<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1996
REGISTRATION NO. 333-12577
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HEARTLAND WIRELESS COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 4841 73-1435149
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
200 CHISHOLM PLACE, SUITE 200
PLANO, TEXAS 75075
(972) 423-9494
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
------------------------------
JOHN R. BAILEY
SENIOR VICE PRESIDENT--FINANCE AND
CHIEF FINANCIAL OFFICER
HEARTLAND WIRELESS COMMUNICATIONS, INC.
200 CHISHOLM PLACE, SUITE 200
PLANO, TEXAS 75075
(972) 423-9494
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------------
COPY TO:
JULIE M. ALLEN, ESQ.
O'SULLIVAN GRAEV & KARABELL, LLP
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10112
(212) 408-2400
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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. / /
------------------------
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.
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<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 20, 1996
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>
PROSPECTUS
HEARTLAND WIRELESS COMMUNICATIONS, INC.
OFFER TO EXCHANGE UP TO $15,000,000 OF ITS
13% SERIES D SENIOR NOTES DUE 2003
FOR ANY AND ALL OF ITS OUTSTANDING
13% SERIES C SENIOR NOTES DUE 2003
------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JANUARY 22,
1997, UNLESS EXTENDED.
------------------------
Heartland Wireless Communications, Inc. (the "Company") hereby offers, upon
the terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange $1,000 principal amount of 13% Series D Senior Notes due
2003 (the "New Notes") of the Company for each $1,000 principal amount of the
issued and outstanding 13% Series C Senior Notes due 2003 (the "Old Notes" and
the Old Notes and the New Notes, collectively, the "Notes") of the Company from
the Holders (as defined herein) thereof. As of the date of this Prospectus,
there is $15,000,000 aggregate principal amount of the Old Notes outstanding.
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
of 1933, as amended (the "Securities Act"), and therefore will not bear legends
restricting their transfer and will not contain certain provisions providing for
an increase in the interest rate on the Old Notes under certain circumstances
relating to the Registration Rights Agreement (as defined herein), which
provisions will terminate as to all of the Notes upon the consummation of the
Exchange Offer.
Interest on the New Notes will accrue from October 15, 1996 and will be
payable semi-annually on April 15 and October 15 of each year, commencing April
15, 1997. No interest will be payable on the Old Notes accepted for exchange.
The New Notes will be senior obligations of the Company ranking pari passu
in right of payment to all existing and future indebtedness of the Company,
other than indebtedness that is expressly subordinated to the New Notes. The
Company has no senior indebtedness, other than $100,000,000 principal amount of
13% Series B Senior Notes due 2003 (the "Series B Notes"), $125,000,000
principal amount of 14% Senior Notes due 2004 (the "14% Notes"), the Notes and
$15.8 million payable to the Federal Communications Commission for the Company's
purchase of licenses for certain "Basic Trading Areas" ("BTAs") secured by a
lien on such licenses (the "BTA Obligation"). However, subject to certain
limitations set forth in the Indenture (as defined herein), the Company and its
subsidiaries may incur additional indebtedness which is secured by assets of the
Company and its subsidiaries. In addition, the Company is a holding company that
conducts substantially all of its business through its subsidiaries. The Old
Notes are, and the New Notes will be, therefore, effectively subordinated to all
liabilities of the Company's subsidiaries, including trade payables. As of
September 30, 1996, the outstanding liabilities of the Company's consolidated
subsidiaries, including all liabilities of consolidated subsidiaries that are
not wholly-owned by the Company, were approximately $12.1 million. The Indenture
permits the Company's subsidiaries to incur additional indebtedness.
The Old Notes were not registered under the Securities Act in reliance upon
an exemption from the registration requirements thereof. In general, the Old
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act. The New Notes are being offered hereby in order to satisfy
certain obligations of the Company contained in the Registration Rights
Agreement. Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by any holder thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 promulgated under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business, such holder has no arrangement
with any person to participate in the distribution of such New Notes and neither
such holder nor any such other person is engaging in or intends to engage in a
distribution of such New Notes. Notwithstanding the foregoing, each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge 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.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by such broker-dealer in connection with any resale of New Notes received
in exchange for such 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). The
Company has agreed that, for a period of 120 days after the date of this
Prospectus, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale.
The Old Notes are designated for trading in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") market. There is no
established trading market for the New Notes. 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 or liquidity of any market for the New Notes.
The Company will pay all of the expenses incident to the Exchange Offer.
Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn as provided
herein at any time prior to the Expiration Date (as defined herein). The
Exchange Offer is subject to certain customary conditions.
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIORS TO TENDERING OLD NOTES IN THE
EXCHANGE OFFER.
---------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is December 23, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the New
Notes being offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted pursuant to the rules and regulations promulgated by the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With respect
to each such contract, agreement or other document filed or incorporated by
reference as an exhibit to the Registration Statement, reference is made to such
exhibit for a more complete description of the matter involved, and each such
statement is qualified in its entirety by such reference.
The Registration Statement may be inspected by anyone without charge at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material may also be obtained at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees. In
addition, the Company is required to file electronic versions of such material
with the Commission through the Commission's Electronic Data Gathering, Analysis
and Retrieval (EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov. that contains information regarding registrants that file
electronically with the Commission.
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and other
information with the Commission. Such material filed by the Company with the
Commission may be inspected, and copies thereof obtained, at the places, and in
the manner, set forth above.
In the event that the Company ceases to be subject to the informational
reporting requirements of the Exchange Act, the Company has agreed that, so long
as the Notes remain outstanding, it will file with the Commission and distribute
to holders of the Notes copies of the financial information that would have been
contained in annual reports and quarterly reports, including management's
discussion and analysis of financial condition and results of operations, that
the Company would have been required to file with the Commission pursuant to the
Exchange Act. Such financial information shall include annual reports containing
consolidated financial statements and notes thereto, together with an opinion
thereon expressed by an independent public accounting firm, as well as quarterly
reports containing unaudited condensed consolidated financial statements for the
first three quarters of each fiscal year. The Company will also make such
reports available to prospective purchasers of the Notes, securities analysts
and broker-dealers upon their request.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company which have been filed with the
Commission are hereby incorporated by reference in this Prospectus: (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1995; (ii)
the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30, 1996; and (iii) the Company's Current Reports on Form
8-K dated February 23, 1996, as amended by Form 8-K/A dated February 23, 1996
(filed with the Commission on April 8, 1996) and Form 8-KA2 dated February 23,
1996 (filed with the Commission on April 29, 1996), July 1, 1996 and December
20, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to September 24, 1996 and prior to the
termination of the Exchange Offer shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective dates
of filing
2
<PAGE>
of such documents. Any statement contained herein or in a document all or part
of which is 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.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. The Company will provide without charge to any
person to whom this Prospectus is delivered, upon the written or oral request of
such person, a copy of any and all of the foregoing documents incorporated
herein by reference (excluding exhibits unless specifically incorporated
therein). Such documents are available upon request from J. Curtis Henderson,
Vice President and General Counsel, Heartland Wireless Communications, Inc., 200
Chisholm Place, Suite 200, Plano, Texas 75075, (972) 423-9494. In order to
ensure timely delivery of such documents, any request should be made by January
15, 1997 (five business days prior to the Expiration Date).
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements (including the notes thereto)
appearing elsewhere in this Prospectus or in the documents incorporated by
reference herein. Unless the context otherwise requires, (i) all references in
this Prospectus to the Company refer collectively to Heartland Wireless
Communications, Inc., its predecessors and its majority-owned subsidiaries and
(ii) all information in this Prospectus assumes consummation of the Pending
Acquisitions and Pending Divestiture (as defined herein). See "Recent Events."
THE COMPANY
Heartland Wireless Communications, Inc. develops, owns and operates wireless
cable television systems, primarily in small to mid-size markets located in the
central United States. At September 30, 1996, the Company had wireless cable
channel rights in 95 markets representing approximately 10.3 million households,
approximately 9.2 million of which the Company believes can be served by
line-of-sight ("LOS") transmissions (which generally require a direct,
unobstructed transmission path from the central transmitting antenna to the
antenna located on the subscriber's premises).
The Company targets small to mid-size markets with significant numbers of
LOS households that are unpassed by traditional hard-wire cable. Many of these
households, particularly in rural areas, have limited access to local off-air
VHF/UHF channels (such as ABC, NBC, CBS and Fox), and typically do not have
access to pay television service except via satellite receivers. As a result,
the Company believes that its wireless cable television service is an attractive
alternative to existing choices for such households. The Company estimates that
within its 95 wireless cable markets, approximately 3.7 million LOS households,
or 36% of the Company's total LOS households, are unpassed by traditional
hard-wire cable systems, as compared to the 20 largest hard-wire cable markets
in the United States, in which only approximately 2% of all households are
unpassed by traditional hard-wire cable. The Company believes that it will
ultimately achieve a penetration rate of the unpassed LOS households in its
markets that is comparable to the average penetration rate achieved by
traditional hard-wire cable operators nationally, which Paul Kagan Associates,
Inc. estimates to be approximately 64% as of December 31, 1995.
At September 30, 1996, the Company's 95 markets included 51 markets in which
the Company has systems in operation (the "Existing Systems") and 44 future
launch markets where the Company has aggregated sufficient wireless cable
channel rights to commence construction of a system or the Company has leases
with or options from applicants for channel licenses that the Company expects to
be granted by the Federal Communications Commission (the "FCC"). At September
30, 1996, the 51 Existing Systems were providing wireless cable service to
approximately 208,975 subscribers.
The executive offices of the Company are located at 200 Chisholm Place,
Suite 200, Plano, Texas 75075, and the telephone number of the executive offices
is (972) 423-9494. The Company's operational headquarters are located in Durant,
Oklahoma.
WIRELESS CABLE INDUSTRY
Initially, most cable systems were hard-wire systems, using coaxial cable
and amplifiers to transmit television signals. In 1983, the FCC allocated a
portion of the radio spectrum from 2500 to 2700 megahertz ("Mhz"), which had
previously been allocated entirely for educational use, to commercial wireless
cable operation. Simultaneously, the FCC also modified its rules on the usage of
the remaining portion of such spectrum allocated for educational use.
Nevertheless, regulatory and other obstacles impeded the growth of the wireless
cable industry through the remainder of the 1980s. The FCC maintained burdensome
restrictions on the commercial use of educational channel capacity. In addition,
before the Cable Act passed by Congress on October 5, 1992 (the "Cable Act")
became effective, many program suppliers were unwilling to provide programming
to wireless cable operators on terms comparable to those offered to
4
<PAGE>
traditional hard-wire cable operators, if at all. During the 1990s, several
factors have contributed to the growth of the wireless cable industry, including
(i) Congressional scrutiny of the rates and practices of the traditional
hard-wire cable industry, (ii) improved technology, particularly signal
encryption, (iii) regulatory reforms by the FCC to facilitate the growth and
competitive impact of the wireless cable industry, including permitting channel
aggregation, (iv) increased availability of programming for wireless cable
systems, (v) consumer demand for alternatives to traditional hard-wire cable
service and (vi) increased availability of capital to wireless cable operators
in the public and private markets.
