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PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 13, 1997)
$100,000,000
360 COMMUNICATIONS COMPANY
6.65% SENIOR NOTES DUE 2008
------------------
The 6.65% Senior Notes Due 2008 (the "Notes") of 360 Communications
Company (the "Company") will mature on January 15, 2008. Interest on the Notes
will be payable semiannually on January 15 and July 15 of each year, commencing
July 15, 1998. The Notes will be redeemable as a whole or in part, at the option
of the Company, at any time at a redemption price equal to the greater of (i)
100% of their principal amount and (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate (as defined) plus 25 basis points,
plus in each case accrued interest thereon to the date of redemption. The Notes
will not be subject to any sinking fund. See "Description of Notes." Upon a
Change of Control Triggering Event (as defined), holders of the Notes will have
the right to require the Company to purchase all or any part of the Notes at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest (if any) to the date of purchase. See "Description of Debt
Securities--Purchase at the Option of Holders Upon a Change of Control" in the
accompanying Prospectus.
Each of the Notes will be represented by one or more Global Securities (as
defined) registered in the name of the nominee of The Depository Trust Company,
as Depository ("DTC"). Beneficial interests in such Global Securities will be
shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. Except as described herein, Notes in
definitive form will not be issued. See "Description of Notes--Book-Entry
System." Settlement for the Notes will be made in immediately available funds.
The Notes will trade in DTC's Same-Day Funds Settlement System, and secondary
market trading activity in the Notes will therefore settle in immediately
available funds. See "Description of Notes--General."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COMPANY(1)(2)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Per Note 99.985% 0.65% 99.335%
- ---------------------------------------------------------------------------------------------------------------
Total $99,985,000 $650,000 $99,335,000
===============================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from January 13, 1998 to date of
delivery.
(2) Before deducting expenses payable by the Company estimated at $120,000.
------------------
The Notes are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the Notes will be made through the facilities of
The Depository Trust Company on or about January 13, 1998, against payment
therefor in immediately available funds.
------------------
SALOMON SMITH BARNEY
J.P. MORGAN & CO.
LAZARD FRERES & CO. LLC
January 8, 1998
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES,
AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
THE COMPANY
OVERVIEW
The Company is one of the leading and most established wireless
communications companies in the United States. As of September 30, 1997, the
Company served approximately 2.45 million customers in more than 100 markets in
15 states. The Company's interests in these markets represent approximately 21.4
million Net POPs as of September 30, 1997. The Company also owns, as of
September 30, 1997, minority interests in 59 additional cellular telephone
markets representing approximately 4.6 million Net POPs, including markets
located in New York, New York; Chicago, Illinois; Houston, Texas; and Orlando,
Florida. The Company sells and markets wireless voice and data services and
related products, as well as residential long distance service, through a
distribution network consisting of nationally recognized and local dealers, full
service retail stores and a direct sales force. "Net POPs" refers to the
estimated population with respect to a given service area multiplied by the
percentage interest that the Company owns in the entity licensed by the Federal
Communications Commission ("FCC") to operate a cellular communications system
within that service area.
The Company operates in four regions in the United States: Mid-Atlantic,
Midwest, Southeast and West. The Company's controlled markets comprising each
region include a number of geographic operating clusters which are primarily
located in mid-sized communities.
For the period from January 1, 1990 to September 30, 1997, the Company grew
its customer base by a compounded annual growth rate of 49%. As of September 30,
1997, the Company had a cellular penetration rate of 10.11% in the markets that
it controlled. Thirteen of the Company's controlled markets had penetration
rates in excess of 15%, four of which had penetration rates in excess of 20%.
For the nine month period ended September 30, 1997, the Company's average
monthly churn rate was 1.82%.
BUSINESS STRATEGY
The Company intends to maintain its strong growth and improvement in
operating margins by continuing to penetrate its existing markets. The Company
believes that its primary growth will be internally generated through the
implementation of its operating strategies as described below. In addition, a
key part of the Company's growth strategy is to pursue favorable opportunities
to expand its regional market clusters or develop new strategic market clusters
through acquisitions or trades or alliances with other cellular carriers. The
principal components of the Company's strategy to achieve these objectives are
as follows:
- clustering of markets to provide broad areas of uninterrupted service
combined with simplified calling and pricing patterns and operating
efficiencies through economies of scale;
- continuous network improvement to meet customer expectations of
ubiquitous coverage, clarity and reliability;
- aggressive distribution management to provide effective and extensive
marketing of products and services through dealers, Company retail stores
and a direct sales force targeted at high volume users;
- exceptional customer service provided by highly motivated, experienced
and trained customer relations personnel who are focused on satisfying
customer needs to build loyalty, improve customer retention and increase
usage;
- targeted pricing strategies and rate plans to increase penetration,
improve customer retention and increase usage;
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- targeted product and service deployment to introduce new features and
network solutions to stimulate increased usage and improve customer
satisfaction and retention; and
- integration of multiple telecommunications services such as cellular,
residential long distance and paging into a single product offering,
including one bill, to improve customer retention and to increase sales
and usage of all services offered by the Company.
The Company believes that the strategies employed to meet existing
competition will also be effective in competing against new service providers.
Companies with Personal Communications Services ("PCS") licences have begun to
offer their products and services in several of the Company's service areas. The
Company has prepared for this new competitive environment by enhancing its
networks, expanding its service territory, offering new features, products and
services to its customers and simplifying its pricing of services. In addition,
the Company intends to further capitalize on its incumbent position as a leading
wireless provider in its markets by increasing revenues through aggressive
customer acquisition, improving the retention rate of new and existing customers
and enhancing its financial performance by continuing to improve operating
margins.
RECENT DEVELOPMENTS
In August 1995, a lawsuit was brought in the Court of Common Pleas of
Greenville County, South Carolina by four independent dealers alleging that the
Company breached its dealer agreements with the plaintiffs and engaged in unfair
trade practices. In particular, the plaintiffs alleged that the Company
discontinued the practice of allowing the plaintiffs to sell cellular telephones
out of the Company's inventory, and instead required the plaintiffs to maintain
their own inventory; and sold cellular telephones to the public at prices lower
than the prices that the Company charged to the plaintiffs. On November 21,
1997, a jury awarded the plaintiffs $1.9 million in compensatory damages and $10
million in punitive damages. The Company intends to file an appeal with the
South Carolina Supreme Court seeking to reverse the decision. The Company
believes that it acted in accordance with the dealer agreements and that the
decision is wholly unwarranted by the facts.
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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
Set forth below are summary consolidated financial and operating data with
respect to the Company for each of the three fiscal years in the period ended
December 31, 1996 and for the nine month periods ended September 30, 1997 and
1996. The summary consolidated financial data as of December 31, 1996, 1995 and
1994 have been derived from audited financial statements. The consolidated
financial statements as of December 31, 1996, 1995 and 1994 and for each of the
three years in the period ended December 31, 1996 have been audited by Ernst &
Young LLP as set forth in their report incorporated by reference herein. The
summary consolidated financial data as of and for the nine month periods ended
September 30, 1997 and 1996 is unaudited but in the opinion of the Company
reflects all adjustments necessary for the fair presentation of the Company's
financial position and results of operations for such periods, and may not be
indicative of the results of operations for a full year. The summary
consolidated financial data presented below should be read in conjunction with
the consolidated financial statements and related notes incorporated by
reference herein.
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(THOUSANDS OF DOLLARS, EXCEPT PER CUSTOMER DATA)
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FOR THE NINE MONTHS
ENDED AND AS OF FOR THE YEAR ENDED AND AS OF
SEPTEMBER 30, DECEMBER 31,
------------------------- ---------------------------------------
1997 1996 1996(1) 1995 1994
----------- ----------- ----------- ----------- -----------
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OPERATING REVENUES
Service Revenues.................................. $ 958,049 $ 766,133 $ 1,052,726 $ 789,459 $ 569,793
Equipment Sales................................... 36,568 29,411 43,146 44,956 56,682
----------- ----------- ----------- ----------- -----------
Total Operating Revenues...................... 994,617 795,544 1,095,872 834,415 626,475
----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES
Cost of Service................................... 118,899 68,492 99,745 68,223 51,071
Cost of Equipment Sales........................... 81,329 71,010 104,327 109,441 79,000
Other Operations Expense.......................... 51,182 39,824 55,776 40,591 30,905
Sales, Marketing and Advertising Expenses......... 170,692 143,146 206,147 141,505 136,501
General, Administrative and Other Expenses........ 230,698 190,287 263,191 214,536 150,985
Depreciation and Amortization..................... 137,738 104,987 146,841 114,731 92,435
----------- ----------- ----------- ----------- -----------
Total Operating Expenses...................... 790,538 617,746 876,027 689,027 540,897
----------- ----------- ----------- ----------- -----------
OPERATING INCOME.................................. 204,079 177,798 219,845 145,388 85,578
Interest Expense.................................. (97,603) (78,854) (106,364) (127,240) (98,437)
Minority Interests in Net Income of Consolidated
Entities........................................ (39,451) (38,168) (46,622) (34,269) (22,110)
Equity in Net Income of Unconsolidated Entities... 44,454 40,359 50,234 40,016 26,390
Other Income (Expense), net....................... 3,060 423 255 (185) (5,481)
----------- ----------- ----------- ----------- -----------
Income (Loss) Before Income Taxes................. 114,539 101,558 117,348 23,710 (14,060)
Income Tax Expense................................ 54,408 47,407 57,829 25,405 5,697
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS)................................. $ 60,131 $ 54,151 $ 59,519 $ (1,695) $ (19,757)
=========== =========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE (IN DOLLARS)(2)....... $ 0.49 $ 0.46 $ 0.50 $ (0.01) $ (0.17)
=========== =========== =========== =========== ===========
RATIO OF EARNINGS TO FIXED CHARGES(3)............. 2.14 2.23 2.05 1.32 --
OTHER OPERATING DATA:
CONSOLIDATED
EBITDA(4)......................................... $ 341,817 $ 282,785 $ 366,686 $ 260,119 $ 178,013
EBITDA Margin(5).................................. 35.68% 36.91% 34.83% 32.95% 31.24%
Capital Expenditures(6)........................... $ 154,234 $ 193,543 $ 300,123 $ 323,651 $ 264,333
CELLULAR
Controlled POPs(7)................................ 24,222,292 20,938,734 24,192,590 19,670,534 19,670,534
Controlled Customers(8)........................... 2,449,996 1,850,528 2,156,412 1,501,757 1,039,989
Gross Customer Additions(9)....................... 704,076 582,227 874,318 734,612 563,193
Net Customer Additions(10)........................ 310,143 302,124 469,785 461,768 390,690
Average Customers(11)............................. 2,319,821 1,684,336 1,776,040 1,240,970 810,753
Churn(12)......................................... 1.82% 1.80% 1.86% 1.81% 1.80%
Penetration(13)................................... 10.11% 8.84% 8.91% 7.63% 5.29%
Service Revenue per Average Customer per
Month(14)....................................... $ 45.69 $ 50.54 $ 49.39 $ 53.01 $ 58.57
EBITDA Margin(5).................................. 37.03% 37.03% 35.25% 32.95% 31.24%
Cost to Acquire a New Customer(15)................ $ 298 $ 317 $ 302 $ 280 $ 282
LONG DISTANCE
Revenue........................................... $ 5,927 $ 31 $ 401 $ -- $ --
EBITDA(4)......................................... $ (11,448) $ (909) $ (4,308) $ -- $ --
</TABLE>
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SEPTEMBER 30, 1997
-----------------------------
AS
ACTUAL ADJUSTED(16)
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BALANCE SHEET DATA:
Working Capital (Deficit) (17).............. $ (65,545) $ (65,545)
Property, Plant and Equipment, net.......... $ 1,106,315 $ 1,106,315
Total Assets................................ $ 2,962,937 $ 2,962,937
Short-Term Debt............................. $ 29,175 $ 29,175
Long-Term Debt.............................. $ 1,849,643 $ 1,849,643
Total Shareowners' Equity................... $ 500,086 $ 500,086
</TABLE>
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(1) On November 1, 1996, the Company completed its acquisition of Independent
Cellular Network, Inc. and affiliated companies (the "ICN Acquisition")
which own and operate cellular licenses and related systems and assets in
Kentucky, Ohio, Pennsylvania and West Virginia and provide cellular service
to approximately 140,000 customers. The Company acquired the licenses from
Independent Cellular Network Partners and certain of its affiliates for
approximately $519 million, comprising 6,500,000 shares of the Company's
common stock, $122 million in aggregate principal amount of the Company's
subordinated promissory notes and the Company's assumption of $240 million
of Independent Cellular Network Partner's senior debt, which was
immediately refinanced with borrowings under the Credit Facility (as
defined below). The remaining portion of the purchase price was paid in
cash. The ICN Acquisition was accounted for as a purchase and its results
of operations are included in the consolidated financial statements from
the date of acquisition. Assets and liabilities have been recorded at
estimated fair value based on a preliminary allocation of the purchase
price. Unaudited combined pro forma financial statements which present
historical financial information as if the ICN Acquisition had occurred in
previous periods are included in the Company's Current Reports on Form 8-K
dated November 1, 1996 and January 24, 1997 incorporated by reference
herein.
