SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Chorus Communications Group, Ltd.
(Exact name of registrant as specified in its charter)
WISCONSIN
(State or other jurisdiction of incorporation or organization)
TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE)[4813]
(Primary Standard Industrial Classification Code Number)
39-1880843
(I.R.S. Employer Identification No.)
1912 PARMENTER STREET
MIDDLETON, WI 53562-3139
(608) 828-2000
(Address, including ZIP Code, and Telephone Number, including area code,
of registrant's principal executive officers)
HOWARD G. HOPEMAN
1912 PARMENTER STREET
MIDDLETON, WI 53562-3139
(608) 828-2000
(Name, address, including ZIP Code, and telephone number, including area
code, of agent for service)
(Copies to:) Daniel T. Hardy, Esq. Mark D.Timmerman, Esq.
Darold J. Londo, Esq. 310 West Sunset Court
Grant B. Spellmeyer, Esq. Madison, WI 53705-5145
Axley Brynelson
2 East Mifflin Street
P.O. Box 1767
Madison, WI 53701-1767
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC
As soon as practicable after the effectiveness of this Registration
Statement and the effective time ("Effective Time") of the merger of one
wholly-owned subsidiary of Chorus Communications Group, Ltd. ("Chorus")
with and into Mid-Plains, Inc. ("Mid-Plains") and the merger of another
wholly-owned subsidiary of Chorus with and into Pioneer Communications, Inc.
("Pioneer") (collectively, referred to as the "Mergers") all as
described in the Agreement and Plan of Merger, dated as of December 31, 1996.
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
Title of Proposed Proposed
Each Class Maximum Maximum Amount of
of Securities Amount to be Offering Aggregate Registration
to be Registered Registered Price Per Unit Offering Price Fee
<F1> <F2> <F3>
Common Stock 2,684,303 $9.88 $26,520,913.64 $9,145.14
No Par Value
<FN>
<F1> Consists of 1,991,743 shares of Chorus Common Stock issuable upon
the conversion pursuant to the Mergers of currently outstanding shares
of Mid-Plains Common Stock and 692,560 shares of Chorus Common Stock
issuable upon the conversion pursuant to the Mergers of currently
outstanding shares of Pioneer Common Stock.
<F2> Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(f)(2) of the Securities Act of 1933, as
amended (the "Securities Act") based on the combined book value of such
securities computed as of the latest practicable date of filing
this Registration Statement.
<F3> Pursuant to Section 6(b) of the Securities Act, fees are 1/29th of
one percent (1%) of the aggregate offering amount.
</FN>
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, as amended, or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said section 8 (a), may determine.
Chorus Communications Group, Ltd.
CROSS-REFERENCE SHEET
PART I
INFORMATION REQUIRED IN THE PROSPECTUS
ITEM NUMBER IN FORM S-4
LOCATION IN PROXY
STATEMENT/PROSPECTUS
A. INFORMATION ABOUT THE TRANSACTION
1.
Forepart of the Registration and
Outside Front Cover Page of
Prospectus
Facing Page of the Registration
Statement;
Outside Front Cover Page of Prospectus
2.
Inside Front and Outside Back Cover
Page of Prospectus
Inside Front Cover Page of Prospectus;
Where You Can Find More Information;
Table of Contents
3.
Risk Factors, Ratio of Earnings to
Fixed Charges and Other Information
Summary; Risk Factors;
The Mergers
4.
Terms of the Transaction
Outside Front Cover Page of
Prospectus; The Mergers; The Merger
Agreement; The Special Meetings;
Comparison of Shareholders Rights;
Description of Chorus Capital Stock
Following the Mergers
5.
Pro Forma Financial Information
Unaudited Pro Forma Combined Condensed
Financial Statements; Appendix VII;
Appendix VIII; Appendix IX
6.
Material Contacts with the Company
Being Acquired
The Mergers, The Merger Agreement
7.
Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters *
8.
Interests of Named Experts and
Counsel *
9.
Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities
Interests of Certain Persons In the
Mergers
B. INFORMATION ABOUT THE REGISTRANT
10.
Information with Respect to S-3
Registrants*
11.
Incorporation of Certain
Information by Reference *
12.
Information with Respect to S-2 or
S-3 Registration *
13.
Incorporation of Certain
Information by Reference *
14.
Information with Respect to
Registrants Other Than S-3 or S-2
Registrants
Summary;
Where You Can Find More Information;
The Mergers; Unaudited Pro Forma
Combined Condensed Financial
Statements; Appendix VII;
Appendix VIII; Appendix IX
C. INFORMATION ABOUT THE COMPANIES BEING ACQUIRED
15.
Information with Respect to S-3 Companies *
Summary; Where You Can Find More Information; The Mergers; Unaudited
Pro Forma Combined Condensed Financial Statements; Appendix VII.
16.
Information with Respect to S-2 or
S-3 Companies *
17.
Information with Respect to
Companies Other Than S-3 or S-2
Companies
Summary; Where You Can Find More Information;
The Mergers; Unaudited Pro Forma
Combined Condensed Financial
Statements; Appendix VIII
D. VOTING AND MANAGEMENT INFORMATION
18.
Information if Proxies, Consents or
Authorizations are to be Solicited
Outside Front Cover Page of
Prospectus; Summary; The Mergers; The Merger
Agreement; The Special Meetings;
Comparison of Shareholders Rights;
Description of Chorus Capital Stock
Following the Mergers
19.
Information if Proxies, Consents or
Authorizations Are Not to be
Solicited or in an Exchange Offer *
* Omitted because the item is inapplicable or the answer thereto is
negative.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM NUMBER IN FORM S-4
LOCATION IN FORM S-4
20.
Indemnification of Directors and
Officers
Part II
21.
Exhibits
Part II
22.
Undertakings
Part II
23.
Financial Statements
Part II
MID-PLAINS, INC.
Post Office Box 620070
Middleton, Wisconsin 53562-0070
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Saturday, May 17, 1997, 10:00 A.M.
Mid-Plains, Inc. ("Mid-Plains") will hold a special meeting of its
shareholders (the "Special Meeting") on May 17, 1997 at 10:00 A.M. at
the Middleton High School Auditorium, 7400 North Avenue, Middleton, Wisconsin
for the following purposes:
1. To consider and vote on a proposal (the "Proposal") to approve
an Agreement and Plan of Merger, dated as of December 31, 1996, (the
"Merger Agreement") between Pioneer Communications, Inc. ("Pioneer") and
Mid-Plains. The Merger Agreement provides for, among other things, the merger
of Mid-Plains Acquisitions, Inc., a wholly-owned subsidiary of Chorus
Communications Group, Ltd., into Mid-Plains, with Mid-Plains surviving
the merger as a wholly-owned subsidiary of Chorus Communications Group, Ltd.,
and for the merger of Pioneer Acquisitions, Inc., a wholly-owned subsidiary
of Chorus Communications Group, Ltd., into Pioneer, with Pioneer surviving
the merger as a wholly-owned subsidiary of Chorus Communications Group, Ltd.
2. To transact such other business as may properly come before
the Special Meeting.
Mid-Plains has fixed the close of business on April 22, 1997 as the
record date for the determination of shareholders entitled to vote at
the Special Meeting or any adjournment thereof. A list of such shareholders
will be available for inspection by shareholders of record during business
hours at Mid-Plains, Inc., 1912 Parmenter Street, Middleton, Wisconsin for
ten days prior to the date of the Special Meeting, and will also be available
at the Special Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE TO APPROVE THE PROPOSAL, WHICH IS DESCRIBED IN DETAIL IN
THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS. Approval of the Proposal
requires the affirmative vote of a majority of the outstanding shares of
Mid-Plains Common Stock entitled to vote at the Special Meeting. Please sign
and promptly return the proxy card in the enclosed envelope, whether or not
you expect to attend the Special Meeting. Failure to return a properly
executed proxy card or to vote at the Special Meeting will have the same
effect as a vote against the Proposal.
Fredrick E. Urben March 17, 1997
Secretary
PIONEER COMMUNICATIONS, INC.
Post Office Box 231
Lancaster, Wisconsin 53813
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Friday, May 16, 1997, 2:00 P.M.
Pioneer Communications, Inc. ("Pioneer") will hold a special meeting
of its shareholders (the "Special Meeting") on May 16, 1997 at 2:00 p.m. at
the Grant County Youth and Agriculture Building, 916 East Elm Street,
Lancaster, Wisconsin, for the following purposes:
1. To consider and vote upon a proposal (the "Proposal") to approve
and adopt an Agreement and Plan of Merger, dated as of December 31, 1996 (the
"Merger Agreement"), between Pioneer and Mid-Plains, Inc. ("Mid-Plains").
The Merger Agreement provides for, among other things, the merger of Pioneer
Acquisitions, Inc., a wholly-owned subsidiary of Chorus Communications
Group, Ltd., into Pioneer, with Pioneer surviving the merger as a
wholly-owned subsidiary of Chorus Communications Group, Ltd. and, for the
merger of Mid-Plains Acquisitions, Inc., a wholly-owned subsidiary of
Chorus Communications Group, Ltd., into Mid-Plains, with Mid-Plains
surviving the merger as a wholly-owned subsidiary of Chorus Communications
Group, Ltd.
2. To transact such other business as may properly come before the
Special Meeting.
Pioneer has fixed the close of business on April 22, 1997 as the record
date for the determination of shareholders entitled to vote at the Special
Meeting or any adjournment thereof. A list of such shareholders will be
available for examination by shareholders of record during business hours at
the offices of Pioneer, 140 North Monroe Street, Lancaster, Wisconsin, for
ten days prior to the Special Meeting and will also be available at the
Special Meeting.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE
AND ADOPT THE PROPOSAL, WHICH IS DESCRIBED IN DETAIL IN THE ACCOMPANYING
JOINT PROXY STATEMENT/PROSPECTUS. Adoption of the Proposal requires the
affirmative vote of a majority of the outstanding shares of Pioneer Common
Stock entitled to vote at the Special Meeting. Please sign and promptly
return the proxy card in the enclosed envelope, whether or not you expect to
attend the Special Meeting. Failure to return a properly executed proxy card
or to vote at the Special Meeting will have the same effect as a vote
against the Proposal.
G. Burton Block March 17, 1997
Secretary
MID-PLAINS PIONEER
MERGERS PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Mid-Plains, Inc. and Pioneer Communications,
Inc. have approved an agreement and plan of merger (the "Merger Agreement"),
the principal objective of which is to cause the companies to become
wholly-owned subsidiaries of a new holding/parent company. The new company
will be named Chorus Communications Group, Ltd. ("Chorus") and will be
headquartered in Dane County, Wisconsin. To effectuate the reorganization,
Mid-Plains and Pioneer will be merged into two wholly-owned subsidiaries of
Chorus (the "Mergers"), which will be formed to facilitate the
reorganization. The corporate existence of both Mid-Plains and Pioneer will
continue following the Mergers.
If the Mergers are completed, Mid-Plains shareholders will receive one
(1) share of Chorus common stock for each share of Mid-Plains common stock
that they own. Pioneer shareholders will receive four (4) shares of Chorus
common stock for each share of Pioneer common stock that they own. We
estimate that the shares of Chorus stock to be issued to Mid-Plains
shareholders will represent approximately 74% of the outstanding stock of
Chorus after the Mergers. Likewise, the shares of Chorus common stock to be
issued to Pioneer shareholders will represent approximately 26% of the
outstanding stock of Chorus after the Mergers.
The Mergers cannot be completed unless the shareholders of both
companies approve the Merger Agreement. We have scheduled separate special
meetings for our shareholders to vote on the Mergers. YOUR VOTE IS VERY
IMPORTANT.
Whether or not you plan to attend a meeting, please take the time to
vote by completing and mailing the enclosed proxy card to us. If you sign,
date and mail your proxy card without indicating how you want to vote, your
proxy will be counted as a vote in favor of the Merger Agreement. If you
fail to return your card, the effect will be a vote against the Merger
Agreement.
The dates, times and places of the meetings are as follows:
For Pioneer Shareholders:
Friday, May 16, 1997
2:00 p.m.
Grant County Youth and Agriculture Building
916 East Elm Street
Lancaster, Wisconsin
For Mid-Plains Shareholders:
Saturday, May 17, 1997
10:00 a.m.
Middleton High School Auditorium
7400 North Avenue
Middleton, Wisconsin
This Joint Proxy Statement/Prospectus provides you with detailed
information about the proposed Mergers. We encourage you to read this entire
document carefully. You may obtain additional information about Mid-Plains
from documents that Mid-Plains has filed with the Securities and Exchange
Commission ("SEC").
Dean W. Voeks Douglas J. Timmerman
President President
Mid-Plains, Inc. Pioneer Communications, Inc.
(The following paragraph is shown outlined in a box in the S-4).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is March 17, 1997.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MERGERS. . . . . . . . . . . 1
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . .8
MARKET DIVIDENDS ON COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
Mid-Plains. . . . . . . . . . . . . . . . . . . . . . . .10
Pioneer. . . . . . . . . . . . . . . . . . . . . . . . . .10
THE MERGERS. . . . . . . . . . . . . . . . . . . . . . . . .12
Background of the Mergers. . . . . . . . . . . . . . . . .13
Reasons for the Mergers;
Recommendations of the Boards. . . . . . . . . . . . . . .19
Cautionary Statement Concerning Forward-
Looking Statements . . . . . . . . . . . . . . . . . . . .22
Accounting Treatment . . . . . . . . . . . . . . . . . . .22
Material Federal Income Tax
Consequences . . . . . . . . . . . . . . . . . . . . . . .22
Regulatory Approvals . . . . . . . . . . . . . . . . . . .23
Dissenters' Rights . . . . . . . . . . . . . . . . . . . .23
Certain Litigation . . . . . . . . . . . . . . . . . . . .24
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS.24
Selected Financial Information of Mid-Plains . . . . . . .31
Management's Discussion and Analysis
of Financial Condition and Results
of Operation - Mid-Plains. . . . . . . . . . . . . . . . .31
Selected Financial Information of Pioneer. . . . . . . . .35
Management's Discussion and Analysis
of Financial Condition and Results
of Operation - Pioneer . . . . . . . . . . . . . . . . . .36
OPINIONS OF FINANCIAL ADVISORS . . . . . . . . . . . . . . .38
Opinion of Mid-Plains' Financial Advisor . . . . . . . . .38
Opinion of Pioneer's Financial Advisor . . . . . . . . . .41
INTERESTS OF CERTAIN PERSONS IN
THE MERGERS. . . . . . . . . . . . . . . . . . . . . . . . .42
Indemnification and Insurance. . . . . . . . . . . . . . .42
THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . .42
General. . . . . . . . . . . . . . . . . . . . . . . . . .42
Consideration to be Received in the Mergers. . . . . . . .43
Exchange of Shares . . . . . . . . . . . . . . . . . . . .44
Chorus Following the Mergers . . . . . . . . . . . . . . .44
Certain Conditions . . . . . . . . . . . . . . . . . . . .44
Certain Representations and Warranties . . . . . . . . . .45
Transition Planning. . . . . . . . . . . . . . . . . . . .45
Certain Covenants. . . . . . . . . . . . . . . . . . . . .46
No Solicitation of Transactions. . . . . . . . . . . . . .46
Certain Benefits Matters . . . . . . . . . . . . . . . . .46
Indemnification and Insurance. . . . . . . . . . . . . . .46
Termination. . . . . . . . . . . . . . . . . . . . . . . .47
Termination Fees . . . . . . . . . . . . . . . . . . . . .47
Expenses . . . . . . . . . . . . . . . . . . . . . . . . .47
THE SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . .48
Times and Places; Purposes . . . . . . . . . . . . . . . .48
Voting Rights; Votes Required for Approval . . . . . . . .48
Proxies. . . . . . . . . . . . . . . . . . . . . . . . . .48
DIRECTORS AND MANAGEMENT OF CHORUS FOLLOWING THE MERGERS . .49
Directors. . . . . . . . . . . . . . . . . . . . . . . . .49
Committees of the Board of Directors . . . . . . . . . . .50
Compensation of Directors. . . . . . . . . . . . . . . . .50
Executive Compensation . . . . . . . . . . . . . . . . . .51
Stock Ownership of Directors, Executive
Officers and Five Percent Shareholders . . . . . . . . . .51
COMPARISON OF SHAREHOLDERS' RIGHTS . . . . . . . . . . . . .52
Comparison of Current Mid-Plains
Shareholder Rights and Chorus Shareholder
Rights Following the Mergers . . . . . . . . . . . . . . .53
Comparison of Current Pioneer
Shareholder Rights and Chorus Shareholder
Rights Following the Mergers . . . . . . . . . . . . . . .53
DESCRIPTION OF CHORUS CAPITAL STOCK
FOLLOWING THE MERGERS. . . . . . . . . . . . . . . . . . . .54
Authorized Capital Stock . . . . . . . . . . . . . . . . .54
Common Stock . . . . . . . . . . . . . . . . . . . . . . .54
Preemptive Rights. . . . . . . . . . . . . . . . . . . . .54
Transfer Agent and Registrar . . . . . . . . . . . . . . .54
Federal Securities Laws Consequences; Stock
Transfer Restriction Agreements. . . . . . . . . . . . . .55
General Acquisition Restrictions . . . . . . . . . . . . .55
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . .55
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . .55
FUTURE SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . .56
WHERE YOU CAN FIND MORE
INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . .56
APPENDIX I: Agreement and Plan of Merger
APPENDIX II: Secs.180.1301-180.1331, of the Wisconsin
Business Corporation Law.
APPENDIX III: Form of Amended and Restated Articles of Incorporation of
Chorus Communications Group, Ltd.
APPENDIX IV: Bylaws of Chorus Communications Group, Ltd.
APPENDIX V: Opinion of Edelman & Co., Ltd.
APPENDIX VI: Opinion of Madison Valuation Associates, Inc.
APPENDIX VII: Audited Financial Statements of Mid-Plains, Inc.
APPENDIX VIII: Audited Financial Statements of Pioneer Communications, Inc.
APPENDIX IX: Audited Financial Statement of Chorus Communications
Group, Ltd.
QUESTIONS AND ANSWERS ABOUT THE MERGERS
Q: WHY ARE THE TWO COMPANIES PROPOSING TO REORGANIZE AS
SUBSIDIARIES OF CHORUS COMMUNICATIONS GROUP, LTD. ("Chorus")?
HOW WILL I BENEFIT?
A: This reorganization means that you will have a stake in what we expect to
be a growing coalition of Wisconsin independent telecommunications
companies. Chorus will continue to serve those markets currently serviced
by Mid-Plains and Pioneer. We also will have opportunities in
the new markets opened to us by legislation, including cable television
and video entertainment. We believe that the reorganization will allow
us to accelerate long-term growth, continue to provide competitive
dividends, and create shareholder value in years to come.
Q: WHAT DO I NEED TO DO NOW?
A: After reviewing this entire proxy statement/prospectus, just mail in your
signed proxy card in the enclosed return envelope as soon as possible,
so that your shares may be represented at the special meetings. The
Pioneer meeting will take place May 16, 1997. The Mid-Plains meeting will
take place May 17, 1997. The Boards of Directors of both Mid-Plains and
Pioneer unanimously recommend voting in favor of the proposed
reorganization.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. If the reorganization is approved by the shareholders and
implemented, all outstanding stock certificates will have to be
surrendered for re-issue by Chorus. We will send you written instructions
for exchanging your share certificates.
Q: PLEASE EXPLAIN THE EXCHANGE RATIO.
A: Pioneer shareholders will receive four (4) shares of Chorus Common Stock
in exchange for each share of Pioneer Common Stock they own. Mid-Plains
shareholders will receive one (1) share of Chorus Common Stock in
exchange for each share of Mid-Plains common stock they own.
Example: If you currently own 100 shares of Pioneer stock, then after
the mergers you will be entitled to receive 400 shares of Chorus stock.
If you currently own 100 shares of Mid-Plains stock, then you will be
entitled to receive 100 shares of Chorus stock after the mergers.
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: After the reorganization, we expect the initial annualized dividend
rate to be $1.08 per share of Chorus stock, reflecting our desire to
provide you with competitive dividends. The annualized rate of $1.08
per share is equivalent to the current dividend rate paid to Mid-Plains
shareholders. The expected dividend policy after the reorganization
would result in an equivalent dividend of $4.32 per share on each of
Pioneer's pre-merger shares, which represents a 15.2% increase as
compared to the 1996 annualized dividend rate.
Q: WHEN DO YOU EXPECT THE REORGANIZATION TO BE COMPLETED?
A: We are working towards completing the reorganization as quickly as
possible. We hope to complete the reorganization as early as
June 30, 1997.
Q: WHAT ARE THE TAX CONSEQUENCES TO SHAREHOLDERS OF THE REORGANIZATION?
A: The exchange of shares by Pioneer shareholders will be tax-free to
Pioneer shareholders for federal income tax purposes and the exchange
of shares by Mid-Plains shareholders will be tax-free to Mid-Plains
shareholders for federal income tax purposes.
FOR A COMPLETE EXPLANATION OF THESE MATTERS, PLEASE SEE THE RELEVANT
SECTION IN THE PROXY STATEMENT/PROSPECTUS.
SUMMARY
This summary highlights selected information from this document and may
not contain all of the information that is important to you. To understand
the Mergers fully and for a more complete description of the legal terms of
the merger, you should read carefully this entire document and the documents
we have referred you to. See "Where You Can Find More Information." (Page
56)
THE COMPANIES
Mid-Plains, Inc.
1912 Parmenter Street
Middleton, WI 53562-3139
(608) 828-2000
Mid-Plains is a public utility currently providing telecommunications
services primarily in Middleton, Cross Plains and the west side of Madison,
Wisconsin. Mid-Plains created a wholly-owned subsidiary, Mid-Plains
Communications Systems, Inc. ("MPCS") in 1980, which markets and installs
communications systems and provides maintenance services related to their
continued use. Mid-Plains operates in two industry segments: a
telecommunications utility providing telephone and data services (telephone
operations) and system sales and service operations. Mid-Plains telephone
utility operations are subject to regulation by the Public Service Commission
of Wisconsin ("PSCW"). Mid-Plains provides local exchange network service to
customers within its 116 square mile service area located in Dane County,
Wisconsin.
Pioneer Communications, Inc.
140 North Monroe Street
Lancaster, WI 53813
(608) 723-4140
Pioneer is a holding company, which through its wholly-owned public
utility subsidiaries, The Farmers Telephone Company ("Farmers") and Dickeyville
Telephone Corporation ("Dickeyville"), currently provides local telephone and
data services for the Beetown, Cassville, Dickeyville, Lancaster and Potosi
exchanges, including communities of Glen Haven, Kieler, Tennyson and the
surrounding areas. Pioneer provides telephone and business systems
installations and services through an affiliated interest agreement with
Farmers to a base of customers within the local exchange areas served by
Farmers and Dickeyville. Pioneer operates a telephone directory service
division ("Pioneer Directory") that publishes telephone directories for
various telephone companies in Wisconsin as well as Minnesota and Iowa.
OUR REASONS FOR THE MERGERS
The Boards of Pioneer and Mid-Plains believe that the Mergers will
create a coalition of independent communications companies that will be better
positioned collectively to compete effectively in the rapidly changing
communications industry. Each Board believes that the Mergers will provide
opportunities to achieve benefits for their respective shareholders and
customers that might not otherwise be available. Chorus, operating with the
combined markets, networks, financial resources, management, personnel and
technical expertise of the respective companies, will be better able to
capitalize on growth opportunities in the communications industry. In
addition, we expect the Mergers will permit Chorus to derive advantages from
the more efficient utilization of the combined assets, management and
personnel of Pioneer and Mid-Plains.
In reaching its recommendation in favor of the Mergers, each of our
Boards of Directors considered a number of uncertainties, including but not
limited to:
(a) the rapidly changing regulatory and competitive environment in the
telecommunications industry; and
(b) the challenges of combining those parts of the businesses of two
corporations, which may be combined at a cost savings to customers
and shareholders.
To review the reasons for the Mergers in greater detail, as well as
related uncertainties, see pages 8 through 10 and 19 through 22.
OUR RECOMMENDATIONS TO SHAREHOLDERS
To Mid-Plains Shareholders:
The Mid-Plains Board believes that the Mergers are in your best interest
and unanimously recommends that you vote FOR the proposal to approve the
Merger Agreement and the Mergers.
To Pioneer Shareholders:
The Pioneer Board believes that the Mergers are in your best interest
and unanimously recommends that you vote FOR the proposal to approve and adopt
the Merger Agreement and the Mergers.
THE MERGERS
The Merger Agreement is attached as Appendix I to this Joint Proxy
Statement/Prospectus. We encourage you to read the Merger Agreement as it is
the legal document that governs the Mergers.
What Mid-Plains Shareholders Will Receive (see page 43)
As a result of the Mergers, Mid-Plains shareholders will receive one (1)
share of Chorus common stock for each share of Mid-Plains common stock that
they own. No fractional shares will be issued.
Mid-Plains shareholders should not send in their stock certificates
until instructed to do so after the Mergers are completed.
Mid-Plains Shareholders' Ownership of Chorus Following the Mergers
The shares of Chorus stock issued to Mid-Plains shareholders in the
Mergers will constitute approximately 74% of the outstanding stock of Chorus
after the Mergers.
What Pioneer Shareholders Will Receive (see page 43)
As a result of the Mergers, Pioneer shareholders will receive four (4)
shares of Chorus common stock for each share of Pioneer common stock that they
own. No fractional shares will be issued.
Pioneer shareholders should not send in their stock certificates until
instructed to do so after the Mergers are completed.
Pioneer Shareholders' Ownership of Chorus Following the Mergers
The shares of Chorus stock issued to Pioneer shareholders in the Mergers
will constitute approximately 26% of the outstanding stock of Chorus after the
Mergers.
Board of Directors and Management of Chorus Following the Mergers (see pages
49 and 51)
If the Mergers are completed, the senior management team for Chorus
immediately following the Mergers will consist of the following individuals:
Dean W. Voeks, Chief Executive Officer; Howard G. Hopeman, Executive
Vice-President and Chief Financial Officer; and Frederick E. Urben,
Secretary and Treasurer.
If the Mergers are completed, the Board of Directors of Chorus initially
will consist of the five (5) following individuals: G. Burton Block,
Charles Maulbetsch, Harold L. (Lee) Swanson, Douglas J. Timmerman and Dean W.
Voeks.
Other Interests of Officers and Directors in the Mergers (see page 42)
In considering the Boards' recommendations that you vote in favor of the
Mergers, you should be aware that a number of officers of Mid-Plains and
Pioneer, including some officers who are also directors, have certain
interests in the Mergers that are different from, or in addition to, yours.
Conditions to the Mergers (see page 46)
The completion of the Mergers depends upon meeting a number of
conditions, including the following:
(a) the approval of the holders of a majority of the stock of each of
Mid-Plains and Pioneer;
(b) there shall have been no law enacted or injunction entered which
effectively prohibits the Mergers or which causes a material
adverse effect on either of our companies;
(c) the receipt of letters from our independent accountants stating
that the Mergers will qualify for pooling of interests accounting
treatment;
(d) the receipt of a letter from our attorney stating that neither
Mid-Plains, Pioneer nor our shareholders will recognize any gain
or loss for federal income tax purposes in the Mergers.
The conditions (a), (b), (c), and (d) above to the Mergers may not be
waived by the company entitled to assert the condition.
Termination of the Merger Agreement (see page 47)
We can agree to terminate the Merger Agreement without completing the
Mergers, and either of us can terminate the Merger Agreement if any of the
following occurs:
(a) the Mergers are not completed by June 30, 1997;
(b) the approvals of the holders of a majority of the stock of either
Mid-Plains or Pioneer are not received;
(c) a court or other governmental authority permanently prohibits the
Mergers;
(d) the business of the other party, or the prospects for Chorus,
materially change for the worse;
(e) the other party breaches or materially fails to comply with any of
its representations or warranties or obligations under the Merger
Agreement; or
(f) the Board of Directors of the other party: (A) withdraws or
modifies in any adverse manner its approval or recommendation in
favor of the Mergers, or (B) approves or recommends a significant
transaction with a third party.
Termination Fees (see page 47)
The Merger Agreement generally requires Pioneer to pay to Mid-Plains a
termination fee equal to 20% of all of Mid-Plains' out of pocket expenses
related to the Merger Agreement if Pioneer either fails to comply with certain
Merger Agreement covenants or if Pioneer fails to obtain shareholder approval
for the Merger Agreement.
The Merger Agreement generally requires Mid-Plains to pay to Pioneer a
termination fee equal to 80% of all of Pioneer's out of pocket expenses
related to the Merger Agreement if Mid-Plains either fails to comply with
certain Merger Agreement covenants or if Mid-Plains fails to obtain
shareholder agreement for the Merger Agreement.
Regulatory Approvals (see page 23)
We believe that it is not necessary to obtain the approval of any
federal or state regulatory commission to complete the Mergers. Mid-Plains
and Pioneer are required to and plan to make informational filings of the
Mergers with the Wisconsin Public Service Commission within ten (10) days
following the effective time of the Mergers.
Accounting Treatment (see page 22)
We expect the Mergers to qualify as a pooling of interests, which means
that we will treat our companies as if they had always been combined for
accounting and financial reporting purposes.
Opinions of Financial Advisors (see pages 38 through 40)
In deciding to approve the Mergers, our Boards considered opinions from
our respective financial advisors. Mid-Plains received an opinion as to the
fairness of the Exchange Ratio from a financial point of view from Edelman &
Co., Ltd. (the "Edelman Opinion"). Pioneer received an opinion as to the
reasonableness of the Edelman Opinion from Madison Valuation Associates, Inc.
These opinions are attached as Appendices V and VI to this Joint Proxy
Statement/Prospectus. We encourage you to read these opinions. These
opinions will not be updated to the effective time of the Mergers.
Material Federal Income Tax Consequences (see page 22)
We have structured the Mergers so that neither Mid-Plains, Pioneer nor
our shareholders will recognize any gain or loss for federal income tax
purposes in the Mergers. We have conditioned the Mergers on our receipt of
legal opinions that such is the case.
Dissenters Rights (see page 23)
Under section 180.1301 to 180.1331 of the Wisconsin Statutes, both
Mid-Plains and Pioneer shareholders have the right to dissent from the Merger
Agreement.
Dividends after the Mergers (see page 44)
We expect that the initial annualized dividend rate paid to Chorus
shareholders after completion of the Mergers will be $1.08 per share, subject
to approval and declaration by the Chorus Board of Directors. The annualized
rate of $1.08 per share is equivalent to the dividend paid on each share of
Mid-Plains common stock for the last full fiscal quarter immediately preceding
the date of the Merger Agreement times four. The payment of dividends by
Chorus in the future, however, will depend on business conditions, its
financial position and earnings, and other factors.
Chorus' Amended and Restated Articles of Incorporation and Bylaws (see
Appendices III and IV)
Chorus' proposed form of Amended and Restated Articles of Incorporation
is attached as Appendix III and its proposed form of Bylaws is attached as
Appendix IV.
A vote by you in favor of the Mergers is a vote to approve the proposed
Amended and Restated Articles of Incorporation. The Chorus Board of Directors
has the power to adopt the proposed Bylaws.
SUMMARY SELECTED HISTORICAL AND UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION
We are providing the following financial information to aid you in your
analysis of the financial aspects of the Mergers. We derived this information
from audited financial statements for 1994 through 1996 for both Mid-Plains
and Pioneer. The information is only a summary and you should read it in
conjunction with our historical financial statements (and related notes)
contained on the audited financial statements attached in Appendices VII and
VIII.
Mid-Plains--Historical Financial Information
At or for the Year Ended December 31,
1996 1995 1994
(Dollars in Thousands, Except for Per Share Amounts)
Operating Revenues $27,087 $24,578 $21,460
Income before extraordinary item $ 3,442 $ 3,425 $ 2,889
Income before extraordinary item
per common share $ 1.73 $ 1.73 $ 1.47
Cash dividends declared per
common share $ 1.06 $ 1.12 $ .86
Book value per common share $ 9.80 $ 9.95 $ 9.23
Total assets $39,888 $40,714 $33,889
Long-term debt $12,401 $ 8,570 $ 6,954
Pioneer--Historical Financial Information
At or for the Year Ended December 31,
1996 1995 1994
(Dollars in Thousands, Except for Per Share Amounts)
Operating Revenues $ 6,094 $ 5,961 $ 5,537
Net Income $ 1,299 $ 1,147 $ 999
Net Income per common share $ 7.50 $ 6.62 $ 5.82
Cash dividends declared
per common share $ 3.75 $ 3.50 $ 3.25
Book value per common share $ 40.36 $ 36.56 $ 33.09
Total assets $11,817 $11,333 $10,872
Long-term debt $ 3,459 $ 3,625 $ 3,808
Unaudited Pro Forma Combined Condensed Financial Information
We expect that the Mergers will be accounted for as a "pooling of
interests," which means that for accounting and financial reporting purposes
we will treat our companies as if they had always been combined. For a more
detailed description of pooling of interests accounting see "The
Merger--Accounting Treatment" on page 22.
We have presented below unaudited pro forma financial information that
reflects the pooling of interests method of accounting and is intended to give
you a better picture of what our businesses might have looked like had they
always been combined. We prepared the pro forma income statement and balance
sheet by adding or combining the historical amounts of each company. The
companies may have performed differently if they were combined. You should
not rely on the pro forma information as being indicative of the historical
results that we would have had or the future results that we will experience
after the Mergers. See "Unaudited Pro Forma Combined Condensed Financial
Statements" on page 24.
Unaudited Pro Forma Combined
At or for the Year Ended December 31,
1996 1995 1994
(Dollars in Thousands, Except for Per Share Amounts)
Operating Revenues $33,181 $30,539 $26,997
Income before extraordinary item $ 4,741 $ 4,572 $ 3,888
Income before extraordinary item
per common share $ 1.77 $ 1.71 $ 1.46
Cash dividends declared per
common share<F1> $ 1.03 $ 1.05 $ .84
Book value per common share $ 9.88
Total assets $51,705
Long-term debt $15,860
<FN>
<F1>The cash dividends declared per common share reflect the sum of the
dividends declared by Mid-Plains and Pioneer divided by the number of shares
that would have been outstanding for the periods presented after adjusting the
Pioneer shares by the exchange ratio of 4 to 1.
</FN>
Comparative Per Share Information
We have summarized below the per share information for our respective
companies on a historical, pro forma combined, and equivalent basis. The
Pioneer Per Share Equivalents are calculated by multiplying the Unaudited Pro
Forma Combined per share amounts by four (4). Pioneer shareholders will
receive four (4) shares of Chorus Common Stock in exchange for each share of
Pioneer Common Stock. The Mid-Plains Per Share Equivalents are calculated
by multiplying the Unaudited Pro Forma Combined per share amounts by one (1).
Mid-Plains shareholders will receive one (1) share of Chorus Common Stock in
exchange for each share of Mid-Plains Common Stock.
Comparative Per Share Information
At or for the Year Ended December 31,
1996 1995 1994
Unaudited Pro Forma Combined
Book value per common share $ 9.88
Income before extraordinary item $ 1.77 $ 1.71 $ 1.46
Net Income $ 1.10 $ 1.71 $ 1.46
Cash dividends declared per common share $ 1.03 $ 1.05 $ .84
Mid-Plains--Historical
Book value per common share $ 9.80 $ 9.95 $ 9.23
Income before extraordinary item $ 1.73 $ 1.73 $ 1.47
Net Income $ .84 $ 1.73 $ 1.47
Cash dividends declared per common share $ 1.06 $ 1.12 $ .86
Mid-Plains Per Share Equivalents
Book value per common share $ 9.88
Income before extraordinary item $ 1.77 $ 1.71 $ 1.46
Net Income $ 1.10 $ 1.71 $ 1.46
Cash dividends declared per common share $ 1.03 $ 1.05 $ .84
Pioneer--Historical
Book value per common share $40.36 $36.56 $33.09
Net Income $ 7.50 $ 6.62 $ 5.82
Cash dividends declared per common share $ 3.75 $ 3.50 $ 3.25
Pioneer Per Share Equivalents
Book value per common share $39.52
Income before extraordinary item $ 7.08 $ 6.84 $ 5.84
Net Income $ 4.40 $ 6.84 $ 5.84
Cash dividends declared per common share $ 4.12 $ 4.20 $ 3.36
RISK FACTORS
In addition to the other matters described in this Joint Proxy
Statement/Prospectus, each Mid-Plains shareholder and each Pioneer shareholder
should consider the specific factors set forth below.
The Proposed Mergers
Mid-Plains has evaluated Pioneer and Pioneer has evaluated Mid-Plains
based on respective historical financial performance, existing markets, and
the steps each has taken to maximize efficiencies in their operations. Each
of Mid-Plains and Pioneer are subject to the risk that the other company will
not perform consistent with historic levels. Competition in the
telecommunications industry will likely effect each of Mid-Plains and Pioneer
whether or not the Mergers are consummated. However, the ability and the
manner in which each company responds to such competition cannot be predicted.
Degree of Competition Each May Face and the Challenges of Growth Through
Affiliations
Assuming the Mergers are consummated, Chorus intends to pursue
opportunities to affiliate with other independent telephone companies in the
Upper Midwest that complement its organizational structure. In affiliating
with such companies Chorus will be subject to the risks that these companies
will not perform as expected or the returns from such companies will not
support debt or capital expenditures incurred in connection with such
affiliations. In addition, in seeking to affiliate with such companies Chorus
will compete with other telecommunications companies, many of whom are larger
and have greater financial and other resources than Chorus. Competition among
bidders for acquisition targets is based upon a variety of factors, including
price, terms and conditions, size and access to capital, ability to offer
cash, stock, or other forms of consideration and similar matters. Expansion
of Chorus' business through the affiliation of additional companies also may
present the challenges of managing operations outside of its existing service
areas and expanding Chorus' support systems to accommodate the additional
demands of new markets.
Chorus' continued expansion and development of the coalition concept
will depend on, among other things, Chorus' ability to assess existing and new
markets, and obtain any required governmental authorizations and permits, all
in a timely manner, at reasonable costs and on terms and conditions acceptable
to the company. Chorus' ability to manage this expansion effectively will
require it to continue to implement and improve its operational and financial
systems and to expand, train and manage its employee base.
Significant Technological Change in Personal Communications System Industry
The personal communications system ("PCS") industry has experienced and
is expected to continue to experience significant and rapid technological
change. On January 14, 1997, Mid-Plains was the highest bidder in the
Madison BTA of the F-block of the PCS Auction. See "Investments of
Mid-Plains." The effect of future technological changes on Mid-Plains'
PCS business and operations cannot be predicted.
Government Regulation
The Telecommunications Act of 1996, enacted on February 8, 1996 (the
"Telecommunications Act"), mandates significant changes in existing regulation
of the telecommunications industry to promote competitive development of new
service offerings, expand public availability of telecommunications services
and streamline regulation of the industry. The implementation of these
mandates by the FCC and state authorities potentially involves numerous
changes in established rules and policies which could adversely affect each of
Mid-Plains' and Pioneer's financial condition or results of operations.
The licensing, construction, operation, sale and interconnection
arrangements of wireless telecommunications systems are regulated to varying
degrees by the Federal Communications Commission ("FCC") and by state
regulatory agencies. Changes in the regulation of wireless telecommunications
providers could have a material effect on the Mid-Plains' operations or
financial performance. There can be no assurance that either the FCC or those
state agencies having jurisdiction over Mid-Plains' business will not adopt
regulations or take other actions that would adversely affect Mid-Plains'
financial condition or results of operations. In addition, FCC licenses to
provide PCS service are subject to renewal and revocation. There may be
competition for the license held by Mid-Plains upon its expiration, and there
can be no assurance that Mid-Plains' license will be renewed.
Competition
The telecommunications marketplace is expected to become increasingly
competitive. Both Mid-Plains and Pioneer expect to compete with other
communications technologies currently in operation, such as PCS. In addition,
as a result of the enactment of the Telecommunications Act, each of Mid-Plains
and Pioneer expect to compete in the future more directly with traditional
landline telephone service providers and other telecommunications companies
who expand the range of telecommunications products and services they offer.
Furthermore, additional technological advances may make available other
alternatives to traditional landline telephone service and cellular service,
creating additional sources of competition. Such continuing technological
advances and the current uncertainty regarding the impact of rules recently
promulgated and to be promulgated by the FCC under the Telecommunications Act
make it impossible to predict the extent of future competition.
Each of Mid-Plains and Pioneer currently has no direct competitors in
its local landline telephone operations. However, TDS Datacom, Inc. and KMC
Telecom, Inc. have submitted applications with the Wisconsin Public Service
Commission seeking authority to construct facilities in Mid-Plains' service
area. Both companies have expressed the desire to deploy switches to provide
local service as an alternative telecommunications utility to business and
residential customers. Mid-Plains has begun preliminary discussions
with both of these companies regarding these matters.
As a result of recent regulatory and legislative initiatives, all of the
operations of each of Mid-Plains and Pioneer are expected to face increased
competition from entities providing other communications technologies and
services. Some of these technologies and services currently are operational
and others are being developed or may be developed in the future. In
addition, the enactment of the Telecommunications Act is expected to have a
significant impact on landline competition.
All of such competition is expected to be intense. There can be no
assurance that either Mid-Plains or Pioneer independently or jointly as
subsidiaries of Chorus will be able to compete successfully in this
environment or that new technologies and products that are more commercially
effective than Mid-Plains' and Pioneer's technologies and products will not be
developed.
Certain Anti-Takeover Provisions
Certain provisions in Chorus' Amended and Restated Articles of
Incorporation, By-laws and the Wisconsin Business Corporation Law may
discourage potential takeover attempts and may tend to perpetuate existing
management. These provisions provide for, among other things, staggered board
of directors' terms, noncumulative voting for directors and limits on the
calling of special meetings of shareholders. In addition, Chorus following
the Mergers will have authorized but unissued shares of common stock. Such
shares will be available for issuance in future mergers or acquisitions,
future private and/or public offerings or for other general corporate
purposes. Except as may otherwise be required to approve the transaction in
which the additional authorized shares would be issued, shareholder approval
generally would not be required for the issuance of these shares.
Absence of Market
Shareholders of each of Pioneer and Mid-Plains should be aware of the
long-term nature of their investment in Chorus. No public market exists for
Chorus Common Stock, and it is unlikely any such market will develop in the
near future.
MARKET AND DIVIDENDS ON COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Mid-Plains
There is no established trading market for Mid-Plains common stock.
Furthermore, there are no principal market makers for Mid-Plains' common
stock. The following table sets forth, for the periods indicated, prices
based only on unrelated party transactions for which the seller and/or buyer
have responded to a Mid-Plains company inquiry. Transactions include both
those handled privately (non-broker) and those handled by stock brokers.
Non-broker prices do not include retail markup, markdown or commissions which
are included in broker prices. Average prices are the weighted average of the
transactions described above. These prices should not be relied upon as an
indication of the price at which Chorus Common Stock may be traded in the
future.
TRANSACTIONS PRICE PER SHARE DIVIDENDS
Number Shares High Low Average Paid
1996
4th Quarter 17 6,763 $42.00 $35.00 $40.95 $.27
3rd Quarter 9 3,570 $42.00 $40.00 $41.87 $.27
2nd Quarter 7 2,702 $43.00 $41.50 $41.70 $.27
1st Quarter 12 5,634 $41.00 $38.00 $39.38 $.25
1995
4th Quarter 1 1,350 $40.00 $40.00 $40.00 $.25
Special Year-End $.14
3rd Quarter 5 497 $40.00 $36.00 $38.96 $.25
2nd Quarter 16 17,157 $41.00 $35.00 $38.91 $.25
1st Quarter 14 3,818 $38.14 $35.00 $36.34 $.23
There were 2,427 shareholders of record as of February 28, 1997 and
1,989,965 shares outstanding. If the Mergers are completed, the shares of
Chorus Common Stock issued to Mid-Plains shareholders will represent
approximately 74% of the outstanding stock of Chorus after the Mergers. The
amount of shares of Mid-Plains Common Stock beneficially owned by each of
Mid-Plains' directors and officers who are directors or officers of Chorus
is set forth in "Stock Ownership of Directors, Executive Officers and Five
Percent Shareholders."
Mid-Plains has regularly paid dividends to its shareholders. In
connection with a long-term financing agreement, Mid-Plains is subject to
restrictions on the amount of retained earnings available for cash dividends.
Under the Agreement, at December 31, 1996, $3,542,000 of its retained earnings
were not restricted and thus available for the payment of dividends.
Mid-Plains' Bylaws currently limit the common stock any one shareholder
may hold to no more than five percent (5%) of the authorized and issued
capital stock of the company provided however, the limitation automatically
terminates without any further action of the Board of Directors of Mid-Plains
upon the Effective Date of a Plan of Merger or share exchange approved by the
requisite number of shareholders, which in effect causes the issued capital
stock of Mid-Plains to be exchanged for the capital stock of a holding/parent
company of Mid-Plains.
Pioneer
There is no established trading market for Pioneer common stock.
Furthermore, there are no principal market makers for Pioneer's common stock.
The following table sets forth, for the periods indicated, the number of
transfers and shares transferred based only on unrelated party transactions,
according to Pioneer's stock ledger. Transactions include both those handled
privately (non-broker) and those handled by stock brokers. Pioneer does not
maintain nor does it inquire as to the price of the shares in these
transactions.
TRANSACTIONS
Number Shares
1996
4th Quarter 10 2,573
3rd Quarter 2 336
2nd Quarter 13 1,565
1st Quarter 10 2,510
1995
4th Quarter 5 2,469
3rd Quarter 4 294
2nd Quarter 7 602
1st Quarter 5 1,150
There were 1,038 shareholders of record as of February 28, 1997 and
173,140 shares outstanding. If the Mergers are completed, the shares of
Chorus Common Stock issued to Pioneer shareholders will represent
approximately 26% of the outstanding stock of Chorus after the Mergers. The
amount of shares of Pioneer common stock beneficially owned by each of
Pioneer's directors who are directors of Chorus is set forth in "Stock
Ownership of Directors, Executive Officers, and Five Percent Shareholders."
Pioneer paid an annual dividend of $3.75 and $3.50 in 1996 and 1995
respectively. Pioneer has regularly paid dividends to its shareholders.
Pioneer is not subject to restrictions on the payment of cash dividends
to its shareholders. In connection with their mortgage notes with the Rural
Utility Service and Rural Telephone Bank, The Farmers Telephone Company and
Dickeyville Telephone Corporation, wholly-owned subsidiaries of Pioneer, are
restricted as to the payment of dividends to Pioneer. As of December 31,
1996, the maximum amount which could be distributed to Pioneer in accordance
with these restrictions was $166,096.
THE MERGERS
We are furnishing this Joint Proxy Statement/Prospectus to holders of
common stock, no par value ("Mid-Plains Common Stock"), of Mid-Plains, Inc.,
a Wisconsin corporation ("Mid-Plains"), and holders of common stock, $.01 par
value ("Pioneer Common Stock"), of Pioneer Communications, Inc., a Wisconsin
corporation ("Pioneer"), in connection with the solicitation of proxies by
the respective Boards of Directors of Mid-Plains and Pioneer for use at their
respective special meetings of shareholders, and at any adjournments or
postponements thereof (the "Mid-Plains Meeting" and the "Pioneer Meeting,"
respectively, and together, the "Special Meetings"). At the Pioneer Meeting,
holders of Pioneer Common stock will be asked to vote upon a proposal (the
"Pioneer Proposal") to approve and adopt an Agreement and Plan of Merger,
dated as of December 31, 1996 (the "Merger Agreement"), between Pioneer and
Mid-Plains, and the transactions contemplated thereby. At the Mid-Plains
Meeting, holders of Mid-Plains Common Stock will be asked to vote upon a
proposal (the "Mid-Plains Proposal") to approve the Merger Agreement, and the
transactions contemplated thereby. A copy of the Merger Agreement is
attached hereto as Appendix I.
The Merger Agreement provides, among other things, for (i) the
formation of Chorus, (ii) the merger of a wholly-owned subsidiary ("Pioneer
Acquisitions") of Chorus with and into Pioneer, and (iii) the merger of a
separate wholly-owned subsidiary of Chorus ("Mid-Plains Acquisitions") with
and into Mid-Plains (collectively, the "Mergers"), with Pioneer and
Mid-Plains, respectively surviving the Mergers as wholly-owned subsidiaries of
Chorus. In the Mergers, each share of Pioneer Common Stock issued and
outstanding immediately before the Effective Time (defined below) (excluding
those held in the treasury of Pioneer and those held by Pioneer shareholders
who perfect dissenters' rights), without any action on the part of the holder
thereof, will be converted into four (4) shares of Chorus Common Stock (the
"Pioneer Exchange Ratio") and each share of Mid-Plains Common Stock issued
and outstanding immediately before the Effective Time (excluding those held
in the treasury of Mid-Plains and those held by Mid-Plains shareholders who
perfect dissenters' rights), without any action on the part of the holder
thereof, will be converted into one (1) share of Chorus Common Stock (the
"Mid-Plains Exchange Ratio"). Collectively, the Pioneer Exchange Ratio and
the Mid-Plains Exchange Ratio are referred to herein as the "Exchange Ratio."
The Mergers will become effective upon the filing of Certificates of Merger
with the Department of Financial Institutions of the State of Wisconsin (the
time of such filings being herein referred to as the "Effective Time"), which
is currently expected to occur soon after the Pioneer Proposal and the
Mid-Plains Proposal are approved by the requisite votes of shareholders of
Pioneer and Mid-Plains, respectively. Approval of the Merger Agreement
includes approval of the Amended and Restated Articles of Incorporation
of Chorus Communications Group, Ltd. as set forth in Appendix III.
Chorus Communications Group, Ltd.
(following the Mergers)
A graph is shown in the S-4 indicating the structure of Chorus
Communications Group, Inc. following the Mergers. Chorus is divided into
Mid-Plains and Pioneer, which are wholly-owned subsidiaries of Chorus.
Mid-Plains Communications Systems, Inc. ("MPCS") is a wholly-owned subsidiary
of Mid-Plains, and MPC of Illinois, Inc. is a wholly-owned subsidiary of MPCS.
PCS-Wisconsin, LLC is a subsidiary of Mid-Plains. Pioneer includes its
wholly-owned subsidiaries, The Farmers Telephone Company ("Farmers") and
Dickeyville Telephone Corporation.
BACKGROUND OF THE MERGERS
Business of Mid-Plains, Inc.
Mid-Plains is a public utility currently providing telecommunications
services primarily in Middleton, Cross Plains and the west side of Madison,
Wisconsin. Mid-Plains was incorporated in 1901.
Mid-Plains created a wholly-owned subsidiary, Mid-Plains Communications
Systems, Inc. ("MPCS") in 1980, which markets and installs communications
systems and provides maintenance services related to their continued use.
In October, 1994 MPCS began providing long distance service. In October,
1995, MPCS began providing Internet service as midplains.net. MPCS created
a wholly-owned subsidiary, MPC of Illinois, Inc., in 1988, which markets and
installs communications systems and provides maintenance services related to
their continued use in Illinois.
Mid-Plains operates in two industry segments: a telecommunications
utility providing telephone and data services (telephone operations) and
system sales and service operations. However, Mid-Plains' principal line of
business is providing telecommunications services. Operating revenues fall
into four major classes: local network revenues, network access and long
distance services, system sales and services, and other (billing and
collection, directory, other nonregulated and miscellaneous).
Mid-Plains telephone utility operations are subject to regulation by
the Public Service Commission of Wisconsin ("PSCW"). Mid-Plains provides
local exchange network service to customers within its 116 square mile
service area located in Dane County, Wisconsin. The customers have local
extended area services ("EAS") and access to the nationwide direct dial toll
service network. Although Mid-Plains' customers have access to the
nationwide direct toll network, Mid-Plains does not have toll operators. The
operator service is provided primarily through Ameritech.
Employee Benefits of Mid-Plains.
Mid-Plains has a pension plan covering most of the employees of its
telephone operations. The plan is non-contributory and provides for benefits
to be paid to eligible employees at retirement based primarily upon years of
service with Mid-Plains and compensation rates near retirement. Mid-Plains'
funding policy is to contribute annually an amount up to the maximum amount
that can be deducted for federal income tax purposes. Plan assets consist
of fixed income securities. Employees have been notified that the pension
plan will be terminated effective April 15, 1997. It is anticipated that
plan settlement will not have a material impact on Mid-Plains.
Mid-Plains offers a defined contribution 401(k) benefit plan to
substantially all employees. The cost of the 401(k) plan was as follows:
1996 - $189,000; 1995 - $179,000; and 1994 - $178,000.
Mid-Plains has a retiree health insurance plan for telephone operations
employees retiring after 1992. The plan, which is unfunded, provides for
limited coverage to retirees between the ages of 60 and 65, based on
accumulated sick leave in excess of 720 hours. The cost of the plan was
$67,000 in 1996, $48,000 in 1995, and $26,000 in 1994.
Mid-Plains has a stock purchase plan which allows employees and
directors to purchase limited quantities of Mid-Plains Common Stock.
Mid-Plains has a pricing policy under which employees, other than officers and
directors, may purchase shares at a discounted market price, and officers and
directors may buy shares at full market price. Employees have been notified
that said plan will be terminated effective March 7, 1997.
Mid-Plains has an unfunded deferred compensation plan whereby an
officer or director can defer a portion of his or her compensation for cash
payment at a later date. For income tax purposes, a deduction is allowed at
the time compensation is paid to the participants.
Mid-Plains provides Dean W. Voeks, President, and Howard G. Hopeman,
Vice-President and Chief Financial Officer, with a nonqualified supplemental
retirement plan, which provides supplemental retirement benefits based on
fixed annual contributions to the plan from 1995 until they reach age 60.
The cost of the plan was $79,000 in 1996 and $76,000 in 1995.
Investments of Mid-Plains.
Mid-Plains owns an 18% share in a cellular partnership with Ameritech
which provides cellular telephone service in Madison, Janesville/Beloit and
bordering areas. The investment is accounted for using the cost method.
From time to time, the general partner of the cellular partnership may
request additional capital contributions from the limited partners to fund
expansion or operation of cellular service. In the event that additional
capital is requested, Mid-Plains may either contribute an amount equal to its
then current percentage interest or have its percentage interest reduced.