In each of the Company's markets, 32 channels of spectrum are available for
wireless cable transmission. Of these, 12 wireless cable channels can be owned
by for-profit entities ("MDS" channels) and the other 20 channels generally must
be owned by qualified non-profit educational organizations ("ITFS" channels).
ITFS channels must be used at least 20 hours per week for educational
programming, while the remaining "excess air time" may be leased to wireless
cable operators for commercial use. Certain commercially available programs,
such as The Discovery Channel and A&E, qualify as educational and thereby
facilitate full-time usage of an ITFS channel by commercial wireless cable
operators.
Wireless cable programming is transmitted through the air via microwave
frequencies from a transmission facility ("head-end") to a small receiving
antenna at each subscriber's location. To a subscriber, wireless cable provides
a high quality picture and a reliable signal. The Company can offer its
subscribers HBO, Showtime, Disney, ESPN, CNN, USA, WGN, WTBS, Discovery, the
Nashville Network, A&E and other programming services and pay-per-view, as well
as local off-air VHF/UHF channels.
BUSINESS STRATEGY
The Company's primary business objective is to develop, own and operate
wireless cable television systems in markets in which the Company believes it
can achieve positive System EBITDA (as defined herein) rapidly after system
launch and then expand such system while ultimately increasing such system's
cash flow.
RURAL MARKET FOCUS. The Company aggregates wireless cable channel rights
and locates operations in geographic clusters of small to mid-size markets that
have a substantial number of households not currently passed by traditional
hard-wire cable. The Company believes that this size market typically has a
stable economic base, less competition than alternative forms of entertainment
and terrain and other conditions conducive to wireless cable transmissions.
MANAGED SUBSCRIBER PENETRATION. The Company attempts to manage system
launch and subscriber growth in order to contain system launch costs and to
achieve positive cash flow rapidly. Typically, the Company's operating systems
achieve positive System EBITDA upon obtaining an average of approximately 1,500
single family household subscribers. Within a system, the Company initially
directs its marketing at unpassed households, which typically have limited
access to local off-air VHF/UHF broadcast channels. Generally, once a system
achieves positive System EBITDA, the Company may expand the channel offering and
add subscribers. For the month ended September 30, 1996, 39 of the Company's
operating systems had achieved positive System EBITDA. The remaining operating
systems that had not achieved positive System EBITDA for the month ended
September 30, 1996 had not reached an average of 1,500 single family household
subscribers. "System EBITDA" means net income (loss) plus interest expense,
income tax expense, depreciation and amortization expense and all other non-cash
charges, less any non-cash items which have the effect of increasing net income
or decreasing net loss, for a system and includes all selling, general and
administrative expenses attributable to employees employed in the system. System
EBITDA is not a financial measure determined under generally accepted accounting
principles and should not be considered as an alternative to net income as a
measure of operating results or to cash flows as a measure of funds available
for discretionary or other liquidity purposes.
5
<PAGE>
LOW COST STRUCTURE. Wireless cable systems typically cost significantly
less to build and operate than traditional hard-wire cable systems. While both
traditional hard-wire cable operators and wireless cable operators must
construct a head-end, traditional hard-wire cable operators must also install an
extensive network of coaxial cable and amplifiers in order to transmit signals
from the head-end to subscribers. Once the head-end is constructed, the Company
estimates that each additional single family household subscriber currently
requires an incremental capital expenditure by the Company of approximately $410
to $465, consisting of, on average, $225 to $280 of material, $145 of
installation labor and overhead charges and $40 of direct commission, all of
which capital expenditures are variable costs. Typically, a multiple dwelling
unit subscriber requires an incremental capital expenditure by the Company lower
than that of a single family household subscriber. Also, without an extensive
cable network, wireless cable operators typically incur lower system maintenance
costs and depreciation expense. Finally, by locating its operations in
geographic clusters, the Company can further contain costs by taking advantage
of economies of scale in management, sales and customer service.
LOW CHURN RATE. The Company currently experiences a low rate of subscriber
turnover of on average approximately 2% per month, as compared to the "churn"
rate of approximately 3% per month typically experienced by traditional
hard-wire cable operators. The Company believes that its churn rate is lower
than the industry standard because a majority of its markets are characterized
by (i) limited or no access to affordable pay television alternatives, (ii) less
competition from alternative forms of entertainment and (iii) a stable
population base. All of these factors contribute to a low level of subscriber
disconnects which helps the Company quickly achieve positive System EBITDA as it
reduces installation and marketing expenses.
QUALITY, VALUE AND CUSTOMER SERVICE. The Company believes that the key
factors that determine the attractiveness of its service offerings are the
following: (i) programming, (ii) price, (iii) picture quality and reliability
and (iv) customer service.
Programming. In the Existing Systems, the Company believes it has
assembled sufficient channel rights and program agreements to provide
programming competitive with that offered by traditional hard-wire cable
operators and direct broadcast satellite ("DBS") providers. The Company
offers its subscribers a programming package of off-air VHF/UHF channels,
satellite networks and premium programming. In the Existing Systems, the
Company focuses on LOS households that are unpassed by traditional hard-wire
cable, many of which have limited access to local off-air VHF/UHF channels.
These households do not have access to traditional hard-wire cable service
and the Company believes subscribers are likely to focus on the current
inability of DBS operators to offer local off-air channels.
Price. The Company can offer a price to its subscribers for basic
pay-television service that is typically less than traditional hard-wire
cable operators and DBS providers because of lower capital and operating
costs. The Company has greater latitude in pricing its service to households
that are unpassed by traditional hard-wire cable.
Picture Quality and Reliability. Wireless cable subscribers enjoy
substantially outage-free, highly reliable picture quality because there is
no coaxial cable, amplifiers or processing and filtering equipment between
the head-end and the subscriber's household, as in the case of traditional
hard-wire cable. Within the signal range of the Existing Systems, the
picture quality of the Company's service is at least as good as that
typically received by traditional hard-wire cable subscribers because,
absent any line-of-sight obstruction, there is less opportunity for signal
degradation between the Company's head-end and the subscriber.
Customer Service. The Company has established the goal of maintaining
high levels of customer satisfaction. In furtherance of that goal, the
Company emphasizes responsiveness and convenient installation scheduling.
The Company has established customer retention and referral programs in an
effort to obtain and retain new subscribers.
6
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COMPANY HISTORY
The Company's founders, David E. Webb, the President and Chief Executive
Officer, and L. Allen Wheeler, Vice Chairman of the Board of Directors, began
acquiring licenses, leases and options to wireless cable channels in 1989, both
individually and through various controlled entities. In September 1990, Messrs.
Webb and Wheeler formed Wireless Communications, Inc., an Oklahoma corporation
("WCI"), and contributed to it certain of their direct and indirect wireless
cable assets and liabilities. In October 1993, Hunt Capital, a principal
stockholder of the Company and affiliate of J.R. Holland, Jr., the Chairman of
the Board of the Company, acquired a $988,000 10% promissory note due September
14, 1994 payable by WCI (the "Hunt Note") from an affiliate of Hunt Capital,
which had entered into a loan agreement with WCI in September 1993.
The Company was incorporated in Delaware in October 1993 to succeed to the
wireless cable businesses previously conducted by Messrs. Webb and Wheeler,
directly and indirectly through various controlled entities, including WCI.
Messrs. Webb and Wheeler contributed all capital stock of entities engaged in
the wireless cable businesses owned by them to the Company for a 50% equity
interest. Hunt Capital contributed the Hunt Note, including accrued interest,
and $2.0 million to the Company for the remaining 50% equity interest. In
addition, Messrs. Webb and Wheeler leased all other wireless cable channel
license rights controlled, directly and indirectly, by them to the Company and
granted the Company an option to purchase such license rights at a nominal
price.
In April and June 1994, the Company sold 2.4 million shares of common stock,
$.001 par value per share (the "Common Stock"), in its initial public offering
at a per share price of $10.50 (the "Initial Public Offering"). The aggregate
net proceeds to the Company from the Initial Public Offering were approximately
$22.3 million. In November 1994, the Company consummated a private placement
(the "Sale of Convertible Notes") of $40.2 million in gross proceeds of 9%
Convertible Subordinated Discount Notes due 2004 (the "Convertible Notes") to
Jupiter Partners L.P. ("Jupiter") and an accredited individual. On April 19,
1995, the Company consummated a private placement to the Initial Purchaser and
Lazard Freres & Co. of 100,000 Units (the "Units") consisting of $100,000,000
principal amount of 13% Senior Notes due 2003 (the "Series A Notes") and 600,000
warrants (the "Warrants") to purchase shares of Common Stock. On March 13, 1996,
the Company consummated an exchange offer pursuant to which $100,000,000
principal amount of Series B Notes were issued in exchange for an equal
principal amount of Series A Notes, which were cancelled. See "Description of
Certain Indebtedness."
7
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THE EXCHANGE OFFER
<TABLE>
<S> <C>
Registration Rights Agreement.......... The Old Notes were sold by the Company on March 28,
1996 to BT Securities Corporation (the "Initial
Purchaser"), who placed the Old Notes with
institutional investors. In connection therewith,
the Company and the Initial Purchaser executed and
delivered for the benefit of the holders of the Old
Notes a registration rights agreement (the
"Registration Rights Agreement") providing, among
other things, for the Exchange Offer.
The Exchange Offer..................... New Notes are being offered in exchange for a like
principal amount of Old Notes. As of the date
hereof, $15,000,000 aggregate principal amount of
Old Notes are outstanding. The Company will issue
the New Notes to Holders promptly following the
Expiration Date. See "Risk Factors--Consequences of
Failure to Exchange."
Expiration Date........................ 5:00 p.m., New York City time, on January 22, 1997,
unless the Exchange Offer is extended as provided
herein, in which case the term "Expiration Date"
means the latest date and time to which the
Exchange Offer is extended.
Interest............................... Each New Note will bear interest from October 15,
1996, the date of the last interest payment on the
Old Notes. No interest will be paid on the Old
Notes accepted for exchange.
Conditions to the Exchange Offer....... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Company reserves the right to amend, terminate or
extend the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such
condition. 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 facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, or an
Agent's Message (as defined herein) together with
the Old Notes and any other required documentation
to the exchange agent (the "Exchange Agent") at the
address set forth herein. By executing the Letter
of Transmittal or delivering an Agent's Message,
each Holder will represent to the Company, among
other things, that (i) the New Notes acquired
pursuant to the Exchange Offer by the Holder and
any beneficial owners of Old Notes are being
obtained in the ordinary course of business of the
person receiving such New Notes, (ii) neither the
Holder nor such beneficial owner has an arrangement
with any person to participate in the
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distribution of such New Notes, (iii) neither the
Holder nor such beneficial owner nor any such other
person is engaging in or intends to engage in a
distribution of such New Notes and (iv) neither the
Holder nor such beneficial owner is an "affiliate,"
as defined under Rule 405 promulgated under 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 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 "The Exchange Offer--Procedures
for Tendering" and "Plan of Distribution."
