REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(as revised by Amendment No. 4)
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: February 7, 1996.
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, 57
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 55-57
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 22-55
18. Information if Proxies, Consents or
Authorizations are to be Solicited
in an Exchange Offer 9, 10, 19-22, 37-38
19. Information if Proxies, Consents or
Authorizations are not to be Solicited N/A
20. Indemnification of Directors and
Officers 39, 57
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, March 2, 1996. 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", PAGE 8 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 February 2, 1996.
This Proxy Statement/Prospectus and the accompanying form of
proxy are first being mailed to Shareholders of Sand Creek on or about
February 7, 1996.
You are advised to retain this Proxy Statement/Prospectus for future
reference.
[Prospectus, p 1]
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 February 20, 1996.
See back cover for Table of Contents.
[Prospectus, p 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, March 2, 1996 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 February 11, 1996. 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 41,259 1/3 shares of Sand Creek
Common Stock issued and outstanding and 153 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, p 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 telecommunication provider 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 the Michigan telecommunications
act, 1991 Public Act 179, as amended, including 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, 86 sales of the Common Stock of Sand Creek. These
sales involved 5,747.33 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
[Prospectus, page 4]
subsidiaries. The reasons for establishing such a corporate
structure include the following: First, Sand Creek is a
telecommunication provider 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 8,251 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, p 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, p 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
36,222 authorized and unissued shares of Common Stock (approximately
27,482 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."
Sand Creek Telephone Company
Selected Financial Data
As of December 31
9 Months Ended Sept. 30
1994 1993 1992 1991 1990 1995 1994
(Audited) (Audited) (Audited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net operating revenue $ 462,643 $ 505,446 $ 369,892 $ 256,930 $ 258,450 $ 266,422 $ 316,395
Net income before
cumulative change in
accounting principle $ 354,758 $ 348,841 $ 206,019 $ 149,031 $ 114,482 $ 289,933 $ 298,022
Net income per share
before cumulative
effect of change in
accounting principle $ 8.58 $ 8.56 $ 5.08 $ 3.69 $ 2.75 $ 6.98 $ 7.22
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 $ 289,933 $ 298,022
Net income per share $ 8.58 $ 9.34 $ 5.08 $ 3.69 $ 2.75 $ 6.98 $ 7.22
Total Assets $2,653,999 $2,458,967 $2,164,697 $1,958,005 $1,805,852 $2,785,269 $2,640,266
Debt $ -0- $ 63,889 $ 97,220 $ 127,945 $ 159,985 $ -0- $ 39,859
Dividends per share $ 2 $ 1 $ 1 $ 1 $ 1 $ 1 $ 1
[Prospectus, p 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 36,222 authorized and unissued shares of
Common Stock (27,482 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, p 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 February 7, 1996.
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 February 11, 1996, are entitled to notice of and to vote
at the Special Meeting. As of the date hereof, there were 41,259 1/3
shares outstanding and 153 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, p 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 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, as
amended ("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, p 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, p 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
[Prospectus, p 12]
EXCHANGE WILL NOT TAKE 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
[Entities shown in boxes; vertical lines show ownership]
STEP 3: FINAL STRUCTURE
Shareholders
Sand Creek Telephone Company
Cass Cellular Sand Creek
Limited Partnership* Communications Company
[Entities shown in boxes; vertical lines show ownership]
[Prospectus, p 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
8,251 of the issued and outstanding shares of Sand Creek. MPSC
approval of the Share Exchange is not required.
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, p 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 of Sand 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 MTA 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 not intended 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 MTA. 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 MTA, 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 December 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 36,222
authorized but unissued shares of Common Stock (approximately 27,482
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 41,259 1/3 were outstanding
as of the date hereof. 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.
[Prospectus, p 15]
C. 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.
D. 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, p 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, 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, p 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:
Paid-In Retained Total
# Of Shares Capital Stock Capital Earnings Equity
Sand Creek
Balance @ 09-30-95 41,299 1/3 412,993 29,482 2,052,138 2,494,613
2. Stock Redemption (41,299 1/3) (412,993) (29,482) 442,475 -0-
3. Stock Issuance 41,299 1/3 412,993 (412,993) -0-
Proforma
post-exchange 41,299 1/3 412,993 -0- 2,081,620 2,494,613
SCCC
Balance @ 09-30-95 1 1,000 -0- -0- 1,000
1. Stock Redemption (1) (1,000) (1,000)
2. Stock Issuance 123,898 1,238,980 (1,238,980) -0-
3. Stock Acquisition 2,494,613 2,494,613
Proforma
Post Exchange 123,898 1,238,980 -0- 1,255,633 2,494,613
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 MBCA 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 MBCA. This summary
does not purport to be complete, and is qualified in its entirety by
reference to Sections 761 through 774 of the MBCA, 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 MBCA 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,p 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 February 11, 1996 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
than 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 February 11, 1996 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, p 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 February 11, 1996 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 8,251 shares.
[Prospectus, p 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 $4,100,000 limit of borrowing from St. Paul Bank for Cooperatives.
The partnership believes that additional lines of borrowing are available
at comparable rates and terms, if necessary.
[Prospectus, p 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.