During 1995, Mid-Plains participated in a capital call and contributed
$1,995,000 to the partnership. No distributions from the partnership were
received during 1994 or 1995. During 1996, Mid-Plains received distributions
from the partnership totaling $273,000.
PCS Wisconsin, LLC is a Wisconsin limited liability company of which
Mid-Plains holds a 75% membership interest. On January 14, 1997, PCS
Wisconsin, LLC was determined by the Federal Communications Commission
("FCC") to have been the high bidder in the Madison BTA of the F-block of the
Broadband PCS Auction. PCS Wisconsin, LLC's high bid amount was $3,247,850.
On January 23, 1997, PCS Wisconsin, LLC made an initial downpayment towards
that license in the amount of $324,785. On or around March 15, 1997, PCS
Wisconsin, LLC will make an additional downpayment of $324,785, assuming the
FCC grants the license to PCS Wisconsin, LLC. Mid-Plains expects that the
PCS license will be granted. The remaining 80% of the license fee will be
financed by the federal government over the next 10 years.
PCS Wisconsin, LLC will be required by the FCC to construct an
operating system that will be capable of providing service to at least 25%
of the population of the license area within 5 years of the grant of the
license. PCS Wisconsin, LLC anticipates that construction, development and
introduction of PCS networks and services will require substantial capital
and operating expenditures over the next several years.
Mid-Plains has retired its loan with the State of Wisconsin Investment
Board ("SWIB") by obtaining financing from the Rural Telephone Finance
Cooperative ("RTFC") in the amount of $29.1 million. These proceeds will be
used to (1) refinance existing debt, allow for capital expenditures, and
provide working capital for telephone operations ($12 million), (2) obtain
a line of credit for telephone operations ($7 million), (3) fund investment
in PCS Wisconsin, LLC ($9 million), and (4) as a condition of obtaining RTFC
financing, purchase RTFC certificates (approximately $1.1 million).
Business of Pioneer Communications, Inc.
Pioneer is a holding company, which through its wholly-owned public
utility subsidiaries, The Farmers Telephone Company ("Farmers") and Dickeyville
Telephone Corporation ("Dickeyville"), currently provides local telephone and
data services for the Beetown, Cassville, Dickeyville, Lancaster and Potosi
exchanges, including communities of Glen Haven, Kieler, Tennyson and the
surrounding areas. Pioneer provides telephone and business systems
installations and services through an affiliated interest agreement with
Farmers to a base of customers within the local exchange areas served by
Farmers and Dickeyville. Pioneer operates a telephone directory service
division ("Pioneer Directory") that publishes telephone directories for
various telephone companies in Wisconsin as well as Minnesota and Iowa.
Pioneer provides local internet access to the surrounding area as PCII.Net.
Pioneer, Farmers, and Dickeyville were incorporated in 1987, 1898, and 1956,
respectively.
Investments of Pioneer.
In 1995, Farmers settled a legal proceeding involving the cellular
license in Wisconsin Rural Service Area ("RSA") Number 8 Limited Partnership.
As a result of the settlement, Farmers acquired a 2% limited partnership
interest in Wisconsin RSA 8 Limited Partnership for $66,303. This investment
is accounted for on the cost method. In addition, the settlement provided
Farmers with an option to sell this interest during the period September 29,
1998 through March 29, 1999 for $400,000, adjusted for capital contributions
and distributions and one-half the change in the Consumer Price Index from
the date of the settlement.
Pioneer has acquired Rural Telephone Board ("RTB") Class B stock valued
at $213,309 as of December 31, 1996. Such RTB stock was purchased from the
RTB as a condition of obtaining long-term financing. Holders of RTB Class
B stock are entitled to patronage dividends in the form of additional RTB
Class B stock. However, such stock must be held until the related RTB loan
is repaid and may be redeemed only after all shares of RTB Class A stock have
been retired, at the discretion of the RTB Board of Directors.
Pioneer also has made investments in commercial property in the Village
of Dickeyville and in the City of Lancaster, which it leases.
Employee Benefits of Pioneer.
Pioneer provides a defined contribution 401(k) benefit plan to
substantially all employees. The costs of the 401(k) plan was as follows:
1996 - $ 45,038; 1995 - $40,180; and 1994 - $35,518.
The Communications Industry.
Since the break-up of American Telephone and Telegraph Company
("AT&T"), effective January 1, 1984, the United States telecommunications
industry has changed substantially. The range of communications services,
the equipment available to provide and access such services and the number
of competitors offering such services has continued to increase. Federal and
state regulators are also encouraging changes that promote competition in the
industry in the belief that increased competition will drive technological
innovation, lower prices and improve service levels.
During 1994, the Wisconsin Legislature changed the definition of small
telecommunications utilities to include utilities with less than 50,000
access lines. This change reduced regulation for Mid-Plains and Pioneer's
two subsidiaries Farmers and Dickeyville, allowing greater flexibility in
regulatory matters. This legislation also resulted in open competition for
Ameritech and GTE, and further relaxed regulation of other telecommunications
utilities in Wisconsin.
Mid-Plains, Farmers and Dickeyville provide local exchange services
under indeterminate permits granting them exclusive franchises within their
respective service areas. Under Wisconsin law, the PSCW can authorize
additional competitors under certain circumstances which include either the
provision by the incumbent LEC of local exchange service in another company's
territory, or if the PSCW makes a determination that additional competition
would be in the public interest.
The Telecommunications Act of 1996.
Overview. The Telecommunications Act of 1996 (the "Telecommunications
Act"), enacted on February 8, 1996, mandates significant changes in existing
telecommunications rules and policies to promote competition, ensure the
availability of telecommunications services to all parts of the nation and
streamline regulation of the telecommunications industry. Mid-Plains and
Pioneer believe that the Telecommunications Act will dramatically change the
telecommunications industry.
Some specific provisions of the Telecommunications Act, which are
expected to affect telecommunications providers, are summarized below.
Competition. The primary purpose of the Telecommunications Act is to
open all telecommunications markets, including local telephone service, to
competition. The Telecommunications Act prohibits state and local barriers
to competition. It directs the FCC to preempt all inconsistent state and
local laws and regulations, after notice and comment proceedings. It also
enables electric and other utilities to provide telecommunications service
through qualifying subsidiaries. Only limited powers over competitive entry
are left to state and local authorities. Each state retains the power to
impose "competitively neutral" requirements that are consistent with the
Telecommunications Act's universal service provision and necessary for
universal services, public safety and welfare, continued service quality and
consumer rights. While states may not impose requirements that effectively
function as barriers to entry, states retain limited authority to regulate
certain competitive practices. Arguments may be advanced that the
Telecommunications Act preempts the enforcement of the exclusive franchise
protection enjoyed by Mid-Plains, Farmers and Dickeyville under Wisconsin
state law. Loss of the exclusive franchise protection would require the PSCW
to address the carrier of last resort responsibilities and other aspects of
regulation for these companies. TDS Datacom, Inc. and KMC Telecom, Inc.
have submitted applications with the PSCW seeking authorization to become
a competitive local exchange carrier in the Mid-Plains' service territory.
No hearing has been scheduled on this request and the outcome of said
proceeding is unknown at this time. Similarly, Mid-Plains has formally
notified TDS Telecom, Inc. ("TDS") and the PSCW of Mid-Plains' desire to
enter into an interconnection agreement with TDS to provide service to
customers in TDS's service territories. Mid-Plains has begun preliminary
discussions with both of these companies regarding these matters.
Obligations of ILECS. The Telecommunications Act establishes a general
duty for Incumbent Local Exchange Carriers ("ILECS") to: interconnect with
other carriers, provide unbundled access to network elements, and to allow
carriers to purchase its services at wholesale rates and then resell those
services at a profit. Mid-Plains, Farmers and Dickeyville are classified as
ILECS. The purpose of imposing these obligations on ILECS is to ensure that
new competitors will have access to an ILECS' customers without needing to
construct an entirely separate duplicate network to reach those customers.
Rural telephone companies such as Mid-Plains, Farmers and Dickeyville are
currently exempted from these requirements but, as indicated, below, that
exemption can be terminated at any time by the PSCW.
The Telecommunications Act sets forth "pricing standards" which
restrict what ILECS can charge for interconnection and access to unbundled
network elements. Prices must be based upon the cost of providing the
interconnection or network element (without reference to a rate-of-return or
other rate-based proceeding) and must be nondiscriminatory. The charges may
include a reasonable profit. The FCC, PSCW and the courts are currently in
the process of further defining these pricing rules. The Telecommunications
Act establishes a framework for state commissions such as the PSCW to mediate
and arbitrate interconnection disputes arising from negotiations between
ILECS and carriers requesting interconnection, services or network elements.
Universal Service. The Telecommunications Act establishes principles
and a process for implementing a strengthened "universal service" policy.
This policy seeks nationwide, affordable service and access to advanced
telecommunications and information services. It also calls for reasonably
comparable urban and rural rates and services. The Telecommunications Act
also requires the provision of universal service to schools, libraries and
rural health facilities at discounted rates, and requires that all interstate
telecommunications providers make an equitable and non-discriminatory
contribution and to support the cost of providing universal service, unless
their contribution would be de minimis. It also authorizes states to require
universal service contributions for intrastate services. In order to make
the new universal service support mechanism function properly, the FCC is in
the process of rewriting its rules governing interstate access charges and
the fees paid by telephone customers such as the subscriber line charge. The
amount of universal service contributions which Mid-Plains, Farmers and
Dickeyville will be required to make is unknown at this time. The amount of
universal service distributions, if any, which Mid-Plains, Farmers and
Dickeyville will receive, is also unknown at this time.
Bell Operating Company Provisions. The Telecommunications Act
establishes a process for eliminating most restrictions placed on the seven
Regional Bell Operating Companies ("RBOCs") by the divestiture order which
approved the break-up of AT&T. Subject to specific safeguards, the RBOCs may
immediately provide long distance service outside the area where that RBOC
serves. Before providing in-region long distance services, an RBOC must
obtain a FCC public interest finding and demonstrate that it has met a strict
list of interconnection requirements and that there is a specified level of
competition in each in-region state where the RBOC wants to provide long
distance service. Once Ameritech receives authorization from the FCC to
provide interlata long distance within this region, it will be another
potential competitor to the long-distance operations of Mid-Plains, Farmers
and Dickeyville.
Cable Television Services. The Telecommunications Act eliminates the
ban of LEC sales of cable programming service directly to subscribers within
its telephone service area. Among other provisions, it authorizes LECs to
operate Open Video Systems which provide cable television services over phone
lines. Mergers, acquisitions and joint ventures by LECs and existing cable
systems in the same area are prohibited unless they fall within one of
several statutory exemptions. Mid-Plains and Pioneer are exploring potential
provision of video services to customers.
Impact on Mid-Plains, Farmers and Dickeyville. The Telecommunications
Act will result in a new wave of competition in the telecommunications
industry. Mid-Plains, Farmers and Dickeyville anticipate the
Telecommunications Act and the rules promulgated thereunder will have a
significant impact on their operations as discussed herein.
There is no assurance that Mid-Plains, Farmers and Dickeyville will not
be adversely affected by the changes mandated by the Telecommunications Act.
The FCC and PSCW currently are in the process of drafting numerous rules and
regulations to implement this legislation, and until such rules and
regulations are in place, Mid-Plains, Farmers and Dickeyville cannot begin
to accurately predict what the full impact of this legislation will be on the
companies. As stated above, the Telecommunications Act exempts rural
telephone companies such as Mid-Plains, Farmers and Dickeyville from certain
requirements under the Act. Once an ILEC receives a bona fide request for
interconnection, the PSCW will have the ability to terminate the rural
telephone company exemption if it finds the interconnection request is not
unduly economically burdensome, is technically feasible, and is consistent
with the universal service requirements under the Telecommunications Act.
Such a finding by the PSCW in regard to Mid-Plains, Farmers and Dickeyville
could occur at any point after they receive a bona fide request. Mid-Plains,
Farmers and Dickeyville expect that eventually the level of competition in
their territories will be greater than it is today.
Mid-Plains, Farmers and Dickeyville also view the enactment of this
legislation as an opportunity to expand their operations into new geographic
areas where they believe they can be viable competitors in the new era.
Discussions between Mid-Plains and Pioneer.
By 1995, our companies had each independently recognized that a
combination with one or more similarly situated companies could be an
effective means of achieving the operating efficiency, scale, scope and
financial resources necessary to expand into new markets, such as long
distance, video, and cable television markets, and to compete with new market
entrants.
During 1995, Dean W. Voeks, President of Mid-Plains, and Douglas J.
Timmerman, President of Pioneer, met informally from time to time to discuss
the possibility of Mid-Plains and Pioneer partnering on various projects,
including directory solicitation and the PCS C Block auction. Mid-Plains had
also made it known on several occasions that it was interested in affiliating
with Pioneer for a variety of reasons.
Formally, during this period, the Pioneer Board embarked upon a
Strategic Planning Process, which included the development of a Strategic
Plan which would position Pioneer to meet unregulated competition.
Additionally, in the fall of 1995, the Pioneer Board held a retreat which
involved bringing in several consultants to review Pioneer's options
regarding the Strategic Planning Process, one of which was to consider the
possibility of Pioneer entering into an alliance or partnership to better
position itself to meet the challenges of the future.
On October 18, 1995, Mr. Voeks and Mr. Timmerman were at a Madison
Chamber of Commerce meeting on an unrelated matter and Mr. Timmerman
approached Mr. Voeks and indicated that Pioneer's general manager was
retiring and that Pioneer was trying to decide if it should replace him or
align itself with a larger organization. On January 8, 1996 Mr. Timmerman
went to Mr. Voeks' office to more formally express Pioneer's interest in
partnering with Mid-Plains and questioned how Mr. Voeks thought such an
arrangement would potentially work. At that time, Mid-Plains started working
on a concept paper to outline how a coalition of independent companies could
function under a single corporate "umbrella."
On June 3, 1996, the Pioneer Board met with a consultant in a strategic
planning meeting. As a result of that meeting, Mr. Timmerman was authorized
to make informal contact with various telecommunications entities. Other
Pioneer Directors were assigned different tasks within the overall context
of strategic planning. One of those initiatives was researching the possible
acquisition of a cable company.
The Pioneer Board proceeded to develop a list of possible interested
parties and on June 14, 1996 Mr. Timmerman and Mr. Voeks again met to discuss
the prospect of partnering. Subsequently, Mr. Timmerman contacted and
informed Mr. Voeks that Pioneer had decided to send out a letter to several
companies asking for an indication of interest in partnering with Pioneer.
Mr. Timmerman informed Mr. Voeks that he would also send Mid-Plains a copy.
Upon receipt of the letter, the companies executed a confidentiality
agreement and Mid-Plains received a packet of information prepared by
Pioneer.
On August 20, 1996, Mr. Voeks informed the Mid-Plains Board of the
Pioneer affiliation opportunity presented to Mid-Plains for consideration.
The Mid-Plains Board recommended that management employ the services of an
investment banker specializing in mergers and acquisitions of telephone
companies to analyze the opportunity of affiliating with Pioneer.
In a letter to Mr. Timmerman dated August 26, 1996, Mr. Voeks discussed
selling a telephone company versus partnering through the coalition concept.
The expected benefits of the coalition concept are outlined in "Reasons for
the Mergers" below.
On September 4, 1996, Mr. Timmerman and Mr. Voeks met to discuss
Mid-Plains' August 26, 1996 reply letter in greater detail. Mr. Voeks
answered a number of questions that the Pioneer Board had raised relative to
the conditions of Mid-Plains' coalition proposal, including the completion
of due diligence and the other terms and conditions of a potential
agreement between the companies. Mr. Timmerman indicated that Mid-Plains'
proposal was indeed unique when compared to the others that Pioneer had
received because none of the other proposals involved a partnering or
coalition concept and none addressed the continuation of direct community
interest, existing local employees, and local board of director involvement.
At a Mid-Plains Board meeting on September 24, 1996, Mr. Voeks updated
the Mid-Plains Board on the Pioneer affiliation opportunity and indicated
that Mid-Plains had responded with an exchange ratio range of 3.5 to 4.5
contingent on due diligence by both companies. Mr. Voeks outlined the
proposed coalition board and the structure of the combined organizations.
Mr. Voeks also advised the Mid-Plains Board that he was discussing potential
employment of qualified financial advisors to assist Mid-Plains in preparing
the affiliation proposal.
Subsequently, Mr. Timmerman informed Mr. Voeks in a telephone
conference that Pioneer was planning meetings with three of the companies
which submitted proposals to Pioneer. Initially, Mid-Plains was not
included in these meetings. However, upon inquiry Mr. Timmerman informed Mr.
Voeks that Pioneer intended to have Mid-Plains be the last presenter to the
Pioneer Board because of the uniqueness of its proposal.
On October 8, 1996, Mid-Plains contracted with Edelman & Co., Ltd.
("Edelman") to provide financial advisory services to Mid-Plains in
connection with a possible merger transaction with Pioneer. Thereafter,
Edelman began working with Mid-Plains' management with regard to the issue
of determining the exchange ratio for the affiliation.
During the balance of October, Edelman reviewed certain financial and
operating information concerning Mid-Plains and Pioneer, including historical
financial statements and access line data, consulted with Mid-Plains'
management concerning the prospective transaction, and provided input to
Mid-Plains regarding strategy and terms, including a recommendation that it
be a stock transaction at an exchange ratio of not more than four (4) shares
of Mid-Plains common stock for every one (1) share of Pioneer common stock.
Edelman was not involved with negotiating the transaction. However, on
October 22, 1996, an Edelman representative attended a meeting of the
Mid-Plains Board to discuss the prospective transaction. At that meeting,
the Mid-Plains Board decided to propose an exchange ratio not to exceed more
than four (4) shares of Mid-Plains common stock for every one (1) share of
Pioneer common stock.
On October 28, 1996, Mr. Voeks, Mr. Hopeman, and an Edelman
representative met with members of the Pioneer Board to discuss the
transaction. At the close of that meeting, Mid-Plains proposed a 3.8:1
exchange ratio. On October 29, 1996 Mr. Timmerman contacted Mr. Voeks and
requested consideration for a 4.0:1 exchange ratio.
On Friday, November 1, 1996, Mr. Timmerman called Mr. Voeks and
indicated that Pioneer's Board had agreed to the 4:1 exchange ratio, but
requested a weekend delay so that the Pioneer Board could complete its
consideration of the transaction. Mr. Voeks was informed on November 5, 1996
that the letter of intent would be signed and Mr. Timmerman had unanimous
approval of Pioneer's Board to go ahead with the merger negotiations.
At a Mid-Plains Board meeting on November 19, 1996, the Mid-Plains
Board decided in concept to approve the merger between Mid-Plains and
Pioneer, including the 4:1 exchange ratio, and to recommend approval of the
merger to Mid-Plains shareholders. Also, the Mid-Plains Board
authorized Mr. Voeks to execute a definitive agreement on behalf of
Mid-Plains and the Mid-Plains Board.
During the remainder of November, 1996, preliminary due diligence was
performed by the companies and there were numerous telephone conferences
and meetings between Mr. Timmerman and Mr. Voeks. Also, management of the
companies attempted to reach an agreement on all elements of the proposed
combination.
In early December, 1996, management of each company reported that
agreement had been reached on all major elements of the proposed combination,
except the name to be given to the parent holding company. Also during this
period, counsel for each company reviewed certain legal matters, including
a detailed review of the terms of the proposed agreement and plan of merger,
a draft of which had been distributed to members of the companies' Board of
Directors. Mid-Plains' counsel advised management of the fiduciary duties
of the directors and other relevant aspects of Wisconsin corporate law.
At a Pioneer Board meeting on December 17, 1996, the Pioneer Board
decided in concept to approve the merger between Pioneer and Mid-Plains,
including the 4:1 exchange ratio and to recommend approval of the merger to
Pioneer shareholders. Also, the Pioneer Board authorized Mr. Timmerman to
further negotiate and execute the proposed agreement and plan of merger. The
Merger Agreement was executed by Mid-Plains and Pioneer effective as of
December 31, 1996.
On January 9, 1997 the Mid-Plains Board considered the Merger
Agreement. Prior to that meeting, Edelman advised Mid-Plains management that
based on information known to Edelman to date, Edelman expected to be able
to provide a written opinion that the 4:1 exchange ratio was fair from a
financial point of view to the holders of Mid-Plains common stock. Pursuant
to the Merger Agreement, Mid-Plains was authorized to terminate the
transaction if it was unable to obtain such an opinion on or before January
31, 1997. Edelman's written opinion was provided to Mid-Plains on January
22, 1997. See "Opinions of Financial Advisors."
On January 21, 1997, Pioneer contracted with Madison Valuation
Associates, Inc. to provide financial advisory services to Pioneer in
connection with the Mergers.
On January 29, 1997 the Pioneer Board considered the Merger Agreement.
At that meeting, Madison Valuation Associates, Inc. delivered an oral opinion
that the analysis contained in the written opinion delivered by Edelman to the
Mid-Plains Board was reasonable. Madison Valuation Associates, Inc. did not
opine as to the fairness of the exchange ratio to the holders of Pioneer
Common Stock. Such opinion was provided in writing to the Pioneer Board on
February 17, 1997. See "Opinions of Financial Advisors."
REASONS FOR THE MERGERS; RECOMMENDATIONS OF THE BOARDS
The Boards of Pioneer and Mid-Plains believe that the Mergers will
create a coalition of independent communications companies that will be
better positioned collectively to compete effectively in the rapidly changing
communications industry. Each Board believes that the Mergers will provide
opportunities to achieve substantial benefits for their respective
shareholders and customers that might not otherwise be available. Chorus,
operating with the combined markets, networks, financial resources,
management, personnel and technical expertise of our respective companies,
will be better able to capitalize on growth opportunities in the
communications industry. In addition, the Mergers will permit Chorus to
derive significant advantages from the more efficient utilization of the
combined assets, management and personnel of Pioneer and Mid-Plains.
Reasons for the Mergers
We believe that the Mergers will provide the following benefits:
Improved Liquidity of Stock. Currently, there is no established
public trading market for either Mid-Plains Common Stock, or
Pioneer Common Stock. Combined the two companies will have a
larger shareholder base with greater activity than any individual
company's stock would have on its own.
Positioning. The Mergers will position the companies for future
partnering with other independent telephone companies. Mid-Plains
is currently engaged in discussion with other such parties.
Resources and Expertise. The Mergers will allow existing
departments/expertise to be strengthened. Independently, Pioneer
is too small to departmentalize to the degree necessary to bring
value to the company. Synergies will be attained in the following
areas:
Billing. Billing flexibility is becoming increasingly more
important to attracting business long distance customers.
Establishing this expertise and making it available to Chorus will
make this effort cost effective.
Data processing. This is another area where the need for technical
expertise is increasingly apparent. Effective maintenance of
hardware, billing software, extensive Wide Area Networks ("WAN")
fully integrated software and Mid-Plains' extensive WAN Network
will significantly contribute to Chorus's ability to compete
effectively.
Engineering. Staff, hardware and software needs in this area are
also increasing due to more sophisticated activity in network
engineering as well as customer engineering. Maintaining facility
control and also taking advantage of economies of scale in this
area will be possible with Chorus sharing resources.
External Affairs/Regulation. The ongoing interaction with the
Wisconsin Public Service Commission ("PSCW") is necessary in the
telecommunications industry today. It is difficult to develop a
recognized presence, attend open meetings and maintain regular
contact with PSCW staff as an isolated independent company. Chorus
will be able to nurture this type of "marketing" relationship as
we move more deeply into the "competitive" arena.
Interconnect Services. Companies must become more adept in selling
application solutions within and without their existing service
territories. Customers feel comfortable in dealing with one
organization for all of their communications needs. MPCS personnel
will assist Mid-Plains and Pioneer company personnel in identifying
and selling sophisticated applications. This combination provides
differentiation from other competitors. Our statistics indicate
that 45-50% of all franchise customers use the incumbent LEC for
their customer premise equipment needs versus about 15-20% outside
franchise boundaries. The future success of communications
companies will require an effective sales organization to analyze
opportunities, identify unique applications and serve existing
customers. Typically, LECs of independent size have had no
established sales department. An established sales force will
assist the companies to identify new network opportunities, retain
customers, and expand customer base.
Long Distance & Internet Operations. In both of these areas, the
efficiencies and economies of scale which we anticipate will be
apparent in billing, sales and management. Success in the internet
business will only come from expansion beyond our traditional
service territories. This will allow us to expand our network
capabilities and our marketing effort, and allow us the opportunity
to staff our own internet help desk.
Marketing. Chorus will be better positioned in the area of
marketing than Mid-Plains and Pioneer are independently. Few LECs
of independent size have staff dedicated solely to marketing, which
is critical to the success of the organization. Whether it is
service promotion, community involvement, shareholder
communications or a new service offering, marketing requires a wide
variety of expertise, creative ideas and dedicated staff to
successfully complete the activity. An example of this is an
Annual Shareholder Report which is designed and used as a useful
marketing tool for shareholders and Interconnect, long distance and
Internet sales opportunities. Mid-Plains brings a separate
dedicated marketing staff to the Mergers.
Opportunities.
Cable TV. While many LECs are not currently involved in a cable
TV enterprise, it is a natural evolution of the network because
LECs generally have experience in the communication business and
currently possess information necessary to address customer service
and billing needs, and an existing customer base from which to
expand. The bandwidth of the network must be enhanced
significantly to meet the ever increasing demands of the customer.
As we increase the capacity of the network, we will need to seek
additional services to place on the network. It is a natural
phenomenon that video services be considered as an additional
revenue stream. Chorus will be able to launch technical and
marketing tests for such services. If successful, this service
could be made available throughout our customer base as rapidly as
possible.
Competition. The synergies which result from the Mergers will be
such that we will gain strength to face competition in the
communications industry. Efficiencies will be realized by (i)
publishing the Mid-Plains telephone directory through the Pioneer
publishing operation, (ii) providing organizational resources for
potential offensive competitive activity by Pioneer in and around
its southwestern Wisconsin market area, and (iii) including the
Pioneer customer base in promotional and marketing efforts
conducted for various services provided by Mid-Plains. Together,
the companies have greater potential to move outside of their
traditional franchise boundaries and compete with Ameritech, GTE,
and others. Chorus expects to have the products, services and
corporate culture to offer products and pricing competitive with
that which will be offered by national "corporate" entities.
Directory. This is a new opportunity for Mid-Plains and creates
an environment where Mid-Plains' larger book will bring significant
new business for the existing Pioneer Directory and will also bring
increased credibility for sales to other independent telephone
companies.
Coalition Expansion. Completing the Mergers introduces the
"coalition" concept to the local marketplace. It also creates an
opportunity for presentation to other independent companies to
encourage them to join in the coalition, thereby compounding the
positive effects of the Mergers. This will allow for the
development of an organization with a broader customer base,
investor base and corporate expertise.
Information and Factors Considered by the Boards of Directors
In reaching its conclusions, each of our Boards of Directors
considered, among other things, (i) information concerning the financial
performance and condition, business operations, capital levels, asset quality
and prospects of each company, and its projected future financial performance
as a separate entity and on a combined basis; (ii) current industry, economic
and market conditions and trends, including the likelihood of continuing
consolidation and increasing competition in the communications industry;
(iii) the importance of market position, significant scale and scope and
financial resources to a company's ability to compete effectively in the
changing environment in the communications market; (iv) the Mergers'
structure as a pooling of interest; (v) the possibility that achieving cost
savings, operating efficiencies and synergies as a result of consummating the
Mergers at this time might not be available to either company on its own
(although specific levels of cost savings, operating efficiencies, and
synergies were not quantified by either Board of Directors); (vi) the terms
of the Merger Agreement; (vii) the opinion of Edelman & Co., Ltd.
described below as to the fairness, from a financial point of view,
to the Mid-Plains shareholders, of the Mid-Plains Exchange Ratio and the
opinion of Madison Valuation Associates, Inc. as to the reasonableness
of the Edelman & Co., Ltd. opinion; (viii) the changing regulatory
environment in the telecommunications industry; (ix) the challenges of
combining the businesses of two corporations of this size and the attendant
risk of diverting management resources from other strategic opportunities and
from operational matters for an extended period of time; (x) labor relations
with the companies' union and non-union employees; (xi) alternative
transactions; and (xii) the impact of the Mergers on the customers and
employees of each company. In reaching their respective decisions to approve
the Mergers and to recommend the Mergers to shareholders, neither of our
Boards of Directors assigned any relative or specific weights to the various
factors considered and individual directors may have given differing weights
to different factors. In consideration of all of the foregoing, and based
on its business judgment, each of the Boards of Directors determined that the
terms of the Merger Agreement, including the Exchange Ratio, were fair to
and in the best interests of their respective shareholders.
Each of the Boards of Directors also considered alternatives to the
Mergers, including merging Pioneer into Mid-Plains and thereby eliminating
the corporate existance of Pioneer. Certain financing restrictions
and the possibility of abandoning existing franchise agreements prevented
the companies from considering such alternatives.
Recommendations of the Boards
Each of our Boards of Directors believes that the terms of the Mergers
are fair to, and in the best interests of, their respective shareholders and
have, by unanimous vote of all directors present, approved the Merger
Agreement and the transactions contemplated thereby and unanimously recommend
that their respective shareholders vote "for" the Pioneer Proposal and the
Mid-Plains Proposal, respectively. For a discussion of the possible detriments
considered by the Boards of Directors, see "Risk Factors."
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document that are
subject to risks and uncertainties. Forward-looking statements include the
information concerning possible or assumed future results of operations of
our companies and Chorus set forth under "Reasons for the Mergers,
Recommendations of the Boards" and "Opinions of Financial Advisors" and those
preceded by, followed by or that include the words "believes," "expects,"
"anticipates" or similar expressions. You should understand that
the following important factors, in addition to those discussed elsewhere in
this document and in the documents which we incorporate by reference, could
affect the future results of Chorus, Mid-Plains and Pioneer, and could cause
those results to differ materially from those expressed in our
forward-looking statements: materially adverse changes in economic conditions
in the markets served by our companies; a significant delay in the expected
closing of the Mergers; future regulatory actions and conditions in our
companies' operating areas; and competition from others in the local exchange
and tolls service markets.
ACCOUNTING TREATMENT
It is a non-waiverable condition to the consummation of the Mergers that
we each receive from Kiesling Associates, LLP a letter dated the Closing Date
to the effect that they concur with the conclusions of Mid-Plains' and
Pioneer's management that the transactions contemplated by the Merger
Agreement, if consummated, will qualify as a transaction to be accounted for
in accordance with the pooling of interests method of accounting under
Opinion No. 16, Business Combinations, of the Accounting Principles Board of
the American Institute of Certified Public Accountants. Under this
accounting method, the assets and liabilities of Pioneer and Mid-Plains will
be carried forward to Chorus at their historical recorded bases. Results of
operations of Chorus will include the results of both Mid-Plains and Pioneer
for the entire fiscal year in which the Mergers occur. The reported balance
sheet amounts and results of operations of the separate corporations for
prior periods will be combined, reclassified and conformed, as appropriate,
to reflect the combined financial position and results of operations for
Chorus. See "Unaudited Pro Forma Combined Condensed Financial Statements."
Furthermore, based upon the limited cash resources of the parties, Mid-Plains
and Pioneer may not consummate the Mergers even if the Mergers qualify for
the pooling of interests accounting, if a large number of shareholders dissent.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes the material federal income
tax consequences of the Mergers as contemplated by Axley Brynelson and is
based on the Internal Revenue Code of 1986, as amended (the "Code"), the
regulations promulgated thereunder, existing administrative interpretations
and court decisions, and is a summary of the opinion of Axley Brynelson
regarding this matter. Future legislation, regulations, administrative
interpretations or court decisions could significantly change such
authorities either prospectively or retroactively. We do not address all
aspects of federal income taxation that may be important to a shareholder in
light of such shareholder's particular circumstances or to shareholders
subject to special rules, such as shareholders who are not citizens or
residents of the United States, financial institutions, tax-exempt
organizations, insurance companies, or dealers in securities. This
discussion assumes that Pioneer and Mid-Plains shareholders hold their
respective shares of stock as capital assets within the meaning of
Section 1221 of the Code.
It is a condition to the obligations of our companies under the Merger
Agreement that the companies receive an opinion of Axley Brynelson regarding
material federal income tax consequences of the Mergers. Neither Mid-Plains
nor Pioneer intends to secure a ruling from the Internal Revenue Service (the
"IRS") with respect to the tax consequences of the Mergers. We believe,
based on the form of opinions of Axley Brynelson referred to above, that the
Mergers will have the federal income tax consequences discussed below. The
opinions of counsel referred to above will assume the absence of changes in
existing facts and may rely on assumptions, representations and covenants
including those contained in certificates of officers of Mid-Plains, Pioneer and
others. The opinions referred to above neither bind nor preclude the IRS
from adopting a contrary position. An opinion of counsel sets forth such
counsel's legal judgment and has no binding effect or official status of any
kind, and no assurance can be given that contrary positions will not be
successfully asserted by the IRS or adopted by a court if the issues are
litigated.
Tax Implications to Mid-Plains Shareholders and Pioneer Shareholders.
Except as discussed below and in the immediately following paragraph, (a) no
gain or loss will be recognized for federal income tax purposes by holders
of Mid-Plains Common Stock or Pioneer Common Stock who exchange their
respective stock for Chorus Common Stock pursuant to the Mergers and (b) the
aggregate tax basis of Chorus Common Stock received as a result of the
Mergers will be the same as the shareholder's aggregate tax basis in the
Mid-Plains Common Stock or Pioneer Common Stock surrendered in the exchange.
Tax Implications to Mid-Plains, Pioneer and Merger Subsidiaries. No
gain or loss will be recognized for federal income tax purposes by
Mid-Plains, Pioneer or either of the Merger Subsidiaries as a result of the
formation of the Merger Subsidiaries or the Mergers.
The discussion set forth above under the "Material Federal Income Tax
Consequences" is intended to provide only a general summary, and does not
purport to be a complete analysis or description of all potential federal
income tax consequences of the Mergers. In addition, the foregoing
discussion does not address tax consequences which may vary with, or are
contingent on, individual circumstances. Moreover, this discussion does not
address any non-income tax or any foreign, state or local tax consequences
of the Mergers. This discussion does not address the tax consequences of any
transaction other than the Mergers. Accordingly, each shareholder is
strongly urged to consult with such shareholder's tax advisor to determine
the particular United States federal, state, local or foreign income or other
tax consequences to such shareholder of the Mergers.
REGULATORY APPROVALS
Mid-Plains, Farmers and Dickeyville are subject to regulation by PSCW
as to rates and service rules, accounts, certain additions and extensions to
facilities, and in other respects. Mid-Plains, Farmers and Dickeyville will
continue to be subject to the jurisdiction of the PSCW after the Effective
Time of the Mergers in the same manner that they were subject to such
jurisdiction prior to the Mergers.
Chorus will not be subject to regulation of its business and financial
affairs to the same extent as Mid-Plains, Farmers and Dickeyville. However,
subsequent to the Mergers, certain types of transactions between various
members of the system consisting of Chorus and its subsidiaries will be
subject to the jurisdiction of the PSCW under provisions of Wisconsin law
governing transactions between public utilities and affiliated interests.
It is not necessary for Mid-Plains and Pioneer to obtain the approval
of the PSCW in order to complete the Mergers. Mid-Plains and Pioneer are
required to and will make information filings of the Mergers with the PSCW
within ten (10) days following the Effective Time.
DISSENTERS' RIGHTS
Pursuant to secs. 180.1301 to 180.1331 of the Wisconsin Statutes, a
copy of which is attached hereto as Appendix II, both Mid-Plains shareholders
and Pioneer shareholders have the right to dissent from the Merger Agreement
and, subject to consummation of the Mergers, to receive in cash the fair
value of their shares of common stock by following the procedures set forth
in such sections. Set forth below is a brief summary of secs. 180.1301 to
180.1331 of the Wisconsin Statutes, which does not purport to be complete and
is qualified by reference to the actual statutes.
Pursuant to sec. 180.1321 of the Wisconsin Statutes, any owner of
Pioneer or Mid-Plains common stock desiring to assert dissenters' rights
shall do all of the following: (i) deliver to the applicable company, before
the vote to approve the Merger Agreement is taken, written objection to the
Merger Agreement which includes his or her intent to demand payment for his
or her shares if the proposed Merger Agreement is effectuated, and (ii) not
vote in favor of the Merger Agreement. A shareholder who fails to satisfy
both (i) and (ii) above is not entitled to payment for his or her shares by
the applicable company.
A shareholder may object to the Merger Agreement with respect to less
than all of his or her shares of common stock. Mid-Plains shareholders who
wish to object must file written objections with Mid-Plains by mail addressed
to Mid-Plains, Inc., 1912 Parmenter Street, P.O. Box 620070, Middleton, WI
53562-0070, or by delivery in person to the company's principal office at
1912 Parmenter Street, Middleton, WI, both to the attention of Fredrick
Urben, Secretary. Pioneer shareholders who wish to object to the Merger
Agreement must file written objections with Pioneer by mail addressed to
Pioneer Communications, Inc., 140 North Monroe Street, P.O. Box 231,
Lancaster, WI 53813, or by delivery in person to the company's principal
office at 140 North Monroe Street, Lancaster, WI, both to the attention of
G. Burton Block, Secretary.
Within ten (10) days after the Merger Agreement is approved at the
Special Meetings each company shall deliver a written dissenters' notice to
each of its shareholders who has dissented to the Merger Agreement in
accordance with sec. 180.1321 of the Wisconsin Statutes. Upon receipt of
such notice, each dissenting shareholder shall have thirty (30) days to
demand payment in writing and surrender the certificate or certificates
representing his or her shares with respect to which he or she has dissented.
A dissenting shareholder who does not demand payment within the designated
time period is not entitled to payment for his or her shares and shall be
bound by the Merger Agreement.
Upon receipt of a payment demand or on the day of the Effective Time,
whichever is later, the respective company shall pay each shareholder who has
demanded payment the amount that the company estimates to be the fair value
of his or her shares, plus accrued interest.
A shareholder who does not agree with the appropriate company's
estimation of the fair value of his or her shares must notify the company of
his or her estimate within thirty (30) days after the company made or offered
payment for his or her shares. If the shareholder and company cannot agree
upon the fair value of the shares or amount of interest due, the company
shall file a petition in any court of competent jurisdiction in the county
in which its principal office is located, requesting a finding and
determination of the fair value of such shares and accrued interest. If the
appropriate company fails to institute such a proceeding within sixty (60)
days after the shareholder notifies the company of his or her disagreement,
such company shall pay each of its dissenters whose demand remains unsettled
the amount demanded.
CERTAIN LITIGATION
A case is currently pending before the State of Wisconsin Tax Appeals
Commission involving an audit of Mid-Plains' sales and use tax liability to
the State of Wisconsin for the years 1991 through 1994, inclusive. The
amount at issue, including interest and penalty through December 26, 1996,
is $150,789.19. The primary issues involved are whether certain equipment
purchased by Mid-Plains qualifies as central office equipment and whether
Mid-Plains should have collected sales tax in connection with its provision
of billing and collection services to long distance carriers. Due to changes
in the sales tax law, these issues are not on going, and resolution of the
case will affect prior years only and not Mid-Plains' future sales tax
liability. Mid-Plains does not expect that the outcome of the litigation
will be material to its results of operations or financial condition.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial
statements give effect to the Mergers using the pooling of interests method
of accounting, which means that for accounting and financial reporting
purposes, we will treat our companies as if they had always been combined.
For a more detailed description of pooling-of-interest accounting, see "The
Mergers-Accounting Treatment." These unaudited pro forma combined condensed
financial statements have been prepared from, and should be read in
conjunction with, the historical consolidated financial statements and notes
thereto of Mid-Plains and Pioneer, which are provided herein.
The unaudited pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the operating results or
financial position that would have occurred had the Mergers been consummated
at the dates indicated, nor is it necessarily indicative of future operating
results or financial position of Chorus .
The unaudited Pro Forma Combined Condensed Balance Sheet gives effect
to the Mergers as if they had occurred on December 31, 1996, combining the
balance sheets of Mid-Plains and Pioneer at December 31, 1996. The unaudited
Pro Forma Combined Condensed Statements of Income give effect to the Mergers
as if they had occurred at the beginning of the earliest period presented,
combining the results of Mid-Plains and Pioneer for each year in the three
year period ended December 31, 1996.
As a result of the Mergers, Mid-Plains and Pioneer will incur certain
transition costs, currently estimated at $211,500 and $90,500 (pretax),
respectively, in connection with consummating the transaction and integrating
the operations of Mid-Plains and Pioneer. The transition costs consist
principally of professional and registration fees. While the exact timing,
nature and amount of these transition costs is subject to change, the
companies anticipate the following charges:
Mid-Plains Pioneer Total
Professional Services
Legal $100,000 $ 50,000 $150,000
Accounting $ 10,000 $ 5,000 $ 15,000
Financial Advisors $ 60,000 $ 15,000 $ 75,000
Registration Fees $ 8,000 $ 4,000 $ 12,000
Printing and Postage $ 33,500 $ 16,500 $ 50,000
TOTAL $211,500 $ 90,500 $302,000
(This space was intentionally left blank)
CHORUS COMMUNICATIONS GROUP, LTD.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AT DECEMBER 31, 1996
(Unaudited)
Historical Historical Pro Forma Pro Forma
Mid-Plains Pioneer Adjustments Combined
In Thousands
Assets
Current Assets
Cash and cash equivalents $ 1,058 $ 844 $1,902
Temporary investments 3,200 3,200
Accounts receivable 3,323 1,354 4,677
Inventories 1,317 246 1,563
Other 551 274 825
Total current assets 6,249 5,918 12,167
Property, Plant and Equipment 50,552 12,012 62,564
Less accumulated depreciation (21,730) (6,432) (28,162)
Total Property, Plant
and Equipment 28,822 5,580 34,402
Investments and Other Assets
Cellular limited
partnership interest 4,101 4,101
Other 716 319 1,035
Total Investments and
Other Assets 4,817 319 5,136
Total Assets $39,888 $11,817 $51,705
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 3,093 $ 630 $3,723
Other 1,305 230 1,535
Total Current Liabilities 4,398 860 5,258
Long-term debt 12,185 3,292 15,477
Deferred credits 3,808 677 4,485
Shareholders' Equity
Common stock 11,889 2 $1,874 13,765
Additional paid-in capital 1,874 (1,847) -0-
Retained earnings 7,608 5,112 12,720
Total Shareholders' Equity 19,497 6,988 -0- 26,485
Total Liabilities and
Shareholders' Equity $39,888 $11,817 $ -0- $51,705
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Financial Statements.
CHORUS COMMUNICATIONS GROUP, LTD.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited)
Historical Historical Pro Forma Pro Forma
Mid-Plains Pioneer Adjustments Combined
In Thousands
Operating Revenues
Telephone Operations $19,861 $ 5,753 $25,614
System sales and services 7,226 341 7,567
Total Operating Revenues 27,087 6,094 33,181
Operating Expenses
Telephone Operations 13,846 3,755 17,601
System sales and services 6,525 212 6,737
Total Operating Expenses20,371 3,967 24,338
Operating Income 6,716 2,127 8,843
Other income 42 196 238
Interest expense (1,177) (231) (1,408)
Income Before Income Tax Expense and
Extraordinary Item 5,581 2,092 7,673
Income tax expense 2,139 793 2,932
Income Before Extraordinary Item 3,442 1,299 4,741
Extraordinary Item 1,782 -0- 1,782
Net Income $ 1,660 $ 1,299 $ -0- $2,959
Earnings per share
Income before
Extraordinary Item $ 1.73 $ 1.88 $ 1.77
Extraordinary item (.89) (.67)
Net Income $ .84 $ 1.88 $ -0- $ 1.10
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Financial Statements.
CHORUS COMMUNICATIONS GROUP, LTD.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
Historical Historical Pro Forma Pro Forma
Mid-Plains Pioneer Adjustments Combined
In Thousands
Operating Revenues
Telephone Operations $18,103 $ 5,666 $23,769
System sales and services 6,475 295 6,770
Total Operating Revenues 24,578 5,961 30,539
Operating Expenses
Telephone Operations 11,973 3,861 15,834
System sales and services 6,141 178 6,319
Total Operating Expenses 18,114 4,039 22,153
Operating Income 6,464 1,922 8,386
Other Income 27 143 170
Interest expense ( 957) (246) (1,203)
Income Before Income Tax Expense 5,534 1,819 7,353
Income tax expense 2,109 672 2,781
Net Income $ 3,425 $ 1,147 $ -0- $4,572
Earnings per share $ 1.73 $ 1.66 $ -0- $ 1.71
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Financial Statements.
CHORUS COMMUNICATIONS GROUP, LTD.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
(Unaudited)
Historical Historical Pro Forma Pro Forma
Mid-Plains Pioneer Adjustments Combined
In Thousands
Operating Revenues
Telephone Operations $15,560 $ 5,260 $20,820
System sales and services 5,900 277 6,177
Total Operating Revenues 21,460 5,537 26,997
Operating Expenses
Telephone Operations 10,534 3,512 14,046
System sales and services 5,444 197 5,641
Total Operating Expenses 15,978 3,709 19,687
Operating Income 5,482 1,828 7,310
Other Income 18 48 66
Interest expense (896) (236) (1,132)
Income Before Income
Tax Expense 4,604 1,640 6,244
Income tax expense 1,715 641 2,356
Net Income $ 2,889 $ 999 $ -0- $3,888
Earnings per share $ 1.47 $ 1.46 $ -0- $ 1.46
See accompanying Notes to Unaudited Pro Form Combined Condensed
Financial Statements.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
Note 1 - Reclassifications
Certain reclassifications have been made to the historical financial
statements to conform to the presentation expected to be used by the
merged companies.
Note 2 - Exchange Ratio.
Under the Merger Agreement, each outstanding share of Mid-Plains common
stock will be converted into one share of Wisconsin Communications
Group, Inc. common stock and each outstanding share of Pioneer
Communications, Inc. common stock will be converted into four shares
of Chorus Communications Group, Ltd. common stock. These exchange
ratios were used in computing share and per share amounts in the
accompanying pro forma combined condensed financial statements.
Note 3 - Pro Forma Combined Condensed Balance Sheet Adjustment
An adjustment was made to eliminate Pioneer's additional paid-in capital
to reflect a change from Pioneer's $.01 par value per common
share to Chorus Communications Group, Ltd.'s no par value per common
share.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
At or for the Year Ended December 31,
1996 1995 1994
In Thousands, Except Per Share Data
Total assets $ 51,705
Long-term debt $ 15,860
Operating revenues $ 33,181 $ 30,539 $ 26,997
Income before extraordinary item $ 4,741 $ 4,572 $ 3,888
Net Income $ 2,959 $ 4,572 $ 3,888
Per share data
Book Value $ 9.88
Income before extraordinary item $ 1.77 $ 1.71 $ 1.46
Net Income $ 1.10 $ 1.71 $ 1.46
Cash dividends declared<F1> $ 1.03 $ 1.05 $ .84
<FN>
<F1> The Cash dividends declared per common share in the Unaudited Pro Forma
Combined Condensed Financial Information reflect the sum of dividends
declared by Mid-Plains and Pioneer divided by the number of shares that would
have been outstanding for the periods presented after adjusting the Pioneer
shares by the exchange ratio of 4 to 1.
</FN>
SELECTED FINANCIAL INFORMATION OF MID-PLAINS
We are providing the following financial information of Mid-Plains to aid you
in your analysis of the financial aspects of the merger. We derived this
information from audited financial statements for 1992 through 1996. The
information is only a summary and you should read it in conjunction with
Mid-Plains' historical financial statements (and related notes) contained in
the annual reports and other information filed with the SEC. See Appendix VII.
MID-PLAINS HISTORICAL FINANCIAL INFORMATION
1996 1995 1994 1993 1992
In Thousands, Except Per Share Data
Total assets $ 39,888 $ 40,714 $ 33,889 $ 33,676 $ 31,079
Long-term debt $ 12,401 $ 8,570 $ 6,954 $ 7,756 $ 8,482
Operating revenues $ 27,087 $ 24,578 $ 21,460 $ 19,041 $ 18,075
Income before extraordinary
item $ 3,442 $ 3,425 $ 2,889 $ 2,882 $ 2,680
Net Income $ 1,660 $ 3,425 $ 2,889 $ 2,882 $ 2,680
Per Share Data
Book Value $ 9.80 $ 9.95 $ 9.23 $ 8.53 $ 7.76
Income before extraordinary
item $ 1.73 $ 1.73 $ 1.47 $ 1.47 $ 1.38
Net Income $ .84 $ 1.73 $ 1.47 $ 1.47 $ 1.38
Cash dividends
declared $ 1.06 $ 1.12 $ .86 $ .78 $ .86
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF MID-PLAINS
RESULTS OF OPERATIONS
OVERVIEW
As a result of actions taken in 1996, Mid-Plains has successfully implemented
several key initiatives that better position the company for competition and
future growth in the communications business. These initiatives, which are
discussed below, include: an alternative regulation plan, discontinuation of
applying certain accounting principles for regulated enterprises, entering
into a merger agreement, successfully bidding on a personal communication
license (PCS), and refinancing first mortgage notes.
Record revenues were once again reported in 1996. Consolidated operating
revenues increased $2.5 million, to $27.1 million, in 1996, and $3.1 million,
to $24.6 million, in 1995. Consolidated income before extraordinary item for
1996 remained constant at 1995's level of $3.4 million which was an increase
of $0.5 million over 1994. Due to an extraordinary charge against income
relating to the discontinuance of regulatory accounting principles (as
discussed below) net income decreased $1.8 million in 1996 as compared to
1995.
Mid-Plains operates in two business segments: a telecommunications utility
providing telephone and data services (telephone operations) and system sales
and service operations.
TELEPHONE SERVICE OPERATING RESULTS
The Telephone segment contributed operating income of $6.0 million, $6.1
million, and $5.0 million to the consolidated operating income in 1996, 1995
and 1994 respectively.
OPERATING REVENUES
Telephone service revenues increased $1.8 million, to $19.9 million, in 1996,
and $2.5 million, to $18.1 million, in 1995.
Local network services revenues increased $.9 million in 1996 as compared to
1995. These revenues increased principally as a result of higher demand for
services, as evidenced by an 8.7% growth in access lines in 1996.
Additionally, effective September 1, 1996, Mid-Plains implemented its
Alternative Regulation Plan which had the effect of increasing local network
services revenues $.4 million for the year.
Local network service revenues for 1995 increased $.7 million as compared to
1994. The growth was primarily due to an increase in local network service
rates in 1995 which increased revenues by $1.1 million, and an 8.6% growth
in the number of access lines served which resulted in $.3 million increase
in revenues. These increases were offset in part by a credit of $.6 million
in 1994 to eliminate regulatory liabilities no longer considered payable.
Interstate network access and long distance network services revenues
increased $.5 million in 1996 as compared to 1995. These revenues increased
largely due to higher demand for access services as evidenced by an increase
in minutes of use of 10.3% in 1996. This increase was offset, in part, by
a net decrease in access rates of approximately 2.3%.
Interstate network access and long distance network services revenues
increased $1 million in 1995 as compared to 1994. This increase was due to
7.0% higher demand for services and the provision of long distance service
of $.5 million.
Intrastate network access and long distance network services revenues
increased $.2 million in 1996 as compared to 1995. The increase in these
revenues was primarily due to higher demand for access services as evidenced
by an increase in minutes of use of 8.3% in 1996. This increase was offset
by $.3 million due to the effects of rate reductions resulting from
Mid-Plains' implementation of their Alternative Regulation Plan on
September 1, 1996.
Intrastate network access and long distance network services revenues
increased $.6 million in 1995 as compared to 1994. This increase was due to
higher demand of 3.1% for services and the provision of long distance service
of $.2 million.
OPERATING EXPENSES
Telephone operating expenses, which include plant, depreciation, customer,
corporate, and general taxes, increased by $1.9 million to $13.8 million and
$1.4 million to $12.0 million in 1996 and 1995, respectively.
The increases in plant, customer and corporate operations in 1996 as compared
to 1995 were due primarily to growth in internal operations. Additionally,
plant operations increased $.3 million in 1996 due to costs associated with
providing Internet access.
The increases in plant, customer and corporate operations in 1995 as compared
to 1994 were again due primarily to growth in internal operations.
Additionally, an increase of $.3 million was due to the cost of providing
long distance services.
Depreciation increased $.2 million in 1996 as compared to 1995 and $.3
million in 1995 as compared to 1994 as a result of increased depreciable
property. Additionally, increases of $0.2 million in 1996 and $0.5 million
in 1995 in depreciation expense were recorded in connection with the
change-out of central office equipment.
On December 17, 1996 the Company's Board of Directors voted to terminate the
pension plan effective April 15, 1997. It is anticipated that the plan
settlement will not have a material effect on the Company. It is also
anticipated that during 1997, after giving effect to enhanced 401(k)
benefits, the company's pension costs will decrease approximately $430,000
due to these changes.
SYSTEM SALES AND SERVICE OPERATING RESULTS
The system sales and service segment contributed operating income of $.7
million, $.3 million and $.5 million to the consolidated operating income in
1996, 1995 and 1994, respectively.
OPERATING REVENUES
System sales and services revenues increased $.8 million in 1996, to $7.2
million, as compared to 1995. The increase was due primarily from the growth
in new system sales. System sales and services revenues for 1995 increased
$.6 million, to $6.5 million over 1994, due primarily from new system sales
as well as an increase in maintenance sales.
OPERATING EXPENSES
As a percentage of system sales and services revenues, cost of sales and
services was 59% in 1996, 64% in 1995, and 58% in 1994. The lower cost of
sales and services percentage in 1996 was primarily the result of the
Company's higher equipment pricing. The higher cost of sales and services
percentage in 1995 in relationship to 1994 was primarily due to reclassifying
to cost of sales, payroll overheads, which in 1994 were included in operating
expenses. If the reclassifications had been made in 1994, the cost of sales
percentage in 1994 would have increased 3% with a corresponding reduction in
operating expenses.
System sales and services operating expenses increased $.3 million in 1996
primarily due to growth in internal operations and increase in incentives.
