby.
A majority in number of shares voted by shareholders of the
corporation shall have the power at any regular or special
stockholders' meeting legally called for such purpose to remove any
director or officer and elect his successor. Thereupon, the
director or officer so removed shall cease to be a director or
officer of the corporation. Provided, such director or officer
shall be given ten (10) days' notice of such meeting and furnished
with a copy of the complaint or charges against him, and
opportunity shall be given to such director or officer at such
meeting to disprove such complaint or charges. Grounds for removal
of a director shall include, but not be limited to, breach of
fiduciary duty, conflict of interest, or negligence in carrying out
the director's responsibilities.
Attendance at regular and special meetings of the Board of
Directors shall be required for each director. Failure to attend
two consecutive board meetings or three board meetings through a
calendar year without an excuse deemed acceptable to the Board of
Directors shall be treated as a resignation by the director
involved. The Board shall declare the director's position vacant
under these circumstances and follow the procedures in Section 7 of
this article.
Section 7. Power To Fill Vacancies. The Board shall have
power to fill any vacancy in any office occurring from any reason
whatsoever, provided, that the power herein conferred to fill
vacancies shall not apply to any director or officer removed by the
shareholders as hereinafter provided.
Section 8. Power To Require Bonds. The Board of Directors
may require any officer or agent to file with the corporation a
satisfactory bond conditioned for faithful performance of his
duties.
Section 9. Compensation. The compensation of directors,
officers and agents may be fixed by the Board.
Section 10. Appointment Of Appraisers. Whenever any
personal or real property not having a readily ascertainable fixed
value shall be exchanged for stock in the corporation, the Board of
Directors may appoint one or more disinterested appraisers to
determine the value upon the property for which stock is being
exchanged.
ARTICLE V
Officers
Section 1. President. The president shall be elected by,
and from the membership of, the Board of Directors. He shall be
the chief executive officer of the corporation. He shall be ex-officio a
member of allstanding committees and shall have the
general powers and duties of supervision and management usually
vested in the office of president of a corporation. He shall sign
as president all orders upon the treasurer of the corporation.
Section 2. Vice-President. One vice-president shall be
elected by the Board of Directors. The vice-president shall be
chosen from the membership of the Board of Directors. Such vice-president shall
perform the duties and exercise the powers of the
president during the absence or disability of the president.
Section 3. Secretary. The secretary shall attend all
meetings of the shareholders and of the Board of Directors and
shall preserve in books of the corporation true minutes of the
proceedings of all such meetings. He shall safely keep in his
custody the seal of the corporation and shall have the authority to
affix the same to all instruments where its use is required. He
shall perform such other duties as may be delegated to him by the
Board of Directors.
Section 4. Treasurer. The treasurer shall have custody of
all corporate funds and securities and shall keep in books
belonging to the corporation full and accurate accounts of all
receipts and disbursements; he shall deposit all moneys,
securities, and other valuable effects in the name of the
corporation in such depositories as may be designated for that
purpose by the Board of Directors. He shall disburse the funds of
the corporation upon the order of the president, duly attested or
countersigned by him. He shall render to the president and
directors at the regular meetings of the Board, and whenever
requested by them, an account of all his transactions as treasurer,
and of the financial condition of the corporation, and shall
regularly render a quarterly financial statement to the Board. If
required by the Board, he shall deliver to the president of the
corporation, and shall keep in force, a bond in form, amount and
with a surety or sureties satisfactory to the Board, conditioned
for faithful performance of the duties of his office, and for
restoration to the corporation in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers,
money and property of whatever kind in his possession or under his
control belonging to the corporation. The treasurer may delegate
any or all of these duties to management, employees, or outside
services, but shall retain the responsibility for fulfilling each
of the treasurer's functions.
Section 5. The offices of secretary and treasurer may be
combined in one person, who shall perform the respective duties of
each office in the discretion of the Board.
ARTICLE VI
Stock And Transfers
Section 1. Certificates Of Share. Every shareholder shall be
entitled to a certificate of his shares signed by the president or
vice-president and the secretary or the treasurer under the seal of
the corporation, certifying the number and class of shares
represented by such certificates, which certificates shall state
the terms and provisions of all classes of shares and, if such
shares are not full paid, the amount paid; provided, that where
such certificate is signed by a transfer agent or an assistant
transfer agent or by a transfer clerk acting on behalf of such
corporation, and by a registrar, the signature of any such
president, vice-president, secretary or treasurer, and the seal of
the corporation, may be a facsimile.
Section 2. Transferable Only On Books Of Corporation.
Shares shall be transferable only on the books of the corporation
by the person named in the certificate, or by attorney lawfully
constituted in writing, and upon surrender of the certificate
lawfully therefor. A record shall be made of every such transfer
and issue. Whenever any transfer is made for collateral security
and not absolutely, the fact shall be so expressed in the entry of
such transfer.
Section 3. Restrictions On Transfer And Ownership Of Stock
A. Restrictions On Transfer Of Shares
Shareholders desiring to sell their shares of the corporation
shall first present the shares to the corporation for sale.
Commencing with receipt of written notice from a shareholder who
wishes to sell his or her stock in the corporation, the corporation
shall have a period of sixty (60) days in which to exercise this
right of first refusal and buy the shares. If this period of time
elapses without a consummation of the transaction by the
corporation, the shareholder shall be free to sell the shares to
any party who meets the shareholder requirements established in
these bylaws and/or by Board policies. The corporation shall
notify the shareholder before the end of the sixty day period if it
decides it will not be interested in purchasing the stock.
Purchase of the stock shall be for cash, unless another payment
plan is acceptable to the shareholder.
The price to be paid by the corporation for the stock shall be
established between the corporation and the shareholder not lower
than the price per share established by the Board of Directors for
the purchase and sale of company stock (Section 5 below) and not
higher than the amount offered to the shareholder (in a valid and
currently unexpired offer) by an outside, unrelated third party for
the shares being presented to the corporation for purchase.
The right of first refusal the corporation retains regarding
all outstanding corporation stock shall not be enforced in the
transactions involving immediate family members. (For purposes of
this section, "immediate family member" shall be defined for
individuals to be spouses, children, parents, or siblings. These
immediate family members are to include marital relationships and
those created by law such as adoption. If the stock is held by a
corporation, "immediate family member" shall be defined as members
of the controlled group, as defined under the Internal Revenue
Code, to which the corporate shareholder belongs.)
B. Limitation On Percent Of Ownership
The shareholders' position concerning stock ownership is that
the corporation's services, its responsiveness to the needs of the
communities served, and the level of the rates charged to its
customers are best preserved through local community ownership.
This policy is considered of major importance to the corporation's
continued success and its ability to best serve its customers.
Therefore, no shareholder shall own more than eight percent (8%) of
the corporation's issued and outstanding stock. Should the
circumstance arise through immediate family transfers described
above or inheritance where a shareholder does own more than eight
percent (8%) of the then issued and outstanding common stock
shares, the excess shares shall be purchased by the corporation as
described above. The corporation shall retain the right to issue
additional shares to the other then existing shareholders at the
then stated transfer price (see Section 5 below) to reduce the
holdings of the shareholder in question to eight percent (8%) of
the outstanding stock. For purposes of this section, stock issued
but being held by the corporation as treasury stock shall not be
considered as outstanding stock.
C. Limitation On Ownership
Because of the importance of local control to the corporation
and to its shareholders discussed in (B) above, the Board of
Directors is authorized and required to establish a policy for
limitations on the persons and entities to whom the corporation
will sell its stock. Such a policy shall be based upon the
business needs of the corporation and shall not be discriminatory
or against public policy.
Section 4. Transfer Agent And Registrar. The Board of
Directors may appoint a transfer agent and registrar of transfers
and may require all certificates of shares to bear the signature of
such transfer agent and of such registrar of transfers, or as the
Board may otherwise direct.
Section 5. Regulations, Policies, And Establishing Share
Transfer Price. The Board of Directors shall have power and
authority to make all such rules and regulations as the Board shall
deem expedient regulating the issue, transfer, and registration of
certificates for shares in this corporation.
In addition, the Board of Directors shall establish from time
to time (at least annually) a transfer price which shall be used by
the corporation for the purchase of stock offered by existing
shareholders or for the sale of corporation stock to new
shareholders. Such price shall be set to reflect a fair current
value for the stock being sold or purchased.
The Board of Directors shall also adopt a policy to define
eligible shareholders as described in Section 3 above and a policy
to assure fair and orderly sales of the corporation stock it
acquires from shareholders when exercising its right of first
refusal.
ARTICLE VII
Dividends And Reserves
Section 1. Sources Of Dividends. The Board of Directors
shall have power and authority to declare dividends.
Section 2. Manner Of Payment Of Dividend. Dividends may be
paid in cash, in property, in obligations of the corporation, or in
shares of the capital stock of the corporation.
Section 3. Reserves. The Board of Directors shall have power
and authority to set apart, out of any funds available for
dividends, such reserve or reserves, for any proper purpose, as the
Board in its discretion shall approve, and the Board shall have
power and authority to abolish any reserve created by the Board,
subject to requirements of applicable law.
ARTICLE VIII
Right Of Inspection
Section 1. Inspection Of List Of Shareholders. At least ten
(10) days before every election of directors, a complete list of
shareholders entitled to vote at such election shall be open to
examination by any registered shareholder entitled to vote at such
election.
Section 2. Inspection Of Books On Account And Stock Books.
The books of account and stock books of this corporation shall be
open to inspection at all reasonable times and for any proper
purpose by the shareholders; provided, that no person who has not
then been a shareholder of record of this corporation for at least
three (3) months prior to making such application shall be
permitted to exercise such privilege of inspection, except pursuant
to resolution of the Board of Directors.
ARTICLE IX
Execution Of Instruments
Section 1. Checks, Etc. All checks, drafts and orders for
payment of money shall be signed in the name of the corporation and
shall be countersigned by any one of the officers of the
corporation.
Section 2. Contracts, Conveyances, Etc. When the execution
of any contract, conveyance, or other instrument has been
authorized without specification of the executing officers, the
president or vice-president, and the secretary may execute the same
in the name and on behalf of this corporation and may affix the
corporate seal thereto. The Board of Directors shall have the
power to designate the officer and agent who shall have authority
to execute any instrument on behalf of this corporation.
ARTICLE X
Indemnification Plan Of The Corporation
Section 1. Third Party Actions. The corporation shall
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlements, actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation or its shareholders, and with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith in
a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation or its shareholders, and,
with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
Section 2. Actions In The Right Of The Corporation. The
corporation shall indemnify any person who was or is a party to or
is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee, or agent of the corporation or
is or was serving at the request of the corporation as a director,
officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust
or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation or its
shareholders and except that no indemnification shall be made in
respect to any claim, issue, or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct
in the performance of his duty to the corporation unless and only
to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnity
for such expenses which such court shall deem proper.
Section 3. Mandatory And Permissive Payments. To the extent
that a director, officer, employee, or agent of the corporation has
been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 or 2 of the of
the Indemnification Plan of the corporation or in defense of any
claim, issue, or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Any indemnification under Sections 1 or 2 of the
Indemnification Plan of the corporation (unless ordered by a court)
shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director,
officer, employee, or agent is proper in the circumstances because
he met the applicable standard of conduct set forth in Sections 1
and 2 of the Indemnification Plan of the corporation. Such
determination shall be made in either of the following ways:
(1) by the Board by a majority vote of a quorum consisting of
directors who are not parties to such action, suit or
proceeding;
(2) by independent legal counsel in a written opinion, if
such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs; or
(3) by the shareholders.
Section 4. Expense Advances. Expenses incurred in defending
a civil or criminal action, suit or proceeding described in
Sections 1 or 2 of the Indemnification Plan of the corporation may
be paid by the corporation in advance of the final disposition of
such action, suit, or proceeding as authorized in the manner
provided in subsection (2) of Section 3 of the Indemnification Plan
of the corporation upon receipt of an undertaking by or on behalf
of the director, officer, employee, or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be
indemnified by the corporation.
Section 5. Continuation. The indemnification provided in
Sections 1 to 4 of the Indemnification Plan of the corporation
continues as to a person who has ceased to be a director, officer,
employee or agent and shall insure the benefit to the heirs,
executors and administrators of such person.
Section 6. Insurance. The corporation may purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against him or incurred by him in any such capacity or
arising out of his status as such, whether or not the corporation
would have power to indemnify him against such liability under
Sections 1 to 5 of the Indemnification Plan of the corporation.
Section 7. Changes In Michigan Law. In the event of any
change of the Michigan statutory provisions applicable to the
corporation relating to the subject matter of this Article or these
Bylaws, the indemnification to which any person shall be entitled
hereunder shall be determined by such changed provisions.
Section 8. Limitation Of Director's Liability. To the
fullest extent authorized by the laws of the State of Michigan, and
subject only to the exceptions contained in MCL 450.1209(c), a
director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for a breach
of the director's fiduciary duty.
ARTICLE XI
Amendment Of Bylaws
The shareholders or the Board of Directors may make and alter
these bylaws provided that the Board of Directors shall not make or
alter any bylaws fixing their qualifications, classifications or
term of office.