In the last quarter of 1995, Sand Creek made from retained earnings an
equity investment in Cass Internet, L.L.C., a Michigan Limited Liability
Company 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 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. Sand
Creek's interest equals 25% of the total equity capital of Cass Internet,
L.L.C.
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
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of 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
except as to Note 5 as to
which the date is January
22, 1996
Okemos, MI
[Prospectus, p 23]
Sand Creek Telephone Company
Sand Creek, Michigan
Consolidated Balance Sheets
Unaudited Unaudited
December 31, December 31, September 30, September 30,
1994 1993 1995 1994
ASSETS
Current Assets
Cash and Cash
Equivalents $ 598,156 $ 828,223 $ 284,250 $ 675,301
Due from sub-
scribers, net
of reserve for
uncollectibles 14,443 22,961 20,084 19,484
Accounts Receivable
Primarily inter-
exchange carriers 68,008 66,312 112,102 55,359
Note Receivable 50,000 -0- -0- -0-
Material and supplies
Inventory 6,491 10,920 16,456 23,563
Equipment held for
Resale 9,101 7,466 19,190 12,205
Prepaid taxes 5,956 -0- 107,064 11,368
Prepaid expenses 2,840 4,021 6,972 6,766
TOTAL CURRENT ASSETS $ 754,995 $ 939,903 $ 566,118 $ 804,046
Investments $ 270,678 $ 190,824 $ 454,377 $ 294,850
Plant, Property
and Equipment
Plant in Service $1,730,133 $2,054,025 $2,153,757 $2,073,274
Plant under
Construction 179,119 6,720 -0- 298,325
$1,909,252 $2,060,745 $2,153,757 $2,371,599
Less:
Accumulated
Depreciation 280,926 732,505 388,983 830,229
Net Plant,
Property and
Equipment $1,628,326 $1,328,240 $1,764,774 $1,541,370
TOTAL ASSETS $2,653,999 $2,458,967 $2,785,269 $2,640,266
[The rest of this page is intentionally left blank.]
[Prospectus, p 24]
Unaudited Unaudited
December 31, December 31, September 30, September 30,
1994 1993 1995 1994
LIABILITIES AND
STOCKHOLDER'S
EQUITY
Current Liabilities
Accounts Payable
Primarily inter-
exchange carriers $ 63,521 $ 120,561 $ 37,792 $ 125,708
Customer Deposits 3,939 3,961 3,883 5,026
Current Maturities
of long-term debt -0- 32,040 -0- 32,040
Income tax accrued 97,403 90,160 -0- 48,962
Other current
liabilities 1,915 3,660 4,885 456
TOTAL CURRENT
LIABILITIES $ 166,778 $ 250,382 $ 46,560 $ 212,192
Long-term Debt $ -0- $ 31,849 $ -0- $ 7,819
Deferred Taxes $ 218,088 $ 184,671 $ 244,096 $ 166,114
TOTAL LIABILITIES $ 384,866 $ 466,902 $ 290,656 $ 386,125
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
09/30/95= 41,299 1/3 Shares
09/30/94= 41,683 1/3 Shares
$ 417,433 $ 416,117 $ 412,993 $ 416,833
Additional Paid-in
Capital 48,090 43,889 29,482 48,690
Retained Earnings 1,803,610 1,532,059 2,052,138 1,788,618
Total Stockholder's
Equity $2,269,133 $1,992,065 $2,494,613 $2,254,141
TOTAL LIABILITIES
AND STOCKHOLDER'S
EQUITY $2,653,999 $2,458,967 $2,785,269 $2,640,266
The accompanying notes are an integral part of these financial
statements.
[Prospectus, p 25]
Statements of Cash Flows
Unaudited
For the Nine Months
For the Years Ended December Ended September 30
1994 1993 1992 1995 1994
Operating Activities
Net Income $ 354,758 $ 380,587 $ 206,019 $ 289,933 $ 298,022
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 130,685 128,152 101,517 108,056 97,725
Investment tax credit (5,988) (6,041) (6,058) (4,380) (4,491)
Cumulative effect of change in
accounting principle -0- (31,746) -0- -0- -0-
Provision for deferred taxes 39,405 (15,148) -0- 30,389 (14,067)
Gain on sale of land (5,730) -0- -0- -0- -0-
Partnership earnings (129,354) (37,822) -0- (179,199) (104,026)
Changes in Operating Assets and
Liabilities:
Due from subscribers/customers 11,232 (1,935) 1,679 (5,641) 3,477
Accounts receivable (1,696) (20,905) (7,452) (44,094) 10,953
Inventories 2,794 7,187 (16,223) (20,054) (17,382)
Prepaid taxes (5,956) -0- 8,312 (101,108) (11,368)
Prepaid expenses 1,181 (422) 1,094 (4,132) (2,745)
Accounts payable (57,040) (57,200) 18,933 (25,729) 5,147
Customer deposits (22) 934 622 (56) 1,065
Income taxes accrued 7,243 54,967 35,193 (97,403) (41,198)
Other current liabilities (1,745) 1,944 (164) 2,970 (3,204)
Net Cash Provided By (Used In)
Operating Activities $ 337,053 $ 405,154 $ 342,963 $ (50,448) $ 217,908
Investing Activities
Purchase of property,
plant and equipment $(480,969) $ (65,809) $ (2,049) $(244,505) $(306,782)
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) $(199,005) $(306,782)
Financing Activities
Principal payments on
long-term debt $ (63,889) $ (33,331) $ (32,040) $ -0- $ (24,030)
Payment of cash dividends (83,207) (40,920) (41,029) (41,405) (41,463)
Proceeds from issuance of stock 59,115 68,366 62,207 -0- 59,116
Payment for retirement of stock (57,670) (28,143) (61,975) (23,048) (57,671)
Net Cash Used in Financing
Activities $(145,651) $ (34,028) $ (72,837) $ (64,453) $ (64,048)
Increase (Decrease) in Cash and
Cash Equivalents $(230,067) $ 299,657 $ 265,827 $(313,906) $(152,922)
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 $ 284,250 $ 675,301
The accompanying notes are an integral part of these financial
statements.