OTHER ITEMS
Interest expense increased $.2 million in 1996 as compared to 1995 and $0.1
million in 1995 as compared to 1994, primarily due to the increase in the
amounts of short-term bank notes owed during the year. Additionally, in
July, 1995 interest on debentures increased as a result of an additional $2.5
million financing, but this was offset in part by a reduction in the
debenture interest rates from 11% to 8%.
EXTRAORDINARY ITEM - DISCONTINUANCE OF REGULATORY ACCOUNTING PRINCIPLES
Mid-Plains discontinued applying Statement of Financial Accounting Standards
No. 71 ("SFAS 71"), "Accounting for the Effects of Certain Types of
Regulation" in the second quarter of 1996. Mid-Plains determined that it no
longer met the criteria for following SFAS 71 due to changes in legislative,
regulatory and competitive environments. Future business transactions will
be recorded following their economic substances, and regulatory assets and
liabilities pursuant to SFAS 71 will no longer be recognized.
Although Mid-Plains' recorded assets and net equities were reduced as a
result of this discontinuance of application of SFAS 71, no material impact
on current and future cash flows is anticipated.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
Mid-Plains requires funds primarily for its construction program, the
maturity and retirement of long-term debt, dividend payments and investments.
The capital resources available to meet these requirements are provided
through internally generated funds and external financing. Net cash provided
from operations of the Company and its subsidiary for the years 1994 - 1996
was $22.0 million. External financing for the same period totaled $8.2
million.
CAPITAL REQUIREMENTS AND RESOURCES
The primary capital requirement of the Company has historically consisted of
expenditures under its construction program. Total construction expenditures
for the years 1994 - 1996 were $17.3 million. Total capital expenditures for
1997 are estimated to be $9 million.
In 1995, Mid-Plains contributed $2 million in a capital call to the cellular
partnership in which Mid-Plains has a limited interest. Additionally, as
discussed below, Mid-Plains anticipates a significant investment in PCS
Wisconsin, LLC, which will be required in the next few years.
In 1995, Mid-Plains sold $5.0 million of five-year debentures, $2.5 million
of which were used to retire debentures that were due on that date. In
addition, in January, 1997 Mid-Plains entered into a financing agreement that
permits Mid-Plains to borrow up to $22 million of long-term debt and $7
million on revolving lines-of-credit.
It is expected that capital requirements for its construction program,
maturity and retirement of long-term debt, dividend payments and investment
in PCS Wisconsin, LLC will be provided for with cash flow from operations,
the issuance of debt and, if necessary, equity financing.
After giving effect to the February, 1997 refinancing, Mid-Plains had
available unused lines-of-credit of $7 million. The Company has experienced
no difficulty in obtaining funds for its construction program or other
purposes and anticipates none in the future.
PCS WISCONSIN, LLC
PCS Wisconsin, LLC ("PCS-WI"), a 75% owned subsidiary of Mid-Plains, was
established in 1996 to build and operate a personal communications system in
south central and southwestern Wisconsin. On January 14, 1997, PCS-WI was
the successful bidder for a broadband Personal Communications Services
("PCS") license at an auction held by the FCC. This license will, when
granted, authorize PCS-WI to provide two-way voice and data services on a new
wireless, digital network. The license covers Dane County and nine adjacent
counties with a total population of 600,000. PCS-WI's bid for the license
was $3,248,000.
Under the terms of the license, PCS-WI will be required to construct an
operating system that will be capable of providing service to at least 25%
of the population in the license area within five years of the grant of the
license. PCS-WI anticipates that construction, development and introduction
of the PCS networks and services will require substantial capital and
operating expenditures over the next several years. However, Mid-Plains
has not determined reasonable cost projections for the construction,
development and introduction of the PCS network with any degree of certainty.
Currently, Mid-Plains has $9 million available through a financing
agreement with the Rural Telephone Finance Cooperative ("RTFC") to invest
in PCS-WI.
In addition to the risks associated with startup operations of PCS-WI, it is
anticipated the company will encounter stiff competition from the two
existing cellular providers as well as from five other new PCS license
holders.
EXTERNAL FINANCING
External financing for the years 1994 - 1996 was $8.2 million consisting of
$5.0 million raised through the sale of debentures, $0.8 million from the
sale of common stock under the employee stock purchase plan, and a net
increase in short-term bank notes of $2.4 million.
On January 31, 1997, Mid-Plains entered into a financing agreement with the
RTFC that permits Mid-Plains to borrow up to $22 million. The RTFC financing
agreements provide that $12 million of the loan is available for refinancing
existing debt, capital expenditures and to provide working capital for
telephone operations; $9 million is available to invest in PCS-WI (see above)
and $1 million is available to purchase RTFC's Subordinate Capital
Certificates, a condition of obtaining financing. RTFC permits the interest
on the loans to be either fixed or variable, with the rates to be determined
by RTFC. The variable rate at February 7, 1997 was 6.3%.
In connection with its long-term debt, the Company is subject to certain
restrictions on its debt and the amount of retained earnings available for
cash dividends. Under the agreement, at December 31, 1996, $3,542,000 of
Mid-Plains' retained earnings were available for the payment of dividends.
OTHER MATTERS
PENDING MERGER
Mid-Plains and Pioneer Communications, Inc.("Pioneer") have entered into an
Agreement and Plan of Merger ("Merger Agreement") dated December 31, 1996,
which will result in the combination of Mid-Plains and Pioneer into creating
Chorus Communications Group, Ltd., a holding company, expected to better
position the companies to compete effectively in the rapid changing
communications industry. Chorus Communications Group, Ltd. will serve
more than 38,000 access lines in southern Wisconsin. It is anticipated that
Chorus Communications Group, Ltd. will retain Mid-Plains' common share
dividend payment level as of the effective time of the merger. On January
9, 1997, the Board of Directors of Mid-Plains declared a quarterly dividend
of 27 cents per share. This represents an annual rate of $1.08 per share.
ALTERNATIVE REGULATION PLAN
On August 27, 1996, Mid-Plains became the first independent local exchange
company in Wisconsin to receive approval on its application for an
Alternative Regulation Plan. Under this five-year plan, Mid-Plains is
required to maintain certain basic residential and business rates under a
rate ceiling as well as reduce access charges received from intrastate long
distance providers. In return, the plan eliminated the tie between local
rates and rate-of-return regulation. As part of the Plan, effective
September 1, 1996, local rates on residential and standard business lines
were increased, while access rates paid by long distance carriers to the
Company for intrastate access were lowered. While the changes noted above
were designed to be revenue neutral to Mid-Plains, they assisted positioning
Mid-Plains to better meet the competition of the future.
COMPETITION
The communications industry is undergoing significant changes. The industry
is converging, forming alliances and positioning to provide a variety of
services. Market convergence has intensified. Legislation and regulation
changes, technological advances and customer demand have expanded the types
of services, products and number of companies offering communication services
and products.
On February 8, 1996, the President signed the Telecommunications Act of 1996
into law. The bill broke down regulatory barriers at both the state and
federal level and is certain to accelerate the convergence of local, long
distance, wireless, video and data. The FCC and state regulators must decide
precisely how Congress's instructions will be carried out. Due to
Mid-Plains' size, it currently has limited exception from several provisions
of the bill.
The breakdown of barriers at both the state and federal levels allows new
competitors to enter telecommunication service markets. At the same time,
telecommunications providers can enter new markets in areas of increased
competition.
As we look ahead, Mid-Plains faces stiff competition with prices and
technology under continued pressure. Along with this, Mid-Plains also sees
growing opportunities in a market-driven information highway.
SELECTED FINANCIAL INFORMATION OF PIONEER
We are providing the following financial information of Pioneer to aid you in
your analysis of the financial aspects of the merger. We derived this
information from audited financial statements for 1995 through 1996 and
unaudited financial statements for 1992 through 1994. The information is
only a summary and you should read it in conjunction with Pioneer's historical
financial statements (and related notes) contained in the annual reports.
See Appendix VIII.
PIONEER HISTORICAL FINANCIAL INFORMATION
1996 1995 1994 1993 1992
(Unaudited)(Unaudited)
(Dollars In Thousands, Except Per Share Data)
Total assets $11,817 $11,333 $10,872 $ 9,898 $8,732
Long-term debt $ 3,549 $ 3,625 $ 3,808 $ 3,729 $3,260
Operating revenues $ 6,094 $ 5,961 $ 5,537 $ 5,385 $4,766
Net Income $ 1,299 $ 1,147 $ 999 $ 1,055 $ 894
Per share data
Book value $ 40.36 $ 36.56 $ 33.09 $ 30.37 $27.30
Net income $ 7.50 $ 6.62 $ 5.82 $ 6.20 $ 5.30
Cash dividends $ 3.75 $ 3.50 $ 3.25 $ 3.25 $ 3.25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - PIONEER
RESULTS OF OPERATIONS
OVERVIEW
Pioneer provides telecommunications services to Southwestern Grant
County, Wisconsin. Pioneer publishes telephone directories for various
telephone companies throughout Wisconsin as well as Minnesota and Iowa. DWR
Long Distance, a division of Dickeyville Telephone Corporation, continues to
provide service to parts of Southwest Wisconsin and Northeast Iowa. PCII.Net
provides local access to the internet information superhighway. The Farmers
Telephone Company owns a 2% interest in the RSA No. 8 Limited Partnership.
Farmers and Dickeyville have also become authorized agents for U.S. Cellular.
TELEPHONE SERVICE OPERATING RESULTS
The regulated utility operations collectively contributed net operating
income of $1,439,000, $1,341,000, and $1,250,000 to the consolidated
operating income for the years ended December 31, 1996, 1995 and 1994
respectively.
OPERATING REVENUES
Telephone operations revenues decreased $28,253 in 1996 and increased
$250,614 in 1995.
Local Network Service revenues increased $373,000 in 1995 due primarily
to the rate increase that went into effect in November 1994 and the
implementation of Extended Community Calling ("ECC"). The ECC revenue is
considered local revenue which resulted in a significant decrease in
intralata access revenue.
Network Access, Long Distance, and Miscellaneous revenues decreased
$137,000 in 1996 due primarily to the implementation of equal access and
DWR Long Distance converting to the switchless arrangement. Network access
and long distance revenues include both interstate and intrastate services.
Network Access, Long Distance, and Miscellaneous revenues decreased
$113,000 in 1995 due primarily to the discontinuance of the Universal Service
Fund and the implementation of ECC. Network access and long distance
revenues include both interstate and intrastate services.
Directory division revenues increased $116,000 in 1996 and $160,000 in
1995 due to an increase in the number of telephone directories published.
OPERATING EXPENSES
Operating expenses, which include plant, depreciation, customer,
corporate and general taxes decreased $135,853 in 1996. The conversion of
DWR Long Distance to a switchless arrangement reduced call completion
expenses, which was then the main factor that resulted in the decrease in
expense.
Operating expenses, which include plant, depreciation, customer,
corporate, and general taxes increased $358,000 in 1995. An increase in
plant maintenance and depreciation on the new switching equipment contributed
significantly to that increase. The cost of paper for printing directories
in the directory division and an increase in access and call completion
expense in the DWR Long Distance division also contributed to the overall
increase in operating expenses.
OTHER ITEMS
Interest expense for 1996 amounted to $231,299 which showed a decrease
of $15,244 from 1995. Interest expense for 1995 amounted to $246,543 which
showed a minimal increase of $10,662 over 1994. Total access lines increased
from 7,234 at the end of 1995 to 7,357 at the end of 1996, an increase of
1.17%. Total access lines increased from 6,869 at the end of 1994 to 7,234
at the end of 1995, an increase of 5.3%.
LIQUIDITY AND CAPITAL RESOURCES
Pioneer requires funds primarily for its construction program,
repayment of debt and dividend payment program. The resources to meet these
needs are primarily provided through internally generated funds. Net cash
provided from operations for the company for 1996, 1995 and 1994 were
$2,124,000, $2,007,000 and $1,538,000. External financing during this period
was only $245,000.
The Company's primary capital requirement over this period was to
finance construction costs over the past three years of approximately
$2,500,000. Estimated capital expenditures for 1997 are $550,000.
It is expected that the capital necessary to finance these expenditures
along with dividends and the repayment of long-term debt will be met through
cash flow from operations and to the extent necessary new debt.
Additional information regarding the Companies cash position,
outstanding debt and current investments are disclosed in the financial
statements.
REGULATORY ENVIRONMENT
For regulatory purposes, Pioneer's telephone subsidiaries, The Farmers
Telephone Company and Dickeyville Telephone Corporation, are currently
considered small telecommunications utilities and are subject to reduced
regulation which allows for greater flexibility in regulatory matters.
The telecommunications industry continues to undergo various
regulatory, competitive and technological changes. The Federal
Telecommunications Act of 1996 will transform the telecommunications industry
and change telecommunications policies in such areas as entry into local
exchange and long distance markets, pricing of telecommunications services,
ownership of facilities, use of spectrum and message content. Not since the
Federal Communications Act of 1934 has a single piece of legislation been
more important for the telephone industry and its customers. While the
long-term impact of the new federal telecommunications legislation is not
known, it is certain that the act will have significant effects in Wisconsin.
Wisconsin regulation of local exchange carriers ("LECs") is also
changing. The Public Service Commission's encouragement of local exchange
competition will cause the emergence of companies providing competitive
access and other services to compete with LECs. Local service competition
will be enhanced by the convergence of telecommunications, cable, wireless,
video, computer and other technologies. While the changes may eventually
cause regulatory risks and adverse revenue and earnings' pressure on Farmers
Telephone Company and Dickeyville Telephone Corporation, competition should
also bring more creative use of the market and new opportunities. Farmers
and Dickeyville will continue to monitor the ongoing changes in regulation,
competition and technology and consider which developments provide the most
favorable opportunities for them to pursue.
OPINIONS OF FINANCIAL ADVISORS
OPINION OF MID-PLAINS' FINANCIAL ADVISOR
Edelman has delivered its written opinion (the "Original Edelman
Opinion") to the Mid-Plains Board that, as of January 22, 1997, and based
upon and subject to the various considerations set forth in such opinion, the
Exchange Ratio under the Merger Agreement was fair from a financial point of
view to the holders of Mid-Plains Common Stock.
Upon receipt of the audited financial statements for Mid-Plains and Pioneer
for the fiscal year ending December 31, 1996, Edelman has also delivered its
written opinion to the Mid-Plains Board that, as of February 21, 1997, and
based upon and subject to the various considerations set forth in such
opinion, the Exchange Ratio is fair from a financial point of view to the
holders of Mid-Plains Common Stock (the "Updated Edelman Opinion"). Neither
the Original Edelman Opinion nor the Updated Edelman Opinion will be updated
to the Effective Time.
The full text of the Updated Edelman Opinion, which sets forth the
assumptions made, matters considered and limits on the review undertaken by
Edelman & Co., Ltd., is attached as Appendix V to this Joint Proxy
Statement/Prospectus. Shareholders of Mid-Plains are urged to read such
opinion in its entirety. The Updated Edelman Opinion is directed only to the
Exchange Ratio and does not constitute a recommendation to any shareholder
of Mid-Plains as to how such shareholder should vote at the Special Meeting.
The summary of the Updated Edelman Opinion set forth in this Joint Proxy
Statement/Prospectus is qualified in its entirety by reference to the full
text of such opinion.
In forming the Updated Edelman Opinion, Edelman reviewed, among other
things: (i) with respect to Mid-Plains, the Annual Reports on Form 10-K and
Annual Reports to shareholders for the fiscal years ended December 31, 1991
through 1995, the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996; and audited financial statements for the fiscal year
ended December 31, 1996, (ii) with respect to Pioneer, the Annual Report to
shareholders for the fiscal year ended December 31, 1995, which contains
audited financial statements; audited financial statements for the fiscal
year ended December 31, 1996; the Annual Reports to shareholders for the
fiscal years ended December 31, 1991 through 1994, which contain unaudited
financial statements; the audited financial statements of Dickeyville
Telephone Corporation and Farmers Telephone Company for the fiscal years
ended December 31, 1991 through 1995; (iii) certain other information
concerning the future prospects of Mid-Plains and Pioneer, and of the
combined entity, as furnished by the respective companies, (iv) historical
stock trading data for Mid-Plains and Pioneer common stock, and for the
stocks of certain larger publicly traded independent telephone companies, (v)
the financial terms of the combination contemplated by the Merger Agreement
and the financial terms of other mergers and acquisitions which Edelman
believed to be relevant, (vi) the business strategy and shareholder benefits
underlying the Mergers, as described by senior management of Mid-Plains and
Pioneer, and (vii) such other matters as Edelman deemed necessary. An
Edelman representative met with certain senior officers of Mid-Plains and
Pioneer to discuss the foregoing as well as other matters relevant to its
opinion, including the past and current business operations, financial
condition and future prospects of Mid-Plains and Pioneer. Edelman also took
into account its assessment of general economic, market, industry and
financial conditions, and such additional financial and other factors as
Edelman deemed relevant.
In conducting its review and preparing its opinion, Edelman relied upon
the accuracy and completeness of the financial and other information provided
to it or as publicly available and did not independently verify any such
information. Edelman relied upon assurances of Mid-Plains and Pioneer
management that the forward-looking information they provided was reasonable
and reflected the best currently available information. Edelman did not
inspect any properties, assets or liabilities of Mid-Plains or Pioneer and
did not make or obtain any evaluations or appraisals of any properties,
assets or liabilities of Mid-Plains or Pioneer. In rendering its opinion,
Edelman assumed that the Mergers will be consummated on the terms described
in the Merger Agreement.
In connection with preparing and rendering its opinions, Edelman
performed a variety of valuation, financial and comparative analyses. The
summary of such analyses, as set forth below, does not purport to be a
complete description of the analyses underlying Edelman's opinions. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to summary description. Edelman believes that its analyses must
be considered as a whole, and that selecting portions of its analyses and the
factors considered by it, without considering all such factors and analyses,
could create an incomplete view of the processes underlying Edelman's
opinions. Moreover, the estimates contained in such analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those
suggested by such analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or necessarily
reflect the prices at which businesses or securities actually may be sold.
Accordingly, such estimates are inherently subject to substantial
uncertainties.
The following is a summary of the material valuation, financial and
comparative analyses performed by Edelman in arriving at the Updated Edelman
Opinion, dated February 21, 1997. In forming its opinion, Edelman:
1. Contribution Analysis. Analyzed the separate and combined recent
financial results of Mid-Plains and Pioneer. Mid-Plains contributed 74.9%
of combined net income for 1995 and 73.0% of combined net income before
extraordinary items and a debt prepayment charge for 1996. Mid-Plains
contributed 73.6% of the combined shareholders equity and 80.8% of combined
access lines as of December 31, 1996. By comparison, Mid-Plains shareholders
will receive 74.2% of combined company shares under the Exchange Ratio.
2. Dilution Analysis. Measured the pro forma effect of the Merger,
using recent operating and balance sheet data, on Mid-Plains earnings and
book value per share. Based on results of operations and ending shares
outstanding for 1996, the merger would result in roughly 1.6% accretion to
Mid-Plains in earnings per share before extraordinary items and the
prepayment charge, and .8% accretion in book value per share.
3. Stock Trading, Market and P/E Analysis.
(a) Historical Exchange Ratio. Sought to compare the Exchange
Ratio to the historical ratio of respective trading prices of Pioneer and
Mid-Plains. However, there is no available market price for Pioneer stock.
Accordingly, it is not possible to identify an historical trading ratio
comparing the two stocks. In any case, the trading characteristics of the
stocks would make such a statistic of limited value even if Pioneer prices
were available.
(b) P/E Comparisons with Major Independent Telephone Companies;
Market for Mid-Plains Stock. Compared the price-to-earnings ratio ("P/E")
and liquidity of Mid-Plains stock to those of five larger, comparable
independent telephone companies: Aliant Communications, Inc., ALLTEL
Corporation, Century Telephone Enterprises, Inc., Frontier Corporation,
and Telephone and Data Systems, Inc. These companies were chosen because
each, in the opinion of Edelman, is a substantial, publicly traded company,
which is not a regional Bell operating company. The Mid-Plains P/E of 23.7
compared to mean and median P/E's of 19.8 and 15.4, respectively, for the
other five companies. Their P/E ratios ranged from 14.2 to 37.0. Certain
characteristics, such as Mid-Plains' high rate of growth, may justify to
certain investors the higher P/E for Mid-Plains. Other characteristics, such
as higher concentrations of cellular telephone or long-distance telephone
operations for some of the comparable companies, may point other investors
toward a lower relative valuation of Mid-Plains.
Beyond such operational differences, however, is the issue of the
relatively small and sporadic level of trading activity in Mid-Plains stock.
Mid-Plains stock is not traded on any exchange or in the NASDAQ National
Market or NASDAQ Small Cap market. Available trading data led to the
conclusion that in evaluating the fairness of the Exchange Ratio to
Mid-Plains shareholders, primary reliance cannot be placed on the dollar value
of the merger consideration to Pioneer shareholders as indicated by the
Mid-Plains stock price. Thus, primary analytical weight was not placed on the
analyses described in paragraphs 3(c) and 4 below.
(c) Public Company P/E's Applied to Pioneer. Applied the P/E
ratios of the five larger independent telephone companies described above to
Pioneer's net income for 1996. The mean and median P/E's, when used as
multiples for Pioneer's net income, resulted in aggregate values
approximately 12% and 31% below the aggregate value represented by the
Exchange Ratio using a $42.00 price per share for Mid-Plains. $42.00 per
share represents the high price for Mid-Plains common stock as reported in
known transactions during the fourth quarter of 1996 and through
February 20, 1997. This information was gathered by Mid-Plains on unrelated
party transactions for which the seller and/or buyer have responded to a
Mid-Plains inquiry, and from public sources related to broker transactions.
Transactions include both those handled privately (non-broker) and those
handled by stock brokers.
4. Comparable Sale Transactions. Analyzed the financial terms and
purchase price multiples of the following six mergers/acquisitions involving
independent local telephone service providers and compared those terms to the
Merger: (i) the acquisitions of Arvig Telcom, Inc., Tipton Telephone Company,
Inc., Camden Telephone Company, Inc., and Deposit Telephone Company, Inc. by
Telephone and Data Systems, Inc.; (ii) the acquisition of Kingsley Telephone
Company by Century Telephone Enterprises, Inc.; and (iii) the pending
acquisition of telephone assets of Fairbanks Municipal Utility System by
Pacific Telecom, Inc. Based on a $42.00 Mid-Plains stock price, Pioneer
shareholders are to receive consideration of approximately $29.1 million.
Applying this value to Pioneer's latest financial and operating data results
in a P/E, Price-to-Book Value and Price Per Access Line of 22.4, 4.2 and
$3,954, compared to median values for the other transactions analyzed of
19.4, 2.9 and $3,573. The ranges of P/E ratio, price-to-book ratio, and price
per access line for the comparable transactions were 12.4 to 32.9, 2.5 to 4.2,
and $1,771 to $3,950 respectively. P/E ratio and price-to-book ratio data
were not available for the Fairbanks Municipal Utility System transactions.
5. Other Considerations.
(a) Coalition Business Plan. Mid-Plains and Pioneer management
wish to assemble a growing coalition of independent Wisconsin telephone
companies in the new holding company, with the Merger as a first step.
Operating benefits are expected to include a greater diversity of locations
and sharing of resources and expertise in a variety of operational areas.
Mid-Plains management believes that the Pioneer transaction will facilitate
further growth by merger. Additionally, the Merger is expected to result in
a higher degree of liquidity for Mid-Plains shareholders, as a larger
shareholder base is created.
(b) Growth Rates. Considered that Mid-Plains, by virtue of its
location in a growing market area, has experienced stronger growth in its
operation and profitability than Pioneer. Pioneer had greater growth in
shareholders equity. Access lines, net income before extraordinary items
(and the prepayment charge) and shareholders equity grew at annualcompounded
rates of 7.7%, 12.8% and 6.9% at Mid-Plains from 1991 through 1996, compared
to 2.6%, 6.4% and 10.7% at Pioneer. The disparity in population growth rates
between the two service areas are likely to continue, although perhaps at
narrowed levels.
(c) Competitive Threats and Opportunities. In the view of
Mid-Plains and Pioneer management, the business of providing local telephone
service is entering a new, competitive era due to changing legal and business
conditions. Management of both companies believe that Mid-Plains, because
of its location in a larger, more densely populated metropolitan area, will
encounter significant competition earlier than Pioneer. Because of its size
and location, Mid-Plains may also have earlier competitive opportunities.
It is reasonable to assume that competitive threats and opportunities offset
each other for Mid-Plains, but that Mid-Plains' future earnings stream will
have a higher degree of volatility than Pioneer's.
(d) Personal Communications Services (PCS). Based on the outcome
of a recent Federal Communications Commission auction, Mid-Plains expects to
be going forward with a PCS venture which will require a large investment
over the next three years. While management believes the new venture will
become a significant profit contributor, significant initial operating losses
are expected initially. PCS adds an additional significant degree of risk
and volatility to Mid-Plains' future earnings and cash flow stream.
(e) Free Cash Flow Generation. Whereas Pioneer contributed
approximately 27% and 26% of latest combined company income and equity (see
item #1 above), during 1991-1996 it generated approximately 37% of combined
company free cash flow (defined as earnings before taxes, interest and
depreciation/amortization, less capital expenditures). This trend is
expected to continue. The combination with Pioneer will be beneficial to
Mid-Plains with respect to Pioneer's capacity to generate needed cash for
investment. This may have an impact on the combined company's ability to pay
higher dividends and/or minimize debt requirements.
(f) Combined Prospects Absent Synergies. Based on input from
Mid-Plains and Pioneer regarding their future prospects over the next five
years on a stand-alone basis, certain observations can be made about their
combined prospects. Such forward-looking suppositions should be taken not as
fact but as indications of potential future trends and issues. It was first
assumed that the combination will result in no change, positive or negative,
in expenses and revenues. On this basis (i) the income statement impact of
early losses in PCS, particularly in 1998, appears to be cushioned by
Pioneer's profit contribution, making the combination appear significantly
accretive to earnings per share from the Mid-Plains point of view before PCS
becomes a significant profit contributor, and (ii) in five years, both from
a book value and earnings point of view, the dilution/accretion impact of the
transaction appears to be immaterial, although Mid-Plains' management
believes that PCS will show further significant profit gain beyond that
point.
Included in Mid-Plains' projections were the following underlying
assumptions: competitive challenges would be offset by opportunities to
expand beyond its traditional markets, growth would continue along historical
trends, the build-out and operation of its personal communications service
license would occur without the participation of its minority interest
partner, and debt and equity financing would be necessary. Pioneer's
projections were based primarily on the underlying assumption that growth
would continue along historical trends.
(g) Synergies. Management of Mid-Plains believes that the
combination of Mid-Plains and Pioneer will result in material profit
improvement over time on a combined basis. Examples cited by management
include (i) publishing the Mid-Plains telephone directory through the Pioneer
publishing operation, (ii) providing organizational resources for potential
offensive competitive activity by Pioneer in and around its southwestern
Wisconsin market area, and (iii) including the Pioneer customer base in
promotional and marketing efforts for various services conducted by
Mid-Plains. Additionally, it is expected that over time cost synergies will be
realized because of staff attrition and other factors.
Edelman was engaged by Mid-Plains as of October 8, 1996. In addition
to its fairness opinion work, Edelman has consulted with Mid-Plains regarding
financial terms and negotiating strategy in connection with the Mergers.
Pursuant to the terms of its engagement letter dated October 8, 1996,
Mid-Plains has paid Edelman an initial retainer fee of $10,000 and an initial
opinion fee of $15,000. Mid-Plains has further agreed to pay Edelman $35,000
if the Mergers are approved by the Mid-Plains and Pioneer shareholders.
Edelman was selected as financial advisor to Mid-Plains in connection
with the Mergers because of its experience and expertise in transactions
similar to the Mergers, and its specific familiarity with Mid-Plains and
its business.
Edelman was not authorized to solicit, and did not solicit, interest
from any party with respect to the acquisition of Mid-Plains or any of its
assets. Edelman also expressed no opinion as to the price or range of prices
at which Chorus Common Stock may trade subsequent to consummations of the
Mergers.
OPINION OF PIONEER'S FINANCIAL ADVISOR
Madison Valuation Associates, Inc. ("MVA") has delivered its written
opinion to the Pioneer Board on February 17, 1997, that, based upon and
subject to the various considerations set forth in such opinion, the analysis
contained in the fairness opinion expressed by Edelman to the directors of
Mid-Plains as to the ownership interests received by Mid-Plains in the
holding company to be established to effect the proposed merger of Pioneer
and Mid-Plains is reasonable. Such written opinion dated February 17, 1997,
confirmed an oral opinion delivered to the Pioneer Board at its meeting on
January 29, 1997. MVA was not asked nor has MVA delivered an opinion as to
the fairness of the Exchange Ratio to Pioneer's shareholders. In addition,
an opinion that the Edelman analysis and opinion are reasonable is not an
opinion that the Exchange Ratio is fair to Pioneer's shareholders.
In forming its opinion, MVA: (i) reviewed Edelman's fairness opinion
to the Mid-Plains Board dated January 22, 1997, (ii) reviewed Edelman's
memorandum to file regarding the Mid-Plains fairness opinion as of December
31, 1996, dated January 22, 1997, (iii) reviewed Edelman's supporting
information and research, (iv) discussed Edelman's fairness opinion and
analysis with an Edelman representative, (v) studied the proposed offering
document and any other workpapers MVA deemed to be appropriate, and (vi)
conducted its own independent research of certain larger publicly traded
independent telephone companies and stock transactions in the
telecommunications industry involving companies similar to Pioneer and
Mid-Plains. In conducting its review and preparing its opinion, MVA relied
upon the accuracy and completeness of the financial and other information
provided to it by Edelman, Pioneer, its agents, advisors and representatives
or otherwise available from generally recognized public sources and did not
independently verify any such information. MVA did not inspect any
properties, assets or liabilities of Mid-Plains or Pioneer and did not make
or obtain any evaluations or appraisals of any properties, assets or
liabilities of Mid-Plains or Pioneer. MVA did not determine the potential
value of Pioneer or its stock in a merger or purchase with any company other
than Mid-Plains, and MVA did not prepare an independent opinion as to the
fairness of the proposed transaction involving Pioneer and Mid-Plains.
Further, MVA made no recommendation to Pioneer's stockholders or directors
about the decision to accept or reject the exchange offer.
Pursuant to the terms of its engagement letter dated January 21, 1997,
Pioneer has agreed to pay MVA $15,000 as an opinion fee.
MVA is a regionally recognized financial advisory and valuation firm
and was selected as financial consultant to Pioneer in connection with the
Mergers because of its experience and expertise in transactions similar to
the Mergers and its experience and expertise in the telecommunications
sector. As part of its regular financial consulting services, MVA regularly
is engaged in the valuation of closely-held businesses and securities in
connection with mergers and acquisitions, private placements, and valuations
for estate, corporate and other purposes.
MVA was engaged by Pioneer as of January 21, 1997 for the purpose of
delivering an opinion as to whether the analysis contained in the fairness
opinion expressed by Edelman to the directors of Mid-Plains as to the
ownership interests received by Mid-Plains is reasonable. MVA did not
participate in the structuring or the negotiation of the terms of the
Mergers. In addition, MVA was not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of Pioneer
or any of its assets. MVA also expressed no opinion as to the price or range
of prices at which Chorus Common Stock may trade subsequent to consummation
of the Mergers.
A copy of the Madison Valuation Associates, Inc. Opinion, which sets
forth the assumptions made, matters considered and limits on the review
undertaken, is attached as Appendix VI to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. The summary
of the Madison Valuation Appraisers, Inc. Opinion set forth in this Joint
Proxy Statement/Prospectus is qualified by reference to the
full text of such opinion. Shareholders of Pioneer are urged to read such
opinion in its entirety.
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
In considering the respective recommendations of the Mid-Plains Board
and the Pioneer Board with respect to the Mergers, shareholders of Mid-Plains
and shareholders of Pioneer should be aware that certain officers of
Mid-Plains and Pioneer, including some officers who are also directors, have
certain interests in the Mergers that are different from, or in addition to,
the interests of shareholders of Mid-Plains and shareholders of Pioneer
generally. Two officers of Mid-Plains, Dean W. Voeks and Fredrick E. Urben,
were also members of Mid-Plains' 7-person Board of Directors when the
Mid-Plains Board approved the Mergers. Four officers of Pioneer, Douglas J.
Timmerman, Mark V. Brickl, Gerald Knapp, and G. Burton Block, were also
members of Pioneer's 8-person Board of Directors when the Pioneer Board
approved the Mergers.
INDEMNIFICATION AND INSURANCE
Chorus is required by the Merger Agreement to provide indemnification
and liability insurance arrangements for officers and directors of Pioneer
and Mid-Plains. See "The Merger Agreement--Indemnification and Insurance."
Notwithstanding this provision, however, SEC rules require that this Joint
Proxy Statement/Prospectus contain the following statement:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
or persons controlling the registrant pursuant to the foregoing
provisions, the registrant 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.
THE MERGER AGREEMENT
GENERAL
The Merger Agreement contemplates the Mergers of Pioneer Acquisitions,
Inc. ("Pioneer Acquisitions") with and into Pioneer and Mid-Plains
Acquisitions, Inc. ("Mid-Plains Acquisitions") with and into Mid-Plains, with
Pioneer and Mid-Plains, respectively, surviving the Mergers as wholly-owned
subsidiaries of Chorus. The Mergers will become effective in accordance with
the Certificates of Merger to be filed with the Department of Financial
Institutions of the State of Wisconsin. It is anticipated that such filings
will be made immediately after the Closing under the Merger Agreement, which
Closing, in turn, should occur as soon as practicable after the last of the
conditions precedent to the Mergers set forth in the Merger Agreement has
been satisfied or waived. The following description of the Merger Agreement
is qualified by reference to the complete text of the Merger Agreement, which
is incorporated by reference herein and attached hereto as Appendix I.
CONSIDERATION TO BE RECEIVED IN THE MERGERS
At the Effective Time:
(a) Mid-Plains Acquisitions will be merged into Mid-Plains, with
Mid-Plains being the surviving corporation.
(b) Pioneer Acquisitions will be merged into Pioneer, with Pioneer
being the surviving corporation.
(c) Each issued and outstanding share of Mid-Plains Common Stock,
other than those shares of shareholders exercising their
dissenters' rights ("Mid-Plains Dissenting Shares"), which shall
not be deemed to include any share then held in Mid-Plains'
treasury, shall by virtue of the Mergers and without any action
on the part of the holder thereof, be converted into one
outstanding share of Chorus Common Stock, whereupon each such
share of Mid-Plains Common Stock so converted shall be deemed to
be a share acquired by Mid-Plains and held in its treasury.
Each such share of Chorus Common Stock so issued shall thereupon
be fully paid and nonassessable, except as provided under sec.
180.0622(2) of the WBCL.
(d) The issued and outstanding shares of common stock of Mid-Plains
Acquisitions shall by virtue of the Mergers and without any
action on the part of Chorus, be converted into a number of
shares of Mid-Plains transferred from those deemed acquired by
Mid-Plains and held in its treasury pursuant to subsection (a)
above, equal to the number of shares of Chorus Common Stock
issued pursuant to subsection (a) above. Each such share of
Mid-Plains shall thereupon be fully paid and nonassessable,
except as provided under sec. 180.0622(2) of the WBCL.
(e) Each issued and outstanding share of Pioneer Common Stock, other
than those shares of shareholders exercising their dissenters'
rights ("Pioneer Dissenting Shares"), which shall not be deemed
to include any share then held in Pioneer's treasury, shall by
virtue of the Mergers and without any action on the part of the
holder thereof, be converted into four (4) outstanding shares of
Chorus Common Stock, whereupon each such share of Pioneer Common
Stock so converted shall be deemed to be a share acquired by
Pioneer and held in its treasury. Each such share of Chorus
Common Stock so issued shall thereupon be fully paid and
nonassessable, except as provided under sec. 180.0622(2) of the
WBCL.
(f) The issued and outstanding shares of common stock of Pioneer
Acquisitions shall by virtue of the Mergers, and without any
action on the part of Chorus, be converted into the number of
shares of Pioneer transferred from those deemed acquired by
Pioneer and held in its treasury pursuant to subsection (e)
above. Each such share of Pioneer shall thereupon be fully paid
and nonassessable, except as provided under sec. 180.0622(2) of
the WBCL.
(g) All shares of Mid-Plains and Pioneer thereafter remaining in
their respective treasuries shall be cancelled.
(h) The 100 shares of Chorus Common Stock owned by Mid-Plains
immediately prior to the Mergers shall by virtue of the Mergers
and without further action be deemed transferred to Chorus's
treasury and cancelled.
(i) Pioneer Dissenting Shares will be cancelled and converted into
such consideration as may be due with respect to such shares
pursuant to the applicable provisions of the WBCL, unless and
until the right of such holder to receive fair value for such
Pioneer Dissenting Shares terminates in accordance with the
WBCL, in which case such shares will cease to be Pioneer
Dissenting Shares and will represent the right to receive Chorus
Common Stock pursuant to the Merger Agreement;
(j) Mid-Plains Dissenting Shares will be cancelled and converted
into such consideration as may be due with respect to such
shares pursuant to the applicable provisions of the WBCL, unless
and until the right of such holder to receive fair value for
such Mid-Plains Dissenting Shares terminates in accordance with
the WBCL, in which case such shares will cease to be Mid-Plains
Dissenting Shares and will represent the right to receive Chorus
Common Stock pursuant to the Merger Agreement;
EXCHANGE OF SHARES
Subject to the terms and conditions of the Merger Agreement, at or
prior to the Effective Time, Mid-Plains and Pioneer will jointly appoint an
exchange agent to effect the exchange of certificates representing shares of
Pioneer Common Stock and Mid-Plains Common Stock for certificates
representing shares of Chorus Common Stock (the "Exchange Agent"). Chorus
will from time to time deposit certificates representing shares of Chorus
Common Stock with the Exchange Agent for conversion of shares as described
above under "Consideration to be Received in the Mergers." Commencing
immediately after the Effective Time, holders of Pioneer Common Stock and
Mid-Plains Common Stock are required to surrender their certificates to the
Exchange Agent (or, if at the time of such surrender there is no Exchange
Agent, to Chorus directly). In exchange for such share certificates, holders
will receive Chorus Common Stock Certificates representing such number of
shares as described under "Consideration to be received in the Mergers."
Holders of unexchanged shares of Pioneer Common Stock or Mid-Plains Common
Stock will not be entitled to receive any dividends or other distributions
payable by Chorus until their certificates are surrendered. Upon surrender,
however, subject to the WBCL, such holders will receive accumulated dividends
and distributions, without interest.
CHORUS FOLLOWING THE MERGERS
Headquarters. The Merger Agreement provides that the headquarters of
Chorus will be located in Dane County, Wisconsin.
Board. The Merger Agreement provides that, at the Effective Time, the
Chorus Board will consist of five (5) members, four (4) of whom initially
will be designated by the Mid-Plains Board and one (1) of whom initially will
be designated by the Pioneer Board. Chorus shareholders will elect directors
upon the expiration of the initial terms of directors, which shall be
staggered. See "Directors and Management of Chorus Following The Mergers."
Dividends. The Merger Agreement reflects the parties' intention that
the initial quarterly dividend per share of Chorus Common Stock following the
Mergers will be at least equal to the dividend paid on each share of
Mid-Plains Common Stock for the last full fiscal quarter immediately preceding
the date of the Merger Agreement, which initial quarterly dividend is
expected to be $.27 per share, subject to approval and declaration by the
Chorus Board.
CERTAIN CONDITIONS
Conditions of Each Party's Obligations to Effect the Mergers. In
addition to shareholder approval, the obligation of each party to the Merger
Agreement to consummate the Mergers is subject to the following: (a) no
statute, rule, regulation, executive order, decree or injunction shall have
been enacted, entered, promulgated or enforced by any court or governmental
authority which makes the Mergers illegal or otherwise prohibits their
consummation, or which causes a Material Adverse Effect on Pioneer or
Mid-Plains, (b) the Registration Statement of which this Joint Proxy
Statement/Prospectus is a part shall have become effective and no stop order
suspending the effectiveness of the Registration Statement or proceedings
therefor shall be then threatened, initiated, or in effect, (c) each of
Pioneer and Mid-Plains shall have received a letter from Kiesling Associates
LLP to the effect that the transactions contemplated by the Merger Agreement
qualify for pooling of interests accounting treatment, (d) each of Pioneer
and Mid-Plains shall have received all material third-party consents with
respect to the transactions contemplated by the Merger Agreement, (e) each
of Pioneer and Mid-Plains shall have received an opinion from Axley Brynelson
as to certain tax matters related to the contemplated transactions, (f) the
Mid-Plains Board shall have received an opinion from its financial advisor
to the effect that the Exchange Ratio is fair from a financial point of view
to its respective shareholders and (g) the Pioneer Board shall have received
the opinion from their financial advisor that the analysis completed by
Mid-Plains' financial advisor was reasonable. The conditions to a party's
obligations to effect the Mergers may be waived by the party entitled to
assert the condition.
Conditions to the Obligations of Pioneer. The obligation of Pioneer
to effect the Mergers is further subject to all the following conditions:
(a) the representations and warranties of Mid-Plains contained in the Merger
Agreement shall be true and correct as of the Effective Time with the same
effect as though made as of the Effective Time and except that, for purposes
of determining whether such condition is met, a representation and warranty
shall be deemed to be true and correct unless the failure of such
representation and warranty to be true would not result or reasonably be
expected to result in a Material Adverse Effect on Pioneer, Mid-Plains, or
Chorus (either with or without including its ownership of Pioneer and
Mid-Plains), (b) Mid-Plains shall have performed or complied in all material
respects with all agreements, conditions and covenants required by the Merger
Agreement on or before the Effective Time, (c) Pioneer shall have received
an officers' certificate as to the matters set forth in the immediately
preceding subsections (a) and (b), (d) no shareholder rights plan shall have
been adopted by Mid-Plains, and (e) at the Effective Time, the composition
of Chorus's Board of Directors complies with the requirements of the Merger
Agreement.
Conditions to the Obligations of Mid-Plains. The obligation of
Mid-Plains to effect the Mergers is further subject to all the following
conditions: (a) the representations and warranties of Pioneer contained in
the Merger Agreement shall be true and correct as of the Effective Time with
the same effect as though made as of the Effective Time and except that, for
purposes of determining whether such condition is met, a representation and
warranty shall be deemed to be true and correct unless the failure of such
representation and warranty to be true would result or reasonably be expected
to result in a Material Adverse Effect on Pioneer, Mid-Plains or Chorus
(either with or without including its ownership of Pioneer and Mid-Plains),
(b) Pioneer shall have performed or complied in all material respects with
all agreements, conditions and covenants required by the Merger Agreement on
or before the Effective Time, (c) Mid-Plains shall have received an officers'
certificate as to the matters set forth in the immediately preceding
subsections (a) and (b), (d) no shareholder rights plan shall have been
adopted by Pioneer, and (e) at the Effective Time, the composition of
Chorus's Board of Directors complies with the requirements of the Merger
Agreement.
"Material Adverse Effect" means any change in or effect on the business
of the referenced corporation or any of its subsidiaries that is or will be
materially adverse to the business, operations (including the income
statement), properties (including intangible properties), condition
(financial or otherwise), assets, liabilities or regulatory status of such
referenced corporation and its subsidiaries taken as a whole, but shall not
include the effects of changes that are generally applicable in (a) the
telecommunications industry, (b) the United States economy or (c) the United
States securities markets if, in any of (a), (b) or (c), the effect on
Pioneer or Mid-Plains or Chorus (determined without including its ownership
of Pioneer and Mid-Plains after the Mergers) (as the case may be), and their
respective subsidiaries, taken as a whole, is not disproportionate relative
to the effect on the others and their subsidiaries, taken as a whole.
CERTAIN REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain representations and warranties
of Mid-Plains and Pioneer as to, among other things, due organization and
good standing, capitalization, ownership of subsidiaries and other
investments, corporate authority to enter into the contemplated transactions,
recent reports filed with the SEC, financial statements, tax matters,
employee matters, regulatory matters, information supplied for use in this
Joint Proxy Statement/Prospectus, contractual defaults, material changes or
events, litigation, violations of law, employee benefit plans, labor
relations, environmental matters, required Board and shareholder approvals,
insurance, intellectual property, material contracts, accounting matters, and
conflicts with organizational documents or certain material agreements.
TRANSITION PLANNING
Dean W. Voeks and Douglas J. Timmerman, as Presidents of Mid-Plains and
Pioneer respectively, jointly shall be responsible for coordinating all
aspects of transition planning and implementation relating to the Mergers and
the other transactions contemplated by the Merger Agreement. Until the
Effective Time, Messrs. Voeks and Timmerman jointly shall (i) examine various
alternatives regarding the manner in which to best organize and manage the
business of Mid-Plains and Pioneer after the Effective Time, and (ii)
coordinate policies and strategies with respect to regulatory authorities and
bodies, in all cases subject to applicable law.
CERTAIN COVENANTS
The Merger Agreement provides that, prior to the Effective Time,
Pioneer, Mid-Plains, and their respective subsidiaries will each conduct its
business in the ordinary course consistent with past practices and will use
commercially reasonable efforts to preserve substantially intact its business
organization, to keep available the services of key officers, employees and
consultants who are integral to the operation of its business as presently
conducted, and to preserve its present relationships with significant
customers and suppliers and with other persons and entities with whom it has
significant business relationships. By way of amplification and without
limiting the foregoing, the Merger Agreement places restrictions on the
ability of each of Pioneer and Mid-Plains to (a) issue or sell capital stock
and related securities or grant options therefor, (b) amend its charter or
bylaws, (c) effect a stock split, combination, or reclassification, (d)
change its dividend, (e) repurchase or redeem its stock, (f) make material
acquisitions of, or investments in, other entities, (g) make material
dispositions of assets, (h) incur indebtedness, (i) enter into derivative
contracts, (j) increase employee compensation or severance benefits, (k) make
material changes in its accounting policies, (l) make material capital
expenditures, (m) adopt or amend employment or consulting agreements or
benefit plans, (n) enter into certain material contracts, and (o) take any
action which would result in a material breach of contract or affect the
accounting treatment of the Mergers.
The Merger Agreement contains certain other covenants including
covenants relating to the obtaining of pooling of interests accounting
treatment for the transactions contemplated by the Merger Agreement,
preparation and distribution of this Joint Proxy Statement/Prospectus, public
announcements, mutual notification of certain matters, and access to
information. In addition, the Merger Agreement contains a general covenant
requiring each of the parties thereto to use its commercially reasonable
efforts to effect the consummation of the Mergers.
NO SOLICITATION OF TRANSACTIONS
The Merger Agreement provides that Pioneer, without the prior written
consent of Mid-Plains, will not, and will not authorize any of its officers,
directors, employees, financial advisors or agents to, directly or
indirectly, solicit, initiate, encourage (including by way of furnishing
information) or take any other action knowingly to facilitate any inquiries
or proposals which constitute or may reasonably be expected to lead to an
Acquisition Proposal (defined below), engage in any discussions or
negotiations relating thereto, or accept any Acquisition Proposal.
"Acquisition Proposal" means a proposal or offer (other than by the
other party to the Merger Agreement) for a tender or exchange offer, merger,
consolidation or other business combination involving Pioneer or any of its
subsidiaries (collectively, the "Proposal Parties") or any proposal to
acquire in any manner a substantial equity interest in, or all or
substantially all the assets of, such Proposal Party; provided, however, that
any proposal or offer involving the acquisition by Pioneer of an equity
interest in or assets of any person, whether by tender or exchange offer,
merger, consolidation or otherwise, which does not involve, directly or
indirectly the issuance of more than 15% of the then outstanding stock of
Pioneer shall not constitute an Acquisition Proposal.
CERTAIN BENEFITS MATTERS
Except as specifically set forth in the Merger Agreement (including
schedules thereto) or as mutually determined by Pioneer and Mid-Plains, the
employee benefit plans covering present and former employees or directors of
each of Pioneer and Mid-Plains and certain of their respective subsidiaries,
or their beneficiaries, or providing benefits to such persons in respect of
services provided to any such entity, including employee benefit plans within
the meaning of Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), deferred compensation bonuses, stock options,
restricted stock plans, incentive compensation, severance or change in
control agreements and any other material benefit arrangements or payroll
practices (collectively, "Benefit Plans") in effect as of December 31, 1996
will remain in effect, subject to their terms, after the Effective Time with
respect to the classes of employees covered by such plans immediately prior
to the Effective Time, unless otherwise expressly terminated by the
respective company.
INDEMNIFICATION AND INSURANCE
Chorus will cause each of Mid-Plains and Pioneer to (a) maintain in
effect its current provisions regarding indemnification of officers and
directors contained in its charters and bylaws (and in those of its
subsidiaries), (b) maintain in effect its current policies (or policies of
at least equal coverages and amounts) of directors' and officers' liability
insurance and fiduciary liability insurance with respect to claims arising
from facts or events which occurred on or before the Effective Time, and (c)
indemnify its directors and officers to the fullest extend permitted under
Wisconsin law and its charters and bylaws.
TERMINATION
Prior to the Effective Time, the Merger Agreement may be terminated by
Pioneer and Mid-Plains by mutual consent, or by either of Pioneer or
Mid-Plains if (a) the Mergers have not been consummated on or before June 30,
1997 (the "Termination Date") (Provided that the party wishing to terminate
shall not have prevented such consummation by failing to fulfill any of its
obligations under the Merger Agreement), (b) a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission has issued an order, decree or ruling which has become final and
nonappealable, or taken any other action permanently to restrain, enjoin or
otherwise prohibit the transactions contemplated by the Merger Agreement, (c)
the other has breached or failed to comply in any material respect with any
of its obligations under the Merger Agreement or any representation or
warranty made by the other in the Merger Agreement is incorrect in any
material respect, and such breaches, failures, or misrepresentations are not
cured within 30 days of notice, and individually or in the aggregate would
reasonably be expected to result in a Material Adverse Effect on Pioneer,
Mid-Plains or Chorus (with or without including its ownership of Pioneer and
Mid-Plains), (d) the board of directors of Mid-Plains or Pioneer resolves to
or does withdraw or adversely modify its approval or recommendation of the
Merger Agreement or the Mergers, fails to reaffirm such approval or
recommendation upon request, or approves or recommends any acquisition of a
material portion of its assets or any tender offer for shares of its capital
stock in each case by a third party (a "Withdrawal"), or (e) any of the
required approvals of the shareholders of either have not been obtained at
a duly held meeting (including any adjournments thereof).
TERMINATION FEES
Termination Fees Payable by Pioneer. The Merger Agreement obligates
Pioneer to pay to Mid-Plains 20% of all of Mid-Plains' out of pocket expenses
related to preparing the Merger Agreement and related activities (the
"Initial Termination Fee") if (i) Mid-Plains terminates the Merger Agreement
because of either a Withdrawal by Pioneer or Pioneer's failure to comply (and
to cure such non-compliance within 30 days' notice of the same) with certain
Merger Agreement covenants relating to the holding of a shareholders meeting,
the solicitation of proxies with respect to the Pioneer Proposal, and the
filing of certain documents with the Department of Financial Institutions of
the State of Wisconsin, or (ii) either party terminates the Merger Agreement
because of the failure of Pioneer to obtain shareholder approval for the
Merger Agreement and the transactions contemplated thereby at a duly held
shareholders' meeting.
Termination of Fees Payable by Mid-Plains. The Merger Agreement
obligates Mid-Plains to pay to Pioneer a termination fee equal to 80% of all
Pioneer's out of pocket expenses related to preparing the Merger Agreement
and related activities (the "Initial Mid-Plains Termination Fee") if (i)
Pioneer terminates the Merger Agreement because of either a Withdrawal by
Mid-Plains or Mid-Plains' failure to comply (and to cure such non-compliance
within 30 days' notice of the same) with certain Merger Agreement covenants
relating to the holding of a shareholders meeting, the solicitation of
proxies with respect to the Mid-Plains Proposal, and the filing of certain
documents with the Department of Financial Institutions of the State of
Wisconsin, or (ii) either party terminates the Merger Agreement because of
the failure of Mid-Plains to obtain shareholder approval for the Merger
Agreement and the transactions contemplated thereby at a duly held
shareholders' meeting.
EXPENSES
Except as otherwise provided in the Merger Agreement, each of Pioneer
and Mid-Plains will bear its own costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby, except
that the expenses incurred in connection with the printing of this Joint
Proxy Statement/Prospectus, as well as the filing fees related thereto, shall
be paid one-third by Pioneer and two-thirds by Mid-Plains.
THE SPECIAL MEETINGS
This Joint Proxy Statement/Prospectus is furnished in connection with
the solicitation of proxies (i) from the holders of Mid-Plains Common Stock
by the Mid-Plains Board for use at the Mid-Plains Meeting and (ii) from the
holders of Pioneer Common Stock by the Pioneer Board for use at the Pioneer
Meeting. This Joint Proxy Statement/Prospectus and accompanying form of
proxy are first being mailed to the respective shareholders of Mid-Plains and
Pioneer on or about April 24, 1997.
TIMES AND PLACES, PURPOSES
The Mid-Plains Meeting will be held Middleton High School Auditorium,
7400 North Avenue, Middleton, Wisconsin, on May 17, 1997 starting at 10:00 a.m.
local time. At the Mid-Plains Meeting, the shareholders of Mid-Plains will
be asked to consider and vote upon (i) the Mid-Plains Proposal and (ii) such
other matters as may properly come before the Mid-Plains Meeting. A
representative from Kiesling Associates LLP, principal accountants for
Mid-Plains for the most recently completed fiscal year, (i) are expected to be
present at the Mid-Plains meeting, (ii) will have an opportunity to make a
statement if they desire to do so, and (iii) are expected to be available to
respond to appropriate questions.
The Pioneer Meeting will be held at the Grant County Youth and Agriculture
Building, 916 East Elm Street, Lancaster, Wisconsin, on May 16, 1997, starting
at 2:00 p.m., local time. At the Pioneer Meeting, the shareholders of
Pioneer will be asked to consider and vote upon (i) the Pioneer Proposal, and
(ii) such other matters as may properly come before the Pioneer Meeting. A
representative from Kiesling Associates LLP, principal accountants for
Pioneer for the most recently completed fiscal year, (i) are expected to be
present at the Pioneer meeting, (ii) will have an opportunity to make a
statement if they desire to do so, and (iii) are expected to be available to
respond to appropriate questions.