On July 26, 1995, Sprint Corporation ("Sprint") announced that its Board of
Directors decided to pursue a tax-free spinoff of the Company to Sprint
shareholders. In the FCC auction of wireless PCS licenses, Sprint Spectrum
LP won the rights to several markets that overlap service territories
operated by the Company. Under FCC rules, Sprint was required to divest or
reduce its cellular holdings in certain markets to clear conflicts with the
PCS licenses awarded to Sprint Spectrum LP. For these reasons, Sprint and
its Board of Directors decided to pursue a spinoff of the cellular
operations of Sprint. On March 7, 1996, the spinoff was consummated. In
conjunction with the spinoff, the Company repaid $1.4 billion of
intercompany debt to Sprint. The remaining intercompany debt, net of
receivables from affiliates, was contributed to the Company by Sprint as
additional paid-in capital. Funding for the repayment was derived from the
proceeds of $900 million of senior notes issued under an indenture and
approximately $500 million of initial borrowings under the Credit Facility.
In addition, a recapitalization of the Company's common stock was effected
pursuant to which the Company split the 10 shares of issued and outstanding
common stock into 116,733,983 new shares of common stock to allow for the
pro rata distribution of such stock to the common shareholders of Sprint.
This distribution was effected as a tax-free dividend.
(2) Net income per share amounts were based on the weighted average number of
shares outstanding, including common stock equivalents. In years prior to
1996, net loss per share amounts were based on the weighted average number
of Sprint shares outstanding, including common stock equivalents, for each
respective period, adjusted for a conversion ratio of one share of the
Company's common stock to three shares of Sprint common stock.
(3) The ratio of earnings to fixed charges have been computed by dividing fixed
charges into the sum of (a) income (loss), less capitalized interest, and
with adjustments to appropriately reflect the Company's majority-owned,
50%-owned and less-than-50%-owned affiliates, (b) income taxes and (c)
fixed charges. Fixed charges consist of interest on all indebtedness and
the interest component of operating rents, with adjustments as appropriate
to reflect the Company's 50%-owned affiliates. For the year ended December
31, 1994, the deficit of earnings to fixed charges was $8,912,000.
(4) EBITDA is defined as operating income (loss) plus depreciation and
amortization. EBITDA, however, is not a measure determined in accordance
with generally accepted accounting principles ("GAAP") and should not be
considered in isolation or as a substitute for or an alternative to net
income (loss), cash flow provided by operating activities or other income
or cash flow data prepared in accordance with GAAP or as a measure of a
company's operating performance or liquidity.
(5) EBITDA Margin represents EBITDA divided by Service Revenues.
(6) Capital Expenditures exclude acquisitions.
(7) Controlled POPs refers to the estimated population with respect to a
service area in the Company's controlled markets at the end of the
respective periods. The Controlled POPs information is based on Strategic
Mapping, Inc. data.
(8) Controlled Customers refers to all of the customers in the Company's
controlled markets at the end of the respective periods.
(9) Gross Customer Additions represent the number of additional customers to
which the Company provided service during each respective period, excluding
customers added through acquisitions in that period.
(10) Net Customer Additions represents the number of Gross Customer Additions
less customers who disconnect service for each respective period, excluding
customers added or subtracted through acquisitions or divestitures.
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(11) Average Customers represents a 10-month rolling average for the nine months
ended September 30, 1997 and 1996 and a 13-month rolling average for the
years ended December 31, 1996, 1995 and 1994.
(12) Churn represents the average monthly rate of customer disconnects.
(13) Penetration is determined by dividing the Controlled Customers by
Controlled POPs.
(14) Service Revenue per Average Customer per Month is determined by dividing
cellular service revenues by Average Customers, and dividing that result by
the number of months in each respective period.
(15) Cost to Acquire a New Customer represents cellular sales, marketing and
advertising costs and losses on equipment sales, divided by Gross Customer
Additions.
(16) Reflects the issuance of the Notes and the application of the net proceeds
to be received by the Company, estimated to be approximately $100 million,
to repay borrowings outstanding under the Credit Facility. See "Use of
Proceeds."
(17) Working Capital (Deficit) is defined as current assets less current
liabilities.
USE OF PROCEEDS
The net proceeds from the sale of the Notes, estimated to be $99,215,000,
will be used for the repayment of a portion of the Company's long-term
indebtedness outstanding under the Second Amended and Restated Credit Agreement,
dated as of December 5, 1997, among the Company and a number of banks and
institutional lenders (the "Credit Facility"). As of December 31, 1997, the
Company had approximately $600 million in borrowings outstanding under the
Credit Facility with an average interest rate equal to 6.44%. Borrowings
outstanding under the Credit Facility become due and payable on December 5, 2002
unless earlier repaid.
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DESCRIPTION OF NOTES
The Notes will be issued under an indenture dated as of March 1, 1997 (the
"Indenture"), between the Company and Citibank, N.A., as trustee (the
"Trustee"). The following description of the particular terms of the Notes
supplements, and to the extent inconsistent therewith, replaces the description
of the general terms and provisions of the Debt Securities set forth under
"Description of Debt Securities" in the accompanying Prospectus, to which
reference is hereby made. The following summaries of certain provisions of the
Indenture do not purport to be complete and are subject, and are qualified in
their entirety by reference, to all the provisions of the Notes and the
Indenture, including the definitions therein of certain terms. Wherever
particular sections or defined terms of the Indenture are referred to herein,
such sections or defined terms are incorporated by reference herein.
GENERAL
The Notes will constitute a series of Debt Securities described in the
accompanying Prospectus, will mature on January 15, 2008, and will be limited to
an aggregate principal amount of $100,000,000. The Notes will bear interest at
the rate of 6.65% per annum from January 13, 1998, or from the most recent
interest payment date to which interest has been paid, payable semiannually on
January 15 and July 15 of each year, beginning on July 15, 1998 to the persons
who are registered holders of the Notes at the close of business on the
preceding January 1 or July 1, as the case may be.
Principal of, premium, if any, and interest on the Notes will be payable in
immediately available funds, and the Notes will be exchangeable and
transferable, at an office or agency of the Company, one of which will be
maintained for such purpose in The City of New York (which initially will be the
corporate trust office of the Trustee) or such other office or agency permitted
under the Indenture and located in The City of New York; provided, however, that
payment of interest may be made at the option of the Company by check mailed to
the person entitled thereto as shown on the Security Register. The Notes will be
issued only in fully registered form without coupons, in denominations of $1,000
or any integral multiple thereof. No service charge will be made for any
transfer or exchange of the Notes, but the Company may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal to DTC will be made by the Company in
immediately available funds. The Notes will trade in DTC's Same-Day Funds
Settlement System until maturity, and secondary market trading activity in the
Notes will therefore settle in immediately available funds on trading activity
in the Notes.
RANKING
The Notes will be senior unsecured obligations of the Company and will rank
pari passu with all unsubordinated unsecured indebtedness of the Company, and
will be senior in right of payment to all future subordinated indebtedness of
the Company. All existing and future indebtedness and other liabilities of the
Company's subsidiaries, however, will be effectively senior in right of payment
to the Notes. As of September 30, 1997, the total balance sheet liabilities of
the Company's subsidiaries (including current trade payables and accrued
liabilities but excluding deferred income tax liabilities), were approximately
$147 million. The Company and its subsidiaries have other liabilities, including
contingent liabilities, which may be significant. Moreover, claims of creditors
of the Company's subsidiaries, including trade creditors, will generally have a
priority as to the assets of such subsidiaries over the claims of the Company
and the holders of the Company's indebtedness, including the Notes. See
"Description of Debt Securities -- Ranking" in the accompanying Prospectus.