[Prospectus, p 26]
Statements of Income
Unaudited
For the Nine Months
For the Years Ended December Ended September 30
1994 1993 1992 1995 1994
Operating Revenues
Local Services $ 255,639 $ 273,464 $ 224,152 $ 214,287 $ 190,678
Access Revenue 639,483 627,405 461,020 417,901 414,545
Miscellaneous 61,688 83,380 58,493 56,858 41,958
Total Operating Revenues $ 956,810 $ 984,249 $ 743,665 $ 689,046 $ 647,181
Operating Expenses
Plant Specific $ 132,573 $ 149,118 $ 98,716 $ 101,496 $ 80,712
Plant Non-Specific:
Network and other 4,266 2,805 3,277 13,646 2,751
Depreciation 130,685 128,152 101,517 108,056 97,725
Customer Operations 119,247 97,708 90,777 87,593 85,175
Corporate Operations 107,396 101,020 79,486 111,833 64,423
Total Operating Expenses $ 494,167 $ 478,803 $ 373,773 $ 422,624 $ 330,786
Net Operating Revenue $ 462,643 $ 505,446 $ 369,892 $ 266,422 $ 316,395
Operating Taxes
Investment Tax Credits-Net$ (5,988) $ (6,041)$ (6,058) $ (4,380)$ (4,491)
Federal Income Taxes-Current 139,531 160,367 89,320 37,766 74,953
Federal Income Taxes-Deferred 21,338 (15,148) 27,563 30,389 (14,067)
Other Operating Taxes 47,916 44,833 40,278 33,551 35,838
Total Operating Taxes $ 202,797 $ 184,011 $ 151,103 $ 97,326 $ 92,233
Net Operating Income $ 259,846 $ 321,435 $ 218,789 $ 169,096 $ 224,162
Other Income and Expense
Interest Income 13,754 11,616 6,740 6,770 10,237
Special Charges (2,449) (200) (6,901) (1,483) 821
Gain on Sale of Land 5,730 -0- -0- -0- -0-
Partnership Earnings 129,354 37,822 -0- 179,199 104,026
Federal Income Taxes
- - Non-Operating (48,657) (16,809) (2,292) (63,229) (38,849)
Interest and Related Charges (2,820) (5,023) (10,317) (420) (2,375)
Net Income Before
Change in Accounting
Principle $ 354,758 $ 348,841 $ 206,019 $ 289,933 $ 298,022
Cumulative Effect of
Change in Accounting
Principle -0- 31,746 -0- -0- -0-
Net Income $ 354,758 $ 380,587 $ 206,019 $ 289,933 $ 298,022
Earnings per common share:
Net income before
cumulative effect
of change in accounting
principle $ 8.58 $ 8.56 $ 5.08 $ 6.98 $ 7.22
Cumulative Effect of
Change in Accounting
Principle -0- .78 -0- -0- -0-
Net Income Per Common
Share $ 8.58 $ 9.34$ 5.08 $ 6.98 $ 7.22
The accompanying notes are an integral part of these financial
statements.
[Prospectus, p 27]
Statement of Changes in Stockholders' Equity
For the Years Ended December 31, 1992, 1993, and 1994
Additional Total
Number of Capital Paid In Retained Stockholders'
Shares Stock Capital Earnings Equity
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
Statements of Changes in Stockholders' Equity
For the Nine Months Ended September 30, 1995 and 1994
Additional Total
Number of Capital Paid In Retained Stockholders'
Shares Stock Capital Earnings Equity
Balance January 1, 1995 41,743 1/3 $ 417,433 $ 48,090 $ 1,803,610 $ 2,269,133
Net Income 289,933 289,933
Capital stock dividend -
Cash ($1.00 per share) (41,405) (41,405)
Capital stock redeemed (444) (4,440) (18,608) (23,048)
Balance at Sept. 30, 1995 41,299 1/3 $ 412,993 $ 29,482 $ 2,052,138 $ 2,494,613
Balance at January 1,1994 41,611 2/3 $ 416,117 $ 43,889 $ 1,532,059 $ 1,992,065
Net Income 298,022 298,022
Capital stock dividend -
Cash ($1.00 per share) (41,463) (41,463)
Capital stock redeemed (1,343 1/3) (13,434) (44,237) (57,671)
Capital stock issued 1,415 14,150 49,038 63,188
Balance at Sept. 30,1994 41,683 1/3 $ 416,833 $ 48,690 $ 1,788,618 $ 2,254,141
The accompanying notes are an integral part of these financial
statements.
