<PAGE>
As filed with the Securities and Exchange Commission on September 15, 1995
Registration No. 33-60925
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
AMENDMENT NO 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
PRONET INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4812 75-1832168
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
600 DATA DRIVE, SUITE 100
PLANO, TEXAS 75075
(214) 964-9500
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------------------
JAN E. GAULDING
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
PRONET INC.
600 DATA DRIVE, SUITE 100
PLANO, TEXAS 75075
(214) 964-9500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
Copies to:
JEFFREY A. CHAPMAN MARK A. SOLLS
VINSON & ELKINS L.L.P. VICE PRESIDENT AND
3700 TRAMMELL CROW CENTER GENERAL COUNSEL
2001 ROSS AVENUE PRONET INC.
DALLAS, TEXAS 75201-2975 600 DATA DRIVE, SUITE 100
PLANO, TEXAS 75075
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
----------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE (1) PRICE (1) REGISTRATION FEE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 7/8% Senior Subordinated
Notes due 2005 $100,000,000 100% $100,000,000 $34,483
============================================================================================
<FN>
(1) Estimated solely for the purpose of calculating the registration fee.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
=============================================================================
<PAGE>
PRONET INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
-------------------------------- ----------------------
<S> <C> <C>
1. Forepart of Registration Statement
and Outside Front Cover Page of Prospectus... Cover Page of Registration Statement;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus................................ Inside Front and Outside Back Cover
Pages of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information................ Summary; Risk Factors
4. Terms of the Transaction...................... Front Cover Page of the Prospectus; The
Exchange Offer; Plan of Distribution
5. Pro Forma Financial Information............... Not Applicable
6. Material Contracts with the Company being
Acquired..................................... Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters.............................. Not Applicable
8. Interests of Named Experts and Counsel........ Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. Not Applicable
10. Information with Respect to S-3 Registrants... Summary; Risk Factors; Management's
Discussion and Analyis of Financial
Condition and Results of Operations;
Description of Credit Facility
11. Incorporation of Certain Information by
Reference..................................... Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2 or S-3
Registrants................................... Not Applicable
13. Incorporation of Certain Information by
Reference..................................... Not Applicable
14. Information with Respect to Registrants Other
Than S-3 or S-2 Registrants................... Not Applicable
15. Information with Respect to S-3 Companies...... Not Applicable
16. Information with Respect to S-2 or S-3
Companies..................................... Not Applicable
17. Information with Respect to Companies Other
Than S-3 or S-2 Companies..................... Not Applicable
18. Information if Proxies, Consents or
Authorizations are to be Solicited............ Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in
an Exchange Offer............................. Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 15, 1995
PROSPECTUS
OFFER FOR ALL OUTSTANDING
11 7/8% SENIOR SUBORDINATED NOTES DUE 2005
IN EXCHANGE FOR
11 7/8% SENIOR SUBORDINATED NOTES DUE 2005
OF
PRONET INC.
----------
INTEREST PAYABLE JUNE 15 AND DECEMBER 15
------------------------
ProNet Inc. (the "Company") is offering upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying letter of
transmittal (the "Letter of Transmittal") (which together constitute the
"Exchange Offer") to exchange $1,000 principal amount of its registered 11 7/8%
Senior Subordinated Notes due 2005 (the "New Notes") for each $1,000 principal
amount of its unregistered 11 7/8% Senior Subordinated Notes due 2005 (the "Old
Notes") of which an aggregate principal amount of $100,000,000 is outstanding.
The form and terms of the New Notes are identical to the form and terms of the
Old Notes except that the New Notes have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), and will not bear any legends
restricting their transfer. The New Notes will evidence the same debt as the Old
Notes and will be issued pursuant to, and entitled to the benefits of, the
Indenture (as hereinafter defined) governing the Old Notes. The Company has not
issued, and does not have any current firm arrangements to issue, any
significant indebtedness to which the New Notes would be senior. The New Notes
will be effectively subordinated to substantially all of the outstanding
indebtedness of the Company and its subsidiaries. The Exchange Offer is being
made in order to satisfy certain contractual obligations of the Company. See
"The Exchange Offer" and "Description of New Notes."
Interest on the New Notes will be payable semi-annually on June 15 and
December 15 of each year commencing December 15, 1995. The New Notes will be
redeemable at the option of the Company, in whole or in part, at any time on or
after June 15, 2000, at the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the date of redemption. The New Notes will not be
subject to any mandatory sinking fund. In the event of a Change of Control (as
herein defined), each holder of the New Notes will have the right, at the
holder's option, to require the Company to purchase such holder's New 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. No assurances can be given
that in the event of a Change of Control the Company will have available funds
to repurchase the New Notes. In addition, the Company's ability to repurchase
the New Notes upon a Change of Control may be limited by the terms of its then
existing contractual obligations. The Credit Facility (as herein defined)
provides that the repurchase of the New Notes upon a Change of Control will
constitute a default under the Credit Facility, and any future credit agreements
or other agreements relating to Senior Debt (as herein defined) may contain
similar provisions. As a result, investors should anticipate that, without the
consent of the lenders under the Credit Facility, the Company may not be able to
consummate a transaction involving a Change of Control. See "Risk Factors --
Subordination" and "Description of New Notes -- Certain Covenants."
Borrowings by the Company under the Credit Facility are guaranteed by the
Company's subsidiaries and are secured by substantially all of the assets of the
Company and its subsidiaries. See "Description of Credit Facility."
The New Notes will be general unsecured obligations of the Company
subordinated in right of payment to all existing and future Senior Debt of the
Company. As of June 30, 1995, after giving PRO FORMA effect to certain
acquisitions and the offering of the Old Notes and the application of the net
proceeds therefrom, the Company would have had approximately $50.9 million of
Senior Debt outstanding. See "Use of Proceeds" and "Capitalization."
The Indenture under which the New Notes are to be issued will not limit the
amount of Senior Debt that may be incurred by the Company if certain tests are
met. See "Risk Factors -- Subordination" and "Description of New Notes --
Certain Covenants."
The interest rate on the Old Notes and the New Notes is subject to increase
and such Additional Interest (as herein defined) will be payable on the payment
dates set forth above, in certain circumstances, if the New Notes are not
registered with the Securities and Exchange Commission (the "Commission") within
prescribed time periods. See "Description of New Notes -- Exchange Offer;
Registration Rights Agreement."
The Exchange Offer will expire at 5:00 p.m., New York City time, ,
1995, or such later date and time to which it is extended (the "Expiration
Date").
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where the Old Notes were acquired by that broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of New Notes received
in exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. See "The Exchange Offer"
and "Plan of Distribution."
The Old Notes are designated for trading in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") market. To the extent Old
Notes are tendered and accepted in the Exchange Offer, the principal amount of
outstanding Old Notes will decrease with a resulting decrease in the liquidity
in the market therefor. Following the consummation of the Exchange Offer,
holders of Old Notes who were eligible to participate in the Exchange Offer but
who did not tender their Old Notes will not be entitled to certain rights under
the Registration Rights Agreement (as herein defined) and such Old Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity in the market for the Old Notes could be adversely affected. No
assurance can be given as to the liquidity of the trading market for either the
Old Notes or the New Notes.
FOR A DISCUSSION OF CERTAIN FACTORS TO BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE NEW NOTES, SEE "RISK FACTORS" ON PAGE 13.
------------------------------
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.
------------------------------
, 1995
<PAGE>
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 Commission. 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 Judiciary Plaza, Room 1924, 450
Fifth Street, N.W., Washington, D.C. 20549, and at its regional offices at 7
World Trade Center, New York, New York 10048 and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60621-2511. The
Company's Common Stock is quoted on The Nasdaq Stock Market and such reports,
proxy statements and other information concerning the Company may be
inspected and copied at the offices of The Nasdaq Stock Market located at
1735 K Street, NW, Washington, D.C. 20006-1500.
The Company is a Delaware corporation. The Company's principal executive
offices are located at 600 Data Drive, Suite 100, Plano, Texas 75075, and the
Company's telephone number at that location is (214) 964-9500.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission by
the Company, are incorporated herein by reference and made a part hereof:
(i) Annual Report on Form 10-K for the fiscal year ended December
31, 1994;
(ii) Annual Report on Form 10-K/A for the fiscal year ended December
31, 1994;
(iii) Annual Report on Form 10-K/A-2 for the fiscal year ended
December 31, 1994;
(iv) Current Report on Form 8-K filed March 16, 1995;
(v) Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1995;
(vi) Current Report on Form 8-K filed April 17, 1995;
(vii) Current Report on Form 8-K filed April 19, 1995;
(viii) Current Report on Form 8-K/A filed May 12,
1995;
(ix) Current Report on Form 8-K filed May 18, 1995;
(x) Current Report on Form 8-K filed May 19, 1995;
(xi) Current Report on Form 8-K/A filed June 2, 1995;
(xii) Current Report on Form 8-K filed June 2, 1995;
(xiii) Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1995;
(xiv) Current Report on Form 8-K filed July 5, 1995;
(xv) Current Report on Form 8-K filed July 7, 1995; and
(xvi) Current Report on Form 8-K filed September 15, 1995.
In addition, all documents filed pursuant to Sections 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 New Notes made hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained
herein or 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 also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
2
<PAGE>
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM THE COMPANY'S PRINCIPAL OFFICE: PRONET INC., 600 DATA DRIVE,
SUITE 100, PLANO, TEXAS 75075, ATTENTION: JAN E. GAULDING, SENIOR VICE
PRESIDENT AND CHIEF FINANCIAL OFFICER (TELEPHONE: (214) 964-9500). IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
, 1995.
3
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE
REQUIRES, REFERENCES IN THIS PROSPECTUS TO "PRONET" AND THE "COMPANY" REFER
TO PRONET INC. AND ITS CONSOLIDATED SUBSIDIARIES.
THE COMPANY
ProNet is one of the fastest growing wireless messaging providers in the
United States. The Company focuses its activities in five geographic regions
or communication "SuperCenters" centered around major metropolitan markets
and population corridors, which generally have the demographics, market size,
travel patterns and types of businesses that indicate significant potential
demand for the Company's products and services. The Company is a leading
provider of paging services in 12 major metropolitan markets in the United
States, including New York, Chicago, Dallas/Fort Worth, Houston, Charlotte
and Los Angeles. As of June 30, 1995, the Company had approximately 636,700
pagers in service. Upon completion of the acquisitions described herein, the
Company will have approximately 960,000 paging subscribers, making it one
of the five largest publicly traded paging companies in the United States.
The Company was founded in 1982 with the purpose of providing paging
services to hospitals, doctors and other healthcare providers. Prior to
January 1994, the Company provided paging services solely to the healthcare
industry. The Company is a solutions-oriented organization dedicated to
customer service which has concentrated on identifying market opportunities
in the wireless communications market where it can provide users with enhanced
wireless services. By utilizing proprietary technologies to manage the under-
served market of both the in-house and wide-area paging requirements of
hospitals, the Company quickly became the premier provider of customized,
enhanced wireless services to healthcare institutions in all of its major
metropolitan markets. In 1988, the Company began to apply advanced wireless
technology to the security business by marketing radio-activated electronic
tracking systems to financial institutions. As of June 30, 1995, the Company's
security systems consisted of 27,015 miniature radio transmitters, or
"TracPacs," in service and served approximately 400 customers.
In 1993, ProNet management recognized that the Company's operating
expertise combined with its presence in major metropolitan markets presented
an opportunity to capitalize on the growing demand for pagers among both
business users and the population at large. The Company believes that much of
the future growth in pagers in service will occur in large population centers
where demand from both business and individual subscribers will be primarily
for metropolitan and/or regional coverage. In 1994, the Company began to
market to these constituents through both direct and reseller distribution
channels and began to pursue acquisitions that complemented its existing
market presence. As a result of the Company's recent acquisition strategy,
the Company primarily provides pagers in the commercial marketplace.
The Company's strategy is to achieve rapid growth of its subscriber base
and expand service offerings while maintaining its low cost operating
structure. The Company believes that by further developing its SuperCenters,
it will continue to realize the benefits of operational consolidation while
maintaining the flexibility to react to regional market developments. Key
elements of the Company's operating strategy include:
GEOGRAPHIC CONCENTRATION. ProNet management believes that focusing
the Company's planned growth strategy around its SuperCenters allows the
Company to receive the greatest benefit for each dollar invested and will
most effectively address anticipated demand by new paging subscribers for
metropolitan and/or regional coverage. ProNet ultimately intends to offer
coverage to 60% of the United States population through its SuperCenters
encompassing the Northeast (anchored by New York City), Midwest (anchored
by Chicago), Southeast (anchored by Charlotte), South Central (anchored by
Houston) and West (anchored by Los Angeles).
4
<PAGE>
SELECTIVE ACQUISITIONS. The Company believes that a substantial
portion of its growth will be achieved through acquisitions of commercial
paging companies in its SuperCenter regions. ProNet carefully screens
and evaluates acquisition candidates according to their synergistic
qualities such as technical and operational characteristics, frequency
compatibilities, geographic coverage and distribution capabilities within
the SuperCenter strategy. Through technical, operational and financial
field teams, each new acquisition is quickly and thoroughly integrated
into the existing SuperCenter operations to maximize cost savings and
operating efficiencies. Since January 1, 1994, the Company has completed
11 acquisitions and signed definitive agreements or letters of intent with
respect to 10 additional acquisitions that are expected to close in 1995
or the first quarter of 1996.
INCREASE MARKET PENETRATION. ProNet intends to become a market leader
in both its current and future markets by utilizing a variety of existing
distribution channels and by continually exploring new channels. The
Company uses its highly trained direct sales force to target businesses,
medical institutions and individual customers. The Company also sells
paging services through non-exclusive agreements with resellers or agents
and through local and regional retailers. Emphasis on any one channel in a
particular region is dictated by market characteristics and business
opportunities. ProNet's emphasis on customer service and system reliability
is intended to enable the Company to continue to maintain a monthly
disconnect ("churn") rate significantly below the industry average and
thereby further strengthen its market share within its SuperCenters. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
COST EFFICIENT PROVIDER. The Company operates efficiently through
consolidation of key operating functions in one location per SuperCenter
and through the elimination of redundant operations in acquired companies.
The Company believes that subscriber volume, automation and shared overhead
will allow each SuperCenter to be one of the most cost efficient providers
in its marketplace.
ENHANCED WIRELESS SERVICES AND PRODUCTS. ProNet currently offers a
number of enhanced wireless products and services. The Company's
proprietary Intelligent Processing Terminal ("IPT") system for large
corporate accounts is a multi-tasking wide-area communications system
capable of managing a company's in-house and wide-area paging
requirements within a single system. The Company also offers value-added
paging services such as voice-mail, simultaneous group paging, news and
sports highlights, stock quotes, remote alpha entry and other specialized
marketing applications. ProNet's security systems, consisting of TracPacs
and tracking receivers, provide a wireless solution to the specialized
asset recovery needs of various governmental agencies and business
customers. The Company expects to offer additional enhanced services
and technologies as they become available.
Wireless messaging is a high growth industry. Industry sources estimate
that there are currently 25 million pagers in service in the United States, a
penetration rate of 10% of the population. The number of pagers in service in
the United States has grown at an annual rate of 15-20% since the early
1980s. Industry reports continue to project rapid growth for one-way pagers
and other wireless messaging services. Factors contributing to this level of
growth include (i) increasing mobility of the population, (ii) movement
toward a service-based economy, (iii) growing consumer awareness of the
benefits of mobile communications, (iv) technical advances in equipment and
services offered, and (v) continuing price efficiencies in equipment and
services offered.
5
<PAGE>
ACQUISITIONS
In 1993, as part of its overall strategy to capitalize on the growing
demand for pagers among commercial users and consumers in general, the Company
announced its plan to commence acquiring paging businesses within its
SuperCenter regions. Since this announcement, the Company has purchased or
entered into definitive agreements or letters of intent to purchase the paging
operations described below:
<TABLE>
<CAPTION>
STATUS OF PAGERS IN
ACQUISTION LOCATION(S) ACQUISITION SERVICE(1) PURCHASE PRICE
---------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C>
COMPLETED
ACQUISITIONS
Contact New York City Closed 3-1-94 91,000 $ 19.0 million
Radio Call New York City Closed 8-1-94 57,000 $ 7.8 million
ChiComm Chicago Closed 8-1-94 30,000 $ 9.8 million
High Tech Chicago and Texas Closed 12-31-94 2,000 $ 0.9 million
Signet Charlotte Closed 3-1-95 30,000 $ 9.0 million
Carrier New York City Closed 4-1-95 31,200 $ 6.5 million
Metropolitan Houston Closed 5-3-95 150,000 $ 21.0 million
All City Milwaukee Closed 5-19-95 20,000 $ 6.4 million
Americom Houston Closed 7-1-95 86,000 $ 17.5 million
Lewis Georgia Closed 9-1-95 15,000 $ 5.3 million
Gold Coast Florida Closed 9-1-95 6,000 $ 2.3 million
Total Closed
Acquisitions 518,200 $105.5 million
------- --------------
PENDING
ACQUISITIONS
Apple Chicago Letter of Intent )
signed 7-10-95 41,500 )
)
Signet )
Raleigh Raleigh Letter of Intent )
signed 7-10-95 13,000 )
)
Sun Florida Letter of Intent )
signed 7-26-95 12,000 )
)
P&C Houston Letter of Intent )
signed 8-2-95 -0-(2) )
)
Page One Georgia Letter of Intent )
signed 8-7-95 30,000 ) $ 74.9 million (3)
)
Nationwide Los Angeles Letter of Intent )
signed 8-11-95 45,000 )
)
Williams Florida Letter of Intent )
signed 8-21-95 )
)
RCS North Carolina Letter of Intent )
signed 8-22-95 78,500(4) )
)
Total Florida Letter of Intent )
signed 8-22-95 )
)
AGR Florida Letter of Intent )
signed 8-22-95 )
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
STATUS OF PAGERS IN
ACQUISITION LOCATION(S) ACQUISITION SERVICE(1) PURCHASE PRICE
---------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C>
--------- --------------
Total Pending
Acquisitions 220,000 $ 76.0 million
--------- --------------
Total
Acquisitions 738,000 $180.4 million
--------- --------------
--------- --------------
-----------------------------
<FN>
(1) As of the closing date or the date of execution of the definitive agreement
or letter of intent, as applicable.
(2) P&C is currently the Company's largest reseller serving more than 40,000
subscribers in Texas.
(3) Represents aggregate purchase price for Apple, Signet Raleigh, Sun, P&C,
Page One, Nationwide, Williams, RCS, Total and AGR.
(4) Represents aggregate number of pagers for Williams, RCS, Total and AGR.
</TABLE>
This portion of the text is a graphic depicting a map of the continental
United States indicating the locations of the Company's SuperCenters in the
Northeast Region (New York, NY -- 269,094 pagers in service), Southeast
Region (Charlotte, NC -- 220,392 pagers in service), South Central Region
(Houston, TX -- 276,114 pagers in service), Midwest Region (Chicago, IL --
129,591 pagers in service), and West Region (Los Angeles -- 31,510 pagers in
service).
7
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer applies to $100 million aggregate principal amount of
the Old Notes. The form and terms of the New Notes are the same as the form
and terms of the Old Notes except that the New Notes have been registered
under the Securities Act and, therefore, will not bear legends restricting
their transfer. The New Notes will evidence the same debt as the Old Notes
and will be entitled to the benefits of the Indenture pursuant to which the
Old Notes were issued. The Company has not issued, and does not have any
current firm arrangements to issue, any significant indebtedness to which the
New Notes would be senior. The New Notes will be effectively subordinated to
substantially all of the outstanding indebtedness of the Company and its
subsidiaries. The Old Notes and the New Notes are sometimes referred to
collectively herein as the "Notes." See "Description of New Notes."
The Exchange Offer......... $1,000 principal amount of New Notes
in exchange for each $1,000 principal
amount of Old Notes. As of the date
hereof, Old Notes representing $100
million aggregate principal amount
were outstanding. The terms of the
New Notes and the Old Notes are
substantially identical.
Based on an interpretation by the
Commission's staff set forth in no-
action letters issued to third parties
unrelated to the Company, the Company
believes that, with the exceptions
discussed herein, New Notes issued
pursuant to the Exchange Offer in
exchange for Old Notes may be offered
for resale, resold and otherwise
transferred by any person receiving
the New Notes, whether or not that
person is the holder (other than any
such holder or such other person that
is an "affiliate" of the Company
within the meaning of Rule 405 under
the Securities Act), without
compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that (i) the
New Notes are acquired in the ordinary
course of business of that holder or
such other person, (ii) neither the
holder nor such other person is
engaging in or intends to engage in a
distribution of the New Notes, and
(iii) neither the holder nor such
other person has an arrangement or
understanding with any person to
participate in the distribution of the
New Notes. However, the Company has
not sought, and does not intend to
seek, its own no-action letter, and
there can be no assurance that the
Commission's staff would make a
similar determination with respect to
the Exchange Offer. See "The Exchange
Offer -- Purpose and Effect." Each
broker-dealer that receives New Notes
for its own account in exchange for
Old Notes, where those Old Notes were
acquired by the broker-dealer as a
result of its market-making activities
or other trading activities, must
acknowledge that it will deliver a
prospectus in connection with any
resale of those New Notes. See "Plan
of Distribution."
Registration Rights
Agreement................. The Old Notes were sold by the Company
on June 15, 1995 in a private
placement. In connection with the
sale, the Company entered into a
Registration Rights Agreement with the
initial purchasers of the Old Notes
(the "Registration Rights Agreement")
providing for the Exchange Offer. See
"The Exchange Offer -- Purpose and
Effect."
8
<PAGE>
Expiration Date............ The Exchange Offer will expire at 5:00
P.M., New York City time, ,
1995, or such later date and time to
which it is extended.
Withdrawal Rights.......... The tender of Old Notes pursuant to
the Exchange Offer may be withdrawn at
any time prior to 5:00 p.m., New York
City time, on the Expiration Date.
Any Old Notes not accepted for
exchange for any reason will be
returned without expense to the
tendering holder thereof as promptly
as practicable after the expiration or
termination of the Exchange Offer.
Interest on the New Notes
and Old Notes............. Interest on each New Note will accrue
from the date of issuance of the Old
Note for which the New Note is
exchanged or from the date of the last
periodic payment of interest on such
Old Note, whichever is later.
Conditions to the Exchange
Offer..................... The Exchange Offer is subject to
certain customary conditions, certain
of which may be waived by the Company.
See "The Exchange Offer -- Conditions."
Procedures for Tendering
Old Notes................. Each holder of Old Notes wishing to
accept the Exchange Offer must
complete, sign and date the Letter of
Transmittal, or a copy thereof, in
accordance with the instructions
contained herein and therein, and mail
or otherwise deliver the Letter of
Transmittal, or the copy, together
with the Old Notes and any other
required documentation, to the
Exchange Agent at the address set
forth herein. Persons holding Old
Notes through the Depository Trust
Company (the "DTC") and wishing to
accept the Exchange Offer must do so
pursuant to the DTC's Automated Tender
Offer Program, by which each tendering
Participant will agree to be bound by
the Letter of Transmittal. By
executing or agreeing to be bound by
the Letter of Transmittal, each holder
will represent to the Company that,
among other things, (i) the New Notes
acquired pursuant to the Exchange
Offer are being acquired in the
ordinary course of business of the
person receiving such New Notes,
whether or not such person is the
holder of the Old Notes, (ii) neither
the holder nor any such other person
is engaging in or intends to engage in
a distribution of such New Notes,
(iii) neither the holder nor any such
other person has an arrangement or
understanding with any person to
participate in the distribution of
such New Notes, and (iv) neither the
holder nor any such other person is an
"affiliate" (as defined under Rule 405
promulgated under the Securities Act)
of the Company.
9
<PAGE>
Pursuant to the Registration Rights
Agreement, the Company is required to
file a registration statement for a
continuous offering pursuant to Rule
415 under the Securities Act in
respect of the Old Notes if existing
Commission interpretations are changed
such that the New Notes received by
holders in the Exchange Offer are not
or would not be, upon receipt,
transferable by each such holder
(other than an affiliate of the
Company) without restriction under the
Securities Act. See "The Exchange
Offer -- Purpose and Effect."
Acceptance of Old Notes
and Delivery of New Notes. The Company will accept for exchange
any and all Old Notes which are
properly tendered in the Exchange
Offer prior to 5:00 p.m., New York
City time, on the Expiration Date.
The New Notes issued pursuant to the
Exchange Offer will be delivered
promptly following the Expiration
Date. See "The Exchange Offer -- Terms
on the Exchange Offer."
Exchange Agent............. First Interstate Bank of Texas, N.A.,
is serving as Exchange Agent in
connection with the Exchange Offer.
Federal Income Tax
Considerations............ The exchange pursuant to the Exchange
Offer will not be a taxable event for
federal income tax purposes. See
"Certain Federal Income Tax
Considerations."
Effect of Not Tendering.... Old Notes that are not tendered or
that are tendered but not accepted
will, following the completion of the
Exchange Offer, continue to be subject
to the existing restrictions upon
transfer thereof. The Company will
have no further obligation to provide
for the registration under the
Securities Act of such Old Notes.
10
<PAGE>
TERMS OF NEW NOTES
Securities Offered......... $100,000,000 principal amount of 11 7/8%
Senior Subordinated Notes due 2005
Maturity Date.............. June 15, 2005
Interest Payment Dates..... June 15 and December 15, commencing December
15, 1995
Sinking Fund Provisions.... None
Optional Redemption........ The New Notes will be redeemable, in whole or
in part, at the option of the Company at any
time on or after June 15, 2000 at the
redemption prices set forth herein plus accrued
interest to the redemption date.