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
Mid-Plains. The Mid-Plains Board has fixed the close of business on
April 22, 1997 as the Mid-Plains Record Date. Only holders of record of
shares of Mid-Plains Common Stock on the Mid-Plains Record Date are entitled
to notice of and to vote at the Mid-Plains Meeting. On the Mid-Plains Record
Date, there were approximately 1,991,743 shares of Mid-Plains Common Stock
outstanding and entitled to vote at the Mid-Plains Meeting held by
approximately 2,400 shareholders of record.
Each holder of record, as of the Mid-Plains Record Date, of Mid-Plains
Common Stock, is entitled to cast one vote per share. The presence, in
person or by proxy, of the holders of a majority of the outstanding shares
of Mid-Plains Common Stock entitled to vote is necessary to constitute a
quorum at the Mid-Plains Meeting. The affirmative vote, in person or by
proxy, of the holders of a majority of the shares of Mid-Plains Common Stock
outstanding on the Mid-Plains Record Date is required to approve and adopt
the Mid-Plains Proposal.
Pioneer. The Pioneer Board has fixed the close of business on
April 22, 1997 as the Pioneer Record Date. Only holders of record of shares of
Pioneer Common Stock on the Pioneer Record Date are entitled to notice of and
to vote at the Pioneer Meeting. On the Pioneer Record Date, there were
approximately 173,140 shares of Pioneer Common Stock outstanding and entitled
to vote at the Pioneer Meeting, held by approximately 1,000 shareholders of
record.
Each holder of record, as of the Pioneer Record Date, of Pioneer Common
Stock, is entitled to cast one vote per share. The presence, in person or
by proxy, of the holders of a majority of the outstanding shares of Pioneer
Common Stock entitled to vote is necessary to constitute a quorum at the
Pioneer Meeting. The affirmative vote, in person or by proxy, of the holders
of a majority of the shares of Pioneer Common Stock outstanding on the
Pioneer Record Date is required to approve and adopt the Pioneer Proposal.
PROXIES
All shares of Mid-Plains Common Stock and Pioneer Common Stock
represented by properly executed proxies received prior to or at the
respective Mid-Plains Meeting or Pioneer Meeting, as the case may be, and not
revoked, will be voted in accordance with the instructions indicated in such
proxies. If no instructions are indicated on a properly executed returned
proxy, such proxies will be voted FOR the approval of the Mid-Plains Proposal
or the Pioneer Proposal, as the case may be. A properly executed proxy
marked "ABSTAIN," although counted for purposes of determining whether there
is a quorum and for purposes of determining the aggregate voting power and
number of shares represented and entitled to vote at the applicable Special
Meeting, will not be voted. Accordingly, since the affirmative vote of a
majority of outstanding shares is required for approval of each of the
Mid-Plains Proposal and the Pioneer Proposal, a proxy marked "ABSTAIN" will
have the effect of a vote against such proposals.
The Mid-Plains Board and the Pioneer Board are not currently aware of
any business to be acted upon at their respective Special Meetings other than
as described herein. If, however, other matters are properly brought before
either Special Meeting, or any adjournments or postponements thereof, the
persons appointed as proxies will have discretion to vote or act thereon
according to their best judgment. Such adjournments may be for the purpose
of soliciting additional proxies. Shares represented by proxies voting
against the approval and adoption of the Mid-Plains Proposal or the Pioneer
Proposal will be voted against a proposal to adjourn the respective Special
Meeting for the purpose of soliciting additional proxies. Neither Mid-Plains
nor Pioneer currently intends to seek an adjournment of its respective
Special Meeting.
A shareholder may revoke his or her proxy at any time prior to its use
by delivering to the Secretary of Mid-Plains or Pioneer, as the case may be,
a signed notice of revocation or a later-dated signed proxy or by attending
the applicable Special Meeting and voting in person. Attendance at the
Mid-Plains Meeting or the Pioneer Meeting will not in itself constitute the
revocation of a proxy.
It is the policy of Mid-Plains and Pioneer to keep confidential proxy
cards, ballots and voting tabulations that identify individual shareholders,
except where disclosure is mandated by law and in other limited circumstance.
The cost of solicitation of proxies will be paid by Mid-Plains for
Mid-Plains proxies and by Pioneer for Pioneer proxies. Both Mid-Plains and
Pioneer plan to solicit proxies by mail. Neither Mid-Plains nor Pioneer plan
to retain the service of any organization to aid in the solicitation of
proxies. To the extent necessary in order to ensure sufficient
representation at its Special Meeting, Mid-Plains or Pioneer may request by
telephone or other communication medium the return of proxy cards. The
extent to which this will be necessary depends entirely upon how promptly
proxy cards are returned. Shareholders are urged to send in their proxies
without delay.
Shareholders should not send in any stock certificates with their proxy
cards. A transmittal form with instructions for the surrender of stock
certificates for Pioneer Common Stock and Mid-Plains Common Stock will be
mailed by Chorus or an Exchange Agent to former Pioneer and Mid-Plains
shareholders as soon as practicable after the consummation of the Mergers.
DIRECTORS AND MANAGEMENT OF CHORUS FOLLOWING THE MERGERS
The Merger Agreement provides that, immediately following the
consummation of the Mergers, the Chorus Board will consist of five (5)
members to be designated by the Mid-Plains and Pioneer Boards. Charles
Maulbetsch, Harold L. (Lee) Swanson, Douglas J. Timmerman, and Dean W. Voeks
were designated by the Mid-Plains Board, and G. Burton Bloch was designated
by the Pioneer Board. These individuals have consented to serve on the
Chorus Board and have been elected to serve as such until the annual
meeting at which their respective terms will expire as provided below.
Brief biographies of the director designees follow. These biographies
include their age (as of March 31, 1997), an account of their business
experience, and the names of corporations of which they are also directors.
DIRECTORS
Dr. G. Burton Bloch, DDS Age: 74
Principal Occupation: Real Estate and Small Business
Owner-Manager;
Annual Meeting at which current term of office will
expire:
1999.
Other Information: Dr. Bloch has served as a director
of Pioneer since 1987, and Farmers, subsidiary of Pioneer
since 1975.
Charles Maulbetsch. Age: 62
Principal Occupation: Retired Bank Officer.
Annual Meeting at which current term of office will
expire:
1999.
Other Information: Mr. Maulbetsch has served as a
director of Mid-Plains since 1981. He was a
Vice-President
of Middleton Community Bank from January 1, 1995
until his retirement on December 31, 1995. Prior to
that he was a Bank Consultant. He is a director of
Middleton Community Bank.
Harold L. (Lee) Swanson. Age 59
Principal Occupation: President of State Bank of Cross
Plains.
Annual Meeting at which current term of office will
expire:
2000.
Other Information: Mr. Swanson has served as a
director of Mid-Plains since 1981. He has served as a
director of Mid-Plains Communications Systems, Inc.,
subsidiary of Mid-Plains, since 1981. He is also a
Director of State Bank of Cross Plains and Madison Gas &
Electric Company.
Douglas J. Timmerman. Age 56
Principal Occupation: CEO Anchor Bank and Anchor
BanCorp Wisconsin, Inc.
Annual Meeting at which current term of office will
expire:
1998.
Other Information: Mr. Timmerman has served as a
director
and President of Pioneer since 1987, and Farmers,
subsidiary of Pioneer, since 1976. He is also a
director
of Anchor Bank, Anchor BanCorp Wisconsin, Inc., Credit
Bureau of Madison, Federal Home Loan Bank of Chicago,
and
Wisconsin Cheeseman, Inc.
Dean W. Voeks. Age 54
Principal Occupation: President of Mid-Plains;
President
of Mid-Plains Communications Systems, Inc., subsidiary
of Mid-Plains.
Annual meeting at which current term of office will
expire:
1998.
Other Information: Mr. Voeks has been an officer of
Mid-Plains since 1987. He has served as a director of
Mid-Plains since 1991. He has served as a director of
Mid-Plains Communications Systems, Inc., subsidiary of
Mid-Plains, since 1991. He has served as a managing board
member and President of PCS Wisconsin, LLC, subsidiary
of Mid-Plains, since 1996. He is a director of First
Business Bank of Madison and the Wisconsin State
Telephone Association.
COMMITTEES OF THE BOARD OF DIRECTORS
The Chorus Board may create one or more committees and appoint members
of the Chorus Board to serve on them. Committee structure and membership
will be determined by the Chorus Board shortly after the completion of the
Mergers. It is anticipated that the Chorus Board will form an audit
committee, a compensation committee and a nominating Committee.
COMPENSATION OF DIRECTORS
The specific terms of the compensation to be paid to directors of
Chorus, Mid-Plains, Pioneer or any of their subsidiaries for service on the
Chorus Board have not yet been determined. However, the director
compensation for Chorus is not expected to include a pension plan.
In 1996, each non-employee director of Mid-Plains received an annual
fee of $14,000 for serving on the Mid-Plains Board. No additional fees were
paid for attending meetings. Employee directors received no directors' fees.
In addition, no fees were paid to the directors of MPCS or MPC of Illinois,
Inc.
In 1996, each director of Pioneer received an annual fee of $2,250 for
serving on the Pioneer Board. In addition, each director received $125 for
each Pioneer Board meeting attended. The directors of Pioneer held 12
meetings in 1996. The directors of Farmers received an annual fee of $11,500
and a meeting fee of $175. The directors of Dickeyville received an annual
fee of $5,250 and a meeting fee of $125. The directors of Farmers held 12
meetings and Dickeyville directors held 6 meetings during 1996.
EXECUTIVE COMPENSATION
The senior management team for Chorus immediately following the Mergers
shall include the following individuals:
Dean W. Voeks (age 54) Chief Executive Officer
Howard G. Hopeman (age 53) Executive Vice-President and
Chief Financial Officer
Fredrick E. Urben (age 55) Secretary/Treasurer
The Chorus Board will rely on its compensation committee, which will
be composed of non-employee directors, to recommend the form and amount of
compensation to be paid to Chorus's Chief Executive Officer, Dean W. Voeks.
Dean W. Voeks shall fix the form and amount of compensation to be paid
to the other executive officers.
The following table summarizes the compensation for the fiscal years
1994, 1995, and 1996 of the President (the chief executive officer) and one
other executive officer of Mid-Plains whose compensation exceeded $100,000
for the fiscal year 1996.
Summary Compensation Table
Annual Compensation All Other
Name and Principal Position Year Salary Bonus Compensation<F1>
Dean W. Voeks: 1996 $145,000 $35,000 $5,700
President 1995 $140,000 $25,000 $5,544
1994 $125,000 $ 7,500 $5,590
Howard G. Hopeman: 1996 $ 97,000 $15,000 $4,704
Vice President and 1995 $ 93,500 $11,000 $4,389
Chief Financial Officer 1994 $ 90,100 $ 2,700 $3,898
<FN>
<F1> Mid-Plains' matching contribution to defined contribution 401(k)
benefit
plan.
</FN>
No employee or director of Pioneer was paid more than $100,000 for the
year ended December 31, 1996.
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND FIVE PERCENT SHAREHOLDERS
No director or executive officer is expected to own more than 0.9% of
the outstanding shares of Chorus Common Stock after giving effect to the
Mergers. The directors and executive officers of Chorus as a group are
expected to beneficially own 3.9% of the outstanding shares of
Chorus Common Stock or 104,557 shares after giving effect to the Mergers. No
person is expected to beneficially own more than 5% of the outstanding shares
of Chorus after giving effect to the Mergers (based upon publicly available
information). Prior to the Effective Time of the Mergers, each director and
each executive officer of Chorus as a group beneficially owned common stock
of either Mid-Plains or Pioneer as listed in the following table. In
accordance with the Merger Agreement, each share of Pioneer Common Stock
represented below shall be converted into four (4) shares of Chorus Common
Stock.
Pioneer
Name of Beneficial Owner Shares Beneficially Owned Percent of Class
Dr. G. Burton Bloch 4,720<F1> 2.7%
Douglas J. Timmerman 5,727<F2> 3.3%
<FN>
<F1> Includes 4,692 shares of Pioneer Common Stock in a family trust in which
Dr. Bloch has a pecuniary interest, voting and investment power, and 28
shares of Pioneer Common Stock in a partnership in which Dr. Bloch has a
pecuniary interest, voting and investment power.
<F2> Includes 5,678 shares of Pioneer Common Stock in a family partnership
in which Mr. Timmerman has a pecuniary interest, voting and investment
power, 28 shares of Pioneer Common Stock in a partnership in which
Mr. Timmerman has a pecuniary interest, voting and investment power, and
21 shares of Pioneer Common Stock in custodial ownership form in which
Mr. Timmerman has voting and investment power.
</FN>
Mid-Plains
Name of Beneficial Owner Shares Beneficially Owned Percent of Class
Howard G. Hopeman 7,659<F1> 0.4%
Charles Maulbetsch 21,707<F1> 1.1%
Harold L. (Lee) Swanson 9,325<F1><F2> 0.5%
Fredrick E. Urben 21,924<F1><F3> 1.1%
Dean W. Voeks 2,154<F1> 0.1%
<FN>
<F1>Includes 5,244; 500; 4,515; 3,500 and 1,037 shares of Mid-Plains Common
Stock in self-directed Individual Retirement Accounts, to which Messrs.
Hopeman, Maulbetsch, Swanson, Urben, and Voeks, respectively, have
voting and investment power.
<F2> Includes 2,325 shares of Mid-Plains Common Stock held by the State Bank of
Cross Plains Profit Sharing Plan and Money Purchase Pension Plan which Mr.
Swanson serves as a member of its Qualified Plan Committee and thereby has
shared voting and investment power.
<F3>Includes 3,400 shares of Mid-Plains Common Stock in a family trust in which
Mr. Urben has a pecuniary interest, voting and investment power and 4,004
shares of Mid-Plains Common Stock in a trust in which Mr. Urben has no
pecuniary interest but has voting and investment power.
</FN>
COMPARISON OF SHAREHOLDERS' RIGHTS
The rights of Mid-Plains shareholders are currently governed by the
Wisconsin Business Corporation Law (the "WBCL") and the articles of
incorporation and bylaws of Mid-Plains. The rights of Pioneer stockholders
are currently governed by the WBCL and the articles of incorporation and
bylaws of Pioneer. The rights of Chorus shareholders following the Effective
Time will be governed by the WBCL and the articles of incorporation and
bylaws of Chorus as set forth in Appendices III and IV hereto. Upon
consummation of the Mergers, the rights of Mid-Plains shareholders and
Pioneer shareholders, who become shareholders of Chorus in the Mergers, will
be governed by the WBCL, the articles of incorporation of Chorus, and the
bylaws of Chorus. The following are summaries of certain differences between
the current rights of Mid-Plains and Pioneer shareholders and those of Chorus
shareholders following the Mergers.
The following discussions are not intended to be complete and are
qualified by reference to the WBCL, the Mid-Plains Articles of Incorporation,
the Mid-Plains Bylaws, the Pioneer Articles of Incorporation, the Pioneer
Bylaws, the Amended and Restated Articles of Incorporation of Chorus
Communications Group, Ltd. (the "Chorus Articles of Incorporation"),and the
Chorus Bylaws. Copies of the Chorus Articles of Incorporation and the
Chorus Bylaws, in substantially the forms to be adopted prior to the
Effective Time, are attached to this Joint Proxy Statement/Prospectus as
Appendices III and IV, respectively. Copies of the Mid-Plains Articles of
Incorporation, the Mid-Plains Bylaws, the Pioneer Articles of Incorporation,
and the Pioneer Bylaws are incorporated by reference herein and will be sent
to holders of shares of Mid-Plains Common Stock and Pioneer Common Stock,
respectively, upon request. See "Where You Can Find More Information."
COMPARISON OF CURRENT MID-PLAINS SHAREHOLDER RIGHTS AND CHORUS SHAREHOLDER
RIGHTS FOLLOWING THE MERGERS
The rights of the holders of Chorus Common Stock will be substantially
the same under the WBCL and the Chorus Articles of Incorporation and Chorus
Bylaws as they were under the WBCL and the Mid-Plains Articles of
Incorporation and the Mid-Plains Bylaws with the following exceptions.
Authorized Capital. The total number of authorized shares of capital
stock of Mid-Plains is 25,000,000 shares, consisting of 25,000,000 shares of
Mid-Plains Common Stock, no par value. The authorized capital of Chorus is
as set forth under "Description of Chorus Capital Stock Following the
Merger--Authorized Capital Stock." As a result of the filing of the Chorus
Articles of Incorporation of Chorus, the total number of authorized shares of
capital stock of Chorus will be increased from 9,000 to25,000,000, no par
value per share.
Board of Directors. Mid-Plains' Board currently consists of 7
directors, which number may be increased to no more than 13 or decreased to
no less than 5 by resolution of the Board, pursuant to the Mid-Plains
Articles of Incorporation. Effective June 1, 1997, the age limit for
Mid-Plains Directors is seventy (70) years of age. Effective June 1, 1997,
Mid-Plains Directors are required to resign from the Mid-Plains Board
coincident with their attainment of age seventy (70).
Chorus' Board will initially consist of 5 directors. The Chorus
Articles of Incorporation provides that the number of directors constituting
the Chorus Board shall be fixed by bylaw. The Chorus Bylaws currently
provides for a Board of Directors consisting of no more than 13, nor less
than 5 directors, which number and range may be increased or decreased by
resolution of the Chorus Board. The Chorus Bylaws does not contain an age
limitation.
Stock Limitation. The Mid-Plains Bylaws provide that no one
shareholder is entitled to hold more than five percent (5%) of the authorized
and issued capital stock of Mid-Plains provided, however, this limitation
shall automatically terminate without any further action of the Mid-Plains
Board only upon the effective date of a plan of merger or share exchange
approved by the requisite number of shareholders, which in effect causes the
issued capital stock of the corporation to be exchanged for the capital stock
of a holding/parent company of the corporation. The Chorus Bylaws does not
contain a similar stock limitation.
COMPARISON OF CURRENT PIONEER SHAREHOLDER RIGHTS AND CHORUS SHAREHOLDER
RIGHTS FOLLOWING THE MERGERS
Authorized Capital. The total number of authorized shares of capital
stock of Pioneer is 500,000 shares, consisting of 500,000 shares, par value
$.01 per share, of common stock. The authorized capital of Chorus is as set
forth under "Description of Chorus Capital Stock Following the Mergers--
Authorized Capital Stock." As a result of the filing of the Articles of
Incorporation of Chorus, the total number of authorized shares of capital
stock of Chorus will be increased from 9,000 to 25,000,000, no par value
per share.
Board of Directors. Pioneer's Board currently consists of 8 directors,
which number may be increased or decreased by the Board pursuant to Pioneer's
Bylaws. Chorus's Board will initially consist of 5 directors. The Chorus
Articles of Incorporation provides that the number of directors constituting
the Chorus Board shall be fixed by bylaw. The Chorus Bylaws currently
provides for a Board of Directors consisting of no more than 13, nor less
than 5 directors, which number and range may be increased or decreased by
resolution of the Chorus Board. Also, the Chorus Board may appoint one or
more former directors to the position of Director Emeritus to assist the
Chorus Board with the discharge of its duties upon such terms and conditions
and at such compensation as the Chorus Board may determine. However, a
Director Emeritus is not entitled to vote on any matter that comes before the
Chorus Board.
DESCRIPTION OF CHORUS CAPITAL STOCK FOLLOWING THE MERGERS
The summary of the terms of the common stock of Chorus set forth below
does not purport to be complete and is qualified by reference to the Chorus
Articles of Incorporation and the Chorus Bylaws. Copies of the Chorus
Articles of Incorporation and the Chorus Bylaws, in substantially the forms
to be adopted immediately prior to the Effective Time, are attached as
Appendices III and IV.
AUTHORIZED CAPITAL STOCK
Under the Chorus Articles of Incorporation, the total number of shares
of all classes of stock that Chorus has authority to issue is 25,000,000
shares, no par value, all of which are shares of Chorus Common Stock.
COMMON STOCK
Holders of shares of Chorus Common Stock will be entitled to receive
dividends on such stock out of assets legally available for distribution
when, as and if authorized and declared by the Chorus Board and to share
ratably in the assets of Chorus legally available for distribution to its
shareholders in the event of its liquidation, dissolution or winding-up.
While future dividends on Chorus Common Stock will depend upon its
respective earnings, financial condition and other factors, it is anticipated
that dividends on Chorus Common Stock will be inaugurated at a rate equal to
$1.08 per year.
Initially, the funds required by Chorus to operate, to invest in
subsidiaries, and to enable it to pay dividends on its common stock are
expected to be derived for the most part from dividends paid by Mid-Plains
and Pioneer on their common stock. As a practical matter, therefore, the
ability of Chorus to pay dividends on its common stock in the immediate
future may be limited by existing covenants restricting the right of
Mid-Plains, Pioneer, Farmers and Dickeyville to pay dividends on or to acquire
its common stock. Such covenants will not be altered by the Merger
Agreement. Farmers and Dickeyville currently have mortgages with the United
States of America, securing certain Rural Electrification Administration
("REA")(now known as the Rural Utilities Service ("RUS")) notes, which
contain certain restrictions regarding the payment of cash dividends and the
redemption of common stock. Mid-Plains currently has a mortgage with the
Rural Telephone Finance Cooperative ("RTFC") securing certain promissory
notes and a revolving line of credit agreement, which contains certain
restrictions regarding the payment of cash dividends and the redemption of
common stock.
Holders of Chorus Common Stock will be entitled to one vote per share
on all matters voted on generally by the shareholders, including the election
of directors. The Chorus Articles of Incorporation does not provide for
cumulative voting for the election of directors.
The shares of Chorus Common Stock, when issued to holders of
outstanding shares of Pioneer Common Stock and Mid-Plains Common Stock in
connection with the Mergers, will be validly issued, fully paid and
non-assessable, except as provided under Sec. 180.0622(2) of the WBCL.
PREEMPTIVE RIGHTS
No holder of any shares of Chorus Common Stock will have any preemptive
or preferential right to acquire or subscribe for any unissued shares of
Chorus Common Stock.
TRANSFER AGENT AND REGISTRAR
The principal transfer agent and registrar for Chorus Common Stock
after the Mergers will be designated by Mid-Plains and Pioneer prior to the
Effective Time of the Mergers.
FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTION AGREEMENTS
This Joint Proxy Statement/Prospectus does not cover any resales of
Chorus Common Stock to be received by the shareholders of Mid-Plains or
Pioneer upon consummation of the Mergers, and no person is authorized to make
any use of this Joint Proxy Statement/Prospectus in connection with any such
resale.
All shares of Chorus Common Stock received by Mid-Plains or Pioneer
shareholders in the Mergers will be freely transferable, except that the
shares of Chorus Common Stock received by persons who are deemed to be
"affiliates" (as such term is defined under the Securities Act of 1933) of
Mid-Plains or Pioneer prior to the Mergers may be resold by them only in
transactions permitted by the resale provisions of Rule 144 or 145
promulgated under the Securities Act of 1933 or as otherwise permitted under
the Securities Act of 1933. Persons who may be deemed to be affiliates of
Mid-Plains or Pioneer generally include individuals or entities that control,
are controlled by, or are under common control with, Mid-Plains or Pioneer
and may include certain officers, directors and principal shareholders of
Mid-Plains or Pioneer.
GENERAL ACQUISITION RESTRICTIONS
There are various provisions in the WBCL, the Chorus Articles of
Incorporation, and the Chorus By-laws which may be deemed
to restrict the ability of a person, firm or entity to acquire Chorus. These
provisions provide for, among other things, staggered boards of directors,
non-cumulative voting for directors and limits on the calling of special
meetings of shareholders. All of these provisions may have the effect of
discouraging a future takeover attempt which is not approved by the Board of
Directors but which shareholders of Chorus may deem to be in their best
interests or in which shareholders may receive a substantial premium for
their shares over the then current market price. As a result, shareholders
who might desire to participate in such a transaction may not have an
opportunity to do so. Such provisions will render the removal of the current
Board of Directors more difficult. These provisions also could decrease the
likelihood of temporary increases in the price of Chorus's Common Stock which
frequently result from non-negotiated takeover attempts and may tend to
perpetuate existing management. The description of these provisions is
necessarily general and reference should be made to the text of Articles of
Incorporation and By-laws of Chorus attached hereto as Appendix III and IV
respectively.
LEGAL MATTERS
The validity of the Chorus Common Stock to be issued in connection with
the Mergers will be passed upon by Axley Brynelson.
EXPERTS
The financial statement of Chorus at March 11, 1997 which is attached to this
Joint Proxy Statement/Prospectus as Appendix IX, has been audited by
Kiesling Associates LLP, independent auditors, as indicated in their report
with respect thereto, and is included herein in reliance upon the authority
of said firm as experts in accounting and auditing.
The consolidated financial statements of Pioneer at December 31, 1996
and December 31, 1995 and for each of the three years in the period ending
December 31, 1996, which are attached to this Joint Proxy
Statement/Prospectus as Appendix VIII, have been audited by Kiesling
Associates LLP, independent auditors, as indicated in their reports
with respect thereto, and are included herein in reliance upon the authority
of said firm as experts in accounting and auditing.
The consolidated financial statements of Mid-Plains at December 31,
1996 and December 31, 1995 and for each of the three years in the period
ended December 31, 1996, which are attached to this Joint Proxy
Statement/Prospectus as Appendix VII, have been audited by
Kiesling Associates LLP, independent auditors, as indicated in their reports
with respect thereto, and are included herein in reliance upon the authority
of said firm as experts in accounting and auditing.
FUTURE SHAREHOLDER PROPOSALS
Any Chorus shareholder who intends to submit a proposal for inclusion
in the proxy materials for the 1998 annual meeting of Chorus must submit such
proposal to the Secretary of Chorus by December 15, 1997. In addition, the
current Chorus bylaws provide that any shareholder wishing to make a
nomination for director to be elected at the 1998 annual meeting of Chorus
must submit a nomination in writing to Chorus's principal executive offices
between January 1, 1998 and February 28, 1998 and that nomination must meet
certain other requirements as set forth in the Chorus bylaws.
Mid-Plains and Pioneer expect to hold annual meetings of shareholders
in the third quarter of 1997 unless the Mergers are completed prior thereto.
SEC rules set forth standards as to what shareholder proposals are required
to be included in a proxy statement. Neither Mid-Plains nor Pioneer
shareholders may submit a proposal for inclusion in the Proxy materials for
either the 1997 annual meeting of Mid-Plains or Pioneer, if such meetings are
necessary. A copy of the Mid-Plains Bylaws may be obtained from the
Secretary of Mid-Plains. A copy of the Pioneer Bylaws may be obtained from
the Secretary of Pioneer. See "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
Chorus filed a Registration Statement on Form S-4 to register with the
SEC the Chorus Common Stock to be issued to Mid-Plains and Pioneer
shareholders pursuant to the Merger Agreement. This Joint Proxy
Statement/Prospectus is a part of that Registration Statement and constitutes
a prospectus of Chorus in addition to being a proxy statement of Mid-Plains
and Pioneer for the Special Meetings. As allowed by SEC rules, this Joint
Proxy Statement/Prospectus does not contain all the information you can find
in the Registration Statement or the exhibits to the Registration Statement.
Mid-Plains files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information Mid-Plains files at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. Mid-Plains SEC filings are also available to the
public from commercial document retrieval services and at the web site
maintained by the SEC at "http://www.sec.gov."
The SEC allows Mid-Plains to "incorporate by reference" information
into this Joint Proxy Statement/Prospectus, which means that Mid-Plains can
disclose important information to you by referring you to another document
filed separately with the SEC. The information incorporated by reference is
deemed to be part of this Joint Proxy Statement/Prospectus, except for any
information superseded by information in this Joint Proxy
Statement/Prospectus. This Joint Proxy Statement/Prospectus incorporates by
reference the documents set forth below that Mid-Plains has previously filed
with the SEC. These documents contain important information about Mid-Plains
and its finances.
Mid-Plains SEC Filings (File No. 0-8320) Period
Annual Report on Form 10-K Year ended December
31, 1996
Quarterly Reports on Form 10-Q Quarters ended March
31, 1996, June 30,
1996, and September
30, 1996
Current Reports on Form 8-K January 7, 1997
Mid-Plains is also incorporating by reference additional documents that
Mid-Plains files with the SEC between the date of this Joint Proxy
Statement/Prospectus and the dates of the Special Meetings of our shareholders.
Mid-Plains has supplied all information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus relating to Mid-Plains,
and Pioneer has supplied all such information relating to Pioneer.
If you are a Mid-Plains shareholder, Mid-Plains may have sent you some
of the documents incorporated by reference. Mid-Plains or Pioneer
shareholders can obtain any such documents through Mid-Plains, Pioneer or the
SEC. Documents incorporated by reference are available from Mid-Plains or
Pioneer without charge, excluding all exhibits unless Mid-Plains has
specifically incorporated by reference an exhibit in this Joint Proxy
Statement/Prospectus. Shareholders may obtain documents incorporated by
reference in this Joint Proxy Statement/Prospectus by requesting them in
writing or by telephone from the appropriate party at the following
addresses:
Mid-Plains Shareholder Services Pioneer Shareholder Services
1912 Parmenter Street 140 North Monroe Street
Middleton, WI 53562-3139 Lancaster, WI 53813
(608) 836-4212 (608) 723-4140
If you would like to request documents from Mid-Plains or Pioneer,
please do so by May 14, 1997 to receive them before the Special
Meetings.
You should rely only on the information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus to vote on the Mergers.
We have not authorized anyone to provide you with information that is
different from what is contained in this Joint Proxy Statement/Prospectus.
This Joint Proxy Statement/Prospectus is dated March 17, 1997. You should
not assume that the information contained in this Joint Proxy
Statement/Prospectus is accurate as of any date other than such date, and
neither the mailing of the Joint Proxy Statement/Prospectus to shareholders
nor the issuance of Chorus Common Stock in the Mergers shall create any
implications to the contrary.
APPENDIX I
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of December
31, 1996, ("the date hereof"), between and among the following Wisconsin
corporations: Pioneer Communications, Inc. ("Pioneer") and Mid-Plains, Inc.
("Mid-Plains"). Pioneer and Mid-Plains are herein sometimes referred to
collectively as the "Companies" or the "Parties," or individually as the
"Party."
W I T N E S S E T H
WHEREAS, the Companies consider it advantageous to establish a parent
corporation, the name of which shall be selected by the Parties subsequent
to the date hereof (referred to herein as the "Parent"), which shall be a
holding company rather than an operating company, in order to realize
efficiencies and economies in operations of the telephone systems of the
Companies, to provide better service to their customers, and to promote the
flexibility needed for expansion of the business of the Companies; and
WHEREAS, the Boards of Directors of the respective Parties hereto deem
it advisable and in the best interests of the respective Parties and their
respective shareholders to merge Pioneer Acquisitions (as defined in Section
1.2 hereof) into Pioneer and to merge Mid-Plains Acquisitions (as defined in
Section 1.2 hereof) into Mid-Plains in accordance with the Wisconsin Business
Corporation Law and this Agreement, whereby each holder of shares of Pioneer
common stock will receive four (4) shares of Parent common stock for each
share presently held of Pioneer common stock, and each holder of shares of
Mid-Plains common stock will receive the same number of shares of Parent
common stock as those presently held of Mid-Plains; and
WHEREAS, the Boards of Directors of the respective Parties hereto have
each determined that the Merger (as defined in Section 1.2 hereof) and the
other transactions contemplated hereby are consistent with, and in
furtherance of, their respective business strategies and goals and have each
approved the Merger upon the terms and conditions set forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall constitute a tax-free reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall
be accounted for as a pooling of interests under generally accepted
accounting principles ("GAAP").
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, provisions, covenants and grants herein contained, and intending
to be legally bound hereby in accordance with the laws of the State of
Wisconsin, the Parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 Formation of the Holding Company. Mid-Plains will form a
Parent under the Wisconsin Business Corporation Law ("Wisconsin Law") as a
wholly-owned subsidiary of Mid-Plains. At the Effective Time (defined in
Section 1.4 below), Mid-Plains and Pioneer shall be wholly-owned subsidiaries
of Parent as set forth in Section 1.3 hereof.
SECTION 1.2 Formation of the Merger Subsidiaries. Parent will form
under Wisconsin Law Pioneer Acquisitions, Inc. ("Pioneer Acquisitions") and
Mid-Plains Acquisitions, Inc. ("Mid-Plains Acquisitions") under Wisconsin
Law. Pioneer Acquisitions and Mid-Plains Acquisitions will be wholly-owned
subsidiaries of Parent and shall be merged into Pioneer and Mid-Plains,
respectively, (collectively, the "Merger") as set forth in Section 1.3
hereof. Pioneer Acquisitions and Mid-Plains Acquisitions are herein
sometimes referred to collectively as the "Merger Subsidiaries." The Merger
Subsidiaries will be formed solely to facilitate the Merger and will conduct
no business or activity other than in connection with the Merger.
SECTION 1.3 The Merger. At the Effective Time and subject to and upon
the terms and conditions of this Agreement and Wisconsin Law, the Merger
shall be consummated, whereby Pioneer Acquisitions shall be merged with and
into Pioneer, the separate corporate existence of Pioneer Acquisitions shall
cease, and Pioneer shall continue as the surviving corporation which shall
be a wholly-owned subsidiary of Parent; and, whereby Mid-Plains Acquisitions
shall be merged with and into Mid-Plains, the separate corporate existence
of Mid-Plains Acquisitions shall cease, and Mid-Plains shall continue as the
surviving corporation which shall also be a wholly-owned subsidiary of
Parent. Pioneer and Mid-Plains, as the surviving corporations after the
Merger, are herein sometimes referred to as the "Surviving Corporations" and
the Merger Subsidiaries, as the non-surviving corporations after the Merger,
are herein sometimes referred to as the "Merged Corporations."
SECTION 1.4 Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VIII hereof and
the consummation of the Closing referred to in Section 7.2(b) hereof, the
Parties shall cause the Merger to be consummated by filing Articles of Merger
with the Department of Financial Institutions of the State of Wisconsin with
respect to the Merger, in such form as required by, and executed in
accordance with, the relevant provisions of Wisconsin Law (the time of such
filing being the "Effective Time").
SECTION 1.5 Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of Wisconsin
Law. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time all the property, rights, privileges, powers and
franchises of the Surviving Corporations and the Merged Corporations shall
continue with, or vest in, as the case may be, Pioneer and Mid-Plains,
respectively, as the Surviving Corporations, and all debts, liabilities and
duties of the Surviving Corporations and the Merged Corporations shall
continue to be, or become, as the case may be, the debts, liabilities and
duties of Pioneer and Mid-Plains, respectively, as the Surviving
Corporations. As of the Effective Time, the Surviving Corporationsshall be
direct wholly-owned subsidiaries of Parent.
SECTION 1.6 Articles of Incorporation; Bylaws; Directors and Officers
of Surviving Corporations. Unless otherwise agreed by Pioneer and Mid-Plains
before the Effective Time, at the Effective Time:
(a) the Articles of Incorporation of Pioneer shall be the Articles of
Incorporation of Pioneer as in effect immediately prior to the Effective
Time, until thereafter amended as provided by law.
(b) the Bylaws of Pioneer shall be the Bylaws of Pioneer immediately
prior to the Effective Time, until thereafter amended as provided by
law; and
(c) the directors and officers of Pioneer immediately prior to the
Effective Time shall continue to serve in their respective offices of Pioneer
from and after the Effective Time, in each case until their successors are
elected or appointed and qualified or until their resignation or removal.
If, at the Effective Time, a vacancy shall exist on the Board of Directors
or in any office of Pioneer, such vacancy may thereafter be filled in
the manner provided by law and the Bylaws of Pioneer.
(d) the Restated Articles of Incorporation of Mid-Plains shall be the
Restated Articles of Incorporation of Mid-Plains as in effect immediately
prior to the Effective Time, until thereafter amended as provided by
law.
(e) the Restated Bylaws of Mid-Plains shall be the Restated Bylaws of
Mid-Plains immediately prior to the Effective Time, until thereafter amended
as provided by law; and
(f) the directors and officers of Mid-Plains immediately prior to the
Effective Time shall continue to serve in their respective offices of
Mid-Plains from and after the Effective Time, in each case until their
successors are elected or appointed and qualified or until their resignation
or removal. If, at the Effective Time, a vacancy shall exist on the Board of
Directors or in any office of Mid-Plains, such vacancy may thereafter be
filled in the manner provided by law and the Restated Bylaws of Mid-Plains.
ARTICLE II
EFFECT ON STOCK OF THE SURVIVING
CORPORATIONS AND THE MERGED CORPORATIONS
SECTION 2.1 Conversion of Securities. The manner and basis of
converting the shares of common stock of the Surviving Corporations and of
the Merged Corporations at the Effective Time, by virtue of the Merger and
without any action on the part of any of the Parties or the holder of any of
such securities, shall be as hereinafter set forth in this Article II.
SECTION 2.2 Conversion of Shares. (a) Each then issued and
outstanding share of common stock, no par value, of Mid-Plains ("Mid-Plains
Common Stock") and all rights in respect thereof other than those shares of
shareholders exercising their dissenters' rights ("Mid-Plains Dissenting
Shares"), which shall not be deemed to include any share then held in its
treasury, shall by virtue of the Merger and without any action on the part
of the holder thereof, forthwith cease to exist and be converted into one
outstanding share of no par value common stock of Parent, whereupon each such
share of Mid-Plains Common Stock so converted shall be deemed to be a share
acquired by Mid-Plains and held in its treasury. Each such share of Parent
common stock so issued shall thereupon be fully paid and nonassessable,
except as provided under sec. 180.0622 of Wisconsin Law.
(b) The then outstanding shares of common stock of Mid-Plains
Acquisitions ("Mid-Plains Acquisitions Common Stock") shall, by virtue of the
Merger and without any action on the part of Parent, be converted into a
number of shares of Mid-Plains transferred from those deemed acquired by
Mid-Plains and held in its treasury pursuant to subsection (a) above, equal to
the number of shares of Parent common stock issued pursuant to subsection (a)
above. Each such share of Mid-Plains shall thereupon be fully paid and
nonassessable, except as provided under sec. 180.0622 of Wisconsin Law.
(c) Each then outstanding share of common stock, $.01 par value, of
Pioneer ("Pioneer Common Stock") and all rights in respect thereof other than
those shares of shareholders exercising their dissenters' rights ("Pioneer
Dissenting Shares"), which shall not be deemed to include any share then held
in its treasury, shall by virtue of the Merger and without any action on the
part of the holder thereof, forthwith cease to exist and be converted into
four (4) outstanding shares of no par value common stock of Parent, whereupon
each such share of Pioneer Common Stock so converted shall be deemed to be
a share acquired by Pioneer and held in its treasury. Each such share of
Parent common stock so issued shall thereupon be fully paid and
nonassessable, except as provided under sec. 180.0622 of Wisconsin Law. Such
ratio of Pioneer Common Stock to Parent common stock is herein referred to
as the "Exchange Ratio."
(d) The then outstanding shares of common stock of Pioneer
Acquisitions shall, by virtue of the Merger and without any action on the
part of Parent, be converted into the number of shares of Pioneer transferred
from those deemed acquired by Pioneer and held in its treasury pursuant to
subsection (c) above. Each such share of Pioneer shall thereupon be fully
paid and nonassessable, except as provided under sec. 180.0622 of Wisconsin
Law.
(e) All shares of Mid-Plains Common Stock and Pioneer Common Stock
thereafter remaining in the Companies' respective treasuries shall be cancelled.
(f) The 100 shares of Parent common stock owned by Mid-Plains
immediately prior to the Merger shall by virtue of the Merger and without
further action be deemed transferred to Parent's treasury and cancelled.
(g) Mid-Plains Dissenting Shares and Pioneer Dissenting Shares
(collectively, the "Dissenting Shares") will be cancelled and converted into
such consideration as may be due with respect to such shares pursuant to the
applicable provisions of Wisconsin Law, unless and until the right of such
holders to receive fair value for such Dissenting Shares terminates in
accordance with Wisconsin Law, in which case such shares will cease to be
Dissenting Shares and will represent the right to receive Parent Common Stock
pursuant to this Agreement.
SECTION 2.3. Stock Certificates. (a) Following the Effective Time,
each holder of an outstanding certificate or certificates theretofore
representing shares of Mid-Plains Common Stock will be required to surrender
the same to Parent for cancellation or transfer, and each such holder or
transferee will be entitled to receive a certificate or certificates
representing the same number of shares of Parent common stock based on the
shares of Mid-Plains Common Stock previously represented by the stock
certificate(s) surrendered. Until so surrendered or presented for transfer,
each outstanding certificate or certificates which prior to the Effective
Time represented the Mid-Plains Common Stock shall be deemed and treated for
all corporate purposes to represent the ownership of the same number of
shares of Parent common stock as though such surrender or transfer and
exchange had taken place. The stock transfer books for Mid-Plains Common
Stock shall be deemed to be closed at the Effective Time, and no transfer of
shares of Mid-Plains Common Stock outstanding prior to and at the Effective
Time shall thereafter be made on such books, provided, however, shares of
Mid-Plains Common Stock owned by Parent pursuant to Section 2.2 (b) hereof
or issued after the Effective Time to any holder shall be fully transferrable
unless otherwise directed by the Board of Directors of Mid-Plains.
(b) Following the Effective Time, each holder of an outstanding
certificate or certificates theretofore representing shares of Pioneer Common
Stock will be required to surrender the same to Parent for cancellation or
transfer, and each such holder or transferee will be entitled to receive a
certificate or certificates representing the number of shares of Parent
common stock as finally determined pursuant to Section 2.2 (c) hereof. Until
so surrendered or presented for transfer, each outstanding certificate, which
prior to the Effective Time represented Pioneer Common Stock, shall be deemed
and treated for all corporate purposes to represent the ownership of the
number of shares of Parent common stock finally determined pursuant to
Section 2.2(c) hereof. The stock transfer books for Pioneer Common Stock
shall be deemed to be closed at the Effective Time, and no transfer of shares
of Pioneer Common Stock outstanding prior to and at the Effective Time shall
thereafter be made on such books, provided, however, shares of Pioneer Common
Stock owned by Parent pursuant to Section 2.3(d) hereof or issued after the
Effective Time to any holder shall be fully transferrable unless otherwise
directed by the Board of Directors of Pioneer.
SECTION 2.4 Transfer Books. The stock transfer books of Pioneer and
Mid-Plains shall be closed at the Effective Time and no transfer of any
Pioneer Common Stock or Mid-Plains Common Stock will thereafter be recorded
on any of such stock transfer books. In the event of a transfer of ownership
of Pioneer or Mid-Plains Common Stock that is not registered in the stock
transfer records of Pioneer or Mid-Plains, respectively, at the Effective
Time, a certificate or certificates representing the number of shares of
Parent common stock into which such Pioneer or Mid-Plains Common Stock shall
have been converted shall be issued to the transferee.
SECTION 2.5 No Fractional Share Certificates. No scrip or fractional
share certificate for Parent common stock will be issued upon the surrender
for exchange of certificates evidencing Pioneer or Mid-Plains Common Stock.
ARTICLE III
CERTAIN MATTERS RELATED TO PARENT
SECTION 3.1 Articles of Incorporation of Parent and Bylaws.
(a) Prior to the Effective Time and subject to and upon the terms and
conditions of this Agreement and Wisconsin Law, Parent shall cause the
Articles of Incorporation of Parent as set forth in Schedule 3.1(a) hereto,
to be filed with the Wisconsin Department of Financial Institutions.
(b) The Bylaws of Parent are as set forth in Schedule 3.1(b) hereto.
SECTION 3.2 Dividends. (a) From the date hereof to the Effective Time,
each of Pioneer and Mid-Plains shall coordinate with the other the
declaration of, and the setting of record dates and payment dates for,
dividends on Pioneer Common Stock and Mid-Plains Common Stock; provided,
however, that (i) Pioneer may not declare an annualized dividend in 1996 in
excess of $3.75 per share, (ii) Mid-Plains may not declare an annualized
dividend in 1996 in excess of $1.08 per share, (iii) Pioneer may not declare
an annualized dividend in 1997 in excess of $4.32 per share, and Mid-Plains
may not declare an annualized dividend in 1997 in excess of $1.08. The
Companies may declare dividends in 1997, provided they do so on a prorata
quarterly basis. As such, the Companies may not declare a dividend per share
for a period in 1997 consisting of less than one (1) fiscal quarter. For
example, if the Effective Time is August 1, 1997, then Pioneer may declare
a dividend of $2.16 per share effective immediately prior to the Effective
Time, and Mid-Plains may declare a dividend of $0.54 per share immediately
prior to the Effective Time, provided that neither of the Companies declared
a dividend for the first fiscal quarter of 1997. Pursuant to the foregoing,
dividends maybe paid prior to or subsequent to the Effective Time.
(b) It is the present intention of the Companies that, after the
Effective Time, the initial quarterly dividend per share of Parent common
stock will be at least equal to $0.27, being the quotient of the dividend
paid on each share of Mid-Plains Common Stock for the last full fiscal year
immediately preceding the date hereof ($1.08), divided by four (4), subject
to approval and declaration thereof by the Board of Directors of Parent.
SECTION 3.3 Headquarters. Pioneer and Mid-Plains agree that
commencing at the Effective Time the headquarters of Parent shall be located
in Dane County, Wisconsin.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PIONEER
Pioneer hereby represents and warrants as of the date hereof to
Mid-Plains as follows:
SECTION 4.1 Organization and Qualification; Subsidiaries. Each of
Pioneer and its Subsidiaries (as defined in Section 10.4) is a corporation
duly organized, validly existing and in good standing under Wisconsin Law.
Each of Pioneer and its Subsidiaries has the requisite corporate power and
authority and any necessary governmental authority, franchise, license or
permit to own, operate or lease the properties that it purports to own,
operate or lease and to carry on its business as it is now being conducted,
and is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary.
SECTION 4.2 Articles of Incorporation and Bylaws. Pioneer has
heretofore furnished, or otherwise made available, to Mid-Plains a complete
and correct copy of the Articles of Incorporation and the Bylaws, each as
amended to the date hereof, of Pioneer and each of its Subsidiaries. Such
Articles of Incorporation and Bylaws are in full force and effect. Neither
Pioneer nor any of its Subsidiaries is in violation of any of the provisions
of its respective Articles of Incorporation or, in any material respect, its
Bylaws.
SECTION 4.3 Capitalization. (a) The authorized capital stock of
Pioneer consists of 500,000 shares of Pioneer Common Stock, of which, as of
March 1, 1996, 173,140 shares were issued and outstanding, no shares were
held in the treasury of Pioneer.
(b) There are no outstanding obligations of Pioneer or any of
Pioneer's Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of Pioneer.
(c) All of the issued and outstanding shares of Pioneer Common Stock
are validly issued, fully paid and nonassessable.
(d) All the outstanding capital stock of each of Pioneer's
Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned by Pioneer free and clear of any liens, security
interests, pledges, agreements, claims, charges or encumbrances, except as
provided in Schedule 4.3(d). There are no existing subscriptions, options,
warrants, calls, commitments, agreements, conversion rights or other rights
of any character (contingent or otherwise) to purchase or otherwise acquire
from Pioneer or any of Pioneer's Subsidiaries at any time, or upon the
happening of any stated event, any shares of the capital stock of any Pioneer
Subsidiary, whether or not presently issued or outstanding, and there are no
outstanding obligations of Pioneer or any of Pioneer's Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of any
of Pioneer's Subsidiaries. The options discussed in Schedule 4.3(d) shall
be exercised prior to the Effective Time or such options shall be void.
Except for those listed in Schedule 4.3(d), Pioneer does not directly or
indirectly own any equity interest in any other person (as defined in Section
10.4).
SECTION 4.4 Authority Relative to this Agreement. Pioneer has the
necessary corporate power and authority to enter into this Agreement and,
subject to obtaining any necessary shareholder approval of this Agreement,
to carry out its obligations hereunder. The execution and delivery of this
Agreement by Pioneer and the consummation by Pioneer of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Pioneer, subject to the approval of this Agreement by
Pioneer's Shareholders required by Wisconsin Law. This Agreement has been
duly executed and delivered by Pioneer and, assuming the due authorization,
execution and delivery thereof by the other Parties, constitutes a legal,
valid and binding obligation of Pioneer, enforceable against it in accordance
with its terms.
SECTION 4.5 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Pioneer does not, and the
performance of this Agreement by Pioneer will not, (i) violate or conflict
with the Articles of Incorporation or Bylaws of Pioneer, (ii) conflict with
or violate any law, regulation, court order, judgment or decree applicable
to Pioneer or any of its Subsidiaries or by which any of their respective
property is bound or affected, (iii) violate or conflict with the Articles
of Incorporation or Bylaws of any of Pioneer's Subsidiaries, (iv) result in
any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights
of termination or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Pioneer or any of its
Subsidiaries pursuant to, result in the loss of any material benefit under,
or require the consent of any other party to, any contract, instrument,
permit, license or franchise to which Pioneer or any of its Subsidiaries is
a party or by which Pioneer, any of such Subsidiaries or any of their
respective property is bound or affected, (v) to Pioneer's knowledge,
conflict with or violate any law, regulation, court order, judgment or decree
applicable to any of its Material Investments (defined in Section 10.4(f) or
by which such Material Investments' property is bound or affected, (vi) to
Pioneer's knowledge, violate or conflict with the Articles of Incorporation
or Bylaws of any of its Material Investments, or (vii) to Pioneer's
knowledge, result in any breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to others any rights of termination or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of any
of its Material Investments pursuant to, or result in the loss of any
material benefit under, or require the consent of any other party to, any
permit, license or franchise to which any of its Material Investments is a
party or by which any of such Material Investments or any of their respective
property is bound or affected, except, in the case of clauses (ii), (iii),
(iv), (v), (vi) or (vii) above, for conflicts, violations, breaches,
defaults, results or consents which, individually or in the aggregate, would
not have a Material Adverse Effect on Pioneer.
(b) Except for applicable requirements, if any, of state regulatory
laws and commissions, the Federal Communications Commission, the Exchange
Act, filing and recordation of appropriate merger or other documents as
required by Wisconsin Law and any filings required pursuant to any state
securities or "blue sky" laws, neither Pioneer nor any of its Subsidiaries
is required to submit any notice, report or other filing with any
governmental authority, domestic or foreign, in connection with the
execution, delivery or performance of this Agreement. Except as set forth
in the immediately preceding sentence, no waiver, consent, approval or
authorization of any governmental or regulatory authority, domestic or
foreign, is required to be obtained by Pioneer or any of its Subsidiaries in
connection with its execution, delivery or performance of this Agreement.
SECTION 4.6 SEC Filings, Financial Statements. (a) Pioneer is exempt
from filing any and all forms, reports and documents required to be filed
with the Securities and Exchange Commission ("SEC") under the Exchange Act
(as defined in Section 10.4 hereof).
(b) The financial statements, including all related notes, contained
in the 1995 Annual Report (or incorporated by reference therein) fairly
present the consolidated financial position of Pioneer and its Subsidiaries
as at the respective dates thereof and the consolidated results of operations
and cash flows of Pioneer and its Subsidiaries for the periods indicated in
accordance with GAAP applied on a consistent basis throughout theperiods
involved (except for changes in accounting principles disclosed in the notes
thereto, if any) and subject in the case of interim financial statements to
normal year-end adjustments.
SECTION 4.7 Absence of Certain Changes or Events. Since December 31,
1995, Pioneer and its Subsidiaries have not incurred any material liability,
except in the ordinary course of their businesses consistent with their past
practices, and there has not been any change, or any event involving a
prospective change, in the business, financial condition or results of
operations of Pioneer or any of its Subsidiaries which has had, or is
reasonably likely to have, a Material Adverse Effect on Pioneer (by way of
illustration, Pioneer has not incurred any material financial obligations
other than those shown on its December 31, 1995 balance sheet), and Pioneer
and its Subsidiaries have conducted their respective businesses in the
ordinary course consistent with their past practices.
SECTION 4.8 Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to Pioneer's knowledge, threatened
against Pioneer or any of its Subsidiaries, or any properties or rights of
Pioneer or any of its Subsidiaries, before any court, administrative,
governmental, arbitral, mediation or regulatory authority or body, domestic
or foreign, as to which there is more than a remote possibility of an adverse
judgment or determination against Pioneer or any of its Subsidiaries or any
properties or rights of Pioneer or any of its Subsidiaries.
SECTION 4.9 No Violation of Law. The business of Pioneer and its
Subsidiaries is not being conducted in violation of any statute, law,
ordinance, regulation, judgment, order or decree of any governmental or
judicial entity (including any self-regulatory body) ("Legal Requirements"),
or in violation of any permits, franchises, licenses, authorizations or
consents that are granted by any government or judicial entity (including any
self-regulatory body) ("Permits"), except for possible violations none of
which, individually or in the aggregate, may reasonably be expected to have
a Material Adverse Effect on Pioneer. No investigation or review by any
governmental or regulatory entity (including any self-regulatory body) with
respect to Pioneer or its Subsidiaries in relation to any alleged violation
of law or regulation is pending or, to Pioneer's knowledge, threatened, nor
has any governmental or regulatory entity (including any self-regulatory
body) indicated an intention to conduct the same, except for such
investigations which, if they resulted in adverse findings, would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Pioneer. Neither Pioneer nor any of its Subsidiaries is
subject to any cease and desist or other order, judgment, injunction or
decree issued by, or is a party to any written agreement, consent agreement
or memorandum of understanding with, or is a party to any commitment letter
or similar undertaking to, or is subject to any order or directive by, or has
adopted any board resolutions at the request of, any court, governmental
entity or regulatory agency that materially restricts the conduct of its
business or which may reasonably be expected to have a Material Adverse
Effect on Pioneer, nor has Pioneer or any of its Subsidiaries been advised
that any court, governmental entity or regulatory agency is considering
issuing or requesting any of the foregoing. None of the representations and
warranties made in this Section 4.9 are being made with respect to
Environmental Laws.