[Prospectus, p 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, p 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.
The balances of the major classes of plant in service as of
December 31 are as follows:
1994 1993
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
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.
Total income tax expense for the years ended December 31, 1994,
1993 and 1992 was allocated as follows:
1994 1993 1992
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
[Prospectus, p 30]
Income tax expense attributable to income before the cumulative
effect of a change in accounting principle is composed of the
following:
1994 1993 1992
Federal
Current $182,200 $171,135 $ 85,554
Deferred 21,338 (15,148) 27,563
$203,538 $155,987 $113,117
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.
The following table reconciles the statutory federal income tax
expense to the effective federal income tax benefit.
1994 1993 1992
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
The detail of the net deferred tax liability is as follows:
1994 1993
Depreciation $150,553 $111,148
Investment tax credits 67,535 73,523
Total deferred tax liabilities $218,088 $184,671
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, p 31]
Summarized information of Cass Cellular is as follows:
1994 1993 1992
Total Assets $4,443,000 $2,499,000 $1,576,000
Total Liabilities 2,308,000 1,373,000 926,000
Bank Loans 1,588,000 943,000 693,000
Partners' Equity 574,000 212,000 48,000
Net Income 575,000 154,000 50,000
Total Revenues 3,477,000 1,859,000 623,000
Total Expenses 2,311,000 1,469,000 437,000
Interest Expense 68,000 75,000 36,000
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 Nine-Month
Periods Ending September 30, 1994 and September 30, 1995
1. General
It is the opinion of management that these unaudited financial
statements, as of September 30, 1995 and 1994, and for the nine months
ended September 30, 1995 and 1994, include all required, material
adjustments which are necessary for a fair statement of the results for the
interim periods presented. All such adjustments are of a normal recurring
nature. All material intercompany items have been eliminated.
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, p 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.
Nine Months Ended September 30, 1995 Compared to Nine Months Ended
September 30, 1994
Results of Operations
Net income for the nine months ended September 30, 1995 decreased by
approximately $8,000 from net income for the nine months ended
September 30, 1994. An increase in operating revenues of approximately
$42,000 was offset by an increase in operating expenses of $92,000,
resulting in a reduction of net operating revenue of approximately
$50,000. Operating taxes increased approximately $5,000. Non-operating
income taxes increased approximately $24,000 as a result of the
increase in partnership earnings of $75,000. Additionally, interest
income was approximately $4,000 less due to lower amounts of cash on
deposit.
Operating Revenues and Expenses. Local service revenues increased by
approximately $23,000 primarily due to higher levels of deregulated
sales in 1995 (cellular equipment sales and commissions.) Rates
charged for local service regulated by the MPSC did not change.
Access revenue increased $4,000. 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 determine. In the
interim, estimates are booked and true-ups recorded based upon a
change in estimate or the final access revenue settlement. It should
be noted that the interstate pool is experiencing excess earnings
which may require reductions to revenues which have been received to
date. Based on information available, management anticipates any such
reduction will be less than $10,000.
Miscellaneous revenue increased approximately $15,000 due primarily to
higher billing and collection revenues.
Operating expenses increased by approximately $92,000. This includes
an increase in depreciation of about $10,000 due to several factors
including the implementation of revised rates which more closely reflect the
remaining useful lives of plant assets, the addition of the new office
building and the retirement of the old switching equipment. The corporate
operations increase reflects additional professional fees of approximately
$36,000 which relate to the planned reorganization. The additional increase
in corporate operations of $12,000, as well as, the increase in plant
specific operations of $21,000, plant non-specific operations of $11,000, and
customer operations of $2,000 are the result of increased compensation
levels.
[Prospectus, p 33]
Taxes. Operating taxes are up approximately $5,000 which includes an
increase in federal income taxes accrued of $7,000 primarily caused by
true-ups of prior year estimates which is offset by a reduction of
other operating taxes in the amount of $2,000. 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
effective federal tax rates. Non-operating federal income tax is up
approximately $24,000 due to higher levels of partnership earnings.
Partnership Earnings. Partnership earnings increased approximately
$75,000 due to the improved performance of Sand Creek's investment in
Cass Cellular Limited Partnership of which they hold a 22.5% interest
as a limited partner. 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 of approximately $2,000 in interest income
plus approximately $6,000 gain on sale of land, less interest and
other expenses were 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
and true-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.
[Prospectus, p 34]
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. These expenditures for 1995 included
fiber cable ($8,500) and buried drops and cable ($4,000). For 1996, the
capital expenditures include central office upgrades ($60,000), outside
electronics ($35,000), fiber cable ($80,000) and outside drops and cable
($4,000). The expected source of future capital for such expenditures is
cash on hand and cash flow from operations and investments. 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, p 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 a $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.
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
approximately $63,000 is due principally to higher levels of taxable
income which was offset 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, p 36]
III. SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT.
As of the date hereof, there were outstanding 41,259 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.
Amount and Nature
Name of of Beneficial
Beneficial Owner* Address Ownership Percent
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
_______________________
* 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, p 37]
Gustav Leu, 6254 Demings Lake Road, Clayton, Michigan, 77, 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, 57,
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.