Change of Control.......... The Company will be required to offer to
repurchase all outstanding New Notes at 101% of
the principal amount plus accrued interest
promptly after the occurrence of a Change of
Control (as defined). See "Description of New
Notes -- Certain Covenants."
Ranking.................... The New Notes will be general unsecured
obligations of the Company and will be
subordinated to all existing and future
Senior Debt (as defined) of the Company.
The indenture pursuant to which the New Notes
will be issued (the "Indenture") provides
that the Company will not incur any debt that
is subordinate in right of payment to any
Senior Debt of the Company and senior in right
of payment to the New Notes.
Certain Covenants.......... The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its subsidiaries to incur other
indebtedness, pay dividends, engage in
transactions with affiliates, sell assets and
engage in mergers and consolidations and other
acquisitions. See "Description of New Notes --
Certain Covenants."
11
<PAGE>
SUMMARY FINANCIAL AND OPERATING INFORMATION
The following table presents summary financial data for the Company as
of the dates and for the periods indicated. The financial data for the years
ended December 31, 1990, 1991, 1992, 1993 and 1994 were derived from the
audited consolidated financial statements of the Company. The financial data
for the six months ended June 30, 1994 and 1995 have been derived from the
Company's unaudited consolidated financial statements. The following
information should be read in conjunction with the Company's pro forma
condensed consolidated financial statements and the consolidated financial
statements and related notes thereto incorporated by reference herein and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------- ---------------------------
PRO PRO
FORMA FORMA
1990 1991 1992 1993 1994 1994 (1) 1994 1995 1995 (2)
------- -------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGE, RATIO AND UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service revenues (3)........ $13,028 $ 15,084 $ 16,845 $ 19,234 $ 33,079 $ 82,431 $13,461 $ 23,892 $ 43,207
Product sales (4)........... 1,581 1,466 1,855 2,040 6,639 19,877 1,931 4,669 9,895
------- -------- -------- -------- -------- -------- ------- -------- --------
Total revenues.............. 14,609 16,550 18,700 21,274 39,718 102,308 15,392 28,561 53,102
Depreciation and
amortization expense....... 3,308 3,748 4,077 4,656 8,574 25,346 3,438 6,461 12,427
Operating income............ 556 1,223 1,834 2,732 3,189 374 1,426 1,399 1,659
Interest expense............ 528 425 310 292 1,774 14,879 517 1,894 7,553
Income (loss) before
extraordinary item......... 215 794 1,754 1,574 693 (14,184) 933 (372) (5,478)
Net income (loss)........... 395 1,312 1,754 1,574 693 (14,184) 933 (372) (5,478)
OTHER DATA:
Pagers in service at end of
period..................... 88,759 103,157 114,356 130,000 353,830 915,168 235,903 636,701 960,398
TracPacs in service at end
of period.................. 11,544 13,846 19,210 25,841 27,595 27,595 26,767 27,015 27,015
Pagers in service per
employee (5)............... 490 570 880 1,000 1,325 1,525 1,204 1,667 1,600
ARPU-Paging (6)............. $ 11.51 $ 10.64 $ 10.48 $ 10.23 $ 8.31 $ 7.09 $ 9.31 $ 6.79 $ 7.10
ARPU-TracPac (7)............ 14.25 15.00 14.75 15.90 16.52 16.52 15.68 16.18 16.18
Operating, general and
administrative costs per
paging subscriber (8)...... 4.76 4.80 5.13 5.33 3.30 3.98 3.75 3.63 3.89
EBITDA (9).................. $ 3,864 $ 4,971 $ 5,911 $ 7,388 $11,763 $ 25,720 $ 4,864 $ 7,860 $ 14,086
EBITDA margin (10).......... 28% 32% 34% 36% 36% 31% 36% 33% 32%
Capital expenditures (11)... $ 4,708 $ 4,193 $ 5,523 $ 5,497 $ 5,777 $ 10,826 $ 2,075 $ 5,847 $ 7,822
Ratio of total debt to
EBITDA (12)................ 1.2x 1.0x 0.6x 0.5x 0.9x 5.8x 2.5x 7.3x 5.3x
Ratio of EBITDA to interest
expense.................... 7.3 11.7 19.1 25.3 6.6 1.7 9.4 4.1 1.9
Ratio of earnings to fixed
charges (13)............... 1.8 4.1 6.1 8.7 1.8 -- 2.5 -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1995
-----------------------------
ACTUAL PRO FORMA (14)
---------- ----------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 48,725 $ --
Working capital.......................... 49,797 2,555
Total assets............................. 168,509 221,480
Total debt............................... 108,002 150,205
Total liabilities........................ 118,453 162,174
Total shareholders' equity............... 50,056 59,306
12
<PAGE>
<FN>
(1) Gives effect to (a) the acquisition of Contact Communications, Inc.
("Contact") and Metropolitan Houston Paging Services, Inc. ("Metropolitan"),
and the acquisition of the paging assets of Radio Call Company, Inc. ("Radio
Call"), the RCC division of Chicago Communication Service, Inc. ("ChiComm"),
High Tech Communications Corp. ("High Tech"), Carrier Paging Systems, Inc.
("Carrier"), Signet Paging of Charlotte, Inc. ("Signet"), All City
Communication Company, Inc. ("All City"), Americom Paging Corporation
("Americom"), Gold Coast Paging, Inc. ("Gold Coast") and Lewis Paging, Inc.
("Lewis" and, together with Contact, Metropolitan, Radio Call, ChiComm,
High Tech, Carrier, Signet, All City, Americom and Gold Coast, the "Completed
Acquisitions") and (b) the acquisition of Apple Communication, Inc.
("Apple"), Williams Metro Communications Corp. and affiliates ("Williams"),
Total Communications, Inc. ("Total"), and A.G.R. Electronics, Inc. and
affiliates ("AGR") and the paging assets of Signet of Raleigh, Inc. ("Signet
Raleigh"), Sun Paging Communications ("Sun"), Paging and Cellular of Texas
(a sole proprietorship) ("P&C"), Cobbwells, Inc. dba Page One Communications
("Page One"), Nationwide Paging, Inc. ("Nationwide"), and RCS paging, a
division of Reisenweaver Communications, Inc. ("RCS" and, together with Apple,
Williams, Total, AGR, Signet Raleigh, Sun, P&C, Page One and Nationwide, the
"Pending Acquisitions") as if they had occurred at the beginning of the period
presented, and assumes that they were funded with a portion of the proceeds of
the offering of the Old Notes. The Completed Acquisitions and the Pending
Acquisitions are collectively referred to as the "Acquisitions."
(2) Gives effect to the acquisitions of Carrier, Signet, Metropolitan,
All City, Americom, Gold Coast, Lewis and the Pending Acquisitions as if
they had occurred at the beginning of the period presented, and assumes that
they were funded with the proceeds of the offering of the Old Notes.
(3) Recurring revenues consist of fixed monthly, quarterly, annual and
bi-annual service and leasing fees.
(4) Product sales include pager and paging equipment sales and other
security systems' income.
(5) Calculated by dividing pagers in service by the number of employees at
the end of the period presented. This calculation excludes employees directly
related to the security systems business.
(6) ARPU-Paging (average revenue per paging unit) is calculated by
dividing paging systems' recurring revenues for the last month in the period
by the number of pagers in service at the beginning of such month.
(7) ARPU-TracPac (average revenue per TracPac unit) is calculated by
dividing security systems' recurring revenues for the last month in the
period by the number of TracPacs in service at the beginning of such month.
(8) Calculated by dividing the sum of the cost of pager lease and access
fees and general and administrative expenses for the last month in the period
by the number of pagers in service at the beginning of such month.
(9) EBITDA is earnings before other income (expense), income taxes,
depreciation and amortization expense. Other income (expense) consists
primarily of interest expense. EBITDA does not represent cash flows as
defined by generally accepted accounting principles and does not necessarily
indicate that cash flows are sufficient to fund all of the Company's cash
needs. EBITDA should not be considered in isolation or as a substitute for
net income, cash from operating activities or other measures of liquidity
determined in accordance with generally accepted accounting principles.
(10) Calculated by dividing EBITDA by the sum of total revenues less cost
of products sold for the period presented.
(11) Excludes acquisition costs.
13
<PAGE>
(12) Calculated by dividing total debt at the end of the period by EBITDA
for the 12 months ended on the last day of the period except the pro forma
ratio for the six months ended June 30, 1995 is based on annualized EBITDA.
(13) The ratio of earnings to fixed charges is calculated as the sum of
income before taxes plus fixed charges, divided by fixed charges. Fixed
charges consist of interest expense including amortization of deferred
financing costs. For the six months ended June 30, 1995 and on a pro forma
basis for the year ended December 31, 1994 and the six months ended June 30,
1995, earnings were insufficient to cover fixed charges by $372,000, $14.2
million and $5.5 million, respectively.
(14) Gives effect to the acquisitions of Americom, Gold Coast, Lewis
and the Pending Acquisitions as if they had occurred on June 30, 1995, as
adjusted to reflect the sale of the Old Notes and the application of the net
proceeds therefrom. See "Use of Proceeds."
</TABLE>
14
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE NEW
NOTES OFFERED BY THIS PROSPECTUS.
ACQUISITION AND GROWTH STRATEGY
The Company intends to continue to pursue an aggressive acquisition
strategy. Since January 1, 1994, the Company has purchased 11 paging
operations and signed definitive agreements or letters of intent to
purchase 10 more companies, representing 738,000 pagers in service in the
aggregate. No assurances can be given that the Pending Acquisitions will be
consummated, that further suitable acquisition candidates can be found or
purchased on favorable terms, or that the Pending Acquisitions, if completed,
will be successful. Moreover, there can be no assurance that the Company will
be able to integrate the paging operations of each of the acquired
companies successfully. If the Company is not successful in integrating such
paging operations, the business of the Company may be adversely affected. In
addition, integration of new acquisitions may, at least in the short term,
have an adverse impact upon the Company's operations.
Prior to 1994, the Company delivered paging services solely to members of
the healthcare industry. However, most of the Company's growth since January
1994 has resulted from, and much of the Company's future growth is expected
to result from, the addition of non-healthcare subscribers, such as small
businesses and individual consumers, many of whom will purchase and maintain
their own pagers rather than lease their pagers from the Company. This may
tend to reduce the Company's average revenue per unit ("ARPU") because such
subscribers will not generate leasing revenues. The combined lease and
access fee of a single leased pager currently ranges from approximately
$3.00 to $45.00 per month, depending upon the type of pager and optional
features selected. The Company charges a monthly access fee for service to
each COAM pager of from $2.00 to $18.00. At June 30, 1995, leased pagers and
COAM pagers represented approximately 34% and 66% of the Company's total
pagers in service, respectively. See "Summary -- Summary
Financial and Operating Information." Marketing and providing
paging services to such businesses and consumers can vary significantly
from marketing and providing such services to healthcare subscribers. No
assurances can be given that the Company will be successful in the general
marketplace. See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
HIGH DEGREE OF LEVERAGE; RESTRICTIONS IMPOSED BY LENDERS
The Company is, and after the completion of the offering of the Old Notes
has continued to be, highly leveraged. At June 30, 1995, after giving pro
forma effect to the acquisitions of Americom, Gold Coast, Lewis and the Pending
Acquisitions and the offering of the Old Notes and the application of the
net proceeds therefrom, the Company would have had approximately $150 million
of debt outstanding and the Company's long-term debt as a percentage of total
capitalization would have been 72%.
The Company's high degree of leverage will have important consequences to
holders of the New Notes, including the following: (i) the ability of the
Company to obtain additional financing in the future for acquisitions,
working capital, capital expenditures or other purposes, should it need to
do so, may be impaired; (ii) a substantial portion of the Company's cash flow
from operations will be required to be dedicated to the payment of the
Company's interest expense, which will reduce the funds available to the
Company for its operations and future business opportunities; (iii) the
Company may be more highly leveraged than some of its competitors, which may
place it at a competitive disadvantage; and (iv) the Company's high degree of
leverage may make it more vulnerable to a downturn in its business or the
economy generally.
The Company's credit facility (the "Credit Facility") and the Indenture
contain financial and operating covenants including, among other things,
requirements that the Company maintain certain financial ratios and satisfy
certain financial tests and limitations on the Company's ability to incur
other indebtedness, pay dividends, engage in transactions with
affiliates, sell assets and engage in mergers and consolidations and other
acquisitions. If the Company fails to comply with these covenants, the
lenders will be able to accelerate the maturity of the applicable
indebtedness. See "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Description of Credit Facility"
and "Description of New Notes."
15
<PAGE>
DEBT SERVICE; DEFICIT OF EARNINGS TO FIXED CHARGES
For the six months ended June 30, 1995 and on a pro forma basis for the year
ended December 31, 1994 and the six months ended June 30, 1995, the Company's
earnings were insufficient to cover fixed charges by $372,000, $14.2 million
and $5.5 million, respectively. The ability of the Company to continue making
payments of principal and interest will be largely dependent upon its future
performance. Many factors, some of which will be beyond the Company's control
(such as prevailing economic conditions), will affect its performance. Because
borrowings under the Credit Facility will bear interest at rates that will
fluctuate with certain prevailing interest rates, increases in such prevailing
interest rates will increase the Company's interest payment obligations and
could have an adverse effect on the Company. There can be no assurance that
the Company will be able to generate sufficient cash flow to cover required
interest and principal payments. If the Company is unable to meet interest and
principal payments in the future, it may, depending upon the circumstances
which then exist, seek additional equity or debt financing, attempt to
refinance its existing indebtedness or sell all or part of its business or
assets to raise funds to repay its indebtedness. There can be no assurance that
sufficient equity or debt financing will be available, or, if available, that
it will be on terms acceptable to the Company, that the Company will be able to
refinance its existing indebtedness or that sufficient funds could be raised
through asset sales. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
SUBORDINATION
The New Notes will be unsecured and subordinated in right of payment to
all existing and future Senior Debt of the Company, including all
indebtedness under the Credit Facility. By reason of such subordination, in
the event of the insolvency, liquidation or other reorganization of the
Company, the Senior Debt must be paid in full before the principal of,
premium, if any, and interest on the New Notes may be paid. As of June 30,
1995, after giving pro forma effect to the acquisitions of Carrier,
Metropolitan, All City, Americom, Gold Coast, Lewis and the Pending
Aquisitions, the offering of the Old Notes and the Exchange Offer, the New
Notes would have been subordinated to approximately $50.9 million of
Senior Debt. The Indenture under which the New Notes are to be issued will
not limit the amount of Senior Debt that may be incurred by the Company if
certain tests are met. See "Description of New Notes -- Certain Covenants."
The Company may not pay the principal of, premium, if any, or interest on
the New Notes, or repurchase, redeem or otherwise retire the New Notes, if
any Senior Debt is not paid when due or any default on Senior Debt occurs and
the maturity of such Senior Debt is accelerated in accordance with its terms
unless, in either case, the default has been cured or waived, any such
acceleration has been rescinded or such Senior Debt has been paid in full,
except that the Company may make payments with respect to the New Notes with
the approval of certain holders of the Senior Debt. In addition, if any
default exists with respect to certain Senior Debt and certain other
conditions are satisfied, the Company may not make any payments on the New
Notes for a designated period of time. The right of each holder of the New
Notes to require the Company to repurchase the New Notes at a premium upon
the occurrence of a Change of Control would be blocked by the foregoing
subordination provisions to the extent that the event constituting a Change
of Control also causes a default (or if a default otherwise exists) under the
Credit Facility or other Senior Debt. Upon any payment or distribution of
assets of the Company upon a total or partial liquidation, dissolution,
reorganization or similar proceeding, the holders of Senior Debt will be
entitled to receive payment in full before the holders of the New Notes are
entitled to receive any payment. See "Description of New Notes --
Subordination."
HOLDING COMPANY STRUCTURE
Because ProNet operates a significant portion of its business through
its subsidiaries, the Company's cash flow and its ability to service debt,
including the New Notes, are substantially dependent upon the cash flow of
its subsidiaries and the payment of funds by those subsidiaries to the
Company through loans, dividends or otherwise. The subsidiaries, however, are
legally distinct from the Company and have no obligation, contingent or
otherwise, to pay amounts due pursuant to the New Notes or to make any funds
available for such payment. The ability of the Company's subsidiaries to make
such payments will be subject to applicable state laws. Claims of creditors
of the Company's subsidiaries will generally have priority as to
16
<PAGE>
the assets of such subsidiaries over the claims of the Company and the
holders of the Company's indebtedness. Except as otherwise permitted in the
Indenture, the Company's subsidiaries may not incur indebtedness. However,
all of the Company's subsidiaries are guarantors of the indebtedness under
the Credit Facility and have granted security interests in substantially all
of their assets to secure such indebtedness. As a result of these factors,
the New Notes will be effectively subordinated to all liabilities of the
Company's subsidiaries. See "Description of New Notes."
FUTURE PROFITABILITY
The Company has been profitable in each of the last five years. However,
the Company anticipates incurring significantly greater depreciation,
amortization and interest expenses in future periods as a result of the
Company's recent and planned acquisitions of commercial paging companies and
the offering of the Old Notes. Such increased expenses will reduce net income
and may contribute to the Company's incurrence of losses in future periods.
In any event, no assurances can be given that the Company will continue to
achieve profitability. See "Summary -- Summary Financial and Operating
Information" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
SUBSCRIBER TURNOVER
The results of operations of paging service providers such as the Company
may be significantly affected by subscriber cancellations. In order to
realize net growth in pagers in service, disconnected users must be replaced
and additional users must be added. However, the sales and marketing costs
associated with attracting new subscribers are substantial relative to the
costs of providing service to existing customers. Although the Company's
current disconnect rate is below the industry average, the Company
anticipates that, as the number of its commercial subscribers increases,
it will experience a higher disconnect rate in the future among small
businesses, individual consumers and other non-healthcare subscribers than
it has experienced historically, primarily because commercial subscribers
tend to disconnect their paging services more frequently than do healthcare
subscribers. A significant increase in the Company's subscriber cancellation
rate may adversely affect the Company's operating results. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
COMPETITION AND TECHNOLOGICAL CHANGE
The Company faces direct competition in all of its paging markets.
Competition for subscribers to the Company's paging services in most
geographic markets is based primarily on the price and quality of services
offered and the geographic area covered. Some of the Company's competitors,
which include certain national and regional paging companies and Regional
Bell Operating Companies, possess greater financial and other resources
than the Company. There can be no assurance that additional competitors will
not enter markets served by the Company or that the Company will be able to
continue to compete successfully. In addition, the telecommunications
industry is characterized by rapid technological change. Future technological
advances in the industry may result in the availability of new services or
products that could compete directly with the services and products being
provided or developed by the Company. Recent and proposed regulatory
changes by the Federal Communications Commission (the "FCC") are aimed at
encouraging such new services and products. Moreover, changes in technology
could lower the cost of competitive services and products to a level at which
the Company's services and products would become less competitive or the
Company would be required to reduce the prices of its services and products.
There can be no assurance that the Company will be able to develop or
introduce new services and products to remain competitive or that the Company
will not be adversely affected in the event of such technological
developments.
GOVERNMENT REGULATION
The paging industry is subject to regulation by the FCC and, depending on
the jurisdiction, may be regulated by state regulatory agencies. There can
be no assurance that either the FCC or those state agencies having
jurisdiction over the Company's business will not adopt regulations or take
other actions that would adversely affect the business of the Company.
RELIANCE ON SELECT GROUP OF EXECUTIVES
The Company believes that its success will depend to a significant extent
on the efforts and abilities of a relatively small group of executive
personnel. The loss of services of one or more of these key executives
17
<PAGE>
could adversely affect the Company. The Company does not maintain "key man"
life insurance policies on its executives. However, the Company has entered
into three-year employment agreements with Jackie R. Kimzey, the Company's
Chairman and Chief Executive Officer, and David J. Vucina, the Company's
President and Chief Operating Officer.
ABSENCE OF PUBLIC MARKET
The Old Notes are designated for trading in the PORTAL market. There
is no established trading market for the New Notes. Although the initial
purchasers of the Old Notes have advised the Company that they currently
intend to make a market in the New Notes, they are not obligated to do so and
they may discontinue such market-making at any time without notice. The
Company does not currently intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. Accordingly, there can be no assurance as to the development of any
market or the liquidity of any market that may develop for the New Notes. If
such a market were to exist, no assurance can be given as to the trading
prices of the New Notes. Future trading prices of the New Notes will depend
on many factors, including, among other things, prevailing interest rates,
the Company's operating results and the market for similar securities.
USE OF PROCEEDS
There will be no cash proceeds to the Company from the Exchange Offer.
The net proceeds received by the Company from the sale of the Old Notes,
after deducting expenses of the offering of the Old Notes, were $95.6
million. Approximately $49.4 million of the net proceeds received by the
Company from the sale of the Old Notes were used to repay indebtedness under
the Credit Facility. The remainder of the net proceeds will be used by the
Company to fund acquisitions of paging businesses, purchase frequency
rights, make capital expenditures for buildout of the Company's regional
paging systems and for enhanced services, and for working capital and
general corporate purposes. See "Capitalization" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
18
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at June 30,
1995 on (a) an historical basis and (b) on a pro forma basis to give effect to
the acquisition of Americom, Gold Coast, Lewis and the Pending Acquisitions
as if they had occurred on June 30, 1995, as adjusted to reflect the sale by
the Company of the Old Notes (after deducting estimated discounts,
commissions and offering expenses) and the application of the net proceeds
therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1995
--------------------------------------
ACTUAL PRO FORMA(1)
------- --------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents........... $ 48,725 $ --
======== ========
Deferred payments (2)............... $ 8,719 $ 25,929
Credit Facility..................... -- 24,993
11 7/8% Senior Subordinated
Notes due 2005..................... 99,283 99,283
-------- --------
Total debt...................... 108,002 150,205
-------- --------
Shareholders' equity:
Preferred Stock, par value $1.00
per share; 5,000,000 shares
authorized; no shares issued or
outstanding...................... --
Common Stock, par value $.01 per
share; 20,000,000 shares
authorized; 6,198,881 shares
issued and outstanding (3)....... 66 70
Less treasury stock at cost....... (1,430) (1,430)
Additional capital (3)............ 49,729 58,975
Retained earnings................. 1,691 1,691
-------- --------
Total shareholders' equity...... 50,056 59,306
-------- --------
Total capitalization.............. $158,058 $209,511
======== ========
<FN>
___________
(1) Gives effect to the acquisition of Americom, Gold Coast, Lewis and
the Pending Acquisitions as if they had occurred on June 30, 1995, as
adjusted to reflect the sale by the Company of the Old Notes (after
deducting estimated discounts, commissions and offering expenses) and the
application of the net proceeds therefrom.
(2) Assuming the completion of all of the Pending Acquisitions, the
Company will have deferred payment obligations (the "Deferred Payments")
aggregating $25.9 million in respect of certain of the Acquisitions. The
Deferred Payments constitute Senior Debt and are due and payable one year
from the closing of the respective Acquisitions. The Company has the option
to issue Common Stock in lieu of cash for each Deferred Payment.
(3) Assuming the completion of all of the Pending Acquisitions, the
Company will issue approximately 437,000 shares of Common Stock (based on the
closing price of the Company's Common Stock on or before June 30, 1995) in
order to satisfy an aggregate of $9.3 million in purchase price obligations,
to be paid upon the closing thereof.
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company provides wireless messaging services through its paging and
security systems operations. Until 1994, paging services were provided solely to
members of the healthcare industry. Beginning in 1994, the Company broadened its
paging focus through the acquisition of paging businesses serving the general
commercial marketplace. As a result of completed and anticipated acquisitions,
the Company's results of operations for prior periods may not be indicative of
future performance.
In both its paging and security systems operations, the Company builds and
operates communications systems and generates revenues from the sale and lease
of pagers, IPT systems and security devices and related access fees. The
Company's revenues are derived primarily from fixed monthly, quarterly, annual
and bi-annual fees charged to customers for paging and security tracking
services. While a subscriber remains in service, operating results benefit from
this recurring monthly revenue stream with minimal requirements for additional
selling expenses or other fixed costs. However, certain variable costs such as
telephone and equipment charges are directly related to the number of pagers in
service.
Each month a percentage of the customer base disconnects service for a
variety of reasons. ProNet does, however, place substantial emphasis on customer
care and quality of service and as a result currently has one of the lowest
average monthly disconnect ("churn") rates in the paging industry -
approximately 2%, compared to an industry average of approximately 2.9%. In the
future, the Company expects that it will experience a higher churn rate among
small businesses, individual consumers and other subscribers than it has
experienced historically with its healthcare subscribers. The Company's monthly
churn rate in the security tracking business is lower than in its paging
business - currently approximately 0.7%.
Currently, recurring revenues consist of two components - service fees and
unit leasing fees. As the Company pursues its strategy of expanding into new
markets, increasing its coverage within its existing service areas and
broadening its customer base and distribution channels, the percentage of
customers who own and maintain ("COAM") their paging equipment rather than
leasing it from the Company is likely to increase. This, together with
competitive factors, may result in declining recurring revenues per subscriber
since these customers will not pay a leasing fee as part of their monthly
charge. However, the Company will not incur the capital costs related to these
COAM pagers. Additionally, average revenue per unit ("ARPU") for pagers served
through resellers is lower than for direct sales due to the wholesale rates
charged to this distribution channel. Such resellers do, however, assume all
selling, marketing, subscriber management and related costs that would otherwise
be incurred by the Company.