Indebtedness may be incurred by subsidiaries of the Company, subject to certain
limitations, which will effectively be senior in right of payment to the Notes.
See "Description of Debt Securities -- Restrictions Under 1996 Indenture and
Credit Facility" in the accompanying Prospectus.
OPTIONAL REDEMPTION
The Notes will be redeemable as a whole or in part, at the option of the
Company, at any time at a redemption price equal to the greater of (i) 100% of
their principal amount and (ii) the sum of the present
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values of the remaining scheduled payments of principal and interest thereon
discounted to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus
25 basis points, plus in each case accrued interest thereon to the date of
redemption.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue (as defined below), assuming a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price (as defined below) for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker (as defined below) as having a
maturity comparable to the remaining term of the Notes to be redeemed that would
be utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such Notes. "Independent Investment Banker"
means one of the Reference Treasury Dealers (as defined below) appointed by the
Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations (as defined below) for such
redemption date, after excluding the highest and lowest such Reference Treasury
Dealer Quotations, or (B) if the Company obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such Quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the Company, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the Company
by such Reference Treasury Dealer at 5:00 p.m. on the third business day
preceding such redemption date.
"Reference Treasury Dealer" means each of Salomon Brothers Inc, J.P. Morgan
Securities Inc. and Lazard Freres & Co. LLC and their respective successors;
provided, however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in The City of New York (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date, to each registered holder of Notes to be
redeemed.
Unless the Company defaults in payment of the redemption price, on and
after the redemption date interest will cease to accrue on the Notes or portions
thereof called for redemption.
SINKING FUND
The Notes will not be subject to any sinking fund.
PURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control Triggering Event, each holder of
Notes shall have the right to require the Company to purchase all or any part
(equal to $1,000 or an integral multiple thereof) of such holder's Notes
pursuant to the Change of Control Offer related thereto at a purchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the purchase date. Without the appropriate consent of the
holders of the Notes, neither the Board of Directors of the Company nor the
Trustee may waive the provisions of the Indenture requiring the Company to make
a Change of Control Offer upon a Change of Control Triggering Event. Events that
could cause a Change of Control Triggering Event to occur may not require the
approval by the Company's Board of Directors. See "Description of Debt
Securities -- Purchase at the Option of Holders Upon a Change of Control" in the
accompanying Prospectus.
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BOOK-ENTRY SYSTEM
The Notes will initially be issued in the form of one or more global
securities (the "Global Securities") held in book-entry form. Accordingly, DTC,
or any successor depository, (the "Depository"), or its nominee will initially
be the sole registered holder of the Notes for all purposes under the Indenture.
Upon the issuance of a Global Security, the Depository or its nominee will
credit the accounts of persons holding through it with the respective principal
amounts of the Notes represented by such Global Security purchased by such
person in connection with the sale of the Notes. Such accounts shall be
designated by the Underwriters with respect to Notes sold by such Underwriters.
Ownership of beneficial interests in a Global Security will be limited to
persons that have accounts with the Depository ("participants") or persons that
may hold interests through participants. Ownership of beneficial interests by
participants in a Global Security will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by the
Depository for such Global Security. Ownership of beneficial interests in such
Global Security by persons that hold through participants will be shown on, and
the transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interest in a Global Security.
Payment of principal and interest on Notes represented by any such Global
Security will be made to the Depository or its nominee, as the case may be, as
the sole registered owner and the sole holder of the Notes represented thereby
for all purposes under the Indenture. None of the Company, the Trustee, any
agent of the Company, or the Underwriters will have any responsibility or
liability for any aspect of the Depository's records relating to or payments
made on account of beneficial ownership interests in a Global Security
representing any Notes or for maintaining, supervising, or reviewing any of the
Depository's records relating to such beneficial ownership interests.
The Company has been advised by the Depository that upon receipt of any
payment of principal of, or interest on, any Global Security, the Depository
will immediately credit, on its book-entry registration and transfer system, the
accounts of participants with payments in amounts proportionate to their
respective beneficial interests in the principal or face amount of such Global
Security as shown on the records of the Depository. Payments by participants to
owners of beneficial interests in a Global Security held through such
participants will be governed by standing instructions and customary practices
as is now the case with securities held for customer accounts registered in
"street name" and will be the sole responsibility of such participants.
A Global Security may not be transferred except as a whole by the
Depository or a nominee of such Depository to a nominee of the Depository. A
Global Security is exchangeable for certificated Notes only if (i) the
Depository notifies the Company that it is unwilling or unable to continue as a
depositary for such Global Security or if at any time the Depository ceases to
be a clearing agency registered under the Securities Exchange Act of 1934 (the
"Exchange Act"), (ii) the Company executes and delivers to the Trustee a notice
that such Global Security shall be so transferable, registerable, and
exchangeable, and such transfers shall be registerable or (iii) there shall have
occurred and be continuing an Event of Default or an event which, with the
giving of notice or lapse of time or both, would constitute an Event of Default
with respect to the Notes represented by such Global Security. Any Global
Security that is exchangeable for certificated Notes pursuant to the preceding
sentence will be transferred to, and registered and exchanged for, certificated
Notes in authorized denominations and registered in such names as the depositary
holding such Global Security may direct. Subject to the foregoing, a Global
Security is not exchangeable, except for a Global Security of like denomination
to be registered in the name of the Depository or its nominee. In the event that
a Global Security becomes exchangeable for certificated Notes, (i) certificated
Notes will be issued only in fully registered form in denominations of $1,000 or
integral multiples thereof, (ii) payment of principal, any repurchase price, and
interest on the certificated Notes will be payable, and the transfer of the
certificated Notes will be registerable, at the office or agency of the Company
maintained for such purposes and (iii) no service charge will be made for any
registration of transfer or exchange of the certificated Notes, although the
S-9
<PAGE> 10
Company may require payment of a sum sufficient to cover any tax or governmental
charge imposed in connection therewith.
So long as the Depository, or its nominee, is the registered owner of such
Global Security, the Depository or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Global
Security for the purposes of receiving payment on the Notes, receiving notices,
and for all other purposes under the Indenture and the Notes. Beneficial
interests in Notes will be evidenced only by, and transfers thereof will be
effected only through, records maintained by the Depository and its
participants. Cede & Co. has been appointed as the nominee of the Depository.
Except as provided above, owners of beneficial interests in a Global Security
will not be entitled to and will not be considered the holders thereof for any
purposes under the Indenture. Accordingly, each person owning a beneficial
interest in a Global Security must rely on the procedures of the Depository,
and, if such person is not a participant, on the procedures of the participant
through which such person owns its interest, to exercise any rights of a holder
under the Indenture, including suing for nonpayment of principal or interest.
The Depository has advised the Company in the Indenture that it will exercise
the rights of a holder thereunder only at the direction of one or more
participants whose accounts have been credited with interests in a Global
Security and will do so only with regard to the total credited interests in a
Global Security which have been so directed. As a result, in the event that the
Company requests any action of holders or that an owner of a beneficial interest
in a Global Security desires to give or take any action which a holder is
entitled to give or take under the Indenture, the Depository would authorize the
participants holding the relevant beneficial interest to give or take such
action and such participants would authorize beneficial owners owning through
such participants to give or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
DTC has advised the Company that DTC is a limited-purpose trust company
organized under the Banking Law of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered under the
Exchange Act. DTC was created to hold the securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations, and certain other organizations some of whom (and/or their
representatives) own DTC. Access to DTC's book-entry system is also available to
others, such as banks, brokers, dealers, and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.
S-10
<PAGE> 11
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell the Notes to each
of the Underwriters named below, and each of the Underwriters has severally
agreed to purchase from the Company the aggregate principal amount of the
respective Notes set forth opposite their respective names.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
------------ ----------------
<S> <C>
Salomon Brothers Inc........................................ $ 60,000,000
J.P. Morgan Securities Inc.................................. 25,000,000
Lazard Freres & Co. LLC..................................... 15,000,000
------------
Total.................................................. $100,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Notes are subject to certain
conditions precedent. In the event of a default by any Underwriter, the
Underwriting Agreement provides that, in certain circumstances, purchase
commitments of the nondefaulting Underwriters may be increased or the
Underwriting Agreement may be terminated. The Underwriters will be obligated to
purchase all the Notes offered hereby if any Notes are purchased.
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering price set forth for such
Notes on the cover page of this Prospectus Supplement and to certain dealers at
such price less a concession not in excess of 0.400% of the principal amount of
the Notes. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of 0.250% of the principal amount of the Notes on sales to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The Company has agreed not to offer, sell or contract to sell, or otherwise
dispose of, or announce the offering of, any Debt Securities for a period of 30
days from the date of this Prospectus Supplement without the prior consent of
Salomon Brothers Inc.
The Notes are a new issue of securities with no established trading market
and the Company does not intend to apply for listing of the Notes on any
national securities exchange. The Company has been advised by the Underwriters
that the Underwriters currently intend to make a market in the Notes. However,
the Underwriters are not obligated to do so and may discontinue any market
making activities at any time without notice. Accordingly, no assurance can be
given about the development or liquidity of any trading market for the Notes.
Salomon Brothers Inc, J.P. Morgan Securities Inc. and Lazard Freres & Co.
LLC have performed various financial advisory and investment banking services
for the Company from time to time, for which they have received or will receive
customary fees. Morgan Guaranty Trust Company of New York, an affiliate of J.P.
Morgan Securities Inc., expects to receive approximately $3.5 million of
principal repayment of indebtedness outstanding under the Credit Facility from
the net proceeds of the sale of the Notes.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including certain liabilities under the Securities Act of 1933, as
amended, or contribute to payments the Underwriters may be required to make in
respect thereof.
Salomon Brothers Inc, on behalf of the Underwriters, may engage in
stabilizing transactions, syndicate covering transactions and penalty bids in
accordance with Rule 104 under the Exchange Act. Stabilizing transactions permit
bids to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases of
the Notes in the open market after the distribution has been completed in order
to cover syndicate short positions. Penalty bids permit the Underwriters to
reclaim a selling concession from a syndicate member when the Notes originally
sold by such syndicate member are purchased in a syndicate covering transaction
to cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the Notes to
S-11
<PAGE> 12
be higher than it would otherwise be in the absence of such transactions. These
transactions, if commenced, may be discontinued at any time.