SUMMARY COMPENSATION TABLE
Other Annual Total
Name/Position Year Salary Compensation Compensation
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/Director1993 -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 Manager1993 31,871 4,615 36,486
1992 30,354 4,300 34,654
[Prospectus, p 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 153
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, 86 sales of the Common Stock of
Sand Creek. These sales involved 5,747.33 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, p 39]
Number of Number of High Low
Date Sales Shares Price Price
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
Fourth Quarter 1 40 $58.00 $58.00
Latest Available Information: $58.00* $58.00*
* Price set by Board of Directors for purchases and sales by Sand
Creek after June 1, 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:
Date Amount per Share
June 1, 1993 $1.00
June 1, 1994 $1.00
December 20, 1994 $1.00
June 1, 1995 $1.00
December 8, 1995 $1.00
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
1994
Independent Auditor's Report
We have audited the accompanying consolidated balance sheet of Cass
Cellular Limited Partnership as of December 31, 1994, and the related
statements of income, partners' capital and cash flows for the year
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion
on these financial statements based upon our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material
[Prospectus, p 40]
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 statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our report dated March 13, 1995, we expressed an opinion that the
1994 financial statements did not fairly present financial position,
results of operations and cash flows in conformity with generally
accepted accounting principles because those financial statements did
not contain the consolidation of a majority owned partnership. The
partnership has restated its 1994 financial statements to conform with
generally accepted accounting principles by consolidating all majority
owned entities. Accordingly, our present opinion on the 1994 financial
statements, as presented herein, is different from that expressed in
our previous report.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Cass Cellular Limited Partnership at December 31, 1994 and the
results of its operations and cash flows for the year then ended in
conformity with generally accepted accounting principles.
McCartney and McIntyre, P.C.
December 16, 1995
Okemos, Michigan
CASS CELLULAR LIMITED PARTNERSHIP
Consolidated Balance Sheet As of December 31, 1994
ASSETS
Current Assets
Cash and Cash Equivalents $ 198,741
Accounts Receivable
Customers, net of allowance
for bad debts of $19,000 248,186
Other 354,331
Affiliates 836,432
Other Current Assets 13,757
Total Current Assets $1,651,447
Noncurrent Assets
St. Paul Bank - Class C Stock $ 26,285
Allocated Patronage-St. Paul Bank 16,029
Total Noncurrent Assets $ 42,314
Property and Plant
Plant in Service $2,784,599
Plant under Construction 444,113
Total Plant $3,228,712
Less Accumulated Depreciation $ (479,363)
Net Property and Plant $2,749,349
Total Assets $4,443,110
[Prospectus, p 41]
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities
Accounts Payable
Construction $ 191,250
Trade 329,788
Deposits and Prepayments 17,601
Advance Billings 63,841
Accrued Expenses 117,820
Current Portion - Bank Loan 356,000
Total Current Liabilities $1,076,300
Noncurrent Liabilities
Bank Loan, net of Current Portion $1,232,077
Total Liabilities $2,308,377
Minority Interest $1,560,862
Partners' Equity $ 573,871
Total Liabilities And Partners' Equity $4,443,110
The accompanying notes are an integral part of these financial
statements.
[Prospectus, p 42]
CASS CELLULAR LIMITED PARTNERSHIP
Consolidated Statement of Income For the Year Ended December 31, 1994
Revenues
Cellular Services $3,437,873
Equipment Sales 25,370
Patronage 13,593
Total Revenues $3,476,836
Expenses
Cost of Goods Sold $ 16,832
Operating 850,933
General and Administrative 464,158
Sales and Marketing 721,566
Depreciation 257,645
Total Expenses $2,311,134
Operating Income $1,165,702
Other Income (Expense)
Interest, Net $ (68,138)
Other 12,832
Income Before Minority Interest $1,110,396
Minority Interest $ (535,491)
Net Income $ 574,905
The accompanying notes are an integral part of these financial
statements.
[Prospectus, p 43]
CASS CELLULAR LIMITED PARTNERSHIP
Consolidated Statement of Partners' Equity
For The Year Ended December 31, 1994
Gen Ptr Limited Partners
Ogden Sand Cr Waldron
Total D&P Comm D&P Comm Tel Co Tel Co Tel Co
100% 10% 22-1/2% 22-1/2% 22-1/2% 22-1/2%
Balance at
01-01-94 $212,216 $ 21,894 $ 49,268 $ 49,268 $ 45,893 $ 45,893
Contri-
butions $ 6,750 $ 3,375 $ 3,375
Distri-
butions (220,000) (22,000) (49,500) (49,500) (49,500) (49,500)
Alloca-
tion of
Partner-
ship
Income 574,905 57,489 129,354 129,354 129,354 129,354
Balance at
12-31-94 $573,871 $ 57,383 $129,122 $129,122 $129,122 $129,122
The accompanying notes are an integral part of these financial
statements.