SAND CREEK COMMUNICATIONS COMPANY
COMMON STOCK TRANSFER POLICIES
By unanimous consent of the Board of Directors of the Sand Creek
Communications Company ("Company"), dated as of June 20, 1995,
the following policies were adopted in accordance with Company
bylaw requirements regarding the transfer of shares of common
stock of the Company
Transfer Price
Effective with the effective date of the share exchange with Sand
Creek Telephone Company, and continuing until these policies are
updated, the transfer price for Company common stock shares shall
be $58.00 per share.
Transfer Procedures
In order to establish an orderly and fair system for selling
Company stock the following procedures will be followed.
The office manager is instructed to maintain a waiting list of
persons interested in acquiring common stock in the Company.
This list shall be maintained on a first come, first serve basis.
To be on the list, a person must request to be placed on the list
in writing delivered to the office manager. (The office manager
will acknowledge, in writing, the receipt of the request so as to
verify receipt of the request.)
Persons currently on such list being maintained by the office
manager shall maintain their present priority position. Upon
receiving shares, a person may request to be put back at the
bottom of the list in order to await the opportunity to acquire
more shares.
In order to maintain an equitable procedure, shares shall be
offered for sale to persons on the waiting list in quantities of
one (1) to no more than one hundred (100) shares. Persons
wishing to purchase more than one hundred shares will have their
name placed at the bottom of the waiting list again and wait for
their turn to again purchase up to one hundred shares. No
person(s) shall be sold Company common stock unless they sign the
Acknowledgement of Restrictions on Transfer of Company Common
Stock.
Restrictions on Eligible Shareholders
In keeping with the shareholders' desires for local ownership of
the Company as indicated in the Company's bylaws, the following
restrictions are established.
1. Priority for purchase of common stock offered by the Company
shall be to persons residing in Sand Creek Telephone
Company's service area, and then current directors,
officers, and employees of the Company. Such persons shall
be moved ahead of all other persons on the waiting list of
purchasers.
2. Second in priority on the waiting list shall be immediate
family members of persons residing in Sand Creek Telephone
Company's service area.
3. Third in priority will be persons residing in the area near
Sand Creek Telephone Company's service area (within fifty
(50) miles of the exchange border and within the State of
Michigan).
4. Fourth in priority shall be existing shareholders who reside
outside Sand Creek Telephone Company's service area and
other individuals outside the Sand Creek Telephone Company's
service area who have a legitimate interest in Sand Creek
Telephone Company's service area (such as relatives of
deceased residents of Sand Creek Telephone Company's service
area).
5. As there is presently interest from these four priority
groups, the Company shall not at the present time make
shares available to corporations, whether involved in the
communications industry or not, or to banks or other
institutional type investors.
Any shareholder or potential shareholder who wishes to request
further information or have questions answered regarding these
policies and procedures should contact the Company's secretary or
treasurer.
Signed:
/s/_______________________________
Robert Hinsdale, President
/s/_______________________________
Gustav Leu, Secretary
c:\...\sandcree\exhibits\final\exhibit4
September 8, 1995
Mr. Robert Hinsdale
Sand Creek Telephone Company
6525 Sand Creek Highway
P.O. Box 66
Sand Creek, MI 49279-0066
Re: Legality of Issuance of Common Stock
Dear Bob:
You have asked for our opinion regarding the issuance of up to 124,000
shares of common stock of Sand Creek Communications Company to be registered
under the Securities Act of 1933 pursuant to the Agreement and Plan of Share
Exchange between Sand Creek Communications Company and Sand Creek Telephone
Company ("Agreement") including whether the shares will, when sold, be legally
issued, fully paid, and non-assessable.
In rendering this opinion, we have examined and relied upon originals, or
copies certified or otherwise identified to our satisfaction, of such
documents, corporate records, certificate of public officials and officers
of Sand Creek Communications Company and Sand Creek Telephone Company and
other instruments as we have deemed necessary or advisable for purposes of
this opinion. In rendering the opinion, we have assumed that the documents
delivered to us were duly authorized, executed and delivered and that all
documents and copies of documents are true and accurate.
The opinions set forth herein are based on the laws of the State of
Michigan, as they currently exist, and no opinion is expressed as to the
laws of any other jurisdiction.
Based on the foregoing, and subject to the qualifications and limitations
hereof, we are of the opinion that:
(1) Sand Creek Communications Company was duly incorporated, is validly
existing and in good standing under the laws of the State of Michigan. Sand
Creek Communications Company authorized capitalization consists of 160,000
shares of commons stock, no par value, of which one (1) share is currently
issued and outstanding, being owned by Sand Creek Telephone Company.
(2) Sand Creek Communications Company has the power and authority to enter
into and consummate the transaction set forth in the Agreement, subject to
satisfaction of the conditions precedent set forth in the Agreement.
(3) The performance of the Share Exchange as set forth in the Agreement does
not require any filings with or approvals of the Michigan Public Service
Commission, nor approval of any other governmental body of administrative
agency.
(4) The performance of the Share Exchange as set forth in the Agreement
complies, or will comply, with all current laws of the State of Michigan
applicable to the Share Exchange.
(5) The 124,000 shares of common stock of Sand Creek Communications
Company to be registered under the Securities Act of 1933 and to be issued
pursuant to the Agreement will, when issued pursuant to the Agreement, be
duly authorized, legally issued, fully paid, and non-assessable.
We hereby consent to this opinion being included in Sand Creek
Communications Company's Registration Statement under the Securities Act of
1933.
Very truly yours,
LOOMIS, EWERT, PARSLEY,
DAVIS & GOTTING, P.C.
/s/
Ronald W. Bloomberg
c:\...\sandcreek\exhibits\final\exhibit.5
September 8, 1995
Mr. Robert Hinsdale
Sand Creek Telephone Company
6525 Sand Creek Highway
P.O. Box 66
Sand Creek, MI 49279-0066
Re: Share Exchange -- Federal Income Tax Treatment
Dear Bob:
You have requested our opinion regarding the federal income tax
consequences to Sand Creek Communications Company, Sand Creek Telephone
Company, and the shareholders of Sand Creek Telephone Company of consummating
the Share Exchange pursuant to the Agreement and Plan of Share Exchange
("Agreement") between Sand Creek Communications Company and Sand Creek
Telephone Company.
The following opinion is based upon the existing provisions of the
Internal Revenue Code and Regulations thereunder (both final and proposed) and
upon current Internal Revenue Service published rulings and existing court
decisions, any of which could be changed at any time. Any such changes may be
retroactive and could significantly modify the statements and opinions
expressed herein. Similarly, any change in the facts and assumptions stated
below, upon which this opinion is based, could modify the conclusion.
We, of course, opine only as to matters expressly forth herein, and no
opinions should be inferred as to any other matters or as to the tax treatment
of this transaction that we do not specifically address. This opinion
expressly excludes advice as to the consequences under the tax laws of any
state or foreign nation regarding the Share Exchange.
This opinion represents our best judgment as to the probable outcome of
the tax issues discussed. It is not binding on the Internal Revenue Service.
Further, we can give no assurances the Internal Revenue Service will not
challenge our conclusions and prevail in the courts in such a matter so as to
cause adverse tax consequences to Sand Creek Communications Company, Sand
Creek Telephone Company and its shareholders.
The federal tax considerations discussed below are necessarily general as
to the various shareholders of Sand Creek Telephone Company, and their
applicability may vary depending upon the individual circumstances. The
following summary of the federal income tax consequences of the Share Exchange
is not intended as a substitute for careful tax planning on an individual
basis. Shareholders considering the Share Exchange are urged to consult their
tax advisor with specific reference to the effect of their own particular
facts and circumstances on the matters discussed herein.
This opinion is addressed to and for the benefit solely of Sand Creek
Communications Company, Sand Creek Telephone Company, and its shareholders.
All such persons and entities may reasonably rely on this opinion. No other
person or persons shall be entitled to rely on the contents herein without our
express written consent.
In rendering this opinion, we have examined and relied upon originals, or
copies certified or otherwise identified to our satisfaction, of such
documents, corporate records, certificate of public officials and officers of
Sand Creek Communications Company and Sand Creek Telephone Company and other
instruments as we have deemed necessary or advisable for purposes of this
opinion. In rendering the opinion, we have assumed that the documents
delivered to us were duly authorized, executed and delivered and that all
documents and copies of documents are true and accurate.
Based on the above, it is our understanding that Sand Creek Telephone
Company is a Michigan corporation with approximately 154 holders of its common
stock. We assume, but have not confirmed, that Sand Creek Telephone Company's
shareholders are citizens of the United States and hold their shares of Sand
Creek Telephone Company common stock as "capital assets". We understand that
Sand Creek Communications Company is a Michigan corporation. It has one (1)
share of common stock issued and outstanding, which is held by Sand Creek
Telephone Company. Sand Creek Communications Company's only asset is the
minimal capitalization amount of $1,000. Sand Creek Communications Company
currently has, and will not prior to the Share Exchange have, any other assets
or liabilities nor transact any business. Upon satisfaction (but not waiver)
of all of the conditions precedent to the Share Exchange set forth in the
Agreement, the Share Exchange will be consummated pursuant to the terms and
provisions of the Agreement. Upon consummation of the Share Exchange,
shareholders of Sand Creek Telephone Company who do not exercise dissenter's
rights will receive three shares of Sand Creek Communications Company common
stock for each share of Sand Creek Telephone Company common stock held by such
shareholder.
Although certainty is not possible, we are pleased to advise you that we
are of the opinion that the following will be the principal federal income tax
consequences of the Share Exchange assuming it is treated as a "tax free
reorganization":
1. No gain or loss will be recognized by Sand Creek Telephone Company or Sand
Creek Communications Company as a result of the Share Exchange.
2. No gain or loss will be recognized by Sand Creek Telephone Company's or
Sand Creek Communications Company Shareholders as a result of the Share
Exchange, except as described in paragraph 6 below.
3. The Share Exchange will not result in a change in the basis of the assets
of either Sand Creek Telephone Company or Sand Creek Communications Company.
4. The aggregate basis for tax purposes of the total number of shares of Sand
Creek Communications Company Common Stock received by a holder of Sand Creek
Telephone Company Common Stock pursuant to the Share Exchange will be the same
as the aggregate basis for such Shareholder's Sand Creek Telephone Company
Common Stock surrendered in exchange therefor.
5. A Sand Creek Telephone Company Shareholder's holding period with respect
to the shares of Sand Creek Communications Company Common Stock received by
such Shareholder as a result of the Share Exchange will include the period for
which he or she held the shares of Sand Creek Telephone Company Common Stock
which were converted into such shares of Sand Creek Communications Company
Common Stock, provided that such shares of Sand Creek Telephone Company Common
Stock were held as a capital asset on the Effective Date.
6. Under current IRS rulings, any Dissenting Shareholder will be treated as
if such Shareholder's shares were redeemed. Under current IRS rulings, such
Dissenting Shareholder should recognize gain to the extent that the cash the
Shareholder receives for the Sand Creek Telephone Company shares exceed the
tax basis (or loss to the extent the tax basis exceeds the amount received),
and such gain (or loss) should be a capital gain (or loss), provided that the
Sand Creek Telephone Company shares were held as a capital asset by the
Dissenting Shareholder. However, if a redemption fails to qualify for
exchange treatment under Section 302(b) of the Code (considering the
attribution rules of Section 318 thereof) because the Shareholder's interest
is not sufficiently reduced, a risk exists that some or all of the cash
received by a Dissenting Shareholder will be treated as a taxable dividend to
such Shareholder.
Under the Code, in order for the Share Exchange to constitute a tax-free
reorganization, the Sand Creek Telephone Company Common Stock must be
converted into an amount of Sand Creek Communications Company Common Stock
that at the Effective Time equals at least 80% of the aggregate value that all
of the Sand Creek Telephone Company Shareholders receive. Thus, the tax-free
reorganization may be jeopardized if the cash payable to Dissenting
Shareholders would exceed 20% of the aggregate value of the total
consideration that all of the Sand Creek Telephone Company Shareholders
receive at the Effective Time. For IRS ruling purposes, in order for the
Share Exchange to constitute a tax-free reorganization, the amount of Sand
Creek Communications Company Stock received by Sand Creek Telephone Company
Shareholders in connection with the Share Exchange must be at least 50% of the
aggregate value of the consideration paid to all Shareholders in connection
with the Share Exchange. Sand Creek Communications Company Common Stock
received in the Share Exchange will not be counted toward the 50% threshold if
the recipient disposes of such stock and such recipient had an intention to
dispose of Sand Creek Communications Company Common Stock on the Effective
Date. The disposition of Sand Creek Communications Company Common Stock
within two years of the Effective Date may evidence that the Shareholder had
an intention to dispose of such stock on the Effective Date.
The tax discussion set forth above is included for general information
and is based upon present law. The tax consequences of the Share Exchange
will depend in large part on the facts and circumstances applicable to each
Shareholder and upon an evaluation of facts and events that will occur in the
future. As a result, the particular tax consequences to a Shareholder cannot
be predicted with certainty and all the foregoing is subject to change and any
such changes could affect the continuing validity of this discussion.