SECTION 4.10 Joint Proxy Statement. None of the information
supplied or to be supplied by or on behalf of Pioneer for inclusion in the
registration statement to be filed with the SEC by Parent and Mid-Plains in
connection with the issuance of shares of Parent common stock in the Merger
(the "Registration Statement") will, at the time the Registration Statement
becomes effective under the 1933 Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by or on behalf of Pioneer for
inclusion or incorporation by reference in the joint proxy statement, in
definitive form, relating to the meetings of Pioneer and Mid-Plains
Shareholders to be held in connection with the Merger, or in the related
proxy and notice of meeting, or soliciting material used in connection
therewith (referred to herein collectively as the "Joint Proxy Statement")
will, at the dates mailed to Shareholders and at the times of the Pioneer
Shareholders' meeting and the Mid-Plains Shareholders' meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement and the Joint Proxy Statement (except
for information relating solely to Mid-Plains) will comply as to form in all
material respects with the provisions of the 1933 Act and the Exchange Act
and the rules and regulations promulgated thereunder.
SECTION 4.11 Employee Matters; ERISA. (a) Set forth on Schedule
4.11 hereto is a true and complete list of all employee benefit plans
covering present and former employees or directors of Pioneer and of each of
its Subsidiaries or their beneficiaries, or providing benefits to such
persons in respect of services provided to any such entity, including, but
not limited to, any employee benefit plans within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
any deferred compensation bonuses, stock options, restricted stock plans,
incentive compensation, severance or change in control agreements and any
other material benefit arrangements or payroll practices (collectively, the
"Pioneer Benefit Plans").
(b) With respect to the Pioneer Benefit Plans, individually and in the
aggregate, no event has occurred and, to Pioneer's knowledge, there does not
now exist any condition or set of circumstances, that could subject Pioneer
or any of its Subsidiaries to any material liability arising under the Code,
ERISA or any other applicable Legal Requirements (including, without
limitation, any liability to any such plan or the Pension Benefit Guaranty
Corporation (the "PBGC")), or under any indemnity agreement to which Pioneer
or any of its Subsidiaries is a party, excluding liability for benefit claims
and funding obligations payable in the ordinary course, if any.
(c) Except as set forth on Schedule 4.11 hereto, none of the Pioneer
Benefit Plans that are "welfare plans" within the meaning of Section 3 (1)
of ERISA provides for any retiree benefits other than continuation coverage
required to be provided under Section 4980B of the Code or Part 6 of Title
I of ERISA.
(d) Pioneer has made available to Mid-Plains a true and correct copy
of each current or last, in the case where there is no current, expired
collective bargaining agreement to which Pioneer or any of its Subsidiaries
is a party or under which Pioneer or any of its Subsidiaries has obligations
and, with respect to each Pioneer Benefit Plan, where applicable, (i) such
plan (but only to the extent such plan is intended to be covered by Section
401 of the Code) and summary plan description, (ii) the most recent annual
report filed with the IRS, (iii) each related trust agreement (including all
material amendments to each such trust agreement), (iv) the most recent
determination of the IRS with respect to the qualified status of such Pioneer
Benefit Plan, and (v) the most recent actuarial report or valuation.
(e)(i) The consummation or announcement of any transaction contemplated
by this Agreement will not (either alone or upon the occurrence of any
additional or further acts or events) result in any (A) payment (whether of
severance pay or otherwise) becoming due from Pioneer or any of its
Subsidiaries to any officer, employee, former employee or director thereof
or to the trustee under any "rabbi trust" or similar arrangement, or (B)
benefit under any Pioneer Benefit Plan being established or becoming
accelerated, vested or payable and (ii) neither Pioneer nor any of its
Subsidiaries is a party to (A) any management, employment, deferred
compensation, severance (including any payment, right or benefit resulting
from a change in control), bonus or other contract for personal services with
any current or former officer, director or employee (whether or not
characterized as a plan for purposes of ERISA), (B) any consulting contract
with any person who prior to entering into such contract was a director or
officer of Pioneer or any of its Subsidiaries, or (C) any plan, agreement,
arrangement or understanding similar to any of the items described in clause
(ii) (A) or (B) of this sentence.
(f) The consummation or announcement of any transaction contemplated
by this Agreement will not (either alone or upon the occurrence of any
additional or further acts or events) result in the disqualification of any
of the Pioneer Benefit Plans intended to be qualified under, result in a
prohibited transaction or breach of fiduciary duty under, or otherwise
violate, ERISA or the Code.
(g) Neither Pioneer nor any of its Subsidiaries nor any of their
directors, officers, employees or agents, nor any "party in interest" or
"disqualified person", as such terms are defined in Section 3 of ERISA and
Section 4975 of the Code has, with respect to any Pioneer Benefit Plan,
engaged in or been a party to any "prohibited transaction", as such term is
defined in Section 4975 of the Code or Section 406 of ERISA which is not
otherwise exempt, which could result in the imposition of either a penalty
assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975
of the Code or which could constitute a breach of fiduciary duty, in each
case applicable to Pioneer or any Pioneer Benefit Plan and which would result
in a Material Adverse Effect on Pioneer.
(h) No Pioneer Benefit Plan subject to Section 412 of the Code has
incurred any now existing "accumulated funding deficiency" (as defined in
ERISA), whether or not waived. Neither Pioneer nor any of its Subsidiaries
has incurred, and none of such entities reasonably expects to incur, any
material liability to the PBGC with respect to any Pioneer Benefit Plan.
Neither Pioneer nor any of its Subsidiaries is a party to, and neither has
incurred or reasonably expects to incur, any withdrawal liability with
respect to any "multiemployer plan" (as defined in Section 3 (37) of ERISA)
for which there is any outstanding liability.
SECTION 4.12 Labor Matters. Except as disclosed on Schedule 4.12
hereto, neither Pioneer nor any of its Subsidiaries is party to any
collective bargaining agreement or other labor agreement with any union or
labor organization and no union or labor organization has been recognized by
Pioneer or any of its Subsidiaries as an exclusive bargaining representative
for employees of Pioneer or any of its Subsidiaries. Except as disclosed on
Schedule 4.12 hereto, to Pioneer's knowledge, there is no current union
representation question involving employees of Pioneer or any of its
Subsidiaries, nor does Pioneer have knowledge of any significant activity or
proceeding of any labor organization (or representative thereof) or employee
group to organize any such employees. Neither Pioneer nor any of its
Subsidiaries has made any commitment not contained in the collective
bargaining agreements listed on Schedule 4.12 hereto that would require the
application of the terms of any collective bargaining agreements entered into
by Pioneer or any of its Subsidiaries to Mid-Plains, to any joint venture of
Mid-Plains, or to any Subsidiary of Mid-Plains (other than Pioneer or its
Subsidiaries). Except as disclosed on Schedule 4.12 hereto, (i) there is no
material active arbitration under any collective bargaining agreements
involving Pioneer or any of its Subsidiaries, (ii) there is no material
unfair labor practice, grievance, employment discrimination or other labor
or employment related charge, complaint or claim against Pioneer or any of
its Subsidiaries pending before any court, arbitrator, mediator or
governmental agency or tribunal, or, to Pioneer's knowledge, threatened,
(iii) there is no material strike, picketing or work stoppage by, or any
lockout of, employees of Pioneer or any of its Subsidiaries pending or, to
Pioneer's knowledge, threatened, against or involving Pioneer or any of its
Subsidiaries, (iv) there is no significant active arbitration under any
collective bargaining agreement involving Pioneer or any of its Subsidiaries
regarding the employer's right to move work from one location or entity to
another, or to consolidate work locations, or involving other similar
restrictions on business operations, (v) there is no arbitration,
administrative agency proceeding, suit or claim pending, or, to Pioneer's
knowledge, threatened, involving the "New Businesses", "Neutrality Letter",
and "Old Business Letter" provisions contained in any collective bargaining
agreement to which Pioneer or any of its Subsidiaries is a party, and (vi)
there is no material proceeding, claim, suit, action or governmental
investigation pending or, to Pioneer's knowledge, threatened, in respect of
which any director, officer, employee or agent of Pioneer or any of its
Subsidiaries is or may be entitled to claim indemnification from Pioneer or
such Pioneer Subsidiary pursuant to their respective charters or bylaws or
as provided in the indemnification agreements, if any, listed on Schedule
4.12 hereto. For purposes of this Section 4.12, "material" refers to any
liability which could reasonably be expected to exceed $50,000.
SECTION 4.13 Environmental Matters.
(a) To Pioneer's knowledge, Pioneer and each of its Subsidiaries is
in compliance with all applicable Environmental Laws (as defined below) and
neither Pioneer nor any of its Subsidiaries has received any written or oral
communication from any person or governmental authority that alleges that
Pioneer or any of its Subsidiaries is not in compliance with applicable
Environmental Laws where such non-compliance could reasonably be expected to
result in a Material Adverse Effect on Pioneer.
(b) To Pioneer's knowledge, Pioneer and each of its Subsidiaries has
obtained or has applied for all material environmental, health and safety
permits, licenses, variances, approvals and authorizations (collectively, the
"Environmental Permits") necessary for the construction of their facilities
or the conduct of their operations, and all such material Environmental
Permits are effective or, where applicable, a renewal application has been
timely filed and is pending agency approval, and Pioneer and its Subsidiaries
are in material compliance with all terms and conditions of such
Environmental Permits. To Pioneer's knowledge, there are no past or present
events, conditions, circumstances, activities, practices, incidents, actions
or plans that may interfere with, or prevent, future continued material
compliance on the part of Pioneer or any of its Subsidiaries with such
Environmental Permits. Neither Pioneer nor any of its Subsidiaries has
knowledge of matters or conditions that would preclude reissuance or transfer
of any such Environmental Permit, including amendment of such instrument, to
Mid-Plains or one of its Subsidiaries, where such action is necessary to
maintain compliance with Environmental Laws in all material respects.
(c) To Pioneer's knowledge, there is no currently existing requirement
to be imposed in the future by any Environmental Law or Environmental Permit
which could reasonably be expected to result in the incurrence of a material
cost by Pioneer or any of its Subsidiaries.
(d) To Pioneer's knowledge, there is no material Environmental Claim
(as defined below) pending or threatened (i) against Pioneer or any of its
Subsidiaries, (ii) against any person whose liability for any Environmental
Claim Pioneer or any of its Subsidiaries has or may have retained or assumed
either contractually or by operation of law, or (iii) against any real or
personal property or operations which Pioneer or any of its Subsidiaries
owns, leases or manages, in whole or in part.
(e) To Pioneer's knowledge, there have been no Releases (as defined
below) of any Hazardous Material (as defined below) that would be reasonably
likely to form the basis of any material Environmental Claim against Pioneer
or any of its Subsidiaries, or against any person whose liability for any
material Environmental Claim Pioneer or any of its Subsidiaries has or may
have retained or assumed either contractually or by operation of law.
(f) To Pioneer's knowledge, with respect to any predecessor of Pioneer
or any of its Subsidiaries, there is no material Environmental Claim pending
or threatened, or any Release of Hazardous Materials that would be reasonably
likely to form the basis of any material Environmental Claim against Pioneer
or any of its Subsidiaries.
(g) To Pioneer's knowledge, Pioneer has disclosed to Mid-Plains all
material facts which Pioneer reasonably believes form the basis of a material
current or future cost relating to any environmental matter affecting Pioneer
and its Subsidiaries which Pioneer believes will or is reasonably likely to
result in a Material Adverse Effect on Pioneer.
(h) To Pioneer's knowledge, neither Pioneer nor any of its
Subsidiaries, nor any owner of premises leased or operated by Pioneer or any
of its Subsidiaries, has filed any notice with respect to such premises under
federal, state, local or foreign law indicating past or present treatment,
storage or disposal of Hazardous Materials, as regulated under 40 C.F.R.
Parts 264-267 or any state or local equivalent or is engaging or has engaged
in business operations involving the generation, transportation, treatment,
recycle or disposal of any waste (excluding low level radioactive tubes from
central office equipment or typical smoke and fire alarm components)
regulated under Environmental Laws pertaining to radioactive materials or the
nuclear power industry.
(i) To Pioneer's knowledge, none of the properties owned, leased or
operated by Pioneer, its Subsidiaries or any predecessor thereof are now, or
were in the past, listed on the National Priorities List of Superfund Sites
(the "NPL"), the Comprehensive Environmental Response, Compensation and
Liability Information System ("CERCLIS"), or any other comparable state or
local environmental database (excluding easements that transgress such
Superfund or CERCLIS sites).
(j) To Pioneer's knowledge, the Merger will not require any
governmental approvals under the Environmental Laws, including those that are
triggered by sales or transfers of businesses or real property.
For purposes of this Section 4.13 and Section 5.13 hereof:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any person (including
any federal, state, local or foreign governmental authority) alleging
potential liability (including, without limitation, potential
responsibility for or liability for enforcement, investigatory costs,
cleanup costs, governmental response costs, removal costs, remedial
costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from (A) the
presence, or Release or threatened Release into the environment, of any
Hazardous Materials at any location, whether or not owned, operated,
leased or managed by Pioneer or any of its Subsidiaries (for purposes
of this Section 4.13) or by Mid-Plains or any of its Subsidiaries (for
purposes of Section 5.13 hereof) (including but not limited to
obligations to clean up contamination resulting from leaking
underground storage tanks); or (B) circumstances forming the basis of
any violation or alleged violation of any Environmental Law; or (C) any
and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Materials.
(ii) "Environmental Laws" means all applicable foreign, federal,
state and local laws (including the common law), rules, requirements
and regulations relating to pollution, the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or protection of human health as it
relates to the environment including, without limitation, laws and
regulations relating to Releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials or
relating to management of asbestos in buildings.
(iii) "Hazardous Materials" means (A) any petroleum or any
by-products or fractions thereof, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, any form of natural
gas, explosives, and polychlorinated biphenyls ("PCBs"); (B) any
chemicals, materials or substances, whether waste materials, raw
materials or finished products, which are now defined as or included
in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous substances," "restricted
hazardous wastes," "toxic substances," "toxic pollutants,"
"pollutants," "contaminants," or words of similar import under any
Environmental Law; and (C) any other chemical, material or substance,
whether waste materials, raw materials or finished products, regulated
or forming the basis of liability under any Environmental Law.
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the environment (including without limitation ambient
air, atmosphere, soil, surface water, groundwater or property).
SECTION 4.14 Board Action; Vote Required. (a) The Board of
Directors of Pioneer has unanimously determined that the transactions
contemplated by this Agreement are in the best interests of Pioneer and its
Shareholders and has resolved to recommend to such Shareholders that they
vote in favor thereof.
(b) The approval of this Agreement by a majority of the votes entitled
to be cast by all holders of Pioneer Common Stock is the only vote of the
holders of any class or series of the capital stock of Pioneer required to
approve this Agreement, the Merger and the other transactions contemplated
hereby.
SECTION 4.15 Opinion of Financial Advisor. Pioneer may receive
the opinion of an investment banker or other qualified entity to the effect
that, as of the date hereof, the Exchange Ratio is fair from a financial
point of view to the holders of Pioneer Common Stock. Alternatively, Pioneer
may receive the opinion from such parties that the analysis completed by
Mid-Plains' financial advisor was reasonable.
SECTION 4.16 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's, investment banking or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Pioneer or any of its
Subsidiaries.
SECTION 4.17 Tax Matters.
(a) All federal tax returns and tax reports required to be filed by
Pioneer or its Subsidiaries on or prior to the Effective Time or with respect
to taxable periods ending on or prior to the Effective Time have been or will
be filed with the appropriate governmental authorities on or prior to the
Effective Time or by the due date thereof including extensions;
(b) All state and local tax returns and tax reports required to be
filed by Pioneer or its Subsidiaries on or prior to the Effective Time or
with respect to taxable periods ending on or prior to the Effective Time
which relate to income, profits, franchise, property, sales, use or other
taxes, have been or will be filed with the appropriate governmental
authorities on or prior to the Effective Time or by the due date thereof
including extensions;
(c) The tax returns and tax reports referred to in subparts (a) and (b)
of this Section 4.17 correctly reflect (and as to returns not filed as of the
date hereof, will correctly reflect) all material tax liabilities of Pioneer
and its Subsidiaries required to be shown thereon;
(d) All federal, state and local and foreign income, profits,
franchise, property, sales, use and other taxes (including interest and
penalties) shown as due on those tax returns and tax reports referred to in
subparts (a) and (b) of this Section 4.17 which have been or will be filed
by the Effective Time, whether or not such amounts are referred to or shown
on any tax returns or tax reports referred to in Section 4.17 (a) or (b)
hereof, have been or will be fully paid or adequately reflected as a
liability on Pioneer's or its Subsidiaries' books and records on or prior to
the Closing Date;
(e) With respect to any period for which tax returns and tax reports
have not yet been filed, or for which taxes are not yet due or owing, Pioneer
and its Subsidiaries have made due and sufficient accruals for such taxes in
their respective books and records and financial statements;
(f) The representations and warranties contained in the Pioneer
Officer's Certificate attached hereto as Schedule 4.17(f) are true and
correct, and will be correct as of the Effective Time; and
(g) Pioneer has not taken or agreed to take any action that would (a)
prevent or impede the Merger from qualifying as a tax-free reorganization
under Section 368 of the Code, or (b) make untrue any representation or
warranty contained in the Officer's Certificate referred to in Section
4.17(f) hereof.
SECTION 4.18 Intellectual Property. To Pioneer's knowledge,
neither Pioneer nor any of its Subsidiaries utilizes or has utilized any
patent, trademark, tradename, service mark, copyright, software, trade secret
or know-how, except for those which are owned, possessed or lawfully used by
Pioneer or its Subsidiaries in their operations, and, to the knowledge of
Pioneer, neither Pioneer nor any of its Subsidiaries infringes upon or
unlawfully or wrongfully uses any patent, trademark, tradename, service mark,
copyright or trade secret owned or validly claimed by another.
SECTION 4.19 Insurance. Each of Pioneer and each of its
Subsidiaries is, and has been continuously since the later of January 1, 1985
or the date of incorporation, insured with financially responsible insurers
in such amounts and against such risks and losses as are customary for
companies conducting the business as conducted by Pioneer and its
Subsidiaries during such time period.
SECTION 4.20 Ownership of Securities. As of the date hereof,
neither Pioneer nor, to Pioneer's knowledge, any of its affiliates or
associates (as such terms are defined under the Exchange Act), (a)(i)
beneficially owns, directly or indirectly, or (ii) is party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of, in each case, shares of capital stock of Mid-Plains, which
in the aggregate represent 10% or more of the outstanding shares of
Mid-Plains Common Stock, nor (b) is an "interested stockholder" of Mid-Plains
within the meaning of Section 180.1140(8) of Wisconsin Law.
SECTION 4.21 Certain Contracts. (a) All contracts described in
Item 601 (b) (10) of Regulation S-K to which Pioneer or its Subsidiaries is
a party or may be bound ("Pioneer Contracts") are valid and in full force and
effect on the date hereof except to the extent they have previously expired
in accordance with their terms, and neither Pioneer nor any of its
Subsidiaries has violated any provision of, or committed or failed to perform
any act which with or without notice, lapse of time or both would constitute
a default under the provisions of, any Pioneer Contract, except for defaults
which, individually and in the aggregate, would not reasonably be expected
to result in a Material Adverse Effect on Pioneer. True and complete copies
of all Pioneer Contracts have been delivered to Mid-Plains or made available
for inspection.
(b) There exists no contract, agreement or arrangement to which Pioneer
or any of its Subsidiaries is a party or may be bound and (i) under the terms
of which any of the rights or obligations of a party thereto will be modified
or altered as a result of the transactions contemplated hereby in a manner
which, individually or in the aggregate with all such other contracts,
agreements or arrangements would reasonably be expected to result in a
Material Adverse Effect on Pioneer; (ii) is an arrangement limiting or
restraining Mid-Plains, Pioneer, any Mid-Plains or Pioneer Subsidiary or any
successor thereto from engaging or competing in any business which has, or
could reasonably be expected to have in the foreseeable future, a Material
Adverse Effect on Pioneer; or (iii) to Pioneer's knowledge, is an arrangement
limiting or restraining Mid-Plains, Pioneer or any of their respective
Subsidiaries or any successor thereto from engaging or competing in any
business.
SECTION 4.22 Certain Regulatory Matters. (a) Except for billing
disputes with customers arising in the ordinary course of business that in
the aggregate involve immaterial amounts, there are no proceedings or
investigations pending or, to Pioneer's knowledge, threatened, before any
court, administrative, governmental or regulatory body in which any of the
following matters are being considered, nor has Pioneer or any of its
Subsidiaries received written notice or inquiry from any such body,
government official, consumer advocacy or similar organization or any private
party, indicating that any of such matters should be considered or may become
the object of consideration or investigation: (i) reduction of rates charged
to customers; (ii) reduction of earnings; (iii) refunds of amounts previously
charged to customers; or (iv) failure to meet any expense, infrastructure,
service quality or other commitments previously made to or imposed by any
administrative, governmental or regulatory body.
(b) Except as disclosed on Schedule 4.22 hereto, neither Pioneer nor
any of its Subsidiaries has any outstanding commitments (and no such
obligations have been imposed upon Pioneer and remain outstanding) regarding
(i) reduction of rates charged to customers; (ii) reduction of earnings;
(iii) refunds of amounts previously charged to customers or (iv) expenses,
infrastructure expenditures, service quality or other regulatory
requirements, to or by any court, administrative, governmental or regulatory
body, government official, consumer advocacy or similar organization.
SECTION 4.23 SFAS 106 Matters. To Pioneer's knowledge, the
accrual by Pioneer at the Effective Time of the portion of its remaining
transition obligation under Statement of Financial Accounting Standards No.
106 which it is required to accrue at such time will not adversely affect the
ability of Pioneer to declare and pay annual dividends to Parent after the
Effective Time in the same amounts as Pioneer paid to its Shareholders on an
annual basis prior to the Effective Time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MID-PLAINS
Mid-Plains hereby represents and warrants as of the date hereof to
Pioneer as follows:
SECTION 5.1 Organization and Qualification; Subsidiaries. Each of
Mid-Plains and its Subsidiaries is an entity duly organized, validly existing
and in good standing under the laws of Wisconsin. Each of Mid-Plains and its
Subsidiaries has the requisite power and authority and any necessary
governmental authority, franchise, license or permit to own, operate or lease
the properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted.
SECTION 5.2 Articles of Incorporation or Organization and Bylaws or
Operating Agreement. Mid-Plains has heretofore furnished, or otherwise made
available, to Pioneer a complete and correct copy of the Articles of
Incorporation and the Bylaws or Articles of Organization and Operating
Agreement (collectively, its "Organizational Documents"), each as amended to
the date hereof, of Mid-Plains and each of its Subsidiaries. Such
Organizational Documents are in full force and effect. Neither Mid-Plains nor
any of its Subsidiaries is in violation of any of the provisions of its
respective Organizational Documents in any material respect.
SECTION 5.3 Capitalization. (a) The authorized capital stock of
Mid-Plains consists of (i) 25,000,000 shares of Mid-Plains Common Stock, of
which, as of December 31, 1995, 1,982,960 shares were issued and outstanding,
no shares were held in the treasury of Mid-Plains and except as set forth on
Schedule 5.3, after the date hereof or, as permitted by Section 6.2 hereof,
(i) since December 31, 1995, no shares of Mid-Plains Common Stock have been
issued, and (ii) there are no outstanding Mid-Plains Equity Rights. For
purposes of this Agreement, Mid-Plains Equity Rights shall mean
subscriptions, options, warrants, calls, commitments, agreements, conversion
rights or other rights of any character (contingent or otherwise) to purchase
or otherwise acquire from Mid-Plains or any of Mid-Plains' Subsidiaries at
any time, or upon the happening of any stated event, any shares of the
capital stock of Mid-Plains ("Mid-Plains Equity Rights"). Schedule 5.3
hereto sets forth a complete and accurate list of certain information with
respect to all outstanding Mid-Plains Equity Rights as of December 31, 1995.
Since December 31, 1995, no Mid-Plains Equity Rights have been issued except
as set forth on Schedule 5.3, or, after the date hereof, as permitted by
Section 6.2 hereof.
(b) There are no outstanding obligations of Mid-Plains or any of
Mid-Plains' Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of Mid-Plains.
(c) All of the issued and outstanding shares of Mid-Plains Common Stock
are validly issued, fully paid and nonassessable.
(d) All the outstanding capital stock or interests of each of
Mid-Plains' Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned by Mid-Plains free and clear of any liens,
security interests, pledges, agreements, claims, charges or encumbrances.
There are no existing subscriptions, options, warrants, calls, commitments,
agreements, conversion rights or other rights of any character (contingent
or otherwise) to purchase or otherwise acquire from Mid-Plains or any of
Mid-Plains' Subsidiaries at any time, or upon the happening of any stated event,
any shares of the capital stock or interests of any Mid-Plains' Subsidiary,
whether or not presently issued or outstanding (except for rights offirst
refusal to purchase interests in Subsidiaries which are not wholly-ownedby
Mid-Plains), and there are no outstanding obligations of Mid-Plains or any
of Mid-Plains' Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock or interests of any of Mid-Plains' Subsidiaries.
Except for (i) its Subsidiaries and Material Investments, (ii) immaterial
amounts of equity securities acquired, in the capacity of creditor, in
bankruptcy proceedings, (iii) equity interests held by Material Investments
and Jointly Held Persons, (iv) investments of persons in which Mid-Plains has
less than a 10% interest and (v) equity interests disclosed on Schedule 5.3
hereto or hereafter acquired as permitted under Section 6.2 hereof,
Mid-Plains does not directly or indirectly own any equity interest in any other
person.
SECTION 5.4 Authority Relative to this Agreement. Mid-Plains has the
necessary corporate power and authority to enter into this Agreement and,
subject to obtaining any necessary shareholder approval of the Merger
Agreement, the issuance of Mid-Plains Common Stock pursuant to the Merger
Agreement, to carry out its obligations hereunder. The execution and
delivery of this Agreement by Mid-Plains and the consummation by Mid-Plains
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Mid-Plains, subject to the approval
of this Agreement by Mid-Plains' Shareholders required by Wisconsin Law.
This Agreement has been duly executed and delivered by Mid-Plains and,
assuming the due authorization, execution and delivery thereof by the other
Parties, constitutes a legal, valid and binding obligation of Mid-Plains,
enforceable against it in accordance with its terms.
SECTION 5.5 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Mid-Plains does not, and the
performance of this Agreement by Mid-Plains will not, (i) violate or conflict
with the Restated Articles of Incorporation or Bylaws of Mid-Plains, (ii)
conflict with or violate any law, regulation, court order, judgment or decree
applicable to Mid-Plains or any of its Subsidiaries or by which any of their
respective property is bound or affected, (iii) violate or conflict with the
Organizational Documents of any of Mid-Plains' Subsidiaries, or (iv) result
in any breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of Mid-Plains or any of its
Subsidiaries pursuant to, result in the loss of any material benefit under,
or require the consent of any other party to, any contract, instrument,
permit, license or franchise to which Mid-Plains or any of its Subsidiaries
is a party or by which Mid-Plains, any of such Subsidiaries or any of their
respective property is bound or affected, (v) to Mid-Plains' knowledge,
conflict with or violate any law, regulation, court order, judgment or decree
applicable to any of its Material Investments or by which such Material
Investments' property is bound or affected, (vi) to Mid-Plains' knowledge,
violate or conflict with the Organizational Documents of any of its Material
Investments, or (vii) to Mid-Plains' knowledge, result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination
or cancellation of, or result in the creation of a lien or encumbrance on any
of the properties or assets of any of its Material Investments pursuant to,
or result in the loss of any material benefit under, or require the consent
of any other party to, any permit, license or franchise to which any of its
Material Investments is a party or by which any of such MaterialInvestments
or any of their respective property is bound or affected, except, in thecase
of clauses (ii), (iii), (iv), (v), (vi) or (vii) above, for conflicts,
violations, breaches, defaults, results or consents which, individually or
in the aggregate, would not have a Material Adverse Effect on Mid-Plains.
(b) Except for applicable requirements, if any, of regulatory laws and
commissions in Wisconsin, the Federal Communications Commission, the Exchange
Act, filing and recordation of appropriate merger or other documents as
required by Wisconsin Law and any filings required pursuant to Wisconsin
state securities or "blue sky" laws, neither Mid-Plains nor any of its
Subsidiaries is required to submit any notice, report or other filing with
any governmental authority, domestic or foreign, in connection with the
execution, delivery or performance of this Agreement. Except as set forth in
the immediately preceding sentence, no waiver, consent, approval or
authorization of any governmental or regulatory authority is required to be
obtained by Mid-Plains or any of its Subsidiaries in connection with its
execution, delivery or performance of this Agreement.
SECTION 5.6 SEC Filings; Financial Statements. (a) Mid-Plains has
filed all forms, reports and documents required to be filed with the SEC
since January 1, 1993, and has heretofore delivered or made available to
Pioneer, in the form filed with the SEC, together with any amendments
thereto, its (i) Annual Reports on Form 10-K for the fiscal years ended
December 31, 1993, 1994 and 1995, (ii) all proxy statements relating to
Mid-Plains' meetings of Shareholders (whether annual or special) held since
January 1, 1993, (iii) Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, June 30, and September 30, 1996, and (iv) all other reports
or registration statements filed by Mid-Plains with the SEC since January 1,
1993 (collectively, the "Mid-Plains SEC Reports"). The Mid-Plains SEC
Reports (i) were prepared substantially in accordance with the requirements
of the Exchange Act, and the rules and regulations promulgated under the
Exchange Act, and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The financial statements, including all related notes and
schedules, contained in the Mid-Plains SEC Reports (or incorporated by
reference therein) fairly present the consolidated financial position of
Mid-Plains and its Subsidiaries as at the respective dates thereof and the
consolidated results of operations and cash flows of Mid-Plains and its
Subsidiaries for the periods indicated in accordance with GAAP applied on a
consistent basis throughout the periods involved (except for changes in
accounting principles disclosed in the notes thereto) and subject in the case
of interim financial statements to normal year-end adjustments, except that
Mid-Plains has taken a $1.8 million one-time extraordinary charge as a result
of Mid-Plains going off of FAS 71.
SECTION 5.7 Absence of Certain Changes or Events. Except as disclosed
in the Mid-Plains SEC Reports filed prior to the date hereof and on Schedule
5.7, since December 31, 1995, Mid-Plains and its Subsidiaries have not
incurred any material liability, except in the ordinary course of their
businesses consistent with their past practices, and there has not been any
change, or any event involving a prospective change, in the business,
financial condition or results of operations of Mid-Plains or any of its
Subsidiaries which has had, or is reasonably likely to have, a Material
Adverse Effect on Mid-Plains, and Mid-Plains and its Subsidiaries have
conducted their respective businesses in the ordinary course consistent with
their past practices.
SECTION 5.8 Litigation. Except as listed on Schedule 5.8, there are
no claims, actions, suits, proceedings or investigations pending or, to
Mid-Plains' knowledge, threatened against Mid-Plains or any of its Subsidiaries,
or any properties or rights of Mid-Plains or any of its Subsidiaries, before
any court, administrative, governmental, arbitral, mediation or regulatory
authority or body, as to which there is more than a remote possibility of an
adverse judgment or determination against Mid-Plains or any of its
Subsidiaries or any properties or rights of Mid-Plains or any of its
Subsidiaries except (a) as disclosed on Schedule 5.8 hereto, (b) as disclosed
on Schedules 5.9, 5.12, 5.13 or 5.22 hereto, and (c) cases in which neither
Mid-Plains nor any of its Subsidiaries is a named defendant. With respect
to tax matters, litigation shall not be deemed threatened unless a tax
authority has delivered a written notice of deficiency to Mid-Plains or any
of its Subsidiaries.
SECTION 5.9 No Violation of Law. The business of Mid-Plains and its
Subsidiaries is not being conducted in violation of any Legal Requirements
or in violation of any Permits, except for possible violations none of which,
individually or in the aggregate, may reasonably be expected to have a
Material Adverse Effect on Mid-Plains. Except as disclosed in Mid-Plains SEC
Reports and as set forth on Schedule 5.9 hereto, no investigation or review
by any governmental or regulatory entity (including any self-regulatory body)
with respect to Mid-Plains or its Subsidiaries in relation to any alleged
violation of law or regulation is pending or, to Mid-Plains's knowledge,
threatened, nor has any governmental or regulatory entity (including any
self-regulatory body) indicated an intention to conduct the same, except for
such investigations which, if they resulted in adverse findings, would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Mid-Plains. Except as set forth on Schedule 5.9 hereto,
neither Mid-Plains nor any of its Subsidiaries is subject to any cease and
desist or other order, judgment, injunction or decree issued by, or is a
party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has adopted
any board resolutions at the request of, any court, governmental entity or
regulatory agency that materially restricts the conduct of its business or
which may reasonably be expected to have a Material Adverse Effect on
Mid-Plains, nor has Mid-Plains or any of its Subsidiaries been advised that any
court, governmental entity or regulatory agency is considering issuing or
requesting any of the foregoing. None of the representations and warranties
made in this Section 5.9 are being made with respect to Environmental
Laws.
SECTION 5.10 Joint Proxy Statement. None of the information
supplied or to be supplied by or on behalf of Mid-Plains for inclusion or
incorporation by reference in the Registration Statement will, at the time
the Registration Statement becomes effective under the 1933 Act, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
None of the information supplied or to be supplied by or on behalf of
Mid-Plains for inclusion or incorporation by reference in the Joint Proxy
Statement will, at the dates mailed to Shareholders and at the times of the
Pioneer Shareholders' meeting and the Mid-Plains Shareholders' meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Registration Statement and the Joint Proxy Statement
(except for information relating solely to Pioneer) will comply as to form
in all material respects with the provisions of the 1933 Act and the Exchange
Act and the rules and regulations promulgated thereunder.
SECTION 5.11 Employee Matters; ERISA. (a) Set forth on Schedule
5.11 hereto is a true and complete list of all employee benefit plans
covering present and former employees or directors of Mid-Plains and of each
of its Subsidiaries or their beneficiaries, or providing benefits to such
persons in respect of services provided to any such entity, including, but
not limited to, any employee benefit plans within the meaning of Section 3(3)
of ERISA, any deferred compensation bonuses, stock options, restricted stock
plans, incentive compensation, severance or change in control agreements and
any other material benefit arrangements or payroll practices (collectively,
the "Mid-Plains Benefit Plans").
(b) All contributions and other payments required to be made by
Mid-Plains or any of its Subsidiaries to or under any Mid-Plains Benefit Plan
(or to any person pursuant to the terms thereof) have been made or the amount
of such payment or contribution obligation has been reflected in the
Mid-Plains Financial Statements.
(c) Each of the Mid-Plains Benefit Plans intended to be "qualified"
within the meaning of Section 401 (a) of the Code has been determined by the
IRS to be so qualified, and, to Mid-Plains' knowledge, no circumstances exist
that could reasonably be expected by Mid-Plains to result in the revocation
of any such determination. Mid-Plains is in compliance in all material
respects with, and each of the Mid-Plains Benefit Plans is and has been
operated in all material respects in compliance with, all applicable Legal
Requirements governing such plan, including, without limitation, ERISA and
the Code. Each Mid-Plains Benefit Plan intended to provide for the deferral
of income or the reduction of salary or other compensation, or to afford
other income tax benefits, complies in all material respects with the
requirements of the applicable provisions of the Code and other Legal
Requirements to the extent required to provide such income tax benefits.
(d) With respect to the Mid-Plains Benefit Plans, individually and in
the aggregate, no event has occurred and, to Mid-Plains' knowledge, there
does not now exist any condition or set of circumstances, that could subject
Mid-Plains or any of its Subsidiaries to any material liability arising under
the Code, ERISA or any other applicable Legal Requirements (including,
without limitation, any liability to any such plan or the PBGC), or under any
indemnity agreement to which Mid-Plains or any of its Subsidiaries is a
party, excluding liability for benefit claims and funding obligations payable
in the ordinary course.
(e) Except as set forth on Schedule 5.11 hereto, none of the Mid-Plains
Benefit Plans that are "welfare plans" within the meaning of Section 3 (1)
of ERISA provides for any retiree benefits other than continuation coverage
required to be provided under Section 4980B of the Code or Part 6 of Title
I of ERISA.
(f) Except as set forth on Schedule 5.11 hereto, (i) the consummation
or announcement of any transaction contemplated by this Agreement will not
(either alone or upon the occurrence of any additional or further acts or
events) result in any (A) payment (whether of severance pay or otherwise)
becoming due from Mid-Plains or any of its Subsidiaries to any officer,
employee, former employee or director thereof or to the trustee under any
"rabbi trust" or similar arrangement, or (B) benefit under any Mid-Plains
Benefit Plan being established or becoming accelerated, vested or payable and
(ii) neither Mid-Plains nor any of its Subsidiaries is a party to (A) any
management, employment, deferred compensation, severance plan (including any
payment, right or benefit resulting from a change in control), bonus or other
contract for personal services with any current or former officer, director
or employee (whether or not characterized as a plan for purposes of ERISA),
(B) any consulting contract with any person who prior to entering into such
contract was a director or officer of Mid-Plains or any of its Subsidiaries,
or (C) any plan, agreement, arrangement or understanding similar to any of
the items described in clause (ii) (A) or (B) of this sentence.
(g) The consummation or announcement of any transaction contemplated
by this Agreement will not (either alone or upon the occurrence of any
additional or further acts or events) result in the disqualification of any
of the Mid-Plains Benefit Plans intended to be qualified under, result in a
prohibited transaction or breach of fiduciary duty under, or otherwise
violate, ERISA or the Code.
(h) Neither Mid-Plains nor any of its Subsidiaries nor any of their
directors, officers, employees or agents, nor any "party in interest" or
"disqualified person", as such terms are defined in Section 3 of ERISA and
Section 4975 of the Code has, with respect to any Mid-Plains Benefit Plan,
engaged in or been a party to any "prohibited transaction", as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, which is not
otherwise exempt, which could result in the imposition of either a penalty
assessed pursuant to Section 502 (i) of ERISA or a tax imposed by Section
4975 of the Code or which could constitute a breach of fiduciary duty, in
each case applicable to Mid-Plains or any Mid-Plains Benefit Plan and which
would result in a Material Adverse Effect on Mid-Plains.
(i) No Mid-Plains Benefit Plan subject to Section 412 of the Code has
incurred any now existing "accumulated funding deficiency" (as defined in
ERISA), whether or not waived. Neither Mid-Plains nor any of its Subsidiaries
has incurred, and none of such entities reasonably expects to incur, any
material liability to the PBGC with respect to any Mid-Plains Benefit Plan.
Neither Mid-Plains nor any of its Subsidiaries is a party to, and neither has
incurred or reasonably expects to incur, any withdrawal liability with
respect to, any "multiemployer plan" (as defined in Section 3(37) of ERISA)
for which there is any outstanding liability.
SECTION 5.12 Labor Matters. Neither Mid-Plains nor any of its
Subsidiaries is party to any collective bargaining agreement or other labor
agreement with any union or labor organization and no union or labor
organization has been recognized by Mid-Plains or any of its Subsidiaries as
an exclusive bargaining representative for employees of Mid-Plains or any of
its Subsidiaries. Except as disclosed on Schedule 5.12 hereto, to Mid-Plains'
knowledge, there is no current union representation question
involving employees of Mid-Plains or any of its Subsidiaries, nor does
Mid-Plains have knowledge of any significant activity or proceeding of any
labor organization (or representative thereof) or employee group to organize
any such employees.
SECTION 5.13 Environmental Matters. Except as set forth on
Schedule 5.13 hereto or in the Mid-Plains SEC Reports filed prior to the date
hereof:
(a) To Mid-Plains' knowledge, Mid-Plains and each of the Mid-Plains
Subsidiaries is in compliance with all applicable Environmental Laws and
neither Mid-Plains nor any of its Subsidiaries has received any written or
oral communication from any person or governmental authority that alleges
that Mid-Plains or any of its Subsidiaries is not in compliance with
applicable Environmental Laws where such non-compliance could reasonably be
expected to result in a Material Adverse Effect on Mid-Plains.
(b) To Mid-Plains' knowledge, Mid-Plains and each of its Subsidiaries
has obtained or has applied for all material Environmental Permits necessary
for the construction of their facilities or the conduct of their operations,
and all such material Environmental Permits are effective or, where
applicable, a renewal application has been timely filed and is pending agency
approval, and Mid-Plains and its Subsidiaries are in material compliance with
all terms and conditions of such Environmental Permits. To Mid-Plains'
knowledge, there are no past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans that may interfere with,
or prevent, future continued material compliance on the part of Mid-Plains
or any of its Subsidiaries with such Environmental Permits.
(c) To Mid-Plains' knowledge, there is no currently existing
requirement to be imposed in the future by any Environmental Law or
Environmental Permit which could reasonably be expected to result in the
incurrence of a material cost by Pioneer or any of its Subsidiaries.
(d) To Mid-Plains' knowledge, there is no material Environmental Claim
pending or threatened (i) against Mid-Plains or any of its Subsidiaries, (ii)
against any person whose liability for any Environmental Claim Mid-Plains or
any of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law, or (iii) against any real or personal
property or operations which Mid-Plains or any of its Subsidiaries owns,
leases or manages, in whole or in part.
(e) To Mid-Plains' knowledge, there have been no Releases of any
Hazardous Material that would be reasonably likely to form the basis of any
material Environmental Claim against Mid-Plains or any of its Subsidiaries,
or against any person whose liability for any material Environmental Claim
Mid-Plains or any of its Subsidiaries has or may have retained or assumed
either contractually or by operation of law.
(f) To Mid-Plains' knowledge, with respect to any predecessor of
Mid-Plains or any of its Subsidiaries, there is no material Environmental Claim
pending or threatened, or any Release of Hazardous Materials that would be
reasonably likely to form the basis of any material Environmental Claim
against Mid-Plains or any of its Subsidiaries.
(g) To Mid-Plains' knowledge, Mid-Plains has disclosed to Pioneer all
material facts which Mid-Plains reasonably believes form the basis of a
material current or future cost relating to any environmental matter
affecting Mid-Plains and its Subsidiaries which Mid-Plains believes will or
is reasonably likely to result in a Material Adverse Effect on Mid-Plains.
(h) To Mid-Plains' knowledge, neither Mid-Plains nor any of its
Subsidiaries, nor any owner of premises leased or operated by Mid-Plains or
any of its Subsidiaries has filed any notice with respect to such premises
under federal, state or local law indicating past or present treatment,
storage or disposal of Hazardous Materials, as regulated under 40 C.F.R.
Parts 264-267 or any state, or local equivalent or is engaging or has engaged
in business operations involving the generation, transportation, treatment,
recycle or disposal of any waste (excluding low level radioactive tubes from
central office equipment or typical smoke and fire alarm components)
regulated under Environmental Laws pertaining to radioactive materials or the
nuclear power industry.
(i) To Mid-Plains' knowledge, none of the properties owned, leased or
operated by Mid-Plains, its Subsidiaries or any predecessor thereof are now,
or were in the past, listed on the NPL, CERCLIS or any other comparable state
or local environmental database (excluding easements that transgress such
Superfund Sites listed on the NPL or CERCLIS sites).
(j) To Mid-Plains' knowledge, the Merger will not require any
governmental approvals under the Environmental Laws, including those that are
triggered by sales or transfers of businesses or real property.
SECTION 5.14 Board Action; Vote Required. (a) The Board of
Directors of Mid-Plains has unanimously determined that the transactions
contemplated by this Agreement are in the best interests of Mid-Plains and
its Shareholders and has resolved to recommend to such Shareholders that they
vote in favor thereof.
(b) The approval of this Agreement by a majority of the votes cast
thereon, provided that the total votes cast thereon represents over 50% in
interest of all securities of Mid-Plains entitled to vote thereon, is the
only vote of the holders of any class or series of the capital stock of
Mid-Plains required to approve this Agreement, the Merger, and the other
transactions contemplated hereby.
SECTION 5.15 Opinion of Financial Advisor. Mid-Plains shall
receive the opinion of Edelman & Co., Ltd. to the effect that, as of the date
hereof, the Exchange Ratio is fair from a financial point of view to the
holders of Mid-Plains Common Stock.
SECTION 5.16 Brokers. Except for Edelman & Co., Ltd., the
arrangements with which have been disclosed to Pioneer prior to the date
hereof, who has been engaged by Mid-Plains, no broker, finder or investment
banker is entitled to any brokerage, finder's, investment banking or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Mid-Plains or any
of its Subsidiaries.
SECTION 5.17 Tax Matters. Except as set forth on Schedule 5.17
hereto:
(a) All material federal and foreign tax returns and tax reports
required to be filed by Mid-Plains or its Subsidiaries on or prior to the
Effective Time or with respect to taxable periods ending on or prior to the
Effective Time have been or will be filed with the appropriate governmental
authorities on or prior to the Effective Time or by the due date thereof
including extensions;
(b) All material state and local tax returns and tax reports required
to be filed by Mid-Plains or its Subsidiaries on or prior to the Effective
Time or with respect to taxable periods ending on or prior to the Effective
Time which relate to income, profits, franchise, property, sales, use or
other taxes, have been or will be filed with the appropriate governmental
authorities on or prior to the Effective Time or by the due date thereof
including extensions;
(c) The tax returns and tax reports referred to in subparts (a) and (b)
of this Section 5.17 correctly reflect (and as to returns not filed as of the
date hereof, will correctly reflect) all material tax liabilities of
Mid-Plains and its Subsidiaries required to be shown thereon;
(d) All material federal, state, and local income, profits, franchise,
property, sales, use and other taxes (including interest and penalties) shown
as due on those tax returns and tax reports referred to in subparts (a) and
(b) of this Section 5.17 which have been or will be filed by the Effective
Time, as well as any material foreign withholding taxes imposed on or in
respect of any amounts paid to or by Mid-Plains or any of its Subsidiaries,
whether or not such amounts or withholding taxes are referred to or shown on
any tax returns or tax reports referred to in Section 5.17(a) or (b) hereof,
have been or will be fully paid or adequately reflected as a liability on
Mid-Plains' or its Subsidiaries' books and records on or prior to the Closing
Date;
(e) With respect to any period for which tax returns and tax reports
have not yet been filed, or for which taxes are not yet due or owing,
Mid-Plains and its Subsidiaries have made due and sufficient accruals for such
taxes in their respective books and records and financial statements;
(f) The representations and warranties contained in the Mid-Plains
Officer's Certificate attached hereto as Schedule 5.17(f) are true and
correct; and
(g) Mid-Plains has not taken or agreed to take any action that would
(a) prevent or impede the Merger from qualifying as a tax-free reorganization
under Section 368 of the Code, or (b) make untrue any representation or
warranty contained in the Officer's Certificate referred to in Section
5.17(f) hereof.
SECTION 5.18 Intellectual Property. To Mid-Plains' knowledge,
neither Mid-Plains nor any of its Subsidiaries utilizes or has utilized any
patent, trademark, tradename, service mark, copyright, software, trade secret
or know-how, except for those which are owned, possessed or lawfully used by
Mid-Plains or its Subsidiaries in their operations, and, to the knowledge of
Mid-Plains, neither Mid-Plains nor any of its Subsidiaries infringes upon or
unlawfully or wrongfully uses any patent, trademark, tradename, service mark,
copyright or trade secret owned or validly claimed by another.
SECTION 5.19 Insurance. Mid-Plains and each of its Subsidiaries
is, and has been continuously since January 1, 1985 (or such later date as
such Subsidiary was organized or acquired by Mid-Plains), insured with
financially responsible insurers in such amounts and against such risks and
losses as are customary for companies conducting the business as conducted
by Mid-Plains and its Subsidiaries during such time period. Except as set
forth on such Schedule 5.19, since January 1, 1993, neither Mid-Plains nor
any of its Subsidiaries has received notice of cancellation or termination
with respect to any material insurance policy of Mid-Plains or its
Subsidiaries. The insurance policies of Mid-Plains and its Subsidiaries are
valid and enforceable policies.
SECTION 5.20 Ownership of Securities. As of the date hereof,
neither Mid-Plains nor, to Mid-Plains' knowledge, any of its affiliates or
associates (as such terms are defined under the Exchange Act), (a)(i)
beneficially owns, directly or indirectly, or (ii) is party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of, in each case, shares of capital stock of Pioneer, which in
the aggregate represent 10% or more of the outstanding shares of Pioneer
Common Stock, nor (b) is an "interested stockholder" of Pioneer within the
meaning of Section 180.1140(8) of the Wisconsin Law.
SECTION 5.21 Certain Contracts. All contracts described in Item
601 (b) (10) of Regulation S-K to which Mid-Plains or its Subsidiaries is a
party or may be bound ("Mid-Plains Contracts") have been filed as exhibits
to, or incorporated by reference in, Mid-Plains' Annual Report on Form 10-K
for the year ended December 31, 1995. All Mid-Plains Contracts are valid and
in full force and effect on the date hereof except to the extent they have
previously expired in accordance with their terms, and neither Mid-Plains nor
any of its Subsidiaries has violated any provision of, or committed or failed
to perform any act which with or without notice, lapse of time or both would
constitute a default under the provisions of, any Mid-Plains Contract, except
for defaults which, individually and in the aggregate, would not reasonably
be expected to result in a Material Adverse Effect on Mid-Plains. True and
complete copies of all Mid-Plains Contracts have been delivered to Pioneer
or made available for inspection.
SECTION 5.22 Certain Regulatory Matters. (a) Except for billing
disputes with customers arising in the ordinary course of business that in
the aggregate involve immaterial amounts, there are no proceedings or
investigations pending or, to Mid-Plains' knowledge, threatened, before any
court, administrative, governmental or regulatory body in which any of the
following matters are being considered, nor has Mid-Plains or any of its
Subsidiaries received written notice or inquiry from any such body,
government official, consumer advocacy or similar organization or any private
party, indicating that any of such matters should be considered or may become
the object of consideration or investigation: (i) reduction of rates charged
to customers; (ii) reduction of earnings; (iii) refunds of amounts previously
charged to customers; or (iv) failure to meet any expense, infrastructure,
service quality or other commitments previously made to or imposed by any
administrative, governmental or regulatory body.
(b) Neither Mid-Plains nor any of its Subsidiaries has any outstanding
commitments (and no such obligations have been imposed upon Mid-Plains and
remain outstanding) regarding (i) reduction of rates charged to customers;
(ii) reduction of earnings; (iii) refunds of amounts previously charged to
customers or (iv) expenses, infrastructure expenditures, service quality or
other regulatory requirements to or by any court, administrative,
governmental or regulatory body, government official, consumer advocacy or
similar organization.
SECTION 5.23 SFAS 106 Matters. To Mid-Plains' knowledge, the
accrual by Mid-Plains at the Effective Time of the portion of its remaining
transition obligation under Statement of Financial Accounting Standards No.
106 which it is required to accrue at such time will not adversely affect the
ability of Mid-Plains to declare and pay annual dividends to Parent after the
Effective Time in the same amounts as Mid-Plains paid to its Shareholders on
an annual basis prior to the Effective Time.
ARTICLE VI
CONDUCT OF INDEPENDENT
BUSINESSES PENDING THE MERGER
SECTION 6.1 Transition Planning. Dean W. Voeks and Douglas J.
Timmerman, as President of Mid-Plains and Pioneer, respectively, jointly
shall be responsible for coordinating all aspects of transition planning and
implementation relating to the Merger and the other transactions contemplated
hereby. If either such person ceases to be President of his respective
company for any reason, such person's successor as President shall assume his
predecessor's responsibilities under this Section 6.1. During the period
between the date hereof and the Effective Time, Messrs. Voeks and Timmerman
jointly shall (i) examine various alternatives regarding the manner in which
to best organize and manage the businesses of Parent, Mid-Plains and Pioneer
after the Effective Time, and (ii) coordinate policies and strategies with
respect to regulatory authorities and bodies, in all cases subject to
applicable law.
SECTION 6.2 Conduct of Business in the Ordinary Course. Each of
Pioneer and Mid-Plains covenants and agrees that, subject to the provisions
of Section 7.11 hereof, between the date hereof and the Effective Time,
unless the other shall otherwise consent in writing, and except as described
on Schedule 6.2 hereto or as otherwise expressly contemplated hereby, the
business of such Party and its Subsidiaries shall be conducted only in, and
such entities shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; and each of Pioneer
and Mid-Plains and their respective Subsidiaries will use their commercially
reasonable efforts to preserve substantially intact their business
organizations, to keep available the services of those of their present
officers, employees and consultants who are integral to the operation of
their businesses as presently conducted and to preserve their present
relationships with significant customers and suppliers and with other persons
with whom they have significant business relations. By way of amplification
and not limitation, except as set forth on Schedule 6.2 hereto or as
otherwise expressly contemplated by this Agreement, each of Pioneer and
Mid-Plains agrees on behalf of itself and its Subsidiaries that they will not,
between the date hereof and the Effective Time, directly or indirectly, do
any of the following without the prior written consent of the other:
(a) (i) except for grants of rights to acquire common stock given to
employees of Mid-Plains and its Subsidiaries under the Mid-Plains Stock
Purchase Plan, which shall not exceed the amounts set forth on Schedule 5.11
hereto: issue, sell, pledge, dispose of, encumber, authorize, or propose the
issuance, sale, pledge, disposition, encumbrance or authorization of any
shares of capital stock, or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of capital stock of, or any
other ownership interest in, such Party or any of its Subsidiaries; (ii)
amend or propose to amend the Organizational Documents of such Party or any
of its Subsidiaries or adopt, amend or propose to amend any shareholder
rights plan or related rights agreement; (iii) split, combine or reclassify
any outstanding shares of Pioneer Common Stock or Mid-Plains Common Stock,
or declare, set aside or pay any dividend or distribution payable in cash,
stock, property or otherwise with respect to shares of Pioneer Common Stock
or Mid-Plains Common Stock; (iv) redeem, purchase or otherwise acquire or
offer to redeem, purchase or otherwise acquire any shares of its capital
stock; or (v) authorize or propose or enter into any contract, agreement,
commitment or arrangement with respect to any of the matters prohibited by
this Section 6.2(a);
(b) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or make any investment in another entity other than an
entity which is a wholly owned Subsidiary of such Party as of the date
hereof; (ii) except in the ordinary course of business and in a manner
consistent with past practice, sell, pledge, dispose of, or encumber or
authorize or propose the sale, pledge, disposition or encumbrance of any
assets of such Party or any of its Subsidiaries; (iii) authorize or make
capital expenditures which are in excess of the amounts shown in Schedule 6.2
hereto; (iv) enter into any agreement, contract or commitment which involves
an amount in excess of $50,000 individually for Pioneer or $200,000
individually for Mid-Plains, or as part of a series of related transactions,
except for agreements, contracts and commitments entered into (A) in the
ordinary course of business of operating the wireline, directory publishing
or cellular business of Pioneer or Mid-Plains, as the case may be, or (B) in
accordance with the then current business plan for any of the other existing
businesses of Pioneer or Mid-Plains, as the case may be; or (v) authorize,
enter into or amend any contract, agreement, commitment or arrangement with
respect to any of the matters prohibited by this Section 6.2(b);
(c) take any action with respect to the grant of any severance or
termination pay, or stay, bonus, or other incentive arrangements (otherwise
than pursuant to Benefit Plans and policies of such Party in effect on the
date hereof) or with respect to any increase in benefits payable under its
severance or termination pay policies, or stay, bonus or other incentive
arrangements in effect on the date hereof.