[Prospectus, p 44]
CASS CELLULAR LIMITED PARTNERSHIP
Consolidated Statement of Cash Flows
For the Year Ended December 31, 1994
Operations
Net Income $ 574,905
Non-Cash Items
Minority Interest 535,491
Depreciation 257,645
Allocated patronage (9,515)
Operating Accounts
Accounts Rec. - Customers (113,854)
Accounts Rec. - Affiliates (378,251)
Accounts Rec. - Other,
and Other Current Assets (187,717)
Accounts Payable Trade 135,369
Advance Payments and
Deposits 35,039
Accrued Expenses 43,229
Cash Provided By Operations $ 892,341
Investing
Purchases of Plant $(1,234,905)
Investment in Class C Stock (10,731)
Cash Used In Investing
Activities $(1,245,636)
Financing
Loan Proceeds $ 644,784
Partner and Minority
Interest Distributions (552,850)
Partner and Minority
Interest Contributions 450,550
Cash Provided By
Financing Activities $ 542,484
Increase in Cash $ 189,189
Cash and Cash Equivalents
Beginning of Year 9,552
Cash and Cash Equivalents
End of Year $ 198,741
The accompanying notes are an integral part of these financial
statements.
[Prospectus, p 45]
CASS CELLULAR LIMITED PARTNERSHIP
Notes to Financial Statements
1. Summary of Accounting Policies
General
Cass 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:
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%
Investment in 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. The
results of RSA #9 have been consolidated within these financial
statements. All material inter-partnership transactions have been
eliminated.
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.
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 and cash equivalents consists of
demand deposits and items with maturities of less than three months.
For the year ended December 31, 1994, Cass Cellular Limited
Partnership paid cash for interest of $78,861.
Depreciation
Depreciation on fixed assets is calculated on the straight-line
method over the estimated useful lives of the assets, which range
between seven and fifteen years.
[Prospectus, p 46]
2. Class C Stock
Class C stock represents amounts purchased from The St. Paul Bank
for Cooperatives as a condition of obtaining financing (see Note 3).
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.
3. 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 $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
1995 $356,000
1996 391,000
1997 430,000
1998 473,000
1999 521,000
The loan contains certain 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.
4. 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.
5. Concentration of Credit Risk
The Partnership, through the operations of RSA #9, grants credit
to customers, substantially all of whom live in the service area of
RSA # 9. The operating partnership usually performs credit checks and
other procedures before the granting of credit for service. However,
in the event of uncollectibility of accounts, there would be a direct
write-off to operations.
Accounts receivable - affiliates represents amounts due to the
RSA # 9 partnership by entities associated with Century Cellunet, Inc.
(principally other subsidiaries of Century Telephone Enterprises,
Inc., parent of Century Cellunet, Inc.). This amount is settled
periodically. Accordingly, the Partnership considers this amount to
be fully collectable.
Accounts Receivable - Other is primarily amounts due from other
telecommunications providers for either roaming charges or from
interexchange carriers for access charges.
6. Property, Plant and Equipment
Components of Property, Plant and Equipment at December 31, 1994
were as follows
[Prospectus, p 47]
Land and Land Improvements $ 444,343
Buildings, Towers and Antennas 1,034,700
Radio Frequency Equipment 1,184,591
Other Equipment 120,965
Construction in Progress 444,113
Total Property, Plant and Equipment $3,228,712
Less Accumulated Depreciation (479,363)
Net Property, Plant and Equipment $2,749,349
7. Related Party Transactions
In performing the duties of operating the cellular system,
Century Cellunet and its affiliates were paid $373,718 for expenses
incurred on behalf of RSA #9, as stipulated in that partnership
agreement. In addition, the RSA # 9 partnership earned $25,000 of
interest on pooled amounts maintained by the operator, Century
Cellunet, Inc. This amount is netted against interest expense in the
statement of operations.
Included in accounts receivable - customers at December 31, 1994
is $193,000 of amounts receivable from Century Cellunet affiliates
whose customers have used the RSA # 9 cellular system. Included in
accounts payable - trade at December 31, 1994 is $58,000 of amounts
owed Century Cellunet affiliates related to RSA # 9 customers' use of
affiliates' cellular system.
[The remainder of this page is intentionally left blank.]
[Prospectus, p 48]
Cass Cellular Limited Partnership
Consolidated Balance Sheet
As of December 31, 1993 and 1992
ASSETS
Unaudited Unaudited
1993 1992
Current Assets
Cash and Cash Equivalents $ 10,000 $ 14,000
Accounts Receivable:
Customers, net of allowance
of bad debt of $15,000 and
$1,000 at Dec. 31, 1993 and
1992 134,000 172,000
Other 173,000 -0-
Affiliates 458,000 -0-
Other Current Assets 8,000 9,000
Total Current Assets $ 783,000 $ 195,000
Noncurrent Assets
St. Paul Bank - Class C Stock $ 16,000 $ 7,000
Allocated Patronage -
St. Paul Bank 7,000 1,000
Total Noncurrent Assets $ 23,000 $ 8,000
Net Property and Plant $1,693,000 $1,373,000
Total Assets $2,499,000 $1,576,000
LIABILITIES AND PARTNERS' EQUITY
Unaudited Unaudited
1993 1992
Current Liabilities
Accounts Payable
Construction $ 114,000 $ 47,000
Trade 194,000 138,000
Deposits and Prepayments 19,000
Advanced Billings 33,000 14,000
Accrued Expenses 75,000 34,000
Total Current Liabilities 430,000 233,000
Noncurrent Liabilities
Bank Loan $ 943,000 $ 693,000
Total Liabilities $ 1,373,000 $ 926,000
Minority Interest $ 914,000 $ 602,000
Partners' Equity $ 212,000 $ 48,000
Total Liabilities and
Partners' Equity $ 2,499,000 $ 1,576,000
See notes to these financial statements.