LEGAL OPINIONS
Certain legal matters in connection with the sale of the Notes, including
with respect to the legality of the Notes offered hereby, will be passed upon
for the Company by Kevin C. Gallagher, Esq., Senior Vice President, General
Counsel and Secretary of the Company, and for the Underwriters by Cravath,
Swaine & Moore, New York, New York.
S-12
<PAGE> 13
PROSPECTUS
360 COMMUNICATIONS COMPANY
DEBT SECURITIES
WARRANTS TO PURCHASE DEBT SECURITIES
-----------------
360 Communications Company (the"Company") may offer from time
to time its unsecured senior debt securities (the "Debt Securities") and/or
warrants (the "Warrants") to purchase Debt Securities at prices and on terms to
be determined when an agreement to sell is made or at the time or times of sale,
as the case may be. The Debt Securities and the Warrants offered pursuant to
this Prospectus may be issued in one or more series or issuances, as the case
may be, and the aggregate initial offering price thereof will not exceed
$500,000,000. The Debt Securities and the Warrants are collectively referred to
herein as the "Securities."
This Prospectus will be supplemented by an accompanying prospectus
supplement or supplements ("Prospectus Supplement") that will set forth, in the
case of any Debt Securities for which this Prospectus is being delivered
("Offered Debt Securities"), the form in which such Debt Securities are to be
issued and the designation thereof, the aggregate principal amount, rate or
rates (or method of calculation thereof) and times of payment of interest,
maturity or maturities, the purchase price or prices and initial offering price
or prices, redemption or repurchase provisions, if any, and other specific terms
of such Debt Securities and, in the case of any Warrants for which this
Prospectus is being delivered ("Offered Warrants"), a description of the Debt
Securities for which each such Warrant is exercisable and the offering price, if
any, exercise price, duration, detachability and other specific items of such
Warrants. See "Description of Debt Securities" and "Description of Warrants"
herein.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Company may sell the Securities to or through underwriters,
dealers or agents, or directly to one or more purchasers. The Prospectus
Supplement will set forth the names of underwriters or agents, if any, any
applicable commissions or discounts and the net proceeds to the Company from any
such sale. See "Plan of Distribution" for possible indemnification arrangements
for underwriters, dealers and agents.
-----------------
The date of this Prospectus is February 13, 1997.
<PAGE> 14
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The Registration
Statement of which this Prospectus is a part, as well as reports, proxy
statements and other information filed by the Company with the Commission
pursuant to the informational requirements of the Exchange Act, may be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Northeast Regional Office, 7 World Trade Center,
Suite 1300, New York, New York 10048; and Midwest Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street N.W., Washington, D.C. 20549 at prescribed rates.
Such material may also be accessed electronically by means of the Commission's
Web site maintained on the Internet at http://www.sec.gov. Such reports and
other information concerning the Company can also be inspected at the offices of
the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005;
The Chicago Stock Exchange, Incorporated, 440 South LaSalle Street, Chicago,
Illinois 60605; and The Pacific Stock Exchange Incorporated, 301 Pine Street,
San Francisco, California 94104.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the
Commission pursuant to the Exchange Act and are hereby incorporated herein by
reference and made a part of this Prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as amended and supplemented by Form 10-K/A thereto filed with
the Commission on April 15, 1996.
(b) The Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1996, June 30, 1996 and September 30, 1996.
(c) The Company's Current Reports on Form 8-K dated March 26, 1996,
April 23, 1996, July 16, 1996, October 15, 1996, November 1, 1996 and January
24, 1997.
All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the Securities
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of filing such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED, UPON WRITTEN
OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED
TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED BY REFERENCE IN THIS PROSPECTUS
(NOT INCLUDING THE EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS). REQUESTS FOR SUCH
DOCUMENTS SHOULD BE DIRECTED TO 360 COMMUNICATIONS COMPANY, 8725 W.
HIGGINS ROAD, CHICAGO, ILLINOIS 60631-2702, ATTENTION: INVESTOR RELATIONS,
TELEPHONE (773) 399-2500.
2
<PAGE> 15
THE COMPANY
The Company is one of the leading and most established wireless
communications companies in the United States. As of December 31, 1996, the
Company served approximately 2 million customers in more than 100 markets in 16
states. The Company's interests in these markets represent approximately 20.9
million Net POPs as of December 31, 1996. The Company also owns, as of December
31, 1996, minority interests in 53 additional cellular telephone markets
representing approximately 4.4 million Net POPs, including markets located in
New York, New York; Chicago, Illinois; Houston, Texas; and Orlando, Florida. The
Company sells and markets wireless voice and data services and related products,
as well as residential long distance service, through a distribution network
consisting of nationally recognized and local dealers, full service retail
stores and a direct sales force. "Net POPs" refers to the estimated population
with respect to a given service area multiplied by the percentage interest that
the Company owns in the entity licensed by the Federal Communications Commission
to operate a cellular communications system within that service area.
The Company was incorporated under the laws of the State of Delaware
in 1982. In March 1993, Centel Corporation, then the Company's immediate parent,
merged with a wholly-owned subsidiary of Sprint Corporation ("Sprint"). In
February 1996, the Company, then known as Sprint Cellular Company, changed its
name to 360 Communications Company. On March 7, 1996, Sprint completed
the spin-off of the Company through a pro rata distribution to Sprint
shareholders of all of the Common Stock of the Company.
The Company's principal executive offices are located at 8725 W.
Higgins Road, Chicago, Illinois 60631- 2702, and its telephone number is (773)
399-2500.
USE OF PROCEEDS
Unless otherwise indicated in an accompanying Prospectus Supplement,
the net proceeds to be received by the Company from the sale of the Securities
will be available for general corporate purposes of the Company and may be used
for the repayment of short-term debt and borrowings under the Company's
revolving credit facility and for the funding of future acquisitions, capital
expenditures and working capital requirements.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges
for the Company and its subsidiaries for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ---------------------------------------------------
1996 1995 1994 1993 1992 1991
-------------- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges(1): 2.23 1.32 -- -- -- --
</TABLE>
- ----------
(1) The ratio of earnings to fixed charges have been computed by dividing fixed
charges into the sum of (a) income (loss) before cumulative effects of
changes in accounting principles, less capitalized interest, and with
adjustments to appropriately reflect the Company's majority-owned, 50%-owned
and less-than-50%-owned affiliates, (b) income taxes and (c) fixed charges.
Fixed charges consist of interest on all indebtedness and the interest
component of operating rents, with adjustments as appropriate to reflect the
Company's 50%-owned affiliates. For each of the four years in the period
ended December 31, 1994, the deficit of earnings to fixed charges was
$8,912,000, $60,217,000, $94,819,000 and $77,607,000, respectively.
3
<PAGE> 16
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute senior unsecured debt securities
of the Company and will be issued under an Indenture (the "Indenture") to be
entered into between the Company and Citibank, N.A., as trustee (the "Trustee").
A copy of the Indenture is filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The following summaries of certain provisions
of the Indenture do not purport to be complete and are qualified in their
entirety by express reference to the detailed provisions of the Indenture,
including the definitions therein of certain terms. References to article and
section numbers under this heading are to articles and section numbers in the
Indenture. Terms used under this heading or in any Prospectus Supplement
relating to the Offered Debt Securities which are defined under this heading are
so defined solely with reference to the Offered Debt Securities.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities that can be issued thereunder and provides that Debt Securities of
any series may be issued thereunder up to the aggregate principal amount that
may be authorized from time to time by the Company. (Art. Three, Sec. 301) The
Indenture does not limit the aggregate principal amount of other indebtedness or
securities that may be issued by the Company. See "Restrictions Under 1996
Indenture and Credit Facility" below for a description of provisions contained
in the 1996 Indenture (as defined below) and the Credit Facility (as defined
below) that may restrict the Company's ability to issue Debt Securities under
the Indenture.
Reference is made to the applicable Prospectus Supplement for the
following terms of the Offered Debt Securities (among others): (i) the title of
such Offered Debt Securities; (ii) the limit, if any, upon the aggregate
principal amount of such Offered Debt Securities that may be issued; (iii) the
rate or rates, or the method of determination thereof, at which such Offered
Debt Securities will bear interest, if any, and the date or dates from which
such interest shall accrue; (iv) the dates on which such interest will be
payable (each, an "Interest Payment Date") and the regular record dates for the
interest payable on such Interest Payment Dates; (v) the obligation, if any, of
the Company to redeem or purchase such Offered Debt Securities pursuant to any
sinking fund or analogous provisions or at the option of the holder thereof and
the periods within which or the dates on which, the prices at which and the
terms and conditions upon which such Offered Debt Securities will be redeemed or
purchased, in whole or in part, pursuant to such obligations; (vi) the periods
within which or the dates on which, the prices at which and the terms and
conditions upon which such Offered Debt Securities may be redeemed, if any, in
whole or in part, at the option of the Company; (vii) if other than
denominations of $1,000 and any integral multiple thereof, the denominations in
which such Offered Debt Securities will be issuable; (viii) whether such Offered
Debt Securities are to be issued in whole or in part in the form of one or more
global Debt Securities and, if so, the identity of the depositary for such
global Debt Securities; and (ix) any other terms of such Offered Debt Securities
not inconsistent with the provisions of the Indenture.
The Indenture does not contain any covenants or other provisions that
are specifically intended to afford holders of the Debt Securities special
protection in the event of a highly leveraged transaction.
RANKING
The Debt Securities will be senior unsecured obligations of the Company,
will rank pari passu in right of payment with all existing and future
unsubordinated, unsecured indebtedness of the Company ("Senior Indebtedness"),
including indebtedness under the 1996 Indenture and the Credit Facility, and
will be senior in right of payment to all future subordinated indebtedness of
the Company. (Art. Three, Sec. 301) As of December 31, 1996, $900 million of the
Company's senior notes issued under an Indenture (the "1996 Indenture") dated as
of March 7, 1996 between the Company and Citibank, N.A., as Trustee, were
outstanding and approximately $680 million in borrowings were outstanding under
the Amended and Restated Credit Agreement (the"Credit Facility") dated as of
October 31, 1996 among the Company and a number of banks and institutional
lenders. As of December 31, 1996, $122 million in aggregate principal amount of
debt subordinated to the Senior Indebtedness was outstanding.