Special Procedures for Beneficial
Owners............................... 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 such registered Holder
promptly and instruct such registered Holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
beneficial owner's own behalf, such beneficial
owner must, prior to completing and executing the
Letter of Transmittal or delivering an Agent's
Message and delivering his Old Notes, either make
appropriate arrangements to register ownership of
the Old Notes in such beneficial owner's name or
obtain a properly completed bond power from the
registered Holder. The transfer of registered
ownership may take considerable time. See "The
Exchange Offer--Procedures for Tendering."
Guaranteed Delivery Procedures......... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or an Agent's Message or
any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Old Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights...................... Tenders may be withdrawn as provided herein at any
time prior to 5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders."
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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 of the Exchange Offer."
Exchange Agent......................... Bankers Trust Company is serving as Exchange Agent
in connection with the Exchange Offer. See "The
Exchange Offer --Exchange Agent."
Use of Proceeds........................ There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
Federal Income Tax Consequences........ The exchange of Old Notes for New Notes will not be
a taxable exchange for Federal income tax purposes.
See "Certain Federal Income Tax Considerations."
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 issuance 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, Old Notes may
not be offered or sold unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws.
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SUMMARY DESCRIPTION OF THE NEW NOTES
The Exchange Offer applies to $15,000,000 aggregate principal amount of Old
Notes. 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 and will
not contain certain provisions providing for an increase in the interest rate on
the Old Notes under certain circumstances relating to the Registration Rights
Agreement, which provisions will terminate as to all of the Notes upon the
consummation of the Exchange Offer. The New Notes will evidence the same debt as
the Old Notes and, except as set forth in the immediately preceding sentence,
will be entitled to the benefits of the Indenture, under which both the Old
Notes were, and the New Notes will be, issued. See "Description of Notes."
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The New Notes.......................... $15,000,000 aggregate principal amount of 13%
Series D Senior Notes due 2003.
Maturity Date.......................... April 15, 2003.
Interest Rate and Payment Dates........ The New Notes will bear interest at the rate of 13%
per annum from October 15, 1996. Interest will be
payable semi-annually on April 15 and October 15 of
each year, commencing on April 15, 1997.
Escrow and Disbursement Agreement...... The Company placed approximately $1.9 million of
the net proceeds realized from the sale of the Old
Notes to the Initial Purchaser, representing funds
sufficient to pay interest on the Notes from April
15, 1996 through April 14, 1997, into an Escrow
Account (as defined herein) to be held by the
Escrow Agent (as defined herein) for the benefit of
the holders of the Notes. Until disbursed in
accordance with the Escrow and Disbursement
Agreement (as defined herein), the Escrow Account
is designed to secure a portion of the Company's
obligations under the Notes. Funds will be
disbursed from the Escrow Account only to pay
interest on the Notes and, upon certain repurchases
or redemptions of the Notes, to pay principal of
and premium, if any, thereon. Pending such
disbursement, all funds contained in the Escrow
Account will be invested in Marketable Securities
(as defined herein). See "Description of
Notes--Disbursement of Funds--Escrow Account" and
"Description of Notes-- Security."
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 April 15, 1999 at the redemption prices
set forth herein plus accrued and unpaid interest
thereon, if any, to the redemption date. See
"Description of Notes--Optional Redemption."
Repurchase Upon Sale of Capital Stock
to Strategic Equity Investor......... In the event of a sale by the Company prior to
April 15, 1998 of at least $25.0 million of its
Capital Stock (as defined herein) (other than
Disqualified Stock (as defined
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herein)) to a Strategic Equity Investor (as defined
herein) in a single transaction, up to 25% of the
Notes may be redeemed at the election of the
Company upon not less than 30 nor more than 45
days' prior notice given within 30 days after such
sale from the net cash proceeds thereof at the
redemption price set forth herein plus accrued and
unpaid interest thereon, if any, to the date of
redemption, provided that at least 75% in aggregate
principal amount of the Notes originally issued
remains outstanding immediately after the
occurrence of such redemption. See "Description of
Notes--Optional Redemption."
Change of Control...................... In the event of a Change of Control (as defined
herein), the Company will be required, subject to
certain conditions, to make an offer to repurchase
all of the Notes at 101% of the principal amount
thereof plus accrued and unpaid interest thereon,
if any, to the date of repurchase. There can be no
assurance that the Company will have the financial
resources necessary to repurchase the Notes upon a
Change of Control. See "Description of Notes--Offer
to Purchase Upon Change of Control."
Ranking................................ The New Notes will be senior obligations of the
Company ranking pari passu in right of payment to
all existing and future indebtedness of the
Company, other than indebtedness that is expressly
subordinated to the New Notes. The Company has no
senior indebtedness, other than the Series B Notes,
the Notes, the 14% Notes and the BTA Obligation.
The Notes are senior in right of payment to the
Convertible Notes, which are expressly subordinated
to the Notes. However, subject to certain
limitations set forth in the Indenture, the Company
and its subsidiaries may incur additional
indebtedness which is secured by assets of the
Company and its subsidiaries. In addition, the
Company is a holding company that conducts
substantially all of its business through its
subsidiaries and, therefore, the Notes are
effectively subordinated to all liabilities of the
Company's subsidiaries, including trade payables.
As of September 30, 1996, the Company's
consolidated subsidiaries had approximately $12.1
million of liabilities. The Indenture permits the
Company's subsidiaries to incur additional
indebtedness. See "Description of Notes-- General"
and "Description of Notes--Certain
Covenants--Limitation on Indebtedness."
Certain Covenants...................... The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its subsidiaries to make restricted
payments, to incur indebtedness, to create liens,
to issue preferred or other capital stock of
subsidiaries, to sell assets, to permit
restrictions on dividends and other payments by
subsidiaries to the Company, to consolidate, merge
or sell
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all or substantially all of its assets, to engage
in transactions with affiliates or to engage in
certain businesses. These covenants are subject to
important exceptions and qualifications. See
"Description of Notes--Certain Covenants."
Bond Premium........................... The Notes were issued with bond premium for Federal
income tax purposes. See "Certain Federal Income
Tax Considerations."
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For additional information regarding the Notes, see "Description of Notes."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by Holders prior to tendering Old Notes in the Exchange Offer.
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RISK FACTORS
HOLDERS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, AS WELL AS THE
OTHER INFORMATION INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
PRIOR TO MAKING A DECISION TO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange the 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 issuance 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, 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 currently anticipate that
it will register the Old Notes under the Securities Act. Based on
interpretations by the staff of the Commission set forth in no-action letters
issued to third parties, the Company believes that the New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold or otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
promulgated under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business, such holder
has no arrangement with any person to participate in the distribution of such
New Notes and neither such holder nor any such other person is engaging in or
intends to engage in a distribution of such New Notes. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge 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. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resale of New Notes received 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). The Company has agreed that, for a period of 120 days from
the date of this Prospectus, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution." However, the ability of any Holder to resell the New Notes is
subject to applicable state securities laws as described in "Risk Factors--Blue
Sky Restrictions on Resale of New Notes."
NECESSITY TO COMPLY WITH EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer, and to avoid the restrictions on
transfer of the Old Notes, Holders of Old Notes must transmit a properly
completed Letter of Transmittal or an Agent's Message, including all other
documents required by such Letter of Transmittal, to the Exchange Agent at one
of the addresses set forth below under "The Exchange Offer --Exchange Agent" on
or 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 or (ii) a timely confirmation of a book-entry transfer of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company pursuant to the procedure for book-entry transfer
described herein, must be received by the Exchange Agent prior to the Expiration
Date or (iii) the Holder must comply with the guaranteed delivery procedures
described herein. See "The Exchange Offer."
BLUE SKY RESTRICTIONS ON RESALE OF NEW NOTES
In order to comply with the securities laws of certain jurisdictions, the
New Notes may not be offered or resold by any Holder unless they have been
registered or qualified for sale in such jurisdictions or an
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exemption from registration or qualification is available and the requirements
of such exemption have been satisfied. The Company does not currently intend to
register or qualify the resale of the New Notes in any such jurisdictions.
However, an exemption is generally available for sales to registered
broker-dealers and certain institutional buyers. Other exemptions under
applicable state securities laws may also be available.
SUBSTANTIAL INDEBTEDNESS OF THE COMPANY; INSUFFICIENCY OF EARNINGS TO COVER
FIXED CHARGES
The Company has a substantial amount of indebtedness. As of September 30,
1996, the Company had approximately $190.2 million of Indebtedness (as defined
herein) and the Company's consolidated subsidiaries had approximately $12.1
million of total liabilities. On December 20, 1996, the Company issued the 14%
Notes. The Indenture limits, but does not prohibit, the incurrence of additional
indebtedness, secured or unsecured, by the Company and its subsidiaries. As a
result, although funds sufficient to pay interest on the Series B Notes through
April 14, 1997 and funds sufficient to pay interest on the 14% Notes through
April 15, 1998 have been placed in escrow and funds sufficient to pay interest
on the Notes from April 15, 1996 through April 14, 1997, have been placed into
the Escrow Account, thereafter a substantial portion of the Company's cash flow
will be devoted to debt service. In addition, although the Convertible Notes
accrete to face value and no cash interest is payable thereunder prior to the
earlier of November 30, 1999 and the occurrence of certain events of default
(the "Applicable Date"), a substantial portion of the Company's earnings will be
reduced by non-cash debt service. The debt service requirements of any
additional indebtedness could make it more difficult for the Company to make
principal and interest payments on the Notes. For the years ended December 31,
1993, 1994 and 1995 and for the nine months ended September 30, 1995 and 1996,
earnings were insufficient to cover fixed charges by $0.4 million, $4.6 million,
$20.2 million, $12.5 million and $35.9 million, respectively. The ability of the
Company to make payments of principal and interest will be largely dependent
upon its future financial performance. Many factors, some of which will be
beyond the Company's control (such as prevailing economic conditions), will
affect its financial performance. 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.
The Company's high level of indebtedness has several important consequences,
including, but not limited to: (i) significant interest expense and principal
repayment obligations resulting in substantial annual fixed charges; (ii)
significant limitations on the Company's ability to obtain financing, make
capital expenditures and acquisitions and take advantage of other business
opportunities that may arise; and (iii) increased vulnerability to adverse
general economic and industry conditions. There can be no assurance that the
Company will be profitable in the future. See "Risk Factors--Holding Company
Structure; Dependence of Company on Subsidiaries for Repayment of Notes," "Risk
Factors--Ranking of Notes" and "Description of Notes."