(d) make any payments (except in the ordinary course of business and
in amounts and in a manner consistent with past practice or as otherwise
required by Legal Requirements or the provisions of any Pioneer Benefit Plan
or Mid-Plains Benefit Plan, as the case may be) under any Pioneer Benefit
Plan or any Mid-Plains Benefit Plan, as the case may be, to any director or
employee of, or independent contractor or consultant to, such Party or any
of its Subsidiaries, adopt or otherwise materially amend (except for
amendments required or made advisable by Legal Requirements) any Pioneer
Benefit Plan or Mid-Plains Benefit Plan, as the case may be, or enter into
or amend any employment or consulting agreement of the type which would be
required to be disclosed hereunder pursuant to Section 4.11 hereof with
respect to Pioneer or Section 5.11 hereof with respect to Mid-Plains, or
grant or establish any new awards under any such existing Pioneer Benefit
Plan or Mid-Plains Benefit Plan or agreement (except in the ordinary course
of business and in amounts and in a manner consistent with past practice);
(e) change in any material respect its accounting policies, methods or
procedures except as required by GAAP;
(f) do any act or omit to do any act which would cause a breach of any
contract, commitment or obligation if the result would, individually or in
the aggregate, have a Material Adverse Effect;
(g) take any action which could reasonably be expected to adversely
affect or delay the ability of any of the Parties to obtain any approval of
any governmental or regulatory body required to consummate the transactions
contemplated hereby;
(h) take any action that would (i) prevent or impede the Merger from
qualifying as a tax-free reorganization under Section 368 of the Code; (ii)
make untrue any representation or warranty contained, in the case of Pioneer
and its Subsidiaries, in the Officer's Certificate set forth on Schedule
4.17(f) and, in the case of Mid-Plains and its Subsidiaries, in the Officer's
Certificate set forth on Schedule 5.17(f); or (iii) prevent or impede the
Merger from qualifying as a pooling of interests for accounting purposes;
(i) take any action other than in the ordinary course of business and
in a manner consistent with past practice with respect to increases in
employee compensation;
(j) take any action which would cause its representations and
warranties contained herein to become inaccurate in any material respect.
Pioneer and Mid-Plains agree that any written approval obtained under
this Section 6.2 may be relied upon by the other Party if signed by the
President or any other executive officer of the Party providing such written
approval.
SECTION 6.3 No Solicitation. From and after the date hereof, Pioneer,
without the prior written consent of Mid-Plains, will not, and will not
authorize or permit any of its Party Representatives (as defined in Section
7.5 hereof) to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing information) or take any other action to
facilitate knowingly any inquiries or the making of any proposal which
constitutes or may reasonably be expected to lead to an Acquisition Proposal
(as defined below) from any person, or engage in any discussion or
negotiations relating thereto or accept any Acquisition Proposal; as used
herein, "Acquisition Proposal" shall mean a proposal or offer for a tender
or exchange offer, merger, consolidation or other business combination
involving Pioneer, or any Subsidiary of Pioneer or any proposal to acquire
in any manner a substantial equity interest in, or all or substantially all
of the assets of or any Subsidiary of Pioneer.
SECTION 6.4 Subsequent Financial Statements. Prior to the Effective
Time, Pioneer and Mid-Plains will consult with the other prior to making
publicly available its financial results for any period. The respective
audited financial statements and unaudited interim financial statements of
each of Pioneer and Mid-Plains, as the case may be, will fairly present the
financial position of such Party and its Subsidiaries as at the dates thereof
and the results of their operations and cash flows for the periods then ended
in accordance with GAAP applied on a consistent basis and, subject, in the
case of unaudited interim financial statements, to normal year-end
adjustments and any other adjustments described therein.
SECTION 6.5 Control of Operations. Nothing contained in this Agreement
shall give Mid-Plains, directly or indirectly, the right to control or direct
Pioneer's operations prior to the Effective Time. Nothing contained in this
Agreement shall give Pioneer, directly or indirectly, the right to control
or direct Mid-Plains' operations prior to the Effective Time. Prior to the
Effective Time, each of Mid-Plains and Pioneer shall exercise, consistent
with the terms and conditions of this Agreement, complete control and
supervision over its respective operations.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Joint Proxy Statement and the Registration Statement.
(a) As promptly as practicable after the execution and delivery of this
Agreement, the Parties shall prepare and file with the SEC, and shall use all
reasonable efforts to have cleared by the SEC, and promptly thereafter shall
mail to the holders of record of shares of Mid-Plains Common Stock and
Pioneer Common Stock, the Joint Proxy Statement, provided, however, that
Pioneer and Mid-Plains shall not mail or otherwise furnish the Joint Proxy
Statement to their respective Shareholders unless and until they have
received notice from the SEC that the Registration Statement is effective
under the 1933 Act.
(b) The Parties will cooperate in the preparation of the Joint Proxy
Statement and the Registration Statement and in having the Registration
Statement declared effective as soon as practicable. However, Mid-Plains
shall be responsible for preparing the Registration Statement and Joint Proxy
Statement.
SECTION 7.2 Pioneer and Mid-Plains Shareholders' Meetings and
Consummation of the Merger. (a) At the earliest reasonably practicable time
following the execution and delivery of this Agreement, each of Pioneer and
Mid-Plains shall promptly take all action necessary in accordance with
Wisconsin Law and its Articles of Incorporation and Bylaws to convene a
Shareholders' Meeting. The shareholder vote or consent required for approval
of this Agreement will be no greater than that contemplated by Sections
4.14(b) and 5.14(b) hereof. Each of Pioneer and Mid-Plains shall use all
commercially reasonable efforts to solicit from its respective Shareholders
proxies to be voted at its Shareholders Meeting in favor of this Agreement
pursuant to the Joint Proxy Statement and, subject to the fiduciary duties
of its Board of Directors, each of Pioneer and Mid-Plains shall include in
the Joint Proxy Statement the recommendation of its Board of Directors in
favor of this Agreement and the Merger. Each of the Parties shall take all
other action necessary or, in the opinion of the other Parties, advisable to
promptly and expeditiously secure any vote or consent of Shareholders
required by Wisconsin Law, and such Party's Articles of Incorporation and
Bylaws to effect the Merger.
(b) Upon the terms and subject to the conditions hereof and as soon as
practicable after the conditions set forth in Article VIII hereof have been
fulfilled or waived, each of the Parties shall execute in the manner required
by Wisconsin Law and deliver to and file with the Department of Financial
Institutions of the State of Wisconsin such instruments and agreements as may
be required by Wisconsin Law and the Parties shall take all such other and
further actions as may be required by law to make the Merger effective.
Prior to the filings referred to in this Section 7.2(b), a closing (the
"Closing") will be held at the offices of Mid-Plains (or such other place as
the Parties may agree) for the purpose of confirming all the foregoing. The
Closing will take place upon the fulfillment or waiver of all of the
conditions to closing set forth in Article VIII of this Agreement, or as soon
thereafter as practicable (the date of the Closing being herein referred to
as the "Closing Date").
SECTION 7.3 Additional Agreements. Each of the Parties will comply
in all material respects with all applicable laws and with all applicable
rules and regulations of any governmental authority in connection with its
execution, delivery and performance of this Agreement and the transactions
contemplated hereby. Each of the Parties agrees to use all commercially
reasonable efforts to obtain in a timely manner all necessary waivers,
consents and approvals and to effect all necessary registrations and filings,
and to use all commercially reasonable efforts to take, or cause to be taken,
all other actions and to do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement.
SECTION 7.4 Notification of Certain Matters. Each of Pioneer and
Mid-Plains shall give prompt notice to the other of the following:
(a) the occurrence or nonoccurrence of any event whose occurrence or
nonoccurrence would be likely to cause either (i) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time, or
(ii) directly or indirectly, any Material Adverse Effect on such Party;
(b) any material failure of such Party, or any officer, director,
employee or agent of any thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
and
(c) any facts relating to such Party which would make it necessary or
advisable to amend the Joint Proxy Statement or the Registration Statement
in order to make the statements therein not misleading or to comply with
applicable law; provided, however, that the delivery of any notice pursuant
to this Section 7.4 shall not limit or otherwise affect the remedies
available hereunder to the Party receiving such notice.
SECTION 7.5 Access to Information. (a) From the date hereof to the
Effective Time, each of Pioneer and Mid-Plains shall, and shall cause its
respective Subsidiaries, and its and their officers, directors, employees,
auditors, counsel and agents to afford the officers, employees, auditors,
counsel and agents of the other Party complete access at all reasonable times
to such Party's and its Subsidiaries' officers, employees, auditors, counsel
agents, properties, offices and other facilities and to all of their
respective books and records, and shall furnish the other with all financial,
operating and other data and information as such other Party may reasonably
request.
(b) Each of Pioneer and Mid-Plains agrees that all information so
received from the other Party shall be deemed received pursuant to the
confidentiality agreement, dated as of June 16, 1996 between Pioneer and
Mid-Plains (the "Confidentiality Agreement") and such Party shall, and shall
cause its Subsidiaries and each of its and their respective officers,
directors, employees, financial advisors and agents ("Party
Representatives"), to comply with the provisions of the Confidentiality
Agreement with respect to such information and the provisions of the
Confidentiality Agreement are hereby incorporated herein by reference with
the same effect as if fully set forth herein.
SECTION 7.6 Public Announcements. Pioneer and Mid-Plains shall use all
reasonable efforts to develop a joint communications plan and each Party
shall use all reasonable efforts to ensure that all press releases and other
public statements with respect to the transactions contemplated hereby shall
be consistent with such joint communications plan or, to the extent
inconsistent therewith, shall have received the prior written approval of the
other.
SECTION 7.7 Cooperation. Upon the terms and subject to the conditions
hereof, each of the Parties agrees to use its commercially reasonable efforts
to take or cause to be taken all actions and to do or cause to be done all
things necessary, proper or advisable to consummate the transactions
contemplated by this Agreement and shall use its commercially reasonable
efforts to obtain all necessary waivers, consents and approvals, and to
effect all necessary filings under the 1933 Act and the Exchange Act. The
Parties shall cooperate in responding to inquiries from, and making
presentations to, regulatory authorities.
SECTION 7.8 Indemnification, Directors' and Officers ' Insurance.
(a) Parent shall cause Mid-Plains and Pioneer to maintain in effect the current
provisions regarding indemnification of officers and directors contained in
the charter and bylaws of Pioneer and Mid-Plains each of their Subsidiaries
and any directors, officers or employees indemnification agreements of
Pioneer and Mid-Plains and their respective Subsidiaries, (b) Parent shall
cause Mid-Plains and Pioneer to maintain in effect the current policies of
directors' and officers' liability insurance and fiduciary liability
insurance maintained by Pioneer and Mid-Plains, respectively, with respect
to claims arising from facts or events which occurred on or before the
Effective Time, and (c) Parent shall cause Pioneer and Mid-Plains to
indemnify the directors and officers of Pioneer and Mid-Plains, respectively,
to the fullest extent to which Pioneer and Mid-Plains are permitted to
indemnify such officers and directors under Wisconsin Law.
SECTION 7.9 Post-Merger Parent Board of Directors. At the Effective
Time, the total number of persons serving on the Board of Directors of Parent
shall be five (unless otherwise agreed in writing by Pioneer and Mid-Plains
prior to the Effective Time), one of whom shall be designated by Pioneer and
four of whom shall be designated by Mid-Plains.
SECTION 7.10 Blue Sky. Pioneer and Mid-Plains will use their best
efforts to obtain prior to the Effective Time all necessary blue sky permits
and approvals, if any, required to permit the distribution of the shares of
Parent common stock to be issued in accordance with the provisions of this
Agreement.
SECTION 7.11 Pooling of Interests. Each of the Parties will use
its best efforts to cause the transactions contemplated by this Agreement to
be accounted for as a pooling of interests in accordance with GAAP, and such
accounting treatment to be accepted by Mid-Plains' independent certified
public accountants, and by the SEC, and each of the Parties agrees that it
will take no action that would cause such accounting treatment not to be
obtained.
SECTION 7.12 Tax-Free Reorganization. Each of the Parties will
use its best efforts to cause the Merger to qualify as a tax-free
reorganization under Section 368 of the Code.
ARTICLE VIII
CONDITIONS TO MERGER
SECTION 8.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each Party to effect the Merger shall
be subject to the following conditions:
(a) Shareholder Approval. The Merger and this Agreement shall have
been approved and adopted by the requisite vote of the Shareholders of each
of Pioneer and Mid-Plains and the issuance of Mid-Plains Common Stock
pursuant to the Merger shall have been approved by the requisite vote of the
Shareholders of Mid-Plains, in each case in accordance with Wisconsin Law;
(b) Legality. No federal or state statute, rule, regulation, executive
order, decree or injunction shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which is in effect and has
the effect of (i) making the Merger illegal or otherwise prohibiting the
consummation of the Merger or (ii) creating a Material Adverse Effect on
Pioneer or Mid-Plains, with or without including its ownership of Pioneer and
its Subsidiaries after the Merger;
(c) Regulatory Matters. All authorizations, consents, orders or
approvals of, or declarations or filings with, and all expirations of waiting
periods imposed by, any governmental body, agency or official (all of the
foregoing, "Consents") which are necessary for the consummation of the
transactions contemplated hereby, other than immaterial Consents the failure
to obtain which would have no material adverse effect on the consummation of
the transactions contemplated hereby and no Material Adverse Effect on
Mid-Plains, with or without including its ownership of Pioneer and its
Subsidiaries after the Merger, or Pioneer, shall have been filed, have
occurred or have been obtained (all such permits, approvals, filings and
consents and the lapse of all such waiting periods being referred to as the
"Requisite Regulatory Approvals") and all such Requisite Regulatory Approvals
shall be in full force and effect, provided, however, that a Requisite
Regulatory Approval shall not be deemed to have been obtained if in
connection with the grant thereof there shall have been an imposition by any
state or federal governmental body, agency or official of any condition,
requirement, restriction or change of regulation, or any other action
directly or indirectly related to such grant taken by such governmental body,
which would reasonably be expected to either (i) have a Material Adverse
Effect on any of (A) Pioneer or (B) Mid-Plains (either with or without
including its ownership of Pioneer and its Subsidiaries after the Merger),
or (ii) prevent the Parties from realizing in all material respects the
economic benefits of the transactions contemplated by this Agreement that
such Parties currently anticipate receiving therefrom;
(d) Registration Statement Effective. The Registration Statement shall
have become effective prior to the mailing by each of Pioneer and Mid-Plains
of the Joint Proxy Statement to its respective Shareholders, no stop order
suspending the effectiveness of the Registration Statement shall then be in
effect, and no proceedings for that purpose shall then be threatened by the
SEC or shall have been initiated by the SEC and not concluded or withdrawn;
(e) Blue Sky. Wisconsin state securities or blue sky permits or
approvals required to carry out the transactions contemplated hereby shall
have been received;
(f) Pooling. Each of Pioneer and Mid-Plains shall have received a
letter from Kiesling Associates LLP, dated as of the Closing Date, to the
effect that the transactions contemplated hereby will qualify for pooling of
interests accounting treatment;
(g) Consents Under Pioneer Agreements. Pioneer shall have obtained the
consent or approval of any person whose consent or approval shall be required
under any agreement or instrument in order to permit the consummation of the
transactions contemplated hereby except those which the failure to obtain
would not, individually or in the aggregate, have a Material Adverse Effect
on Mid-Plains, with or without including its ownership of Pioneer and its
Subsidiaries after the Merger, or Pioneer; and
(h) Consents Under Mid-Plains Agreements. Mid-Plains shall have
obtained the consent or approval of any person whose consent or approval
shall be required under any agreement or instrument in order to permit the
consummation of the transactions contemplated hereby except those which the
failure to obtain would not, individually or in the aggregate, have a
Material Adverse Effect on Mid-Plains, with or without including its
ownership of Pioneer and its Subsidiaries after the Merger, or Pioneer.
(i) Pioneer and Mid-Plains shall have received the opinions referred
to in Sections 4.15 and 5.15.
(j) The Parties contemplate that the concept of a confederation of
independent telephone companies may be found desirable by other similarly
situated companies. If one or more of such companies expresses an interest
to join the Parties to this Agreement in the formation of a holding company
and provides notice to that effect to Mid-Plains within ninety (90) days from
the date hereof, then proceeding to satisfy the terms and conditions of this
Agreement shall be conditioned upon acceptance by such third party and the
Parties hereto of (1) an agreement similar in form to this Agreement, and (2)
acknowledgement from each of the parties thereto that the exchange ratios
contained in such an agreement are fair from the financial point of view of
the holders of common stock of such parties.
SECTION 8.2 Additional Conditions to Obligations of Pioneer. The
obligations of Pioneer to effect the Merger are also subject to the
fulfillment of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Mid-Plains contained in this Agreement shall be true and correct on the
date hereof and (except to the extent such representations and warranties
speak as of a date earlier than the date hereof) shall also be true and
correct on and as of the Closing Date, except for changes permitted under
Section 6.2 hereof or otherwise contemplated by this Agreement, with the same
force and effect as if made on and as of the Closing Date, provided, however,
that for purposes of this Section 8.2(a) only, such representations and
warranties shall be deemed to be true and correct unless the failure or
failures of such representations and warranties to be so true and correct
(without regard to materiality qualifiers contained therein), individually
or in the aggregate, results or would reasonably be expected to result in a
Material Adverse Effect on Mid-Plains, either with or without including its
ownership of Pioneer and its Subsidiaries after the Merger;
(b) Agreements, Conditions and Covenants. Mid-Plains shall have
performed or complied in all material respects with all agreements,
conditions and covenants required by this Agreement to be performed or
complied with by them on or before the Effective Time, including by way of
illustration and not limitation, satisfactory completion of its due diligence
on or before February 14, 1997;
(c) Certificates. Pioneer shall have received a certificate of an
executive officer of Mid-Plains to the effect set forth in paragraphs (a) and
(b) above;
(d) Tax Opinion. (i) Pioneer shall have received an opinion of Axley
Brynelson, special counsel to Pioneer for this specific purpose, dated as of
the Closing Date, in form and substance reasonably satisfactory to Pioneer,
substantially to the effect that, on the basis of the facts, representations
and assumptions set forth in such opinion, the Merger constitutes a tax-free
reorganization under Section 368 of the Code and therefore: (A) no gain or
loss will be recognized for federal income tax purposes by Mid-Plains,
Pioneer or the Merger Subsidiaries as a result of the formation of the Merger
Subsidiaries and the Merger; and (B) no gain or loss will be recognized for
federal income tax purposes by the Shareholders of Pioneer upon their
exchange of Pioneer Common Stock solely for Mid-Plains Common Stock pursuant
to the Merger (except with respect to cash received in lieu of a fractional
share interest in Mid-Plains Common Stock or the payment of any real property
transfer or gains taxes on behalf of the Shareholders of Pioneer). In
rendering such opinion, Axley Brynelson may require and rely upon
representations and covenants including those contained in certificates of
officers of Pioneer and Mid-Plains and others; and
(ii) Mid-Plains shall have received the opinion described in
Section 8.3 (d) (i) hereof, in form and substance reasonably
satisfactory to Pioneer.
(e) Bylaws Amendment, Board of Directors. Mid-Plains shall have taken
all such actions as shall be necessary so that (i) the Bylaws Amendment shall
become effective not later than the Effective Time; and (ii) at the Effective
Time, the composition of Parent's Board shall comply with Section 7.9 hereof
(assuming Pioneer has designated the Pioneer Director as contemplated by
Section 7.9 hereof).
(f) Schedules. Pioneer shall have received all of the schedules
required to be prepared by Mid-Plains hereunder on or before January 31,
1997, and shall have satisfactorily completed its review of such schedules
on or before February 14, 1997.
SECTION 8.3 Additional Conditions to Obligations of Mid-Plains. The
obligations of Mid-Plains to effect the Merger are also subject to the
fulfillment of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Pioneer contained in this Agreement shall be true and correct on the date
hereof and (except to the extent such representations and warranties speak
as of a date earlier than the date hereof) shall also be true and correct on
and as of the Closing Date, except for changes permitted under Section 6.2
hereof or otherwise contemplated by this Agreement, with the same force and
effect as if made on and as of the Closing Date, provided, however, that for
purposes of this Section 8.3(a) only, such representations and warranties
shall be deemed to be true and correct unless the failure or failures of such
representations and warranties to be so true and correct (without regard to
materiality qualifiers contained therein), individually or in the aggregate,
results or would reasonably be expected to result in a Material Adverse
Effect on Pioneer or Mid-Plains (only after including its ownership of
Pioneer and its Subsidiaries after the Merger);
(b) Agreements, Conditions and Covenants. Pioneer shall have performed
or complied in all material respects with all agreements, conditions and
covenants required by this Agreement to be performed or complied with by them
on or before the Effective Time, including by way of illustration and not
limitation, satisfactory completion of its due diligence on or before
February 14, 1997;
(c) Certificates. Mid-Plains shall have received a certificate of an
executive officer of Pioneer to the effect set forth in paragraphs (a) and
(b) above;
(d) Tax Opinion. (i) Mid-Plains shall have received an opinion of
Axley Brynelson, special counsel to Mid-Plains, dated as of the Effective
Time, in form and substance reasonably satisfactory to Mid-Plains,
substantially to the effect that, on the basis of the facts, representations
and assumptions set forth in such opinion, the Merger constitutes a tax-free
reorganization under Section 368 of the Code and therefore: (A) no gain or
loss will be recognized for federal income tax purposes by Mid-Plains,
Pioneer or the Merger Subsidiaries as a result of the formation of the Merger
Subsidiaries and the Merger; and (B) no gain or loss will be recognized for
federal income tax purposes by the Shareholders of Mid-Plains as a result of
the Merger. In rendering such opinion, Axley Brynelson may require and rely
upon representations and covenants including those contained in certificates
of officers of Mid-Plains and Pioneer and others; and
(ii) Pioneer shall have received the opinion described in Section
8.2(d) (i) hereof, in form and substance reasonably satisfactory to Mid-Plains.
(e) Schedules. Mid-Plains shall have received all of the schedules
required to be prepared by Pioneer hereunder on or before January 31, 1997,
and shall have satisfactorily completed its review of such schedules on or
before February 14, 1997.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 Termination. This Agreement may be terminated at any time
before the Effective Time, in each case as authorized by the respective Board
of Directors of Pioneer or Mid-Plains:
(a) By mutual written consent of each of Pioneer and Mid-Plains;
(b) By either Pioneer or Mid-Plains if the Merger shall not have been
consummated on or before June 30, 1997 (the "Termination Date");provided,
however, that the right to terminate this Agreement under this Section 9.1
(b) shall not be available to any Party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before the Termination Date; and
provided, further, that if on the Termination Date the conditions to the
Closing set forth in Section 8.1(c) shall not have been fulfilled, but all
other conditions to the Closing shall be fulfilled or shall be capable of
being fulfilled, then the Termination Date shall be extended to December 31,
1997. The Parties agree that any amendment of this Agreement to extend the
Termination Date beyond December 31, 1997 shall be made without any amendment
to or renegotiation of any other material provisions of this Agreement;
(c) By either Pioneer or Mid-Plains if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling the Parties shall use their
commercially reasonable efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement, and such order, decree, ruling or other action shall have
become final and nonappealable;
(d) By either Pioneer or Mid-Plains if the other shall have breached,
or failed to comply with, in any material respect any of its obligations
under this Agreement or any representation or warranty made by such other
Party shall have been incorrect in any material respect when made or shall
have since ceased to be true and correct in any material respect, and such
breach, failure or misrepresentation is not cured within 30 days after notice
thereof and such breaches, failures or misrepresentations, individually or
in the aggregate and without regard to materiality qualifiers contained
therein, results or would reasonably be expected to result in a Material
Adverse Effect on Pioneer, Mid-Plains or Chorus with or without including its
ownership of Pioneer, Mid-Plains and their Subsidiaries after the Mergers;
(e) By either Pioneer or Mid-Plains upon the occurrence of (i) a
Material Adverse Effect or an event which could reasonably be expected to
result in a Material Adverse Effect on Chorus (either with or without
including its ownership of Pioneer and Mid-Plains and their Subsidiaries
after the Mergers), or Mid-Plains, Pioneer or Chorus, under Section 8.1 (c)
hereof arising from an action by a state or federal governmental body, agency
or official which has become final and nonappealable, or (ii) any other
Material Adverse Effect, or an event which could reasonably be expected to
result in a Material Adverse Effect on the others (which in the case of
Chorus shall not include its ownership of Pioneer and Mid-Plains and their
Subsidiaries after the Mergers), or, after the Effective Time, Chorus,
including its ownership of Pioneer and Mid-Plains and their Subsidiaries;
(f) By either Pioneer or Mid-Plains if the Board of Directors of the
other or any committee of the Board of Directors of the other (i) shall
withdraw or modify in any adverse manner its approval or recommendation of
this Agreement or the Merger or, in the case of the Board of Directors or any
committee of the Board of Directors of Mid-Plains, or the issuance of Chorus
Common Stock pursuant to the Merger Agreement, (ii) shall fail to reaffirm
such approval or recommendation upon such Party's request, (iii) shall
approve or recommend any acquisition of the other or a material portion of
its assets or any tender offer for shares of its capital stock, in each case,
other than by a Party thereof, or (iv) shall resolve to take any of the
actions specified in clause (i) above;
(g) By either Pioneer or Mid-Plains if any of the required approvals
of the Shareholders of Pioneer or of Mid-Plains shall fail to have been
obtained at a duly held Shareholders meeting of either of such companies,
including any adjournments thereof; or
(h) Provided, however, that no termination shall be effective pursuant
to Sections 9.1(f) or (g) under circumstances in which an Initial Pioneer
Termination Fee or an Initial Mid-Plains Termination Fee is payable by the
terminating Party under Section 9.2(b) or (c), as the case may be, unless
concurrently with such termination, such termination fee is paid in full by
the terminating Party in accordance with the provisions of Sections 9.2(b)
or (c), as the case may be.
SECTION 9.2 Effect of Termination. (a) In the event of termination of
this Agreement as provided in Section 9.1 hereof, and subject to the
provisions of Section 10.1 hereof, this Agreement shall forthwith become void
and there shall be no liability on the part of any of the Parties, except (i)
as set forth in this Section 9.2 and in Sections 4.10, 4.16, 5.10, 5.16 and
10.3 hereof, and (ii) nothing herein shall relieve any Party from liability
for any willful breach hereof.
(b) If this Agreement (A) is terminated by Pioneer pursuant to Section
9.1 (f) hereof or by Pioneer pursuant to Section 9.1(g) hereof because of the
failure to obtain the required approval from the Pioneer Shareholders or (B)
is terminated as a result of Pioneer's material breach of Section 7.2 hereof
which is not cured within 30 days after notice thereof to Pioneer, Pioneer
shall pay to Mid-Plains a termination fee equal to 20% of all of Mid-Plains'
out of pocket expenses related to preparing this Agreement and related
activities (the "Initial Pioneer Termination Fee").
(c) If this Agreement (A) is terminated by Mid-Plains pursuant to
Sections 9.1 (f) hereof or Mid-Plains pursuant to Section 9.1 (g) hereof
because of the failure to obtain the required approval from the Mid-Plains
Shareholders, or (B) is terminated as a result of Mid-Plains's material
breach of Section 7.2 hereof which is not cured within 30 days after notice
thereof to Mid-Plains, Mid-Plains shall pay to Pioneer a termination fee
equal to 80% of all of Pioneer's out of pocket expenses related to preparing
this Agreement and related activities (the "Initial Mid-Plains Termination
Fee").
(d) Each termination fee payable under Sections 9.2(b) and (c) above
shall be payable in cash within ten (10) days of written demand.
(e) Pioneer and Mid-Plains agree that the agreements contained in
Sections 9.2(b) and (c) above are an integral part of the transactions
contemplated by this Agreement and constitute liquidated damages and not a
penalty. If one Party fails to promptly pay to the other any fee due under
such Sections 9.2(b) and (c), the defaulting Party shall pay the costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the
publicly announced prime rate of Marshall & Ilsley Bank from the date such
fee was required to be paid.
SECTION 9.3 Amendment. This Agreement may be amended by the Parties
pursuant to a writing adopted by action taken by all of the Parties at any
time before the Effective Time; provided, however, that, after approval of
the Merger Agreement by the Shareholders of Pioneer or Mid-Plains, whichever
shall occur first, no amendment may be made which would (a) alter or change
the amount or kinds of consideration to be received by the holders of Pioneer
Shares upon consummation of the Merger, (b) alter or change any term of the
Articles of Incorporation of Pioneer or the Articles of Incorporation of
Mid-Plains, or (c) alter or change any of the terms and conditions of this
Agreement if such alteration or change would adversely affect the holders of
any class or series of securities of Pioneer or Mid-Plains. This Agreement
may not be amended except by an instrument in writing signed by the Parties.
SECTION 9.4 Waiver. At any time before the Effective Time, any Party
may (a) extend the time for the performance of any of the obligations or
other acts of the other Parties, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a Party to any such
extension or waiver shall be valid only as against such Party and only if set
forth in an instrument in writing signed by such Party.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this
Agreement pursuant to Section 9.1 hereof, as the case may be, except that (a)
the agreements set forth in Article I and Sections 2.3, 2.4, 2.5, and 7.8
hereof shall survive the Effective Time indefinitely, (b) the agreements and
representations set forth in Sections 4.10, 4.16, 5.10, 5.16, 7.5(b), 9.2 and
10.3 hereof shall survive termination indefinitely and (c) nothing contained
herein shall limit any covenant or agreement of the Parties which by its
terms contemplates performance after the Effective Time.
SECTION 10.2 Notices. All notices and other communications given
or made pursuant hereto shall be in writing and shall be deemed to have been
duly given or made as of the date of receipt and shall be delivered
personally or mailed by registered or certified mail (postage prepaid, return
receipt requested), sent by overnight courier or sent by telecopy, to the
Parties at the following addresses or telecopy numbers (or at such other
address or telecopy number for a Party as shall be specified by like notice):
(a) if to Pioneer:
Pioneer Communications, Inc.
25 West Main Street
Madison, WI 53703
Attention: Douglas J. Timmerman, President
Telecopy No.: (608) 252-8783
(b) if to Mid-Plains:
Mid-Plains, Inc.
1912 Parmenter Street
Post Office Box 620070
Middleton, WI 53562-0070
Attention: Dean W. Voeks, President
Telecopy No.: (608) 836-8060
with a copy to:
Axley Brynelson
2 East Mifflin Street
Post Office Box 1767
Madison, WI 53701-1767
Attention: Daniel T. Hardy, Esq. and
Darold J. Londo, Esq.
Telecopy No.: (608) 257-5444
SECTION 10.3 Expenses. Except as otherwise provided herein, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Party incurring such
costs and expenses, except that those out of pocket expenses incurred by
either Party in connection with the preparation and printing of the Joint
Proxy Statement and the Registration Statement, as well as the filing fees
related thereto, shall be paid one-third by Pioneer and two-thirds by
Mid-Plains.
SECTION 10.4 Certain Definitions. For purposes of this Agreement,
the following terms shall have the following meanings:
(a) "1933 Act" means the Securities Act of 1933, as the same may be
amended from time to time, and "Exchange Act" means the Securities Exchange
Act of 1934, as the same may be amended from time to time.
(b) "affiliate" of a person means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person.
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of aperson,
whether through the ownership of stock or other equity interests, as trustee
or executor, by contract or credit arrangement or otherwise.
(d) "knowledge" of any Party shall mean the actual knowledge of the
executive officers of such Party.
(e) "Material Adverse Effect" means any change in or effect on the
business of the referenced corporation or any of its Subsidiaries that is or
will be materially adverse to the business, operations (including the income
statement), properties (including intangible properties), condition
(financial or otherwise), assets, liabilities or regulatory status of such
referenced corporation and its Subsidiaries taken as a whole, but shall not
include the effects of changes that are generally applicable in (A) the
telecommunications industry, (B) the United States economy or (c) the United
States securities markets if, in any of (A), (B) or (C), the effect on
Pioneer or Mid-Plains, determined without including its ownership of Pioneer
after the Merger, (as the case may be) and its respective Subsidiaries, taken
as a whole, is not disproportionate relative to the effect on the other and
its Subsidiaries, taken as a whole. All references to Material Adverse Effect
on Mid-Plains or its Subsidiaries contained in Article IV, V or VI of this
Agreement shall be deemed to refer solely to Mid-Plains and its Subsidiaries
without including its ownership of Pioneer and its Subsidiaries after the
Merger.
(f) "Material Investment" means (a) as to Pioneer, any person which
Pioneer directly or indirectly holds the stock of, or other equity interest
in, provided the lesser of the fair market value or book value of such
interest exceeds $50,000, excluding, however, any person which is a
Subsidiary of Pioneer; and (b) as to Mid-Plains, any person which Mid-Plains
directly or indirectly holds the stock of, or other equity interest in,
provided the lesser of the fair market value or book value of such interest
exceeds $200,000, excluding, however, any person which is a Subsidiary of
Mid-Plains.
(g) "person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, entity
or group (as defined in the Exchange Act).
(h) "Subsidiary", "Pioneer Subsidiary", or "Mid-Plains Subsidiary"
means any corporation or other legal entity of which Pioneer or Mid-Plains,
as the case may be (either alone or through or together with any other
Subsidiary or Subsidiaries), owns, directly or indirectly, more than 50% of
the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
SECTION 10.5 Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
SECTION 10.6 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic
or legal substance of the transactions contemplated hereby is not affected
in any manner adverse to any Party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
Parties shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the Parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the maximum extent possible.
SECTION 10.7 Entire Agreement; No Third-Party Beneficiaries. This
Agreement constitutes the entire agreement and, except as expressly set forth
herein, supersedes any and all other prior agreements and undertakings, both
written and oral, among the Parties, or any of them, with respect to the
subject matter hereof and, except for Section 7.8 (Indemnification,
Directors' and Officers' Insurance) and Section 7.9 (Post-Merger Parent Board
of Directors), is not intended to confer upon any person other than Pioneer,
Mid-Plains, Parent, and the Merger Subsidiaries and, after the Effective
Time, their respective Shareholders, any rights or remedies hereunder.
SECTION 10.8 Assignment. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 10.9 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Wisconsin
applicable to contracts executed in and to be performed entirely within that
State.
SECTION 10.10 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different Parties in separate counterparts,
each of which when executed shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
MID-PLAINS, INC.
By: /s/Dean W. Voeks
Dean W. Voeks, President
PIONEER COMMUNICATIONS, INC.
By: /s/Douglas J. Timmerman
Douglas J. Timmerman, President
APPENDIX II
SECTIONS 180.1301 TO 180.1331 OF THE
WISCONSIN BUSINESS CORPORATION LAW
SUBCHAPTER XIII
DISSENTERS' RIGHTS
180.1301 Definitions. In st. 180.1301 to 180.1331:
(1) "Beneficial shareholder" means a person who is a beneficial owner of
shares held by a nominee as the shareholder.
(1m) "Business combination" has the meaning given in s. 180.1130 (3).
(2) "Corporation" means the issuer corporation or, if the corporate
action giving rise to dissenters' rights under s. 180.1302 is a merger or
share exchange that has been effectuated, the surviving domestic corporation
or foreign corporation of the merger or the acquiring domestic corporation
or foreign corporation of the share exchange.
(3) "Dissenter" means a shareholder or beneficial shareholder who is
entitled to dissent from corporate action under s. 180.1302 and who exercises
that right when and in the manner required by ss. 180.1320 to 180.1328.
(4) "Fair value", with respect to a dissenter's shares other than in a
business combination, means the value of the shares 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. "Fair value", with respect to
a dissenter's shares in a business combination, means market value, as
defined in s. 180.1130 (9) (a) 1. to 4.
(5) "Interest" means interest from the effectuation 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 of the circumstances.
(6) "Issuer corporation" means a domestic corporation that is the issuer
of the shares held by a dissenter before the corporate action.
History: 1989 a. 303; 1991 a. 16.
180.1302 Right to dissent. (1) Except as provided in sub. (4) and s. 180.1008
(3), a shareholder or beneficial shareholder may 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 issuer corporation is
a party if any of the following applies:
1. Shareholder approval is required for the merger by s. 180.1103 or by
the articles of incorporation.
2. The issuer corporation is a subsidiary that is merged with its parent
under s. 180.1104.
(b) Consummation of a plan of share exchange if the issuer corporation's
shares will be acquired, and the shareholder or the shareholder holding
shares on behalf of the beneficial 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 issuer corporation other than in the usual and regular
course of business, including a sale in dissolution, but not including any
of the following:
1. A sale pursuant to court order.
2. A sale for cash pursuant to a plan by which all or substantially all
of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale.
(d) Except as provided in sub. (2), any other corporate action taken
pursuant to a shareholder vote to the extent that the articles of
incorporation, bylaws or a resolution of the board of directors provides that
the voting or nonvoting shareholder or beneficial shareholder may dissent and
obtain payment for his or her shares.
(2) Except as provided in sub. (4) and s. 180.1008 (3), the articles of
incorporation may allow a shareholder or beneficial shareholder to dissent
from an amendment of the articles of incorporation and obtain payment of the
fair value of his or her shares if the amendment materially and adversely
affects rights in respect of a dissenter's shares because it does any of the
following:
(a) Alters or abolishes a preferential right of the shares.
(b) Creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares.
(c) Alters or abolishes a preemptive right of the holder of shares to
acquire shares or other securities.
(d) Excludes or limits the right of the shares to vote on any matter or
to cumulate votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights.
(e) Reduces the number of shares owned by the shareholder or beneficial
shareholder to a fraction of a share if the fractional share so created is
to be acquired for cash under s. 180.0604.
(3) Notwithstanding sub. (1) (a) to (c), if the issuer corporation is a
statutory close corporation under ss. 180.1801 to 180.1837, a shareholder of
the statutory close corporation may dissent from a corporate action and
obtain payment of the fair value of his or her shares, to the extent
permitted under sub. (1) (d) or (2) or s. 180.1803, 180.1813 (1) (d) or (2)
(b), 180.1815 (3) or 180.1829 (1) (c).
(4) Except in a business combination or unless the articles of
incorporation provide otherwise, subs. (1) and (2) do not apply to the
holders of shares of any class or series if the shares of the class or series
are registered on a national securities exchange or quoted on the national
association of securities dealers, inc., automated quotations system on the
record date fixed to determine the shareholders entitled to notice of a
shareholders meeting at which shareholders are to vote on the proposed
corporate action.
(5) Except as provided in s. 180.1833, a shareholder or beneficial
shareholder entitled to dissent and obtain payment for his or her shares
under ss. 180.1301 to 180.1331 may not challenge the corporate action
creating his or her entitlement unless the action is unlawful or fraudulent
with respect to the shareholder, beneficial shareholder or issuer corporation.
History: 1989 a. 303; 1991 a. 16.
180.1303 Dissent by shareholders and beneficial shareholders. (1) A
shareholder may assert dissenters' rights as to fewer than all of the shares
registered in his or her name only if the shareholder dissents with respect
to all shares beneficially owned by any one 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 shareholder who under
this subsection asserts dissenters' rights as to fewer than all of the shares
registered in his or her name 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 the beneficial shareholder does all of the
following:
(a) Submits to the corporation the shareholder's written consent to the
dissent not later than the time that the beneficial shareholder asserts
dissenters' rights.
(b) Submits the consent under par. (a) with respect to all shares of
which he or she is the beneficial shareholder.
History: 1989 a. 303.
180.1320 Notice of dissenters' rights. (1) If proposed corporate action
creating dissenters' rights under s. 180.1302 is submitted to a vote at a
shareholders' meeting, the meeting notice shall state that shareholders and
beneficial shareholders are or may be entitled to assert dissenters' rights
under ss. 180.1301 to 180.1331 and shall be accompanied by a copy of those
sections.
(2) If corporate action creating dissenters' rights under s. 180.1302 is
authorized without a vote of shareholders, the corporation shall notify, in
writing and in accordance with s. 180.0141, all shareholders entitled to
assert dissenters' rights that the action was authorized and send them the
dissenters' notice described in s. 180.1322.
History: 1989 a. 303.
180.1321 Notice of intent to demand payment. (1) If proposed corporate action
creating dissenters' rights under s. 180.1302 is submitted to a vote at a
shareholders' meeting, a shareholder or beneficial shareholder who wishes to
assert dissenters' rights shall do all of the following:
(a) Deliver to the issuer corporation before the vote is taken written
notice that complies with s. 180.0141 of the shareholder's or beneficial
shareholder's intent to demand payment for his or her shares if the proposed
action is effectuated.
(b) Not vote his or her shares in favor of the proposed action.
(2) A shareholder or beneficial shareholder who fails to satisfy sub. (1)
is not entitled to payment for his or her shares under ss. 180.1301 to 180.1331.
History: 1989 a. 303.
180.1322 Dissenters' notice. (1) If proposed corporate action creating
dissenters' rights under s. 180.1302 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters' notice to all
shareholders and beneficial shareholders who satisfied s. 180.1321.
(2) The dissenters' notice shall be sent no later than 10 days after the
corporate action is authorized at a shareholders' meeting or without a vote
of shareholders, whichever is applicable. The dissenters' notice shall
comply with s. 180.0141 and shall include or have attached all of the following:
(a) A statement indicating where the shareholder or beneficial
shareholder must send the payment demand and where and when certificates for
certificated shares must be deposited.
(b) For holders of uncertificated shares, an explanation of the extent
to which transfer of the shares will be restricted after the payment demand
is received.
(c) A form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and that requires the shareholder or beneficial shareholder
asserting dissenters' rights to certify whether he or she acquired beneficial
ownership of the shares before that date.
(d) A date by which the corporation must receive the payment demand,
which may not be fewer than 30 days nor more than 60 days after the date on
which the dissenters' notice is delivered.
(e) A copy of ss. 180.1301 to 180.1331.
History: 1989 a. 303.
180.1323 Duty to demand payment. (1) A shareholder or beneficial shareholder
who is sent a dissenters' notice described in s. 180.1322, or a beneficial
shareholder whose shares are held by a nominee who is sent a dissenters'
notice described in s. 180.1322, must demand payment in writing and certify
whether he or she acquired beneficial ownership of the shares before the date
specified in the dissenters' notice under s. 180.1322 (2) (c). A shareholder
or beneficial shareholder with certificated shares must also deposit his or
her certificates in accordance with the terms of the notice.
(2) A shareholder or beneficial shareholder with certificated shares who
demands payment and deposits his or her share certificates under sub. (1)
retains all other rights of a shareholder or beneficial shareholder until
these rights are canceled or modified by the effectuation of the corporate
action.
(3) A shareholder or beneficial shareholder with certificated or
uncertificated shares who does not demand payment by the date set in the
dissenters' notice, or a shareholder or beneficial shareholder with
certificated shares who does not deposit his or her share certificates where
required and by the date set in the dissenters' notice, is not entitled to
payment for his or her shares under ss. 180.1301 to 180.1331.
History: 1989 a. 303.
180.1324 Restrictions on uncertificated shares. (1) The issuer corporation
may restrict the transfer of uncertificated shares from the date that the
demand for payment for those shares is received until the corporate action
is effectuated or the restrictions released under s. 180.1326.
(2) The shareholder or beneficial shareholder who asserts dissenters'
rights as to uncertificated shares retains all of the rights of a shareholder
or beneficial shareholder, other than those restricted under sub. (1), until
these rights are canceled or modified by the effectuation of the corporate
action.
History: 1989 a. 303.
180.1325 Payment. (1) Except as provided in s. 180.1327, as soon as the
corporate action is effectuated or upon receipt of a payment demand,
whichever is later, the corporation shall pay each shareholder or beneficial
shareholder who has complied with s. 180.1323 the amount that the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(2) The payment shall be accompanied by all of the following:
(a) The corporation's latest available financial statements, audited and
including footnote disclosure if available, but including not less than a
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 the latest available
interim financial statements, if any.
(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 s.
180.1328 if the dissenter is dissatisfied with the payment.
(e) A copy of ss. 180.1301 to 180.1331.
History: 1989 a. 303.
180.1326 Failure to take action. (1) If an issuer corporation does not
effectuate the corporate action within 60 days after the date set under s.
180.1322 for demanding payment, the issuer corporation shall return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the issuer corporation effectuates the corporate action, the
corporation shall deliver a new dissenters' notice under s. 180.1322 and
repeat the payment demand procedure.
History: 1989 a. 303.
180.1327 After-acquired shares. (1) A corporation may elect to withhold
payment required by s. 180.1325 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date specified in the dissenters'
notice under s. 180.1322 (2) (c) as the date of the first announcement to
news media or to shareholders of the terms of the proposed corporate action.
(2) To the extent that the corporation elects to withhold payment under
sub. (1) after effectuating the corporate action, it shall estimate the fair
value of the shares, plus accrued interest, and shall pay this amount to each
dissenter who agrees 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 s. 180.1328
if the dissenter is dissatisfied with the offer.
History: 1989 a. 303.
180.1328 Procedure if dissenter dissatisfied with payment or offer. (1) A
dissenter may, in the manner provided in sub. (2), notify the corporation of
the dissenter's 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
received under s. 180.1325, or reject the offer under s. 180.1327 and demand
payment of the fair value of his or her shares and interest due, if any of
the following applies:
(a) The dissenter believes that the amount paid under s. 180.1325 or
offered under s. 180.1327 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 s. 180.1325 within 60
days after the date set under s. 180.1322 for demanding payment.
(c) The issuer corporation, having failed to effectuate the corporate
action, does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within 60 days after the date
set under s. 180.1322 for demanding payment.
(2) A dissenter waives his or her right to demand payment under this
section unless the dissenter notifies the corporation of his or her demand
under sub. (1) in writing within 30 days after the corporation made or
offered payment for his or her shares. The notice shall comply with s. 180.0141.
History: 1989 a. 303.
180.1330 Court action. (1) If a demand for payment under s. 180.1328 remains
unsettled, the corporation shall bring a special proceeding within 60 days
after receiving the payment demand under s. 180.1328 and petition the court
to determine the fair value of the shares and accrued interest. If the
corporation does not bring the special proceeding within the 60-day period,
it shall pay each dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall bring the special proceeding in the circuit
court for the county where its principal office or, if none in this state,
its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall bring the
special proceeding in the county in this state in which was located the
registered office of the issuer corporation that merged with or whose shares
were acquired by the foreign corporation.
(3) The corporation shall make all dissenters, whether or not residents
of this state, whose demands remain unsettled parties to the special
proceeding. Each party to the special proceeding shall be served with a copy
of the petition as provided in s. 801.14.
(4) The jurisdiction of the court in which the special proceeding is
brought under sub. (2) is plenary and exclusive. The court may appoint one
or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. An appraiser has the power described in the
order appointing him or her or in any amendment to the order. The dissenters
are entitled to the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the special proceeding is entitled to
judgment for any of the following:
(a) 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.
(b) The fair value, plus accrued interest, of his or her shares acquired
on or after the date specified in the dissenter's notice under s. 180.1322
(2) (c), for which the corporation elected to withhold payment under s.
180.1327.
History: 1989 a. 303.
180.1331 Court costs and counsel fees. (1) (a) Notwithstanding ss. 814.01
to 814.04, the court in a special proceeding brought under s. 180.1330 shall
determine all costs of the proceeding, including the reasonable compensation
and expenses of appraisers appointed by the court and shall assess the costs
against the corporation, except as provided in par. (b).
(b) Notwithstanding ss. 814.01 and 814.04, the court may assess costs
against all or some of the dissenters, in amounts that the court finds to be
equitable, to the extent that the court finds the dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment under s.
180.1328.
(2) The parties shall bear their own expenses of the proceeding, except
that, notwithstanding ss. 814.01 to 814.04, the court may also assess the
fees and expenses of counsel and experts for the respective parties, in
amounts that the court finds to be equitable, as follows:
(a) Against the corporation and in favor of any dissenter if the court
finds that the corporation did not substantially comply with ss. 180.1320 to
180.1328.
(b) Against the corporation or against 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 chapter.
(3) Notwithstanding ss. 814.01 to 814.04, if the court finds that the
services of counsel and experts for any dissenter were of substantial benefit
to other dissenters similarly situated, the court may award to these counsel
and experts reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
History: 1989 a. 303.
APPENDIX III
FORM OF AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CHORUS COMMUNICATIONS GROUP, LTD.
Executed by the undersigned for the purpose of forming a Wisconsin
for-profit corporation to engage in any lawful act authorized by Chapter 180
of the Wisconsin Statutes.
ARTICLE I
The name of the corporation is Chorus Communications Group, Ltd.
ARTICLE II
The corporation shall be authorized to issue 25,000,000 shares of common
stock, each share having no par value. No holder of common stock shall be
entitled as such, as a matter of right, to subscribe for or purchase or
receive any part of any new or additional issue of stock, or securities
convertible into stock, of any class whatever, whether now or hereafter
authorized, or whether issued for cash, property or services, by way of
dividend, or in exchange for the stock of another corporation.
ARTICLE III
The initial registered office of the corporation is 1912 Parmenter
Street, City of Middleton, County of Dane, State of Wisconsin.
ARTICLE IV
The name of the initial registered agent at such address is Fredrick
E. Urben.
ARTICLE V
The number of directors constituting the board of directors shall be
fixed by bylaw.
The foregoing Amended and Restated Articles of Incorporation for Chorus
Communications Group, Ltd. supersede and take the place of the existing
Articles of Incorporation and any amendments thereto. Furthermore, the
undersigned, the duly appointed acting Secretary of Chorus Communications
Group, Ltd., does hereby certify that the foregoing Amended and Restated
Articles of Incorporation for Chorus Communications Group, Ltd. is a true
and accurate portrayal of the Amended and Restated Articles of Incorporation
for Chorus Communications Group, Ltd. adopted by the shareholders of Chorus
Communications Group, Ltd. on May 17, 1997, pursuant to secs. 180.1003,
180.1004 and 180.1007, Wisconsin Statutes.
/s/Fredrick E. Urben
Fredrick E. Urben, Secretary
This instrument was drafted by:
Attorney Daniel T. Hardy
Post Office Box 1767
Madison, WI 53701-1767
APPENDIX IV
BYLAWS
OF
CHORUS COMMUNICATIONS GROUP, LTD.
(a Wisconsin Corporation)
TABLE OF CONTENTS
ARTICLE I. OFFICES . . . . . . . . . . . . . . . . . . .IV-1
Section 1. Principal Office . . . . . . . . . . .IV-1
Section 2. Registered Office . . . . . . . . . .IV-1
ARTICLE II. SHAREHOLDERS . . . . . . . . . . . . . . . .IV-1
Section 1. Annual Meeting . . . . . . . . . . . .IV-1
Section 2. Special Meetings . . . . . . . . . . .IV-1
Section 3. Nominations for the Board of Directors IV-1
Section 4. Shareholder Proposals . . . . . . . .IV-1
Section 5. Place of Meeting . . . . . . . . . . .IV-2
Section 6. Notice of Meeting . . . . . . . . . .IV-2
Section 7. Quorum . . . . . . . . . . . . . . IV-2
Section 8. Proxies . . . . . . . . . . . . . . .IV-2
Section 9. Voting . . . . . . . . . . . . . . . .IV-2
Section 10. Acceptance and Rejection of Votes, Proxies, Etc.
IV-2
Section 11. Fixing of Record Date . . . . . . . .IV-3
ARTICLE III. BOARD OF DIRECTORS . . . . . . . . . . . . .IV-3
Section 1. General Powers . . . . . . . . . . . .IV-3
Section 2. Number and Term. . . . . . . . . . . .IV-3
Section 3. Qualifications . . . . . . . . . . . .IV-3
Section 4. Regular Meetings . . . . . . . . . . .IV-3
Section 5. Special Meetings . . . . . . . . . . .IV-4
Section 6. Notice . . . . . . . . . . . . . . . .IV-4
Section 7. Quorum . . . . . . . . . . . . . . . .IV-4
Section 8. Manner of Acting . . . . . . . . . . .IV-4
Section 9. Vacancies . . . . . . . . . . . . . .IV-4
Section 10. Compensation . . . . . . . . . . . .IV-5
Section 11. Informal Action by Directors . . . .IV-5
Section 12. Removal . . . . . . . . . . . . . . .IV-5
Section 13. Committees . . . . . . . . . . . . .IV-5
Section 14. Director Emeritus . . . . . . . . . .IV-5
ARTICLE IV. OFFICERS . . . . . . . . . . . . . . . . . .IV-6
Section 1. Number and Qualifications . . . . . .IV-6
Section 2. Election and Term of Office . . . . .IV-6
Section 3. Removal . . . . . . . . . . . . . . .IV-6
Section 4. Vacancies . . . . . . . . . . . . . .IV-6
Section 5. President/CEO . . . . . . . . . . . .IV-6
Section 6. The Vice-Presidents . . . . . . . . .IV-6
Section 7. The Secretary . . . . . . . . . . . .IV-6
Section 8. The Treasurer . . . . . . . . . . . .IV-7
Section 9. Assistant Secretaries and Assistant Treasurers IV-7
Section 10. Salaries . . . . . . . . . . . . . .IV-7
ARTICLE V. CONTRACTS, LOANS. CHECKS AND DEPOSITS . . . .IV-7
Section 1. Contracts . . . . . . . . . . . . . .IV-7
Section 2. Loans . . . . . . . . . . . . . . . .IV-7
Section 3. Checks, Drafts, etc . . . . . . . . .IV-7
Section 4. Deposits . . . . . . . . . . . . . . .IV-7
ARTICLE VI. CERTIFICATES OF STOCK OWNERSHIP . . . . . . .IV-7
Section 1. Certificates for Shares . . . . . . .IV-8
Section 2. Acquisition of Shares . . . . . . . .IV-8
ARTICLE VII. FISCAL YEAR . . . . . . . . . . . . . . . .IV-8
ARTICLE VIII. AMENDMENTS . . . . . . . . . . . . . . . .IV-8
ARTICLE IX. LOST CERTIFICATES . . . . . . . . . . . . . .IV-8
ARTICLE X. INDEMNIFICATION . . . . . . . . . . . . . . .IV-8
Section 1. Indemnification for Successful Defense IV-8
Section 2. Other Indemnification . . . . . . . .IV-8
Section 3. Written Request . . . . . . . . . . .IV-9
Section 4. Nonduplication . . . . . . . . . . . .IV-9
Section 5. Determination of Right to Indemnification IV-9
Section 6. Advance Payment of Expenses as Incurred IV-9
Section 7. Nonexclusivity . . . . . . . . . . . .IV-9
Section 8. Insurance . . . . . . . . . . . . . IV-10
Section 9. Securities Law Claims. . . . . . . . IV-10
Section 10. Liberal Construction . . . . . . . . IV-10
ARTICLE XI. DISTRIBUTIONS . . . . . . . . . . . . . . . IV-10
ARTICLE XII. CORPORATE SEAL . . . . . . . . . . . . . . IV-10
ARTICLE XIII. EMERGENCY BYLAWS . . . . . . . . . . . . IV-11
BYLAWS
OF
CHORUS COMMUNICATIONS GROUP, LTD.