4
<PAGE> 17
All existing and future indebtedness and other liabilities of the
Company's subsidiaries, however, will be effectively senior in right of payment
to the Debt Securities. Claims of creditors of the Company's subsidiaries,
including trade creditors, will generally have a priority as to the assets of
such subsidiaries over the claims of the Company and the holders of the
Company's indebtedness, including the Debt Securities. The Indenture does not
limit the amount of indebtedness that may be incurred by subsidiaries of the
Company.
The Debt Securities will be obligations exclusively of the Company.
Since the operations of the Company are primarily conducted through subsidiaries
of the Company, the cash flow and the consequent ability to service debt,
including the Debt Securities, of the Company is primarily dependent upon the
earnings of such subsidiaries and the distribution of those earnings to, or upon
loans or other payments of funds by, such subsidiaries to the Company. The
payment of dividends and the making of loans and advances to the Company by its
subsidiaries may be subject to statutory or contractual restrictions, are
dependent upon the earnings of such subsidiaries and are subject to various
business considerations.
PAYMENT OF DEBT SECURITIES; TRANSFERS; EXCHANGES
Except as may be provided in the applicable Prospectus Supplement,
interest, if any, on each Offered Debt Security payable on each Interest Payment
Date will be paid by check mailed to the person in whose name such Debt Security
is registered (the registered holder of any Debt Security being herein called a
"Holder") as of the close of business on the regular record date relating to
such Interest Payment Date; provided, however, that interest payable at maturity
(whether at stated maturity, upon redemption or otherwise, hereinafter
"Maturity") will be paid to the person to whom principal is paid. However, if
there has been a default in the payment of interest on any Debt Security, such
defaulted interest may be payable to the Holder of such Debt Security as of the
close of business on a date selected by the Trustee not more than 15 days and
not less than 10 days prior to the date proposed by the Company for payment of
such defaulted interest.
Principal of and premium, if any, and interest, if any, on the Debt
Securities at Maturity will be payable upon presentation of the Debt Securities
at the principal corporate trust office of the Trustee in New York, New York.
The Company may change the place of payment on the Debt Securities, may appoint
one or more paying agents (including the Company) and may remove any paying
agent, all in its discretion. The applicable Prospectus Supplement will identify
any new place of payment and any paying agent appointed, and will disclose the
removal of any paying agent effected, prior to the date of such Prospectus
Supplement.
The transfer of Debt Securities may be registered and Debt Securities
may be exchanged for other Debt Securities of authorized denominations and of
like tenor and aggregate principal amount, at the principal corporate trust
office of the Trustee in New York, New York. The Company may change the place
for registration of transfer of the Debt Securities, may appoint one or more
additional security registrars or transfer agents (including the Company) and
may remove any security registrar or transfer agent appointed, all in its
discretion. The applicable Prospectus Supplement will identify any new place for
registration of transfer and any additional security registrar or transfer agent
appointed, and will disclose the removal of any security registrar or transfer
agent effected, prior to the date of such Prospectus Supplement. No service
charge will be made for any transfer or exchange of the Debt Securities, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. (Art. Three, Sec. 305) The
Company will not be required (a) to issue, register the transfer of or exchange
Debt Securities during a period of 15 days prior to giving any notice of
redemption or (b) to issue, register the transfer of or exchange any Debt
Security selected for redemption in whole or in part, except the unredeemed
portion of any Debt Security being redeemed in part.
PURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control Triggering Event (as defined
below), each Holder of Debt Securities of any series subject to such Change of
Control Triggering Event shall have the right to require the Company to purchase
all or any part (equal to $1,000 or an integral multiple thereof) of such
Holder's Debt Securities
5
<PAGE> 18
pursuant to the offer described below (the "Change of Control Offer") at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the purchase date (the "Change of Control
Purchase Price"). Without the appropriate consent of the Holders of the Debt
Securities of such series, neither the Board of Directors of the Company nor the
Trustee may waive the provisions of the Indenture requiring the Company to make
a Change of Control Offer upon a Change of Control Triggering Event with respect
to the Debt Securities of such series. (Art. Ten, Sec. 1001)
Within 30 days following any Change of Control Triggering Event, the
Company shall (i) cause a notice of the Change of Control Offer to be sent at
least once to the Dow Jones News Service or similar business news service in the
United States and (ii) mail a notice to the Trustee and each Holder of Debt
Securities of any series subject to such Change of Control Triggering Event
stating (1) that a Change of Control Triggering Event has occurred and a Change
of Control Offer is being made pursuant to the covenant in the Indenture
entitled "Repurchase of Securities at Option of the Holder Upon a Change of
Control" and that all Debt Securities of such series timely tendered will be
accepted for payment; (2) the purchase price and the purchase date, which shall
be, subject to any contrary requirement of applicable law, a business day no
earlier than 30 days nor later than 60 days from the date such notice is mailed
(the "Change of Control Payment Date"); (3) that any Debt Security of such
series (or portion thereof) accepted for payment (and duly paid on the Change of
Control Payment Date) pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Payment Date; (4) that any Debt
Securities of such series (or portions thereof) not tendered will continue to
accrue interest; (5) a description of the transaction or transactions
constituting the Change of Control Triggering Event; and (6) the procedures that
Holders of Debt Securities of such series must follow in order to tender their
Debt Securities (or portions thereof) for payment and the procedures that
Holders of Debt Securities of such series must follow in order to withdraw an
election to tender their Debt Securities (or portions thereof) for payment.
(Art. Ten, Sec. 1001)
Under the Indenture, a "Change of Control Triggering Event" is defined
as the occurrence of both a Change of Control (as defined below) and a Rating
Decline (as defined below) with respect to the Debt Securities of any series.
"Change of Control" is defined as the occurrence of any of the following events:
(i) any "person" or "group" (within the meaning of Sections 13(d) and 14(d) of
the Exchange Act (provided that a group formed solely for the purpose of voting
securities shall not be deemed to be a group for purposes of this definition))
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 35% or more of the total voting power
of the fully diluted Voting Stock (defined as all classes of capital stock
normally entitled to vote in the election of directors) of the Company; (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together with new
directors whose election by the Board of Directors of the Company or whose
nomination for election by the shareholders of the Company was approved by a
vote of 66 2/3% of the directors of the Company then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; (iii) the
Company consolidates or merges with or into any other Persons (as defined below)
or any other Person consolidates or merges with or into the Company, in either
case, other than a consolidation or merger (a) with a wholly-owned subsidiary of
the Company in which all of the Voting Stock of the Company outstanding
immediately prior to the effectiveness thereof is changed into or exchanged for
substantially the same consideration or (b) pursuant to a transaction in which
the outstanding Voting Stock of the Company is changed into or exchanged for
cash, securities or other property with the effect that the "beneficial owners"
(as such term is used in Section 13(d) of the Exchange Act) of the outstanding
Voting Stock of the Company immediately prior to such transaction, beneficially
own, directly or indirectly, more than 50% of the total voting power of the
fully diluted Voting Stock of the surviving corporation immediately following
such transaction; or (iv) the Company sells, conveys, transfers or leases,
directly or indirectly, all or substantially all of its assets to any Person
other than a wholly-owned subsidiary of the Company. "Person" is defined as any
individual, corporation, company (including any limited liability company),
partnership, joint venture, trust, unincorporated organization or government or
any agency or political subdivision thereof.
A "Rating Decline" with respect to the Debt Securities of any series
is defined under the Indenture as the occurrence of the following on, or within
90 days after the date of public notice of the occurrence of a Change of
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Control or of the intention by the Company to effect a Change of Control (which
period shall be extended so long as the rating assigned to the Debt Securities
of such series is under publicly announced consideration for the possible
downgrade by any of Standard & Poor's Rating Group, a division of McGraw Hill,
Inc. ("S&P"), Duff & Phelps Credit Rating Co. ("Duff & Phelps") and Moody's
Investors Service, Inc. ("Moody's") (or any successor to the respective rating
agency businesses thereof, collectively, the "Rating Agencies")): (a) in the
event the Debt Securities of such series are assigned an Investment Grade Rating
(as defined below) by at least two of the three Rating Agencies on the Rating
Date (as defined below), the rating assigned to the Debt Securities of such
series by at least two of the three Rating Agencies shall be below an Investment
Grade Rating; or (b) in the event the Debt Securities of such series are rated
below an Investment Grade Rating by at least two of the three Rating Agencies on
the Rating Date, the rating assigned to the Debt Securities of such series by at
least two of the three Rating Agencies shall be decreased by one or more
gradations (including gradations within rating categories as well as between
rating categories). "Investment Grade Rating" is defined as a rating equal to or
higher than Baa3 (or the equivalent) by Moody's, BBB- (or the equivalent) by S&P
and BBB- (or the equivalent) by Duff & Phelps. "Rating Date" is defined as the
date which is 90 days prior to the earlier of (i) a Change of Control and (ii)
public notice of the occurrence of a Change of Control or the intention of the
Company to effect a Change of Control.
The Company will comply to the extent then applicable and required by
law with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder in connection with the purchase of
Debt Securities in connection with a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
relating to the Change of Control Offer, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations described above by virtue thereof. (Art. Ten, Sec.
1002)
Except as described above with respect to a Change of Control
Triggering Event and except as may be set forth in the applicable Prospectus
Supplement, the Holders of the Debt Securities of any series are not entitled to
any other rights to require the Company to purchase or redeem their Debt
Securities in the event of a takeover, recapitalization or similar
restructuring.
The 1996 Indenture contains change of control repayment provisions
substantially identical to those contained in the Indenture. The occurrence of
certain of the events that would constitute a Change of Control under the
Indenture and the 1996 Indenture would constitute an event of default under the
Credit Facility. If the Company is not able to obtain requisite consents or
waivers from the lenders under the Credit Facility, the Company may be unable to
fulfill its repurchase obligations following a Change of Control Triggering
Event, thereby resulting in a default under the Indenture and the 1996 Indenture
and permitting the pursuit of remedies thereunder. Future Senior Indebtedness of
the Company may also contain prohibitions of certain events that would
constitute a Change of Control or require such Senior Indebtedness to be
repurchased upon a Change of Control. Moreover, the exercise by the Holders of
Debt Securities of any series of their right to require the Company to
repurchase such Debt Securities could cause a default under such Senior
Indebtedness, even if the Change of Control Triggering Event itself does not,
due to the financial effect of such repurchase obligation on the Company.