NET LOSSES SINCE INCEPTION
As of September 30, 1996, the Company had recorded net losses of
approximately $43.6 million since inception in April 1992, due primarily to
start-up costs, interest expense and charges for depreciation and amortization
of capital expenditures to develop its wireless cable systems. Until such time
as the Company substantially increases its subscriber base, resulting in higher
subscription fee revenues, it will continue to experience losses. Because of the
costs associated with launching a wireless cable television system and expanding
its subscriber base, continued growth by the Company is anticipated to reduce
net income, if
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any, or increase net losses. As a result, the Company expects to continue to
experience net losses for an indefinite period while it develops and expands its
wireless cable systems even if mature individual systems of the Company are
profitable.
HOLDING COMPANY STRUCTURE; DEPENDENCE OF COMPANY ON SUBSIDIARIES FOR REPAYMENT
OF NEW NOTES
The New Notes will be obligations of the Company exclusively. Substantially
all of the operations of the Company are conducted through direct and indirect
subsidiaries. The Company's cash flow and, consequently, its ability to service
debt, including the New Notes, is dependent upon the cash flow of its
subsidiaries and the payment of funds by those subsidiaries to the Company in
the form of loans, dividends or otherwise. The subsidiaries are separate and
distinct legal entities and have no obligation, contingent or otherwise, to pay
any amounts due pursuant to the New Notes or to make any funds available
therefor, whether in the form of loans, dividends or otherwise. In addition,
certain of the Company's subsidiaries may become parties to credit agreements,
which may contain limitations on the ability of such subsidiaries to pay
dividends or to make loans or advances to the Company. The Indenture limits the
ability of the Company to create or permit restrictions on dividends and other
payments by its subsidiaries. See "Description of Notes--Certain
Covenants--Dividend and Other Payment Restrictions Affecting Subsidiaries."
Because the Company is a holding company that conducts its business through
its subsidiaries, all existing and future liabilities of the Company's
subsidiaries, including trade payables, will be effectively senior to the New
Notes. As of September 30, 1996, the Company's consolidated subsidiaries,
including those that are not wholly-owned by the Company, had aggregate
liabilities of approximately $12.1 million. The Indenture limits, but does not
prohibit, the incurrence of additional indebtedness by the Company and its
subsidiaries. See "Description of Notes--Certain Covenants--Limitation on
Indebtedness."
RANKING OF NOTES
The New Notes will not be secured by any of the assets of the Company except
to the limited extent provided for by the Escrow and Disbursement Agreement and
will become general unsecured obligations of the Company upon disbursement in
full of the funds in the Escrow Account. The Company's obligation to pay future
installments of its bid amount in the FCC's recently concluded auction ("BTA
Auction") of licenses for certain BTAs is secured by a lien on the licenses
purchased in the BTA Auction. Any holders of secured indebtedness of the Company
would be entitled to payment of their indebtedness out of the proceeds of their
collateral prior to the holders of any general unsecured obligations of the
Company, including the New Notes.
The New Notes will be senior obligations of the Company ranking pari passu
in right of payment as to all existing and future indebtedness of the Company,
other than indebtedness that is expressly subordinated to the New Notes. The
Company has no senior indebtedness, other than the Series B Notes, the Notes,
the 14% Notes and the BTA Obligation. The New Notes will be senior in right of
payment to the Convertible Notes, which are expressly subordinated to the New
Notes. However, the Company and its subsidiaries may incur additional
indebtedness which is secured by assets of the Company and its subsidiaries. In
the event of any distribution or payment of the assets of the Company in any
foreclosure, dissolution, winding-up, liquidation or reorganization, holders of
secured indebtedness will have a secured prior claim to the assets of the
Company that constitute their collateral. In the event of bankruptcy,
liquidation or reorganization of the Company, except to the extent assets are
available to holders of the New Notes under the Escrow and Disbursement
Agreement, holders of the New Notes will participate ratably with all holders of
indebtedness of the Company which is unsecured and all other general creditors
of the Company, based upon the respective amounts owed to each holder or
creditor, in the remaining assets of the Company, and there is no assurance that
there will be sufficient assets to pay amounts due on the New Notes.
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NEED FOR ADDITIONAL FINANCING FOR GROWTH
The growth of the Company's business requires substantial investment on a
continuing basis to finance capital expenditures and expenses related to
subscriber growth and system development. The Company believes that its cash and
cash equivalent assets and cash generated from operations and available bank
financing will be sufficient to fund the Company's operations and expansion at
least through the end of 1997. Additional funds will be necessary to complete
the launch, build-out and expansion of all of the Company's wireless cable
systems and to bring such systems to a mature state. These activities may be
financed in whole or in part directly by the Company and/or by its existing or
future subsidiaries, through debt or equity financings, joint ventures or other
arrangements. As in the past, the Company may also finance its system
construction, development, launch and expansion activities or the acquisition of
additional markets through the sale and/or exchange of its existing portfolio of
wireless cable channel rights. Although the Company believes that cash provided
by operating activities, the sale of wireless cable channel rights that are not
a part of the Company's current strategic plan and proceeds from additional
public or private debt or equity offerings will be sufficient for the Company to
complete its planned system construction, development, launch and expansion
activities in 1997 and beyond, there can be no assurance that the Company will
achieve positive cash flow from operations, that the Company will consummate the
sale of any wireless cable channel rights or that sufficient debt or equity
financing will be available on satisfactory terms and conditions, if at all. In
addition, there is also no assurance that, subject to certain limitations set
forth in the Indenture, the Company will not pursue, from time to time, other
opportunities to acquire additional wireless cable channel rights and businesses
that may utilize the capital currently expected to be available for its current
markets. The amount and timing of the Company's future capital requirements will
depend upon a number of factors, including programming costs, equipment costs,
marketing expenses, staffing levels, subscriber growth and competitive
conditions, many of which are not within the Company's control. Failure to
obtain any required additional financing could materially adversely affect the
growth, cash flow or earnings of the Company.
MANAGEMENT OF GROWTH
The Company has experienced rapid growth in the number of its employees and
the scope of its operating and financial systems. This growth has resulted in an
increased level of responsibility for both existing and new management personnel
and an additional strain on the Company's operating and financial systems. In
particular, certain subscribers in recently acquired systems and in systems
recently converted to new hardware were not billed during portions of the third
quarter due to a billing software problem. The Company has corrected this
problem and is continuing to develop methods to improve its billing systems. To
manage its growth effectively, the Company will be required to implement and
improve its operating and financial systems and controls and to expand, train
and manage its employee base. There can be no assurance that the management,
systems and controls currently in place or any steps taken to improve such
management, systems and controls will be adequate in the future.
COMPETITION
The subscription television industry is highly competitive. Wireless cable
television systems face or may face competition from several sources, such as
traditional hard-wire cable companies, Satellite Master Antenna Television
systems, Direct Broadcast Satellites and other alternative methods of
distributing and receiving television transmissions. In areas where several
local off-air VHF/UHF broadcast signals can be received without the benefit of
subscription television, cable television systems also have experienced
competition from the availability of broadcast signals generally and have found
market penetration to be more difficult. Legislative, regulatory and
technological developments may result in additional and significant competition,
including competition from local telephone companies, from a proposed new
wireless service known as local multi-point distribution and from emerging
trends and technologies. As the telecommunications industry continues to evolve,
the Company may face additional competition from new
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providers of entertainment and data services. In particular, there are a rapidly
growing number of information and data service providers serving consumers via
on-line services and communications networks, such as the Internet and World
Wide Web. Although the Company is unaware of any such provider delivering
programming like that available on wireless cable television, there can be no
assurance that continuing advances in technology will not make such delivery
possible. Even if such direct competition does not exist in the future, however,
the Company's services will compete, indirectly, with entertainment services
generally, including those provided by operators using evolving technology. Many
actual and potential competitors have greater financial, marketing and other
resources than the Company. No assurance can be given that the Company will
compete successfully.
GOVERNMENT REGULATION
The right to transmit on wireless cable channels is regulated by the FCC and
the copyright for the retransmission of local off-air VHF/UHF broadcasts is
regulated by the United States Copyright Office (the "U.S. Copyright Office")
pursuant to the Copyright Act of 1976, as amended (the "Copyright Act").
FEDERAL LEGISLATION. Pursuant to the Cable Act, the FCC adopted rate
regulations exclusively for traditional hard-wire cable systems. Pursuant to the
Telecommunications Act of 1996 (the "Act"), which was enacted in February 1996,
all cable rate regulation will be eliminated after three years, and for "small
systems" as defined in the Act, and under certain other circumstances, rate
regulation will be eliminated immediately. The Company cannot predict precisely
what effect these regulations or other governmental regulations may have on
traditional hard-wire cable operators as to price and service. While current FCC
regulations are intended to promote the development of a competitive pay
television industry, the rules and regulations affecting the wireless cable
industry may change, and any future changes in FCC rules, regulations, policies
and procedures could have an adverse effect on the industry as a whole and on
the Company in particular.
COPYRIGHT ACT. Secondary transmission of a broadcast signal is permissible
only if approved by the copyright holder or if subject to compulsory licensing
under the Copyright Act. The United States Congress has adopted legislation
extending the compulsory copyright licensing system to include wireless cable
systems. As a result of this action, wireless cable operators may engage in
secondary transmissions of distant programming without the copyright holder's
approval, provided that such operators file certain reports and pay certain fees
set by copyright arbitration royalty panels.
REGULATION OF RETRANSMISSION. Effective October 6, 1993, pursuant to the
Cable Act, local broadcasters (other than super-stations) may require that cable
operators obtain their consent before retransmitting local off-air VHF/UHF
broadcasts. The FCC has exempted wireless cable operators from the
retransmission consent rules if the receive-site antenna is either owned by the
subscriber or within the subscriber's control and available for purchase by the
subscriber upon the termination of service. In all other cases, wireless cable
operators must obtain consent to retransmit local broadcast signals. The Company
has obtained such consents in each of its Existing Systems where the Company is
retransmitting broadcast signals on a wireless cable channel. Such consents will
be required in the Company's other markets. There can be no assurance that the
Company will be able to obtain such consents on terms satisfactory to the
Company.
OTHER REGULATIONS. Wireless cable operators are also subject to regulation
by the Federal Aviation Administration (the "FAA") with respect to the
construction of transmission towers and to certain local zoning regulations
affecting construction of towers and other facilities. There may also be
restrictions imposed by local authorities. There can be no assurance that the
Company will not be required to incur additional costs in complying with such
regulations and restrictions. No assurance can be given that new regulations
will not be imposed or that existing regulations will not be changed. Any such
new or modified regulations could have a material adverse effect on the wireless
cable industry as a whole and on the Company in particular.