Therefore, each Shareholder is urged to consult with his or her own tax
advisor regarding the tax consequences of the Share Exchange. With regard to
the tax consequences under the laws of states or local governments or of any
other jurisdiction, no information or opinion is provided herein, and
Shareholders are urged to consult, and should rely upon, their own tax
advisors.
<PAGE>
We hereby consent to this opinion being included in Sand Creek
Communications Company's Registration Statement under the Securities Act of
1933.
Very truly yours,
LOOMIS, EWERT, PARSLEY,
DAVIS & GOTTING, P.C.
/s/Ronald W. Bloomberg
Ronald W. Bloomberg
c:\...\sandcreek\exhibits\final\exhibit.8
AGREEMENT ESTABLISHING
CASS CELLULAR LIMITED PARTNERSHIP
THIS AGREEMENT is made as of the day of December 5, 1989, by and among
ROCHESTER TEL CELLULAR HOLDING CORPORATION ("RTCHC"), a corporation organized
and exiting under the laws of the State of Delaware and having its mailing
address at Rochester Tel Center, 180 South Clinton Avenue, Rochester, New York
14646; DEERFIELD FARMERS' TELEPHONE COMPANY ("DEERFIELD"), a corporation
organized and existing under the laws of the State of Michigan and having its
principal place of business at 141 Saline Street, Petersburg, MI 49270; OGDEN
TELEPHONE COMPANY ("OGDEN"), a corporation organized and existing under the
laws of the State of Michigan and having its principal place of business at
4726 E. Weston Road, Blissfield, MI 49228; SAND CREEK TELEPHONE COMPANY ("SAND
CREEK"), a corporation organized and existing under the laws of the State of
Michigan and having its principal place of business at 6231 Sand Creek
Highway, Sand Creek, MI 49279-0066; WALDRON TELEPHONE COMPANY ("WALDRON"), a
corporation organized and existing under the laws of the State of Michigan and
having its principal place of business at 119 S. Main Street, Waldron, MI
49288-0197. RTCHC, as general partner hereunder, is herein sometimes referred
to as the "General Partner" and RTCHC, as a limited partner hereunder,
DEERFIELD, OGDEN, SAND CREEK, and WALDRON are sometimes collectively referred
to as the "Limited Partners." The General Partner and the Limited Partners
are herein sometimes collectively referred to as the "Partners".
W I T N E S E T H:
WHEREAS, RTCHC, DEERFIELD, OGDEN, SAND CREEK and WALDRON desire to participate
in providing Cellular Service in Michigan RSA No. 9; and
WHEREAS, the Federal Communications Company ("FCC") in its cellular orders set
forth in "An Inquiry Into The Use of The Bands 825-845 MHz and 870-890 MHz for
Cellular Communications Systems; and Amendment of Parts 2 and 22 of the
Commission's Rules Relative to Cellular Communications Systems" (CC Docket No.
79-318), 86 F.C.C.2d 469 (1981) ("Final Decision"), modified as set forth in
reconsideration order 89 F.C.C.2d 58 (1982) ("Reconsideration Order"), and as
further modified as set forth in reconsideration order FCC 82-308 (released
July 8, 1982) ("Further Reconsideration Order") and as set forth in its orders
concerning Rural Service Areas ("RSA"), specifically "In the Matter of
Amendment of the Commission's Rules for Rural Cellular Service, Third Report
and Order" (CC Docket No. 85-388), FCC 88-155, released May 18, 1988. ("RSA
Orders") (the Final Decision, the Reconsideration Order, the Further
Reconsideration Order and the RSA Orders being collectively referred to herein
as the "Cellular Radio Decisions") stated that (a) a pressing need exists for
expeditious implementation of cellular service, (b) one of the two frequency
allocations for providing cellular service within designated metropolitan
areas would be assigned to a wireline carrier having an exchange presence in
that metropolitan area, (c) it expected that the wireline carriers would
commence providing cellular service promptly, and (d) it strongly urged
wireline carriers eligible and desiring to provide cellular service in any
such designated metropolitan area to reach mutually acceptable arrangements to
provide such service and it continued to allow partial and full market
settlements among wireline applicants in the RSAs; and
WHEREAS, the Partners desire to further the objectives of the FCC set forth in
the Cellular Radio Decisions by expeditiously providing cellular service to
the public and believe that this agreement, as so encouraged by the FCC, is
consistent with the FCC's cellular communications policy and is lawful and in
the public interest; and
WHEREAS, DEERFIELD, OGDEN, SAND CREEK and WALDRON have entered into an
agreement with the General Partner or its predecessor, which is attached as
Attachment C and which terms are incorporated by reference herein and made a
part hereof; and
WHEREAS, the areas with respect to which the Partners hereto presently provide
wireline telephone service are contiguous, a community of interests exists
therein, and such areas can most economically and efficiently be served by a
unified cellular system, and the Partners accordingly desire to form a limited
partnership to arrange for the funding, establishment and provision of
Cellular Service through this Partnership directly or its involvement in
another partnership or joint venture;
NOW, THEREFORE, it is mutually agreed that:
ARTICLE I
DEFINITIONS
The below referenced words shall have the meanings contained herein.
1.1 Act. The Michigan Uniform Limited Partnership Act.
1.2 Affiliate. A person, association, co-partnership, partnership,
corporation or joint-stock company or trust (hereinafter "person") that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with another person. Control shall
be defined as (i) ownership of a majority of the voting power of all classes
of voting stock or (ii) ownership of a majority of the beneficial interests in
income and capital of an entity other than a corporation.
1.3 Agreed Value. The credit the General Partner receives in its capital
account upon its initial Capital Contributions for contributed equipment and
real property (including buildings) valued as set forth in Section 5.3.
1.4 Capital Contribution. Funds paid or property contributed to the
Partnership for the purchase of the Partnership Interests issued pursuant to
Article V, in the amount and manner as set forth for the General Partner and
the Limited Partners in Attachment B to this Agreement and as supplemented
from time to time pursuant to Sections 5.2 and 5.3 hereof.
1.5 Cellular Service. Any and all service authorized by the FCC under Part
22 of its cellular rules as promulgated under the Cellular Radio Decisions and
provided pursuant to the terms of this Agreement.
1.6 CGSA. The Cellular Geographic Service Area, which initially is generally
contained within the boundaries of the RSA (a copy of which is designated in
the attached Attachment B) and which constitutes the geographical limits of
the initial area in which Cellular Service will be provided hereunder or as
amended in accordance with the terms of this agreement.
1.7 General Partner's Interest. The Partnership Interest of the General
Partner.
1.8 Income and Losses. The income and losses of the Partnership as of the
close of the Partnership's fiscal year or any other fiscal period, determined
in accordance with generally accepted accounting principles, provided however
that Income and Losses will be determined as though equipment and real
property (including buildings) contributed to the Partnership have been
purchased by the Partnership at its Agreed Value.
1.9 Initial Capital Account Amount. The respective amounts initially
credited to the capital account established for the General Partner and the
Limited Partners pursuant to Section 5.1, which amounts shall equal the sum of
the amount of cash and the Agreed Value contributed as provided in Section
5.1.
1.10 Limited Partner's Interest. The Partnership Interest of a Limited
Partner.
1.11 Partnership Interest. The fractional ownership of a Partner in the
Partnership at any particular time as determined by the ratio which that
Partner's aggregate Capital Contributions bears to the aggregate capital
contributions of all Partners. Such interest includes, without limitation,
the interest of the General Partner or any such Limited Partner in the
Partnership's Income and Losses and any and all benefits to which the General
Partner or any such Limited Partner may be entitled as provided in this
Agreement and in the Act, together with the obligations of the General Partner
or any such Limited Partner to comply with all the terms and provisions of
this Agreement and the Act.
1.12 RSA. The Rural Service Area designated No. 480 by the Federal
Communications Commission, otherwise known as Michigan RSA No. 9, which
consists of the counties of Cass, St. Joseph, Hillsdale, Lenawee and Branch
Counties, Michigan.
<PAGE>
ARTICLE II
FORMATION OF LIMITED PARTNERSHIP
2.1 Formation. The Partners mutually covenant and agree and hereby do form a
limited partnership as of the effective date of this Agreement pursuant to the
provisions of the Act, in accordance with the further terms and provisions
hereof.
2.2 Name and Office.
(a) The name of the Partnership is Cass Cellular Limited Partnership and its
business shall be carried on in this name with such variations and changes as
the General Partner deems necessary to comply with requirements of the
jurisdictions in which operations are conducted or as the General Partner
deems necessary to change for any reasonable business purpose.
(b) The principal office and place of business of the Partnership shall be
maintained at Rochester Tel Center, 180 South Clinton Avenue, Rochester, New
York 14646 or at such other location as the General Partner may from time to
time select, upon prior written notice to the Limited Partners.
2.3 Business Purpose. The purpose of the Partnership shall be to fund,
establish and provide Cellular Service, and to engage in any and all
activities related or incidental thereto. It is understood and agreed that
Cellular Service provided by the Partnership directly or through its
involvement with another partnership or joint venture shall initially be
limited to the CGSA which is generally located within the boundaries of the
RSA, but may, subject to the provisions of this Agreement and applicable
licensing requirements, be expanded to include other areas.
2.4 Effectiveness of the Agreement. This Agreement shall become effective no
later than the date the FCC conditionally dismisses or authorizes the
conditional dismissal or withdrawal of all applications other than that of the
Partnership or of a partnership or joint venture in which the Partnership is
involved, to provide Cellular Service. The General Partner shall be
responsible for the filing of a Certificate of Limited Partnership with the
appropriate state authorities. The Partners agree to take no action
inconsistent with the provisions of this Agreement and shall reasonably
support the Partnership's interest at all times.
2.5 First Partnership Meeting. The first partnership meeting will be held
after the signing hereof and after reasonable notice as to time and place but
no later than ninety (90) days after the grant of the construction permit for
the RSA covered by this partnership agreement to RTCHC, the Partnership
directly, or any other partnership or joint venture in which the Partnership
may participate.
(a) The Limited Partners shall be presented with a plan developed by the
General Partner to provide Cellular Service which may consist of Partnership
participation in a full or partial market settlement as a limited or general
partner if in the opinion of the General Partner the Partners are best served
thereby. Participation by the Partnership in such full or partial market
settlement shall be contingent upon an affirmative vote of sixty percent (60%)
of the Partnership Interests.
(b) Alternatively, the Limited Partners shall be presented with a three year
capital/network coverage plan developed by the General Partner ("initial
coverage plan"), consisting of the network design, coverage areas, equipment
and the amount and sources of funds necessary to complete same. The General
Partner shall consult with the Limited Partners in the development of such
capital network coverage plan.
(c) In the event that the initial coverage plan submitted by the General
Partner does not meet with the expectations of one or more of the Limited
Partners, the Limited Partner(s) will have the option of presenting an
expanded coverage plan to the General Partner with sixty (60) days of the
initial partnership meeting.
(d) The General Partner shall review the expanded coverage plan and determine
if the initial coverage plan should include the expanded coverage plan.
If the General Partner determines that the expanded coverage plan should not
be included in the initial coverage plan, then the Limited Partner(s) shall
have the one time option to fund its expanded coverage plan. All costs and
expenses of such additional coverage requested by the Limited Partner(s) will
be charged directly to those Limited Partner(s) supporting such a plan, and
the capital costs associated therewith will be charged to those Limited
Partner's capital account. The respective interests of all Partners will be
adjusted to reflect the change contemplated herein. Any increase in a Limited
Partner's Interest as a result of any reduction in the General Partner's
General Partner Interest under this Paragraph 2.5 shall not constitute that
Limited Partner as a General Partner hereunder.
ARTICLE III
REGULATORY MATTERS
3.1 Contingency. The permits or licenses to be issued by regulatory
authorities in connection with the provision of Cellular Service may be
contingent during the pendency of litigation or regulatory action concerning
the present wireline allocation; however, the pendency of such litigation or
regulatory action shall not affect the Partners' obligations under this
Agreement.
3.2 Cooperation. The Partners pledge their best efforts and mutual
cooperation to permit the Partnership to implement Cellular Service
expeditiously and to obtain all necessary approvals to provide Cellular
Service.
3.3 Operational Date. The Partners recognize that the date when Cellular
Service can first be offered to the public depends upon the time required to
obtain cellular licenses for providing such Cellular Service and other
federal, state and local approvals, the time required to organize any
necessary proposed affiliated companies and to vest them with appropriate
authority to provide Cellular Service, and the time required to construct and
test the cellular system taking into account the General Partner's
construction schedule and the cellular system manufacturer's schedule.