Finally, the Company's ability to pay cash to the Holders upon a repurchase may
be limited by the Company's then existing financial resources. In the event that
a Change of Control Offer occurs at a time when the Company does not have
sufficient available funds to pay the Change of Control Purchase Price for all
Debt Securities tendered pursuant to such offer, or a time when the Company is
prohibited from purchasing such Debt Securities (and the Company is unable
either to obtain the consent of the holders of the relevant indebtedness or to
repay such indebtedness), an Event of Default (as defined below) would occur
under the Indenture.
REDEMPTION
Any terms for the optional or mandatory redemption of Offered Debt
Securities by the Company (other than as discussed above under "Purchase at the
Option of Holders Upon a Change of Control") will be set forth in the applicable
Prospectus Supplement. Except as may otherwise be provided in the applicable
Prospectus Supplement with respect to Offered Debt Securities redeemable at the
option of the Holder, such Offered Debt Securities will be
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<PAGE> 20
redeemable only upon notice, by mail, not less than 30 or more than 60 days
prior to the date fixed for redemption, and if less than all of the Offered Debt
Securities of any series, or any tranche thereof, are to be redeemed, the
particular Offered Debt Securities will be selected by such methods as the
Trustee deems fair and appropriate. (Art. Four, Sec. 403 and 404)
EVENTS OF DEFAULT
The following constitute "Events of Default" under the Indenture with
respect to each series of Debt Securities outstanding thereunder:
(a) failure to pay any interest on any Debt Security of such
series within 30 days after the same becomes due and payable;
(b) failure to pay the principal of, or premium, if any, on
any Debt Security of such series when the same becomes due and payable
at maturity, upon acceleration, optional redemption, required purchase
(including purchases described above under "Purchase at the Option of
Holders Upon a Change of Control") or otherwise;
(c) failure to perform or breach of any covenant or warranty
of the Company in the Indenture described under "Certain Covenants"
below for 30 days after written notice to the Company by the Trustee,
or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Debt Securities of such series outstanding
under the Indenture as provided in the Indenture;
(d) failure to perform or breach of any other covenant or
warranty of the Company in the Indenture (other than a covenant or
warranty of the Company in the Indenture solely for the benefit of one
or more series of Debt Securities other than the Debt Securities of
such series) for 60 days after written notice to the Company by the
Trustee, or to the Company and the Trustee by the Holders of at least
25% in principal amount of the Debt Securities of such series
outstanding under the Indenture as provided in the Indenture;
(e) failure of the Company or any Restricted Subsidiary to
pay when due within any applicable grace period principal, interest or
premium aggregating $25 million or more with respect to any
indebtedness of the Company or any Restricted Subsidiary (as defined
below) (including indebtedness under the 1996 Indenture and the Credit
Facility) or the acceleration of any such indebtedness;
(f) any final judgment or decree for the payment of money in
an uninsured aggregate amount in excess of $25 million shall be
rendered against the Company or any Restricted Subsidiary and shall
not be waived, satisfied or discharged for any period of 60
consecutive days during which a stay of enforcement shall not be in
effect;
(g) certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Restricted
Subsidiary; and
(h) any other Event of Default specified with respect to
Debt Securities of such series. (Art. Eight, Sec. 801)
No Event of Default with respect to the Debt Securities of a series
necessarily constitutes an Event of Default with respect to the Debt Securities
of any other series issued under the Indenture. A "Default," with respect to the
Debt Securities of any series, is defined as any event which is, or after notice
or passage of time or both would be, an Event of Default with respect to the
Debt Securities of such series.
REMEDIES
If an Event of Default with respect to any series of Debt Securities
occurs and is continuing, then either the
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<PAGE> 21
Trustee or the Holders of not less than 25% in principal amount of the
outstanding Debt Securities of such series may declare the principal amount (or
if the Debt Securities of such series are discount notes or similar Debt
Securities, such portion of the principal amount of such Debt Securities as may
be specified in the terms thereof) of all the Debt Securities of such series to
be due and payable immediately; provided, however, that if an Event of Default
occurs and is continuing with respect to more than one series of Debt
Securities, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the outstanding Debt Securities of all such series,
considered as one class, may make such declaration of acceleration and not the
Holders of the Debt Securities of any one of such series.
At any time after the declaration of acceleration with respect to the
Debt Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained, the Holders of a majority in
principal amount of the outstanding Debt Securities of such series, by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(1) all overdue interest on all Debt Securities of such
series;
(2) the principal of and premium, if any, on any Debt
Securities of such series which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate or rates
prescribed therefore in such Debt Securities;
(3) interest upon overdue interest at the rate or rates
prescribed therefor in such Debt Securities, to the extent that
payment of such interest is lawful; and
(4) all amounts due to the Trustee under the Indenture; and
(b) all Events of Default with respect to the
Debt Securities of such series, other than the nonpayment of the
principal of the Debt Securities of such series which has become due
solely by such declaration of acceleration, have been cured or waived
as provided in the Indenture. (Art. Eight, Sec. 802)
If an Event of Default with respect to the Debt Securities of any
series occurs and is continuing, the Holders of a majority in principal amount
of the outstanding Debt Securities of such series will have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of such series; provided, however, that if an
Event of Default occurs and is continuing with respect to more than one series
of Debt Securities, the Holders of a majority in aggregate principal amount of
the outstanding Debt Securities of all such series, considered as one class,
will have the right to make such direction, and not the Holders of the Debt
Securities of any one of such series. (Art. Eight, Sec. 812) The Trustee is not
required to exercise any of the rights and powers vested in it under the
Indenture at the request or direction of any Holder unless such Holder shall
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction. (Art. Nine, Sec. 903) The right of a Holder of any Debt
Security of such series to institute a proceeding with respect to the Indenture
is subject to certain conditions precedent, but each Holder has an absolute
right to receive payment of principal and premium, if any, and interest, if any,
when due and to institute suit for the enforcement of any such payment. (Art.
Eight, Sec. 807 and 808) The Indenture provides that the Trustee is required,
within 90 days after the occurrence of any Default thereunder with respect to
the Debt Securities of a series, to give the Holders of the Debt Securities of
such series notice of any Default known to it, unless cured or waived; provided,
however, that, except in the case of a Default in the payment of principal of or
premium, if any, or interest, if any, on any Debt Securities of such series, the
Trustee may withhold such notice if the Trustee determines that it is in the
interest of such Holders to do so; and provided, further, that in the case of a
default of the character specified above in clauses (c) and (d) under "Events of
Default," no such notice shall be given to such Holders until at least 75 days
er the occurrence thereof. (Art. Nine, Sec. 902)
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<PAGE> 22
The Company will be required to furnish annually to the Trustee a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance. (Art. Six, Sec.
606)
CERTAIN COVENANTS
Limitation on Liens. The Indenture provides that the Company shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
incur or suffer to exist, any mortgage, pledge, security interest or lien
("Lien") upon any of its property or assets, whether now owned or hereinafter
acquired, or any interest therein or any income or profits therefrom, unless it
has made or will make effective provision whereby the Debt Securities will be
secured by such Lien equally and ratably with (or prior to) all other
Indebtedness (defined as any indebtedness, secured or unsecured, contingent or
otherwise, which is for borrowed money) of the Company or any Restricted
Subsidiary secured by such Lien for so long as any such other Indebtedness of
the Company or any Restricted Subsidiary shall be so secured. (Art. Six, Sec.
602)
The foregoing limitation does not apply to (i) Liens incurred by the
Company or any Restricted Subsidiary if, after giving effect to such incurrence
on a pro forma basis, the amount of the total Indebtedness of the Company and
the Restricted Subsidiaries that is secured by a Lien does not exceed 15% of the
product of (a) the sum of the Pro Forma EBITDA (as defined below) of the Company
for the most recent four consecutive fiscal quarters and (b) 6.5; (ii) Liens on
property existing on March 7, 1996; (iii) Liens on property to secure any
extension, renewal, refinancing, replacement or refunding, in whole or in part,
of any Indebtedness secured by Liens referred to in any of clauses (i), (ii),
(viii) or (xi) of this paragraph; (iv) Liens for taxes, assessments or
governmental charges or levies if the same shall not at the time be delinquent
or thereafter can be paid without penalty, or are being contested in good faith
and by appropriate proceedings; (v) Liens imposed by law, such as carriers',
warehousemen's and mechanics' Liens and other similar Liens arising in the
ordinary course of business which secure payment of obligations not more than 60
days past due or are being contested in good faith and by appropriate
proceedings; (vi) Liens incurred in the ordinary course of business to secure
performance of obligations with respect to statutory or regulatory requirements,
performance or return-of-money bonds, surety bonds or other obligations of a
like nature and incurred in a manner consistent with industry practice; (vii)
Liens incurred to secure appeal bonds and judgment and attachment Liens, in each
case in connection with litigation or legal proceedings which are being
contested in good faith by appropriate proceedings so long as reserves have been
established to the extent required by generally accepted accounting principles
as in effect at such time and so long as such Liens do not encumber assets by an
amount in excess of $25 million; (viii) Liens on property at the time the
Company or any Restricted Subsidiary acquired or constructed such property,
including any acquisition by means of a merger or consolidation with or into the
Company or such Restricted Subsidiary; (ix) other Liens on the property of the
Company or any Restricted Subsidiary incidental to the conduct of their
respective businesses or the ownership of their respective properties which were
not created in connection with the incurrence of Indebtedness or the obtaining
of advances or credit and which do not in the aggregate materially detract from
the value of their respective properties or materially impair the use thereof in
the operation of their respective businesses; (x) pledges or deposits under
workmen's compensation laws, unemployment insurance laws or similar legislation,
or good faith deposits in connection with bids, tenders, contracts (other than
for the payment of Indebtedness) or leases to which the Company or any
Restricted Subsidiary is a party, or deposits to secure public or statutory
obligations of the Company or any Restricted Subsidiary or deposits for the
payment of rent, in each case incurred in the ordinary course of business; (xi)
Liens on the property of a Person at the time such Person becomes a Restricted
Subsidiary; provided, however, that any such Lien may not extend to any other
property of the Company or any other Restricted Subsidiary which is not a direct
subsidiary of such Person; provided, further however, that any such Lien was not
incurred in anticipation of or in connection with the transaction or series of
related transactions pursuant to which such Person became a Restricted
Subsidiary; (xii) utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character; or (xiii) Liens in
favor of the Trustee securing the obligations of the Company under the Indenture
(collectively, "Permitted Liens").