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DEPENDENCE ON CHANNEL LEASES; LOSS OF LICENSES BY LESSORS
The Company is dependent on leases with unaffiliated third parties for most
of its wireless cable channel rights. The Company has entered into leases for
substantially all of its wireless cable channel rights with channel license
holders, applicants for channel licenses and applicants that have had
previously-filed applications returned without prejudice by the FCC and which
will be refiled. The Company's channel leases typically cover four ITFS and one
to four MDS channels each. Generally, ITFS channels may only be owned by
qualified non-profit educational organizations and in general must use a minimum
of 20 hours per week per channel for educational programming. The remaining
excess ITFS channel air time, other than 20 hours per channel per week of
reserved recapture time, may be leased to wireless cable operators for
commercial use without further restriction. MDS channels may be owned by
commercial entities and allow full-time usage without programming restrictions.
Under the rules of the FCC, the term of an ITFS channel lease cannot exceed ten
years. There is no such restriction for MDS channel leases. ITFS licenses
generally are granted for a term of ten years and are subject to renewal by the
FCC. MDS licenses granted prior to mid-1996 will expire on May 1, 2001, unless
renewed. The use of such channels by the license holders is subject to
regulation by the FCC and the Company's ability to continue to enjoy the
benefits of its leases with channel license holders is dependent upon the
continuing compliance by the channel license holders with applicable regulations
including the requirement that ITFS license holders must meet certain
educational use requirements in order to lease transmission capacity to wireless
cable operators. The remaining initial terms of most of the Company's channel
leases are approximately 5 to 10 years, although certain of the Company's
channel leases have initial terms expiring during the next several years. Most
of the Company's leases grant the Company a right of first refusal to purchase
the channels after the expiration of the lease if FCC rules and regulations so
permit, provide for automatic renewal of the lease term upon FCC renewal of the
license and/or require the parties to negotiate lease renewals in good faith.
The termination of or failure to renew a channel lease or termination of the
channel license, or the denial by the FCC of an application for an extension of
time to construct an authorized station, would result in the Company being
unable to deliver television programming on such channel(s). Although the
Company does not believe that the termination of or failure to renew a single
channel lease or license would adversely affect the Company, several of such
terminations or failures in one or more markets that the Company actively serves
could have a material adverse effect on the Company. Additionally, FCC licenses
also specify construction deadlines, which, if not met, could result in the loss
of the license. Requests for additional time to construct may be filed and are
subject to review pursuant to FCC rules. Certain of the Company's channel rights
are subject to pending extension requests and it is anticipated that additional
extensions will be required. There can be no assurance that the FCC will grant
any particular extension request or license renewal request. There can also be
no assurance that the FCC will not change its current policies regarding such
extension application to require a greater showing or limit the number of
extensions one license holder may request.
UNCERTAINTY OF GRANT OF PENDING APPLICATIONS
Applications for wireless cable licenses are subject to approval by the FCC.
Applicants with whom the Company has entered into leases have filed a series of
applications with the FCC for a number of wireless cable channels and the
Company has entered into leases for additional channels with applicants that
have had previously-filed applications returned without prejudice by the FCC and
which will be refiled. The vast majority of such leases are in the form of lease
agreements with qualified non-profit educational organizations for ITFS
channels. ITFS applications undergo review by the FCC's engineering and legal
staff, and there is no limit on the time that may elapse between filing an
application with the FCC for a modification or new license and action thereon by
the FCC. Once the FCC staff determines that an application meets certain basic
technical and legal qualifications, the staff will then determine whether each
application is proximate to the transmit and receive-site locations of other
applications. Those applications that would result in signal interference to
other pending applications ("Competing Applications") must then undergo a
comparative selection process. The FCC's ITFS application selection process
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is based on a set of objective criteria that includes whether an applicant is
located in the community to be served, whether the applicant is an accredited
instituiton and how many hours of formal educational programming the applicant
proposes to transmit on the channels. The FCC employs a tie-breaking procedure
if two or more applicants receive the same number of points in the initial
comparative review. The tie-break process involves determining the number of
students who will receive the applicant's educational programming. Thus, the
outcome of the selection process when two or more qualified applicants are
competing for the same channels lends itself to a degree of predictability that
varies according to the circumstances. Most of the Company's lease agreements
with applicants for channel licenses involve channel licenses for which
Competing Applications have been filed. In each market, the Company has
carefully considered the FCC's selection criteria in choosing the educational
entities with which it has entered into lease agreements. However, because the
FCC's application review process does not lend itself to complete certainty, and
given the considerable number of applications involved, no assurance can be
given as to the precise number of applications that will be granted. A number of
competing applicants for channel licenses have filed with the FCC petitions to
deny the applications in which the Company has acquired channel rights, based
upon alleged substantive defects in the applicant or in technical or other
aspects of the application. The Company anticipates that the FCC will deny most
of the currently pending petitions to deny the applications in which the Company
has acquired channel rights. However, no assurance can be given as to the
precise number of such petitions that will be granted or denied. Although the
Company does not believe that any single award of a channel license to an
applicant that has filed a Competing Application or the granting of any single
petition to deny an application in which the Company has acquired channel rights
would adversely affect the Company, several of such awards or grants could have
a material adverse effect on the Company.
UNCERTAINTY OF ABILITY TO OBTAIN FCC AUTHORIZATIONS
Wireless cable systems transmit programming over wireless cable channels
that are licensed by the FCC. Generally, the Company believes that a minimum of
12 wireless cable channels is necessary to offer a commercially viable wireless
cable system in most rural markets and that more channels are required in more
competitive markets, such as those well served by traditional cable television
systems. In some of its long-term launch markets, the Company does not currently
have the right to operate 12 channels from the same transmitter site. In those
markets, the Company is dependent upon (i) the grant of pending applications for
modification of existing licenses for unbuilt ITFS stations, (ii) the grant of
such license modification applications which have not yet been filed and/or
(iii) the grant of applications for new ITFS licenses, some of which were filed
during the FCC's October 1995 filing window but have not yet been granted, and
some of which have not yet been filed. There can be no assurance that any or all
of the modification applications and new license applications actually made or
anticipated to be made by the Company will be granted by the FCC. Although the
Company does not believe that the denial of any single modification or new
license application will adversely affect it, the denial of several such
applications, particularly if concentrated in one or a few of the Company's
markets, could have a material adverse effect on its growth.
INTERFERENCE ISSUES
Under current FCC regulations, a wireless cable operator may install
receive-site equipment and serve any point where its signal can be received,
subject to the interference protection rights of certain other wireless cable
systems. Interference from other wireless cable systems can limit the ability of
a wireless cable system to serve particular points, in the same manner that
interference from one television station limits the ability of a viewer to
receive another television station broadcasting on the same frequency. In
licensing ITFS and MDS stations, a primary concern of the FCC is avoiding
situations where proposed stations are predicted to cause interference to the
reception of existing or previously proposed station signals. Pursuant to
current FCC regulations, a wireless cable license holder is generally protected
from interference within a 35-mile radius of the transmission site. In September
1995, the 35-mile protected
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service area of MDS stations became fixed and will not change if a licensee
modifies its facilities to a new transmission location. The Company's business
plan involves moving the authorized transmitter site of various of its MDS and
ITFS licensed stations and obtaining the grant of licenses to new stations that
the Company will use in its wireless cable systems. The FCC interference
protection standards may make one or more of those proposed relocations or new
grants unavailable. In any such event, it may be necessary to negotiate
interference agreements with the licensees of stations which would otherwise
block such relocations or new grants. There can be no assurance that the Company
will be able to negotiate any required interference agreements on terms
acceptable to it. In the event that the Company cannot obtain interference
agreements required to implement its plans for a given market, the Company may
have to curtail or modify operations in that market. Any substantial
modification or curtailment of the Company's operations in its markets could
have a material adverse effect on its growth or financial performance. In
addition, the Company's leases with MDS and ITFS licensees require their
cooperation, it is possible that one or more of the Company's channel lessors
may hinder or delay the Company's efforts to use the channels in accordance with
its plans for a particular market.
DEPENDENCE ON PROGRAM MATERIAL AGREEMENTS
In connection with its distribution of television programming, the Company
is dependent on fixed-term contracts with various program suppliers. Generally,
the terms of the Company's material programming contracts are for periods of one
to five years. Although the Company has no reason to believe that any such
contracts will be cancelled or will not be renewed upon expiration, if such
contracts are cancelled or not renewed, the Company will have to seek program
material from other sources. There is no assurance that other program material
will be available to the Company on acceptable terms or at all or, if so
available, that such material will be acceptable to the Company's subscribers.
The likelihood that program material will be unavailable to the Company is
significantly mitigated by the Cable Act and various FCC regulations issued
thereunder, which, among other things, impose limits on exclusive programming
contracts and generally prohibit cable programmers in which a cable operator has
an attributable interest from discriminating against cable competitors with
respect to the price and terms and conditions of sale of programming. Only a few
of the major cable television programming services carried by the Company are
not currently directly owned by a vertically integrated cable operator, and the
Company historically has not had difficulty in arranging satisfactory contracts
for these services. The Cable Act is the subject of various legal challenges and
if it were found to be unconstitutional, program suppliers might raise their
prices or make their program material unavailable to the Company.
PHYSICAL LIMITATIONS OF WIRELESS CABLE TRANSMISSION
Wireless cable programming is transmitted through the air via microwave
frequencies from a transmission facility to a small receiving antenna at each
subscriber's location, which generally requires a direct, unobstructed
line-of-sight from the transmission facility to the subscriber's receiving
antenna. Therefore, in communities with tall trees, hilly terrain, tall
buildings or other obstructions in the transmission path, wireless cable
transmission can be difficult or impossible to receive at certain locations
without the use of signal boosters. Consequently, the Company may not be able to
supply services to certain potential subscribers. In addition, in limited
circumstances, extremely adverse weather can damage transmission and receiving
antennas as well as transmit site equipment.
WIRELESS ONE AND CS WIRELESS MINORITY INVESTMENTS
The Company owns approximately 21% of the outstanding common stock of
Wireless One, Inc., a Delaware corporation ("Wireless One"). Although David E.
Webb and J. R. Holland, Jr., directors of the Company, serve as directors of
Wireless One, the Company cannot exercise unfettered control over this
substantial investment. The Company does not control the management of Wireless
One, and is dependent upon the skill, expertise and managerial efforts of the
management of Wireless One to achieve a return on
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the Company's substantial investment in Wireless One. To the extent that
Wireless One proves unsuccessful in its business, the value of the Company's
investment therein will be adversely affected. Similarly, the Company owns
approximately 37% of the outstanding common stock of CS Wireless. Although David
E. Webb and J. R. Holland, Jr., directors of the Company, serve as directors of
CS Wireless, the Company cannot exercise unfettered control over this
substantial investment. The Company does not control the management of CS
Wireless, and is dependent upon the skill, expertise and managerial efforts of
the management of CS Wireless to achieve a return on the Company's substantial
investment in CS Wireless. To the extent that CS Wireless proves unsuccessful in
its business, the value of the Company's investment therein will be adversely
affected.