ARTICLE I. OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office of the corporation
in the State of Wisconsin shall be located at 1912 Parmenter Street,
Middleton, Wisconsin. The corporation may have such other offices, within
the State of Wisconsin, as the Board of Directors may designate from time to
time.
SECTION 2. REGISTERED OFFICE. The registered office of the
corporation required by the Wisconsin business corporation law to be
maintained in the State of Wisconsin may be, but need not be, identical with
the principal office in the State of Wisconsin, and the address of the
registered office may be changed from time to time by the Board of
Directors.
ARTICLE II. SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The date of the Annual Meeting of
Shareholders shall be in April of each year or at such time as the Board of
Directors may determine. The specific date and time shall be determined by
the Board of Directors. The purpose of the annual meeting is to elect
directors and to transact other business as may properly come before the
meeting, pursuant to Section 4 below. If the election of directors is not
held at the annual meeting of the shareholders, or other business is not
transacted at any subsequent continuation after adjournment thereof, the
Board of Directors shall cause the election to be held and the other business
to be transacted at a special meeting of the shareholders as soon thereafter
as convenient.
SECTION 2. SPECIAL MEETINS. Special meetings of the shareholders for
any purpose or purposes, unless otherwise prescribed by statute, may be
called by the President/CEO, the Secretary, or the Board of Directors, and
shall be called by the President/CEO at the request of holders of ten percent
(10%) of the issued voting stock of the corporation.
SECTION 3. NOMINATIONS FOR THE BOARD OF DIRECTORS. Nominations for
election to the Board of Directors may be made by the Board of Directors or
by any shareholder of the corporation. Nominations for the Board of
Directors, other than those made by or on behalf of the existing management
of the corporation, shall be made in writing and delivered or mailed to the
principal executive offices of the corporation not earlier than the January
1 and not later than the February 28 immediately preceding the corporation's
Annual Meeting of Shareholders at which such nomination is to be acted upon.
Notice of the appropriate time within which to make a nomination shall be
given to all shareholders in the proxy statement for the year preceding the
election. Any nominations for the Board of Directors made by the
shareholders shall contain the name, address and date of birth of each
proposed nominee, the principal occupation of each nominee for the last five
years, the name and address of the nominating shareholder, and the number of
shares of common stock of the corporation owned by the proposed nominee and
nominating shareholder.
SECTION 4. SHAREHOLDER PROPOSALS. The proposal of other business
(other than the election of directors) to be considered by the shareholders
at an Annual Meeting of Shareholders may be made (i) by or at thedirection
of the Board of Directors, or (ii) by any shareholder of the corporation
pursuant to timely notice in writing to the Secretary of thecorporation.
To be timely, a Shareholder's Notice shall be delivered to or mailed and
received at the principal executive offices of the corporation byDecember
15 prior to the meeting in order to have such proposal considered for
inclusion in the proxy statement. Such Shareholder's Notice to theSecretary
shall set forth (a) as to the shareholder giving notice and thebeneficial
owner, if any, on whose behalf the proposal is made, (i) their name and
record address, and (ii) the number of shares of capital stock of the
corporation which are beneficially owned by each of them, and (b) a brief
description of the business desired to be brought before the meeting,the
reasons for conducting such business at the meeting and any material interest
in such business of such shareholder giving notice and the beneficial owner,
if any, on whose behalf the proposal is made. Only such business shall be
conducted at a special meeting of shareholders as shall have been brought
before the meeting pursuant to the corporation's Notice of Meeting. Only
such business shall be conducted at a meeting of shareholders as shall have
been brought before the meeting in accordance with the procedures set forth
in this section.
SECTION 5. PLACE OF MEETING. The Board of Directors may designate any
place, within the State of Wisconsin, as the place of meeting for any annual
meeting or for any special meeting called by the President/CEO, the
Secretary, or the Board of Directors. A waiver of notice signed by all
shareholders entitled to vote at a meeting may designate any place, within
the State of Wisconsin, as the place for the holding of such meeting. If no
designation is made, the place of meeting shall be the registered office of
the corporation in the State of Wisconsin, but any meeting may be adjourned
to reconvene at any place designated by vote of a majority of the
shareholders. If no designation is made, the place of meeting shall be the
principal business office of the corporation in the State of Wisconsin or
such other suitable place in the county of such principal office as may be
designated by the person calling such meeting, but any meeting may be
adjourned to reconvene at any place designated by vote of a majority of the
shares represented thereat.
SECTION 6. NOTICE OF MEETING. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than
ten (10) nor more than sixty (60) days before the date of the meeting, either
personally or by mail, by or at the direction of the President/CEO, the
Secretary, or the Board of Directors, to each shareholder entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder at the
shareholder's address as it appears on the books of the corporation, with
postage thereon prepaid.
SECTION 7. QUORUM. The holders of a majority of the issued common
stock of the corporation shall constitute a quorum at a meeting of
shareholders. Though less than a quorum of shareholders are represented at
a meeting, the holders of a majority of the issued voting common stock so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or be
represented, any business may be transacted which might have been transacted
at the meeting as originally notified. Once a share is represented for any
purpose at a meeting, it is deemed present for quorum purposes for the
remainder of the meeting and for any adjournment of that meeting unless a new
record date is or must be set for that adjourned meeting. If a quorum
exists, action on a matter (other than the election of directors) by the
shareholders is approved if the votes cast by the shareholders favoring the
action exceed the votes cast opposing the action.
SECTION 8. PROXIES. At all meetings of shareholders, a shareholder
entitled to vote may vote by proxy appointed in writing by such shareholder.
Such proxy shall be filed with the Secretary of the corporation before or at
the time of the meeting. No proxy shall be valid after eleven months from
the date of its execution, unless otherwise provided in the proxy. Unless
otherwise provided in the proxy, a proxy may be revoked at any time before
it is voted, either by written notice filed with the Secretary or the acting
Secretary of the meeting or by oral notice given by the shareholder to the
presiding officer during the meeting. The presence of a shareholder who has
filed his or her proxy shall not of itself constitute a revocation.
SECTION 9. VOTING. Each shareholder entitled to vote shall be
entitled to one vote for each share held upon each matter submitted to a vote
at a meeting of shareholders.
SECTION 10. ACCEPTANCE AND REJECTION OF VOTES, PROXIES, ETC. If the
name signed on a vote, consent, waiver, or proxy appointment corresponds to
the name of a shareholder, the corporation if acting in good faith is
entitled to accept the vote, consent, waiver, or proxy appointment and give
it effect as the act of the shareholders. The corporation is entitled to
reject a vote, consent, waiver, or proxy appointment if the Secretary or
other officer or agent authorized to tabulate votes, acting in good faith,
has reasonable basis for doubt about the validity of the signature on it or
about the signatory's authority to sign for the shareholder. The corporation
and its officer or agent who accepts or rejects a vote, consent, waiver, or
proxy appointment in good faith and in accordance with the standards of this
section are not liable in damages to the shareholder for the consequences of
the acceptance or rejection. Corporate action based on the acceptance or
rejection of a vote, consent, waiver, or proxy appointment under this section
is valid unless a court of competent jurisdiction determines otherwise.
SECTION 11. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders,
or shareholders entitled to receive payment of any distribution or dividend,
or in order to make a determination of shareholders for any other proper
purpose, the Board of Directors may fix in advance a date as the record date.
Such record date shall not be less then ten (10) nor more than seventy (70)
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If no record date is so fixed
by the Board of Directors for the determination of shareholders entitled to
notice of, or to vote at a meeting of shareholders, or shareholders entitled
to receive a share dividend or distribution, the record date for
determination of such shareholders shall be at the close of business on:
(a) With respect to an annual shareholder meeting or any special
shareholder meeting called by the Board of Directors or any
person specifically authorized by the Board of Directors or
these Bylaws to call a meeting, the date on which the first
notice is delivered to shareholders;
(b) With respect to a special shareholder's meeting demanded by the
shareholders, the date the first shareholder signs the demand;
(c) With respect to the payment of a share dividend, the date the
Board of Directors authorizes the share dividend;
(d) And with respect to a distribution to shareholders, (other than
one involving a repurchase or reacquisition of shares), the date
the Board of Directors authorizes the distribution.
When a determination of shareholders entitled to vote at any meeting
of shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof unless the Board of Directors fixes
a new record date which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The affairs of the corporation shall be
managed by its Board of Directors.
SECTION 2. NUMBER AND TERM. The Board of Directors of the corporation
shall consist of such number of directors, not less than five (5) nor more
than thirteen (13), as shall, from time to time, be fixed by the Board of
Directors. The Board of Directors shall be divided into three classes as
nearly equal in number as may be, with the term of office of one class
expiring each year. When the number of directors is changed, any newly
created directorships or any decrease in directorships shall be so
apportioned among the classes as to make all classed as nearly equal in
number as possible. Subject to the foregoing, at each annual meeting of
shareholders the successors to the class of directors whose term shall then
expire shall be elected to hold office for a term expiring at the third
succeeding annual meeting.
SECTION 3. QUALIFICATIONS. Directors shall be residents of the
State of Wisconsin and shareholders of the corporation.
SECTION 4. REGULAR MEETINGS. A regular meeting of the Board of
Directors may be held without other notice than this By-law immediately
after, and at the same place as, the annual meeting of shareholders, and each
adjourned session thereof, and the Board of Directors may provide by
resolution for the holding of additional regular meetings. The time and
place, within or without the State of Wisconsin, for the holding of such
additional regular meetings shall be without other notice than such
resolution.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the President/CEO, Secretary
or any two directors. The person or persons authorized to call special
meetings of the Board of Directors may fix any place, within or without the
State of Wisconsin, as the place for holding any special meeting of the Board
of Directors called by them. If no other place is fixed, the place of the
meeting shall be the principal office of the corporation in the State of
Wisconsin.
SECTION 6. NOTICE. Notice of any special meeting shall be given at
least forty-eight (48) hours previously thereto by mail, telegram, radiogram,
facsimile, telex, e-mail, other form of wire or wireless communication
medium, or by personal service delivered to each director at his or her
address as designated. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. If notice be given by telegram, teletype, facsimile, e-mail,
or other form of wire or wireless communication medium, such notice
shall be deemed to be delivered when said notice is delivered to the
applicable transferring medium. Whenever any notice whatever is required to
be given to any director of the corporation under the provisions of these
By-laws or under the provisions of any statute, a waiver thereof in writing,
signed at any time, whether before or after the time of meeting, by the
director entitled to such notice, shall be deemed equivalent to the giving
of such notice. The attendance of a director at a meeting shall constitute
a waiver of notice of such meeting, except where a director attends a meeting
for the express purpose of objecting to the transaction of any business and
at the beginning of the meeting (or promptly upon his or her arrival) objects
to holding the meeting or transacting business at the meeting, and does not
thereafter vote for or assent to action taken at the meeting.
Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the Board of Directors, need be specified in
the notice or waiver of notice of such meeting.
SECTION 7. QUORUM. A majority of the number of directors fixed by the
Board of Directors shall constitute a quorum for the transaction of business
at any meeting of the Board of Directors, but though less than such quorum
is present at a meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice.
SECTION 8. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the
Board of Directors, unless the act of a greater number is required by these
Bylaws or by law. Any or all directors may participate in a regular or
special meeting by, or conduct the meeting through the use of, any means of
communication by which (i) all directors participating may simultaneously
hear each other during the meeting or (ii) all communication during the
meeting is immediately transmitted to each participating director, and each
participating director is able to immediately send messages to all other
participating directors. If a meeting will be conducted through the use of
any means described in (i) and (ii) above, all participating directors shall
be informed that a meeting is taking place at which official business may be
transacted. A director participating in a meeting by this means is deemed
to be present in person at the meeting.
A director who is present at a meeting of the Board of Directors or a
committee of the Board of Directors when corporate action is taken is deemed
to have assented to the action taken unless: (1) he or she objects at the
beginning of the meeting (or promptly upon his or her arrival) to holding it
or transacting business at the meeting; or (2) his or her dissent or
abstention from the action taken is entered in the minutes of the meeting;
or (3) he or she delivers written notice of his or her dissent or abstention
to the presiding officer of the meeting before its adjournment or to the
corporation immediately after adjournment of the meeting. The right of
dissent or abstention is not available to a director who votes in favor of
the action taken.
SECTION 9. VACANCIES. Any vacancy occurring in the Board of
Directors, including a vacancy created by an increase in the number of
directors, shall be filled for the unexpired term by the affirmative vote of
a majority of the directors then in office; provided, that in case of a
vacancy created by the removal of a director by vote of the shareholders, the
shareholders shall have the right to fill such vacancy at the same meeting
or any adjournment thereof.
SECTION 10. COMPENSATION. The Board of Directors shall receive such
compensation as the Board of Directors shall from time to time determine.
SECTION 11. INFORMAL ACTION BY DIRECTORS. Any action required to be
taken at a meeting of the Board of Directors, or any other action which may
be taken at a meeting of the Board of Directors, may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors entitled to vote with respect to the subject
matter thereof.
SECTION 12. REMOVAL. A director may be removed from office with or
without cause by the affirmative vote of a majority of the outstanding shares
entitled to vote for the election of such director, taken at a meeting of
shareholders called for that purpose. A director may resign at any time by
delivering written notice of his or her resignation to the Board of
Directors, to the President/CEO or Secretary of the corporation. A
resignation is effective when the notice is delivered unless the notice
specifies a later effective date.
SECTION 13. COMMITTEES
(a) Creation of Committees. The Board of Directors may create one
or more committees and appoint members of the Board of Directors to serve on
them. Each committee must have two or more members, who serve at the
pleasure of the Board of Directors.
(b) Selection of Members. The creation of a committee and
appointment of members to it must be approved by a majority of all the
directors in office when the action is taken.
(c) Required Procedures. Sections of this Article III, which govern
meetings, action without meetings, notice and waiver of notice, quorum and
voting requirements of the Board of Directors, apply to committees and their
members.
(d) Authority. Each committee may exercise those aspects of the
authority of the Board of Directors which the Board of Directors confers upon
such committee in the resolution creating the committee. Provided, however,
a committee may not do any of the following: (1) authorize distributions;
(2) approve or propose to shareholders action that the Wisconsin Business
Corporation Act requires be approved by shareholders; (3) fill vacancies on
the Board of Directors or on any of its committees; (4) amend the Articles
of Incorporation; (5) adopt, amend, or repeal Bylaws; (6) approve a plan of
merger; (7) authorize or approve reacquisition of shares, except according
to a formula or method prescribed by the Board of Directors; or (8) authorize
or approve the issuance or sale or contract for sale of shares or determine
the designation and relative rights, preferences, and limitations of a class
or series of shares, except that the Board of Directors may authorize a
committee (or a senior executive officer of the corporation) to do so within
limits specifically prescribed by the Board of Directors. Unless otherwise
provided by the Board of Directors in creating the committee, a committee may
employ counsel, accountants and other consultants to assist it in the
exercise of authority.
SECTION 14. DIRECTOR EMERITUS. The Board of Directors may appoint one
or more former directors to the position of Director Emeritus to assist the
Board with the discharge of its duties upon such terms and conditions and at
such compensation as the Board of Directors may determine. A Director
Emeritus shall not be entitled to vote on any matter that comes before the
Board.
ARTICLE IV. OFFICERS
SECTION 1. NUMBER AND QUALIFICATIONS. The principal officers of the
corporation shall be a President/Chief Executive Officer (CEO), a
Vice-President, a Secretary, an Assistant Secretary, a Treasurer and an
Assistant Treasurer, each of whom shall be elected by the Board of Directors.
Such other officers and assistant officers as may be deemed necessary may be
elected by the Board of Directors. Whenever the Board of Directors shall so
order, two offices may be held by the same person except President/CEO and
Vice-President, and President/CEO and Secretary. Officers of the
corporation, other than the President/CEO, need not be directors of the
corporation.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
corporation shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of the
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as conveniently may be. Each
officer shall hold office until his or her successor shall have been elected
and shall have been qualified or until his or her death or until he or she
shall resign.
SECTION 3. REMOVAL. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation will be served thereby.
SECTION 4. VACANCIES. Should a vacancy in any officer position arise
because of an officer's death, resignation, removal, disqualification or
otherwise, such vacancy, upon recommendation of the President/CEO, shall be
filled by the Board of Directors for the unexpired portion of the term.
SECTION 5. PRESIDENT/CEO. The President/CEO shall be the chief
executive officer of the corporation and subject to the control of the Board
of Directors, shall in general supervise and control all of the business and
affairs of the corporation. He or she shall, when present, preside at all
meetings of the shareholders and of the Board of Directors. He or she shall
have authority, subject to such rules as may be prescribed by the Board of
Directors, to appoint such officers, agents and employees of the corporation
as he or she shall deem necessary, to prescribe their powers, duties, and
compensation, and to delegate authority to them. He or she may sign, with
the Secretary or any other proper officer of the corporation thereunto
authorized by the Board of Directors, certificates representing shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments
which the Board of Directors has authorized to be executed, except in cases
where the signing or the execution thereof shall be expressly delegated by
the Board of Directors or by these By-laws to some other officer or agent of
the corporation, or shall be required by law to be otherwise signed or
executed; and in general shall perform all duties incident to the office of
the President/CEO and such other duties as may be prescribed by the Board of
Directors from time to time.
SECTION 6. THE VICE-PRESIDENTS. The Board of Directors may appoint
an Executive Vice-President and as many Vice-Presidents as it deems
appropriate. Any Vice-President shall perform such duties and have such
authority as from time to time may be delegated or assigned to him or her by
the President/CEO or the Board of Directors. In the absence of the
President/CEO or in the event of his or her death, inability or refusal to
act, the Vice-President delegated authority under Section 5 and, in the
absence of such delegation, the Executive Vice-President and then the
Vice-President with the most seniority as a Vice-President and who is not then
absent or disabled, shall perform the duties of the President/CEO, and when
so acting, shall have all the powers of and be subject to all the
restrictions upon the President/CEO. Any Vice-President may sign, with the
Secretary, certificates representing the shares of the corporation; and shall
perform such other duties as from time to time may be assigned to him or her
by the President/CEO or by the Board of Directors.
SECTION 7. THE SECRETARY. The Secretary shall: (a) keep the minutes
of the shareholders and of the Board of Directors meetings in one or more
books provided for that purpose; (b) see that all notices are given in
accordance with the provisions of these By-laws or as required by law; (c)
be custodian of the corporate records; (d) keep a register of the post office
address of each shareholder which shall be furnished to the Secretary by such
shareholder; (e) sign with the President/CEO, or a Vice-President,
certificates of stock ownership of the corporation, the issuance of which
shall have been authorized by resolution of the Board of Directors; (f) have
general charge of the stock transfer books of the corporation; and (g) in
general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him or her by the
President/CEO or by the Board of Directors.
SECTION 8. THE TREASURER. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his or her duties
in such sum and with such surety or sureties as the Board of Directors shall
determine. He or she shall: (a) have charge and custody of and be
responsible for all funds and securities of the corporation, receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in
such banks, trust companies or other depositaries as shall be selected in
accordance with the provisions of Article V of these By-laws; and (b) in
general perform all of the duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to him or her by the
President/CEO or by the Board of Directors.
SECTION 9. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretaries, when authorized by the Board of Directors, may sign
with the President/CEO or any Vice-President certificates for shares of the
corporation the issuance of which shall have been authorized by a resolution
of the Board of Directors. The Assistant Treasurers shall respectively, if
required by the Board of Directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the Board of Directors
shall determine. The Assistant Secretaries and Assistant Treasurers, in
general, shall perform such duties as shall be assigned to them by the
Secretary or the Treasurer, respectively, or by the President/CEO or the
Board of Directors.
SECTION 10. SALARIES. The salary of the President/CEO shall be fixed
from time to time by the Board of Directors or by a duly authorized committee
thereof. All other salaries of principal officers shall be fixed by the
President/CEO, subject to review by the Board of Directors.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the corporation,
and such authorization may be general or confined to specific instances.
SECTION 2. LOANS. No long-term loans shall be contracted on behalf
of the corporation without approval of a majority of the Board of Directors.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in
the name of the corporation, shall be signed by such officer or officers,
agent or agents of the corporation and in such manner as shall from time to
time be determined by or under the authority of resolution of the Board of
Directors or any of its committees.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositories as may be
selected by or under the authority of the Board of Directors.
ARTICLE VI. CERTIFICATES OF STOCK OWNERSHIP
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares
of the corporation shall be in such form as shall be determined by the Board
of Directors. Such certificates shall be signed by the President/CEO or any
Vice-President and by the Secretary or Assistant Secretary. All certificates
shall be consecutively numbered or otherwise identified. The name and
address of the shareholder to whom the certificates thereby are issued, and
date of issue, shall be entered on the books of the corporation. All
certificates surrendered to the corporation for transfer shall be cancelled
and no new certificate shall be issued until the former certificate for a
like number of shares shall have been surrendered and cancelled, except that
in case of a lost, destroyed, or mutilated certificate, a new one may be
issued therefor pursuant to Article IX hereof or upon such other terms and
indemnity to the corporation as the Board of Directors may prescribe.
SECTION 2. ACQUISITION OF SHARES. The corporation may acquire its own
shares and the shares so acquired shall constitute authorized but unissued
shares.
ARTICLE VII. FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of
January and end on the last day of December in each following year.
ARTICLE VIII. AMENDMENTS
The corporation's shareholders may amend or repeal the corporation's
Bylaws even though the Bylaws may also be amended or repealed by its Board
of Directors.
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board of Directors of the corporation unless the shareholders
in adopting, amending, or repealing a particular bylaw provide expressly that
the Board of Directors may not amend or repeal that bylaw.
The Secretary of the corporation shall mail a copy of each amendment
adopted by the Board of Directors at the time of payment of the dividend next
following the adoption of the amendment.
ARTICLE IX. LOST CERTIFICATES
Any shareholder claiming a certificate of stock to have been lost,
stolen or destroyed shall make an affidavit or affirmation of such fact, and
shall give the Board of Directors such bond as the Treasurer may require
sufficient to indemnify against any claim that may be made against the
corporation on account of the alleged loss, theft or destruction of such
certificate or any damage or loss that may arise from issuing a new
certificate, whereupon the Board of Directors may by resolution duly entered
on record order a new certificate of the same alleged to be lost or destroyed.
ARTICLE X. INDEMNIFICATION
SECTION 1. INDEMNIFICATION FOR SUCCESSFUL DEFENSE. Within twenty (20)
days after receipt of a written request pursuant to Section 3 below, the
corporation shall indemnify a director or officer, to the extent he or she
has been successful on the merits or otherwise in the defense of a
proceeding, for all reasonable expenses incurred in the proceeding if the
director or officer was a party because he or she is a director or officer
of the corporation. The phrase "expenses" in this Article X shall include
fees, costs, charges, disbursements, attorneys fees, and other expenses
incurred in connection with a proceeding. The phrase "director or officer"
in this Article X shall mean each present, former, and future director or
officer of the corporation or an individual who, while a director or officer
of the corporation, is or was serving at the corporation's request as an
officer, director, partner, trustee, member of any governing or
decision-making committee, manager, employee or agent of another corporation or
foreign corporation, limited liability company, partnership, joint venture,
trust or other enterprise. Other definitions which may be relevant to this
Article X are as set forth in Section 180.0850 of the Wisconsin Statutes.
SECTION 2. OTHER INDEMNIFICATION.
(a) In cases not included under Section 1 above, the corporation
shall indemnify a director or officer against liability and expenses incurred
by such person in a proceeding to which the person was a party because he or
she is a director or officer unless liability was incurred because the person
breached or failed to perform a duty he or she owes or owed to the
corporation and the breach or failure to perform constitutes any of the
following:
(1) A willful failure to deal fairly with the corporation or
its shareholders in connection with a matter in which the
person has a material conflict of interest.
(2) A violation of criminal law, unless the director or
officer had reasonable cause to believe his or her conduct
was lawful or not reasonable cause to believe his or her
conduct was unlawful.
(3) A transaction from which the director or officer derived
an improper personal profit.
(4) Willful misconduct.
(b) Determination of whether indemnification is required under this
section shall be made pursuant to Section 5 below.
(c) The termination of a proceeding by judgment, order, settlement,
or conviction, or upon a plea of no contest or an equivalent plea, does not,
by itself, create a presumption that indemnification of the director or
officer is not required under this section.
SECTION 3. WRITTEN REQUEST. A director or officer who seeks
indemnification under Sections 1 or 2 above shall make a written request to
the corporation.
SECTION 4. NONDUPLICATION. The corporation shall not indemnify a
director or officer under Sections 1 or 2 above if the director or officer
has previously received indemnification or allowance of expenses from any
person, including the corporation, in connection with the same proceeding.
However, the director or officer has no affirmative duty to look to any other
person for indemnification nor to first exhaust his or her remedies to seek
indemnification from such other person.
SECTION 5. DETERMINATION OF RIGHT TO INDEMNIFICATION. The director
or officer seeking indemnification under Section 2 above shall seek one of
the methods for determining his or her right to indemnification pursuant to
the provisions of Section 180.0855(1) through (6) of the Wisconsin Statutes;
and such selection shall be made within sixty (60) days after the
commencement of any proceeding. Such selection shall be made in writing and
delivered to the Secretary of the corporation. If it is determined that
indemnification is required under Section 2 above, the corporation shall pay
all liabilities and expenses not prohibited by Section 4 above within ten
(10) days after receipt of the written determination as to a director's or
officer's indemnification under Section 2 above. The corporation shall also
pay all expenses incurred by the director or officer in the determination
process.
SECTION 6. ADVANCE PAYMENT OF EXPENSES AS INCURRED. Upon written
request by the person seeking indemnification under Section 2 above, the
corporation will pay or reimburse his or her reasonable expenses as incurred
if the person requesting such indemnification provides the corporation with
all of the following: (a) a written affirmation of his or her good faith
belief that he or she has not breached or failed to perform his or her duties
to the corporation and (b) a written undertaking, executed by such person,
to repay the allowance and reasonable interest on the allowance to the extent
it is ultimately determined under Section 5 above that indemnification under
Section 2 above is not required and that indemnification is not ordered by
a court under Section 180.0854 of the Wisconsin Statutes. The undertaking
under this section shall be an unlimited general obligation of the director
or officer and may be accepted without reference to his or her ability to
repay the allowance. The undertaking may be secured or unsecured.
SECTION 7. NONEXCLUSIVITY.
(a) Except as provided in (b), Sections 1, 2, and 6 above do not
preclude any additional right to indemnification or allowance of expenses
that a director or officer may have under any of the following:
(1) The articles of incorporation.
(2) A written agreement between the director or officer and the
corporation.
(3) A resolution of the Board of Directors.
(4) A resolution, after notice, adopted by a majority vote of
all of the corporation's voting shares then issued and outstanding.
(5) The statutes or common law of the State of Wisconsin.
(b) Regardless of the existence of an additional right under (a), the
corporation shall not indemnify a director or officer or permit a director
or officer to retain any allowance of expenses, unless it is determined by
or on behalf of the corporation that the director or officer did not breach
or fail to perform a duty he or she owed or owes to the corporation which
constitutes conduct under Section 2(a) (1), (2), (3) or (4). A director or
officer who is a party to the same or related proceeding for which
indemnification or an allowance of expenses is sought may not participate in
a determination under this subsection.
(c) Sections 1 to 8 herein do not affect the corporation's power to
pay or reimburse expenses incurred by a director or officer in any of the
following circumstances:
(1) As a witness in a proceeding to which he or she is not a
party.
(2) As a plaintiff or petitioner in a proceeding because he or
she is or was a director or officer of the corporation.
SECTION 8. INSURANCE. The corporation may purchase and maintain
insurance on behalf of an individual who is a director or officer of the
corporation against liability asserted against or incurred by the individual
in his or her capacity as a director or officer, regardless of whether the
corporation is required or authorized to indemnify or allow expenses to the
individual against the same liability under Sections 1, 2, or 6.
SECTION 9. SECURITIES LAW CLAIMS.
(a) Pursuant to the public policy of the State of Wisconsin, the
corporation shall provide indemnification, allowance of expenses, and
insurance for any liability incurred in connection with a proceeding
involving securities regulation described under (b) to the extent required
or permitted under Sections 1 to 8.
(b) Section 1 to 8 apply, to the extent applicable to any other
proceeding, to any proceeding involving a federal or state statute, rule, or
regulation regulating the offer, sale, or purchase of securities, securities
brokers or dealers, or investment companies or investment advisors.
SECTION 10. LIBERAL CONSTRUCTION. In order for the corporation to
obtain and retain qualified directors and officers, the foregoing provisions
shall be liberally administered in order to afford maximum indemnification
of directors or officers and, accordingly, the indemnification above provided
for shall be granted in all cases unless to do so would clearly contravene
applicable law, controlling precedent, or public policy.
ARTICLE XI. DISTRIBUTIONS.
The Board of Directors may authorize, and the corporation may make,
distributions (including dividends on its outstanding shares) in the manner
and upon the terms and conditions provided by law.
ARTICLE XII. CORPORATE SEAL.
The Board of Directors may provide a corporate seal which may be
circular in form and have inscribed thereon any designation including the
name of the corporation, Wisconsin as the state of incorporation, and the
words "Corporate Seal."
ARTICLE XIII. EMERGENCY BYLAWS.
The following provisions of this Article XIII, "Emergency Bylaws" shall
be effective only during an emergency, which is defined as when a quorum of
the corporation's directors cannot be readily assembled because of some
catastrophic event or events. These Emergency Bylaws are not effective after
the emergency ends.
During such emergency:
(a) Notice of Board of Director Meetings. Any one member of the
Board of Directors or any one of the following officers: President/CEO,
Vice-President, Secretary, or Treasurer, may call a meeting of the Board of
Directors. Notice of such meeting need be given only to those directors whom
it is practicable to reach, and may be given in any practical manner,
including by publication and radio. Such notice shall be given at least six
(6) hours prior to commencement of the meeting.
(b) Temporary Directors and Quorum. One or more officers of the
corporation present at the emergency Board of Directors meeting, as is
necessary to achieve a quorum, shall be considered to be directors for the
meeting, and shall so serve in order of rank, and within the same rank, in
order of seniority. In the event that less than a quorum of the directors
are present (including any officers who are to serve as directors for the
meeting), those directors present (including the officers serving as
directors) shall constitute a quorum.
(c) Actions Permitted To Be Taken. The Board of Directors as
constituted in paragraph (b), and after notice as set forth in paragraph (a)
may:
(1) Officers' Powers. Prescribe emergency powers to any officer
of the corporation;
(2) Delegation of Any Power. Delegate to any officer or director,
any of the powers of the Board of Directors;
(3) Lines of Succession. Designate lines of succession of
officers and agents, in the event that any of them are unable to
discharge their duties;
(4) Relocate Principal Place of Business. Relocate the principal
place of business, or designate successive or simultaneous
principal places of business;
(5) All Other Action. Take any other action, convenient, helpful,
or necessary to carry on the business of the corporation.
APPENDIX V
OPINION OF EDELMAN & CO., LTD.
February 21, 1997
The Board of Directors
Mid-Plains, Inc.
1912 Parmenter Street
Middleton, WI 53562
Gentlemen:
We understand that Mid-Plains, Inc. ("Mid-Plains") and Pioneer
Communications, Inc. ("Pioneer") have entered into an Agreement and Plan of
Merger dated as of December 31, 1996 ("the Agreement") the effect of which,
among other things, shall be that Mid-Plains and Pioneer shall each become
wholly owned subsidiaries of a newly formed holding company (the "Parent").
Under the Agreement, upon consummation of this transaction (the "Merger"),
each share of Pioneer common stock will be exchanged for four (4) shares of
Parent common stock and each share of Mid-Plains common stock will be
exchanged for one (1) share of Parent common stock (the "Exchange Ratio").
The terms and conditions of the Merger are more fully set forth in the
Agreement. We understand that the Merger is intended to be accounted for as
a pooling-of-interests.
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of Mid-Plains common stock of the Exchange Ratio.
In forming our opinion, we have reviewed, among other things: (i) with
respect to Mid-Plains, the Annual Reports on Form 10-K and Annual Reports to
shareholders for the fiscal years ended December 31, 1991 through 1995; the
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996; and
audited financial statements for the fiscal year ended December 31, 1996,
(ii) with respect to Pioneer, the Annual Report to shareholders for the
fiscal year ended December 31, 1995, which includes audited financial
statements; audited financial statements for the fiscal year ended December
31, 1996, the Annual Reports to shareholders for the fiscal years ended
December 31, 1991 through 1994, which contain unaudited financial statements;
and audited financial statements of Dickeyville Telephone Corporation and
Farmers Telephone Company for the fiscal years ended December 31, 1991
through 1995, (iii) certain other information concerning the future prospects
of Mid-Plains and Pioneer, and of the combined entity, as furnished by the
respective companies, (iv) historical stock trading data for Mid-Plains and
Pioneer common stock, and for the stocks of certain larger publicly traded
independent telephone companies, (v) the financial terms of the combination
contemplated by the Agreement and the financial terms of other mergers and
acquisitions which we believed to be relevant, (vi) the business strategy and
shareholder benefits underlying the Merger, as described by senior management
of Mid-Plains and Pioneer, and (vii) such other matters as we deemed
necessary. We also met with certain senior officers of Mid-Plains and
Pioneer to discuss the foregoing as well as other matters relevant to our
opinion, including the past and current business operations, financial
condition and future prospects of Mid-Plains and Pioneer. We also took into
account our assessment of general economic, market, industry and financial
conditions, and such additional financial and other factors as we deemed
relevant.
In conducting our review and preparing our opinion, we relied upon the
accuracy and completeness of the financial and other information provided to
us or as publicly available and did not independently verify any such
information. We relied upon assurances of Mid-Plains and Pioneer management
that the forward-looking information they provided was reasonable and
reflected the best currently available information. We did not inspect any
properties, assets or liabilities of Mid-Plains or Pioneer and did not make
or obtain any evaluations or appraisals of any properties, assets or
liabilities of Mid-Plains or Pioneer. In rendering our opinion, we have
assumed that the Merger will be consummated on the terms described in the
Agreement.
In addition to our services in connection with rendering this opinion, we
have acted as financial advisor to Mid-Plains in connection with this
transaction and will receive a fee for our services upon closing of the Merger.
Our engagement and the opinion expressed herein are for the benefit of the
Mid-Plains Board of Directors. Our opinion is based on economic, market and
other conditions, as of December 31, 1996, and is based upon financial
statements through December 31, 1996. Our opinion relates solely to the
fairness, from a financial point of view, of the Exchange Ratio and does not
address Mid-Plains' decision to effect the Merger. It is understood that,
except for inclusion in full in a proxy statement relating to the Merger,
this letter may not be disclosed or otherwise referred to without our prior
written consent, which will not unreasonably be withheld, except as may
otherwise be required by law or by a court of competent jurisdiction.
Based on and subject to the foregoing and such other factors as we deem
relevant, we are of the opinion that the Exchange Ratio is fair, from a
financial point of view, to the holders of Mid-Plains common stock.
Sincerely,
/s/ Edelman & Co., Ltd.
Edelman & Co., Ltd.
APPENDIX VI
OPINION OF MADISON VALUATION APPRAISERS, INC.
February 17, 1997
Board of Directors
Pioneer Communications, Inc.
Attention: Douglas J. Timmerman, President
140 N. Monroe Street
Lancaster, Wisconsin 53813
RE: Analysis of Fairness Opinion of Edelman & Co., Ltd.
Gentlemen:
Madison Valuation Associates, Inc., ("MVA") was engaged by you to review the
fairness opinion expressed by Edelman & Co., Ltd. ("Edelman") to the
directors of Mid-Plains, Inc., ("Mid-Plains") as to the ownership interests
received by Mid-Plains in the holding company to be established to effect the
proposed merger of Pioneer Communications, Inc. ("Pioneer") and Mid-Plains
and to advise you as to our opinion of whether Edelman's analysis is
reasonable.
More specifically, we were engaged to:
review the report and supporting information prepared by Edelman,
discuss Edelman's report with a representative of Edelman,
study the offering document provided to the stockholders of Pioneer
and all other supporting workpapers we deem to be appropriate,
conduct our independent research on publicly reported business
enterprises and stock transactions in the telecommunications
industry involving companies similar to Pioneer and Mid-Plains, and
present our conclusions regarding the reasonableness of Edelman's
analysis to you in an oral discussion and this summary letter.
We were not engaged to determine the potential value of Pioneer or its stock
in a merger or purchase with any company other than Mid-Plains, and we were
not engaged to prepare an independent opinion as to the fairness of the
proposed transaction involving Pioneer and Mid-Plains. We were also not
engaged to make a recommendation to Pioneer's stockholders or directors about
the decision to accept or reject the exchange offer.
It is our understanding that Mid-Plains and Pioneer have entered into an
Agreement and Plan of Merger (the "Agreement") dated December 31, 1996, the
effect of which, among other things, shall be that Mid-Plains and Pioneer
shall each become wholly-owned subsidiaries of a newly formed holding
company. Under the Agreement, upon consummation of this transaction which
is to be accounted for as a "pooling-of-interests," each share of Pioneer
common stock will be exchanged for four shares of the new company's common
stock and that each share of Mid-Plains common stock will be exchanged for
one share of the new company's common stock. The terms and conditions of the
transaction are detailed in the Agreement.
We have reviewed the Fairness Opinion letter to Mid-Plains by Edelman, dated
January 22, 1997, and Edelman's Memorandum to File dated January 22, 1997,
regarding the Mid-Plains Fairness Opinion as of December 31, 1996, and its
supporting workpapers. In addition, we have discussed Edelman's analysis
with an Edelman representative; studied the offering document to be provided
to the stockholders of Pioneer and other supporting workpapers that we have
deemed appropriate; and conducted our independent research of certain larger,
publicly traded, independent telephone companies and stock transactions in
the telecommunications industry involving companies similar to Pioneer and
Mid-Plains. We presented our conclusions regarding the reasonableness of
Edelman's analysis to you in an oral discussion at the offices of Pioneer on
January 29, 1997, and in this summary letter.
Based on our review of the information relevant to the fairness opinion
expressed by Edelman to the directors of Mid-Plains, and Edelman's supporting
analysis and letter representing its fairness opinion, dated January 22,
1997, and our independent research, it is our opinion that Edelman's analysis
and opinion are reasonable.
In conducting our review and preparing our analysis, we used and relied on
information and data furnished to MVA by Edelman, Pioneer, its agents,
advisors and representatives or otherwise available from generally recognized
public sources, and we do not assume responsibility for the accuracy or
completeness of this information. MVA did not undertake to independently
verify this information. In particular, in forming an opinion about the
reasonableness of Edelman's work, we have reviewed, among other things:
a. Pioneer's Annual Report to shareholders for the fiscal year ended
December 31, 1995, which contains audited financial statements; the
Annual Reports to shareholders for the fiscal years ended December
31, 1991 through 1994, which contain unaudited financial
statements; unaudited financial information for Pioneer as of
September 30, 1996; and the audited financial statements of
Dickeyville Telephone Corporation and Farmers Telephone Company for
the fiscal years ended December 31, 1991 through 1995;
b. Mid-Plains' Annual Reports on Form 10-K and Annual Reports to
shareholders for the fiscal years ended December 31, 1991 through
1995, and the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996;
c. certain other information concerning the future prospects of
Mid-Plains and Pioneer, and of the combined entity, as furnished to
Edelman by the respective companies which was assumed to be
reasonable;
d. historical stock trading data for Mid-Plains and Pioneer common
stock, and for the stocks of certain larger, publicly traded,
independent telephone companies;
e. the financial terms of the combination contemplated by the
Agreement and the financial terms of other mergers and acquisitions
which were considered comparable;
f. the Agreement;
g. Fairness Opinion letter to Mid-Plains by Edelman, dated January 22,
1997 in which Edelman concludes:
"Based on and subject to the foregoing and such
other factors as we deem relevant, we are of the
opinion that, as of December 31, 1996, the Exchange
Ratio is fair, from a financial point of view, to
the holders of Mid-Plains common stock"
h. Edelman Memorandum to File, dated January 22, 1997, re: Mid-Plains
Fairness Opinion as of December 31, 1996; and
i. such other matters as we deemed relevant and necessary including
the past and current business operations, financial condition and
future prospects of Mid-Plains, Pioneer, the general economy and
the telecommunications industry. In rendering our opinion, we have
assumed that the Merger will be consummated on the terms described
in the Agreement.
Pioneer acknowledges that all opinions and advice (written or oral) given by
MVA to Pioneer in connection with this proposed merger are intended solely
for the benefit and use of Pioneer (including its stockholders, management,
directors, and attorneys) in considering the transaction to which they
relate, and Pioneer agrees that no such opinion or advice shall be used for
any other purpose or reproduced, disseminated, quoted, or referred to at any
time, in any manner, or for any purpose, nor shall any public references to
MVA be made by Pioneer, its stockholders, agents, advisors, or
representatives without the prior written consent of MVA, which will not be
unreasonably withheld, except as may otherwise be required by law or by a
court of competent jurisdiction.
Pioneer has agreed to indemnify MVA, its directors, employees, agents and
controlling persons (each an "Indemnified Party") from and against any and
all losses, claims, damages, liabilities and expenses, joint or several, to
which such Indemnified Party may become subject under any federal or state
law, or otherwise, relating to or arising out of the proposed merger or the
performance by MVA of the services contemplated by this engagement and will
reimburse any Indemnified Party for all expenses (including counsel fees and
expenses) as they are incurred in connection with the investigation of,
preparation for, or defense of any pending or threatened claim or any action
or proceeding arising therefrom, whether or not such Indemnified Party is a
party. Pioneer will not be liable under the foregoing indemnification
provision to the extent that any loss, claim, damage, liability, or expense
is found in a final judgment by a court to have resulted primarily from MVA's
gross negligence or bad faith.
This summary letter presents our conclusions regarding our review of the
reasonableness of the fairness opinion expressed by Edelman to the directors
of Mid-Plains. If you have any questions regarding this letter or our
conclusions, please give us a call. We have appreciated the opportunity to
work with you. Thank you for allowing Madison Valuation Associates, Inc.,
to be of service to you.
Sincerely,
MADISON VALUATION ASSOCIATES, INC.
/s/ Robert H. Cramer
Robert H. Cramer
APPENDIX VII
MID-PLAINS, INC.
Consolidated Financial Statements
As of December 31, 1996 and 1995
Together With Report of
Independent Public Accountants
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors,
Mid-Plains, Inc.:
We have audited the accompanying consolidated balance sheets of Mid-Plains,
Inc. (a Wisconsin Corporation) and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, shareholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1996. 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 audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. 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 Mid-Plains, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in Note 3 to the consolidated financial statements, the company
discontinued applying the provisions of Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation," in 1996.
/s/KIESLING ASSOCIATES LLP
Madison, Wisconsin
February 10, 1997
MID-PLAINS, INC.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
1996 1995
In Thousands
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,058 $ 560
Accounts receivable
Due from subscribers 1,069 818
Customer sales and service 941 704
Other, principally connecting
companies 1,313 2,073
Refundable income taxes 138 215
Inventories
Plant materials and supplies 459 376
Communication systems and parts 858 903
Other 413 271
6,249 5,920
PROPERTY, PLANT AND EQUIPMENT
Telephone, in service and under
construction 50,552 46,198
Less accumulated depreciation (21,730) (16,663)
28,822 29,535
INVESTMENTS AND OTHER ASSETS
Cellular limited
partnership interest 4,101 4,374
Personal Communication
Services deposit 360 -0-
Other 356 885
4,817 5,259
TOTAL ASSETS $ 39,888 $ 40,714
MID-PLAINS, INC.
CONSOLIDATED BALANCE SHEETS
December 31, December
31,
1996 1995
In Thousands
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 216 $ 973
Notes payable to banks -0- 4,440
Accounts payable 3,093 2,949
Other 1,089 636
4,398 8,998
LONG-TERM DEBT 12,185 7,597
DEFERRED CREDITS
Deferred income taxes 2,568 3,230
Unamortized investment tax credits 177 236
Other 1,063 931
3,808 4,397
COMMITMENTS AND CONTINGENCIES (See Notes)
SHAREHOLDERS' EQUITY
Common stock 11,889 6,610
Additional paid-in capital -0- 5,059
Retained earnings 7,608 8,053
19,497 19,722
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $39,888 $ 40,714
The accompanying notes are an integral part of the consolidated
financial statements.
TABLE
MID-PLAINS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1996 1995 1994
In Thousands Except For Per Share Data
OPERATING REVENUES
Telephone operations -
Local network services $ 5,211 $ 4,265 $3,548
Network access and long
distance services 12,259 11,530 9,916
Other 2,391 2,308 2,096
System sales and services 7,226 6,475 5,900
27,087 24,578 21,460
OPERATING EXPENSES
Telephone operations -
Plant operations 3,397 2,818 2,567
Depreciation 3,428 3,073 2,307
Customer operations 2,809 2,524 2,411
Corporate operations 3,037 2,531 2,381
General taxes 1,175 1,027 868
System sales and services -
Cost of sales and services 4,230 4,118 3,429
Operating expenses 2,295 2,023 2,015
20,371 18,114 15,978
OPERATING INCOME 6,716 6,464 5,482
Other income 42 27 18
Interest expense (1,177) (957) (896)
INCOME BEFORE INCOME TAX EXPENSE
AND EXTRAORDINARY ITEM 5,581 5,534 4,604
Income tax expense 2,139 2,109 1,715
INCOME BEFORE EXTRAORDINARY ITEM 3,442 3,425 2,889
EXTRAORDINARY ITEM 1,782 -0- -0-
NET INCOME $1,660 $ 3,425 $2,889
EARNINGS PER SHARE
Income before Extraordinary Item $ 1.73 $ 1.73 $ 1.47
Extraordinary Item (.89) -0- -0-
Net Income $ .84 $ 1.73 $ 1.47
The accompanying notes are an integral part of the consolidated
financial statements.
TABLE
MID-PLAINS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Additional Total
Common Stock Paid-in Retained
Shareholders'
Shares Amount Capital Earnings Equity
In Thousands
Balances,
December 31, 1993 1,965 $6,549 $4,568 $5,649 $16,766
Net income 2,889 2,889
Cash dividend -
$.86 a share (1,693) (1,693)
Stock purchase plan 9 32 238 270
Balances,
December 31, 1994 1,974 6,581 4,806 6,845 18,232
Net income 3,425 3,425
Cash dividend -
$ 1.12 a share (2,217) (2,217)
Stock purchase plan 9 29 253 282
Balances,
December 31, 1995 1,983 6,610 5,059 8,053 19,722
Net income 1,660 1,660
Cash dividend -
$1.06 a share (2,105) (2,105)
Stock purchase plan 6 178 42 220
Conversion to
no par common stock 5,101 (5,101) -0-
Balances,
December 31, 1996 1,989 $11,889 $ -0- $7,608 $19,497
The accompanying notes are an integral part of the consolidated
financial statements.
TABLE
MID-PLAINS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1996 1995 1994
In Thousands
OPERATING ACTIVITIES
Net income $1,660 $3,425 $2,889
Add (Deduct) adjustments to
reconcile net income to net
cash from operations:
Extraordinary Item 1,782 -0- -0-
Depreciation 3,528 3,173 2,390
Deferred income taxes 431 390 485
Change in accounts and other
receivables 272 (211) (369)
Change in inventories (38) (134) 51
Change in accounts payable 144 150 809
Change in other assets and
liabilities 1,151 130 (139)
Net cash from operating activities 8,930 6,923 6,116
FINANCING ACTIVITIES
Long-term borrowings -0- 5,000 -0-
Repay long-term debt (969) (3,384) (802)
Short-term bank notes:
Borrowings 16,816 9,230 400
Repayments (16,456) (6,090) (1,500)
Dividends paid (2,105) (2,217) (1,693)
Stock purchase plan 220 282 270
Net cash from (used in)
financing activities (2,494) 2,821 (3,325)
INVESTING ACTIVITIES
Additions to property, plant
and equipment (5,901) (7,146) (4,233)
Investment in cellular
partnership 273 (1,995) -0-
Personal Communication
Services deposit (360) -0- -0-
Other, net 50 (229) 22
Net cash used in
investing activities (5,938) (9,370) (4,211)
CASH AND CASH EQUIVALENTS
Net increase (decrease)
during year 498 374 (1,420)
Beginning of year 560 186 1,606
End of year $1,058 $ 560 $ 186
The accompanying notes are an integral part of the consolidated
financial statements.
MID-PLAINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Name Change - On April 29, 1996, the shareholders approved amendments
to the company's Articles of Incorporation which included changing the
name from Mid-Plains Telephone, Inc. to Mid-Plains, Inc.
Business and Consolidation - Mid-Plains Inc.'s consolidated financial
statements include the accounts of Mid-Plains, its wholly-owned
subsidiary, Mid-Plains Communications Systems, Inc. and its 75%
interest in PCS Wisconsin, LLC. All significant inter-company items
have been eliminated in consolidation. The preparation of
consolidated financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Mid-Plains, Inc.'s main business is a telecommunications provider
which provides telephone and data services to customers within its 116
square mile service area located in Dane County, Wisconsin. Mid-Plains
Communications Systems, Inc.'s operations provide business
systems, installation and service to a base of customers throughout
southern Wisconsin and northern Illinois. PCS Wisconsin, LLC was
established in 1996 to build and operate a personal communication
system in south central and southwestern Wisconsin.
Regulation - The accounting policies of Mid-Plains, Inc. and its
subsidiaries (Mid-Plains) conform to generally accepted accounting
principles, and where applicable, the accounting principles prescribed
by the Public Service Commission of Wisconsin (PSCW).
Prior to the second quarter of 1996, Mid-Plains had followed the
accounting for regulated enterprises as prescribed by Statement of
Financial Accounting Standards No.71, "Accounting for the Effects of
Certain Types of Regulation" (SFAS 71). This accounting requires the
deferral of certain costs and obligations based upon recovery of such
amounts in future years. SFAS 71 also requires companies to
depreciate plant and equipment over lives acceptable to the regulator.
In the second quarter of 1996, Mid-Plains concluded that generally
accepted accounting principles prescribed by SFAS 71 were no longer
appropriate. As a result, Mid-Plains recorded a second quarter
extraordinary non-cash after-tax charge of $1,782,000 (See note 3).
Additionally, Mid-Plains has adjusted its estimated depreciated lives
of its plant and equipment to give effect to shorter, more economical
realistic lives.
In 1994, the Wisconsin Legislature enacted the Telecommunications Act
of 1993. As a result of this and other regulatory and legislative
activities, management concluded that the recovery of certain
regulatory assets and payment of certain regulatory liabilities
related to employee and retiree benefits would not be realized. The
elimination of these regulatory assets of $360,000 and regulatory
liabilities of $574,000 were reflected as increases in the 1994
operating expenses and revenues, respectively. These changes in
estimates increased 1994 net income by $130,000.
Property, Plant and Equipment - Telephone property is stated at
original cost of construction. Beginning in September 1995,
regulators modified accounting principles for the allowance for funds
used during construction (AFUDC) to conform with Statement of
Financial Accounting Standards No. 34 "Capitalization of Interest
Cost". During 1996, interest capitalized relating to plant
construction was $38,000. No AFUDC was taken in 1995 or in 1994.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, Plant and Equipment -
Normal retirements of telephone property are charged against
accumulated depreciation along with
the costs of removal less salvage, with no gain or loss recognition.
Renewals and betterments of plant and equipment are capitalized while
repairs, as well as renewals of minor items, are charged to operating
expenses.
As a result of the discontinuation of applying SFAS 71, beginning July
1, 1996, depreciation of telephone plant is provided for primarily on
the straight-line method over estimated service lives. Prior to that
date, depreciation of telephone plant was provided for primarily on
the straight-line method using class rates acceptable to the PSCW. The
composite rates are 7.3%, 7.3%, and 6.1%, for the years 1996, 1995,
and 1994, respectively.
When non-telephone property is sold or retired, a gain or loss is
recognized. Depreciation is provided on the straight-line method over
estimated service lives.
Inventories - Inventories are stated at the lower of cost or market.
The cost of materials and supplies inventory, which is used primarily
for the construction of telephone plant, is determined principally by
the average cost method.
The cost of communications systems and parts inventory, held primarily
for sale and servicing of telephone systems, is determined principally
by the First-In, First-Out (FIFO) method.
Income Taxes - Mid-Plains files a consolidated federal income tax
return.