ARTICLE IV
PARTNERSHIP OPERATIONS
4.1 Management and Operating Services. The General Partner, on behalf of the
Partnership, shall be responsible for providing Cellular Service. Such
provision may, consistent with provisions of Article 2.5(a) hereof, take the
form of Partnership participation in a full or partial market settlement as a
limited or general partner if in the opinion of the General Partner the
Partners are best served thereby. Alternatively, the General Partner may
arrange for obtaining interconnection with the landline network, for operating
and maintaining the Cellular Service system, including but not limited to,
frequency coordination, engineering, construction and the ensuring of system
compatibility and for marketing Cellular Service. In carrying out the
Partnership's responsibility to provide Cellular Service, the Partners hereto
agree that the General Partner shall perform all activities and/or functions
as the General Partner may deem necessary or appropriate to market, establish,
operate, maintain and manage the Cellular Service system or Partnership
participation in another partnership or joint venture. The Limited Partners
agree to aid the General Partner and to take no action inconsistent with the
provisions of this Agreement and shall reasonably support the Partnership's
interest at all times.
The General Partner shall provide management and accounting services to the
Partnership, either directly or through an affiliate, consisting of, but not
limited to, maintaining books of record, opening bank accounts, preparing
accounting reports (in accordance with generally accepted accounting
principles, as varied by appropriate regulatory authorities), and other
records or reports necessary to meet regulatory and legal filings, as the
General Partner may deem necessary or appropriate.
4.2 Operating and Management Expenses. The General Partner shall be
reimbursed by the Partnership monthly for any reasonable and necessary
expenses incurred by the General Partner on behalf of the Partnership in
providing Cellular Service plus reasonable and necessary administrative and
general overhead expenses, including, but not limited to, marketing,
maintenance, message charges, facilities, engineering, customary legal,
accounting and auditing fees, development and implementation of billing
procedures, expense of preparing tax returns and reports, taxes, travel,
office rent, telephone, salaries (including social security, relief, pensions
and other benefits), and other incidental business expenses incurred by the
General Partner on behalf of the Partnership in connection with the provision
of Cellular Services. The General Partner or any affiliate thereof shall not
be entitled to any profit in rendering such services to the Partnership, as
described in this paragraph, it being understood that the General Partner or
any affiliate thereof will be entitled to its proportionate allocated share of
Income and Losses as provided in Article VI. Expenses incurred prior to the
date of the formation of the Partnership, except as stated in Section 5.3
below, shall not be reimbursed.
4.3 Ownership of Properties. In addition to the properties contributed to
the Partnership by the General Partner pursuant to Section 5.3, the
Partnership shall acquire and hold in its name, directly or through license,
all real and personal property, equipment, software and other assets required
to provide Cellular Service.
4.4 Licenses. The General Partner shall, on behalf of the Partnership and
consistent with Section 13.1, (a) cause to be transferred to the Partnership's
name all licenses, permits or other regulatory approvals necessary to provide
Cellular Service; and (b) if other local, state or federal licenses, permits,
certificates of convenience, franchises, or other approvals or authorities are
necessary to provide Cellular Service, make application to the appropriate
authority therefor.
ARTICLE V
CAPITALIZATION OF PARTNERSHIP
5.1 Initial Capital Contributions. Initial Capital Contributions, in the
amount of Five Thousand Dollars ($5,000.00) for each Partner, shall be set
forth in Attachment A hereto, as such Capital Contributions may be modified
pursuant to Sections 2.5 and 5.3 and in accordance with the General Partner's
rights and powers in Sections 7.2 and 15.1. Such initial Capital
Contributions shall result in the following respective Partnership Interests
for the partners:
(A) 10.00% for RTCHC as General Partner
(B) 10.00% for RTCHC as Limited Partner
(C) 20.00% for DEERFIELD as Limited Partner
(D) 20.00% for OGDEN as Limited Partner
(E) 20.00% for SAND CREEK as Limited Partner
(F) 20.00% for WALDRON as Limited Partner
Initial Capital Contributions shall be made within sixty (60) days of receipt
of written requests by the General Partner; provided, however, that no initial
Capital Contributions shall be made prior to issuance to the Partnership of
the FCC's permission to construct. The Limited Partners shall notify the
General Partner within ten (10) days after receipt of such requests, each
notice stating whether or not the Limited Partner intends to make the
requested initial Capital Contribution. The Partners understand that the
contribution schedule under this Article V is intended for the purpose of this
Agreement only and that the schedule may not reflect the full level of
expenditures (or Capital Contributions) appropriate for regulatory purposes.
5.2 Additional Capital Contributions. From time to time additional capital
may be required to be invested by the Partnership to fund expansion or
operation of Cellular Service. In the event the General Partner determines
that additional capital is so needed, each Partner shall be entitled to
provide all (but not part of) its share of additional capital in proportion to
its then current Partnership Interest. This additional funding is due and
payable on the date set forth in a written notice requesting an additional
Capital Contribution given by the General Partner to a Partner, which date
shall not be less than sixty (6) days from the date of the notice. The
Limited Partner shall notify the General Partner within ten (10) days after
receipt of such requests, each notice stating whether or not the Limited
Partner intends to make the requested additional Capital Contribution. Should
any Partner decline to make such additional Capital Contribution, or fail to
pay its contribution when due, the other Partners may contribute pro rata,
according to their then current respective Partnership Interests, an aggregate
amount equal to the additional Capital Contribution declined by the
non-participating Partner(s), thereby increasing their interest in such
proportion to the other Partners' Partnership Interests (it being understood
that the General Partner may make such additional Capital Contribution as a
Limited Partner, if it desires). In such event, the Partnership Interest of a
non-participating Partner shall be diluted accordingly and such Partner shall
be limited in its right to provide future additional capital in proportion to
its Partnership Interest as so revised.
5.3 Capital Contributions in Cash. Funding of both initial and additional
Capital Contributions to the Partnership shall be in cash and not real or
personal property, provided, however, that with respect to its initial Capital
Contribution the General Partner for its Partnership Interest as General
Partner and as a Limited Partner may contribute, in lieu of or in addition to
cash, real property (including buildings), equipment acquired and other direct
expenses incurred in anticipation of and for use by the Partnership in the
provision of Cellular Service. The approximate or actual cost associated with
and directly related to the acquisition of such real property (including
buildings), equipment and other direct expenses incurred is set forth in
Attachment A. The value of such contributed real property (including
buildings), equipment acquired and other direct expenses incurred is to be
determined on the basis of acquisition cost plus interest calculated at the
General Partner's average cost of debt, compounded annually from the date of
acquisition to the date by which all other initial Capital Contributions have
been received. The Partners recognize the General Partner may have acquired
and may continue to acquire real property (including buildings), and equipment
and incur other direct expenses in anticipation of and for use by the
Partnership in the provision of Cellular Service. Additional real property
(including buildings) and equipment may be purchased between execution of this
Agreement and the date when the initial Capital Contribution is made;
therefore, Attachment A may not list all such real property (including
buildings), equipment and direct expenses the General Partner would contribute
to the Partnership. In the event such further property, equipment, or direct
expenses is contributed (a) it shall be valued as set forth in this Section
5.3, and (b) its value shall be deducted from the cash portion of the General
Partner's initial Capital Contribution as set forth in Attachment A.
5.4 Additional Limited Partners. In providing Cellular Service within the
RSA, the General Partner may invite one or more carriers to become additional
Limited Partners hereunder subject to approval by at least sixty percent (60%)
of the Limited Partners. Similarly, in providing Cellular Service outside the
RSA covered by this Agreement the General Partner shall have the right to
invite one or more carriers not affiliated with the General Partner to become
additional limited partners hereunder upon the approval of sixty percent (60%)
of the Limited Partners. The Limited Partners hereby consent to amend this
Agreement to reflect any such inclusion. In the event of any such addition
(a) the new Limited Partner shall participate in the Partnership on the same
terms and conditions described herein (or as hereafter amended), and (b) the
Partnership Interests of the other Partners shall be adjusted according to
their then current respective Partnership Interests.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTION
6.1 Capital Accounts. A capital account shall be established for each
Partner in such Partner's Initial Capital Account Amount. Such capital
accounts shall be increased to reflect allocable shares of Income, as defined
in Section 1.8, and additional Capital Contributions pursuant to Section 2.5,
5.2 and 5.4, and decreased to reflect allocable shares of Losses, as defined
in Section 1.8, and cash distributions made by the Partnership. For purposes
of this Section 6.1, Income and Losses shall be apportioned ratably to each
day of the fiscal period and each day's share shall be allocated pursuant to
the Partnership Interests on such date. In the case of distributions in kind
pursuant to Section 14.3, capital accounts shall be adjusted in accordance
with Section 14.3.
6.2 Tax Allocations Among Partners. All items of income, gain, loss,
deduction and credit (including items of tax preference) of the Partnership
for Federal income tax purposes shall be apportioned ratably to each day of
the Partnership's taxable year and each day's share of such items shall be
allocated to the Limited Partners and to the General Partner in proportion to
their respective Partnership Interests on such days, provided however,
depreciation and gain or loss recognized for Federal income tax purposes with
respect to property contributed to the Partnership shall be allocated to the
Limited Partners (other than the Limited Partner who is also the General
Partner) as though such property had been purchased by the Partnership at its
Agreed Value. The remainder of any depreciation and gain or loss recognized
for Federal income tax purposes with respect to such contributed property
shall be allocated to the General Partner in respect of its General Partner's
Interest and Limited Partner's Interest proportionately.
6.3 Distributions. Funds of the Partnership from all sources, less
appropriate reserves as are determined by the General Partner to be reasonably
necessary for future administrative and operating expenses, loan payments and
other costs and expenses and contingencies, shall be distributed on a fiscal
quarterly basis as promptly as practicable after the end of each quarter.
Each distribution pursuant to this Section 6.3 shall be made to the Partners
in proportion to the daily weighted average of their respective Partnership
Interests as in effect from time to time during the relevant quarterly time
period.
6.4 Tax Compliance. It is the intention of the Partners that each Partner's
distributive share of tax items shall be determined and allocated in
accordance with the allocation provisions of this Agreement. If the General
Partner reasonably determines that the allocation provisions of this Agreement
are unlikely to be respected for federal income tax purposes, due to the
application of Internal Revenue Code sections 704(b) and (c), the regulations
promulgated thereunder, or otherwise, the General Partner shall recommend
appropriate amendments to this Agreement in order to effectuate the allocation
provisions contemplated therein.
ARTICLE VII
RIGHTS AND POWERS OF PARTNERSHIP, GENERAL PARTNER
AND LIMITED PARTNERS
7.1 Partnership Powers. In furtherance of the business purpose specified in
Section 2.3, the Partnership, and the General Partner on behalf of the
Partnership, shall be empowered to do or cause to be done any and all acts
reasonably deemed by the General Partner to be necessary or appropriate in
furtherance of the purposes of the Partnership or forbear from doing any act
if the General Partner reasonably deems such forbearance necessary or
appropriate in furtherance of the purposes of the Partnership, including
without limitation, the power and authority:
(a) To enter into, perform and carry out contracts and agreements of every
kind necessary or incidental to the accomplishment of the Partnership's
purposes, including without limitation, contracts and agreements with the
General Partner, and to take or omit such other or further action in
connection with the Partnership's business as may be necessary or desirable in
the opinion of the General Partner to further the purposes of the Partnership,
provided, however, that any transaction between the Partnership and Partners
or their Affiliates shall be documented and shall become parts of the records
of the Partnership;
(b) To borrow from banks and other lenders on such terms and conditions as
shall be approved by the General Partner and to secure any such borrowings by
mortgaging, pledging or assigning assets and revenues of the Partnership to
the extent deemed necessary or desirable by the General Partner;
(c) To invest such funds as are temporarily not required for Partnership
purposes in short-term debt obligations selected by the General Partner,
including government securities, certificates of deposit of commercial banks
(domestic or foreign), commercial paper, bankers' acceptances and other money
market instruments; and
(d) To carry on any other activities necessary to, in connection with or
incidental to any of the foregoing.
7.2 Powers of the General Partner. In addition to those powers vested
pursuant to Section 7.1, the General Partner hereby is vested with the power
to:
(a) Manage, supervise and conduct the affairs of the Partnership;
(b) Make all elections, investigations, evaluations and decisions, binding
the Partnership thereby, that may be necessary or appropriate in connection
with the business purposes of the Partnership;
(c) Incur obligations or make payment on behalf of the Partnership in its own
name or in the name of the Partnership;
(d) Execute all instruments of any kind or character which the General
Partner in its discretion shall deem necessary or appropriate in connection
with the business purposes of the Partnership;
(e) From time to time increase the coverage area of Cellular Service within
the RSA or to apply for regulatory approval to expand the geographic area of
the RSA; and
(f) Subject to the provisions of Sections 5.2 and 5.4 herein, apply to the
FCC on behalf of the Partnership for permits and licenses to provide Cellular
Service in an adjoining area or where a community of interest exists and would
result in Cellular Service being provided by the Partnership in a unified
area, negotiate on behalf of the Partnership to reach mutually acceptable
arrangements with other carriers desiring to provide service in such areas and
decide to conduct all matters pertaining to such applications and to the
Cellular Service that may result from such applications.