AGREEMENT TO VOTE FOR BOARD DESIGNEE OF JUPITER; CO-SALE RIGHT
David E. Webb, the President and Chief Executive Officer of the Company, L.
Allen Wheeler, Vice Chairman of the Board of Directors of the Company, and Hunt
Capital Group, L.L.C. ("Hunt Capital"), a principal stockholder of the Company
and affiliate of J. R. Holland, Jr., the Chairman of the Board of the Company,
collectively own approximately 40.8% of the outstanding Common Stock. Pursuant
to the terms of a Stockholders' Agreement (the "Stockholders' Agreement"), for
so long as Jupiter, the purchaser of $40.0 million gross proceeds of the
Convertible Notes, retains a 25% interest in the Convertible Notes originally
purchased by it and/or the shares of Common Stock issued or issuable upon
conversion thereof (the "Conversion Shares") originally issuable to it, each of
Hunt Capital, David E. Webb and L. Allen Wheeler, have agreed to vote their
shares (i) in favor of the election to the Company's Board of Directors of one
designee of Jupiter and (ii) in favor of the Company's Board of Directors
consisting of at least three and not more than seven members. The agreement of
such stockholders to elect Jupiter's designee to the Board of Directors may
restrict the ability of such stockholders to elect their preferred slate of
directors to manage the Company, which may result in a member of the Board of
Directors having interests that conflict with those of the other stockholders of
the Company. In addition, under the terms of the Stockholders' Agreement, each
of Hunt Capital, David E. Webb and L. Allen Wheeler have agreed that, for so
long as Jupiter holds such 25% interest, in the event of any proposed sale or
series of sales of Common Stock by any such stockholder to a non-affiliate for
aggregate consideration greater than $15.0 million or representing in excess of
5% of the outstanding Common Stock at such time, such stockholder shall not
effect such sale unless Jupiter is permitted to participate in such sale on a
pro rata basis with such stockholder. The co-sale right may reduce the
likelihood of a change in control of the Company, because any potential
purchaser of stock held by the controlling stockholders may also be required to
purchase shares by Jupiter.
FUTURE ACQUISITIONS
The Company has in the past made a number of acquisitions and may in the
future make additional acquisitions. The Company can be expected to seek to
acquire additional channel rights, both in its existing markets and in other
markets, both directly and indirectly by acquiring other wireless cable
television providers. Such acquisitions may be in geographic areas or markets
outside of the Company's traditional focus of small to mid-sized markets in the
central United States. In addition, subject to limitations set forth in the
Indenture, it is possible that the Company might make one or more acquisitions
outside of the business of providing wireless cable television services. Any
such acquisitions may be made for cash, securities, including Common Stock,
notes or other indebtedness, property or combinations thereof. Under applicable
law and regulations, in many circumstances, approval by the Company's
stockholders of any such acquisitions may not be required. The issuance of
equity to effect or finance such acquisitions would have the effect of reducing
the percentage ownership of the Company held by each pre-acquisition stockholder
and the incurrence of indebtedness in connection with such acquisitions could
adversely affect the liquidity, results of operations and financial condition of
the Company. The Company recently registered 1,250,000 shares of Common Stock to
be issued from time to time to acquire additional wireless cable channel rights
and businesses.
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LACK OF PUBLIC MARKET FOR THE NEW NOTES
The Old Notes are designated for trading in the PORTAL market.There is no
established trading market for the New Notes. Although the Initial Purchaser has
advised the Company that it currently intends to make a market in the New Notes,
it is not obligated to do so and it 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.
POSSIBLE VOLATILITY OF PRICE OF THE NEW NOTES
The market price of the Common Stock could be subject to wide fluctuations
in response to quarterly variations in the Company's results of operations,
changes in earnings estimates by analysts, conditions in the wireless cable
industry or general market or economic conditions. In addition, in recent years
the stock market has experienced extreme price and volume fluctuations. These
fluctuations have had a substantial effect on the market prices for many
emerging growth companies, often unrelated to the operating performance of the
specific companies. Such market fluctuations could adversely affect the price of
the Common Stock and, to the extent that the Company's business requires
additional financing, the price of the New Notes.
RECENT EVENTS
The Company has entered an agreement in principle to acquire two wireless
cable operating systems in Oklahoma for an aggregate of approximately $1.75
million in cash. In addition, the Company has reached an agreement in principle
to acquire one wireless cable operating system in Iowa and wireless cable assets
in one market in each of Nebraska and Montana from CS Wireless for an aggregate
of approximately $4.6 million to be paid by an equivalent reduction of the
principal balance of a $15.0 million note payable by CS Wireless to the Company.
As part of such agreement in principle, the Company will sell to CS Wireless for
approximately $1.4 million certain channel rights in Grand Rapids, Michigan
which the Company expects to receive from a third party in exchange for certain
existing channel rights of the Company. Such sum may be paid in cash or the
principal balance of the CS Wireless note may be reduced by $3.2 million rather
than $4.6 million. The markets to be acquired represent approximately 186,500
households, 171,300 LOS households and 1,680 subscribers and are collectively
referred to as the "Pending Acquisitions." In addition, a subsidiary of the
Company has agreed to sell to CAI Wireless Systems, Inc. ("CAI") certain
wireless cable assets in Portsmouth, New Hampshire (the "Pending Divesture").
The Company will receive approximately 267,000 shares of common stock of CS
Wireless as its portion of the consideration for such assets. Each agreement for
the five markets to be acquired and for the divestiture of the Portsmouth, New
Hampshire market is subject to customary closing conditions. Finally, the
Company has reached agreements in principle to acquire additional channel rights
in certain of its existing markets for approximately $1 million in cash. The
Company anticipates that these agreements will be consummated on or before
January 31, 1997, although there can be no assurance that any of these
transactions will be consummated.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on March 28, 1996 to the Initial
Purchaser, who placed the Old Notes with institutional investors. In connection
therewith, the Company and the Initial Purchaser entered into the Registration
Rights Agreement, pursuant to which the Company agreed, for the benefit of the
Holders of the Old Notes, that the Company would, at its sole cost, (i) within
180 days following the original issuance of the Old Notes, file with the
Commission the Registration Statement (of which this Prospectus is a part) under
the Securities Act with respect to an issue of a series of new notes of the
Company identical in all material respects to the series of Old Notes (except
that such New Notes would not contain terms with respect to transfer
restrictions) and (ii) cause such Registration Statement to be declared
effective under the Securities Act within 270 days following the original
issuance of the Old Notes. Upon the effectiveness of the Registration Statement,
the Company will offer, pursuant to this Prospectus, to the Holders of the Old
Notes the opportunity to exchange their Old Notes for a like principal amount of
New Notes, to be issued without a restrictive legend and which may, generally,
be reoffered and resold by the holder without restrictions or limitations under
the Securities Act. The term "Holder" with respect to the Exchange Offer means
any person in whose name Old Notes are registered on the books of the Company or
any other person who has obtained a properly completed bond power from the
registered holder.
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The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Instead, based on interpretations by the staff of the Commission
set forth in no-action letters issued to third parties, the Company believes
that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by any holder of
such New Notes (other than any such holder that is an "affiliate" of the Company
within the meaning of Rule 405 promulgated under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such Holder's business, such Holder has no arrangement or understanding with
any person to participate in the distribution of such New Notes and neither such
Holder nor any other such person is engaging in or intends to engage in a
distribution of such New Notes. Since the Commission has not considered the
Exchange Offer in the context of a no-action letter, there can be no assurance
that the staff of the Commission would make a similar determination with respect
to the Exchange Offer. Any Holder who is an affiliate of the Company or who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the New Notes cannot rely on such interpretations by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a resale transaction.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge 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. 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 by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company). The
Company has agreed that, for a period of 120 days after the date of this
Prospectus, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution."
In the event that (i) any changes in law or the applicable interpretations
of the staff of the Commission do not permit the Company to effect the Exchange
Offer, (ii) the Exchange Offer is not consummated within 300 days of the Issue
Date, (iii) in certain circumstances, the Initial Purchaser so requests within
270 days after the consummation of the Exchange Offer or (iv) in the case of any
Holder that participates in the Exchange Offer, such Holder does not receive New
Notes on the date of the exchange that may be sold without restriction under
state and Federal securities laws (other than due solely to the status of such
Holder as an affiliate of the Company within the meaning of the Securities Act)
and so notifies the Company within 60 days after such Holder first becomes aware
of such restriction and provides the Company with a reasonable basis for its
conclusion, in the case of each of clauses (i)-(iv) of this sentence, then the
Company will promptly deliver to the Holders and the Trustee written notice
thereof (the "Shelf Notice") and, at its cost, (a) as promptly as practicable,
file a shelf registration statement covering resales of the Notes (the "Shelf
Registration Statement"), (b) use all reasonable efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act by the
60th day after the delivery of the Shelf Notice (or promptly in the event of a
request by the Initial Purchaser) and (c) use all reasonable efforts to keep the
Shelf Registration Statement effective until three years after its effective
date, or such shorter period ending when (i) all Notes covered by the Shelf
Registration Statement have been sold in the manner set forth and as
contemplated therein or (ii) a subsequent Shelf Registration Statement covering
all unregistered Old Notes has been declared effective under the Securities Act.
The Company will, in the event of the filing of a Shelf Registration Statement,
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 for the Old Notes has become effective and take certain
other actions as are required to permit unrestricted resales of the Old Notes. A
Holder of Old Notes that
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sells such Old Notes pursuant to the Shelf Registration Statement generally will
be required to be named as a selling securityholder in the related prospectus
and to deliver a 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). In addition, each Holder of the Old Notes will be required to
deliver information to be used in connection with the Shelf Registration
Statement and to provide comments on the Shelf Registration Statement within the
time periods set forth in the Registration Rights Agreement in order to have its
Old Notes included in the Shelf Registration Statement and to benefit from the
provisions regarding liquidated damages set forth in the following paragraph.
In the event that either (i) the Registration Statement is not filed with
the Commission on or prior to the 180th calendar day following the Issue Date,
(ii) the Registration Statement is not declared effective on or prior to the
270th calendar day following the Issue Date, or (iii) (A) the Exchange Offer is
not consummated, (B) the Shelf Registration Statement is not declared effective
on or prior to the 60th calendar day following the delivery of the Shelf Notice
or (C) the Shelf Registration Statement ceases to be effective (each such event
referred to in clauses (i) through (iii), a "Registration Default"), the Company
will pay increased cash interest to each Holder of the Old Notes during the
first 90 day period immediately following the occurrence of such Registration
Default in an amount equal to 0.50% per annum on the Old Notes. The amount of
the cash interest will increase by an additional 0.50% per annum for each
subsequent 90 day period until the Registration Statement is filed, the
Registration Statement is declared effective, the Exchange Offer is consummated
or the Shelf Registration Statement is declared effective or again became
effective, as the case may be, up to a maximum amount of additional cash
interest of 2.00% per annum. All accrued cash interest shall be paid to record
holders of the Old Notes by wire transfer of immediately available funds or by
federal funds check by the Company on each Interest Payment Date. Upon (x) the
filing of the Registration Statement in the case of clause (i) above, (y) the
effectiveness of the Registration Statement in the case of clause (ii) above or
(z) the consummation of the Exchange Offer or the effectiveness of a Shelf
Registration Statement, as the case may be, in the case of clause (iii) above,
and provided that none of the conditions set forth in clauses (i), (ii) and
(iii) above continues to exist, such additional interest shall cease to accrue
on the Old Notes from the date of such filing, effectiveness or consummation.