Income tax expense is based on reported earnings before income taxes.
Refundable income taxes reflect the difference between the amount of
estimated income taxes prepaid and the amount currently owed.
Deferred income taxes have been established to reflect the impact of
temporary differences between the amount of assets and liabilities
recognized for financial reporting purposes and such amounts
recognized for tax purposes. In addition, deferred tax balances are
adjusted to reflect tax rates, based on currently enacted tax laws,
that are anticipated to be in effect in the years in which the
temporary differences are expected to reverse.
Investment tax credits which were deferred prior to 1986 are being
amortized over the service life of the related property.
Revenue Recognition - Mid-Plains recognizes revenues when earned,
regardless of the period in which they are billed.
Telephone Revenues - Mid-Plains is required to provide service
(and grant credit) to subscribers within its defined service
territory.
Revenues from long-distance services are derived from charges for
access to Mid-Plains' local exchange network, subscriber line
charges and contractual arrangements for billing and collection
and other services. Interstate access revenues are based on an
average schedule company settlement formula administered by the
National Exchange Carrier Association (NECA) as regulated by the
FCC. Intrastate access revenues are based on an individual
company tariff access charge structure regulated by the PSCW.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition (Continued)
The percentage of revenues for long-distance services provided to
carriers which exceeded 10% of telephone revenues were: AT&T
Communications, Inc. 21% in 1996, 23% in 1995, and 30%
in 1994; Ameritech 12% in 1996, 15% in 1995, and 16% in 1994; and
MCI 11% in 1996, 10% in 1995, and 11% in 1994. No other customer
accounted for more than 10% of total revenues.
System Sales and Services Revenues - Revenues from system sales
and services are derived from the sale, installation and servicing
of deregulated communications systems. Mid-Plains grants credit
to customers, substantially all of whom are located in southern
Wisconsin.
Customer contracts for sales and installations are accounted for
using the completed-contract method which recognizes income only
if the contract is completed, or substantially so. This resulted
in net deferred revenues of $273,000 and $185,000, at December 31,
1996 and 1995, respectively, which are included in other current
liabilities.
Cash and Cash Equivalents - Cash and cash equivalents include cash and
certificates of deposit with original maturities of three months or
less. Cash and cash equivalents are stated at cost which approximates
market value. At December 31, 1996 and 1995, Mid-Plains had bank
deposits in excess of federally insured limits of approximately
$682,000 and $510,000, respectively.
Supplemental Cash Flow Disclosures - Mid-Plains, during 1996, 1995,
and 1994, paid interest in the amount of approximately $1,068,000,
$960,000, and $888,000, respectively, and income taxes in the amount
of approximately $1,658,000, $1,902,000, and $1,137,000, respectively.
Earnings Per Share - Earnings per share are computed by dividing net
income by the weighted average number of shares of common stock
outstanding. The number of shares used in this calculation were: 1996
- 1,985,795; 1995 - 1,978,725; and 1994 - 1,969,628.
2. PROPOSED MERGER
Mid-Plains, Inc. (Mid-Plains) and Pioneer Communications, Inc.
(Pioneer) have entered into an Agreement and Plan of Merger (Merger
Agreement) dated December 31, 1996, which will result in the
combination of Mid-Plains and Pioneer into a holding company. The
proposed merger, which will be accounted for as a pooling of
interests, has been approved by the respective Board of Directors.
It is still subject to approval by the shareholders of each company.
The companies expect to receive shareholder approvals and complete the
proposed combination during the second quarter of 1997. Under the
terms of the proposed Merger Agreement, Mid-Plains' shareholders will
become shareholders of the holding company's common stock on a
share-for-share basis and Pioneers' shareholders will become shareholders
of the holding company's common stock on a four-for-one basis.
3. EXTRAORDINARY ITEM - SFAS 71
On a regular basis, management has evaluated the continued
applicability of accounting for its telecommunications operations
under SFAS 71. In the second quarter of 1996, Mid-Plains concluded
that generally accepted accounting principles (GAAP) prescribed by
SFAS 71 were no longer appropriate due to a number of factors
including: The Federal Telecommunications Act of 1996; Mid-Plains'
application pending before the Public Service Commission of Wisconsin
(PSCW) for authority to implement an alternative plan to traditional
rate-of-return regulation; and recognition of potential increased
competition.
3. EXTRAORDINARY ITEM - SFAS 71 (Continued)
As a result of the discontinuation of applying SFAS 71, Mid-Plains
recorded a second-quarter extraordinary noncash after-tax charge of
$1,782,000. The following table is a summary of the extraordinary
charge:
In Thousands
Pretax After tax
Increase in the accumulated
depreciation balance $ 3,036 $ 1,845
Non-plant assets and liabilities (121) (63)
$ 2,915 $ 1,782
The adjustment of $3,036,000 to net telecommunications plant was
necessary as the estimated useful lives historically acceptable to the
PSCW did not keep up with the rapid pace of technological changes in
the industry and differed significantly from those used by unregulated
enterprises. Plant balances were adjusted by increasing the
accumulated depreciation balance. The increase was supported by a
depreciation analysis that identified inadequate accumulated
depreciation levels which Mid-Plains believes developed over the years
primarily as a result of the systematic under-depreciation of assets
resulting from the regulatory process. An impairment analysis was
performed that did not identify any additional amounts not recoverable
from future operations.
When adjusting its net telecommunications plant, Mid-Plains gave
effect to shorter, more economic realistic lives. The following is
a summary of average lives of the affected telephone plant before and
after the discontinuance of SFAS 71.
Asset Category Before After
Digital Switching Equipment 13 10
Underground Metallic Cable 28 20
Buried Metallic Cable 23 19
4. COMMON STOCK
On April 29, 1996, the shareholders of Mid-Plains approved amendments
to the Company's Articles of Incorporation changing the Company's
common stock from $3.33 1/3 par value to no par value and increasing
the number of authorized shares of common stock from 3,000,000 to
25,000,000. The number of shares issued and outstanding as of
December 31, 1996 and 1995 were 1,989,041 and 1,982,960, respectively.
5. LONG-TERM DEBT
The following table sets forth interest rates and other information
on long-term debt outstanding at December 31, after giving effect to
February 1997 refinancing of $2,601,000 Wisconsin Investment Board
(WIB) First Mortgage Notes and $4,800,000 notes payable to banks.
Interest December 31,
Rates Maturities 1996 1995
In Thousands
Registered Subordinate
Debentures 8% 2000 $5,000 $5,000
Wisconsin Investment
Board First
Mortgage Notes:
8-1/2% 1974-1998 - 414
9-3/4% 1987-1997 - 653
10-1/2% 1991-2000 - 2,503
RTFC First Mortgage Note 6.3% 1997-2012 7,401 -
12,401 8,570
Less current portion 216 973
Long-term debt 12,185 7,597
* Variable rate based on RTFC's cost
On January 31, 1997, Mid-Plains entered into a financing agreement with the
Rural Telephone Finance Corporation (RTFC) that permits the Company to borrow
up to $22,105,000 within four years at the RTFC's variable or fixed rates of
interest as determined by RTFC. Mid-Plains is required to purchase
Subordinated Capital Certificates (SCCs) equal to 5% of the advanced
amount. SCCs are noninterest-bearing and are returned as the loan
is repaid. The RTFC financing agreements provide that: $12,000,000 of the loan
is available for refinancing existing debt, for capital expenditures and to
provide working capital for telephone operations; $9,000,000 is available to
invest in PCS Wisconsin (See note 10) and $1,105,000 is available to purchase
SCCs.
Substantially all of the assets of Mid-Plains are pledged under the RTFC
mortgage note.
In connection with the RTFC financing agreement, Mid-Plains is subject to
restrictions on debt and the amount of retained earnings available for cash
dividends. Under the agreement, at December 31, 1996, $3,542,000 of its
retained earnings were not restricted and thus available for the payment of
dividends.
Long-term debt maturing within each of the next five years is as follows: 1997 -
$216,000; 1998 - $305,000; 1999 - $327,000; 2000 - $5,351,000 and 2001 -
$376,000.
6. SHORT-TERM FINANCING
The table below contains information related to short term financing:
Year Ended December 31,
1996 1995 1994
In Thousands
Balance of notes payable to
banks at end of year $ * $4,440 $1,300
Weighted average interest rate
at end of year 8.10% 8.30% 8.50%
Maximum amount outstanding
during year $5,682 $4,440 $2,400
Average amount outstanding
during year $3,864 $1,619 $1,392
Weighted average interest
rate during the year 8.10% 8.80% 6.91%
* Balance of notes payable to banks at December 31, 1996 was
included in long-term debt due to refinancing (See note 5).
After giving effect to the refinancing, Mid-Plains has
available unused lines-of-credit of $7,000,000 for general
corporate purposes.
7. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment were as
follows:
December 31,
1996 1995
In Thousands
Land $ 318 $ 318
Buildings 3,434 3,431
Digital switching equipment 17,166 15,668
Cable, wiring and conduit 24,283 21,813
Other 5,257 4,879
50,458 46,109
Under construction 94 89
50,552 46,198
Less accumulated depreciation (21,730) (16,663)
$28,822 $29,535
The 1996 increase in accumulated deprecation includes $3,036,000 due
to the discontinuation of applying SFAS 71.
8. INCOME TAXES
The components of income tax expense were as follows:
Year Ended December 31,
1996 1995 1994
In Thousands
Current:
Federal $1,377 $1,479 $1,018
State 357 373 263
Total current 1,734 1,852 1,281
Deferred:
Federal 363 247 395
State 91 74 110
Total deferred 454 321 505
Investment tax credits (49) (64) (71)
Total income tax expense $2,139 $2,109 $1,715
The following is a reconciliation of the statutory federal income tax
rate of 34% to Mid-Plains' effective income tax rate.
Year Ended December 31,
1996 1995 1994
Statutory federal income tax
rate 34.0% 34.0% 34.0%
State income taxes, net of
federal benefit 5.3 5.4 5.3
Amortization of investment tax
credits (.9) (1.2) (1.6)
Amortization of excess deferred
federal taxes (.4) (.6) (.7)
Other differences .3 .5 .3
Effective income tax rate 38.3% 38.1% 37.3%
The components of Mid-Plains' deferred tax asset (liability) were as
follows:
December 31,
1996 1995
In Thousands
Deferred tax asset:
Unamortized investment tax credit $ 60 $ 112
Compensated absences 242 196
Deferred compensation 115 106
Deferred income 102 91
Other 178 143
Deferred tax asset 697 648
Deferred tax liability:
Property, plant and equipment
depreciation (2,044) (2,636)
Cellular interest (954) (920)
Other (61) (118)
Deferred tax liabilities (3,059) (3,674)
Net deferred tax liability (2,362) (3,026)
Less: Current deferred tax asset (206) (204)
Long-term deferred tax liability $(2,568) $(3,230)
9. BENEFIT PLANS
Pension Plan - Mid-Plains has a pension plan covering most of the
employees of its telephone operations. The plan is non-contributory
and provides for benefits to be paid to eligible employees at
retirement based primarily upon years of service with Mid-Plains and
compensation rates near retirement. Mid-Plains' funding policy has
been to contribute annually an amount up to the maximum amount that
can be deducted for federal income tax purposes. Plan assets consist
of fixed income securities.
Mid-Plains applies the Financial Accounting Standards Board's SFAS 87,
Employers' Accounting for Pensions, using a measurement date of
September 30 for financial reporting purposes.
The funded status of the plan at October 1 for the year ended December
31 was as follows:
1996 1995
In Thousands
Vested benefit obligation $ 5,717 $4,889
Non-vested benefit obligation 119 89
Total actuarial present value of
accumulated benefit obligation $ 5,836 $ 4,978
Projected benefit obligation for
service rendered to date $(9,124) $(7,557)
Plan assets at fair value as of
October 1 6,748 6,101
Plan assets less than
projected benefit obligation (2,376) (1,456)
Unrecognized loss on assets 2,135 1,425
Unrecognized net asset at transition (94) (115)
Unrecognized prior service cost 333 243
Amount contributed to plan for
fourth quarter 155
Prepaid pension (accrued) cost at
December 31 $ (2) $ 252
On December 17, 1996, the Company's Board of Directors voted to
terminate the pension plan effective April 15, 1997. It is
anticipated that plan settlement will not have a material effect on
the Company.
The net periodic pension cost consists of the following:
1996 1995 1994
In Thousands
Service cost -
benefits earned during the period $ 506 $ 494 $548
Interest cost on
projected benefit obligation 488 454 449
Actual return on plan assets (228) (719) 230
Net amortization and deferral (201) 403 (584)
Net pension cost $ 565 $ 632 $643
Rates used for calculations -
Discount rate - Interest rate used to
adjust for the time value of money 6.50% 6.50% 6.50%
Assumed rate of increase in
compensation levels 5.26% 5.30% 5.33%
Expected long-term rate of return on
pension assets 7.75% 7.75% 7.75%
401(k) Benefit Plan - Mid-Plains offers a defined contribution 401(k)
benefit plan to substantially all employees. The cost of the 401(k)
plan was as follows: 1996 - $189,000, 1995 - $179,000, and 1994 -
$178,000.
9. BENEFIT PLANS (Continued)
Retiree Health Insurance Plan - Mid-Plains has a retiree health
insurance plan for telephone operations employees retiring after 1992.
The plan, which is unfunded, provides for limited coverage to retirees
between the age of 60 and 65, based on accumulated sick leave in
excess of 720 hours. The cost of the plan was $67,000 in 1996,
$48,000 in 1995, and $26,000 in 1994.
Stock Purchase Plan - Mid-Plains has a stock purchase plan which
allows employees and directors to purchase limited quantities of
Mid-Plains, Inc. stock. Mid-Plains has a pricing policy under which
employees, other than officers, may purchase shares at a discounted
market price and officers and directors may buy shares at full market
price.
Deferred Compensation Plan - Mid-Plains has an unfunded deferred
compensation plan whereby an officer or director can defer a portion
of current officers' salaries or director fees. For income tax
purposes, a deduction is allowed at the time compensation is paid to
the participants.
10. COMMITMENTS AND CONTINGENCIES
Capital expenditures for 1997 are estimated at $9 million, and
substantial commitments have been made in connection with such
expectations.
On January 14, 1997, PCS Wisconsin LLC (PCS-WI), a subsidiary of
Mid-Plains in which it has a 75% interest, was the successful bidder for
a broadband Personal Communications Services (PCS) F-block license at
an auction of the FCC. This 10MHz PCS license will, when granted,
authorize the Company to provide two-way voice and data services on
a new wireless digital network. The license covers Dane County and
nine adjacent counties with a total population of approximately
600,000. PCS-WI's bid for the license was $3,248,000. Pursuant to
the FCC's auction procedures, on January 23, 1997, PCS-WI applied
$325,000 of its bid deposits as a 10% down payment and will pay
another 10% within five days of grant of license with the remaining
80% to be financed by the federal government over the next 10 years.
PCS-WI will be required by the FCC to construct an operating system
that will be capable of providing service to at least 25% of the
population in the license area within five years of the grant of the
license. PCS-WI anticipates that construction, development and
introduction of PCS networks and services will require substantial
capital and operating expenditures over the next several years.
11. INVESTMENT, LIMITED PARTNERSHIP
Mid-Plains has an 18% share in a cellular partnership with Ameritech
which provides cellular telephone service in Madison,
Janesville/Beloit and bordering areas. The investment is accounted
for using the cost method.
From time to time, the general partner may request additional capital
contributions from the limited partners to fund expansion or operation
of cellular service. In the event that additional capital is
requested, Mid-Plains may either contribute an amount equal to its
then current percentage interest or have its percentage interest
reduced. During 1995, Mid-Plains participated in a capital call and
contributed $1,995,000 to the partnership. During 1996, Mid-Plains
received distributions from the partnership of $273,000. No
distributions were received from the partnership during 1995 and 1994.
12. SEGMENT INFORMATION
Mid-Plains operates in two industry segments: telephone services and
the sales and service of communications systems.
Year ended December 31,
1996 1995 1994
In Thousands
Operating Revenues
Telephone operations $19,861 $18,103 $15,560
System sales and services 7,226 6,475 5,900
$27,087 $24,578 $21,460
Operating Income
Telephone operations $ 6,015 $6,130 $5,026
System sales and services 701 334 456
$ 6,716 $ 6,464 $5,482
Identifiable assets
Telephone operations $37,259 $38,441 $31,508
System sales and services 2,629 2,273 2,381
$39,888 $40,714 $33,889
Depreciation
Telephone operations $ 3,428 $3,073 $2,307
System sales and services 100 100 83
$ 3,528 $ 3,173 $2,390
Capital expenditures
Telephone operations $ 5,799 $7,016 $4,089
System sales and services 102 130 144
$ 5,901 $7,146 $4,233
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents and short-term debt
are based on face amounts which approximate fair value.
After giving effect to refinancing (See Note 5), the fair value of
long-term debt, estimated using discounted cash flow analysis based
on Mid-Plains estimated current incremental borrowing rates for debt
with similar terms, was as follows:
1996 1995
In Thousands
Carrying amount $12,401 $8,570
Fair market value $12,901 $9,058
It was not practicable to estimate the fair market value of Mid-Plains
investment in the cellular limited partnership interest because of
lack of quoted market prices. The carrying amount at December 31,
1996 is based upon the cost method of accounting. Management believes
this amount is not impaired.
14. QUARTERLY FINANCIAL INFORMATION (Unaudited):
Quarter Ended
March 31 June 30 Sept. 30 Dec.31
In Thousand Except for Per Share Data
1996
Operating Revenues $6,609 $6,379 $7,309 $6,790
Operating Income $1,706 $1,663 $1,840 $1,507
Income before
Extraordinary Item $ 887 $ 899 $ 954 $ 702
Net Income (loss) $ 887 $ (833) $ 954 $ 702
Earnings per Share $ .45 $ (.45) $ .48 $ .36
1995
Operating Revenues $5,746 $6,019 $6,710 $6,103
Operating Income $1,535 $1,706 $1,856 $1,367
Net Income $ 825 $ 946 $ 976 $ 678
Earnings per Share $ .42 $ .46 $ .49 $ .36
The second quarter of 1996 includes a $1,782,000 ($.89 per share)
after tax charge related to the discontinuance of applying SFAS 71,
as discussed in Note 3 above.
APPENDIX VIII
Pioneer Communications, Inc.
Lancaster, Wisconsin
Consolidated Financial Statements
Years Ended December 31, 1996, 1995 and 1994
With Independent Auditor's Report
Independent Auditor's Report
To the Board of Directors and Stockholders
Pioneer Communications, Inc.
We have audited the accompanying consolidated balance sheets of Pioneer
Communications, Inc. (a Wisconsin corporation) and subsidiaries, as of
December 31, 1996 and 1995, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the three years
in the period ended December 31, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
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 consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Pioneer
Communications, Inc. and subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
/s/ KIESLING ASSOCIATES LLP
Madison, Wisconsin
April 2, 1997
PIONEER COMMUNICATIONS, INC.
Lancaster, Wisconsin
Consolidated Balance Sheets
December 31
1996 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 844,290 $ 659,917
Temporary investments 3,200,000 2,600,000
Accounts receivable -
Due from subscribers 344,365 373,203
Directory 345,421 324,425
Interexchange carriers 553,044 544,170
Other 111,314 72,445
Inventories -
Plant materials and supplies 204,207 155,560
Communications systems and parts 41,349 34,059
Prepaid taxes 57,935 213,668
Prepaid directory expense 135,011 114,297
Deferred income taxes 30,863 17,014
Other 50,225 46,694
5,918,024 5,155,452
PROPERTY AND EQUIPMENT
Telephone plant in service
and under construction 10,766,319 10,322,477
Other property 1,245,311 1,306,797
12,011,630 11,629,274
Less accumulated depreciation (6,431,746) (5,775,980)
5,579,884 5,853,294
NONCURRENT ASSETS
Investments 302,014 302,014
Deferred charges 796 5,479
Deferred regulatory assets 15,855 16,757
318,665 324,250
TOTAL ASSETS $ 11,816,573 $11,332,996
The accompanying notes are an integral part of these consolidated
financial statements.
PIONEER COMMUNICATIONS, INC.
Lancaster, Wisconsin
Consolidated Balance Sheets
December 31
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable -
Interexchange carriers $ 273,982 $ 254,967
Directory 96,825 86,484
Other, trade 258,736 422,156
Current portion of long-term debt 166,748 170,894
Accrued taxes 15,095 3,966
Other 47,682 65,399
859,068 1,003,866
LONG-TERM DEBT, less current portion 3,292,306 3,453,697
DEFERRED CREDITS
Unamortized investment tax credit 116,768 145,128
Deferred income taxes 469,943 288,909
Deferred regulatory liability 90,335 111,752
677,046 545,789
STOCKHOLDERS' EQUITY
Common stock - $.01 par value,
500,000 shares authorized,
173,140 and 164,340 shares
issued and outstanding 1,731 1,643
Additional paid-in capital 1,873,873 1,504,206
Director stock option plan -0- 360,955
Retained earnings 5,112,549 4,462,840
6,988,153 6,329,644
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,816,573 $11,332,996
The accompanying notes are an integral part of these consolidated
financial statements.
PIONEER COMMUNICATIONS, INC.
Lancaster, Wisconsin
Consolidated Statements of Income
Year Ended December 31
1996 1995 1994
OPERATING REVENUES
Telephone operations
Local network services $ 1,341,095 $ 1,239,967 $ 866,973
Network access and
long distance services 3,064,029 3,182,354 3,189,816
Other 490,705 501,761 621,700
Directory revenues 857,352 742,345 581,426
Equipment sales and rentals 340,546 294,668 277,088
6,093,727 5,961,095 5,537,003
OPERATING EXPENSES
Plant operations 502,459 580,185 624,779
Depreciation 802,376 780,750 598,340
Customer operations 777,317 948,008 964,722
Corporate operations 596,391 510,836 478,864
General Taxes 273,682 268,299 255,933
Directory expense 802,539 772,923 589,494
Cost of equipment sales and rentals 212,012 177,681 197,268
3,966,776 4,038,682 3,709,400
OPERATING INCOME 2,126,951 1,922,413 1,827,603
OTHER INCOME AND EXPENSE
Interest and other income 196,707 143,062 48,636
Interest expense (231,299) (246,543) (235,881)
(34,592) (103,481) (187,245)
INCOME BEFORE INCOME TAX EXPENSE 2,092,359 1,818,932 1,640,358
INCOME TAX EXPENSE 793,375 671,923 640,997
NET INCOME $ 1,298,984 $ 1,147,009 999,361
Earnings per share $ 7.50 $ 6.62 $ 5.82
The accompanying notes are an integral part of these consolidated
financial statements.
PIONEER COMMUNICATIONS, INC.
Lancaster, Wisconsin
Consolidated Statements of Stockholders' Equity
Director
Additional Stock
Common Stock Paid-In Option Retained
Shares Amount Capital Plan Earnings Total
Balance at
December 31, 1993 164,340 $ 1,643 $1,504,206 $ 212,425 $3,449,490 $5,167,764
Add - Net income 999,361 999,361
- 1994 Grants 70,770 70,770
Deduct - Dividends
(3.25/share) (557,830) (557,830)
Balance at
December 31, 1994 164,340 $ 1,643 $1,504,206 $ 283,195 $3,891,021 $5,680,065
Add - Net income 1,147,009 1,147,009
- 1995 Grants 77,760 77,760
Deduct - Dividends
(3.50/share) (575,190) (575,190)
Balance at
December 31, 1995 164,340 1,643 $1,504,206 $ 360,955 $4,462,840 $6,329,644
Add - Net income 1,298,984 1,298,984
Deduct - Dividends
(3.75/share) (649,275) (649,275)
Grants Exercised 8,800 88 369,667 (360,955) 8,800
Balance at
December 31, 1996 173,140 $ 1,731 $ 1,873,873 $ -0- $5,112,549 $6,988,153
The accompanying notes are an integral part of these consolidated
financial statements.
PIONEER COMMUNICATIONS, INC.
Lancaster, Wisconsin
Consolidated Statements of Cash Flows
Years Ended December 31
1996 1995 1994
Increase (Decrease) in Cash
and Cash Equivalents
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,298,984 $1,147,009 $ 999,361
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 807,512 795,758 616,096
Deferred income tax expense 167,185 215,698 149,239
Amortization of investment
tax credits (28,360) (33,144) (30,181)
Regulatory assets and liabilities (20,515) (25,593) (21,505)
Directors' stock option plan -0- 77,769 70,770
Realized loss on investments -0- -0- 50,000
Changes in assets and liabilities:
(Increase) Decrease in:
Accounts receivable (39,901) (75,414) (154,099)
Inventories (55,937) 4,319 (74,333)
Prepaid taxes 155,733 16,267 -0-
Deferred charges 4,683 25,462 (91,480)
Other -0- -0- 16,327
Increase (Decrease) in:
Accounts payable (134,064) (133,233) 151,812
Accrued taxes 11,129 (2,391) (181,228)
Other (41,962) (5,366) 55,074
Net cash provided by
operating activities $ 2,124,487 $2,007,132 $1,555,853
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (545,188) (518,875) (1,565,243)
Purchase of temporary investments (1,900,000) (2,000,000) (1,000,000)
Proceeds from sale of
temporary investments 1,300,000 800,000 1,798,250
Purchase of other investments -0- (66,303) (25,000)
Cost of removing plant, net of salvage 11,086 5,829 85,588
Net cash used in investing activities $(1,134,102)$(1,779,349) $ (706,405)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowing -0- -0- 245,000
Repayment of long-term debt (165,537) (183,469) (178,547)
Dividends paid (649,275) (575,190) (557,830)
Other 8,800 -0- -0-
Net cash used in financing activities $ (806,012) $ (758,659) $(491,377)
Net Increase (Decrease) in Cash
and Cash Equivalents 184,373 (530,876) 358,071
Cash and Cash Equivalents
at Beginning of Year 659,917 1,190,793 832,722
Cash and Cash Equivalents at End of Year $ 844,290 $ 659,917 $1,190,793
The accompanying notes are an integral part of these consolidated
financial statements.
PIONEER COMMUNICATIONS, INC.
Lancaster, Wisconsin
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accounting policies of Pioneer Communications, Inc. (Company) and
its subsidiaries conform to generally accepted accounting principles.
Management uses estimates and assumptions in preparing its consolidated
financial statements. Those estimates and assumptions affect the
reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported revenues and
expenses. Telephone operations reflect practices appropriate to the
telephone industry.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, The Farmers Telephone
Company and Dickeyville Telephone Corporation. All material
intercompany transactions have been eliminated in consolidation.
Business of Subsidiaries
The Company was organized as a holding company primarily to acquire and
operate communications-related companies. In addition, the Company
publishes directories for local telephone companies in Wisconsin and
surrounding states.
The Farmers Telephone Company (Farmers) and Dickeyville Telephone
Corporation (Dickeyville) provide local and long distance telephone
service to customers located in southwestern Wisconsin.
Accounts Receivable
The Company and Dickeyville use the reserve method for directory and
certain due from subscriber accounts. The reserve for uncollectibles
at December 31, 1996, 1995 and 1994 are $10,606, $13,913 and $-0-,
respectively, for directory accounts and $11,127, $8,965 and $-0-,
respectively, for due from subscriber accounts. The expense for
uncollectible accounts, net of recoveries, were $13,328, $35,929 and
$28,038 for directory accounts for 1996, 1995 and 1994, respectively.
The expense for uncollectible accounts, net of recoveries, were
$4,772, $11,666 and $1,561 for certain due from subscriber accounts
for 1996, 1995 and 1994, respectively.
Property and Equipment
Telephone plant and other property are capitalized at original cost,
including the capitalized cost of salaries and wages, materials,
certain payroll taxes and employee benefits. Beginning in September
1995, regulators modified accounting principles for the allowance for
funds used during construction (AFUDC) to conform with Statement of
Financial Accounting Standards No. 34 "Capitalization of Interest
Cost". The impact of this change was not material. No AFUDC was taken
in 1996, 1995, or 1994.
The Company provides for depreciation for financial reporting purposes
on the straight-line method by the application of rates, based on the
estimated service lives of the various classes of depreciable property,
as approved by the Board of Directors. These estimates are subject to
change in the near term.
Depreciation on depreciable property totaled $807,512, $795,758 and
$616,096, which resulted in composite rates of 7.0% for both 1996 and
1995 and 5.3% for 1994.
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment (Continued)
Renewals and betterment of units of property are charged to telephone
plant in service. When telephone plant is retired, its cost is removed
from the asset account and charged against accumulated depreciation,
together with removal cost less any salvage realized. No gains or
losses are recognized in connection with routine retirements of
depreciable property. Repairs and renewals of minor items of property
are included in plant specific operations expense.
Inventories
Inventories are stated at the lower of cost or market.
The cost of materials and supplies inventory, which is used primarily
for the construction of telephone plant, is determined by the average
cost method.
The cost of communications systems and parts inventory, held primarily
for sales and service, is determined by the average cost method.
Income Taxes
Income taxes are accounted for using a liability method and provide for
the tax effects of transaction reported in the consolidated financial
statements including both taxes currently due and deferred. Deferred
taxes reflect the net tax effect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The deferred
tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when
the assets and liabilities are recovered or settled.
Investment tax credits (ITC), which were deferred prior to the Tax
Reform Act of 1986, are being amortized over the regulatory life of the
plant which produced the ITC.
Revenue Recognition
The Company recognizes revenues when earned regardless of the period in
which they are billed.
Telephone Operations
Local network service revenues are recognized over the period a subscriber
is connected to the telephone network. Calls within an extended
community calling area are recognized when made based on a rate per
minute of usage as approved by the PSCW.
Network access and long distance service revenues are derived from
charges for access to the Companies' local exchange network. The
interstate portion of access revenues are based on an average schedule
company settlement formula administered by the National Exchange Carrier
Association (NECA) which is regulated by the FCC. The intrastate portion
of access revenues are billed on individual company tariff access charge
structure based on expense and plant investment of the Company as
approved by the PSCW. The tariffs developed from these formulas are used
to charge the connecting carrier and recognize revenues in the period
the traffic is transported based on the minutes of traffic carried. Long
distance revenues are recognized at the time a call is placed based on
the minutes of traffic processed at tariffed and contracted rates.
Other revenues include contractually determined arrangements for the
provision of billing and collecting services and are recognized in the
period when the services are performed.
Directory Publishing Revenues
Both the revenues and expenses related to directory publishing activities
are recognized in the period when the directory is published.
Equipment Sales and Rentals
Revenues from system sales and services are derived from the sale,
installation and servicing of communications systems. Customer contracts
of sales and installations are recognized using the completed contract
method which recognizes income when the contract is substantially
comlete. Rental revenues are recognized over the rental period.
Cash Equivalents
All highly liquid investments with a maturity of three months or less
at the time of purchase are considered cash equivalents.
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued).
Earnings Per Share
Earnings per share are computed by dividing net income by the weighted
average number of shares and share equivalents of common stock
outstanding during the year. The number of shares and share
equivalents used in this calculation was 173,140 for both 1996 and
1995 and 171,640 for 1994.
Note 2. PROPOSED MERGER
The Company and Mid-Plains, Inc. (Mid-Plains) have entered into an
Agreement and Plan of Merger (Merger Agreement) dated December 31,
1996, which will result in the combination of the Company and Mid-Plains
into a holding company. The proposed merger, which will be
accounted for as a pooling of interests, has been approved by the
respective Board of Directors. It is still subject to approval by the
shareholders of each company. The companies expect to receive
shareholder approvals and complete the proposed combination during the
second quarter of 1997. Under the terms of the proposed Merger
Agreement, the Company's shareholders will become shareholders of the
holding company's common stock on a four-for-one basis and Mid-Plains'
shareholders will become shareholders of the holding company's common
stock on a one-for-one basis.
Note 3. PROPERTY AND EQUIPMENT
Property and equipment includes the following:
1996 1995
Telephone Plant In Service -
Land and buildings $ 764,816 $ 767,549
Vehicles and work equipment 451,092 415,066
Furniture and office equipment 513,044 447,740
Switching Equipment 3,241,360 2,947,538
Outside Plant 5,637,299 5,544,664
Other plant and equipment 46,183 45,844
Under construction 112,525 154,076
Subtotal 10,766,319 10,322,477
Other Property -
Land and buildings 296,433 296,433
Radio equipment 172,123 172,123
Customer premise equipment 577,702 651,613
Other 197,636 184,726
Under construction 1,417 1,902
Subtotal 1,245,311 1,306,797
Total property and equipment $12,011,630 $11,629,274
Note 4. LONG-TERM DEBT
Long-term debt consists of:
1996 1995
RUS Mortgage notes - 2% $ 196,996 231,364
RUS Mortgage notes - 5% 404,916 415,395
RTB Mortgage Notes - 4% 309,978 330,895
RTB Mortgage notes - 6.04% 239,034 248,349
RTB Mortgage notes - 6.05% 559,468 581,215
RTB Mortgage notes - 7% 96,279 99,220
RTB Mortgage notes - 8% 1,652,383 1,718,153
Total long-term debt 3,459,054 3,624,591
Less current portion 166,748 170,894
$ 3,292,306 $ 3,453,697
The annual requirements for principal payments on long-term debt for
the next five years are as follows:
1997 $166,748
1998 172,300
1999 188,700
2000 195,800
2001 208,000
Substantially all assets of Farmers and Dickeyville are pledged as
security for the long-term debt under certain loan agreements with the
Rural Utilities Service (RUS) and the Rural Telephone Bank (RTB).
These mortgage notes are to be repaid in equal quarterly and monthly
installments covering the principal and interest beginning two to three
years after the date of issue and expiring by 2012.
Cash paid for interest for 1996, 1995 and 1994, totaled $229,526,
$242,125 and $235,772, respectively.
Of the funds available under the RUS and RTB approved loans, including
amendments, $102,201 remained unadvanced as of December 31, 1996.
Note 5. EMPLOYEE BENEFITS
The Company provides a defined contribution 401(k) benefit plan to
substantially all employees. Under this plan the Company matches the
employee deferred amount up to 5% of compensation. The pension costs,
expensed and capitalized, were $45,038, $40,180 and $35,518 for the
years ended December 31, 1996, 1995 and 1994, respectively. The Company
makes annual contributions to the plan equal to amounts accrued for
pension expense.
Note 6. DIVIDEND RESTRICTION
The Company is not subject to restrictions on the payment of cash
dividends to its stockholders.
Farmers and Dickeyville are restricted as to the payment of dividends
to the Company, by the RUS and RTB mortgage notes. As of December 31,
1996, the maximum amount which could be distributed to the Company in
accordance with these restrictions was $166,096.
Note 7. INCOME TAXES
Income taxes reflected in the Consolidated Statements of Income consist
of the following:
1996 1995 1994
Federal income taxes -
Current tax expense $510,868 $401,986 $420,003
Deferred tax expense 130,463 93,181 103,026
Amortization of
investment tax credits (28,360) (33,144) (30,181)
State income taxes -
Current tax expense 164,268 112,976 141,052
Deferred tax expense 16,136 96,924 7,097
Total income tax expense $793,375 $671,923 $640,997
Cash paid for income taxes and estimated income taxes for 1996, 1995
and 1994 totaled $487,025, $544,525 and $694,025, respectively.
The following is a reconciliation of the statutory federal income tax
rate of 34% to the Company's effective income tax rate:
Year Ended December 31
1996 1995 1994
Statutory federal income tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal benefit 5.6 5.9 6.1
Amortization of investment tax credits (1.2) (1.8) (1.8)
Other differences (0.5) (1.2) 0.8
Effective income tax rate 37.9% 36.9% 39.1%
The components of the Company's deferred tax asset (liability) were as
follows:
December 31
1996 1995
Deferred tax asset:
Unamortized investment tax credit $ 47,308 $57,327
Regulatory liabilities 35,683 44,143
Loss carryforwards 58,252 39,158
Accrued liabilities 22,279 9,051
Director stock option plan -0- 142,580
Other 20,084 12,009
Deferred tax assets 183,606 304,268
Less: Valuation allowance (58,252) (67,908)
125,354 236,360
Deferred tax liability:
Property, plant and
equipment depreciation (564,434) (508,255)
Deferred tax liabilities (564,434) (508,255)
Net deferred tax liability (439,080) (271,895)
Less: Current deferred tax asset (30,863) (17,014)
Long-term deferred tax liability $(469,943) $ (288,909)
Note 7. INCOME TAXES (Continued)
Deferred credits include a regulatory liability at December 31, 1996
and 1995, of $90,335 and $111,752, respectively. A portion of the
regulatory liability represents the excess deferred taxes on
depreciable assets, resulting primarily from reductions in the
statutory federal income tax rate. This amount is being amortized over
the lives of the related depreciable assets in accordance with the
average rate assumption method as required by income tax regulations.
The regulatory liability also includes an amount associated with
unamortized investment tax credits. This amount will be amortized in
the same manner as the underlying investment tax credits. The
regulatory liabilities have been increased to reflect future revenue
requirement levels.
As of December 31, 1996, the Company had Net Operating Loss (NOL)
carryforwards for state income tax purposes of $699,900 that may be
used in future years to offset taxable income. To the extent not
utilized, the NOL carryforward will begin to expire in 2003.
Note 8. INVESTMENTS
In 1995, Farmers settled a legal proceeding involving the cellular
license in Wisconsin Rural Service Area Number 8. As a result of the
settlement, the Company acquired a 2% limited partnership interest in
Wisconsin RSA 8 Limited Partnership for $66,303. This investment is
accounted for on the cost method. In addition, the settlement provides
Farmers an option to sell this interest during the period September 29,
1998 through March 29, 1999 for $400,000 adjusted for capital
contributions and distributions and one-half the change in the Consumer
Price Index from the date of the settlement.
Temporary investments at December 31, 1996 consist primarily of one-year
certificates of deposit with interest rates ranging from 5.50% to
6.75%. At December 31, 1995, certificates of deposit included in
temporary investments had interest rates ranging from 5.35% to 6.82%.
These investments are stated at cost.
Investments also include $213,309 at December 31, 1996 and 1995,
related to RTB Class B stock. Such RTB stock was purchased from the
RTB as a condition of obtaining long-term financing. Holders of RTB
Class B stock are entitled to patronage dividends in the form of
additional Class B stock. However, such stock must be held until the
related RTB loan is repaid and may be redeemed only after all shares
of Class A stock have been retired, at the discretion of the Board of
Directors of RTB.
Note 9. DIRECTOR STOCK OPTION PLAN
The Director Stock Option Plan, approved by the Company shareholders
on April 25, 1990, and an amendment approved by the Company
shareholders on April 29, 1992, granted the Company directors the
option to purchase up to 13,000 shares of the Company's common stock.
Each director has the option to purchase up to 200 shares of stock
annually in lieu of receiving director fees or other compensation.
Under the option, each share of common stock may be purchased for 1.5
times the previous year's book value per Company share less $1. The
options expire and all rights to purchase shares cease ten years after
the option is purchased. The options can be exercised not sooner than
six months after the date of grant and must be exercised upon the
director's death, disability or termination of service or otherwise
with the consent of the plan committee.
The options have no voting rights.
The plan also provides for a cash payment equal to the amount of
dividends that would have been paid had such options been outstanding
shares of stock.
Note 9. DIRECTOR STOCK OPTION PLAN (Continued)
On February 22, 1996, the Company Directors cancelled the plan
effective January 2, 1996. At that time, all 8,800 shares subject to
granted option were issued. The remaining shares which had not been
subject to granted options were removed from the plan and returned to
the Company.
The following table summarizes activity of the plan for 1995 and 1996:
Shares Subject
to Grant of Option Amount
Balance at December 31, 1993 5,800 212,425
1994 Grants 1,500 70,770
Balance at December 31, 1994 7,300 $283,195
1995 Grants 1,500 77,760
Balance at December 31, 1995 8,800 360,955
Grants exercised (8,800) (360,955)
Balance at December 31, 1996 -0- $ 0
Note 10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following required disclosures present the fair value of certain
financial instruments for which it is practicable to estimate that
value. For purposes of the following disclosure, the fair value of a
financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than
in a forced sale or liquidation.
The amounts disclosed represent management's best estimate of fair
value. These fair value estimates are made at a specific point in
time, based on relevant market information and information about the
financial instrument. These estimates are subjective in nature,
involve uncertainties, and require significant judgment and therefore,
may vary significantly from amounts that would be realized in actual
transactions. Further, in accordance with accounting requirements, the
Company has excluded certain financial instruments and all other assets
and liabilities from its disclosure. Accordingly, the aggregate fair
value amounts presented are not intended to, and do not, represent the
underlying fair value of the Company.
The methods and assumptions used to estimate fair value are as follows:
Cash, Cash Equivalents, and Temporary Investments
The carrying amount of cash and cash equivalents approximates fair
value because of the short maturity of those instruments.
The fair value of temporary investment was approximated by discounting
the cash flow of the investments at the current rates offered for
similar investments.
Note 10. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Long-Term Investments
For investments totaling $302,014 there are no quoted market prices.
Because of this and certain limitations on charges in equity interest,
management does not believe it is practicable or cost effective at this
time to provide a current estimate of fair value. A portion of these
investments represents a 2% interest in a limited partnership which is
carried at its original cost of $66,303 on Farmers' books. As
described in Note 8 Farmers does, however, have an option to sell
this investment during the period September 29, 1998 through
March 29, 1999.
Long-Term Debt
The fair value of the Company's long-term debt was estimated based on
the current rates available to the Company for debt with similar
remaining maturities.
The carrying amount and estimated fair value of the Company's financial
instruments are as follows:
1996 1995
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
Financial Assets
Cash, cash equivalents, and
temporary investments $4,044,290 $4,050,699 $3,259,917 $3,272,059
Financial Liabilities
Long-term debt $3,459,054 $3,179,603 $3,624,591 $3,482,004
Note 11. REGULATORY ACCOUNTING
Farmers and Dickeyville follow accounting for regulated enterprises
prescribed by Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation" (SFAS 71).
In general, SFAS 71 requires companies to depreciate plant and
equipment over lives approved by regulators which may extend beyond the
assets' actual economic and technological lives. SFAS 71 also requires
deferral of certain costs and obligations based upon approvals received
from regulators to permit recovery in the future. Consequently, the
recorded net book value of certain assets and liabilities, primarily
telephone plant and equipment, may be greater than that which would
otherwise be recorded by unregulated enterprises. On an ongoing basis,
the Company reviews the continued applicability of SFAS 71 based on the
current regulatory and competitive environment. Although recent
developments suggest that the telecommunications industry will become
increasingly competitive, the degree to which cost of service
regulatory oversight of local-exchange carriers, including the Company,
will be lifted and competition will be permitted to establish the cost
of service to the consumer is presently unknown. As a result, the
Company continues to believe that accounting under SFAS 71 is
appropriate.
APPENDIX IX
CHORUS COMMUNICATIONS GROUP, LTD.
Financial Statement
as of
March 11, 1997
With Independent Auditor's Report
Independent Auditor's Report
To the Board of Directors
Chorus Communications Group, Ltd.
We have audited the accompanying balance sheet of Chorus
Communications Group, Ltd. (a Wisconsin corporation) at March 11, 1997.
This financial statement is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the balance sheet is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit 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
Chorus Communications Group, Ltd. at March 11, 1997, in
conformity with generally accepted accounting principles.
/s/KIESLING ASSOCIATES LLP
KIESLING ASSOCIATES LLP
Madison, Wisconsin
March 11, 1997
CHORUS COMMUNICATIONS GROUP, LTD.
BALANCE SHEET
March 11, 1997
ASSETS
CURRENT ASSETS
Cash 100
TOTAL ASSETS 100
LIABILITIES AND STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY
Common stock - no par value, 9,000 shares
authorized, 100 shares issued and outstanding 100
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 100
The accompanying note is an integral part of this financial
statement.
Note to Financial Statement
March 11, 1997
Note 1. GENERAL
Chorus Communications Group, Ltd. (Chorus) was
incorporated as a Wisconsin corporation on March 7,
1997, to serve as a holding company. On March 10,
1997, Mid-Plains, Inc. purchased 100 shares of the
common stock for $100 in cash, for the purpose of
completing the organization of Chorus. Chorus has had
no other financial transactions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 180.0851 of the WBCL requires a corporation to indemnify a
director or officer, to the extent that he or she has been successful on the
merits or otherwise in the defense of a proceeding, for all reasonable
expenses incurred in the proceeding, if the director or officer was a party
because he or she is a director or officer of the corporation. In cases not
included in the foregoing, a corporation is required to indemnify a director
or officer against liability incurred by the director or officer in a
proceeding to which the director or officer was a party because he or she is
a director or officer of the corporation, unless liability was incurred
because the director or officer breached or failed to perform a duty that he
or she owes to the corporation and the breach or failure to perform
constitutes any of the following:
(A-1) A willful failure to deal fairly with the corporation or its
shareholders in connection with a matter in which the director
or officer has a material conflict of interest.
(A-2) A violation of the criminal law, unless the director or officer
had reasonable cause to believe that his or her conduct was
lawful or no reasonable cause to believe that his or her conduct
was unlawful.
(A-3) A transaction from which the director or officer derived an
improper personal profit.
(A-4) Willful misconduct.
Determination of whether indemnification is required under (A-1) through (A-4)
above is made under Section 180.0855 of the WBCL, which provides that
unless otherwise provided by the Articles of Incorporation or Bylaws or by
written agreement between the director or officer and the corporation, the
director or officer seeking indemnification shall select one of the following
means for determining his or her right to indemnification:
(B-1) By a majority vote of a quorum of the Board of Directors
consisting of directors who are not at the time parties to the
same or related proceedings.
(B-2) By independent legal counsel selected by a quorum of the Board
of Directors or its committee in the manner prescribed in (B-1)
above or, if unable to obtain such a quorum or committee, by a
majority vote of the full Board of Directors, including
directors who are parties to the same or related proceedings;
(B-3) By a panel of three arbitrators consisting of one arbitrator
selected by those directors entitled under (B-2) above to select
independent legal counsel, one arbitrator selected by the
director or officer seeking indemnification and one arbitrator
selected by the two arbitrators previously selected;
(B-4) By an affirmative vote of shares as provided in Section 180.0725
of the WBCL;
(B-5) By a court under Section 180.0854 of the WBCL; or
(B-6) By any other method provided for in any additional rights to
indemnification permitted under Section 180.0858 of the WBCL.
The termination of a proceeding by judgment, order, settlement or
conviction, or upon a plea of no contest or an equivalent, does not, by
itself, create a presumption that indemnification of the director or officer
is not required under Section 180.0851(2) of the WBCL.
The mandatory indemnification provided in Section 180.0851 of the WBCL
as outlined above, may be limited by the corporation's articles of
incorporation, pursuant to Section 180.0852 of the WBCL.
Section 180.0854 of the WBCL provides that except as provided otherwise
by written agreement between the director or officer and the corporation, a
director or officer who is a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another court
of competent jurisdiction. The court shall order indemnification if it
determines any of the following: (a) that the director or officer is
entitled to indemnification under Section 180.0851(1) or (2) of the WBCL; or
(b) that the director or officer is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, regardless of
whether indemnification is required under Section 180.0851(2) of the WBCL.
Section 180.0858 of the WBCL provides that Sections 180.0851 and
180.0853 of the WBCL do not preclude any additional rights to indemnification
or allowance of expenses that a director or officer may have under the
articles of incorporation or bylaws of the corporation, a written agreement
between the director or officer and the corporation, a resolution of the
Board of Directors, or a resolution that is adopted, after notice, by a
majority vote of all of the corporation's shares then issued and outstanding.
Notwithstanding the foregoing, however, the corporation may not
indemnify a director or officer, or permit a director or officer to retain
any allowance of expenses, unless it is determined by or on behalf of the
corporation that the director or officer did not breach or fail to perform
a duty that he or she owes to the corporation which constitutes conduct under
(A-1) to (A-4) discussed above. A director or officer who is a party to the
same or related proceeding for which indemnification or an allowance of
expenses is sought may not participate in this determination.
None of the foregoing provisions effect the corporation's power to pay
or reimburse expenses incurred by a director or officer as a witness in a
proceeding to which he or she is not a party, or as a plaintiff or petitioner
in a proceeding because he or she is or was an employee, agent, director or
officer of the corporation.
It is the public policy of the state of Wisconsin to require or permit
indemnification, allowance of expenses and insurance for any liability
incurred in connection with a proceeding involving a federal or state
statute, rule or regulation regulating the offer, sale or purchase of
securities, securities brokers or dealers, or investment companies or
investments by advisors.
The Chorus Articles of Incorporation do not contain any provision
which may limit its obligation to indemnify under Section 180.0851 of the
WBCL.
Article XI of the Chorus Bylaws makes mandatory the indemnification
expressly authorized under the WBCL.
Pursuant to Section 7.8 of the Merger Agreement, Chorus shall cause
Mid-Plains and Pioneer to maintain in effect the current provisions regarding
indemnification of officers and directors contained in the articles of
incorporation and bylaws of Pioneer and Mid-Plains, and each of their
subsidiaries. Chorus shall also cause Mid-Plains and Pioneer to maintain in
effect a current policy of directors' and officers' liability insurance and
fiduciary liability insurance maintained by Pioneer and Mid-Plains,
respectively, with respect to claims arising from facts or events which
occurred on or before the Effective Time. Lastly, Chorus shall cause Pioneer
and Mid-Plains to indemnify the directors and officers of Pioneer and
Mid-Plains, respectively, to the fullest extent to which Pioneer and Mid-Plains
are permitted to indemnify such officers and directors under Wisconsin law.
ITEM 21. EXHIBITS.
Exhibit
Number Exhibit
2 Agreement and Plan of Merger, dated December 31, 1996, between Pioneer
Communications, Inc., and Mid-Plains, Inc. (Included as Appendix I to
the Joint Proxy Statement/Prospectus.)
3(a) Form of Amended and Restated Articles of Incorporation of Chorus
Communications Group, Ltd. (Included as Appendix II to the Joint Proxy
Statement/Prospectus.)
3(b) Form of Bylaws of Chorus Communications Group, Ltd. (Included as
Appendix III to the Joint Proxy Statement/Prospectus.)
5 Opinion of Axley Brynelson regarding validity of securities being
registered.
8 Form of opinion of Axley Brynelson regarding certain federal income tax
matters.
21 Subsidiaries of Chorus Communications Group, Ltd.
23(a) Consent of Kiesling Associates LLP (Mid-Plains)
23(b) Consent of Kiesling Associates LLP (Pioneer)
23(c) Consent of Kiesling Associates LLP (Chorus)
23(d) Consent of Axley Brynelson. (Included in the opinion filed as Exhibit
5 to this Registration Statement and incorporated herein by
reference.)
23(e) Consent of Axley Brynelson. (Included in the opinion filed as Exhibit
8 to this Registration Statement and incorporated herein by
reference.)
23(f) Consent of Edelman & Co., Ltd.
23(g) Consent of Madison Valuation Associates, Inc.
24(a) Powers of Attorney - Chorus.
24(b) Powers of Attorney - Mid-Plains
24(c) Powers of Attorney - Pioneer
99(a) Mid-Plains Proxy/Voting Instruction Card.
99(b) Pioneer Proxy/Voting Instruction Card.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) to include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in the Registration Statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
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 the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4) 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), 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 the
other items of the applicable form.
(5) That every prospectus (i) that is filed pursuant to paragraph
(4) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to rule 415, will be
filed as a 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 the Securities Act, 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 the 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 to supply by means
of a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised 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. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precendent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Chorus
Communications Group, Ltd. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in
Middleton, Wisconsin on March 14, 1997.
Chorus Communications Group, Ltd.
By: /s/ Dean W. Voeks
Dean W. Voeks
Chief Executive Officer
By: /s/ Howard G. Hopeman
Howard G. Hopeman
Executive Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons
in the capacity indicated.
Signature Title Date
/s/ G. Burton Bloch
G. Burton Bloch Director March 14, 1997
/s/ Charles Maulbetsch
Charles Maulbetsch Director March 14, 1997
/s/ Harold L. Swanson
Harold L. Swanson Director March 14, 1997
/s/ Douglas J. Timmerman
Douglas J. Timmerman Director March 14, 1997
/s/ Dean W. Voeks
Dean W. Voeks Director March 14, 1997
Pursuant to the requirements of the Securities Act of 1933,
Mid-Plains,
Inc. has duly caused this Registration Statement to be signed on its
behalf
by the undersigned, thereunto duly authorized in Middleton, Wisconsin on
March 14, 1997.
MID-PLAINS, INC.
By: /s/ Dean W. Voeks
Dean W. Voeks
President
By: /s/ Howard G. Hopeman
Howard G. Hopeman
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacity indicated.
Signature Title Date
/s/ Floyd A. Brynelson
Floyd A. Brynelson Director March 14, 1997
/s/ S. C. Ehlers
S. C. Ehlers Director March 14, 1997
/s/ E. A. Johnson
E. A. Johnson Director March 14, 1997
/s/ Charles Maulbetsch
Charles Maulbetsch Director March 14, 1997
/s/ Harold L. (Lee) Swanson
Harold L. (Lee) Swanson Director March 14, 1997
/s/ Fredrick E. Urben
Fredrick E. Urben Director March 14, 1997
/s/ Dean W. Voeks
Dean W. Voeks Director March 14, 1997
Pursuant to the requirements of the Securities Act of 1933, Pioneer
Communications, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in
Lancaster, Wisconsin on March 14, 1997.
PIONEER COMMUNICATIONS, INC.
By: /s/ Douglas J. Timmerman
Douglas J. Timmerman
President
By: /s/ Terrence Mathers
Terrence Mathers
Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacity indicated.
Signature Title Date
/s/ G. Burton Bloch Director March 14, 1997
G. Burton Bloch
/s/ Mark V. Brickl Director March 14, 1997
Mark V. Brickl
/s/ Albert Ertz, Jr. Director March 14, 1997
Albert Ertz, Jr.
/s/ Joseph Grosser Director March 14, 1997
Joseph Grosser
/s/ Gerald Knapp Director March 14, 1997
Gerald Knapp
/s/ Henry A. Melssen Director March 14, 1997
Henry A. Melssen
/s/ Dennis Marshall Director March 14, 1997
Dennis Marshall
/s/ Douglas J. Timmerman Director March 14, 1997
Douglas J. Timmerman