Under the Indenture,"Pro Forma EBITDA," for any period, is defined as
the EBITDA (as defined below) of
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the Company and the Restricted Subsidiaries as determined on a consolidated
basis in accordance with generally accepted accounting principles, adjusted to
reflect the acquisition or sale of assets by the Company or any Restricted
Subsidiary during such period. "EBITDA," for any period, is defined as an amount
equal to (i) the sum of (a) consolidated net income of the Company and the
Restricted Subsidiaries for such period, plus (b) the provision for taxes for
such period based on income or profits to the extent such income or profits were
included in computing consolidated net income and any provision for taxes
utilized in computing net loss under clause (a) hereof, plus (c) consolidated
interest expense of the Company and the Restricted Subsidiaries for such period,
plus (d) depreciation for such period on a consolidated basis, plus (e)
amortization of intangibles for such period on a consolidated basis, plus (f)
any other non-cash items reducing consolidated net income for such period, minus
(ii) all non-cash items increasing consolidated net income for such period, all
determined in accordance with generally accepted accounting principles
consistently applied.
Designation of Restricted and Unrestricted Subsidiaries. The Board of
Directors of the Company may designate an Unrestricted Subsidiary as a
Restricted Subsidiary or designate a Restricted Subsidiary as an Unrestricted
Subsidiary at any time; provided, however, that (i) immediately after giving
effect to such designation, there exist no Liens (other than Permitted Liens) on
the property of the Company or any Restricted Subsidiary and (ii) an officers'
certificate with respect to such designation is delivered to the Trustee within
75 days after the end of the fiscal quarter in which such designation is made
(or, in the case of a designation made during the last fiscal quarter of the
Company's fiscal year, within 120 days after the end of such fiscal year), which
officers' certificate shall state the effective date of such designation. (Art.
Six, Sec. 603)
A "Restricted Subsidiary" is defined under the Indenture as (i) any
Subsidiary (as defined below) of the Company existing on and after the date that
the first series of Debt Securities are authenticated under the Indenture (the
"Issue Date") unless such Subsidiary shall have been designated an Unrestricted
Subsidiary as permitted under the Indenture and (ii) an Unrestricted Subsidiary
which is redesignated as a Restricted Subsidiary as permitted under the
Indenture. An "Unrestricted Subsidiary" is defined as (i) any Subsidiary of the
Company in existence on the Issue Date that is not a Restricted Subsidiary, (ii)
any Subsidiary of an Unrestricted Subsidiary and (iii) any Subsidiary of the
Company which is designated after the Issue Date as an Unrestricted Subsidiary
as permitted under the Indenture and not thereafter designated as a Restricted
Subsidiary. A "Subsidiary" is defined as any corporation, partnership, joint
venture, association or other business entity, whether now existing or hereafter
organized or acquired, (a) in the case of a corporation, of which at least 50%
of the total voting power of the Voting Stock is held by the Company or any of
its Subsidiaries and the Company or any of its Subsidiaries has the power to
direct the management, policies and affairs thereof; or (b) in the case of a
partnership, joint venture, association or other business entity, with respect
to which the Company or any of its Subsidiaries has the power to direct or cause
the direction of the management and policies of such entity, by contract or
otherwise, if in accordance with generally accepted accounting principles such
entity is consolidated with the Company for financial statement purposes.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Indenture provides that the Company shall not merge or consolidate
with, or into, any other entity (other than a merger of a wholly-owned
subsidiary of the Company into the Company) or sell, transfer, assign, lease,
convey or otherwise dispose of all or substantially all of its property or
assets in any one transaction or series of transactions unless (a) the entity
formed by or surviving any such consolidation or merger (if the Company is not
the surviving entity) or the Person to which such sale, transfer, assignment,
lease or conveyance is made (the "Surviving Entity") shall be a corporation
organized and existing under the laws of the United States or a State thereof or
the District of Columbia and such corporation expressly assumes, by supplemental
indenture in form satisfactory to the Trustee, executed and delivered to the
Trustee by such corporation, the due and punctual payment of the principal of,
premium, if any, and interest on all the Debt Securities according to their
tenor, and the due and punctual performance and observance of all the covenants
and conditions of the Indenture to be performed by the Company; (b) in the case
of a sale, transfer, assignment, lease, conveyance or other disposition of all
or substantially all of the Company's property or assets, such property or
assets shall have been transferred as an entirety or virtually as an entirety to
one Person; and (c) immediately before and after giving effect to such
transaction or series of transactions, no Default or
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Event of Default shall have occurred and be continuing. (Art. Eleven, Sec.
1101)
In connection with any consolidation merger or transfer, the Company
shall deliver or cause to be delivered to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an officers' certificate and an opinion
of counsel, each stating that such consolidation merger, or transfer and the
supplemental indenture in respect thereto comply with the Indenture and that all
conditions precedent therein provided for relating to such transaction or
transactions have been complied with. (Art. Eleven, Sec. 1101)
MODIFICATION OF INDENTURE
Without the consent of any Holders of Debt Securities, the Company and
the Trustee may enter into one or more supplemental indentures for any of the
following purposes:
(a) to evidence the succession of another person to the
Company and the assumption by any such successor of the covenants of
the Company in the Indenture and the Debt Securities pursuant to a
consolidation, merger or conveyance of substantially all of the
Company's assets as described above under "Merger, Consolidation and
Sale of Assets;" or
(b) to add to the covenants of the Company for the benefit
of the Holders of all or any series of outstanding Debt Securities or
to surrender any right or power conferred upon the Company by the
Indenture; or
(c) to add any additional Events of Default with respect to
all or any series of outstanding Debt Securities; or
(d) to change or eliminate any provision of the Indenture or
to add any new provision to the Indenture; provided that if such
change, elimination or addition will adversely affect the interest of
the Holders of Debt Securities of any series in any material respect
such change, elimination or addition will become effective with
respect to such series only when there is no Debt Security of such
series remaining outstanding under the Indenture; or
(e) to provide collateral security for all series of Debt
Securities; or
(f) to establish the form or terms of Debt Securities of
any series as permitted by the Indenture; or
(g) to evidence and provide for the acceptance of the appointment
of a successor Trustee under the Indenture with respect to the Debt
Securities of one or more series and to add or change any of the
provisions of the Indenture as shall be necessary to provide for or to
facilitate the administration of the trusts under the Indenture by more
than one trustee; or
(h) to provide for the procedures required to permit the
utilization of a non-certificated system of registration for any
series of Debt Securities; or
(i) to change any place where (1) the principal of and
premium, if any, and interest, if any, on Debt Securities of any
series, or any tranche thereof, shall be payable, (2) any Debt
Securities of any series, or any tranche thereof, may be surrendered
for registration of transfer, (3) Debt Securities of any series, or
any tranche thereof, may be surrendered for exchange and (4) notices
and demands to or upon the Company in respect of the Debt Securities
of any series, or any tranche thereof, and the Indenture may be
served, subject to certain exceptions; or
(j) to cure any ambiguity, defect or inconsistency or to
make any other provisions with respect to matters and questions
arising under the Indenture, provided such provisions shall not
adversely affect the
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interests of the Holders of Debt Securities of any series in any
material respect. (Art. Twelve, Sec. 1201)
DEFEASANCE
The Company at any time may terminate all of its obligations under the
Debt Securities of any series and the Indenture with respect to the Debt
Securities of such series ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Debt Securities of such series, to replace
mutilated, destroyed, lost or stolen Debt Securities of such series and to
maintain a registrar and paying agent in respect of the Debt Securities of such
series by taking the action described below. By taking such action, the Company
at any time may terminate its obligations under the covenants described above
under "Certain Covenants" and the provisions discussed above in clauses (c),
(e), (f) and (g) (in the case of such clause (g), with respect to Restricted
Subsidiaries only) under "Events of Default" ("covenant defeasance").
The Company may exercise its legal defeasance option with respect to
the Debt Securities of any series notwithstanding its prior exercise of its
covenant defeasance option with respect to the Debt Securities of such series.
If the Company exercises its legal defeasance option with respect to the Debt
Securities of any series, payment of the Debt Securities of such series may not
be accelerated because of the occurrence of an Event of Default with respect to
such Debt Securities. If the Company exercises its covenant defeasance option
with respect to the Debt Securities of any series, payment of the Debt
Securities of such series may not be accelerated because of the occurrence of an
Event of Default specified in clauses (c), (e), (f) or (g) (in the case of such
clause (g), with respect to Restricted Subsidiaries only) under "Events of
Default" above.
In order to exercise either defeasance option with respect to the Debt
Securities of any series, the Company must irrevocably deposit in trust with the
Trustee money or U.S. Obligations (as defined below) sufficient for the payment
of principal and interest on the Debt Securities of such series to maturity and
must comply with certain other conditions, including the delivery to the Trustee
of an opinion of counsel to the effect that Holders of the Debt Securities of
such series will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and defeasance and will be subject to
Federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred (and, in the case of legal defeasance only, such opinion of counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law). (Art. Seven, Sec. 701) "U.S. Government
Obligations" is defined as direct obligations (or certificates representing an
ownership interest in such obligations) of the United States (including any
agency or instrumentality thereof) for the payment of which the full faith and
credit of the United States is pledged and which are not callable or redeemable
at the issuer's option.