7.3 Rights of Limited Partners. Each Limited Partner shall have the right
to:
(a) Inspect and copy, upon three (3) business days notice to the General
Partner, any of the books of record, accounting records, financial statements
or other records or reports of the Partnership or of the General Partner
relating to its operation of the Partnership;
(b) Have on demand true and full information of all things affecting the
Partnership, and a formal account of Partnership affairs whenever
circumstances render it just and reasonable;
(c) Audit, at its own expense once every calendar year, the Partnership books
of record, accounting records, and financial statements of the Partnership;
(d) Have dissolution and winding up by decree of court when permitted under
the Act; and
(e) Meet with representatives of the General Partner as required by Section
2.5 and thereafter on an annual basis at a time and place designated by the
General Partner or as designated by an affirmative vote of sixty percent (60%)
of the Limited Partnership interests to discuss with the General Partner the
operation of the Partnership (such meeting may be waived upon a unanimous vote
of the Limited Partners).
(f) Consistent with the provisions of Sections 2.5(a), 5.2, 5.4, 7.1, and 7.2
herein, the Limited Partners shall have the right to approve, upon an
affirmative vote of sixty percent (60%) of the Partnership Interests,
agreements to enter into full or limited market settlement agreements,
admission of additional Limited Partners and the sale or disposition of all or
substantially all of the assets of the Partnership assets other than in the
ordinary course of its business.
(g) The Limited Partners shall have the right, upon the affirmative vote of
all of the Limited Partners, less one, to remove the General Partner on
account of willful misconduct or gross negligence.
7.4 Ownership or Conduct of Other Business. Subject to the provisions of
Sections 8.8 and 10.4, the Partners may engage in or possess an interest in
other business ventures of every kind and description. Neither the
Partnership nor any Partner shall have any rights by virtue of this Agreement
in such independent business ventures or the income or profits therefrom.
7.5 Incorporation of Prefilling Settlement Agreement. In addition to the
rights bestowed and duties imposed in this Agreement, the parties shall
continue to have those rights and duties bestowed and imposed by a Prefilling
Settlement Agreement dated October 15, 1987, a copy of which is attached as
Attachment C and is incorporated herein by reference. The Partners expressly
acknowledge that RTCHC shall be deemed to be substituted for C, C & S Telco,
Inc. in said Prefilling Settlement Agreement pursuant to paragraph G therein
and RTCHC shall be entitled to all associated rights bestowed and shall assume
all associated duties imposed therein, the same as if RTCHC had been an
original signatory in place and stead of C, C & S Telco, Inc.
<PAGE>
ARTICLE VIII
OBLIGATIONS OF GENERAL PARTNER
8.1 Duty of the General Partner. The General Partner will at all times act
in the best interests of the Partnership.
8.2 Conduct of Business. The General Partner shall manage and provide
administrative services to the Partnership, and shall execute all contracts,
agreements and instruments as the General Partner reasonably may deem
necessary or desirable to carry on the purpose of the Partnership.
8.3 Filings. The General Partner shall file all certificates, notices,
statements or other instruments required by law for the formation, operation
and termination of the Partnership and its business in all appropriate
jurisdictions and shall prepare and file all necessary Partnership tax
returns. The General Partner shall advise the Limited Partners of any
elections under applicable tax laws that may affect Partnership Income or
Losses.
8.4 Maintain Accounts. Pursuant to the provisions of this Agreement, the
General Partner shall maintain or cause to be maintained capital accounts on
the books and records of the Partnership in respect of each Partnership
Interest.
8.5 Financial Reports. The General Partner shall furnish annual audited
Partnership financial statements examined by a recognized firm of independent
certified public accountants and quarterly unaudited Partnership financial
statement to the Limited Partners. Quarterly unaudited financial statements
will be furnished to the Limited Partners within thirty (30) business days
after the close of each quarter and be certified by an officer of the General
Partner. Year-end audited financial statements will be made available to the
Limited Partners by April 30 following the close of the fiscal year.
8.6 Performance of Partnership Obligations. The General Partner shall use
its best efforts to cause the Partnership to observe and perform each and
every obligation under all agreements and undertakings made by the Partnership
or imposed on the Partnership by law or regulatory authority.
8.7 Resale of Cellular Service. Nothing herein shall preclude the General
Partner or an Affiliate thereof from reselling Cellular Service or selling or
leasing terminal equipment used in connection with Cellular Service
independently from the Partnership whether within or outside the RSA. Neither
the General Partner nor any Affiliate thereof shall be funded or staffed by
the Partnership for such provision of Cellular Service or resale activity and
any transaction between the General Partner or any such Affiliate and the
Partnership shall be on an arms-length basis and on prices, terms and
conditions equivalent to the prices, terms and conditions of any agreements
between the Partnership and other resellers of Cellular Service.
8.8 Cellular Service in Other Areas. Nothing herein shall preclude the
General Partner or an Affiliate thereof from providing Cellular Service
independently from the Partnership in areas other than the RSA.
ARTICLE IX
BANKING, ACCOUNTING, BOOKS AND RECORDS
9.1 Banking. All funds of the Partnership shall be deposited in a bank
account or accounts as shall be established and designated by the General
Partner. Withdrawals from any such bank accounts shall be made upon such
signature or signatures as the General Partner may designate.
9.2 Maintenance of Books and Accounting Method. The General Partner shall
keep or cause to be kept full and accurate accounts of the transactions of the
Partnerships in proper books of account in accordance with generally accepted
accounting principles, as varied by the appropriate regulatory authorities.
Such books and records shall be maintained or available on notice at the
principal place of business of the General Partner and be made available for
reasonable inspection, examination and copying by the Limited Partners or
their respective duly authorized agents or representatives upon three (3)
business days' notice to the General Partner.
9.3 Fiscal Year; Partnership Tax Returns. The fiscal year of the Partnership
shall begin on the first day of January in each year and end on the 31st day
of December in each year. The General Partner shall cause to be filed the
Federal income tax partnership return and all other tax returns required to be
filed for the Partnership for all applicable tax years, and shall furnish as
promptly as practicable a statement of each Limited Partner's appropriate
share of income, gains, losses, deductions and credits for such taxable year.
ARTICLE X
LIMITED PARTNERS
10.1 Limited Partners Not to Take Part in Business. The Limited Partners,
acting in their capacity as a Limited Partner, shall not take part in, or
interfere in any manner with, the conduct or control of the Partnership
business, nor shall the Limited Partners have any right or authority to act
for or bind the Partnership.
10.2 Limitation on Liability of Limited Partners. The liability of each
Limited Partner to provide funds or any other property to the Partnership
shall be limited to the amount of Capital Contributions which the Limited
Partner makes or otherwise agrees to make pursuant to the provisions of
Article V. The obligation of any Limited Partner to return any distributions
previously made shall be as set forth in the Act. Subject to the provisions
of the Act, the Limited Partner shall have no further liability to contribute
money to the Partnership for, or in respect of, the liabilities or obligations
of the Partnership and shall not be personally liable for any obligations
under the Partnership.
10.3 Resale of Cellular Service. Nothing herein shall preclude any Limited
Partner or an Affiliate thereof from reselling Cellular Service or selling or
leasing terminal equipment used in connection with Cellular Service
independently from the Partnership whether within or outside the RSA. Neither
the Limited Partners nor any Affiliates thereof shall be funded or staffed by
the Partnership for such provision of Cellular Service or resale activities
and any transactions between any such Limited Partner or Affiliate and the
Partnership shall be on an arms-length basis and on prices, terms and
conditions equivalent to the prices, terms and conditions of any agreements
between the Partnership and other resellers of Cellular Service.
10.4 Cellular Service in Other Areas. Nothing herein shall preclude any
Limited Partner or an Affiliate thereof from providing Cellular Service in
areas other than the RSA. In addition, after a five-year period commencing
with the date that the Partnership obtains a construction permit from the FCC,
nothing herein shall preclude any Limited Partner or Affiliate thereof from
providing Cellular Service in areas within the RSA provided that the
Partnership has refused to approve a change in the CGSA to provide service in
the RSA which the Partner desires to serve. No partner, however, may seek
such approval if that Partner has voted against authorizing the Partnership to
provide Cellular Service in the area under consideration. Any such Limited
Partner or Affiliate shall however withdraw from the Partnership pursuant to
Article XII prior to seeking any regulatory approval to provide Cellular
Service within the RSA.
ARTICLE XI
TRANSFER OF LIMITED PARTNER'S INTEREST
11.1 Limitation on Transfer; Right of First Refusal. Any Limited Partner may
transfer its Partnership Interest to an Affiliate thereof at any time without
any consent or restriction from the General Partner or any other Limited
Partner. Otherwise, there shall be no sale, exchange or other transfer or
assignment of the whole or any portion of any Limited Partner's Interest
without the prior written consent of the General Partner, which consent shall
not be unreasonably withheld. In addition, before any Limited Partner sells,
exchanges or transfers any part of its Partnership Interest to a non-Affiliate
of such Limited Partner, it shall offer, by giving written notice to the
General Partner, that interest to all of the other Partners for the price and
on the terms at which such non-Affiliate has offered in writing to acquire
such interest. The General Partner, in turn shall forward such notice to all
other Limited Partners. Each Partner shall initially be entitled to purchase
that fraction of the offering Partner's Interest equal to its Partnership
Interest divided by the Partnership Interests of all non-selling Partners. If
any Partner declines to exercise its right of purchase hereunder, the
remaining Partner(s) electing to exercise that right shall be entitled to
purchase that portion of the interest intended to be sold that has been
declined by the other Partner(s) in amounts determined pursuant to
reapplication of the principles set forth in this Section 11.1, excluding from
consideration the Partnership Interests of the selling and declining Partners.
Each non-selling Partner shall notify the General Partner and the selling
Limited Partner, in writing, of its intention to exercise or not to exercise
its purchase rights hereunder within thirty (30) days following receipt of the
offer of sale. The General Partner shall promptly notify each Limited Partner
of the elections by the other Limited Partners. Subsequent written
notifications, if necessary, shall be required within ten (10) days after
receipt by the Limited Partners which have not previously declined to exercise
their rights of purchase, of their intentions with respect to that portion of
the selling Limited Partner's Partnership Interest still subject to a right of
purchase.
11.2 Substitute Limited Partner. No assignee, purchaser or transferee of the
whole or any portion of any Limited Partner's Interest shall have the right to
become a substitute Limited Partner, unless:
(a) The transferring Limited Partner has designated such intention in a
written instrument of assignment, sale or transfer, a copy of which has been
delivered to the General Partner;
(b) The transferring Limited Partner has obtained the written consent of the
General Partner, which consent shall not be unreasonably withheld;
(c) The person acquiring the Limited Partner's Interest has adopted and
agreed in writing to be bound by all of the provisions hereof, as the same may
have been amended;
(d) All documents reasonably required by the General Partner and the Act to
effect the substitution of the person acquiring the Limited Partner's Interest
as a Limited Partner shall have been executed and filed at no cost to the
Partnership; and
(e) Any necessary prior consents have been obtained from any regulatory
authorities.
Provided, however, that subsections (a) and (b) above shall not apply in the
case of an assignment or sale to an Affiliate of the assignor or seller.
11.3 Indemnification. Each Limited Partner transferring a Limited Partner's
Interest hereby indemnifies the Partnership and the other Partners against any
and all loss, damage or expense (including, without limitation, tax
liabilities or loss of tax benefits) arising, directly or indirectly, as a
result of any transfer or purported transfer in violation of any provision
contained in this Article XI.
11.4 Distribution and Allocation Subsequent to Transfer.
(a) The Income and Losses of the Partnership attributable to any Partnership
Interest acquired by reason of the assignment of the Partnership Interest or
substitution of a Partner with respect to that Interest and any distributions
made with respect thereto shall be allocated between the assignor and assignee
based upon the length of time during any fiscal year of the Partnership, as
measured by the effective date of the assignment or substitution, that the
Partnership Interest so assigned or with respect to which there is a
substitution was owned by each of them.
(b) The effective date of an assignment, sale or transfer of the Limited
Partner's Interest or any portion thereof shall be the date on which written
consent has been obtained from the General Partner as provided in Section
11.2(b).
ARTICLE XII
WITHDRAWAL BY LIMITED PARTNER
12.1 Withdrawal.
(a) Effective upon thirty (30) days written notice to each Partner, any
Limited Partner may withdraw from the Partnership subject to any required
regulatory approval;
(b) Any Limited Partner shall promptly withdraw from the Partnership upon the
occurrence of default in performance by such Limited Partner of any obligation
under this Agreement if such default shall not be corrected within sixty (60)
days after the same shall be called to the attention of such Limited Partner
by the General Partner by written notice specifying the thing or matter in
default and the General Partner chooses to insist upon such withdrawal;
provided, however, that such sixty (60) day period shall cease to run during
the pendency of any arbitration proceeding institute pursuant to Section 19.9
to determine the existence of such a default. The General Partner shall
notify each nondefaulting Limited Partner of such default in performance;
(c) Any Limited Partner shall promptly withdraw upon the bankruptcy or
assignment for the benefit of creditors of such Limited Partner;
(d) Any Limited Partner shall promptly withdraw upon failure by such Limited
Partner to make its initial Capital Contribution pursuant to Section 5.1;
(e) Upon withdrawal pursuant to (a), (b) or (c) above, the Limited Partner so
withdrawing shall, subject to the provisions of Section 12.2, receive
distribution of its capital account in cash; and
(f) Upon withdrawal pursuant to (a), (b), (c) or (d) above, the proportionate
Partnership Interests of the remaining Limited Partners shall be increased pro
rata to reflect such withdrawal.