Product sales and costs are also likely to increase as the business mix
shifts in favor of COAM units. The Company's objective is to break even on
product sales, but it may selectively offer discounts due to promotional offers
or competitive pressures.
The Company currently enjoys low operating costs per unit due to the
efficiency of its operations. It expects that the development of its business
around its SuperCenters will result in substantial economies of scale and
consolidation of operating and selling expenses that will help it retain this
competitive advantage.
Earnings before other income (expense), income taxes, depreciation and
amortization ("EBITDA") is a standard measure of operating performance in the
paging industry. The Company's EBITDA has grown at a compound annual rate of
over 30% over the past four years. EBITDA growth is expected to continue
although near term margins may be slightly impacted by start-up costs associated
with certain SuperCenters and the buildout of existing and acquired frequencies
in its marketplaces. The Company, unlike a number of its competitors, has
generated net income in recent years. It should be noted, however, that non-cash
and financing-related charges for the Company's acquisition program have the
potential to negatively impact earnings in the future.
20
<PAGE>
PAGING SYSTEMS' RESULTS OF OPERATIONS FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Net revenues and gross margin for paging systems consisted of the
following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------
1995 1994
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Revenues
Pager lease and access fees.......................................... $ 21,278 $ 10,984
Product sales........................................................ 4,532 1,850
-------- --------
Total revenues............................................................ 25,810 12,834
Cost of products sold..................................................... 4,532 1,825
------ -----
Net revenues (1).......................................................... 21,278 11,009
Cost of pager lease and access fees....................................... 5,355 2,960
----- -----
Gross margin.............................................................. 15,923 8,049
Sales and marketing expenses.............................................. 3,271 2,675
General and administrative expenses....................................... 6,434 1,912
Depreciation and amortization expense..................................... 5,632 2,680
------- -------
Operating income.......................................................... $ 586 $ 782
------- -------
------- -------
EBITDA.................................................................... $ 6,218 $ 3,462
------- -------
------- -------
<FN>
-------------------------------
(1) Net revenues represent revenues from services, rent and maintenance plus
product sales less cost of products sold.
</TABLE>
PAGING SYSTEMS' NET REVENUES for the six months ended June 30, 1995
increased to $21.3 million, compared to $11.0 million for the comparable period
in 1994. Pager lease and access fees increased approximately 94%, to
$21.3 million for the six months ended June 30, 1995, compared to $11.0 million
for the comparable period in 1994. This increase was primarily the result of a
170% increase in pagers in service to 636,701 at June 30, 1995 from 235,903 at
June 30, 1994. The increase in pagers in service was primarily the result of
the acquisitions of Radio Call, ChiComm, and High Tech in 1994 and the
acquisitions of Signet, Carrier, All City and Metropolitan during the first two
quarters of 1995. In 1994 and 1995, most of the Company's growth in pagers in
service has been from acquisitions. In addition, internal growth accounted for
approximately 45,000 pagers in service during the six months ended June 30,
1995, representing an annual growth rate of approximately 20%. The Company
believes that this internal growth rate will increase due to continued
commercial paging activity.
ARPU was $6.79 for the month of June 1995 compared to $9.31 for the month
of June 1994. This decrease was due to the Company's continued acquisition of
commercial paging businesses, which traditionally have lower ARPU than
healthcare operations since most commercial pagers are COAM and do not generate
leasing fees. The Company believes that ARPU will continue to decrease, although
at a slower rate upon completion of the Pending Acquisitions, as the Company
continues to become more involved in the commercial paging business and expands
its reseller operations, which tend to generate lower revenues per subscriber.
PRODUCT SALES LESS COST OF PRODUCTS SOLD were at breakeven for the six
months ended June 30, 1995, compared to a gain of $25,000 for the comparable
period in 1994. In certain of the Company's markets, pagers are being sold at
a slight loss in order to gain market share. As the Company's commercial
operations continue to grow, management anticipates that product sales will
increase but that margins on these sales will be lower than were achieved
prior to 1994 in the healthcare industry. Management also anticipates that the
Company's margins may vary from market to market due to competition and other
factors.
21
<PAGE>
RECLASSIFICATION OF COSTS. During 1994, the Company restructured its
technical, sales and operational functions into its decentralized SuperCenter
strategy. To reflect this restructuring financially, certain costs that were
previously classified as cost of pager lease and access fees and sales and
marketing expenses in 1994 were reclassified to general and administrative
expenses in 1995. In the aggregate, costs of pager lease and access fees,
sales and marketing expenses and general and administrative expenses increased
by 100% for the six months ended June 30, 1995, compared to the same period
last year as a result of the Company's internal growth and acquisitions. In
total, these costs were $15.1 million (71% of paging systems' net revenues) for
the six months ended June 30, 1995, compared to $7.5 million (69% of paging
systems' net revenues) for the comparable period in 1994. The increase in
these costs as a percentage of net revenues is the result of increased
expenses related to the buildout of the Company's regional SuperCenters.
These expenses as a percentage of net revenues should decline in the future as
new acquisition companies are integrated into the existing SuperCenters.
PAGING SYSTEMS' GROSS MARGIN (net revenues less cost of pager lease and
access fees) was $15.9 million (75% of paging systems' net revenues) for the six
months ended June 30, 1995, compared to $8.0 million (73% of paging systems' net
revenues) for the comparable period in 1994. The increase in gross margin was
due to the reclassification of certain operating expenses described above. The
Company believes that the margin on net revenues will decrease in the near
future as an increasing number of the Company's customers elect to purchase
their paging equipment resulting in a corresponding decrease in ARPU as
discussed above. In addition, cost of pager lease and access fees increased to
$5.4 million for the six months ended June 30, 1995, compared to $3.0 million
for the comparable period in 1994, as a result of the increased costs of
servicing new customers added through both internal growth and acquisitions.
PAGING SYSTEMS' SALES AND MARKETING EXPENSES were $3.3 million (15% of
paging systems' net revenues) for the six months ended June 30, 1995, compared
to $2.7 million (24% of paging systems' net revenues) for the comparable period
of the prior year. The decrease as a percentage of paging systems' net revenues
was due to the reclassification of certain operating expenses described above.
These expenses are not expected to change significantly in the future as a
percentage of paging systems' net revenues.
PAGING SYSTEMS' GENERAL AND ADMINISTRATIVE EXPENSES were $6.4 million (30%
of paging systems' net revenues) for the six months ended June 30, 1995,
compared to $1.9 million (17% of paging systems' net revenues) for the
comparable period in 1994. The increase as a percentage of paging systems' net
revenues was due to the reclassification of certain operating expenses described
above, plus the cost of additional management hired in the fourth quarter of
1994 and the first half of 1995, offset by savings resulting from consolidating
the paging operations into the Company's SuperCenters. The Company anticipates
that paging systems' general and administrative expenses will continue to grow
but at a lesser rate than increases in paging systems' net revenues, as a result
of general and administrative expenses being amortized across a larger
subscriber base as well as savings resulting from the consolidation of
acquisitions.
PAGING SYSTEMS' DEPRECIATION AND AMORTIZATION EXPENSES are better expressed
as a percentage of paging systems' recurring revenues since product sales do not
require any capital investment. Paging systems' depreciation and amortization
expenses as a percentage of recurring paging revenues for the six months ended
June 30, 1995, were 26%, compared to 24%, for the comparable period in 1994.
The increase is due to the amortization of intangibles arising from
acquisitions. The Company believes that this trend in depreciation and
amortization expenses as a percentage of paging systems' recurring revenues
will continue in the short term as a result of acquisitions and continued
capital investment in paging equipment to support the Company's growth.
EBITDA for the paging systems' operations was $6.2 million (29% of paging
systems' net revenues) for the six months ended June 30, 1995, compared to $3.5
million (31% of paging system's net revenues) for the comparable period in 1994.
Consolidation savings in general and administrative expenses were offset by
lower margins on product sales. The Company believes EBITDA may decrease in
the short term due to increased commercial paging activity as a result of
internal growth and
22
<PAGE>
future acquisitions of commercial paging operations, but will thereafter
increase over time as the Company integrates the acquired operations and
achieves resulting economies of scale and operating efficiencies.
SECURITY SYSTEMS' RESULTS OF OPERATIONS FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Security systems' net revenues and gross margin consisted of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------
1995 1994
-------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Revenues
Security systems' equipment fees........................................ $2,614 $2,477
Other security systems' income.......................................... 137 81
------ ------
Total revenues............................................................... 2,751 2,558
Cost of other security systems............................................... 63 30
-- --
Net revenues(1).............................................................. 2,688 2,528
Cost of security systems' equipment services................................. 539 617
--- ---
Gross margin................................................................. 2,149 1,911
Sales and marketing expenses................................................. 141 127
General and administrative expenses.......................................... 365 382
Depreciation and amortization expense........................................ 830 758
------ ------
Operating income............................................................. $ 813 $ 644
------- -------
------- -------
EBITDA....................................................................... $ 1,643 $ 1,402
------- -------
------- -------
<FN>
-------------------------------
(1) Net revenues represent revenues from services, rent and maintenance plus
other security systems' income less cost of other security systems income.
</TABLE>
SECURITY SYSTEMS' EQUIPMENT FEES increased to $2.6 million for the six
months ended June 30, 1995, from $2.5 million for the comparable period in 1994.
The increase was due to the installation of two new systems since June 30, 1994,
as well as expansion and additional penetration in existing markets. The number
of TracPacs in service increased from 26,767 at June 30, 1994 to 27,015 at June
30, 1995.
OTHER SECURITY SYSTEMS' INCOME LESS COST OF OTHER SECURITY SYSTEMS was
$74,000 for the six months ended June 30, 1995 compared to $51,000 for the
comparable period in 1994. Net revenues fluctuate depending on the type and
volume of equipment sold. The Company does not anticipate significantly
increasing this area of security systems operations.
SECURITY SYSTEMS' GROSS MARGIN was $2.1 million (80% of security systems'
net revenues) for the six months ended June 30, 1995, compared to $1.9 million
(76% of security systems' net revenues) for the comparable period in 1994. The
increase as a percentage of net revenues is due to additional product sales in
the first quarter of 1995. The Company anticipates that these margins will
increase slightly above the margin for the six months ended June 30, 1994 in the
near future as more subscribers are added to existing systems and as systems are
installed in new or existing markets.
SECURITY SYSTEMS' SALES AND MARKETING EXPENSES were $141,000 for the six
months ended June 30, 1995 (5% of security systems' net revenues), compared to
$127,000 for the comparable period in 1994 (5% of security systems' net
revenues). The Company currently anticipates hiring additional management in the
near future to accelerate the growth of security systems' net revenues.
Therefore, these expenses should grow at or slightly above the rate of growth in
the related security systems' net revenues and therefore should increase
slightly as a percentage of these revenues.
SECURITY SYSTEMS' GENERAL AND ADMINISTRATIVE EXPENSES were $365,000 (14% of
security systems' net revenues) for the six months ended June 30, 1995, compared
to $382,000 (15% of security systems' net revenues) for the comparable period in
1994. This decrease in general and administrative expenses was the result of the
decreased burden of corporate overhead as a result of the Company's expanded
paging
23
<PAGE>
operations. The Company currently believes that general and administrative
expenses will grow at a slower rate than security systems' net revenues and
therefore should represent a decreasing percent of such revenues.
SECURITY SYSTEMS' DEPRECIATION AND AMORTIZATION EXPENSES are better
expressed as a percentage of recurring revenues since product sales do not
require any capital investment. Security systems' depreciation and amortization
expenses as a percentage of recurring revenues for the six months ended June 30,
1995 were 32%, compared to 31%, for the comparable period in 1994. These
increases were a result of the capital investment necessary to support the
expansion into new markets as well as growth within existing markets. The
Company believes that this trend in depreciation and amortization should
continue due to the relationship of capital investment to recurring revenue.
EBITDA for the security systems' operations was $1.6 million (61% of
security systems' net revenues) for the six months ended June 30, 1995, compared
to $1.4 million (55% of security systems' net revenues) for the same period in
1994. This increase was primarily due to decreases in general and administrative
expenses as described above.
PAGING SYSTEMS' RESULTS OF OPERATIONS FOR THE
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1992 1993 1994
----------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Pager lease and access fees...................................................... $13,969 $14,853 $28,015
Product sales.................................................................... 1,613 1,554 6,506
------- ------- -------
Total revenues........................................................................ 15,582 16,407 34,521
Cost of products sold................................................................. 894 794 6,605
------- ------- -------
Net revenues(1)....................................................................... 14,688 15,613 27,916
Cost of pager lease and access fees................................................... 3,889 4,119 7,972
------- ------- -------
Gross margin.......................................................................... 10,799 11,494 19,944
Sales and marketing expenses.......................................................... 3,444 3,736 6,530
General and administrative expenses................................................... 2,639 2,908 4,713
Depreciation and amortization expense................................................. 3,025 3,333 7,017
------- ------- -------
Operating income...................................................................... $ 1,691 $ 1,517 $ 1,684
------- ------- -------
------- ------- -------
EBITDA................................................................................ $ 4,716 $ 4,850 $ 8,701
------- ------- -------
------- ------- -------
<FN>
-------------------------------
(1) Net revenues represent revenues from services, rent and maintenance plus
product sales less cost of products sold.
</TABLE>
PAGING SYSTEMS' NET REVENUES increased in each of the last three years
compared to prior years. These increases were attributable primarily to a
growing subscriber base achieved through greater market penetration in existing
markets and the acquisitions of Contact, Radio Call and ChiComm in 1994.
Pager lease and access fees increased from $14.0 million in 1992 to $14.9
million in 1993 and to $28.0 million in 1994. This increase from 1993 to 1994
was primarily due to a 172% increase in pagers in service to 353,830 at
December 31, 1994, from 130,000 at December 31, 1993. The increase in pagers
in service was primarily due to such acquisitions. In addition, internal growth
accounted for approximately 38,000 units during 1994, which represents an
annualized internal growth rate of approximately 16%.
ARPU was $10.48, $10.23, and $8.31 for the months of December 1992, 1993
and 1994, respectively. This decrease was primarily due to the acquisition of
commercial paging businesses in 1994, which traditionally have lower ARPU than
healthcare operations since most commercial pagers are COAM and do not generate
leasing fees.
PRODUCT SALES LESS COST OF PRODUCTS SOLD was $719,000 in 1992, $760,000 in
1993 and ($99,000) in 1994. Historically, the Company has primarily leased
equipment to customers rather than selling it, whereas the industry trend is
towards increased COAM pagers. In certain markets, pagers are being sold at a
slight discount to cost in order to gain market share. As commercial operations
continue to grow, management
24
<PAGE>
anticipates that product sales will increase but that margins on these sales
will be lower than have been achieved prior to 1994 in the healthcare industry.
Management also anticipates that margins may vary from market to market due to
competition and other factors.
PAGING SYSTEMS' GROSS MARGIN (net revenues less related cost of pager lease
and access fees) increased from $10.8 million (73% of paging systems' net
revenues) in 1992 to $11.5 million (74% of paging systems' net revenues) in 1993
and to $19.9 million (71% of paging systems' net revenues) in 1994. The margin
on net revenue decreased in 1994 due to the transition into the commercial
paging marketplace, which resulted in lower ARPU as well as a slight loss on
product sales.
PAGING SYSTEMS' SALES AND MARKETING EXPENSES were $3.4 million (23% of
paging systems' net revenues) in 1992, $3.7 million (24% of paging systems' net
revenues) in 1993 and $6.5 million (23% of paging systems' net revenues) in
1994.
PAGING SYSTEMS' GENERAL AND ADMINISTRATIVE EXPENSES were $2.6 million (18%
of paging systems' net revenues) in 1992, $2.9 million (19% of paging systems'
net revenues) in 1993 and $4.7 million (17% of paging systems' net revenues) in
1994. The percentage decrease was due to savings resulting from the
consolidation of certain of the Completed Acquisitions' paging operations into
the Company's SuperCenters.
PAGING SYSTEMS' DEPRECIATION AND AMORTIZATION EXPENSES are better expressed
as a percentage of paging systems' recurring revenues since product sales do not
require any capital investment. Paging systems' depreciation and amortization
expenses were $3.0 million, $3.3 million and $7.0 million in 1992, 1993 and
1994, respectively, which, as percentages of paging systems' recurring revenue,
were 22% for 1992 and 1993 and 25% in 1994. The increase was primarily due to
the amortization of intangibles arising from the Completed Acquisitions in 1994.
EBITDA for the paging systems' operations was approximately $4.7 million
(32% of paging systems' net revenues), $4.9 million (31% of paging systems' net
revenues) and $8.7 million (31% of paging systems' net revenues) for 1992, 1993
and 1994, respectively. Consolidation savings in general and administrative
expenses were offset by lower margins on product sales for Contact, Radio Call
and ChiComm, which sell pagers at a lower margin or at a slight discount to cost
compared to the Company's healthcare communications operations.
SECURITY SYSTEMS' RESULTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1992, 1993 AND 1994
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1992 1993 1994
--------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Security systems' equipment fees $ 2,876 $ 4,381 $ 5,064
Other security systems' income 242 486 133
------- -------- --------
Total revenues 3,118 4,867 5,197
Cost of other security systems 192 162 39
------- -------- --------
Net revenues(1) 2,926 4,705 5,158
Cost of security systems' equipment services 819 983 1,213
------- -------- --------
Gross margin 2,107 3,722 3,945
Sales and marketing expenses 248 314 207
General and administrative expenses 665 871 676
Depreciation and amortization expense 1,051 1,323 1,557
------- -------- --------
Operating income $ 143 $ 1,214 $ 1,505
------- -------- --------
------- -------- --------
EBITDA $ 1,194 $ 2,537 $ 3,062
------- -------- --------
------- -------- --------
<FN>
-------------------------------
(1) Net revenues represent revenues from services, rent and maintenance plus
other security systems' income less cost of other security systems' income.
</TABLE>
25
<PAGE>
SECURITY SYSTEMS' EQUIPMENT FEES increased in each of the last three years.
These increases were attributable primarily to installation of new systems in
each year, as well as further market penetration in existing markets. The
Company installed four systems in 1992, four in 1993 and two in 1994. The number
of TracPacs in service at the end of 1994 was 27,595, an increase of 7% over the
end of 1993. The number of TracPacs in service at the end of 1993 was 25,841, an
increase of 35% over the end of 1992.
OTHER SECURITY SYSTEMS' INCOME LESS COST OF OTHER SECURITY SYSTEMS for
1992, 1993 and 1994 consisted primarily of miscellaneous equipment sales and
research and development contracts which earned gross margins of $50,000 or 21%
in 1992, $324,000 or 67% in 1993, and $94,000 or 71% in 1994. The margins
fluctuate depending on the type of sales and contracts.
SECURITY SYSTEMS' GROSS MARGIN was $2.1 million (72% of security systems'
net revenues) in 1992, $3.7 million (79% of security systems' net revenues) in
1993 and $3.9 million (76% of security systems' net revenues) in 1994. The
increase in margin from 1992 to 1993 resulted from four new systems being added
to the existing customer base in early 1993, a major expansion of an existing
system, and margin improvement on systems installed in 1992. The decrease in
margin from 1993 to 1994 was due to profitable production work on earlier
research and development contracts that were completed in 1993.
SECURITY SYSTEMS' SALES AND MARKETING EXPENSES were $248,000 (8% of
security systems' net revenues) in 1992, $314,000 (7% of security systems' net
revenues) in 1993 and $207,000 (4% of security systems' net revenues) in 1994.
The decrease in 1994 was the result of a planned reduction in marketing costs.
SECURITY SYSTEMS' GENERAL AND ADMINISTRATIVE EXPENSES were $665,000 (23% of
security systems' net revenues) in 1992, $871,000 (19% of security systems' net
revenues) in 1993 and $676,000 (13% of security systems' net revenues) in 1994.
The percentage decrease in 1993 was a result of revenue growth with no
significant increase in general and administrative expenses. The percentage
decrease in 1994 was the result of the decreased burden of corporate overhead as
a result of the Company's overall expanded operations. In late 1994, the Company
hired additional management to assist in managing the day-to-day operations of
the security systems business.
SECURITY SYSTEMS' DEPRECIATION AND AMORTIZATION EXPENSES are better
expressed as a percentage of recurring revenues since product sales do not
require any capital investment. Depreciation and amortization expenses for
security systems' operations were $1.1 million (37% of security systems'
recurring revenues), $1.3 million (30% of security systems' recurring revenues)
and $1.6 million (31% of security systems' recurring revenues) in 1992, 1993 and
1994, respectively. The decrease in depreciation and amortization expenses as a
percentage of security systems' recurring revenues from 1992 to 1993 primarily
resulted from increasing revenues. Depreciation expense for security systems'
operations has increased in each of the last three years because of capital
equipment requirements necessary to support the expansion into new markets as
well as the continued growth of the existing systems.
EBITDA for security systems' operations were $1.2 million (41% of security
systems' net revenues) in 1992, $2.5 million (54% of security systems' net
revenues) in 1993 and $3.1 million (59% of security systems' net revenues) in
1994. This increase was primarily due to decreases in general and administrative
expenses as a percentage of revenues as a result of general and administrative
costs being expensed across a larger combined subscriber base.
OTHER INCOME (EXPENSE)
Other income (expense) includes interest income generated from
short-term investments and interest expense incurred. The period-to-period
fluctuation in interest expense has resulted primarily from changes in the
outstanding amounts under the Company's revolving loan agreement and the
Notes. Interest expense increased in 1994 as a result of the increased
borrowings to fund acquisitions made during the year. Interest expense will
increase in the future as a result of interest due on the Notes which were
issued in June 1995.
26
<PAGE>
FEDERAL INCOME TAXES
At December 31, 1994, the Company had net operating loss carryforwards of
$3.3 million for income tax purposes that expire in years 2004 through 2007. For
the year ended December 31, 1994, the primary differences between the U.S.
Federal statutory tax rate and the effective rate in the Company's historical
financial statements are state income taxes and the amortization of goodwill
related to stock acquisitions, which is not deductible for tax purposes. The
Company anticipates that in the future the primary differences between the U.S.
Federal statutory tax rate and the effective rate in the Company's financial
statements will continue to be state income taxes and the amortization of
goodwill related to stock acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
During 1992, 1993 and 1994, the Company financed the majority of its
growth, other than acquisitions, through internally generated funds. Net cash
provided by operating activities was $3.2 million for the six months ended
June 30, 1995 and $6.7 million in 1992, $7.1 million in 1993 and $8.4 million
in 1994 after deducting debt financing costs. The acquisitions of Contact,
Radio Call, ChiComm and High Tech in 1994 and Signet, Carrier, Metropolitan
and All City in 1995 were financed under the Credit Facility. The Company
anticipates that its ongoing capital needs, including the Pending
Acquisitions, will be funded with borrowings under the Credit Facility,
proceeds from the sale of the Old Notes and net cash generated by operations.
CAPITAL EXPENDITURES
As of June 30, 1995, the Company had invested $46.8 million in system
equipment and pagers for its 12 major metropolitan markets and $11.2 million in
system equipment and TracPacs for its 26 security systems.
Capital expenditures for paging systems' equipment and pagers (excluding
assets acquired pursuant to the completed acquisitions) were $4.0 million in
each of 1992 and 1993, $5.0 million in 1994 and $4.5 million for the six months
ended June 30, 1995. Capital expenditures for security systems' equipment and
TracPacs were $1.5 million in each of 1992 and 1993, $763,000 in 1994 and
$672,000 for the six months ended June 30, 1995.
At June 30, 1995, the Company had invested $4.1 million in inventories, the
majority of which were pagers, compared to $4.6 million at December 31, 1994.
The decrease was due to better inventory management as the SuperCenters
generated operating efficiencies. Inventory balances are expected to remain at
higher levels than in prior years as a result of acquisitions and increased
subscriber growth.
Except for those assets acquired through acquisitions, the Company expects
to meet its capital requirements in 1995 with cash generated from operations.
Although the Company had no material binding commitments to acquire capital
equipment at June 30, 1995, the Company anticipates capital expenditures for the
remainder of 1995 to be approximately $9.9 million for the purchase of pagers
and system equipment for its current paging systems' operations and $1.5 million
for the manufacture of TracPacs and the purchase of system equipment for its
security systems' operations.
PRIVATE PLACEMENT OF $100 MILLION OF OLD NOTES
In June 1995, the Company completed the private placement of the Old Notes.
Proceeds to the Company from the sale of the Old Notes, after deducting
discounts, commissions and offering expenses, were approximately $95.6 million.
The Company used approximately $49.4 million of the net proceeds to repay all
indebtedness outstanding under the Credit Facility. The Company expects to use
the remaining proceeds to pursue the Company's acquisition strategy, to purchase
frequency rights, to make capital expenditures for buildout of the Company's
regional paging systems and for enhanced services, and for working capital and
general corporate purposes.
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The Notes are general unsecured obligations of the Company and are
subordinated to all existing and future Senior Debt of the Company. The
indenture provides that the Company may not incur any debt that is subordinate
in right of payment to the Senior Debt and senior in right of payment to the
Notes. The indenture also contains certain covenants that, among other things,
limit the ability of the Company and its subsidiaries to incur indebtedness, pay
dividends, engage in transactions with affiliates, sell assets and engage in
certain other transactions.