[Prospectus, p 49]
Cass Cellular Limited Partnership
Consolidated Statements Of Income
For The Years Ended December 31, 1993 and 1992
Unaudited Unaudited
1993 1992
Revenues
Cellular Services $1,829,000 $ 609,000
Equipment Sales 22,000 13,000
Patronage 8,000 1,000
Total Revenues $1,859,000 $ 623,000
Expenses
Cost of Goods Sold $ 17,000 $ 10,000
Operating 408,000 154,000
General and Administrative 298,000 128,000
Sales and Marketing 570,000 84,000
Depreciation 179,000 61,000
Total Expenses $1,469,000 $ 437,000
Operating Income $ 390,000 $ 186,000
Other Income (Expense)
Interest, Net $ (75,000) $ (36,000)
Other 3,000 -0-
Income Before
Minority Interest 318,000 150,000
Minority Interest $ 164,000 $ 100,000
Net Income $ 154,000 $ 50,000
See notes to financial statements.
[Prospectus, p 50]
CASS CELLULAR LIMITED PARTNERSHIP
Consolidated Statements Of Partners' Equity
For The Years Ended December 31, 1993 and 1992
Gen.Ptr. Limited Ptrs.
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
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%
Balance at
January 1,
1992 $(26,000) $ (2,000) $ (6,000) $ (6,000) $ (6,000) $ (6,000)
Contributions 26,000 2,000 6,000 6,000 6,000 6,000
Contributions
Receivable (2,000) (2,000)
Allocation of
Partnership
Income 50,000 6,000 11,000 11,000 11,000 11,000
Balance at
January 1,
1993 48,000 6,000 11,000 11,000 9,000 11,000
Contributions 17,000 2,000 3,000 3,000 6,000 3,000
Contributions
Receivables (7,000) (4,000) (3,000)
Allocation of
Partnership
Income 154,000 14,000 35,000 35,000 35,000 35,000
Balance at
December 31,
1993 212,000 22,000 49,000 49,000 46,000 46,000
See notes to financial statements.
[Prospectus, p. 51]
CASS CELLULAR LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
Unaudited Unaudited
1993 1992
Operations:
Net Income $154,000 $ 50,000
Non-Cash Items:
Minority Interest 164,000 100,000
Depreciation 179,000 61,000
Allocated Patronage (6,000) (1,000)
Operating Accounts:
Accounts Rec.-Customers (106,000) (172,000)
Accounts Rec.-Affiliates (553,000) 574,000
Accounts Rec.-Other
and Other Current Assets (27,000) (3,000)
Accounts Payable-Trade 152,000 43,000
Advance Payments and
Deposits 33,000 14,000
Accrued Expenses 41,000 19,000
Cash Provided by Operations 31,000 685,000
Investing:
Purchases of Plant $ (434,000) $(1,061,000)
Investment In Class
C Stock (8,000) (6,000)
Cash Used In Investing
Activities $ (442,000) $(1,067,000)
Financing:
Loan Proceeds $ 250,000 $ 221,000
Partner and Minority
Interest Contributions 157,000 173,000
Cash Provided By
Financing Activities $ 407,000 $ 394,000
Increase (Decrease) in Cash $ (4,000) $ 12,000
Cash and Cash Equivalents
Beginning Of Year 14,000 2,000
Cash and Cash Equivalents
End Of Year $ 10,000 $ 14,000
See notes to financial statements.
[Prospectus, p 52]
Cass Cellular Limited Partnership
Notes to Consolidated Financial Statements
1. Summary of Accounting Policies
General:
It is the opinion of management that these unaudited financial statements, as
of December 31, 1993 and 1992, and for the twelve months ended December 31,
1993 and 1992 include all required, material adjustments, which are necessary
for a fair statement of the results of the periods presented. All such
adjustments are of a normal recurring nature.
Cass 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:
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%
Investment in 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.
The results of RSA #9 have been consolidated within these financial
statements. All material inter-partnership transactions have been eliminated.
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.
As of December 31, 1993, there were several sites operational within the
cellular service area. The members of RSA #9 have approved additional
sites to be constructed during the next two years. The construction costs
for these sites along with additional equipment for existing sites are
expected to approximate $3,500,000. Cass Cellular's portion of these
costs would be approximately $1,947,000. These amounts will be funded
principally through additional borrowings.
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 Limited Partnership.
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, 1993, and 1992, Cass Cellular Limited Partnership paid
cash for interest of approximately $60,000 and $30,000, respectively.
[Prospectus, p 53]
Depreciation:
Depreciation on fixed assets is calculated on the straight-line method over the
estimated useful lives of the assets, which range between seven and fifteen
years.
2. Class C Stock
Class C stock represents amounts purchased from The St. Paul Bank for
Cooperatives as a condition of obtaining financing (see Note 3). This
amount 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, 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.
3. 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 $657,000 at December 31, 1993. This note bears
interest at a variable rate (7.2% at December 31, 1993).