RESTRICTIONS UNDER 1996 INDENTURE AND CREDIT FACILITY
The 1996 Indenture contains restrictions with respect to the Company
and the Restricted Subsidiaries. Under the 1996 Indenture, during any period of
time that the ratings assigned to the senior notes outstanding thereunder by two
or more of the three Rating Agencies are below Investment Grade Ratings or
withdrawn, the Company and the Restricted Subsidiaries will be restricted from
(a) incurring additional indebtedness, other than certain permitted
indebtedness, unless the ratio of (i) the outstanding indebtedness of the
Company and the Restricted Subsidiaries divided by (ii) the sum of the Pro Forma
EBITDA of the Company and the Restricted Subsidiaries for the most recent four
consecutive fiscal quarters would not exceed 6.5 as a result of such incurrence;
(b) making restricted payments (defined generally as dividends and
distributions, payments to purchase, redeem, acquire or retire capital stock,
warrants, rights or options of the Company or its affiliates and investments,
other than certain permitted investments, in other Persons); (c) selling assets
under certain circumstances; (d) entering into or otherwise permitting any
subsidiary distribution restrictions (defined generally to include any
agreement, encumbrance or restriction on the ability of any subsidiary to pay
dividends, make loans, or transfer property or assets to the Company or any
Restricted Subsidiary); (e) entering into certain transactions with affiliates;
and (f) consummating certain consolidations, mergers and transfers of assets.
The Indenture does not contain similar restrictions with respect to the Debt
Securities.
13
<PAGE> 26
The Credit Facility contains additional covenants that, among other
things, restrict the Company and the Restricted Subsidiaries from incurring
additional debt (subject to certain limits on dollar amounts and maturities and
except for intercompany debt, subject to limitations, and debt incurred to hedge
against interest rate risk or foreign exchange fluctuations) and require the
Company to maintain certain maximum debt to EBITDA ratios and minimum EBITDA to
interest ratios.
While these covenants, as well as other covenants contained in the
1996 Indenture and the Credit Facility, are more restrictive than the covenants
contained in the Indenture, the covenants contained in the 1996 Indenture and
the Credit Facility are solely for the benefit of the holders of the senior
notes outstanding under the 1996 Indenture and the lenders under the Credit
Facility, respectively, and are subject to amendment, waiver or consent at the
discretion of such holders and lenders.
REGARDING THE TRUSTEE
The Company engages in banking transactions in the ordinary course of
business with the Trustee and the Trustee currently serves as trustee under the
1996 Indenture.
DESCRIPTION OF WARRANTS
The following statements with respect to the Warrants are summaries
of, and subject to, the detailed provisions of a Warrant Agreement (the "Warrant
Agreement") to be entered into by the Company and a warrant agent to be selected
at the time of issue (the "Warrant Agent"), a form of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part. Terms
used under this heading or in any Prospectus Supplement relating to the Offered
Warrants which are defined under this heading are so defined solely with
reference to the Offered Warrants.
GENERAL
The Warrants, evidenced by Warrant certificates (the "Warrant
Certificates"), may be issued under the Warrant Agreement independently or
together with any Debt Securities offered by any Prospectus Supplement and may
be attached to or separate from such Debt Securities. If Warrants are offered,
the applicable Prospectus Supplement will describe the terms of such Offered
Warrants, including the following: (i) the offering price, if any; (ii) the
designation, aggregate principal amount and terms of the Debt Securities
purchasable upon exercise of such Offered Warrants; (iii) if applicable, the
designation and terms of the Debt Securities with which such Offered Warrants
are issued and the number of Offered Warrants issued with each such Debt
Security; (iv) if applicable, the date on and after which such Offered Warrants
and the related Debt Securities will be separately transferable; (v) the
principal amount of Debt Securities purchasable upon exercise of one Offered
Warrant and the price at which such principal amount of Debt Securities may be
purchased upon such exercise; (vi) the date on which the right to exercise such
Offered Warrants shall commence and the date on which such right shall expire;
(vii) Federal income tax consequences, if any; (viii) whether such Offered
Warrants represented by the Warrant Certificates will be issued in registered or
bearer form; and (ix) any other terms of such Offered Warrants not inconsistent
with the provisions of the Warrant Agreement.
Warrant Certificates may be exchanged for new Warrant Certificates of
different denominations and may (if in registered form) be presented for
registration of transfer at the corporate trust office of the Warrant Agent or
any Co-Warrant Agent, which will be listed in the applicable Prospectus
Supplement, or at such other office as may be set forth therein. Warrant holders
do not have any of the rights of Holders of Debt Securities (except to the
extent that the consent of Warrant holders may be required for certain
modifications of the terms of the Indenture and the series of Debt Securities
issuable upon exercise of the Warrants) and are not entitled to payments of
principal of and interest, if any, on such Debt Securities.
14
<PAGE> 27
EXERCISE OF WARRANTS
Warrants may be exercised by surrendering the Warrant Certificate at
the corporate trust office of the Warrant Agent or at the corporate trust office
of the Co-Warrant Agent, if any, with the form of election to purchase on the
reverse side of the Warrant Certificate properly completed and executed, and by
payment in full of the exercise price, as set forth in the applicable Prospectus
Supplement. Upon the exercise of Warrants, the Warrant Agent or Co- Warrant
Agent, if any, will, as soon as practicable, deliver the Debt Securities in
authorized denominations in accordance with the instructions of the exercising
Warrant holder and at the sole cost and risk of such holder. If less than all of
the Warrants evidenced by the Warrant Certificate are exercised, a new Warrant
Certificate will be issued for the remaining amount of Warrants.
LEGAL OPINIONS
The legality of the Securities offered hereby will be passed upon for
the Company by Kevin C. Gallagher, Esq., Senior Vice President, General Counsel
and Secretary of the Company. At December 31, 1996, Mr. Gallagher was the
beneficial owner of 10,226 shares of Common Stock of the Company.
EXPERTS
The consolidated financial statements, schedule and Selected
Proportionate Operating Results of the Company included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995 (the "1995 Form
10-K") have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference which, as to GTE Mobilnet of South Texas Limited Partnership and New
York SMSA Limited Partnership, is based in part on the reports of other
auditors. Such consolidated financial statements, schedule and Selected
Proportionate Operating Results are, and audited financial statements, schedule
and Selected Proportionate Operating Results to be included in subsequently
filed documents will be, incorporated herein by reference in reliance upon the
report of Ernst & Young LLP pertaining to such financial statements, schedule or
Selected Proportionate Operating Results (to the extent covered by consents of
such firm filed with the Commission) given upon the authority of such firms as
experts in accounting and auditing.
The financial statements of Kansas City SMSA Limited Partnership at
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995 not separately presented in the 1995 Form 10-K have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The financial statements of GTE Mobilnet of South Texas Limited
Partnership at December 31, 1995 and 1994 and for each of the three years in the
period ended December 31, 1995 included in the 1995 Form 10-K and the financial
statements of Independent Cellular Network, Inc. and Affiliates at December 31,
1995 and 1994 and for each of the three years in the period ended December 31,
1995 included in the Company's Current Report on Form 8-K dated November 1, 1996
(the "Form 8-K"), have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their separate reports thereon included in the 1995
10-K and the Form 8-K, respectively, and incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of New York SMSA Limited Partnership and
Orlando SMSA Limited Partnership at December 31, 1995 and 1994 and for each of
the three years in the period ended December 31, 1995 included in the 1995 Form
10-K, have been incorporated herein by reference in reliance on the reports of
Coopers & Lybrand L.L.P., independent accountants, given upon the authority of
such firm as experts in accounting and auditing.
15
<PAGE> 28
PLAN OF DISTRIBUTION
The Company may sell Securities through underwriters or dealers,
directly to one or more purchasers or through agents. The applicable Prospectus
Supplement will set forth the terms of the offering of any Securities, including
the names of any underwriters or agents, the purchase price of such Securities
and the proceeds to the Company from such sale, any underwriters' discounts and
other items constituting underwriters' compensation, any initial public offering
price, any discounts or concessions allowed or reallowed or paid to dealers and
any securities exchanges on which such Securities may be listed.
If underwriters are used in the sale, Securities will be acquired by
the underwriters for their own account and may be resold, from time to time, in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. Such
Securities may be offered to the public either through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
Unless otherwise set forth in the applicable Prospectus Supplement, the
obligations of the underwriters to purchase such Securities will be subject to
certain conditions precedent, and the underwriters will be obligated to purchase
all of such Securities, if any of such Securities are purchased. Any initial
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time. Only underwriters named in a
Prospectus Supplement are deemed to be underwriters in connection with the
Securities offered thereby.
Securities may also be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of Securities will be named, and any commissions payable by the Company to
such agent will be set forth in the applicable Prospectus Supplement. Unless
otherwise indicated in the applicable Prospectus Supplement, any such agent will
act on a best efforts basis for the period of the appointment.
If so indicated in the applicable Prospectus Supplement, the Company
will authorize agents, underwriters or dealers to solicit offers by certain
specified institutions to purchase Securities at the public offering price set
forth in such Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a future date specified in such Prospectus
Supplement. Such contacts will be subject only to those conditions set forth in
the applicable Prospectus Supplement and such Prospectus Supplement will set
forth the commissions payable for solicitation of such contracts.
Any underwriters, dealers or agents participating in the distribution
of Securities may be deemed to be underwriters and any discounts or commissions
received by them on the sale or resale of Securities may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933, as
amended (the "Securities Act"). Agents and underwriters may be entitled under
agreements entered into with the Company to indemnification by the Company
against certain liabilities, including liabilities under the Securities Act or
to contribution with respect to payments that the agents or underwriters may be
required to make in respect thereof. Agents and underwriters may be customers
of, engage in transactions with, or perform services for, the Company or its
affiliates in the ordinary course of business.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY UNDERWRITER, AGENT OR DEALER. NEITHER THE DELIVERY OF
THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER OR THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AT ANY
TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF. THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
16
<PAGE> 29
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION CONTAINED HEREIN OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company.......................... S-2
Recent Developments.................. S-3
Summary Consolidated Financial and
Operating Data..................... S-4
Use of Proceeds...................... S-6
Description of Notes................. S-7
Underwriting......................... S-11
Legal Opinions....................... S-12
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents By
Reference.......................... 2
The Company.......................... 3
Use of Proceeds...................... 3
Ratio of Earnings to Fixed Changes... 3
Description of Debt Securities....... 4
Description of Warrants.............. 14
Legal Opinions....................... 15
Experts.............................. 15
Plan of Distribution................. 16
</TABLE>
======================================================
======================================================
$100,000,000
360
COMMUNICATIONS
COMPANY
6.65% SENIOR NOTES
DUE 2008
[360 LOGO]
------------
PROSPECTUS SUPPLEMENT
JANUARY 8, 1998
------------
SALOMON SMITH BARNEY
J.P. MORGAN & CO.
LAZARD FRERES & CO. LLC
======================================================