CREDIT FACILITY
The Credit Facility was amended and restated in February 1995 to increase
the amount of available credit from $52 million to $125 million. The Credit
Facility was subsequently amended in June 1995. The Credit Facility is a
revolving line of credit which, in February 1997, will convert to a five and
one-half year term loan maturing in July 2002. The term loan may be repaid at
any time and will be payable in quarterly installments, based on the principal
amount outstanding on the conversion date, in amounts ranging from 3.25%
initially to 5.75% over five and one-half years.
Concurrent with the Company's offering of the Old Notes, the Credit
Facility was amended by and among the Company and its lenders to permit issuance
of the Notes. The approximate $49.9 million outstanding under the Credit
Facility was repaid with the proceeds of the offering of the Old Notes. See
"Description of Credit Facility."
ACQUISITIONS
In early 1993, the Company announced its plans to commence a program of
acquiring businesses that serve the commercial paging market and offer
operational synergies when integrated within the Company's SuperCenters. During
1994, the Company acquired all of the outstanding capital stock of Contact,
substantially all of the paging assets of Radio Call and High Tech and
substantially all of the Chicago-area paging assets of ChiComm for $19.0
million, $7.8 million, $900,000 and $9.8 million, respectively. In the first
six months of 1995, the Company has acquired the paging assets of All City for
$6.4 million, Signet for $9.0 million and Carrier for $6.5 million and all the
outstanding capital stock of Metropolitan for $21.0 million. In July 1995, the
Company acquired the paging assets of Americom for $17.5 million. In September
1995, the Company acquired the paging assets of Lewis for $5.3 million and Gold
Coast for $2.3 million. The Completed Acquisitions were all accounted for as
purchases and were funded either by borrowings under the Credit Facility or
proceeds from the sale of the Old Notes. Also in 1995, the Company signed
letters of intent or definitive agreements to purchase the paging assets of
Signet Raleigh, Sun, P&C, Page One, RCS and Nationwide and all of the
outstanding capital stock of Apple, Williams, Total and AGR. The Pending
Acquisitions are expected to close in late 1995 or early 1996 and will be
funded by proceeds from the sale of the Old Notes, borrowings under the Credit
Facility and issuances of shares of Common Stock of the Company. The Pending
Acquisitions are subject to various conditions, including FCC, regulatory and
other third-party approvals and the execution of definitive agreements.
The Company has Deferred Payments outstanding related to the High Tech,
Signet, Carrier and All City acquisitions of $200,000, $4.2 million, $3.0
million and $350,000, respectively, which are due and payable one year from the
closing of the respective transactions. These balances are payable, at the
Company's discretion, either in cash or shares of the Company's Common Stock
based on current market value at the date of payment. With regard to Contact,
Radio Call, Metropolitan and Gold Coast, the purchase price was paid in full at
closing. In addition, the Company has an $8.7 million Deferred Payment related
to the Americom acquisition and a $2.1 million Deferred Payment related to the
Lewis acquisition, both of which closed subsequent to the end of the second
quarter.
On August 1, 1995, the Company issued 44,166 shares of its Common Stock to
ChiComm in payment of the $950,000 deferred portion of the purchase price of
ChiComm.
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DESCRIPTION OF CREDIT FACILITY
On February 9, 1995, the Company amended and restated its former credit
facility with First Chicago, increasing its existing $52 million revolving
line of credit to $125 million. The Company uses the Credit Facility for
working capital purposes and for acquisitions approved by the lenders under
the Credit Facility (the "Lenders"). Borrowings by the Company are
guaranteed by the Company's subsidiaries and are secured by all of the
assets of the Company and its subsidiaries. The availability of advances
under the Credit Facility is conditioned on the continued maintenance of
certain specified financial and operating covenants, including a prohibition
on the payment of dividends or other distributions on the Company's Common
Stock. A portion of the proceeds of the offering of the Old Notes was used to
repay all outstanding balances under the Credit Facility. Concurrent with the
offering of the Old Notes, the Company and the Lenders amended the Credit
Facility to, among other things, permit the issuance of the Old Notes.
Immediately following the completion of the offering of the Old Notes, the
Company had approximately $31.3 million in borrowing availability under the
Credit Facility.
The Credit Facility consists of a revolving line of credit which, in
February 1997, will convert to a five and one half year term loan maturing in
July 2002. The term loan may be repaid at any time and will be payable in
quarterly installments, based on the principal amount outstanding on the
conversion date, in amounts ranging from 3.25% initially to 5.75% quarterly
over five and one half years. The borrowings bear interest, at the Company's
designation, at either (i) the greater of First Chicago's corporate base rate
or the Federal Funds Rate, plus a margin of up to 1.25%, or (ii) LIBOR, plus
a margin of up to 2.5%. In addition, a commitment fee is required on the
revolving line of credit at .5% per annum computed on the daily unused
portion of the available loan commitment.
The Credit Facility requires that the interest expense on 50% of the
aggregate principal amount of outstanding indebtedness of the Company be
effectively fixed at a prevailing market rate through either (i) the issuance
of indebtedness bearing interest at a fixed rate or (ii) interest exchange or
insurance agreements to effectively convert a portion of its floating rate
debt to a fixed rate basis. At March 31, 1995, none of the outstanding
borrowings under the Credit Agreement were subject to hedging agreements.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company on June 15, 1995 in a private
placement. In connection with that placement, the Company entered into the
Registration Rights Agreement, which requires that the Company file a
registration statement under the Securities Act with respect to the New Notes
and, upon the effectiveness of that registration statement, offer to the
holders of the Old Notes the opportunity to exchange their Old Notes for a
like principal amount of New Notes, which will be issued without a
restrictive legend and may be reoffered and resold by the holder without
registration under the Securities Act. The Registration Rights Agreement
further provides that the Company must use its best efforts to cause the
registration statement with respect to the Exchange Offer to be declared
effective within 105 days following the original issuance of the Old Notes. A
copy of the Registration Rights Agreement has been filed as an exhibit to the
registration statement of which this Prospectus is a part. As a result of
the filing and the effectiveness of the registration statement, certain
prospective increases in the interest rate on the Old Notes provided for in
the Registration Rights Agreement and the Indenture will not occur.
Following the completion of the Exchange Offer, holders of Old Notes not
tendered will not have any further registration rights and those Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for the Old Notes could be adversely affected
upon completion of the Exchange Offer.
In order to participate in the Exchange Offer, a holder must represent to
the Company, among other things, that (i) the New Notes acquired pursuant to
the Exchange Offer are being acquired in the ordinary course of business of
the person receiving the New Notes, whether or not such person is the holder
of the Old Notes, (ii) neither the holder nor any such other person is
engaging in or intends to engage in a distribution of the New Notes, (iii)
neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of the New
Notes, and (iv) neither the holder nor any such other person is an
"affiliate" (as defined under Rule 405 promulgated under the Securities Act)
of the Company.
The Old Notes are designated for trading in the PORTAL market. To the
extent Old Notes are tendered and accepted in the Exchange Offer, the
principal amount of outstanding Old Notes will decrease with a resulting
decrease in the liquidity in the market therefor. Following the consummation
of the Exchange Offer, holders of Old Notes who were eligible to participate
in the Exchange Offer but who did not tender their Old Notes will not be
entitled to certain rights under the Registration Rights Agreement and such
Old Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for the Old Notes could be adversely
affected. No assurance can be given as to the liquidity of the trading
market for either the Old Notes or the New Notes.
Based on an interpretation by the Commission's staff set forth in
no-action letters issued to third parties unrelated to the Company, the
Company believes that, with the exceptions discussed herein, New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any person receiving the New
Notes, whether or not that person is the holder (other than any such holder
or such other person that is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that (i) the New Notes are acquired in the ordinary course of
business of that holder or such other person, (ii) neither the holder nor
such other person is engaging in or intends to engage in a distribution of
the New Notes, and (iii) neither the holder nor such other person has an
arrangement or understanding with any person to participate in the
distribution of the New Notes. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where those Old Notes were
acquired by the broker-dealer as a result of its market-making activities
or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of those New Notes. See "Plan of
Distribution."
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CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set forth in the legend thereon
as a consequence of the offer or sale of the Old Notes pursuant to exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old
Notes may not be offered or sold, unless registered under the Securities Act
and applicable state securities laws, except pursuant to an exemption from,
or in a transaction not subject to, the Securities Act and applicable state
securities laws. The Company does not intend to register the Old Notes under
the Securities Act and, after consummation of the Exchange Offer, will not be
obligated to do so. Based on an interpretation by the staff of the Commission
set forth in a series of no-action letters issued to third parties, the
Company believes that, except as set forth in the next sentence, New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold or otherwise transferred by holders thereof (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such Old
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the distribution
of such New Notes. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount
of New Notes in exchange for each $1,000 principal amount of outstanding Old
Notes accepted in the Exchange Offer. Holders may tender some or all of
their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in integral multiples of $1,000 in principal amount.
The form and terms of the New Notes are substantially the same as the form
and terms of the Old Notes except that the New Notes have been registered
under the Securities Act and will not bear legends restricting their
transfer. The New Notes will evidence the same debt as the Old Notes and will
be issued pursuant to, and entitled to the benefits of, the Indenture
pursuant to which the Old Notes were, and the New Notes will be, issued.
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of the Old Notes were outstanding. The Company has fixed the close of
business on , 1995 as the record date for the Exchange Offer for
purposes of determining the persons to whom this Prospectus, together with
the Letter of Transmittal, will initially be sent. As of such date, there
were registered holders of the Old Notes. Holders of Old Notes do not
have any appraisal or dissenters' rights under the General Corporation Law of
the State of Delaware or the Indenture in connection with the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
applicable requirements of the Exchange Act and the rules and regulations of
the Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as, and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering
holders for the purpose of receiving the New Notes from the Company. If any
tendered Old Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses,
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other than certain applicable taxes, in connection with the Exchange
Offer. See "The Exchange Offer -- Solicitation of Tenders; Fees and
Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time,
on , 1995, unless the Company, in its sole discretion,
extends the Exchange Offer, in which case the term "Expiration Date" shall
mean the latest date and time to which the Exchange Offer is extended. In
order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice prior to 9:00 a.m., New
York City time, on the next business day after the previously
scheduled Expiration Date. The Company reserves the right, in its sole
discretion, (i) to delay accepting any Old Notes, to extend the Exchange
Offer or, if any of the conditions set forth under "The Exchange Offer --
Conditions" shall not have been satisfied, to terminate the Exchange Offer,
by giving oral or written notice of such delay, extension or termination to
the Exchange Agent, or (ii) to amend the terms of the Exchange Offer in any
manner.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from June 15, 1995, the date of original
issuance of the Old Notes. No interest will be paid on the Old Notes accepted
for exchange.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender the Old Notes in the Exchange Offer.
Except as set forth under "The Exchange Offer --Book Entry Transfer," to
tender in the Exchange Offer a holder must complete, sign and date the Letter
of Transmittal, or a copy thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver the
Letter of Transmittal or copy to the Exchange Agent prior to the Expiration
Date. In addition, either (i) certificates for such Old Notes must be
received by the Exchange Agent along with the Letter of Transmittal, (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation")
of such Old Notes, if that procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "DTC" or the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer
described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Old Notes,
Letter of Transmittal and other required documents must be received by the
Exchange Agent at the address set forth under "The Exchange Offer -- Exchange
Agent" prior to the Expiration Date.
The tender by a holder that is not withdrawn before the Expiration Date
will constitute an agreement between that holder and the Company in
accordance with the terms and subject to the conditions set forth herein and
in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE AND PROPER INSURANCE SHOULD BE OBTAINED. NO LETTER OF TRANSMITTAL OR
OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE
BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR NOMINEES TO EFFECT
THESE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company, or other nominee and who wishes to
tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. If the
beneficial owner wishes to tender on the owner's own behalf, the owner must,
prior to completing and executing the Letter of Transmittal and delivering
the owner's Old Notes, either make appropriate arrangements to register
ownership of the Old
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Notes in the beneficial owner's name or obtain a properly completed bond
power from the registered holder. The transfer of registered ownership may
take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined
herein) unless Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box titled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. If signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, the guarantee must be by any eligible guarantor
institution that is a member of or participant in the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Program, the Stock Exchange Medallion Program, or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, the Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by the
registered holder as that registered holder's name appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations, or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and evidence satisfactory to
the Company of their authority to so act must be submitted with the Letter of
Transmittal unless waived by the Company.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Company's acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The
Company also reserves the right to waive any defects, irregularities or
conditions of tender as to particular Old Notes. The Company's interpretation
of the terms and conditions of the Exchange Offer (including the instructions
in the Letter of Transmittal) will be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
Old Notes must be cured within such time as the Company shall determine.
Although the Company intends to notify holders of defects or irregularities
with respect to tenders of Old Notes, neither the Company, the Exchange Agent
nor any other person shall incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such defects or irregularities have been cured or waived. Any Old Notes
received by the Exchange Agent that the Company determines are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders,
unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding after the
Expiration Date or, as set forth under "The Exchange Offer -- Conditions," to
terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions
or otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder, (ii) neither the holder nor
any such other person is engaging in or intends to engage in a distribution
of such New Notes, (iii) neither the holder nor any such other person has an
arrangement or understanding with any person to participate in the
distribution of such New Notes, and (iv) neither the holder nor any such
other person is an "affiliate" (as defined in Rule 405 of the Securities Act)
of the Company. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company), may
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participate in the Exchange Offer but may be deemed an "underwriter" under
the Securities Act and, therefore, must acknowledge in the Letter of
Transmittal that it will deliver a prospectus in connection with any resale
of such New Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. See
"Plan of Distribution."
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility, a properly completed and duly executed
Letter of Transmittal (or, with respect to the DTC and its participants,
electronic instructions in which the tendering holder acknowledges its
receipt of and agreement to be bound by the Letter of Transmittal), and all
other required documents. If any tendered Old Notes are submitted for a
greater principal amount than the holder desires to exchange, such
unaccepted or non-exchanged Old Notes will be returned without expense to
the tendering holder thereof (or, in the case of Old Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the book-entry transfer procedures described
below, such non-exchanged Old Notes will be credited to an account maintained
with such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this
Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility system may make book-entry delivery of Old Notes
being tendered by causing the Book-Entry Transfer Facility to transfer such
Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures
for transfer. However, although delivery of Old Notes may be effected through
book-entry transfer at the Book-Entry Transfer Facility, the Letter of
Transmittal or copy thereof, with any required signature guarantees and any
other required documents, must, in any case other than as set forth in the
following paragraph, be transmitted to and received by the Exchange Agent at
the address set forth under "The Exchange Offer -- Exchange Agent" on or
prior to the Expiration Date or the guaranteed delivery procedures described
below must be complied with.
The DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through the DTC. To accept the Exchange Offer
through ATOP, participants in the DTC must send electronic instructions to
the DTC through the DTC's communication system in place of sending a signed,
hard copy Letter of Transmittal. The DTC is obligated to communicate those
electronic instructions to the Exchange Agent. To tender Old Notes through
ATOP, the electronic instructions sent to the DTC and transmitted by the DTC
to the Exchange Agent must contain the character by which the participant
acknowledges its receipt of and agrees to be bound by the Letter of
Transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot
be completed on a timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent received from such Eligible Institution a properly completed
and duly executed Letter of Transmittal (or a facsimile thereof) and Notice
of Guaranteed Delivery, substantially in the form provided by the Company
(by telegram, telex, facsimile transmission, mail or hand delivery), setting
forth the name and address of the holder of Old Notes and the amount of Old
Notes tendered, stating that the tender is being made thereby and
guaranteeing that within five New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the
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Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within five NYSE trading days after the date
of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
(for DTC participants) electronic ATOP transmission notice of withdrawal must
be received by the Exchange Agent at its address set forth herein prior to
5:00 p.m., New York City time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount
of such Old Notes), (iii) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes into the name of the person
withdrawing the tender, and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. All questions
as to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company, in its sole discretion, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "The Exchange Offer -- Procedures for Tendering"
at any time on or prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall
not be required to accept for exchange, or exchange New Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
(a) the Exchange Offer shall violate applicable law or any applicable
interpretation of the staff of the Commission; or
(b) any action or proceeding is instituted or threatened in any court
or by any governmental agency that might materially impair the ability of
the Company to proceed with the Exchange Offer or any material adverse
development has occurred in any existing action or proceeding with respect
to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall deem necessary for the consummation of the Exchange Offer.
If the Company determines in its sole discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering holders (or, in the
case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described above, such Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility), (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders to withdraw
such Old Notes (see "The Exchange Offer -- Withdrawal Rights") or (iii) waive
such unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Old Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer,
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the Company will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered holders, and the
Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the waiver and the manner of
disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five-to-ten-business-day period.
EXCHANGE AGENT
All executed Letters of Transmittal should be directed to the Exchange
Agent. First Interstate Bank of Texas, N.A., has been appointed as Exchange
Agent for the Exchange Offer. Questions, requests for assistance and requests
for additional copies of this Prospectus or of the Letter of Transmittal
should be directed to the Exchange Agent addressed as follows:
BY REGISTERED OR CERTIFIED MAIL,
BY OVERNIGHT COURIER OR BY HAND:
First Interstate Bank of Texas, N.A.
Attention: Danny Ampaya
Debt Operations, A86-9
26610 West Agoura Road
Calabasas, CA 91302
BY FACSIMILE:
(818) 880-3090
Attention: Danny Ampaya
CONFIRM BY TELEPHONE:
(818) 880-7132
SOLICITATIONS OF TENDERS; FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person
or by telephone by officers and employees of the Company.
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptances of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer
will be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register New Notes in the name of, or request that
Old Notes not tendered or not accepted in the Exchange Offer be returned to,
a person other than the registered tendering holder will be responsible for
the payment of any applicable transfer tax thereon.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of Old Notes for New Notes, but does
not purport to be a complete analysis of all potential tax effects. The
discussion is based upon the Internal Revenue Code of 1986, as amended,
Treasury regulations, Internal Revenue Service rulings and pronouncements
and judicial decisions now in effect, all of which are subject to change at
any time by legislative, judicial or administrative action. Any such changes
may be applied retroactively in a manner that could adversely affect a holder
of the New Notes. The description does not consider the effect of any
applicable foreign, state, local or other tax laws or estate or gift tax
considerations.
EACH HOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO IT OF EXCHANGING OLD NOTES FOR NEW NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
The exchange of Old Notes for New Notes should not be an exchange or
otherwise a taxable event to a holder for federal income tax purposes.
Accordingly, a holder should have the same adjusted issue price, adjusted
basis and holding period in the New Notes as it had in the Old Notes
immediately before the exchange.
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DESCRIPTION OF NEW NOTES
GENERAL
The Old Notes were, and the New Notes will be, issued pursuant to an
Indenture, dated as of June 15, 1995 (the "Indenture"), between the Company
and First Interstate Bank of Texas, N.A., as trustee (the "Trustee"). The
terms of the New Notes are identical in all material respects to the Old
Notes, except that the New Notes have been registered under the Securities
Act and, therefore, will not bear legends restricting their transfer. Upon
the issuance of the New Notes, the Indenture will be subject to and governed
by the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
The following summary of certain provisions of the Indenture and the
Registration Rights Agreement does not purport to be complete and is
qualified in its entirety by reference to the Indenture and the Registration
Rights Agreement, including the definitions therein of certain terms used
below. The Company will provide, without charge, to each person, including
any beneficial owner, to whom this Prospectus is delivered, upon such
person's written or oral request, copies of the Indenture and the
Registration Rights Agreement. Any such request should be delivered to ProNet
Inc., 600 Data Drive, Suite 100, Plano, Texas 75075 (telephone number (214)
964-9500), Attention: Jan E. Gaulding. Capitalized terms not otherwise
defined below or elsewhere in this Prospectus have the meanings given them in
the Indenture. The definitions of certain terms used in the following summary
are set forth below under "Description of New Notes -- Certain Definitions."
The Notes will be general unsecured senior subordinated obligations of
the Company and will be subordinate and junior in right of payment to
substantially all of the outstanding indebtedness of the Company and its
subsidiaries, including all existing and future Senior Debt of the Company.
The Notes will be limited to an aggregate principal amount of $100
million and will mature in 2005.
Interest on the Notes will be payable in cash semi-annually, on each
June 15 and December 15 (each an "Interest Payment Date"), commencing
December 15, 1995, to the persons in whose names the Notes are registered at
the close of business on the preceding June 1 and December 1, as the case may
be. Interest will accrue from the most recent Interest Payment Date to which
interest has been paid or duly provided for or, if no interest has been paid
or duly provided for, commencing June 15, 1995. Interest will be computed on
the basis of a 360-day year of twelve 30-day months. The Notes will bear
interest until maturity at the rate set forth on the cover page of this
Prospectus.
The Notes are issuable only in registered form, without coupons, in
denominations of $1,000 or any integral multiple thereof. Principal and
premium, if any, and interest on each Note will be payable and the Notes may
be presented for transfer or exchange at the office or agency of the Company
maintained for such purpose. At the option of the Company, payment of
interest may be made by check mailed to registered holders of the Notes at
the addresses set forth on the registry books maintained by the Trustee, who
will initially act as registrar for the Notes. No service charge will be made
for any exchange or registration of transfer of Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. (Sections 4.1, 4.6) Unless otherwise
designated by the Company, the Company's office or agency will be the
corporate trust office of the Trustee. (Section 4.2)
Old Notes that remain outstanding after the consummation of the Exchange
Offer and New Notes issued in connection with the Exchange Offer will be
entitled to vote or consent on all matters as a single class of securities
under the Indenture.
SUBORDINATION
The Notes will, to the extent set forth in the Indenture, be subordinate
in right of payment to the prior payment in full of all Senior Debt. Upon any
payment or distribution of assets of the Company to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshalling of assets or any bankruptcy, insolvency or
similar proceedings of the Company, the holders of Senior Debt will first be
entitled to receive payment in full of principal of (and
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premium, if any) and interest on such Senior Debt before the holders of Notes
are entitled to receive any payment of principal of (and premium, if any) or
interest on the Notes or on account of the purchase or redemption or other
acquisition of Notes by the Company or any subsidiary of the Company. In the
event that notwithstanding the foregoing, the Trustee or the holder of any
Note receives any payment or distribution of assets of the Company of any
kind or character (excluding shares of Capital Stock of the Company or
securities of the Company provided for in a plan of reorganization or
readjustment which are subordinate in right of payment to all Senior Debt to
substantially the same extent as the Notes are so subordinated) before all
the Senior Debt is paid in full, then such payment or distribution will be
required to be paid over or delivered forthwith to the trustee in bankruptcy
or other Person making payment or distribution of assets of the Company for
application to the payment of all Senior Debt remaining unpaid, to the extent
necessary to pay the Senior Debt in full. (Section 11.2)
The Company may not make any payments on account of the Notes or on
account of the purchase or redemption or other acquisition of Notes if there
shall have occurred and be continuing a default in the payment of principal
of (or premium, if any) or interest on Senior Debt, the payment of commitment
or facility fees, letter of credit fees and agency fees under the Credit
Facility, and payments with respect to letter of credit reimbursement
arrangements with one or more lenders under the Credit Facility when due (a
"Senior Payment Default"). In addition, if any default (other than a Senior
Payment Default) with respect to any Senior Debt permitting, or which with
the giving of notice or lapse of time (or both) would permit, the holders
thereof (or a trustee on behalf thereof) to accelerate the maturity thereof
(a "Senior Nonmonetary Default") has occurred and is continuing and the
Company and the Trustee have received written notice thereof from the agent
bank for the Credit Facility or from an authorized person on behalf of any
Designated Senior Debt, then the Company may not make any payments on account
of the Notes or on account of the purchase or redemption or other acquisition
of Notes for a period (a "blockage period") commencing on the date the
Company and the Trustee receive such written notice and ending on the earlier
of (x) 179 days after such date and (y) the date, if any, on which the Senior
Debt to which such default relates is discharged or such default is waived or
otherwise cured. In any event, not more than one blockage period may be
commenced during any period of 360 consecutive days, and there shall be a
period of at least 181 consecutive days in each period of 360 consecutive
days when no blockage period is in effect. No Senior Nonmonetary Default that
existed or was continuing on the date of the commencement of any blockage
period with respect to the Senior Debt initiating such blockage period will
be, or can be, made the basis for the commencement of a subsequent blockage
period, unless such default has been cured or waived for a period of not less
than 90 consecutive days. In the event that, notwithstanding the foregoing,
the Company makes any payment to the Trustee or the holder of any Note
prohibited by the subordination provisions, then such payment will be
required to be paid over and delivered forthwith to the holders of the Senior
Debt remaining unpaid, to the extent necessary to pay in full all the Senior
Debt. (Section 11.2) For the purposes hereof, "Designated Senior Debt" means
any Senior Debt (other than under the Credit Facility) in an original
principal amount of not less than $5 million where the instrument governing
such Senior Debt expressly states that such Debt is "Designated Senior Debt"
for purposes of the Indenture and a Board Resolution setting forth such
designation by the Company has been filed with the Trustee. (Section 1.1)
By reason of such subordination, in the event of insolvency, creditors
of the Company who are not holders of Senior Debt or of the Notes may recover
less, ratably, than holders of Senior Debt and may recover more, ratably,
than the holders of the Notes.