In March 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 are as follows:
1994 $ -0-
1995 $356,000
1996 $391,000
1997 $430,000
1998 $473,000
The loan contains covenants which, among other things, restrict
distributions to the partners and mandate certain financial ratios.
In addition, substantially all assets of the Partnership are pledged
as collateral for the loans.
4. Concentration Of Credit Risk
The Partnership, through the operation of RSA #9, grants credit to customers,
substantially all of whom live in the service area of RSA #9. The operating
partnership usually performs credit checks and other procedures before granting
of credit for service. However, in the event of uncollectibility of accounts,
there would be a direct write-off to operations.
Accounts receivable - affiliates represents amount due to the RSA #9
partnership by entities associated with Century Cellunet, Inc. (principally
other subsidiaries of Century Telephone Enterprises, Inc., parent of Century
Cellunet, Inc.). This amount is settled periodically. Accordingly, the
Partnership considers this amount to be fully collectable.
Accounts Receivable- Other is primarily amounts due from other
telecommunications providers for either roaming charges or from interexchange
carriers for access charges.
[Prospectus, p 54]
5. Property, Plant And Equipment
Components of Property, Plant and Equipment at December 31, 1993 and 1992 were
as follows:
1993 1992
Plant in Service $ 1,928,000 $ 987,000
Construction in Progress -0- 447,000
Total Property Plant and Equipment 1,928,000 $ 1,434,000
Less Accumulated Depreciation $ (235,000) $ (61,000)
Net Property, Plant and Equipment $ 1,693,000 $ 1,373,000
6. Related Party Transactions
In performing the duties of operating the cellular system, Century Cellunet
and its affiliates were paid $316,000 and $107,000, respectively, for expenses
incurred on behalf of RSA #9, 1993 and 1992 as stipulated in that partnership
agreement. In addition, the RSA #9 partnership earned $12,000 and $-0-
interest on pooled amount maintained by the operator, Century Cellunet, Inc.
This amount is netted against interest expense in the statement of operations.
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:
Board of Directors
Sand Creek Communications Company
Sand Creek, Michigan
Independent Auditor's Report
We have audited the accompanying balance sheet of Sand Creek
Communications Company, as of September 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
[Prospectus, p 55]
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 September 30, 1995, in conformity with
generally accepted accounting principles.
McCartney and McIntyre, P.C.
Okemos, Michigan
December 20, 1995
Sand Creek Communications Company
Balance Sheet
As Of September 30, 1995
Assets
Cash $1,000
Total Current Assets: $1,000
Stockholder's Equity
Common Stock, 160,000 shares
authorized, issued and outstanding,
1 share $1,000
Total Stockholder's Equity: $1,000
The accompanying notes are an integral part of this financial
statement.
Notes to September 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.
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
[Prospectus, p 56]
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 MBCA, 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.
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.
[Prospectus, p 57]
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, except as to Note 5, as to which the date is January
22, 1996.
The balance sheet of Cass Cellular Limited Partnership as of
December 31, 1994, and the statement of income, changes in partners'
equity, and cash flows for the year ended December 31, 1994 has been
audited by McCartney and McIntyre, P.C. and their report was dated on
December 16, 1995.
The balance sheet of Sand Creek Communications Company as of
September 30, 1995 has been audited by McCartney and McIntyre, P.C.
and their report was dated on December 20, 1995.
[Prospectus, 58]
[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.
[PROXY 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........................................ 55
I. DESCRIPTION OF SCCC BUSINESS......................... 55
II. SCCC MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AS A RESULT OF OPERATIONS............... 56
III. SECURITY OWNERSHIP OF CERTAIN OWNERS AND
MANAGEMENT........................................ 56
IV. MANAGEMENT.......................................... 57
V. LIABILITY AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS.......................................... 57
VI. LEGAL PROCEEDINGS................................. 57
VII. DIVIDENDS ON AND MARKET PRICES OF SCCC COMMON
STOCK........................................... 57
LEGAL MATTERS.............................................. 58
EXPERTS...................................................... 58
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 fourth 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 February 2, 1996.
Sand Creek Communications Company
By: /S/ Robert Hinsdale
Robert Hinsdale, President
Pursuant to the requirements of the Securities Act of 1933, this
fourth amended registration statement has been signed by the following
persons in the capacities and on the dates indicated.
/s/Robert Hinsdale Date: February 2, 1996
Robert Hinsdale
Director, Sand Creek Communications Company
/s/ Gustav Leu Date: February 2, 1996
Gustav Leu
Secretary/Director, Sand Creek Communications Company
/s/ Lawrence Wilt Date: February 2, 1996
Lawrence Wilt
Vice President/Director, Sand Creek Communications Company
/s/ Richard Simpkins Date: February 2, 1996
Richard Simpkins
Director, Sand Creek Communications Company
/s/ Harvey Souders Date: February 2, 1996
Harvey Souders
Director, Sand Creek Communications Company
/s/ Margie M. Gallatin Date: February 2, 1996
Margie M. Gallatin
Treasurer, Sand Creek Communications Company
Sand Creek Telephone Company
By: /s/ Robert Hinsdale Date: February 2, 1996
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 Not Applicable
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 Trustee 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 ----------