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 has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
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.
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.
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The form and terms of the New Notes will be identical in all material
respects to 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 and will not contain certain provisions providing for
an increase in the interest rate on the Old Notes under certain circumstances
relating to the Registration Rights Agreement, which provisions will terminate
upon the consummation of the Exchange Offer. The New Notes will evidence the
same debt as the Old Notes and will be entitled to the benefits of the Indenture
under which the Old Notes were, and the New Notes will be, issued.
As of the date of this Prospectus, $15,000,000 aggregate principal amount of
the Old Notes are outstanding. The Company has fixed the close of business on
December 19, 1996 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 the Old Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law (the "DGCL") 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 notice (confirmed in writing) oral or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering Holders for the purpose of the exchange of Old Notes.
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, 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,
other than certain applicable taxes, in connection with the Exchange Offer. See
"The Exchange Offer--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
January 22, 1997, 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 notice (confirmed in writing) or written notice
and will make a public announcement thereof prior to 9:00 a.m., New York City
time, on the next business day after each 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 below under "The Exchange Offer--Conditions" shall not have
been satisfied, to terminate the Exchange Offer, by giving oral notice
(confirmed in writing) 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. Any such delay in acceptance, extension, termination or amendment will
be followed as promptly as practicable by a public announcement thereof. If the
Exchange Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment 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 10 business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five- to 10-business-day period.
27
<PAGE>
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from October 15, 1996, the date of the last
interest payment on the Old Notes. No interest will be paid on the Old Notes
accepted for exchange.
PROCEDURES FOR TENDERING
The tender of Old Notes by a Holder thereof pursuant to one of the
procedures set forth below and the acceptance thereof by the Company will
constitute a binding agreement between such Holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal. This Prospectus, together with the Letter of Transmittal, will
first be sent on or about December 23, 1996, to all Holders of Old Notes known
to the Company and the Exchange Agent.
Only a Holder of the Old Notes may tender such Old Notes in the Exchange
Offer. A Holder who wishes to tender any Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, or a facsimile thereof, or an Agent's Message, including any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) the certificates for such
Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Notes, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company (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 or Agent's Message and other required documents must be received by
the Exchange Agent at the address set forth below under "Exchange Agent" prior
to 5:00 p.m., New York City time, on the Expiration Date.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering Old Notes which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such participant.
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. If sent by mail, it is recommended that
registered mail, return receipt requested, be used and proper insurance be
obtained. In all cases, sufficient time should be allowed to assure delivery to
the Exchange Agent before the Expiration Date. No Letter of Transmittal or Old
Notes should be sent to the Company.
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 such registered
Holder to tender on such beneficial owner's behalf. If such beneficial owner
wishes to tender on such beneficial owner's own behalf, such beneficial owner
must, prior to completing and executing the Letter of Transmittal or delivering
an Agent's Message and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or obtain a properly completed bond power from the
registered Holder. The transfer of registered ownership may take considerable
time.
28
<PAGE>
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
the Old Notes tendered pursuant thereto are tendered (i) by a registered Holder
who has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15
promulgated 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, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered Holder
as such registered Holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, adminstrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
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.
By tendering, each Holder will represent to the Company, among other things,
that (i) the New Notes acquired by the Holder and any beneficial owners of Old
Notes pursuant to the Exchange Offer are being obtained in the ordinary course
of business of the persons receiving such New Notes, (ii) neither the Holder nor
such beneficial owner has an arrangement with any person to participate in the
distribution of such New Notes, (iii) neither the Holder nor such beneficial
owner nor any such other person is engaging in or intends to engage in a
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. 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
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."
29
<PAGE>
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's system may make book-entry delivery of Old Notes 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 facsimile thereof, or
an Agent's Message, with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received by the
Exchange Agent at one of the addresses set forth below under "The Exchange
Offer--Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) or an Agent's Message, together with
the certificate(s) representing the Old Notes, or a Book-Entry Confirmation,
and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof) or an Agent's Message, as well as the certificate(s)
representing all tendered Old Notes in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and all other document required
by the Letter of Transmittal are received by the Exchange Agent within three
New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile 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 persons 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. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such
30
<PAGE>
certificates, the withdrawing Holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the procedure
for book-entry transfer described above, any notice of withdrawal must specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of such facility. 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, which determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no New Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly retendered.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "The Exchange Offer-- Procedures for Tendering"
at any time prior to the Expiration Date.
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable to the Holder thereof without cost
to such Holder (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 for the
Old Notes).
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 of Tenders") 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, 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 10 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 10-business-day period.
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EXCHANGE AGENT
Bankers Trust Company has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<S> <C> <C>
TO: BANKERS TRUST COMPANY
BY MAIL: BY HAND: BY OVERNIGHT MAIL OR COURIER:
BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc.
Reorganization Unit Corporate Trust and Agency Corporate Trust and Agency
P.O. Box 292737 Group Group
Nashville, TN 37229-2737 Receipt & Delivery Window Reorganization Unit
123 Washington St., 1st Floor 648 Grassmere Park Road
New York, NY 10006 Nashville, TN 37211
FOR INFORMATION CALL:
(800) 735-7777
Confirm: (615) 835-3572
Facsimile: (615) 835-3701
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company.The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager 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.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
Holder or any other person) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value less accrued original issue discount, as reflected in the
Company's accounting records on the date of the exchange. Accordingly, no gain
or loss for accounting purposes will be recognized. The expenses of the Exchange
Offer and the unamortized expenses related to the issuance of the Old Notes will
be amortized over the term of the New Notes.
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<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Old Notes were, and the New Notes will be, issued under an Indenture, as
supplemented (the "Indenture"), between the Company and First Trust of New York,
National Association, 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 and will not contain certain provisions
providing for an increase in the interest rate on the Old Notes under certain
circumstances relating to the Registration Rights Agreement, which provisions
will terminate upon the consummation of the Exchange Offer.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended and as in effect on the date of the qualification of the Indenture under
the Trust Indenture Act (the "Trust Indenture Act"). The Notes are subject to
all such terms, and holders of Notes (the "Holders") are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Indenture, including the definitions therein of certain terms used below. The
definitions of certain terms used in the following summary are set forth below
under "Certain Definitions." As used in this section, the term "Company" refers
only to Heartland Wireless Communications, Inc. and not to its subsidiaries and
the term "Holder" refers to a holder of a Note.
The Notes are secured by a first priority security interest in the Escrow
Account described under "Disbursement of Funds--Escrow Account." The Notes are
senior obligations of the Company ranking PARI PASSU in right of payment to all
existing and future Indebtedness of the Company, other than Indebtedness that is
expressly subordinated to the Notes. The Company has no senior Indebtedness,
other than the Series B Notes, the Notes, the 14% Notes and the BTA Obligation.
The Notes are senior in right of payment to the Convertible Notes, which are
expressly subordinated to the Notes. However, subject to certain limitations set
forth in the Indenture, the Company and its Subsidiaries may incur Indebtedness
which is secured by assets of the Company and its Subsidiaries. In addition, the
operations of the Company are conducted through its subsidiaries and, therefore,
the Company will be dependent upon the cash flow of its subsidiaries to meet its
obligations under the Notes. As a result, the Notes are effectively subordinated
to all existing liabilities and future Indebtedness and other liabilities and
commitments of the Company's subsidiaries. Any right of the Company to receive
assets of the Company's Subsidiaries or any future Subsidiaries of the Company,
upon the latter's liquidation or reorganization (and the consequent right of the
Holders to participate in those assets), will be effectively subordinated to the
claims of that Subsidiary's creditors, except to the extent that the Company is
itself recognized as a creditor of such Subsidiary, although other creditors of
such Subsidiary may be secured by certain assets of such Subsidiary. As of
September 30, 1996, the outstanding liabilities of the Company's consolidated
subsidiaries, including all the liabilities of consolidated subsidiaries that
are not wholly-owned by the Company, were approximately $12.1 million. The
Indenture permits the Company's subsidiaries to incur additional indebtedness in
the future.
The Notes will constitute a new issue of securities for which there is
currently no trading market. See "Risk Factors--Lack of Public Market."
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, Bankers Trust
Company will act as Paying Agent and Registrar for the Notes. The Notes may be
presented for registration or transfer and exchange at the offices of the
Registrar, which will be the Registrar's corporate trust office. The Company may
change any Paying Agent and Registrar without notice to the Holders. The Company
will pay principal (and premium, if any) on the Notes at the Paying Agent's
corporate office in New York, New York. At the Company's option, interest may be
paid by check mailed to the registered addresses of Holders.
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<PAGE>
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $15 million and will
mature on April 15, 2003. Interest on the Notes will accrue at the rate of 13%
per annum and will be payable semiannually in cash on each April 15 and October
15 commencing on April 15, 1996, to the Persons who are registered Holders at
the close of business on the April 1 and October 1 immediately preceding the
applicable interest payment date. Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of issuance.
OPTIONAL REDEMPTION
OPTIONAL REDEMPTION. The Notes will not be redeemable at the Company's
option prior to April 15, 1999. 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 the applicable redemption date, if redeemed during the
twelve-month period beginning on April 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -----------
<S> <C>
1999.................................................................................. 105.571%
2000.................................................................................. 103.714%
2001.................................................................................. 101.857%
2002 and thereafter................................................................... 100.000%
</TABLE>
Optional Redemption Upon Sale of Equity to Strategic Equity Investor.
Notwithstanding the foregoing, in the event of the sale by the Company prior to
April 15, 1998 of at least $25.0 million of its Capital Stock (other than
Disqualified Stock) to a Strategic Equity Investor in a single transaction, the
Company may, at its option, use the net cash proceeds of such sale of Capital
Stock to redeem up to 25% of the Notes at a redemption price equal to 113% of
the principal amount thereof plus accrued and unpaid interest thereon, if any,
to the date of redemption; provided that at least 75% of the initial principal
amount of the Notes remains outstanding immediately after such redemption. In
order to effect the foregoing redemption with the proceeds of any such sale of
Capital Stock (other than Disqualified Stock), the Company shall make such
redemption not more than 120 days after the consummation of any such sale of
Capital Stock.