The subordination provisions described above will cease to be applicable
to the Notes upon any defeasance or covenant defeasance of the Notes as
described under "Description of New Notes -- Defeasance." (Article 8)
As of March 31, 1995, after giving pro forma effect to certain
acquisitions and the sale of the Old Notes and the application of the
proceeds therefrom, the Company would have had approximately $21.3 million of
Senior Debt outstanding. See "Use of Proceeds" and "Capitalization." The
Company may from time to time hereafter incur additional Debt constituting
Senior Debt under the Credit Facility or otherwise, subject to the provisions
of "Limitation on Consolidated Debt" described below.
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OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to June
15, 2000. Thereafter, the Notes will be subject to redemption at the option
of the Company, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest thereon to but not
including the applicable redemption date, if redeemed during the twelve-month
period beginning on June 15 of the years indicated below:
Year Percentage
2000. . . . . . . . . . . . . 105.938%
2001. . . . . . . . . . . . . 103.958%
2002. . . . . . . . . . . . . 101.979%
2003 and 2004 . . . . . . . . 100.000%
The Notes will not have the benefit of any sinking fund payments
obligations.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed or to be purchased
pursuant to any purchase offer required under the Indenture, at any time,
selection of Notes for redemption or purchase will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed, or, if the Notes are not so
listed, on a pro rata basis, by lot or by such method as the Trustee shall
deem fair and appropriate, PROVIDED, that no Notes with a principal amount of
$1,000 or less shall be redeemed or purchased in part. Notice of redemption
shall be mailed by first class mail at least 30 but not more than 60 days
before the redemption date to each holder of Notes to be redeemed at the last
address for such holder then shown on the registry books. If any Note is to
be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount to be redeemed. A new Note in
principal amount equal to the unredeemed or unpurchased portion will be
issued in the name of the holder thereof upon cancellation of the original
Note. On and after the redemption or purchase date, interest will cease to
accrue on the Notes or portions of them called for redemption or purchase.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON CONSOLIDATED DEBT
The Company may not, and may not permit its Subsidiaries to, directly or
indirectly, create, incur, assume, become liable for or guarantee the payment
of (collectively, "incur") any Debt (including Acquired Debt), PROVIDED,
HOWEVER, that the Company may incur Debt (including Acquired Debt) and may
permit a Subsidiary to incur Acquired Debt if immediately thereafter the
ratio of the aggregate principal amount of Debt of the Company and its
Subsidiaries outstanding as of the most recent available quarterly or annual
balance sheet to Pro Forma Consolidated Cash Flow for the preceding four full
fiscal quarters, determined on a pro forma basis as if any such Debt had been
incurred and the proceeds thereof had been applied at the beginning of such
four fiscal quarters, would be less than 5.5 to 1.
Notwithstanding the foregoing, the Company may, and may permit its
Subsidiaries to, incur the following without regard to the foregoing
limitation and without duplication: (i) Debt of the Company under the Credit
Facility in an aggregate principal amount not to exceed $125 million at any
one time outstanding; (ii) Guarantees by Subsidiaries of Debt permitted by
clause (i); (iii) Debt of the Company evidenced by the Notes; (iv) Debt owed
by the Company to any wholly owned Subsidiary of the Company or owed by any
wholly owned Subsidiary of the Company to the Company or any other wholly
owned Subsidiary of the Company (but only so long as such Debt is held by the
Company or such wholly owned Subsidiary); (v) Debt outstanding on the date
the Notes are originally issued under the Indenture; (vi) Permitted Deferred
Payments; (vii) Debt arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn
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against insufficient funds in the ordinary course of business, PROVIDED that
such Debt is extinguished within two Business Days of its incurrence; (viii)
Refinancing Debt; and (ix) renewals of Guarantees permitted by clause (ii)
above. (Section 4.9)
For purposes of determining any particular amount of Debt under this
covenant, Guarantees of (or obligations with respect to letters of credit
supporting) Debt otherwise included in the determination of such amount shall
not also be included. For the purpose of determining compliance with this
covenant, (A) in the event that an item of Debt meets the criteria of more
than one of the types of Debt described in the above clauses, the Company, in
its sole discretion, shall classify such item of Debt and only be required to
include the amount and type of such Debt in one of such clauses; and (B) the
amount of Debt issued at a price which is less than the principal amount
thereof shall be equal to the amount of the liability in respect thereof
determined in accordance with generally accepted accounting principles.
(Section 4.9)
LIMITATION ON CERTAIN DEBT
So long as any of the Notes are outstanding the Company will not incur
or suffer to exist any Debt (other than (i) the Notes and (ii) any pari passu
Debt) that is by its terms subordinate in right of payment to any other Debt
of the Company unless such Debt is also subordinate by its terms in right of
payment to the Notes. (Section 4.10)
LIMITATION ON RESTRICTED PAYMENTS
The Company may not, and may not permit any of its Subsidiaries to, (i)
directly or indirectly, declare or pay any dividend, or make any
distribution, in respect of its Capital Stock or to the holders thereof
(including pursuant to a merger or consolidation of the Company, but
excluding any dividends or distributions payable solely in shares of its
Capital Stock (other than Redeemable Stock) or in options, warrants or other
rights to acquire its Capital Stock (other than Redeemable Stock)), other
than dividends or distributions payable to the Company or any wholly owned
Subsidiary of the Company, or by a Subsidiary of the Company to a holder who
is not the Company or a wholly owned Subsidiary of the Company, provided that
such dividend or distribution is paid to all of the holders of the Capital
Stock of the payor of such dividend, pro rata in accordance with their
respective interests, (ii) directly or indirectly, purchase, redeem or
otherwise acquire or retire for value (a) any Capital Stock of the Company or
any Related Person or (b) any options, warrants, or rights to purchase or
acquire shares of Capital Stock of the Company or any Related Person, (iii)
make any loan, advance, capital contribution to or investment in, or payment
on a Guarantee of any obligation of, any Affiliate or any Related Person
(other than the Company or a Subsidiary of the Company), inclusive of any
loan, advance, capital contribution to or investment in, or payment on a
Guarantee of any obligation of, any Affiliate or Related Person by the
Company pursuant to a transaction whereby any such Affiliate or Related
Person becomes an Affiliate or Related Person, but exclusive of any loan,
advance, capital contribution to or investment in, or payment on a Guarantee
of any obligation of, any Person by the Company or a Subsidiary of the
Company pursuant to a transaction whereby any such Person becomes a
Subsidiary of the Company, in each case unless otherwise prohibited by the
terms of the Indenture, or (iv) redeem, defease, repurchase, retire or
otherwise acquire or retire for value prior to any scheduled maturity,
repayment or sinking fund payment (other than with the proceeds of
Refinancing Debt) Debt of the Company which is subordinate in right of
payment to the Notes (each of clauses (i) through (iv) being a "Restricted
Payment"), if at the time of such Restricted Payment, or after giving effect
thereto: (1) an Event of Default, or an event that with the lapse of time or
the giving of notice, or both, would constitute an Event of Default, shall
have occurred and be continuing, (2) the Company could not incur $1.00 of
additional Debt under the first paragraph of the "Limitation on Consolidated
Debt" covenant, above, or (3) the aggregate of all Restricted Payments from
the date of the Indenture exceeds the sum of: (a) the remainder of (x) 100%
of cumulative Free Cash Flow after June 30, 1995 through the last day of the
last full fiscal quarter immediately preceding such Restricted Payment for
which quarterly or annual financial statements of the Company are available
minus (y) the product of 2.0 times cumulative Consolidated Fixed Charges
after June 30, 1995 through the last day of the last full fiscal quarter
immediately preceding such Restricted Payment for which quarterly or annual
financial statements of the Company are available; and (b) after the date of
the Indenture, 100% of the aggregate net proceeds from the issuance of
Capital Stock (other than Redeemable Stock) of the Company
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and options, warrants or other rights on Capital Stock (other than Redeemable
Stock) of the Company and the principal amount of Debt of the Company that
has been converted into Capital Stock (other than Redeemable Stock) of the
Company.
The foregoing provision will not be violated by reason of (i) the
payment of any dividend within 60 days after declaration thereof if at the
declaration date such payment would have complied with the foregoing
provision; (ii) the purchase, redemption, acquisition or retirement of any
shares of Capital Stock of the Company in exchange for, or out of the net
proceeds of the substantially concurrent sale (other than to a Subsidiary of
the Company) of, other shares of Capital Stock (other than Redeemable Stock)
of the Company; (iii) the purchase, redemption, defeasance or other
acquisition or retirement of Debt of the Company which is subordinate in
right of payment to the Notes, in exchange for, by conversion into, or out of
the net proceeds of, a substantially concurrent (a) issue or sale (other than
to a Subsidiary) of Capital Stock (other than Redeemable Stock) of the
Company, or (b) incurrence of Refinancing Debt with respect to such
subordinated Debt; or (iv) investments in telecommunications businesses in an
aggregate amount not exceeding $10.0 million; PROVIDED that no Default or
Event of Default shall have occurred and be continuing at the time, or shall
occur as a result, of any of the actions contemplated in clauses (ii) and
(iii) above. Any payment made pursuant to clauses (i) through (iii) (other
than subclause (iii)(b)) of this paragraph shall be a Restricted Payment for
purposes of calculating aggregate Restricted Payments under the preceding
paragraph. (Section 4.11)
LIMITATION ON DISTRIBUTIONS BY AND TRANSFERS TO SUBSIDIARIES, ETC.
The Company may not, and may not permit any Subsidiary of the Company
to, create, assume or otherwise suffer to exist any encumbrance or
restriction on the ability of any Subsidiary of the Company to (i) pay,
directly or indirectly, dividends or make any other distributions in respect
of its Capital Stock or pay any Debt or other obligation owed to the Company
or any other Subsidiary of the Company; (ii) make loans or advances to the
Company or any Subsidiary of the Company; or (iii) transfer any of its
property or assets to the Company or a Subsidiary of the Company.
Notwithstanding the foregoing, the Company may, and may permit any of its
Subsidiaries to, create, assume or otherwise suffer to exist any such
encumbrances or restrictions on the ability of any Subsidiary of the Company
if and to the extent (i) subject to the provision described under "Limitation
on Mergers, Consolidations and Certain Sales of Assets," such encumbrance or
restriction existed prior to the time any Person became a Subsidiary of the
Company and such restriction or encumbrance was not incurred in anticipation
of such acquisition of such Person by the Company; (ii) subject to the
provisions described under "Limitation on Mergers, Consolidations and
Certain Sales of Assets," "Limitation on Certain Asset Dispositions" and
"Limitation on Issuances and Sales of Capital Stock of Subsidiaries," such
encumbrance or restriction exists by reason of a customary merger or
acquisition agreement for the purchase or acquisition of the stock or assets
of the Company or any of its Subsidiaries by another Person; (iii) such
encumbrance or restriction is contained in an operating lease for real
property and is effective only upon the occurrence and during the continuance
of a default in the payment of rent; (iv) such encumbrance or restriction is
the result of applicable corporate law or regulation relating to the payment
of dividends or distributions; (v) such encumbrance or restriction is the
result of applicable statute, regulation or administrative rule which
restricts the transfer of licenses or permits; and (vi) such encumbrance or
restriction is contained in the Credit Facility on the date of the Indenture,
including any amendment, modification, supplementation, restatement or
replacement of such Credit Facility, PROVIDED that the terms and conditions
of such amendment, modification, supplementation, restatement or
replacement in respect of such encumbrance or restriction are not less
favorable to the holders of the Notes than the terms and conditions in
respect of such encumbrance or restriction of the Credit Facility on the date
of the Indenture. (Section 4.12)
LIMITATION ON LIENS
The Company will not, and will not permit any Subsidiary of the Company
to, create, incur, assume or suffer to exist any Lien (other than Permitted
Liens) upon or in respect of any of its property or assets to secure any Debt
which is pari passu with or subordinate in right of payment to the Notes,
unless the Notes are secured equally and ratably simultaneously with or prior
to the creation, incurrence or assumption of such Lien; PROVIDED, HOWEVER,
that if such Debt is expressly subordinate to the Notes, the Lien securing
such
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subordinated Debt shall be subordinate and junior to the Lien securing the
Notes with the same relative priority as such subordinated Debt shall have
with respect to the Notes. (Section 4.13)
LIMITATION ON TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS
The Company may not, and may not permit any Subsidiary of the Company
to, directly or indirectly, enter into any transaction or series of
transactions after the date of the Indenture with any Affiliate or Related
Person (other than the Company or a wholly owned Subsidiary of the Company),
unless (i) such transaction or series of transactions is on terms no less
favorable to the Company or such Subsidiary than those that could be obtained
in a comparable arm's-length transaction with an entity that is not an
Affiliate or a Related Person; and (ii) if such transaction or series of
transactions involves aggregate consideration in excess of $1 million, then
such transaction or series of transactions is approved by a majority of the
Board of Directors of the Company, including the approval of a majority of
the independent, disinterested directors, and is evidenced by a resolution of
the Board of Directors of the Company. Any such transaction or series of
transactions shall be conclusively deemed to be on terms no less favorable to
the Company or such Subsidiary than those that could be obtained in an
arm's-length transaction if such transaction or transactions are approved by
a majority of the Board of Directors of the Company, including a majority of
the independent disinterested directors, and are evidenced by a resolution of
the Board of Directors of the Company. (Section 4.14)
This covenant will not apply to (a) transactions between the Company or
any of its Subsidiaries and any employee of the Company or any of its
Subsidiaries that are entered into in the ordinary course of business, (b)
the payment of reasonable and customary regular fees and expenses to
directors of the Company, (c) the making of indemnification, contribution or
similar payments to any director or officer of the Company or any Subsidiary
of the Company under the Company's or such Subsidiary's charter or bylaws
(as each may be amended after the date of this Prospectus) or any
indemnification or similar agreement between the Company or any such
Subsidiary and any of its directors or officers (collectively, the
"Indemnification Agreements") or (d) the entering into any Indemnification
Agreements with any current or future directors or officers of the Company or
any Subsidiary of the Company. (Section 4.14)
LIMITATION ON CERTAIN ASSET DISPOSITIONS
The Company may not, and may not permit any Subsidiary of the Company
to, make any Asset Disposition in one or more transactions unless: (i) the
Company (or such Subsidiary, as the case may be) receives consideration at
the time of such Asset Disposition at least equal to the fair market value
for the assets sold or disposed of as determined by the Board of Directors of
the Company; (ii) at least 80% of the consideration for such Asset
Disposition consists of cash or readily marketable cash equivalents or the
assumption of Senior Debt or pari passu Debt of the Company and release from
all liability on such Senior Debt or pari passu Debt; and (iii) all Net
Available Proceeds of such Asset Disposition, less any amounts invested
within 180 days of such Asset Disposition in assets related to the business
of the Company, are applied within 180 days of such Asset Disposition, (a)
first to the permanent reduction of any Debt then outstanding under the
Credit Facility to the extent the terms of the Credit Facility require such
application or prohibit prepayment of the Notes, (b) second, to the repayment
of any other Senior Debt to the extent the terms of such Debt require such
application or prohibit prepayment of the Notes, and (c) third, to the extent
remaining Net Available Proceeds, together with any remaining Net Available
Proceeds from any prior Asset Disposition, exceed $3 million, to make an
offer to purchase, on a pro rata basis according to their respective
principal amounts then outstanding (or accreted value, as the case may be),
the outstanding Notes and pari passu Debt, at 100% of their principal amount
(or accreted value, as the case may be) plus accrued interest to the date of
the purchase.
Notwithstanding the foregoing, the Company shall not be required to
repurchase or redeem Notes or to repay other Debt pursuant to clause (iii)
above until the Net Available Proceeds from any Asset Disposition together
with the Net Available Proceeds from any prior Asset Disposition not
otherwise applied in accordance with clauses (a), (b) or (c) of the preceding
paragraph, less any amounts invested within 180 days of such disposition or
dispositions in assets related to the business of the Company, exceed $5
million. To the extent that the aggregate purchase price of the Notes
tendered pursuant to such an offer to purchase
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is less than the aggregate purchase price offered in such offer, the Company
may use such shortfall for general corporate purposes. The Company shall not
be entitled to any credit against such obligation to purchase Notes for the
principal amount of any Notes acquired by the Company other than pursuant to
such offer to purchase. These provisions will not apply to a transaction
which is permitted under the provisions described under "Limitation on
Mergers, Consolidations and Certain Sales of Assets." (Section 4.15)
Subject to the provisions described under "Limitation on Mergers,
Consolidations and Certain Sales of Assets" below, the provisions of this
covenant shall not apply to any Asset Disposition which is part of an Asset
Exchange Transaction if (i) the Board of Directors of the Company shall
determine that the Asset Exchange Transaction is fair and reasonable to, and
in the best interests of, the Company, which determination shall be evidenced
by a resolution of the Board of Directors of the Company filed with the
Trustee and (ii) in the event (a) the properties and assets of the Company or
a Subsidiary of the Company to be transferred in such Asset Exchange
Transaction or the properties and assets of the Subsidiary of the Company
whose Capital Stock is being transferred in such Asset Exchange Transaction
represent $5 million or more as reflected in the most recent quarterly or
annual consolidated balance sheet of the Company and its Subsidiaries prior
to such Asset Exchange Transaction and (b) such transfer is made to an
Affiliate or Related Person, the Company shall have obtained the written
opinion of an independent financial advisor stating that the Asset Exchange
Transaction is fair to the Company from a financial point of view or the
determination under (i) above shall have been made by a majority of the
disinterested directors of the Company. (Section 4.15)
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF SUBSIDIARIES
The Company (i) shall not, and shall not permit any Subsidiary of the
Company to, transfer, convey, sell, lease or otherwise dispose of any Capital
Stock of such or any other Subsidiary to any Person (other than the Company
or a wholly owned Subsidiary) unless such transfer, conveyance, sale, lease
or other disposition is of all the Capital Stock of such Subsidiary owned by
the Company or such other Subsidiary and the Net Available Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in
accordance with "Limitation on Certain Asset Dispositions" and (ii) shall not
permit any Subsidiary to issue shares of its Capital Stock (other than
directors' qualifying shares), or securities convertible into, or warrants,
rights or options to subscribe for or purchase shares of, its Capital Stock
to any Person other than the Company or a wholly owned Subsidiary of the
Company. (Section 4.16)
LIMITATION ON MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS
The Company (i) may not consolidate with or merge into any other Person
or permit any other Person to consolidate with or merge into the Company or
any Subsidiary of the Company (in a transaction in which such Subsidiary
remains a Subsidiary of the Company); (ii) may not, directly or indirectly,
transfer, convey, sell, lease or otherwise dispose of all or substantially
all of its assets; (iii) may not, and may not permit any Subsidiary of the
Company to, directly or indirectly, acquire Capital Stock of any other Person
such that such Person becomes a Subsidiary of the Company; and (iv) may not,
and may not permit any Subsidiary of the Company to, directly or indirectly,
purchase, lease or otherwise acquire (x) all or substantially all of the
assets or (y) any existing business (whether existing as a separate entity,
subsidiary, division, unit or otherwise) of any Person unless: (1)
immediately before and after giving effect to such transaction and treating
any Debt incurred by the Company or a Subsidiary of the Company as a result
of such transaction as having been incurred by the Company or such Subsidiary
at the time of the transaction, no Event of Default or event that with the
passing of time or the giving of notice, or both, shall constitute an Event
of Default, shall have occurred and be continuing; (2) in a transaction in
which the Company does not survive or in which the Company conveys, sells,
leases or otherwise disposes of all or substantially all of its assets, the
successor entity to the Company is organized under the laws of the United
States or any State thereof or the District of Columbia and expressly
assumes, by a supplemental Indenture executed and delivered to the Trustee in
form satisfactory to the Trustee, all of the Company's obligations under the
Indenture; and (3) immediately after giving effect to such transaction, the
Company or the successor entity to the Company could incur at least $1.00 of
additional Debt pursuant to the first paragraph of the "Limitation on
Consolidated Debt" covenant above; PROVIDED, HOWEVER, that the provisions of
this clause (3) shall not apply to transactions described in
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clauses (i) through (iv) above which are (x) between the Company and one or
more of its wholly owned Subsidiaries or (y) between two or more wholly owned
Subsidiaries of the Company.
Notwithstanding clause (3) above, the Company or any Subsidiary of the
Company may acquire the Capital Stock of a Person in a transaction in which
such Person becomes a Subsidiary of the Company or directly or indirectly
purchase, lease or otherwise acquire (x) all or substantially all of the
assets or (y) any existing business (whether existing as a separate entity,
subsidiary, division, unit or otherwise) of any Person so long as (a) the sum
of the consideration paid for such Capital Stock or assets and the Debt
assumed in connection therewith plus the sum of the aggregate amount of
consideration paid for all other such acquisitions consummated during the
twelve-month period immediately preceding the date of such acquisition and
the Debt incurred in connection therewith does not exceed 5% of
Consolidated Tangible Assets of the Company immediately prior to such
acquisition. (Article 5)
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the Notes
shall have the right to require that the Company repurchase such holder's
Notes, in whole or in part (equal to $1,000 or integral multiples of $1,000),
at a repurchase price in cash equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of repurchase, pursuant
to the offer described in the succeeding paragraph (the "Change of Control
Offer").
Within 30 days following any Change of Control, the Company shall mail a
notice to each holder with a copy to the Trustee stating: (i) that a Change
of Control has occurred and that such holder has the right to require the
Company to repurchase such holder's Notes, in whole or in part (equal to
$1,000 or integral multiples of $1,000), at a repurchase price in cash equal
to 101% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of repurchase; (ii) the circumstances and relevant facts
regarding such Change of Control (including relevant information with respect
to the transaction giving rise to such Change of Control and, if applicable,
information with respect to pro forma historical income, cash flow and
capitalization after giving effect to such Change of Control); (iii) the
repurchase date (which shall be not earlier than 30 days or later than 60
days from the date such notice is mailed) (the "Repurchase Date"); (iv) that
any Note not tendered will continue to accrue interest; (v) that any Note
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Repurchase Date; (vi) subject to certain
conditions, that holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the form
titled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the paying agent (which may be the Company) at the address
specified in the notice prior to the close of business on the Repurchase
Date; (vii) that holders will be entitled to withdraw their election if the
paying agent receives, not later than the close of business on the third
business day (or such shorter periods as may be required by applicable law)
preceding the Repurchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the holder, the principal amount of Notes
the holder delivered for purchase, and a statement that such holder is
withdrawing his election to have such Notes purchased; and (viii) that
holders which elect to have their Notes purchased only in part will be issued
Notes in a principal amount equal to the unpurchased portion of the Notes
surrendered.
On the Repurchase Date, the Company shall (i) accept for payment Notes
or portions thereof tendered pursuant to the Change of Control Offer, (ii)
deposit with the Trustee or a paying agent (or segregate, if the Company is
acting as its own paying agent) money sufficient to pay the purchase price of
all Notes or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee Notes so accepted, together with an officers'
certificate stating the Notes or portions thereof which are thereby tendered
to the Company. The Trustee or a paying agent shall promptly mail to the
holders of Notes such accepted payment in an amount equal to the purchase
price and promptly authenticate and mail to such holders a new Note in a
principal amount equal to any unpurchased portion of the Note surrendered.
The Company will publicly announce the results of the Change of Control Offer
on or as soon as practicable after the Repurchase Date. (Section 4.17)
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In the event a Change of Control occurs and any repurchase pursuant to
the foregoing constitutes a "tender offer" for purposes of Rule 14e-1 under
the Exchange Act, the Company will comply with the requirements of Rule 14e-1
as then in effect, to the extent applicable, and any other applicable
securities laws or regulations with respect to such repurchase. The Change of
Control provisions described above may deter certain mergers, tender offers
and other takeover attempts involving the Company.
The Company's ability to repurchase Notes upon a Change of Control may
be limited by the terms of its then existing contractual obligations. The
Credit Facility provides that the repurchase of the Notes upon a Change of
Control will constitute a default under the Credit Facility, and any future
credit agreements or other agreements relating to Senior Debt may contain
similar provisions. If the Company makes a Change of Control Offer following
a Change of Control, the Company may not have adequate financial resources
to repurchase all Notes tendered. The Company's failure to repurchase
tendered Notes or to make a Change of Control Offer following a Change of
Control would constitute an Event of Default under the Indenture, but the
subordination provisions in the Indenture would likely restrict payments to
the Holders of Notes. As a result, investors should anticipate that, without
the consent of the lenders under the Credit Facility, the Company may not be
able to consummate a transaction involving a Change of Control.
EVENTS OF DEFAULT
The following are Events of Default with respect to the Notes: (a)
failure to pay any interest on any Note when due, continued for 30 days; (b)
failure to pay principal of (or premium, if any, on) any Note when due; (c)
default in the payment of principal and interest on Notes required to be
purchased pursuant to an Offer to Purchase as described under "Limitation on
Certain Asset Dispositions" and "Change of Control" when due and payable;
(d) failure to perform or comply with the provisions described under
"Limitation on Mergers, Consolidations and Certain Sales of Assets"; (e)
failure to perform or breach of any other covenant or warranty of the Company
in the Indenture, continued for 60 days after written notice from the Trustee
or holders of at least 25% in principal amount of the outstanding Notes as
provided in the Indenture; (f) a default shall have occurred under any bonds,
debentures, notes or other evidences of indebtedness of the Company or any
Subsidiary of the Company or under any mortgages, indentures or instruments
under which there may be issued or by which there may be secured or evidenced
any indebtedness by the Company or any Subsidiary of the Company, in any case
with a principal amount of at least $2 million outstanding, and such
indebtedness already is due and payable in full or such default has resulted
in the acceleration of the maturity of such indebtedness, in each case after
a period of five days during which period such default shall not have been
cured or such acceleration shall not have been rescinded; (g) the rendering
of a final judgment or judgments (not subject to appeal) against the Company
or any of its Subsidiaries in an aggregate amount in excess of $2 million
which remain unstayed, in effect and unpaid for a period of 60 consecutive
days thereafter; and (h) certain events in bankruptcy, insolvency or
reorganization affecting the Company or any Subsidiary of the Company.