12.2 Distribution on Withdrawal. If distribution is made pursuant to Section
12.1, amounts payable to the Limited Partner so withdrawing shall be paid to
such Limited Partner by the Partnership and may at the General Partner's
option and consistent with regulatory and other legal constraints, be paid
over a period not to exceed three (3) years in order to provide the
Partnership sufficient time to raise capital to replace that capital being
withdrawn and to ensure the continued provision of Cellular Service. In such
event, the Limited Partner so withdrawing shall be entitled to interest on the
amounts payable to such Limited Partner. Such interest shall be calculated at
a rate equal to the average of the then current prime interest rate which has
been charged on new borrowings by Citibank N.A., the Chase Manhattan Bank
N.A., and Morgan Guaranty Trust Company of New York as applied to the
outstanding balance due.
ARTICLE XIII
TRANSFER OF GENERAL PARTNER'S INTEREST
13.1 Assignment. The General Partner may transfer or assign its General
Partner's Interest only after written notice to all the other Partners and the
unanimous vote of all the other Partners to permit such transfer and to
continue the business of the Partnership with the assignee of the General
Partner as General Partner. Any such transfer or assignment shall be subject
to required regulatory approval.
13.2 Withdrawal. Withdrawal of the General Partner will cause the
dissolution and termination of the Partnership in accordance with the terms of
Article XIV except in the case of assignments as provided in Sections 11.1 and
13.1. The General Partner may not withdraw until it has given the other
Partners ninety (90) days' notice. If during that time the other Partners
unanimously designate a substitute General Partner who will agree both to
purchase the General Partner's Interest and its Limited Partner's Interest, on
terms acceptable to the General Partner, and continue the business of the
Partnership, subject to required regulatory approval, the General Partner
agrees to transfer or assign its Interests to the designated General Partner.
The General Partner shall not unreasonably withhold its acceptance of terms
for purchase of its Partnership Interest proposed by the substitute General
Partner.
<PAGE>
ARTICLE XIV
DISSOLUTION AND TERMINATION OF LIMITED PARTNERSHIP
14.1 Dissolution. The Partnership shall be dissolved and terminated if:
(a) The FCC approves this Agreement subject to terms and conditions that are
unacceptable to both the General Partner and one Limited Partner which is not
also the General Partner and all available administrative and judicial appeals
of such FCC approval have been finally exhausted;
(b) The Cellular Radio Decisions are not continued in substantially the same
form and such change materially and adversely impacts the Partnership's
ability to conduct its business and all available administrative and judicial
appeals regarding such Cellular Radio Decisions have been finally exhausted;
(c) The FCC finally denies to the Partnership licenses empowering it to
construct and provide Cellular Service;
(d) The Partnership applies for and is finally denied state or other
regulatory approvals or is granted such approval subject to terms and
conditions that are unacceptable to both the General Partner and one Limited
Partner that is not also the General Partner on the grounds that such denial
or conditional grant has a materially adverse impact on the Partnership's
ability to conduct its business; or
(e) The Partners unanimously agree to dissolve and terminate the Partnership
and receive any approvals required by the FCC or any other regulatory
authority for such dissolution and termination.
Regarding (c) and (d) above, any such denial of regulatory approval shall not
be considered finally denied until all available administrative and judicial
appeals of such denial have been finally exhausted.
14.2 Distribution Upon Dissolution. Upon dissolution of the Partnership, the
General Partner shall proceed, subject to the provisions herein, to liquidate
the Partnership and apply the proceeds of such liquidation or to distribute
Partnership assets, in the following order of priority:
(a) To creditors, including Partners who are creditors, to the extent
otherwise permitted by law, in satisfaction of liabilities of the Partnership
other than liabilities for distribution to Partners under Articles XII and
XIII;
(b) To the establishment of any reserve which the General Partner may deem
reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Partnership. Such reserve may be paid over by the General
Partner to any attorney at law, or other acceptable party, as escrow agent to
be held for disbursement in payment of any of the aforementioned liabilities
and, at the expiration of such period as shall be deemed advisable by the
General Partner, for distribution of the balance, in the manner hereinafter
provided in this Section 14.2;
(c) To Partners and former Partners in satisfaction of liabilities for
distributions under Articles XII and XIII; and
(d) To Partners first for the return of their capital accounts as set forth
in Section 6.1 in proportion to the Partners' respective capital accounts at
the time of such dissolution, with any remaining Partnership assets being
distributed in proportion to the Partner's respective Partnership Interests on
the date of dissolution.
14.3 Distributions in Cash or in Kind. Upon dissolution, the General Partner
may in its discretion (a) liquidate all or a portion of the Partnership assets
and apply the proceeds of such liquidation in the priorities set forth in
Section 14.2 or (b) hire independent recognized appraisers to appraise the
value of the Partnership assets not sold or otherwise disposed of (the cost of
such appraisal to be considered a debt of the Partnership), allocate any
unrealized gain or loss to the Partners' capital accounts as though the
properties in question has been sold on the date of distribution and, after
giving effect to any such adjustment, distribute said assets in accordance
with the priorities as set forth in Section 14.2. The General Partner may
determine in its sole discretion whether undivided portions of assets
distributed in kind will be distributed pro rata to Partners in accordance
with their respective Partnership Interests at the time of dissolution;
provided, however, that any distributions of unrealized receivables or
substantially appreciated inventory within the meaning of Section 751 of the
Internal Revenue Code shall be made proportionately to the Partners'
Partnership Interests at the time of dissolution unless the Partners otherwise
unanimously agree. In the case of any distribution in kind of Partnership
assets under this Section to a Partner, the value of the asset determined by
the appraisal as provided above shall be applied against the Partner's capital
account.
14.4 Time for Liquidation. A reasonable amount of time shall be allowed for
the orderly liquidation of the assets of the Partnership and the discharge of
liabilities to creditors so as to enable the General Partner to minimize any
losses which otherwise might be incurred.
14.5 Termination. Upon compliance with the foregoing distribution plan the
Partnership shall cease to be such, and the General Partner shall execute,
acknowledge and cause to be filed a certificate of dissolution of the
Partnership pursuant to the power of attorney contained in Article XV.
14.6 General Partner Not Liable for Return of Distribution. The General
Partner shall not be liable for any distribution required pursuant to Sections
14.2(b), (c) and (d) and such distribution shall be made solely from available
Partnership assets, if any.
14.7 General Partner's Right to Continue Providing Cellular Service. Each
Limited Partner hereby agrees that, in the event that such Limited Partner
withdraws pursuant to Article XII or the Partnership is dissolved pursuant to
Articles XIII or XIV, the General Partner shall have the right to provide
Cellular Service either singly or with others, subject to any necessary
regulatory approval. In such event, the General Partner shall invite all
other parties to this Agreement, including their successors and assigns, to
participate in a new partnership to carry out such business. The terms of any
such offer made hereunder shall be substantially on the same terms and
conditions as those contained in this Agreement. In the event that any party
declines to contribute capital to the new partnership, as may be required,
that party's interest shall be diluted accordingly. Until such partnership is
formed, if at all, the General Partner shall have the right to continue to
provide Cellular Service, subject to any necessary regulatory approval.
ARTICLE XV
POWER OF ATTORNEY
15.1 Grant of Power of Attorney. Each Limited Partner hereby irrevocably
constitutes and appoints the General Partner as its true and lawful attorney
and agent, in its name, place and stead to make, execute, acknowledge and, if
necessary, file and record:
(a) Any certificates or other instruments or amendments thereof which the
Partnership may be required to file under the laws of each state governing
this Agreement or pursuant to the requirements of any governmental authority
having jurisdiction over the Partnership or which the General Partner shall
deem it advisable to file, including, without limitation, this Agreement, any
amended Agreement and a certificate of dissolution as provided in Section
14.5;
(b) Any certificates or other instruments (including counterparts of this
Agreement with such changes as may be required by the law of other
jurisdictions) and all amendments thereto which the General Partner deems
appropriate or necessary to qualify, or continue the qualification of, the
Partnership as a limited partnership (or a partnership in which the Limited
Partner has limited liability) and to preserve the limited liability status of
the Partnership in the jurisdictions in which the Partnership may own
properties, conduct business and acquire investment interests;
(c) Any certificates or other instruments which may be required to admit
additional or substitute Limited Partners pursuant to the terms of this
Agreement, to reflect the withdrawal of any Limited Partner, to reflect
changes in capital contributions or changes in respective Partnership
Interests of the Partners or to effectuate the dissolution and termination of
the Partnership, pursuant to Article XIV; and
(d) Any amendments to any certificate necessary to reflect any other changes
made pursuant to the exercise of the powers of attorney contained in this
Article XV.
15.2 Irrevocable and Coupled with an Interest: Copies to be Transmitted. The
powers of attorney granted under Section 15.1 shall be deemed irrevocable and
to be coupled with an interest. A copy of each document executed by the
General Partner pursuant to the powers of attorney granted in Section 15.1
shall be transmitted to each Limited Partner promptly after the date of the
execution of any document.
15.3 Survival of Power of Attorney. The powers of attorney granted in
Section 15.1 shall survive delivery of an assignment by a Limited Partner of
the whole or any portion of its Limited Partner's Interest, except that if
such assignment was of all of its Limited Partner's Interest and the
substitution of the assignee as a Limited Partner has been consented to by the
General Partner, the foregoing powers of attorney shall survive the delivery
of such assignment for the purpose of enabling the General Partner to execute,
acknowledge and file any and all certificates and other instruments necessary
to effectuate the substitution of the assignee as a Limited Partner. Such
powers of attorney shall survive the dissolution or termination of a Limited
Partner and shall extend to such Limited Partner's successors and assigns.
15.4 Limitation of Power of Attorney. Except as set forth in this Article
XV, the General Partner may not modify the terms of this power of attorney or
this Agreement without the written consent of all the Limited Partners. The
powers of attorney granted under Section 15.1 of this Article cannot be
utilized by the General Partner to increase or extend any financial obligation
or liability of any Limited Partner without the written consent of such
Limited Partner.
ARTICLE XVI
EXCULPATION AND INDEMNIFICATION
16.1 Exculpation of the General Partner. The General Partner will not be
liable for any loss to the Partnership or the Limited Partners by reason of
any act or failure to act unless the General Partner was guilty of willful
misconduct or gross negligence.
16.2 Indemnification of the General Partner. The Partnership shall indemnify
the General Partner against any loss or damage incurred by the General Partner
(including legal expenses) by reason of any acts performed or not performed by
the General Partner for and on behalf of the Partnership, unless the General
Partner was guilty of willful misconduct or gross negligence. The General
Partner shall indemnify the Partnership against any damages incurred by reason
of the General Partner's willful misconduct or gross negligence.<PAGE>
ARTICLE XVII
AMENDMENTS
17.1 Amendments. Except for amendments made in accordance with this
Agreement in connection with assignments of Partnership Interests by Partners
to their Affiliates and to reflect additional or substitute Partners or
changes in Capital Contributions, this Agreement may not be amended except
upon written consent of the General Partner and all the Limited Partners.
17.2 Execution of Amended Agreements. Each Limited Partner agrees to execute
or cause to be executed promptly any amendments to this Agreement and
certificates of the Partnership reasonably requested by the General Partner
and authorized under Section 17.1
ARTICLE XVIII
TECHNOLOGY AND INFORMATION
18.1 Technology License. The General Partner shall, on behalf of the
Partnership, obtain the right to use hardware and software technology
associated with Cellular Service. The General Partner is hereby authorized,
on behalf of the Partnership, to engage in negotiations and to enter into
contracts for licenses to use cellular hardware, software or related
processes. In general, such contracts shall be merely right to use contracts
and will not vest any title in any Partner to this Agreement.
18.2 Proprietary Information. All information including but not limited to
specifications, microfilm, photocopies, keypunch cards, magnetic tapes,
drawings, sketches, models, samples, tools, technical information, data,
employee records, maps, customer information, financial reports, and market
data marked or identified in writing as proprietary (all hereinafter
designated as "Proprietary Information") furnished to or obtained by a Partner
from any other Partner, whether written or oral or in other form, shall remain
the disclosing Partner's property. All copies of such information, whether in
written, graphic or other tangible form, shall be returned to the disclosing
Partner upon the disclosing Partner's request except that one copy may be
retained for archival purposes. Unless otherwise agreed, no obligation
hereunder shall extend beyond five (5) years from the date of receipt of such
information and the obligation does not apply to such Proprietary Information
as was previously known to the receiving Partner free of any obligation to
keep it confidential or has been or is subsequently made public by the
disclosing Partner or a third party. Such Proprietary Information shall be
kept confidential by the receiving Partner and shall be used only for
performing the covenants contained in this Agreement and may be used for such
other purposes only upon such terms as may be agreed upon between the
disclosing Partner and receiving Partner in writing.<PAGE>
ARTICLE XIX
MISCELLANEOUS PROVISIONS
19.1 Warranties. Each Partner warrants as follows:
(a) It has the legal capacity to enter into and execute this Agreement, and
(b) This Agreement does not breach any of its existing agreements with other
parties.