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the holders, unless
such holders shall have offered to the Trustee reasonable indemnity. Subject
to such provisions for the indemnification of the Trustee, the holders of a
majority in aggregate principal amount of the outstanding Notes 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. (Section 6.1)
If an Event of Default (other than Events of Default with respect to
certain events of bankruptcy, insolvency or reorganization affecting the
Company or any Subsidiary of the Company) shall occur and be continuing,
either the Trustee or the holders of at least 25% in aggregate principal
amount of the outstanding Notes may accelerate the maturity of all Notes;
PROVIDED, HOWEVER, that after such acceleration, but before a judgment or
decree based on acceleration, the holders of a majority in aggregate
principal amount of outstanding Notes may, under certain circumstances,
rescind and annul such acceleration if all Events of Default, other than the
non-payment of accelerated principal, have been cured or waived as provided
in the Indenture. If a specified Event of Default with respect to certain
event of bankruptcy, insolvency or reorganization affecting the Company or
any Subsidiary of the Company occurs, the principal of the Notes then
outstanding shall become immediately due and payable without any declaration
or other act on the part of the Trustee or any holder of the Notes. (Section
6.2) For information as to waiver of defaults, see "Modification and Waiver."
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No holder of any Note will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder, unless such
holder shall have previously given to the Trustee written notice of a
continuing Event of Default and unless also the holders of at least 25% in
aggregate principal amount of the outstanding Notes shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the
holders of a majority in aggregate principal amount of the outstanding Notes
a direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. (Section 6.6) However, such limitations do
not apply to a suit instituted by a holder of a Note for enforcement of
payment of the principal of (and premium, if any) or interest on such Note on
or after the respective due dates expressed in such Note. (Section 6.7)
The Company will be required to furnish to the Trustee annually 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. (Section 4.4)
DEFEASANCE
The Indenture will provide that (A) if applicable, the Company will be
discharged from any and all obligations in respect of the outstanding Notes
(including the provisions described under "Subordination") or (B) if
applicable, the Company may omit to comply with certain restrictive
covenants, and that such omission shall not be deemed to be an Event of
Default under the Indenture and the Notes, in either case (A) or (B) upon
irrevocable deposit with the Trustee, in trust, of money and/or U.S.
government obligations which will provide money in an amount sufficient in
the opinion of a nationally recognized firm of independent certified public
accountants to pay the principal of and premium, if any, and each installment
of interest, if any, on the outstanding Notes. With respect to clause (B),
the obligations under the Indenture other than with respect to such covenants
and the Events of Default other than the Event of Default relating to such
covenants above shall remain in full force and effect. Such trust may only be
established if, among other things (i) with respect to clause (A), the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or there has been a change in law, which in an
opinion of counsel to the Company provides that holders of the Notes will not
recognize gain or loss for Federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to Federal income tax
on the same amount, in the same manner and at the same times as would have
been the case if such deposit, defeasance and discharge had not occurred; or,
with respect to clause (B), the Company has delivered to the Trustee an
opinion of counsel to the Company to the effect that the holders of the Notes
will not recognize 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, in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred; (ii) no Event of
Default or event that with the passing of time or the giving of notice, or
both, shall constitute an Event of Default shall have occurred or be
continuing; (iii) no default on any Senior Debt shall have occurred and be
continuing; and (iv) certain other customary conditions precedent are
satisfied. (Article 8)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the holders of a majority in aggregate
principal amount of the outstanding Notes; PROVIDED, HOWEVER, that no such
modification or amendment may, without the consent of the holder of each
outstanding Note affected thereby, (a) change the stated maturity of the
principal of, or any installment of interest on, any Note, (b) reduce the
principal amount of (or the premium) or interest on, any Note, (c) change the
place or currency of payment of principal of (or the premium) or interest on,
any Note, (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any Note, (e) reduce the above-stated
percentage of outstanding Notes necessary to modify or amend the Indenture,
(f) reduce the percentage of aggregate principal amount of outstanding Notes
necessary for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults, (g) modify any provisions of the Indenture
relating to the modification and amendment of the Indenture or the waiver of
past defaults or covenants, except as otherwise specified, (h) modify any of
the provisions of the Indenture relating to the subordination of the Notes
in a manner adverse to such holders, or (i) following the mailing of an offer
with respect to an Offer to Purchase
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the Notes as described under "Limitation on Certain Asset Dispositions" and
"Change of Control," modify the Indenture with respect to such Offer to
Purchase in a manner adverse to such holders. (Sections 9.1, 9.2)
The holders of a majority in aggregate principal amount of the
outstanding Notes may waive compliance by the Company with certain
restrictive provisions of the Indenture. (Section 9.2) The holders of a
majority in aggregate principal amount of the outstanding Notes may waive any
past default under the Indenture, except a default in the payment of
principal, premium, if any, or interest. (Section 6.4)
REPORTS
So long as the Notes are outstanding, the Company will furnish to the
holders thereof such quarterly and annual consolidated financial reports as
the Company is required to file with the Commission under the Exchange Act or
similar reports in the event the Company is not at the time required to file
such reports with the Commission. (Section 4.7)
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the continuance of an Event of Default, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. (Section 7.1)
The Indenture contains limitations on the rights of the Trustee, should
it become a creditor of the Company, to obtain payment of claims in certain
cases or to realize on certain property received by it in respect of any such
claim as security or otherwise. The Trustee is permitted to engage in other
transactions with the Company or any Affiliate; PROVIDED, HOWEVER, that if
it acquires any conflicting interest (as defined in the Indenture or in the
Trust Indenture Act), it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided. (Section 1.1)
"Acquired Debt" means (i) Debt of a Person existing at the time such
Person was acquired (by merger, consolidation or otherwise) by the Company or
a Subsidiary of the Company, PROVIDED that such Debt was not incurred in
connection with or in contemplation of the acquisition of such Person and
(ii) every obligation of such Person issued as the deferred purchase price,
to the extent payable within one year, of property (but excluding trade
accounts payable or accrued liabilities arising in the ordinary course of
business).
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Subsidiaries
(including a consolidation or merger or other sale of any such Subsidiary
with, into or to another Person in a transaction in which such Subsidiary
ceases to be a Subsidiary, but excluding a disposition by a Subsidiary of
such Person to such Person or a wholly owned Subsidiary of such Person or by
such Person to a wholly owned Subsidiary of such Person, and excluding the
creation of a lien, pledge or security interest) of (i) shares of Capital
Stock (other than directors' qualifying shares) or other ownership interests
of a Subsidiary of such Person, (ii) substantially all of the assets of such
Person or any of its Subsidiaries representing a division or line of business
or (iii) other assets or rights of such Person or any
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of its Subsidiaries outside of the ordinary course of business, in any case
where the consideration received by such Person or a Subsidiary of such
Person exceeds $1 million.
"Asset Exchange Transaction" means (i) any transaction pursuant to which
properties or assets of the Company or a Subsidiary of the Company
constituting a paging system within a geographically identifiable area and
related properties and assets (an "Identifiable Paging System") or all of the
shares of Capital Stock of a Subsidiary of the Company, the properties and
assets of which constitute an Identifiable Paging System, are to be
exchanged for properties or assets constituting an Identifiable Paging
System of another Person or all of the shares of Capital Stock of another
Person the properties and assets of which constitute an Identifiable Paging
System or (ii) any transaction pursuant to which licenses for frequencies
(for purposes other than paging) or related agreements and related properties
or assets of the Company or a Subsidiary of the Company ("Non-Paging
Licenses") or all of the shares of Capital Stock of a Subsidiary of the
Company, the properties and assets of which constitute Non-Paging Licenses,
are to be exchanged for properties or assets constituting Non-Paging Licenses
of another Person or all of the shares of Capital Stock of another Person the
properties and assets of which constitute Non-Paging Licenses.
"Attributable Debt" in respect of a sale and leaseback means, at the
time of determination, the present value (discounted at the interest rate
implicit in the lease, compounded semiannually) of the obligation of the
lessee of the property subject to such sale leaseback transaction for rental
payments during the remaining term of the lease included in such transaction
including any period for which such lease has been extended or may, at the
option of the lessor, be extended or until the earliest date on which the
lessee may terminate such lease without penalty or upon payment of penalty
(in which case the rental payments shall include such penalty), after
excluding all amounts required to be paid on account of maintenance and
repairs, insurance, taxes, assessments, water, utilities and similar charges.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
are authorized or obligated by law or executive order to close.
"Capital Expenditures" means, with respect to any Person for any period,
the aggregate of all direct and indirect expenditures (including capitalized
interest) of such Person during such period which are required to be included
in property, plant or equipment or similar tangible property account,
including, without limitation, additions to equipment and leasehold
improvements, on a consolidated balance sheet of such Person and its
Subsidiaries prepared in accordance with generally accepted accounting
principles.
"Capital Lease Obligation" of any Person means the obligation to pay
rent or other payment amounts under a lease of (or other Debt arrangements
conveying the right to use) real or personal property of such Person which is
required to be classified and accounted for as a capital lease or a liability
on the face of a balance sheet of such Person in accordance with generally
accepted accounting principles. The stated maturity of such obligation shall
be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
participation or other equivalents (however designated) of corporate
stock of such Person.
"Change of Control" means the occurrence of one or more of the following
events: (i) a person or entity or group (as that term is used in Section
13(d)(3) of the Exchange Act) of persons or entities shall have become the
beneficial owner of a majority of the securities of the Company ordinarily
having the right to vote in the election of directors; (ii) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any
directors who are members of such Board of Directors of the Company on the
date hereof and any new directors whose election by such Board of Directors
of the Company or whose nomination for election by the stockholders of the
Company was approved by a vote of 6623% of the directors 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) any sale, lease, exchange
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or other transfer (in one transaction or a series of related transactions) of
all, or substantially all, the assets of the Company to any person or entity
or group (as so defined) of persons, or entities (other than any wholly owned
Subsidiary of the Company); or (iv) the merger or consolidation of the
Company with or into another corporation or the merger of another corporation
into the Company with the effect that immediately after such transaction any
person or entity or group (as so defined) of persons or entities shall have
become the beneficial owner of securities of the surviving corporation of
such merger or consolidation representing a majority of the combined voting
power of the outstanding securities of the surviving corporation ordinarily
having the right to vote in the election of directors.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution
of assets upon any voluntary or involuntary liquidation, dissolution or
winding up of such Person, to shares of Capital Stock of any other class of
such Person.
"Consolidated Cash Flow" of any Person means for any period the
Consolidated Net Income of such Person for such period increased by (i)
Consolidated Interest Expense of such Person for such period, plus (ii) the
consolidated income tax expense of such Person for such period, plus (iii)
the consolidated depreciation and amortization expense included in the income
statement of such Person and its consolidated Subsidiaries for such period,
plus (iv) other non-cash charges deducted from consolidated revenues in
determining Consolidated Net Income for such period, minus (v) non-cash items
increasing Consolidated Net Income for such period.
"Consolidated Fixed Charges" of any Person means for any period
Consolidated Interest Expense plus Preferred Stock dividends declared and
payable in cash.
"Consolidated Interest Expense" of any Person means for any period the
consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of such Person and its consolidated
Subsidiaries for such period determined in accordance with generally
accepted accounting principles, including without limitation or
duplication (or, to the extent not so included, with the addition of), (i)
the amortization of Debt discounts; (ii) any payments of fees with respect to
letters of credit, bankers' acceptances or similar facilities; (iii) fees
with respect to interest rate swap or similar agreements or foreign currency
hedge, exchange or similar agreements, other than fees or charges related to
the acquisition or termination thereof which are not allocable to interest
expense in accordance with generally accepted accounting principles; and (iv)
the interest component of Capital Lease Obligations.
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person and its Subsidiaries for
such period determined in accordance with generally accepted accounting
principles; PROVIDED, that there shall be excluded therefrom (i) the net
income (but not the net loss) of any consolidated Subsidiary of such Person
which is subject to restrictions which prevent the payment of dividends and
the making of distributions (by loans, advances, intercompany transfers or
otherwise) to such Person to the extent of such restrictions, (ii) the net
income (or loss) of any Person that is not a consolidated Subsidiary of such
Person except to the extent of the amount of dividends or other distributions
actually paid to such Person by such other Person during such period, (iii)
gains or losses on Asset Dispositions by such Person or its consolidated
Subsidiaries and (iv) all extraordinary gains and extraordinary losses.
"Consolidated Tangible Assets" of any Person means, at any date, on a
consolidated basis, the gross book value determined in accordance with
generally accepted accounting principles of all its property both real and
personal, less (i) the net book value of all its licenses, patents, patent
applications, copyrights, trademarks, trade names, goodwill, non-compete
agreements or organizational expenses and other like intangibles, (ii)
unamortized Debt discount and expense, (iii) all reserves for depreciation,
obsolescence, depletion and amortization of its properties and (iv) all
proper reserves which in accordance with generally accepted accounting
principles should be provided in connection with the business conducted by
such Person.
"Credit Facility" means the credit agreement dated as of June 30, 1994,
between the Company and The First National Bank of Chicago, as amended and
restated as of February 9, 1995, and further amended
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as of June 12, 1995, and as the same may be amended (including any amendment
and restatement thereof), modified, supplemented, restated or replaced from
time to time.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person, and whether or
not contingent, (i) every obligation of such Person for money borrowed, (ii)
every obligation of such Person evidenced by bonds, debentures, notes or
other similar instruments, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of
such Person issued or assumed as the deferred purchase price of property or
services (but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business), (v) every Capital Lease Obligation of
such Person, (vi) Attributable Debt of such Person, (vii) the maximum fixed
redemption or repurchase price of Redeemable Stock of such Person at the time
of determination, and (viii) every obligation of the type referred to in
clauses (i) through (vii) of another Person and all dividends of another
Person the payment of which, in either case, such Person has Guaranteed or
for which such Person is responsible or liable, directly or indirectly, as
obligor, Guarantor or otherwise.
"Free Cash Flow" of any Person means, for any period, Consolidated Cash
Flow of such Person minus Capital Expenditures of such Person for such period.
"Guaranty" by any Person means any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any
Debt of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including, without limitation, any obligation of
such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or to purchase (or to advance or supply
funds for the purchase of) any security for the payment of such Debt, (ii) to
purchase property, securities or services for the purpose of assuring the
holder of such Debt of the payment of such Debt, or (iii) to maintain working
capital, equity capital or other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such Debt
(and "Guaranteed," "Guaranteeing" and "Guarantor" shall have meanings
correlative to the foregoing); PROVIDED, HOWEVER, that the Guaranty by any
Person shall not include endorsements by such Person for collection or
deposit, in either case, in the ordinary course of business.
"Lien" means, with respect to any property or assets, any mortgage or
deed of trust, pledge, security interest, lien, charge, encumbrance of any
kind in respect of such properties or assets or other security agreement
(including, without limitation, any conditional sale or other title
retention agreement having substantially the same economic effect as any of
the foregoing).
"Net Available Proceeds" from any Asset Disposition by any Person means
cash or readily marketable cash equivalents received (including by way of
sale or discounting of a note, installment receivable or other receivable,
but excluding any other consideration received in the form of assumption by
the acquiree of Debt or other obligations relating to such properties or
assets or received in any other noncash form) therefrom by such Person, net
of (i) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred and all federal, state, provincial, foreign and
local taxes required to be accrued as a liability as a consequence of such
Asset Disposition, (ii) all payments made by such Person or its Subsidiaries
on any Debt which is secured by such assets in accordance with the terms of
any Lien upon or with respect to such assets or which must by the terms of
such Lien, or in order to obtain a necessary consent to such Asset
Disposition or by applicable law be repaid out of the proceeds from such
Asset Disposition, (iii) all distributions and other payments made to
minority interest holders in Subsidiaries of such Person or joint ventures
as a result of such Asset Disposition, and (iv) a reasonable reserve for the
after-tax costs of any indemnification payments (fixed or contingent)
attributable to the seller's indemnities to the purchaser undertaken by the
Company or any of its Subsidiaries in connection with such Asset Disposition.
"Permitted Deferred Payments" means Debt incurred by the Company or any
of its Subsidiaries in connection with the acquisitions of, and payable to
the sellers of, the paging assets of Americom, Gold Coast, Denton,
MetroTones, Lewis and the capital stock of Page East (provided that the
aggregate principal amount thereof does not exceed $12.7 million).
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"Permitted Liens" means: (i) Liens incurred and pledges and deposits
made in the ordinary course of business in connection with liability
insurance, workers' compensation, unemployment insurance, old-age pensions,
and other social security benefits other than in respect of employee benefit
plans subject to ERISA; (ii) Liens securing performance, surety, and appeal
bonds and other obligations of like nature incurred in the ordinary course of
business; (iii) Liens on goods and documents securing trade letters of
credit; (iv) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's, and vendor's liens, incurred in the ordinary
course of business and securing obligations which are not yet due or which
are being contested in good faith by appropriate proceedings; (v) Liens
securing the payment of taxes, assessments, and governmental charges or
levies (a) either (1) not delinquent or (2) being contested in good faith by
appropriate legal or administrative proceedings and (b) as to which adequate
reserves shall have been established on the books of the relevant
corporation in conformity with generally accepted accounting principles;
(vi) zoning restrictions, easements, rights of way, reciprocal easement
agreements, operating agreements, covenants, conditions or restrictions on
the use of any parcel of property that are routinely granted in real estate
transactions or do not interfere in any material respect with the ordinary
conduct of the business of the Company and its Subsidiaries or the value of
such property for the purpose of such business; (vii) purchase money Liens
upon any property or equipment acquired or held in the ordinary course of
business to secure Debt incurred prior to, at the time of, or within 60 days
after the acquisition of such property or equipment solely for the purpose of
financing the acquisition of such property or equipment; (viii) Liens on
property existing at the time such property is acquired and Liens on the
assets of any Subsidiary of the Company at the time such Subsidiary is
acquired, provided such Liens apply only to such acquired property; (ix)
Liens existing as of the date of the Indenture; (x) Liens securing Debt
incurred for the purpose of financing all or any part of the cost of
acquiring assets (whether by merger, consolidation, purchase of assets or
otherwise), PROVIDED that such Debt is incurred prior to, at the time of, or
within 60 days after the acquisition of such assets solely for the purpose of
financing the acquisition of such assets in compliance with the provision
described under "Limitation on Consolidated Debt" covenant above; (xi) any
attachment or judgment Lien, unless the judgment it secures would constitute
an Event of Default; (xii) Liens with respect to assets of a Subsidiary
granted by such Subsidiary to the Company to secure Debt owing to the
Company; (xiii) right of banks to set off deposits against debts owed to said
banks; (xiv) any interest or title of a lessor in property of the Company or
a Subsidiary of the Company subject to any capitalized lease or operating
lease, as each are defined under generally accepted accounting principles;
(xv) other Liens incidental to the conduct of the business of the Company or
any of its Subsidiaries, as the case may be, or the ownership of their assets
that do not materially detract from the value of the property of the Company
or a Subsidiary of the Company subject thereto; (xvi) Liens in addition to
the foregoing securing Debt not to exceed, together with Attributable Debt in
connection with sale-leaseback transactions, $500,000 in the aggregate
outstanding at any time; and (xvii) without limiting the ability of the
Company or any of its Subsidiaries to create, incur, assume, or suffer to
exist any Lien otherwise permitted under any of the foregoing clauses, any
extension, renewal, or replacement, in whole or in part, of any Lien
described in the foregoing clauses; PROVIDED, HOWEVER, that any such
extension, renewal, or replacement Lien is limited to the property or assets
covered by the Lien extended, renewed, or replaced or substitute property or
assets, the value of which is determined by the Board of Directors of the
Company to be not materially greater than the value of the property or assets
for which the substitute property or assets are substituted.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political
subdivision thereof.
"Preferred Stock," as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated)
that ranks prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding
up of such Person, to shares of Capital Stock of any other class of such
Person.
"Pro Forma Consolidated Cash Flow" of any Person means for any period
the Consolidated Cash Flow of such Person for such period calculated on a pro
forma basis to give effect to any Asset Disposition or acquisition of assets
not in the ordinary course of business (including acquisitions of other
Persons by merger, consolidation or purchase of Capital Stock) during such
period as if such Asset Disposition or acquisition had taken place on the
first day of such period.
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"Redeemable Stock" means any equity security that by its terms or
otherwise is required to be redeemed prior to the stated maturity of the
Notes, or is redeemable at the option of the holder thereof at any time prior
to the stated maturity of the Notes.
"Refinancing Debt" means any Debt of the Company that renews, refunds or
extends any Debt of the Company or a Subsidiary of the Company, in any case
in an amount not to exceed the outstanding principal amount of the Debt so
refinanced plus the amount of any premium required to be paid in connection
with such refinancing pursuant to the terms of the debt refinanced or the
amount of any premium reasonably determined by the Company as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated repurchase, plus the expenses of the Company incurred in
connection with such refinancing, PROVIDED that, (A) in the case of any
refinancing of the Notes or any pari passu Debt, such Refinancing Debt is
made pari passu or subordinate in right of payment to the Notes, (B) in the
case of any refinancing of Debt that is subordinate in right of payment to
the Notes, such Refinancing Debt is made subordinate in right of payment to
the Notes, and (C) such Refinancing Debt does not require the payment of all
or a portion of the principal thereof (whether pursuant to purchase,
redemption, repayment, defeasance, retirement, prepayment, sinking fund
payment, payment at stated maturity or otherwise) prior to the final
scheduled maturity of the Debt being renewed, refunded or extended.
"Related Person" means any Person owning (i) 5% or more of the
outstanding Common Stock of the Company or a Subsidiary of the Company or
(ii) 5% or more of the Voting Stock of the Company or a Subsidiary of the
Company.
"Senior Debt" means (i) the principal of (and premium, if any), interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on,
penalties and any obligation of the Company for reimbursement, indemnities
and fees relating to, Debt outstanding pursuant to the Credit Facility, (ii)
all other Debt of the Company referred to in the definition of Debt other
than clauses (vii) and (viii) (with respect to clause (vii) of such
definition) thereof, (iii) payment obligations of the Company under interest
rate swap or similar agreements or foreign currency hedge, exchange or
similar agreements required by the Credit Facility, where the counterparty to
such agreement is a lender under the Credit Facility, and (iv) all renewals,
extensions, modifications, refinancings, refundings and amendments of any
Debt or payment obligations referred to in clause (i), (ii), or (iii) above
(including, without limitation, any interest rate swap or similar agreements
or foreign currency hedge, exchange or similar agreements that are entered
into by the Company for the purpose of modifying, terminating or hedging
any agreement that constitutes Senior Debt under clause (iii) above whether
or not such modification, termination or hedge was required by the Credit
Facility and whether or not the counterparty to such agreement is a lender or
former lender under such Credit Facility), unless, in the case of any
particular Debt referred to above, (a) such Debt is owed to a Subsidiary of
the Company, (b) the instrument creating or evidencing the same or pursuant
to which the same is outstanding expressly provides that such Debt is not
superior in right of payment to the Notes, (c) such Debt is incurred in
violation of the Indenture, or (d) such Debt is by its terms subordinate in
right of payment in respect of any other Debt of the Company.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person, or by such
Person and one or more other Subsidiaries thereof or (ii) any other Person
(other than a corporation) in which such Person, or one or more other
Subsidiaries of such Person or such Person and one or more other Subsidiaries
thereof, directly or indirectly, has at least a majority ownership and power
to direct the policies, management and affairs thereof; PROVIDED, that an
Unrestricted Subsidiary shall not be deemed to be a Subsidiary of the Company
for purposes of the Indenture.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company which
at the time of determination shall be an Unrestricted Subsidiary (as
designated by the Board of Directors of the Company, as provided below) and
(ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of
the Company may designate any Subsidiary of the Company (other than as
provided below but including any newly acquired or newly formed Subsidiary)
to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital
Stock of,
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or owns or holds any Lien on any property of, any other Subsidiary of the
Company which is not a Subsidiary of the Subsidiary to be so designated or
otherwise an Unrestricted Subsidiary, PROVIDED, that (a) either (x) the
Subsidiary to be so designated has total assets of $10,000 or less or (y)
immediately after giving effect to such designation, the Company could incur
$1.00 of additional Debt pursuant to the first paragraph of the
"Limitation on Consolidated Debt" covenant and (b) immediately after giving
effect to such designation, the Company could make an additional Restricted
Payment of $1.00 pursuant to the first paragraph of the "Limitation of
Restricted Payments" covenant above; PROVIDED that the holders of Debt
thereof do not have direct or indirect recourse against the Company or any
Subsidiary of the Company and neither the Company nor any Subsidiary of the
Company otherwise has liability, for any payment obligations in respect of
such Debt. The Board of Directors of the Company may designate any
Unrestricted Subsidiary to be a Subsidiary, PROVIDED, that immediately after
giving effect to such designation, the Company could incur $1.00 of
additional Debt pursuant to the first paragraph of the "Limitation on
Consolidated Debt" covenant. Any such designation by the Board of Directors
of the Company shall be evidenced by filing with the Trustee a certified copy
of the resolution of the Board of Directors of the Company giving effect to
such designation and an Officers' Certificate certifying that such
designation complies with the foregoing conditions.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
BOOK-ENTRY, DELIVERY AND FORM
The certificates representing the Old Notes were issued, and the
certificates representing the New Notes will be issued, in fully registered
form, without coupons. The Old Notes are represented by a single, permanent
global certificate in definitive, fully registered form without interest
coupons (the "Initial Global Note"). Except as described in the next
paragraph, the New Notes initially will be represented by a single,
permanent global certificate in definitive, fully registered form (the
"Global Note") and will be deposited with, or on behalf of, the DTC, and
registered in the name of Cede & Co., as the DTC's nominee or will remain in
the custody of the Trustee pursuant to a FAST Balance Certificate Agreement
between the DTC and the Trustee. If any holder of Old Notes whose interest in
such Old Notes is represented by the Initial Global Note fails to tender in
the Exchange Offer, the Company may issue and deliver to such holder a
separate certificate representing such holder's Old Notes in registered form
without interest coupons.
New Notes exchanged for Old Notes originally purchased by or transferred
to (i) institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) who are not "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act)
("QIBs") or (ii) QIBs who elect to take physical delivery of their
certificates (collectively, "Non-Global Purchasers") will be issued in
registered form without interest coupons (the "Certificated Notes"). Upon the
transfer to a QIB of Certificated Notes initially issued to a Non-Global
Purchaser, such Certificated Notes will, unless the transferee requests
otherwise or the Global Note has previously been exchanged in whole for
Certificated Notes, be exchanged for an interest in the Global Note.
The DTC has advised the Company that it is a limited-purpose trust
company that was created to hold securities for its participating
organizations (collectively, the "Participants" or the "Depository's
Participants") and to facilitate the clearance and settlement of
transactions in such securities between Participants through electronic
book-entry changes in accounts of its Participants. The Depository's
Participants include securities brokers and dealers, banks and trust
companies, clearing corporations and certain other organizations. Access to
the Depository's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depository's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly. Persons who are not Participants may beneficially own
securities held by or on behalf of the Depository only thorough the
Depository's Participants or the Depository's Indirect Participants.
The Company has been advised by the Depository that (i) upon deposit of
the Global Note, the Depository credited the accounts of Participants
designated by the initial purchasers of the Old Notes with
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portions of the principal amount of the Global Note and (ii) ownership of the
Notes evidenced by the Global Note is shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depository
(with respect to the interests of the Depository's Participants), the
Depository's Participants and the Depository's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Notes evidenced by the Global
Note will be limited to such extent.
So long as the Global Note holder is the registered owner of any Notes,
the Global Note holder will be considered the sole holder under the Indenture
of any Notes evidenced by the Global Note. Beneficial owners of Notes
evidenced by the Global Note will not be considered the owners or holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the Trustee
thereunder. Neither the Company nor the Trustee will have any responsibility
or liability for any aspect of the records of the Depository or for
maintaining, supervising or reviewing any records of the Depository relating
to the Notes.
Payments in respect of the principal of, premium, if any, and interest
on any Notes registered in the name of the Global Note holder on the
applicable record date will be payable by the Trustee to or at the direction
of the Global Note holder in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names the Notes, including the Global Note, are
registered as the owners thereof for the purpose of receiving such payments.
Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial
owners of the Notes (including principal, premium, if any, or interest). The
Company believes, however, that it is currently the policy of the Depository
to immediately credit the accounts of the relevant Participants with such
payments, in amounts proportionate to their respective holdings of beneficial
interests in the relevant security as shown on the records of the Depository.
Payments by the Depository's Participants and the Depository's Indirect
Participants to the beneficial owners of the Notes will be governed by
standing instructions and customary practice and will be the responsibility
of the Depository's Participants or the Depository's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest
in the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Notes in the
name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). In addition, if (i) the Company notifies the
Trustee in writing that the Depository is no longer willing or able to act as
a depository and the Company is unable to locate a qualified successor within
90 days or (ii) the Company, at its option, notifies the Trustee in writing
that it elects to cause the issuance of Notes in the form of Certificated
Notes under the Indenture, then, upon surrender by the Global Note holder of
its Global Note, Notes in such form will be issued to each person that the
Global Note holder and the Depository identify as being the beneficial owner
of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note holder or the Depository in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note holder or the
Depository for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Notes
(including principal, premium, if any, and interest) be made in immediately
available funds.
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EXCHANGE OFFER; REGISTRATION RIGHTS AGREEMENT
The Old Notes were sold by the Company on June 15, 1995 in a private
placement. In connection with that placement, the Company entered into the
Registration Rights Agreement with the initial purchasers of the Old Notes on
or prior to the date of issuance of the Old Notes (the "Issue Date"). The
summary herein of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
Pursuant to the Registration Rights Agreement, the Company agreed,
within 30 days after the Issue Date, to file with the Commission and use its
best reasonable efforts to cause to become effective within 105 days after
the Issue Date a registration statement (the "Exchange Offer Registration
Statement") with respect to the issue of the New Notes and, upon becoming
effective, to offer the holders of the Old Notes the opportunity to exchange
their Old Notes for the New Notes. The Company will keep the Exchange Offer
open for not less than 30 days (or longer if required by applicable law)
after the date notice of the Exchange Offer is mailed to the holders of Old
Notes. For each Old Note surrendered to the Company pursuant to the Exchange
Offer, the holder of such Old Note will receive a New Note having a principal
amount equal to that of the surrendered Old Note. Interest on each New Note
will accrue from the last interest payment date on which interest was paid on
the Old Note surrendered in exchange therefor or, if no interest has been
paid on such Old Note, from the date of its original issue.
The New Notes will be issued (i) under the Indenture or (ii) under an
indenture substantially similar to the Indenture, which, in either event,
will provide that the New Notes will not be subject to transfer restrictions
and that the New Notes and the Old Notes of the corresponding series will
vote and consent together on all matters as one class and that neither the
New Notes nor the Old Notes will have the right to vote or consent as a
separate class on any matter.
The Company will be entitled to close the Exchange Offer provided that
it has accepted all Old Notes theretofore validly tendered in accordance with
the terms of the Exchange Offer. Old Notes not tendered in the Exchange Offer
shall bear interest at the same rates as in effect at the time of issuance of
the Old Notes.
Under current Commission interpretations, the New Notes will in general
be freely transferable after the Exchange Offer without further registration
under the Securities Act, provided that broker-dealers ("Participating
Broker-Dealers") receiving New Notes in the Exchange Offer will have a
prospectus delivery requirement with respect to resales of such New Notes.
The Commission has taken the position that Participating Broker-Dealers
may fulfill their prospectus delivery requirements with respect to the New
Notes (other than a resale of an unsold allotment from the original sale of
the Old Notes) with the prospectus contained in the Exchange Offer
Registration Statement. Under the Registration Rights Agreement, the Company
is required to allow Participating Broker-Dealers and other persons, if any,
with similar prospectus delivery requirements to use the prospectus contained
in the Exchange Offer Registration Statement in connection with the resale of
such New Notes. However, any Purchaser of Old Notes who is an "affiliate" of
the Company or who intends to participate in the Exchange Offer for the
purpose of distributing the New Notes (i) will not be able to rely on the
interpretations of the Commission; (ii) will not be able to tender its Old
Notes in the Exchange Offer; and (iii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or transfer of the Old Notes unless such sale or transfer is made
pursuant to an exemption from such requirements.
Each holder of the Old Notes (other than certain specified holders) who
wishes to exchange Old Notes for New Notes in the Exchange Offer will be
required to represent that (i) it is not an affiliate of the Company; (ii)
any New Notes to be received by it were acquired in the ordinary course of
its business; and (iii) at the time of commencement of the Exchange Offer, it
has no arrangement with any person to participate in the distribution (within
the meaning of the Securities Act) of the New Notes. In addition, in
connection with any resale of New Notes, any broker-dealer who acquired the
Old Notes for its own account as a result of market-making activities or
other trading activities must deliver a prospectus meeting the requirements
of the Securities Act (which may be this Prospectus).
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The Company has agreed to pay all expenses incident to the Exchange
Offer and will indemnify the initial purchasers of the Old Notes against
certain liabilities, including liabilities under the Securities Act.
In the event that, due to any change in law or the current
interpretations of the Commission, the Company is not permitted to effect
such Exchange Offer, or if for any reason the Exchange Offer is not
consummated within 105 days after the Issue Date, or upon the request of any
initial purchaser of the Old Notes (under certain circumstances), the Company
will, at its cost, within 30 days after the date of such change in law or
interpretations of the Commission (the "Exchange Offering Determination
Date"), file a registration statement covering resales of Old Notes (a "Shelf
Registration Statement") and will use its best reasonable efforts to cause
such Shelf Registration Statement to become effective within 105 days after
the Exchange Offer Determination Date and to keep such Shelf Registration
Statement effective for three years from the effective date thereof. The
Company shall, in the event of a shelf registration, provide to each holder
of the Old Notes copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement has become effective and take certain other actions as are required
to permit unrestricted resales of the Old Notes. The Company shall have the
right under certain circumstances to restrict the use of such prospectus upon
notice to the holders of the Old Notes (a "Suspension Event Notice"). A
holder that sells Old Notes pursuant to a Shelf Registration Statement
generally will be required to be named as a selling security holder in the
related prospectus and to deliver a current prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act
in connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such a holder
(including certain indemnification obligations).
If the Company fails to comply with the above provisions, additional
interest (the "Additional Interest") shall be assessed as follows:
(i) if the Exchange Offer Registration Statement or the Shelf
Registration Statement is not filed within 30 days following the Issue
Date or the Exchange Offer Determination Date, as the case may be, then
commencing on the 31st day after the Issue Date or the Exchange Offer
Determination Date, as the case may be, Additional Interest shall be
accrued on the Old Notes over and above the stated interest at a rate
of 0.50% per annum for the first 90 days immediately following the 30th
day after the Issue Date or the Exchange Offer Determination Date, as
the case may be, such Additional Interest rate increasing by an
additional 0.25% per annum at the beginning of each subsequent 90-day
period;
(ii) if an Exchange Offer Registration Statement or the Shelf
Registration Statement is filed pursuant to clause (i) above but is not
declared effective within 105 days following the Issue Date or the
Exchange Offer Determination Date, as the case may be, then commencing on
the 106th day after the Issue Date or the Exchange Offer Determination
Date, as the case may be, Additional Interest shall be accrued on the
Old Notes over and above the stated interest at a rate of 0.50% per annum
for the first 90 days immediately following the 105th day after the Issue
Date or the Exchange Offer Determination Date, as the case may be, such
Additional Interest rate increasing by an additional 0.25% per annum at
the beginning of each subsequent 90-day period; and
(iii) if (A) the Exchange Offer is not consummated within
30 days following the effective date of the Exchange Offer Registration
Statement or (B) the Shelf Registration Statement ceases to be effective
or the prospectus which is a part thereof cannot be used as a result of
a Suspension Event Notice for a period of more than 90 days prior to
three years from its original effective date, then Additional
Interest shall be accrued on the Old Notes over and above the stated
interest at a rate of 0.50% per annum for the first 60 days immediately
following (x) the 30 days after the effective date of the Exchange Offer
Registration Statement, in the case of (A) above, or (y) the day such
Shelf Registration Statement ceases to be effective or a Suspension
Event has lasted for more than 90 days in the case of (B) above, such
Additional Interest rate increasing by an additional 0.25% per annum at
the beginning of each subsequent 60-day period;
PROVIDED, HOWEVER, that the Additional Interest rate on the Old Notes may not
exceed 1.00% per annum; and, PROVIDED, FURTHER, that (1) upon the filing of
the Exchange Offer Registration Statement or the Shelf
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Registration Statement (in case of clause (i) above), (2) upon the
effectiveness of the Exchange Offer Registration Statement or the Shelf
Registration Statement (in the case of clause (ii) above), (3) upon the
consummation of the Exchange Offer (in the case of clause (iii) (A) above),
or (4) upon the effectiveness of the Shelf Registration Statement that had
ceased to remain effective prior to three years from its original effective
date or the end of the Suspension Event (in the case of clause (iii) (B)
above), Additional Interest on the Old Notes as a result of such clause (i),
(ii) or (iii) shall cease to accrue.
58
<PAGE>
PLAN OF DISTRIBUTION
Based on an interpretation by the Commission's staff set forth in
no-action letters issued to third parties unrelated to the Company, the
Company believes that, with the exceptions set forth below, New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any person receiving such New
Notes, whether or not such person is the holder (other than any such holder
or such other person which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that the New Notes are acquired in the ordinary course of business
of the holder or such other person and neither the holder nor such other
person has an arrangement or understanding with any person to participate in
the distribution of such New Notes. The Company, however, has not sought, and
does not intend to seek, its own no-action letter and there can be no
assurance that the Commission's staff would make a similar determination with
respect to the Exchange Offer. Any holder who tenders in the Exchange Offer
for the purpose of participating in a distribution of the New Notes cannot
rely on this interpretation by the Commission's staff and must comply with
the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction.
Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes, where the Old Notes were acquired by that
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired as a result of market-making activities or other trading
activities. The Company has agreed that it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale for such period of time as such persons must comply with
such requirements in order to resell the New Notes.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such New
Notes. Any broker-dealer that resells New Notes that were received by it for
its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of New Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The Company will promptly send additional copies of this Prospectus and
any amendment or supplement to this Prospectus to any broker-dealer that
requests such documents in the Letter of Transmittal for such period of time
as such persons must comply with such requirements in order to resell the New
Notes. The Company has agreed to pay all expenses incident to the Exchange
Offer (including the expenses of one counsel for the holders of the Notes)
other than commissions or concessions of any brokers or dealers.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Vinson & Elkins L.L.P., Dallas, Texas.
59
<PAGE>
EXPERTS
The consolidated financial statements of ProNet Inc. for the three years
ended December 31, 1994, appearing in ProNet Inc.'s Annual Report on Form
10-K have been audited by Ernst & Young LLP, independent auditors, as
indicated in their report thereon included therein. Such
consolidated 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 combined financial statements of Contact Communications, Inc.
appearing in one of the documents incorporated herein by reference to the
extent and for the periods indicated in their report have been audited by
Hiltzik, Schneider, Ehrlich & Wengrover, independent public accountants, as
indicated in their report incorporated by reference herein upon the authority
of such firm as experts in accounting and auditing.
The combined financial statements of Radio Call Company, Inc. appearing
in one of the documents incorporated herein by reference have been audited by
Cummings & Carroll, P.C., independent public accountants, as indicated in
their report incorporated by reference herein upon the authority of such firm
as experts in accounting and auditing.
The financial statements of the RCC Division of Chicago Communication
Service, Inc. appearing in one of the documents incorporated herein by
reference to the extent and for the periods indicated in their report have
been audited by Natarelli & Associates, independent public accountants, as
indicated in their report incorporated by reference herein upon the authority
of such firm as experts in accounting and auditing.
The financial statements of All City Communication Company, Inc.
appearing in one of the documents incorporated herein by reference to the
extent and for the periods indicated in their report have been audited by
Winter, Kloman, Moter & Repp, S.C., independent public accountants, as
indicated in their report incorporated by reference herein upon the authority
of such firm as experts in accounting and auditing.
The financial statements of Signet Paging of Charlotte, Inc. appearing
in one of the documents incorporated herein by reference have been audited
by Greer & Walker, L.L.P., independent public accountants, as indicated in
their report incorporated by reference herein upon the authority of such firm
as experts in accounting and auditing.
The financial statements of Metropolitan Houston Paging Services, Inc.
appearing in one of the documents incorporated herein by reference to the
extent and for the periods indicated in their report have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report incorporated by reference herein upon the authority of such firm as
experts in accounting and auditing.
The financial statements of Americom Paging Corporation as of December 31,
1994, and for each of the years in the two-year period ended December 31, 1994,
have been incorporated by reference in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
The report of KPMG Peat Marwick LLP covering the December 31, 1994,
financial statements contains an explanatory paragraph that states that the
Company's recurring losses from operations and net capital deficiency raise
substantial doubt about the entity's ability to continue as a going concern.
These financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
The financial statements of Paging and Cellular of Texas (a sole
proprietorship) appearing in one of the documents incorporated herein by
reference to the extent and for the periods indicated in their report have
been audited by KPMG Peat Marwick LLP, independent public accountants, as
indicated in their report incorporated by reference herein in reliance upon
such report given upon the authority of such firm as experts in accounting
and auditing.
The financial statements of Apple Communication, Inc., Signet of
Raleigh, Inc., Cobbwells, Inc. d/b/a Page One Messaging Services, A.G.R.
Electronics, Inc. and affiliates and Nationwide Paging, Inc. and the
statement of assets to be acquired of RCS Paging, a division of Reisenweaver
Communications, Inc., appearing in one of the documents incorporated herein
by reference to the extent and for the periods indicated in their reports
have been audited by Ernst & Young, LLP, independent auditors as indicated in
their reports thereon included therein. 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.
60
<PAGE>
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-------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY
INITIAL PURCHASER OF THE OLD NOTES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Summary........................................ 4
Risk Factors................................... 15
Use of Proceeds................................ 18
Capitalization................................. 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 20
Description of Credit Facility................. 29
The Exchange Offer............................. 30
Certain Federal Income Tax Considerations...... 37
Description of New Notes....................... 38
Plan of Distribution........................... 59
Legal matters.................................. 59
Experts........................................ 60
</TABLE>
$100,000,000
PRONET INC.
11 7/8% SENIOR SUBORDINATED
NOTES DUE 2005
---------------------
PROSPECTUS
, 1995
---------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Six of the Certificate of Incorporation of the Registrant
provides that the Registrant shall indemnify its officers and directors to
the maximum extent allowed by the Delaware General Corporation Law. Pursuant
to Section 145 of the Delaware General Corporation Law, the Registrant
generally has the power to indemnify its present and former directors against
expenses and liabilities incurred by them in connection with any suit to
which they are, or are threatened to be made, a party by reason of their
serving in those positions so long as they acted in good faith and in a
manner they reasonably believed to be in, or not opposed to, the best
interests of the Registrant, and with respect to any criminal action, so long
as they had no reasonable cause to believe their conduct was unlawful. With
respect to suits by or in the right of the Registrant, however,
indemnification is generally limited to attorneys' fees and other expenses
and is not available if the person is adjudged to be liable to the
Registrant, unless the court determines that indemnification is appropriate.
The statute expressly provides that the power to indemnify authorized thereby
is not exclusive of any rights granted under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise. The Registrant also
has the power to purchase and maintain insurance for its directors and
officers and has purchased a policy providing such insurance.
The preceding discussion of the Registrant's Certificate of
Incorporation and Section 145 of the Delaware General Corporation Law is not
intended to be exhaustive and is qualified in its entirety by the Certificate
of Incorporation and Section 145 of the Delaware General Corporation Law.
The Registrant has entered into indemnification agreements with the
Registrant's directors and officers. Pursuant to such agreements, the
Registrant will, to the extent permitted by applicable law, indemnify such
persons against all expenses, judgments, fines and penalties incurred in
connection with the defense or settlement of any actions brought against them
by reason of the fact that they were directors or officers of the Registrant
or assumed certain responsibilities at the direction of the Registrant.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
3.1 -- Restated Certificate of Incorporation dated July 31, 1987.
3.2 -- Certificate of Designation of Series A Junior
Participating Preferred Stock dated April 11, 1995
(filed as part of the Registrant's Registration
Statement on Form 8-A dated April 7, 1995, and
incorporated herein by reference).
3.3 -- Certificate of Amendment to Restated Certificate of
Incorporation dated June 12, 1995 (filed as an
exhibit to the Registrant's Current Report on Form 8-K,
dated July 5, 1995, and incorporated herein by
reference).
3.4 -- Restated Bylaws of the Registrant, as amended (filed as an
exhibit to the Registrant's Current Report on Form 8-K dated
April 7, 1995, and incorporated herein by reference).
4.1 -- Indenture, dated as of June 15, 1995, between the
Registrant and First Interstate Bank of Texas, N.A.,
as Trustee (filed as an exhibit to the Registrant's
Current Report on Form 8-K, dated July 5, 1995,
and incorporated herein by reference).
4.2 -- Registration Rights Agreement, dated as of June 15,
1995, between the Registrant, Lehman Brothers, Inc.,
Alex. Brown & Sons Incorporated and PaineWebber
Incorporated.
4.3 -- Rights Agreement, dated as of April 5, 1995,
between the Registrant and Chemical Shareholder
Services Group, Inc., as Rights Agent, specifying
the terms of the rights to purchase the Registrant's
Series A Junior Participating Preferred Stock, and
the exhibits thereto (filed as an exhibit to the
Registrant's Registration Statement on Form 8-A dated
April 7, 1995, and incorporated herein by reference).
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
5.1 -- Opinion of Vinson & Elkins L.L.P.*
10.1 -- Agreement dated June 15, 1988, between the Registrant
and Texas Instruments Incorporated for the
acquisition of assets including the use of patents,
technology and software related to ProNet Tracking
Systems (filed as an exhibit to the Registrant's
Current Report on Form 8-K, dated July 21, 1988,
and incorporated herein by reference).
10.2 -- Office/Showroom/Warehouse Lease Agreement dated
January 2, 1990, between the Registrant and Dal-Mac
Westridge I, Ltd., as amended (filed as an exhibit
to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1990, and incorporated
herein by reference).
10.3 -- Stock Purchase Agreement dated September 24, 1993,
by and between the Registrant and Contact
Communications, Inc. (filed as an exhibit to the
Registrant's Current Report on Form 8-K, dated March
1, 1994, and incorporated herein by reference).
10.4 -- Amendment Letter No. One to Stock Purchase
Agreement dated October 20, 1993, by and between
the Registrant and Contact Communications, Inc. (filed
as an exhibit to the Registrant's Current Report on
Form 8-K, dated March 1, 1994, and incorporated
herein by reference).
10.5 -- Amendment Letter No. Two to Stock Purchase
Agreement dated January 4, 1994, by and between the
Registrant and Contact Communications, Inc. (filed as
an exhibit to the Registrant's Current Report on Form
8-K, dated March 1, 1994, and incorporated herein
by reference).
10.6 -- Amendment Letter No. Three to Stock Purchase
Agreement dated March 1, 1994, by and between the
Registrant and Contact Communications, Inc. (filed as
an exhibit to the Registrant's Current Report on Form
8-K, dated March 1, 1994, and incorporated herein
by reference).
10.7 -- Asset Purchase Agreement dated March 22, 1994, by
and among the Registrant, Radio Call Company, Inc., a
New York corporation, MRN Communications, Inc., a
New York corporation, Radio Call Co. of N.J., Inc.,
a New Jersey corporation and Marvin R. Neuwirth
(filed as an exhibit to the Registrant's Current
Report on Form 8-K, dated August 5, 1994, and
incorporated herein by reference).
10.8 -- Asset Purchase Agreement dated May 5, 1994, by and
among the Registrant, Chicago Communication Service,
Inc., an Illinois corporation, Gerald C. Bear,
Gerald C. Bear, Trustee of the Lewis Bear Trust,
Leo Magiera and Gerald Manikowski (filed as an
exhibit to the Registrant's Current Report on Form
8-K, dated August 5, 1994, and incorporated herein by
reference).
10.9 -- Asset Purchase Agreement dated June 30, 1994, by
and among the Registrant, All City Communication
Company, Inc., Robert J. von Bereghy, Maurice S.
Meyers, Martin T. Franke, Virginia Franke, Personal
Representative of the estate of Martin K. Franke
and Cove Communications of Wisconsin, Inc. (filed
as an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994, and incorporated herein by reference).
10.10 -- Amendment Agreement dated July 29, 1994, by and
among the Registrant, Radio Call Company, Inc., a New
York corporation, MRN Communications, Inc., a New
York corporation, Radio Call Co. of N.J., Inc., a
New Jersey corporation and Marvin R. Neuwirth
(filed as an exhibit to the Registrant's Current
Report on Form 8-K, dated August 5, 1994, and
incorporated herein by reference).
10.11 -- Amendment Agreement dated August 1, 1994, by and
among the Registrant, All City Communication Company,
Inc., Robert J. von Bereghy, Maurice S. Meyers,
Martin T. Franke, Virginia Franke, Personal
Representative of the estate of Martin K. Franke
and Cove Communications of Wisconsin, Inc. (filed
as an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994, and incorporated herein by reference).
II-2
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
10.12 -- Stock Purchase Agreement dated April 20, 1994,
regarding the acquisition of the outstanding
capital stock of Metropolitan Houston Paging
Services, Inc., ("Metro Houston") by and among
Contact Communications Inc., Metro Houston and the
shareholders of Metro Houston (filed as an exhibit
to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1995, and incorporated
herein by reference).
10.13 -- Form of PS-58 Split Dollar Agreement between the
Registrant and each of its executive officers (filed
as an exhibit to the Registrant's Registration
Statement on Form S-2 (File No. 33-85696) filed
with the Commission on October 28, 1994, and
incorporated herein by reference).
10.14 -- Asset Purchase Agreement dated November 30, 1994,
among Signet Paging of Charlotte, Inc., Eileen L.
Knight, John R. Knight, Sr., John R. Knight, Jr.
and Contact Communications Inc. (filed as an
exhibit to Amendment No. 2 to the Registrant's
Registration Statement on Form S-2 (File No. 33-
85696) filed with the Commission on December 14,
1994, and incorporated herein by reference).
10.15 -- Employment Agreement dated May 18, 1994, by and
between the Registrant and Jackie R. Kimzey (filed as
an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994, and incorporated herein by reference).