19.2 Table of Contents and Headings. The table of contents and the headings
of the Sections of this Agreement are inserted for convenience only and shall
not be deemed to constitute a part hereof.
19.3 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the Partners and any additional or substitute Limited
Partner or General Partner and to their respective successors and assigns
except that nothing contained in this Section shall be construed to permit any
attempted assignment or other transfer which would be unauthorized by or void
pursuant to any other provision of this Agreement.
19.4 Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of the Agreement; provided, however, that the general intent
of this Agreement shall not be voided thereby.
19.5 Non-Waiver. No provision of this Agreement shall be deemed to have been
waived unless such waiver is contained in a written notice given to the
Partner claiming such waiver and no such waiver shall be deemed to be a waiver
of any other or further obligation or liability of the Partner or Partners in
whose favor the waiver was given.
19.6 Applicable Law. This Agreement and the rights and obligations of the
Partners shall be interpreted in accordance with the laws of the State of
Michigan. The Partnership will be bound by and fully comply with any
applicable provisions of the equal employment opportunity laws, including any
Executive Orders issued thereunder.
19.7 Entire Agreement. This Agreement constitutes the entire Limited
Partnership Agreement between the Partners and (a) shall supersede all
previous negotiations, commitments, representations and writings, and (b) to
the extent inconsistent with any provision contained in the documents attached
hereto as Attachment A, shall supersede such provision, and without limiting
the foregoing, there shall be no requirement for the Partners to make
additional Capital Contributions by virtue of anything contained in Attachment
A.
19.8 Notices. All notices given by any Partner to any other Partner under
this Agreement shall be in writing, registered or certified mail, postage
prepaid, addressed as follows (or to such other address as a Partner may
specify in such a notice to all other Partners):
General Partner and Limited Partner:
ROCHESTER TEL CELLULAR HOLDING CORPORATION
180 South Clinton Avenue
Rochester, New York 14646
Attention: Vice President
Limited Partner:
DEERFIELD FARMERS' TELEPHONE COMPANY
141 Saline Street; P.O. Box 68
Petersburg, MI 49270
Attention: Mr. David LaRocca
Limited Partner:
OGDEN TELEPHONE COMPANY
4726 E. Weston Road
Blissfield, MI 49228
Attention: Ms. Linda Corie
Limited Partner:
SAND CREEK TELEPHONE COMPANY
6231 Sand Creek Highway; P.O. Box 66
Sand Creek, MI 49279-0066
Attention: Mr. Neil Pearcy
Limited Partner:
WALDRON TELEPHONE COMPANY
119 S. Main Street; P.O. Box 197
Waldron, MI 49288-0197
Attention: Ms. Katheryn Fox
Such notices shall be effective on the third business day subsequent to the
date of mailing.
19.9 Arbitration.
(a) If any disagreement as to the existence of a default by a Partner
hereunder, which cannot be resolved by negotiation, shall arise between any
Limited Partner or group of Limited Partners and the General Partner, the
General Partner or such Limited Partner or group of Limited Partners may
initiate proceedings to submit such disagreement to arbitration by serving
written notice of arbitration on the other party, which notices shall include
appointment of an arbitrator, naming such arbitrator. Within thirty (30) days
after the date that such notice is deemed to be given, pursuant to the
provisions of Section 19.8, the Partner (or group thereof, if applicable) to
whom such notice is given shall similarly appoint an arbitrator by filing like
written notice to the initiating Partner or Partners; or, failing to make such
appointment, the arbitrator initially appointed shall be empowered to act as
the sole arbitrator and to render a binding decision. In such event, such
sole arbitrator shall set a date for hearing the dispute not later than ninety
(90) days after the date of his or her appointment, and shall render a
decision in writing to the disputing Partners not later than sixty (60) days
after the last hearing date.
(b) In the event that the disputing Partners duly appoint arbitrators
pursuant to subparagraph (a) above, the two arbitrators so appointed shall,
with thirty (30) days after the appointment of the latter of them to be
appointed, select a third arbitrator who shall act as Chairman of the
arbitration panel. Such arbitration panel shall set a time for the hearing of
the dispute which shall not be later than sixty (60) days after the date of
appointment of the third arbitrator, and the final decision of the arbitrators
shall be rendered in writing to the disputing Partners not later than sixty
(60) days after the last hearing date.
(c) In the event that the arbitrators appointed by the disputing Partners are
not able within thirty (30) days after the appointment of the later of them to
be appointed to agree on the selection of a third arbitrator, either one of
them may request the American Arbitration Association to select a third
arbitrator, and the selection of such third arbitrator of such Association
shall be binding.
(d) The place of any arbitration shall be Jackson, Michigan or at such other
place as agreed to by the disputing Partners.
(e) The arbitration shall be conducted in accordance with the rules of the
American Arbitration Association then prevailing, and the decision of the
arbitrator or arbitrators, as the case may be, shall be final and binding on
the disputing Partners, and shall be enforceable in the courts of the United
States.
19.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed by their duly authorized representatives.
GENERAL PARTNER AND LIMITED PARTNER
ROCHESTER TEL CELLULAR HOLDING CORPORATION
By:____________________________ Date:______________________
Attest:________________________ Title: President
Date:__________________________
LIMITED PARTNER
DEERFIELD FARMERS' TELEPHONE COMPANY
By:____________________________ Date:______________________
Attest:________________________ Title:_____________________
Date:__________________________
LIMITED PARTNER
OGDEN TELEPHONE COMPANY
By:____________________________ Date:______________________
Attest:________________________ Title:_____________________
Date:__________________________
<PAGE>
LIMITED PARTNER
SAND CREEK TELEPHONE COMPANY
By:____________________________ Date:______________________
Attest:________________________ Title:_____________________
Date:__________________________
LIMITED PARTNER
WALDRON TELEPHONE COMPANY
By:____________________________ Date:______________________
Attest:________________________ Title:_____________________
Date:__________________________
c:\...\sandcree\exhibits\final\exhibit.10i
<PAGE>
ATTACHMENT A
APPROXIMATE INITIAL CAPITAL CONTRIBUTION
A. General Partner: RTCHC
Cash: $2,500
Real Property and Equipment: $0
B. Limited Partner: RTCHC
Cash: $2,500
Real Property and Equipment: $0
C. Limited Partner: Deerfield Farmers' Telephone Company
Cash: $5,000
D. Limited Partner: Ogden Telephone Company
Cash: $5,000
E. Limited Partner: Sand Creek Telephone Company
Cash: $5,000
F. Limited Partner: Waldron Telephone Company
Cash: $5,000<PAGE>
ATTACHMENT B
GEOGRAPHIC DESCRIPTION OF _______________________ RURAL SERVICE AREA (RSA)
Rural Service Area No. 479 as established by the Federal Communications
Commission, also referred to as Michigan RSA No. 9, which encompasses the
following Michigan counties:
Branch
Cass
Hillsdale
Lenawee
St. Joseph<PAGE>
FIRST AMENDMENT TO THE CASS CELLULAR
LIMITED PARTNERSHIP AGREEMENT
This First Amendment is effective as of July 1, 1991, between Rochester
Tel Cellular Holding Corporation ("RTCHC"), Deerfield Farmers' Telephone
Company ("Deerfield"), D & P Communications, Inc. ("D & P"), Ogden Telephone
Company ("Ogden"), Sand Creek Telephone Company ("Sand Creek"), and Waldron
Telephone Company ("Waldron") collectively referred to as "Partners".
WHEREAS, the parties hereto, with the exception of D & P, entered into a
Limited Partnership Agreement dated December 5, 1989 (the "Agreement"); and
WHEREAS, Deerfield intends to assign and transfer its interest in the
Cass Cellular Limited Partnership (the "Partnership") to its wholly-owned
subsidiary, D & P; and
WHEREAS, all parties hereto have consented to the assignment and transfer
by Deerfield of its interest in the Partnership to D & P and the withdrawal of
Deerfield as a Partner; and
WHEREAS, RTCHC has provided notice to all Partners of its intention to
accept an offer from Centel Corporation to purchase RTCHC's interest in the
Partnership for certain consideration in accordance with the terms of the
Agreement; and
WHEREAS, D & P (as assignee of the partnership interest of Deerfield),
Ogden, Sand Creek, and Waldron have provided notice of their election pursuant
to the terms of the Agreement to exercise their purchase rights as reflected
in Exhibit A, which is attached hereto and incorporated herein by reference;
and
WHEREAS, pursuant to Articles 11 and 13 of the Agreement, RTCHC intends
to assign and transfer its interest as a General Partner in the Partnership to
D & P for consideration and assign and transfer its interest as a Limited
Partner in the Partnership equally to D & P, Ogden, Sand Creek and Waldron for
consideration.
NOW, THEREFORE, the parties hereto choose to amend the Agreement as
described below.
1. Addition of Limited Partner. The Agreement is amended to add D & P
as a Limited Partner and party to said Agreement due to the assignment and
transfer by Deerfield to D & P of its interest as a Limited Partner. D & P
agrees to be bound by all terms and conditions of the Agreement.
2. Withdrawal of Partners. The Agreement is amended to delete Deerfield
as a Limited Partner due to Deerfield's assignment and transfer of its
interest in the Partnership to D & P. The Agreement is also amended to delete
RTCHC as a General Partner and Limited Partner due to RTCHC's assignment and
transfer of its interest as a General Partner to D & P and RTCHC's assignment
and transfer of its interest as Limited Partner equally to D & P, Ogden, Sand
Creek and Waldron.
3. General Partner. General Partner, as referred to in the Agreement
shall mean D & P.
4. Limited Partners. Limited Partners, collectively, as referred to in
the Agreement shall mean D & P, Ogden, Sand Creek and Waldron.
5. Amendment to Section 2.2(b). Section 2.2(b) of the Agreement is
hereby amended to read as follows:
(b) The principal office and place of business of the Partnership shall be
maintained at D & P Communications, Inc., 141 Saline Street, Petersburg,
Michigan 49270 or at other such location as the General Partner may from time
to time select, upon prior written notice to the Limited Partners.
6. Amendment to Section 5.1. Section 5.1 of the Agreement is hereby
amended to read as follows:
5.1 Initial Capital Contributions. Initial Capital Contributions, in the
amount of Five Thousand Dollars ($5,000.00) for each Partner, shall be set
forth in Attachment A hereto, as such Capital Contributions may be modified
pursuant to Sections 2.5 & 5.3 and in accordance with the General Partner's
rights and powers in Sections 7.2 & 15.1. Due to the assignment and transfer
by Deerfield of its interest as a Limited Partner to D & P, the assignment and
transfer by RTCHC of its interest as a General Partner to D & P, and the
assignment and transfer by RTCHC of its interest as a Limited Partner equally
to D & P, Ogden, Sand Creek and Waldron, the following shall be the respective
Partnership Interests for the Partners):
(A) 10.0% for D & P as General Partner
(B) 22.5% for D & P as Limited Partner
(C) 22.5% for OGDEN as Limited Partner
(D) 22.5% for SAND CREEK as Limited Partner
(E) 22.5% for WALDRON as Limited Partner
Initial Capital Contributions shall have been made within sixty (60) days
of receipt of written requests by the General Partner; provided, however, that
no initial Capital Contributions shall be made prior to issuance to the
Partnership of the FCC's permission to construct. The Limited Partners shall
notify the General Partner within ten (10) days after receipt of such
requests, each notice stating whether or not the Limited Partner intends to
make the requested initial Capital Contribution. The Partners understand that
the contribution scheduled under this Article V is intended for the purpose of
this Agreement only and that the schedule may not reflect the full level of
expenditures (or Capital Contributions) appropriate for regulatory purposes.
7. Amendment to Section 19.8. Section 19.8 of the Agreement is hereby
amended to read as follows:
19.8 Notices. All notices given by any Partner to any other Partner under
this agreement shall be in writing, registered or certified mail, postage
prepaid, addressed as follows (or to such other address as a Partner may
specify in such a notice to all other Partners):
General Partner and Limited Partner:
D & P COMMUNICATION, INC.
141 Saline Street; P.O. Box 68
Petersburg, MI 49270
Attention: Mr. David LaRocca
Limited Partner:
OGDEN TELEPHONE COMPANY
4726 E. Weston Road
Blissfield, MI 49228
Attention: Ms. Linda Corie
Limited Partner:
SAND CREEK TELEPHONE COMPANY
6231 Sand Creek Highway; P.O. Box 66
Sand Creek, MI 49279-09066
Attention: Mr. Neil Pearcy
Limited Partner:
WALDRON TELEPHONE COMPANY
119 S. Main Street; P.O. Box 197
Waldron, MI 49288-0197
Attention: Ms. Kathryn Fox
Such notices shall be effective on the third business day subsequent to the
date of mailing.
8. Ratification. The parties hereto hereby adopt and ratify by
reference all other terms and conditions of the Agreement as if set forth
herein in full.