10.16 -- Employment Agreement dated May 18, 1994, by and
between the Registrant and David J. Vucina (filed as
an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994, and incorporated herein by reference).
10.17 -- Change in Control Agreement dated May 18, 1994, by
and between the Registrant and Bo Bernard (filed as an
exhibit to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1994,
and incorporated herein by reference).
10.18 -- Change in Control Agreement dated May 18, 1994, by
and between the Registrant and Jan E. Gaulding (filed
as an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994, and incorporated herein by reference).
10.19 -- Change in Control Agreement dated May 18, 1994, by
and between the Registrant and Jeffery Owens (filed as
an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994, and incorporated herein by reference).
10.20 -- Change in Control Agreement dated January 17, 1995,
by and between the Registrant and Mark A. Solls (filed
as an exhibit to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994, and incorporated
herein by reference).
10.21 -- Asset Purchase Agreement dated May 24, 1995,
regarding the acquisition of substantially all of
the paging assets of Americom Paging Corporation,
by and among the Registrant, Gregory W. Hadley, Mo
Shebaclo and American 900 Paging, Inc. dba Americom
Paging Corporation (filed as an exhibit to the
Registrant's Current Report on Form 8-K, dated July 7, 1995,
and incorporated herein by reference).
10.22 -- Amended and Restated Credit Agreement dated
February 9, 1995, by and among the Registrant, The
First National Bank of Chicago, as Agent, and the
Lenders party thereto (filed as an exhibit to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994, and incorporated herein by
reference).
10.23 -- Waiver, Consent and Amendment No. 1 dated as of
June 12, 1995 by and among the Registrant, The First
National Bank of Chicago, as Agent, and the Lenders
party thereto.
II-3
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
10.24 -- Letter of Agreement dated March 31, 1995, regarding
the acquisition of substantially all of the common
stock of Lewis Paging Inc., by and among the
Registrant and Terry W. Lewis (filed as an exhibit to
the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1995, and incorporated
herein by reference).
10.25 -- Letter of Agreement dated March 31, 1995, regarding
the acquisition of substantially all of the common
stock of Page East Inc., by and among the Registrant
and C.T. Spruill (filed as an exhibit to the
Registrant's Current Report on Form 8-K, dated
July 5, 1995, and incorporated herein by reference).
10.26 -- Office Lease Agreement by and between the Registrant
and Carter-Crowley Properties, Inc., as Landlord
(filed as an exhibit to the Registrant's Current Report
on Form 8-K, dated July 5, 1995, and incorporated herein
by reference).
10.27 -- Letter of Agreement dated July 10, 1995, regarding the
acquisition of substantially all of the paging assets of
Signet Paging of Raleigh, Inc., by and among CCI, Signet
Paging of Raleigh, Inc., and W. David Sweatt (filed as an
Exhibit to the Registrant's Registration Statement on
Form S-3 (file no. 33-61279) filed with the Commission
July 25, 1995, and incorporated herein by reference).
10.28 -- Letter of Agreement dated July 10, 1995, regarding the
acquisition of the common stock of Apple Communication,
Inc. and certain assets of Best Page, Inc., by and among
Apple Communication, Inc., Best Page, Inc., CCI,
Sam Zarcone and Jill DiFoggio (filed as an exhibit to
the Registrant's Registration Statement of Form S-3
(file no. 33-61279) filed with the Commission July 25,
1995, and incorporated herein by reference).
10.29 -- Letter of Agreement dated August 2, 1995, regarding the
acquisition of substantially all of the paging assets of
Paging and Cellular of Texas, by and among CCI, Paging and
Cellular of Texas and Daniel L. Sheppard (filed as an exhibit
to the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1995 , and incorporated herein by reference).
10.30 -- Letter of Agreement dated August 7, 1995, regarding the
acquisition of substantially all of the paging assets of
Cobbwells, Inc. dba Page One Communications, by and among CCI,
Cobbwells, Inc. dba Page One Communications, James H.
Cobb, III and Warren K. Wells (filed as an exhibit to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1995, and incorporated herein by reference).
12.1 -- Ratio of Earnings to Fixed Charges.
22.1 -- Subsidiaries of the Registrant (filed as an exhibit to
the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994, and incorporated
herein by reference).
23.1 -- Consent of Vinson & Elkins L.L.P. (set forth in
Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP, Independent Auditors.
23.3 -- Consent of Hiltzik, Schneider, Ehrlich & Wengrover,
Independent Public Accountants.
23.4 -- Consent of Cummings & Carroll, P.C., Independent
Public Accountants.
23.5 -- Consent of Natarelli & Associates, Independent
Public Accountants.
23.6 -- Consent of Winter, Kloman, Moler & Repp, S.P.,
Independent Public Accountants.
23.7 -- Consent of Greer & Walker, L.L.P., Independent
Public Accountants.
23.8 -- Consent of Arthur Andersen LLP, Independent Public
Accountants.
23.9 -- Consent of KPMG Peat Marwick LLP, Independent
Public Accountants.
23.10 -- Consent of KPMG Peat Marwick LLP, Independent
Public Accountants.
24.1 -- Powers of Attorney (set forth on signature page).
25.1 -- Form T-1 of First Interstate Bank of Texas, N.A.*
99.1 -- Form of Letter of Transmittal.*
99.2 -- Form of Notice of Guaranteed Delivery.*
---------------
* Previously filed.
II-4
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) to reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in this Registration Statement when it becomes effective;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if this Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant
to section 13 or section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-5
<PAGE>
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 and Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with
the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Trust Indenture Act.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Amendment to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the
City of Plano, State of Texas, on September 13, 1995.
PRONET INC.
By: /s/ Jan E. Gaulding
__________________________
Jan E. Gaulding
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to Registration Statement has been signed by the following
persons in the capacities indicated on the dates indicated.
SIGNATURE TITLE DATE
/s/ Jackie R. Kimzey*
_______________________ Chairman, Chief Executive Officer September 13, 1995
Jackie R. Kimzey and Director
(Principal Executive Officer)
/s/ David J. Vucina*
_______________________ President, Chief Operating September 13, 1995
David J. Vucina Officer and Director
/s/ Jan E. Gaulding
_______________________ Senior Vice President, Treasurer September 13, 1995
Jan E. Gaulding and Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Thomas V. Bruns*
_______________________ Director September 13, 1995
Thomas V. Bruns
/s/ Harvey B. Cash*
_______________________ Director September 13, 1995
Harvey B. Cash
/s/ Edward E. Jungerman*
_______________________ Director September 13, 1995
Edward E. Jungerman
/s/ Mark C. Masur*
_______________________ Director September 13, 1995
Mark C. Masur
*By /s/ Jan E Gaulding
______________________
Jan E. Gaulding
Attorney-in-Fact
II-7
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
3.1 -- Restated Certificate of Incorporation dated July 31, 1987.*
3.2 -- Certificate of Designation of Series A Junior
Participating Preferred Stock dated April 11, 1995
(filed as part of the Registrant's Registration
Statement on Form 8-A dated April 7, 1995, and
incorporated herein by reference).
3.3 -- Certificate of Amendment to Restated Certificate of
Incorporation dated June 12, 1995 (filed as an
exhibit to the Registrant's Current Report on Form
8-K, dated July 5, 1995, and incorporated herein by
reference).
3.4 -- Restated Bylaws of the Registrant, as amended (filed as an
exhibit to the Registrant's Current Report on Form 8-K dated
April 7, 1995, and incorporated herein by reference).
4.1 -- Indenture, dated as of June 15, 1995, between the
Registrant and First Interstate Bank of Texas, N.A.,
as Trustee (filed as an exhibit to the Registrant's
Current Report on Form 8-K, dated July 5, 1995,
and incorporated herein by reference).
4.2 -- Registration Rights Agreement, dated as of June 15,
1995, between the Registrant, Lehman Brothers, Inc.,
Alex. Brown & Sons Incorporated and PaineWebber
Incorporated.
4.3 -- Rights Agreement, dated as of April 5, 1995,
between the Registrant and Chemical Shareholder
Services Group, Inc., as Rights Agent, specifying
the terms of the rights to purchase the Registrant's
Series A Junior Participating Preferred Stock, and
the exhibits thereto (filed as an exhibit to the
Registrant's Registration Statement on Form 8-A dated
April 7, 1995, and incorporated herein by
reference).
5.1 -- Opinion of Vinson & Elkins L.L.P.*
10.1 -- Agreement dated June 15, 1988, between the Registrant
and Texas Instruments Incorporated for the
acquisition of assets including the use of patents,
technology and software related to ProNet Tracking
Systems (filed as an exhibit to the Registrant's
Current Report on Form 8-K, dated July 21, 1988,
and incorporated herein by reference).
10.2 -- Office/Showroom/Warehouse Lease Agreement dated
January 2, 1990, between the Registrant and Dal-Mac
Westridge I, Ltd., as amended (filed as an exhibit
to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1990, and incorporated
herein by reference).
10.3 -- Stock Purchase Agreement dated September 24, 1993,
by and between the Registrant and Contact
Communications, Inc. (filed as an exhibit to the
Registrant's Current Report on Form 8-K, dated March
1, 1994, and incorporated herein by reference).
10.4 -- Amendment Letter No. One to Stock Purchase
Agreement dated October 20, 1993, by and between
the Registrant and Contact Communications, Inc. (filed
as an exhibit to the Registrant's Current Report on
Form 8-K, dated March 1, 1994, and incorporated
herein by reference).
10.5 -- Amendment Letter No. Two to Stock Purchase
Agreement dated January 4, 1994, by and between the
Registrant and Contact Communications, Inc. (filed as
an exhibit to the Registrant's Current Report on Form
8-K, dated March 1, 1994, and incorporated herein
by reference).
10.6 -- Amendment Letter No. Three to Stock Purchase
Agreement dated March 1, 1994, by and between the
Registrant and Contact Communications, Inc. (filed as
an exhibit to the Registrant's Current Report on Form
8-K, dated March 1, 1994, and incorporated herein
by reference).
10.7 -- Asset Purchase Agreement dated March 22, 1994, by
and among the Registrant, Radio Call Company, Inc., a
New York corporation, MRN Communications, Inc., a
New York corporation, Radio Call Co. of N.J., Inc.,
a New Jersey corporation and Marvin R. Neuwirth
(filed as an exhibit to the Registrant's Current
Report on Form 8-K, dated August 5, 1994, and
incorporated herein by reference).
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
10.8 -- Asset Purchase Agreement dated May 5, 1994, by and
among the Registrant, Chicago Communication Service,
Inc., an Illinois corporation, Gerald C. Bear,
Gerald C. Bear, Trustee of the Lewis Bear Trust,
Leo Magiera and Gerald Manikowski (filed as an
exhibit to the Registrant's Current Report on Form
8-K, dated August 5, 1994, and incorporated herein by
reference).
10.9 -- Asset Purchase Agreement dated June 30, 1994, by
and among the Registrant, All City Communication
Company, Inc., Robert J. von Bereghy, Maurice S.
Meyers, Martin T. Franke, Virginia Franke, Personal
Representative of the estate of Martin K. Franke
and Cove Communications of Wisconsin, Inc. (filed
as an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994, and incorporated herein by reference).
10.10 -- Amendment Agreement dated July 29, 1994, by and
among the Registrant, Radio Call Company, Inc., a New
York corporation, MRN Communications, Inc., a New
York corporation, Radio Call Co. of N.J., Inc., a
New Jersey corporation and Marvin R. Neuwirth
(filed as an exhibit to the Registrant's Current
Report on Form 8-K, dated August 5, 1994, and
incorporated herein by reference).
10.11 -- Amendment Agreement dated August 1, 1994, by and
among the Registrant, All City Communication Company,
Inc., Robert J. von Bereghy, Maurice S. Meyers,
Martin T. Franke, Virginia Franke, Personal
Representative of the estate of Martin K. Franke
and Cove Communications of Wisconsin, Inc. (filed
as an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994, and incorporated herein by reference).
10.12 -- Stock Purchase Agreement dated April 20, 1994,
regarding the acquisition of the outstanding
capital stock of Metropolitan Houston Paging
Services, Inc., ("Metro Houston") by and among
Contact Communications Inc., Metro Houston and the
shareholders of Metro Houston (filed as an exhibit
to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1995, and incorporated
herein by reference).
10.13 -- Form of PS-58 Split Dollar Agreement between the
Registrant and each of its executive officers (filed
as an exhibit to the Registrant's Registration
Statement on Form S-2 (File No. 33-85696) filed
with the Commission on October 28, 1994, and
incorporated herein by reference).
10.14 -- Asset Purchase Agreement dated November 30, 1994,
among Signet Paging of Charlotte, Inc., Eileen L.
Knight, John R. Knight, Sr., John R. Knight, Jr.
and Contact Communications Inc. (filed as an
exhibit to Amendment No. 2 to the Registrant's
Registration Statement on Form S-2 (File No. 33-
85696) filed with the Commission on December 14,
1994, and incorporated herein by reference).
10.15 -- Employment Agreement dated May 18, 1994, by and
between the Registrant and Jackie R. Kimzey (filed as
an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994, and incorporated herein by reference).
10.16 -- Employment Agreement dated May 18, 1994, by and
between the Registrant and David J. Vucina (filed as
an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994, and incorporated herein by reference).
10.17 -- Change in Control Agreement dated May 18, 1994, by
and between the Registrant and Bo Bernard (filed as an
exhibit to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1994,
and incorporated herein by reference).
10.18 -- Change in Control Agreement dated May 18, 1994, by
and between the Registrant and Jan E. Gaulding (filed
as an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994, and incorporated herein by reference).
10.19 -- Change in Control Agreement dated May 18, 1994, by
and between the Registrant and Jeffery Owens (filed as
an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994, and incorporated herein by reference).
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
10.20 -- Change in Control Agreement dated January 17, 1995,
by and between the Registrant and Mark A. Solls (filed
as an exhibit to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994, and incorporated
herein by reference).
10.21 -- Asset Purchase Agreement dated May 24, 1995,
regarding the acquisition of substantially all of
the paging assets of Americom Paging Corporation,
by and among the Registrant, Gregory W. Hadley, Mo
Shebaclo and American 900 Paging, Inc. dba Americom
Paging Corporation (filed as an exhibit to the
Registrant's Current Report on Form 8-K, dated
July 7, 1995, and incorporated herein by reference).
10.22 -- Amended and Restated Credit Agreement dated
February 9, 1995, by and among the Registrant, The
First National Bank of Chicago, as Agent, and the
Lenders party thereto (filed as an exhibit to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994, and incorporated herein by
reference).
10.23 -- Waiver, Consent and Amendment No. 1 dated as of
June 12, 1995 by and among the Registrant, The First
National Bank of Chicago, as Agent, and the Lenders
party thereto.*
10.24 -- Letter of Agreement dated March 31, 1995, regarding
the acquisition of substantially all of the common
stock of Lewis Paging Inc., by and among the
Registrant and Terry W. Lewis (filed as an exhibit to
the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1995, and incorporated
herein by reference).
10.25 -- Letter of Agreement dated March 31, 1995, regarding
the acquisition of substantially all of the common
stock of Page East Inc., by and among the Registrant
and C.T. Spruill (filed as an exhibit to the
Registrant's Current Report on Form 8-K, dated
July 5, 1995, and incorporated herein by reference).
10.26 -- Office Lease Agreement by and between the Registrant
and Carter-Crowley Properties, Inc., as Landlord
(filed as an exhibit to the Registrant's Current Report
on Form 8-K, dated July 5, 1995, and incorporated
herein by reference).
10.27 -- Letter of Agreement dated July 10, 1995, regarding the
acquisition of substantially all of the paging assets of
Signet Paging of Raleigh, Inc., by and among CCI, Signet
Paging of Raleigh, Inc., and W. David Sweatt (filed as an
Exhibit to the Registrant's Registration Statement on
Form S-3 (file no. 33-61279) filed with the Commission
July 25, 1995, and incorporated herein by reference).
10.28 -- Letter of Agreement dated July 10, 1995, regarding the
acquisition of the common stock of Apple Communication,
Inc. and certain assets of Best Page, Inc., by and among
Apple Communication, Inc., Best Page, Inc., CCI,
Sam Zarcone and Jill DiFoggio (filed as an exhibit to
the Registrant's Registration Statement of Form S-3
(file no. 33-61279) filed with the Commission July 25,
1995, and incorporated herein by reference).
10.29 -- Letter of Agreement dated August 2, 1995, regarding the
acquisition of substantially all of the paging assets of
Paging and Cellular of Texas, by and among CCI, Paging and
Cellular of Texas and Daniel L. Sheppard (filed as an exhibit
to the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1995, and incorporated herein by reference).
10.30 -- Letter of Agreement dated August 7, 1995, regarding the
acquisition of substantially all of the paging assets of
Cobbwells, Inc. dba Page One Communications, by and among CCI,
Cobbwells, Inc. dba Page One Communications, James H.
Cobb, III and Warren K. Wells (filed as an exhibit to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1995, and incorporated herein by reference).
12.1 -- Ratio of Earnings to Fixed Charges.
22.1 -- Subsidiaries of the Registrant (filed as an exhibit to
the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994, and incorporated
herein by reference).
23.1 -- Consent of Vinson & Elkins L.L.P. (set forth in
Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP, Independent Auditors.
23.3 -- Consent of Hiltzik, Schneider, Ehrlich & Wengrover,
Independent Public Accountants.
23.4 -- Consent of Cummings & Carroll, P.C., Independent
Public Accountants.
23.5 -- Consent of Natarelli & Associates, Independent
Public Accountants.
23.6 -- Consent of Winter, Kloman, Moler & Repp, S.P.,
Independent Public Accountants.
23.7 -- Consent of Greer & Walker, L.L.P., Independent
Public Accountants.
23.8 -- Consent of Arthur Andersen LLP, Independent Public
Accountants.
23.9 -- Consent of KPMG Peat Marwick LLP, Independent
Public Accountants.
23.10 -- Consent of KPMG Peat Marwick LLP, Independent
Public Accountants.
24.1 -- Powers of Attorney (set forth on signature page).
25.1 -- Form T-1 of First Interstate Bank of Texas, N.A.*
99.1 -- Form of Letter of Transmittal.*
99.2 -- Form of Notice of Guaranteed Delivery.*
--------------------
* Previously filed.
<PAGE>
Exhibit 12.1
ProNet Inc.
Ratio of Earnings to Fixed Charges
(In thousands, except ratio)
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
----------------------------------------------------- ---------------------------
Pro Pro
Forma Forma
1990 1991 1992 1993 1994 1994 1994 1995 1995
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pretax income (loss) $434 $1,372 $1,754 $2,483 $1,588 $(14,184) $ 933 $ (372) $5,458
Fixed charges 530 446 341 324 1,987 15,542 629 2,088 7,797
---- ------ ------ ------ ------ -------- ------ ------ ------
Subtotal $964 $1,818 $2,095 $2,807 $3,575 $ 1,358 $1,562 $1,716 $2,339
Fixed charges:
Interest expense $528 $ 425 $ 310 $ 292 $1,774 $ 14,879 $ 517 $1,894 $7,553
Amortization of deferred
financing costs 2 21 31 32 213 663 112 194 244
---- ------ ------ ------ ------ -------- ------ ------ ------
Total fixed charges $530 $ 446 $ 341 $ 324 $1,987 $ 15,542 $ 629 $2,088 $7,797
Ratio of earnings to
fixed charges 1.8 4.1 6.1 8.7 1.8 -- 2.5 -- --
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the caption "Experts" in the
Registration Statement (Form S-4, No. 33-60925) and related Prospectus of ProNet
Inc. for the registration of $100,000,000 of 11 7/8% Senior Subordinated Notes
due 2005 and to the incorporation by reference therein of our reports (a) dated
March 3, 1995, with respect to the consolidated financial statements and
schedule of ProNet Inc. included in its Annual Report (Form 10-K) for the year
ended December 31, 1994, and (b) with respect to the financials of companies to
be acquired as follows:
<TABLE>
<CAPTION>
WITH RESPECT TO YEAR ENDED REPORT DATED
--------------------------------------------- ----------------------- -----------------------
<S> <C> <C>
Apple Communications, Inc. December 31, 1994 August 4, 1995
SigNet of Raleigh, Inc. December 31, 1994 August 9, 1995
Cobbwells, Inc. d/b/a Page One December 31, 1994 August 24, 1995
A.G.R. Electronics, Inc. December 31, 1994 September 9, 1995
Nationwide Paging, Inc. December 31, 1994 September 9, 1995
and with respect to the statement of assets to be acquired as follows:
RCS Paging, A Division of
Reisenweaver Communications, Inc. December 31, 1994 September 9, 1995
</TABLE>
all such statements are included in ProNet Inc.'s Current Report on Form 8-K
dated September 15, 1995, and all filed with the Securities and Exchange
Commission.
Ernst & Young LLP
Dallas, Texas
September 15, 1995
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4, No. 33-60925) and related Prospectus of
ProNet Inc. for the registration of $100,000,000 of 11-7/8% Senior
Subordinated Notes due 2005 and to the incorporation by reference therein of
our report dated September 17, 1993, with respect to the combined financial
statements of Contact Communications, Inc. and its Affiliated Companies
included in ProNet Inc.'s Current Report on Form 8-K/A dated March 1, 1994,
both filed with the Securities and Exchange Commission.
/s/ Schneider, Ehrlich & Wengrover
---------------------------------------------------
SCHNEIDER, EHRLICH & WENGROVER
(successor firm to Hiltzik, Schneider, Ehrlich & Co.)
September 13, 1995
Great Neck, New York
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4, No. 33-60925) and related prospectus of
ProNet Inc. for the registration $100,000,000 of 11 7/8% Senior Subordinated
Notes due 2005 and to the incorporation by reference therein of our report
dated September 16, 1994, with respect to the consolidated financial statements
of Radio Call Company, Inc. and Affiliates included in ProNet Inc.'s Current
Report on Form 8-K/A dated August 1, 1994, both filed with the Securities
and Exchange Commission.
CUMMINGS & CARROLL, P.C.
/s/ Cummings & Carroll, P.C.
--------------------------------
Certified Public Accountants
September 13, 1995
Great Neck, New York
<PAGE>
EXHIBIT 23.5
September 13, 1995
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4, No. 33-60925) and related Prospectus of
ProNet Inc. for the registration $100,000,000 of 11 7/8% Senior
Subordinated Notes due 2005 and to the incorporation by reference therein of
our report dated October 10, 1994, with respect to the consolidated financial
statements of RCC Division of Chicago Communication Service, Inc. included in
ProNet Inc.'s Current Report on Form 8-K/A dated August 1, 1994, both filed
with the Securities and Exchange Commission.
/s/ Charles J. Natarelli
----------------------------
Charles J. Natarelli
NATARELLI & ASSOCIATES
Chicago, Illinois
<PAGE>
EXHIBIT 23.6
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4, No. 33-60925) and related Prospectus of
ProNet Inc. for the registration of $100,000,000 of 11 7/8% Senior
Subordinated Notes due 2005 and to the incorporation by reference therein of
our report dated April 14, 1995, with respect to the consolidated financial
statements of All City Communication Company, Inc. included in ProNet Inc.'s
Current Report on Form 8-K dated May 19, 1995, both filed with the Securities
and Exchange Commission.
/s/ Winter, Kloman, Moter & Repp, S.C.
September 13, 1995
Elm Grove, Wisconsin
<PAGE>
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4, No. 33-60925) and related Prospectus of
ProNet Inc. for the registration of $100,000,000 of 11 7/8% Senior Subordinated
Notes due 2005 and to the incorporation by reference therein of our report
dated April 13, 1995, with respect to the financial statements of Signet
Paging of Charlotte, Inc. included in ProNet Inc.'s Current Report on
Form 8-K/A dated March 1, 1995, both filed with the Securities and Exchange
Commission.
/s/ Greer & Walker, L.L.P.
September 13, 1995
Charlotte, North Carolina
<PAGE>
EXHIBIT 23.8
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports dated April 20, 1995
with respect to the financial statements of Metropolitan Houston Paging
Services, Inc. included in ProNet Inc.'s Form 8-K dated May 18, 1995, and to
all references to our firm included in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Little Rock, Arkansas,
September 12, 1995.
<PAGE>
EXHIBIT 23.9
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4, No. 33-60925) and related Prospectus of
ProNet Inc. for the registration of $100,000,000 of 11 7/8% Senior
Subordinated Notes due 2005 and to the incorporation by reference therein of
our report dated April 17, 1995, with respect to the financial statements of
Americom Paging Corporation included in ProNet Inc.'s Current Report on Form
8-K dated July 6, 1995, both filed with the Securities and Exchange
Commission.
Our report dated April 17, 1995, contains an explanatory paragraph that
states that Americom Paging Corporation has suffered recurring losses from
operations and has a net capital deficiency, which raise substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of that
uncertainty.
/s/ KPMG PEAT MARWICK LLP
------------------------------
KPMG PEAT MARWICK LLP
September 13, 1995
Houston, Texas
<PAGE>
EXHIBIT 23.10
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4, No. 33-60925) and related Prospectus of
ProNet Inc. for the registration of $100,000,000 of 11 7/8% Senior Subordinated
Notes due 2005 and to the incorporation by reference therein of our report
dated September 8, 1995, with respect to the financial statements of Paging
and Cellular of Texas (a Sole Proprietorship) included in ProNet Inc.'s
Current Report on Form 8-K dated September 15, 1995, both filed with the
Securities and Exchange Commission.
/s/ KPMG Peat Marwick LLP
September 14, 1995
Houston, Texas