IN WITNESS WHEREOF, the undersigned have caused this First Amendment to
the Cass Cellular Limited Partnership Agreement to be executed by their duly
authorized representatives.
<PAGE>
WITHDRAWING PARTNER:
ROCHESTER TEL CELLULAR HOLDING
CORPORATION
By: /s/ Frank S. Kabel
Attest: /s/ Joes Shael Title: Vice President and Director
Date: 6/28/91 Date: 6/28/91
WITHDRAWING PARTNER:
DEERFIELD FARMERS' TELEPHONE COMPANY
By: /s/ David LaRocca
Attest: /s/ Patrick L. Miliran Title: General Manager
Date: 07/2/91 Date: 7/2/91
GENERAL PARTNER AND LIMITED PARTNER:
D & P COMMUNICATIONS, INC.
By: /s/ David LaRocca
Attest: /s/ Patrick L. Miliran Title: General Manager
Date: 07/2/91 Date: 7/2/91
LIMITED PARTNER:
OGDEN TELEPHONE COMPANY
By: /s/ Charles G. Neuroth
Attest: /s/ Patrick L. Miliran Title: President
Date: 07/2/91 Date: 7/2/91
LIMITED PARTNER:
SAND CREEK TELEPHONE COMPANY
By: /s/ Robert E. Hinsdale
Attest: /s/ Patrick L. Miliran Title: President
Date: 07/2/91 Date: 7/2/91
LIMITED PARTNER:
WALDRON TELEPHONE COMPANY
By: /s/ Kathryn A. Fox
Attest: /s/ Patrick L. Miliran Title: President
Date: 07/2/91 Date: 7/2/91
<PAGE>
EXHIBIT A
Existing Additional Revised
Capital
Owner Interest Ownership Ownership Account
D & P Communications
Inc.
(General Partner) -------% 10.0000% 10.0000% $
D & P Communications
Inc.
(Limited Partner) 20.0000% 2.5000% 22.5000% $
Ogden Telephone Co. 20.0000% 2.5000% 22.5000% $
Sand Creek
Telephone Co. 20.0000% 2.5000% 22.5000% $
Waldron Telephone Co. 20.0000% 2.5000% 22.5000% $
SAND CREEK TELEPHONE COMPANY
Sand Creek, Michigan
<TABLE>
Computation of Earnings Per Share
For the Years Ended December 31, 1994, 1993 and 1992
and the Six Months Ended June 30, 1995 and 1994
<CAPTION>
"Earnings per share" were calculated by dividing net income by
the weighted average number of shares outstanding determined as
follows:
1994 1993 1992
<S> <C> <C> <C>
Shares outstanding
each month:
December 41,671 2/3 40,646 2/3 40,578 2/3
January 40,648 1/3 40,476 2/3 40,578 2/3
February 40,648 1/3 40,256 2/3 40,578 2/3
March 40,748 1/3 40,256 2/3 40,578 2/3
April 41,463 1/3 40,156 2/3 40,578 2/3
May 41,463 1/3 40,156 2/3 40,468 2/3
June 41,343 1/3 41,019 2/3 41,218 2/3
July 41,143 1/3 41,019 2/3 41,218 2/3
August 41,543 1/3 41,019 2/3 40,218 2/3
September 41,743 1/3 41,019 2/3 40,218 2/3
October 41,743 1/3 41,019 2/3 40,218 2/3
November 41,743 1/3 41,019 2/3 39,718 2/3
December 41,743 1/3 41,671 2/3 40,646 2/3
537,646 2/3 529,739 2/3 526,820 2/3
13 13 13
Weighted average
shares outstanding 41,357 40,749 40,525
Divided into
net income 354,758 380,587 206,019
Earnings per share $ 8.58 $ 9.34 $ 5.08
June 30, June 30,
Shares outstanding 1995 1994
each month:
December 41,743 1/3 41,671 2/3
January 41,743 1/3 40,648 1/3
February 41,743 1/3 40,648 1/3
March 41,513 1/3 40,748 1/3
April 41,513 1/3 41,463 1/3
May 41,405 1/3 41,463 1/3
June 41,405 1/3 41,343 1/3
291,067 1/3 287,986 2/3
7 7
Weighted average
shares outstanding 41,581 41,141
Divided into
net income 198,829 153,906
Earnings per share $ 4.78 $ 3.74
</TABLE>
EXHIBIT 15
DESCRIPTION LETTER RE: UNAUDITED INTERIM
FINANCIAL STATEMENTS
SEE EXHIBIT 23
September 22, 1995
Mr. Robert Hinsdale
Sand Creek Telephone Company
6525 Sand Creek Highway
P.O. Box 66
Sand Creek, MI 49279-0066
Re: Consent to Naming of Counsel in Registration
Statement
Dear Mr. Hinsdale:
In connection with the registration of the common stock of
Sand Creek
Communications Company with the Securities and Exchange
Commission, Loomis,
Ewert, Parsley, Davis & Gotting, P.C., hereby consent to the
naming in the
Registration Statement of the firm as having passed upon certain
legal
matters, including the legality of the Sand Creek Communications
Company
Common Stock to be issued in connection with the proposed share
exchange.
Very truly yours,
LOOMIS, EWERT, PARSLEY,
DAVIS & GOTTING, P.C.
/S/_______________________________
By: Jack C. Davis
Its: President
INDEPENDENT ACCOUNTANT'S CONSENT
We consent to the reference to our firm under the caption
"Experts" and to the use of our reports (i) dated June 21, 1995,
covering the audited December 31, 1994, 1993 and 1992 financial
statements for Sand Creek Telephone Company; (ii) dated March 13,
1995 covering the audited December 31, 1994, 1993 and 1992
financial statements for Cass Cellular Limited Partnership; and
(iii) dated October 30, 1995 covering the audited June 30, 1995
Balance Sheet for Sand Creek Communications Company, in the Proxy
Statement for Sand Creek Telephone Company and Prospectus for
Sand Creek Communications Company Common Stock.
We are aware of the use of the June 30, 1995 and June 30, 1994
unaudited financial statements of Sand Creek Telephone Company in
the Proxy Statement for Sand Creek Telephone Company and
Prospectus for Sand Creek Communications Company Common Stock.
These unaudited statements were compiled but not reviewed by us
and, accordingly, we have not prepared nor provided a report
regarding them.
McCartney & McIntyre,
P.C.
October 31, 1995
Okemos, Michigan
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary information extracted from the following
financial statements of Sand Creek Telephone Company: December 31, 1994 and June
30, 1995 Balance Sheets; And Income statements for the 12-month period ended
December 31, 1994 and for the 6-month period, ended June 30, 1995, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995
<PERIOD-END> DEC-31-1994 JUN-30-1995
<CASH> 598,156 293,923
<SECURITIES> 0 0
<RECEIVABLES> 137,727 85,252
<ALLOWANCES> 5,276 3,295
<INVENTORY> 15,592 17,603
<CURRENT-ASSETS> 754,995 539,366
<PP&E> 1,909,252 2,115,780
<DEPRECIATION> 280,926 336,723
<TOTAL-ASSETS> 2,653,999 2,687,676
<CURRENT-LIABILITIES> 166,778 42,592
<BONDS> 0 0
<COMMON> 417,433 414,053
0 0
0 0
<OTHER-SE> 1,851,700 1,995,604
<TOTAL-LIABILITY-AND-EQUITY> 2,653,999 2,687,676
<SALES> 956,810 444,873
<TOTAL-REVENUES> 1,105,648 543,415
<CGS> 494,167 236,088
<TOTAL-COSTS> 542,083 261,138
<OTHER-EXPENSES> 2,449 1,137
<LOSS-PROVISION> 2,018 0
<INTEREST-EXPENSE> 2,820 207
<INCOME-PRETAX> 558,296 280,933
<INCOME-TAX> 203,538 82,104
<INCOME-CONTINUING> 354,758 198,104
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 354,758 198,829
<EPS-PRIMARY> 8.58 4.78
<EPS-DILUTED> 8.58 4.78
</TABLE>
SAND CREEK
LETTERHEAD
October 27, 1995
NOTICE OF SPECIAL SHAREHOLDER MEETING
Dear Shareholder:
You are cordially invited to attend a Special Meeting of
the Shareholders of Sand Creek Telephone Company ("Sand Creek"),
which will be held at Sand Creek Community Church, East Street,
Sand Creek, Michigan, at 1:00 p.m., local time, on Saturday,
December 2, 1995 (the "Special Meeting").
At the Special Meeting, Shareholders will be asked to
consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Share Exchange (the "Plan of Share Exchange") between
Sand Creek and Sand Creek Communications Company ("SCCC"),
currently a wholly-owned subsidiary of Sand Creek. The Plan of
Share Exchange provides that each Sand Creek Shareholder will
receive three shares of SCCC Common Stock in exchange for each
share of Sand Creek Common Stock held by such Shareholder. The
Plan of Share Exchange requires, among other conditions, the
affirmative vote of holders of a majority of the outstanding shares
of Sand Creek Common Stock.
If the Plan of Share Exchange is approved, Sand Creek
will continue to operate as a separate telephone company in Sand
Creek, Michigan. The transactions contemplated by the Plan of
Share Exchange are intended to be tax-free for federal income tax
purposes to both Sand Creek and its shareholders who exchange their
shares solely for shares of common stock of SCCC.
The Sand Creek Board has determined that the Plan of
Share Exchange is in the best interests of Sand Creek and its
shareholders. THE SAND CREEK BOARD APPROVED THE PLAN OF SHARE
EXCHANGE AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF
THE PLAN OF SHARE EXCHANGE AT THE SPECIAL MEETING.
The accompanying Proxy Statement/Prospectus is
incorporated into and is a part of this Notice. It describes the
matters to be acted upon at the Special Meeting. Shareholders are
urged to review carefully the attached Proxy Statement/Prospectus.
This document contains a detailed description of the Plan of Share
Exchange, its terms and conditions and the transactions
contemplated thereby.
<PAGE>
BECAUSE OF THE SIGNIFICANCE OF THE PROPOSED TRANSACTION,
YOUR PARTICIPATION IN THE SPECIAL MEETING, IN PERSON OR BY PROXY,
IS ESPECIALLY IMPORTANT. I URGE YOU TO VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
Your continuing interest in the business of Sand Creek is
appreciated, and we hope you will attend the Special Meeting. It
is important that your shares be represented at the Special
Meeting. Accordingly, whether or not you plan to attend the
Special Meeting, please sign, date and mail the enclosed Proxy
promptly in the postage-paid envelope that has been provided to you
for your convenience. If you wish to vote in accordance with the
recommendations of the Sand Creek Board, it is not necessary to
specify your choices; you may merely sign, date and return the
enclosed Proxy.
Sincerely,
Robert Hinsdale
President and Chairman of the
Board
A shareholder may think his or her vote is not important,
but it is vital. The Plan of Share Exchange cannot be approved
unless a majority of all outstanding shares of Common Stock of Sand
Creek are voted in favor of it. Thus, a failure to vote has the
same practical effect as a "no" vote. You and all other
shareholders are encouraged to return your proxy vote immediately.
REVOCABLE PROXY
(ABSENTEE BALLOT)
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned
shareholder of Sand Creek Telephone Company hereby appoints_______________
or, if a (please print)
qualified proxy is not identified, the Secretary of the Cooperative, as
attorney and agent for undersigned to vote as undersigned's proxy at the
Special Meeting of the shareholders of SAND CREEK TELEPHONE COMPANY to be
held at Sand Creek Community Church, East Street, Sand Creek, Michigan on
Saturday, December 2, 1995, at 1:00 p.m. and at any adjournment or
adjournments thereof. The above named agent is instructed to vote as
follows: (check one box, failure to check a box will authorize your
proxy to vote as your proxy selects).
A. The Agreement and Plan of Share Exchange with Sand Creek
Communication Company approved by the Board of Directors
of Sand Creek Telephone Company is:
Approved [ ]
Not Approved [ ]
Dated: ________________ ______________________________
Shareholder Signature
______________________________
Other Shareholder Signature
(If Joint Owner)
_______________ _____________
Certificate Nos. Number of
Shares
SCHEDULE Section 210.12-09
The valuation accounts deducted in the balance sheet from the accounts
to which they apply are as follows:
<TABLE>
<CAPTION>
Beginning Charged to Charged to Ending
Description Balance Expenses Other Accounts Deductions Balance
Charged to Collection Accounts
to Bad Debt Amount Written
Expense Previously Off
Written Off
<S> <C> <C> <C> <C> <C>
1/1/94 12/31/94
Accounts receivable
allowance for
doubtful accounts $ 7,990 $ 2,018 $ 2,985 $(7,717) $ 5,276
1/1/93 12/31/93
Accounts receivable
allowance for
doubtful accounts $ 5,388 $ 3,403 $ (801) $ 7,990
1/1/94 6/30/94
Accounts receivable
allowance for
doubtful accounts $ 7,990 $ 383 $(5,699) $ 2,674
1/1/95 6/30/95
Accounts receivable
allowance for
doubtful accounts $ 5,276 $ 529 $(2,510) $ 3,295
</TABLE>