MANDATORY REDEMPTION
Except as set forth below under "Offer to Purchase Upon Change of Control"
and "Certain Covenants --Limitation on Asset Sales," the Company will not be
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee or Registrar 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 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 its registered address. 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 portion will be issued in the name of the Holder thereof
upon cancellation of the
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<PAGE>
original Note. On and after the redemption date, interest will cease to accrue
on the Notes or portions of the Notes called for redemption.
OFFER TO PURCHASE UPON CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, each
Holder will have the right to require that the Company purchase all or a portion
of such Holder's Notes pursuant to the offer described below (the "Change of
Control Offer"), at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase.
Within 30 days following the date upon which a Change of Control occurs, the
Company must send, by first class mail, a notice to each Holder, with a copy to
the Trustee and Paying Agent, which notice shall govern the terms of the Change
of Control Offer. Such notice shall state, among other things, the purchase
date, which must be no earlier than 30 days nor later than 45 days from the date
such notice is mailed, other than as may be required by law (the "Change of
Control Payment Date"). Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the Note prior to the
close of business on the third Business Day prior to the Change of Control
Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, the Indenture limits
the Company's ability to incur Indebtedness (see "Certain Covenants--Limitation
on Indebtedness") and there can be no assurance that the Company would be able
to obtain such financing.
The definition of "Change of Control" includes a disposition of all or
substantially all of the property and assets of the Company. With respect to the
disposition of property or assets, the phrase "all or substantially all" as used
in the Indenture (including as set forth under "Certain Covenants--Merger,
Consolidation and Sale of Assets" below) varies according to the facts and
circumstances of the subject transaction, has no clearly established meaning
under New York law (which is the governing law under the Indenture) and is
subject to judicial interpretation. Accordingly, in certain circumstances there
may be a degree of uncertainty in ascertaining whether a particular transaction
would involve a disposition of "all or substantially all" of the property or
assets of the Company, and therefore it may be unclear as to whether a Change of
Control has occurred and whether the Company is required to make a Change of
Control Offer.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of the Company and
its Subsidiaries to incur additional Indebtedness, to grant liens on its
property, to make Restricted Payments and to make Asset Sales may also make more
difficult or discourage a takeover of the Company, whether favored or opposed by
the management or Permitted Holders of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of the
Notes, and there can be no assurance that the Company or the acquiring party
will have sufficient financial resources to effect such redemption or
repurchase. Such restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage any
leveraged buyout of the Company or any of its Subsidiaries by the management or
Permitted Holders of the Company. While such restrictions cover a wide variety
of arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
35
<PAGE>
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities law and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
DISBURSEMENT OF FUNDS--ESCROW ACCOUNT
The Company placed approximately $1.9 million of the net proceeds realized
from the sale of the Notes, representing funds sufficient to pay interest on the
Notes from April 15, 1996 through April 14, 1997, in the Escrow Account held by
the Escrow Agent for the benefit of the Trustee under the Indenture in
accordance with the Escrow and Disbursement Agreement. The Company entered into
the Escrow and Disbursement Agreement, which provides, among other things, that
funds may be disbursed from the Escrow Account only to pay interest on the Notes
(or, if a portion of the Notes has been retired by the Company, funds
representing the interest payment on the retired Notes may be paid to the
Company) and, upon certain repurchases or redemptions thereof, to pay principal
of and premium, if any, thereon. Pending such disbursement, the Company will
cause all funds contained in the Escrow Account to be invested in Marketable
Securities. Interest earned on these Marketable Securities will be added to the
Escrow Account.
The Notes are secured by a first priority security interest in the Escrow
Account. See "Security" below.
CERTAIN COVENANTS
LIMITATION ON RESTRICTED PAYMENTS. The Indenture provides that the Company
and its Subsidiaries may not, directly or indirectly (i) declare or pay any
dividend or make any distribution on account of any Equity Interests of the
Company or any of its Subsidiaries other than dividends or distributions payable
(A) in Equity Interests of the Company that are not Disqualified Stock or (B) to
the Company or any Wholly-Owned Subsidiary of the Company; (ii) purchase, redeem
or otherwise acquire or retire for value any Equity Interests of the Company or
any of its Subsidiaries (other than any such Equity Interests owned by the
Company or a Wholly-Owned Subsidiary); (iii) purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is PARI PASSU or
subordinated in right of payment to the Notes, except in accordance with the
scheduled repayment provisions set forth in the original documentation governing
such Indebtedness; or (iv) in a single transaction or a series of related
transactions, until the date on which the ratio of Annualized EBITDA to
Consolidated Interest Expense equals or exceeds 1.75 to 1.00, make Investments
in a cumulative amount for the Company and all of its Subsidiaries, in excess of
(A) the sum of (1) $10 million and (2) 100% of the Net Proceeds received by the
Company from the issue or sale of Equity Interests of the Company (other than
Equity Interests sold to a Subsidiary of the Company or to an employee stock
ownership plan or similar trust and other than Disqualified Stock) (provided,
however, that simultaneously with the payment of the Additional Consent
Payments, Investments made prior to November 30, 1996 shall be excluded from the
computation of the ratio in clause (iv), the $10 million amount shall be
increased to $15 million and the Net Proceeds referred to in (2) above shall
relate only to the issue or sale of Equity Interests subsequent to November 30,
1996) less (B) the cumulative amount of Net Proceeds received by the Company
from the issue or sale of Equity Interests of the Company that has been applied
to make Restricted Payments (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of such Restricted Payment: (a) no Default or
Event of Default shall have occurred and be continuing or would occur as a
consequence thereof; (b) after giving effect to such Restricted Payment on a pro
forma basis as if such Restricted Payment had been made at the beginning of the
applicable fiscal quarter, the Company could incur $1.00 of additional
Indebtedness pursuant to the Annualized Cash Flow Ratio test described
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below under "Certain Covenants--Limitation on Indebtedness"; and (c) such
Restricted Payment, together with the aggregate of all other Restricted Payments
made by the Company and its Subsidiaries after the Issue Date, is less than the
sum of: (x) 50% of the Consolidated Net Income (or if Consolidated Net Income
shall be a loss, minus 100% of such loss) of the Company earned from the first
day of the fiscal quarter during which the Issue Date occurs to the end of the
most recent fiscal quarter ending prior to the date of such Restricted Payment,
plus (y) 100% of the aggregate Net Cash Proceeds received by the Company from
the issue or sale of Equity Interests of the Company (other than Equity
Interests sold to a Subsidiary of the Company or to an employee stock ownership
plan or similar trust and other than Disqualified Stock or the Net Proceeds from
the sale of Equity Interests applied to make Investments in accordance with this
covenant) since the Issue Date. Notwithstanding the foregoing, the Company and
its Subsidiaries may not, subsequent to the payment by the Company of the
Additional Consent Payments, directly or indirectly, make any Investment in
Wireless Cable Related Assets other than Permitted Assets, except as permitted
under clause (xv) of the following paragraph.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit (i) the payment of any dividend within 60
days after the date of declaration thereof, if at such date of declaration such
payment would have complied with the provisions of the Indenture; (ii) so long
as no Default or Event of Default shall have occurred and be continuing, the
redemption, repurchase, retirement or other acquisition of any Equity Interests
of the Company in exchange for, or out of the net proceeds of, the substantially
concurrent sale for cash or Marketable Securities (other than to a Subsidiary of
the Company) of other Equity Interests of the Company that are not Disqualified
Stock; (iii) so long as no Default or Event of Default shall have occurred and
be continuing, the repurchase of Capital Stock of the Company (including
options, warrants or other rights to acquire such Capital Stock) from employees
or former employees of the Company or any Subsidiary thereof pursuant to any
employment agreement, management equity subscription agreement or stock option
plan or similar agreement in effect as of the Issue Date or entered into in the
ordinary course of business for consideration which, when added to all loans
made pursuant to clause (iv) below during the fiscal year and then outstanding,
does not exceed $0.5 million in the aggregate in any fiscal year or $2.5 million
in the aggregate over the life of the Notes; (iv) so long as no Default or Event
of Default shall have occurred and be continuing, the making of loans and
advances to employees of the Company or any Subsidiary thereof in the ordinary
course of business which, when added to the aggregate consideration paid
pursuant to clause (iii) above during the same fiscal year, does not exceed $0.5
million in any fiscal year or $2.5 million in the aggregate over the life of the
Notes; provided that upon repayment of such loans or advances made after the
Issue Date, such repaid amounts shall no longer be included in the principal
amount of loans and advances made to employees; (v) so long as no Default or
Event of Default shall have occurred and be continuing, a Permitted Refinancing;
(vi) so long as no Default or Event of Default shall have occurred and be
continuing, the redemption, repurchase, retirement or other acquisition of
Equity Interests of a Subsidiary of the Company for (A) Equity Interests of the
Company that are not Disqualified Stock or (B) up to $1.0 million in the
aggregate over the life of the Notes of cash consideration; (vii) the payment of
funds to satisfy or discharge any liability or obligation incurred by the
Company as a result of its joint and several liability as a general partner for
all third-party liabilities and obligations of RuralVision Joint Venture, if
any; (viii) the acquisition by the Company of the Cross Country Sale Assets;
(ix) the acquisition by the Company of the Tulsa, Oklahoma wireless cable market
from USWS; (x) the acquisition by the Company of the Amarillo, Texas market from
U.S. Wireless; (xi) the payment of dividends on Preferred Stock of Subsidiaries
outstanding on the Issue Date; (xii) the redemption, repurchase, retirement or
other acquisition of Capital Stock of the Company from U.S. Wireless for
consideration comprised of the note receivable related to the U.S. Wireless
Loan; (xiii) Investments in Wireless Cable Related Assets made with the Net Cash
Proceeds from an Asset Sale made in compliance with the first paragraph of the
"Limitation on Asset Sales" covenant (whether such Asset Sale shall have been
consummated prior to or after the Issue Date) or otherwise permitted by the
"Limitation on Asset Sales" covenant, provided that if such Investment had been
acquired in a simultaneous swap or exchange for the assets disposed of in such
Asset Sale, such swap or exchange would have
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complied with the provisions of the third paragraph under the "Limitation on
Asset Sales" covenant; (xiv) Investments that constitute part of an Asset Sale
transaction consummated in compliance with or otherwise permitted by the
provisions of the third paragraph under the "Limitation on Asset Sales"
covenant; (xv) Investments in the Wireless Cable Business acquired in
consideration for the issuance of Equity Interests of the Company (other than
Disqualified Stock) and cash paid in lieu of the issuance of fractional shares
and in satisfaction of any applicable dissenter's or appraisal rights (provided
that such Investments need not be in Permitted Assets); and (xvi) the
consummation of any of the Transactions. The amounts referred to in clauses (i),
(ii), (iii), (iv) and (vi) shall be included as Restricted Payments in any
computation made pursuant to clause (c) above. Restricted Payments shall be
deemed not to include Permitted Payments and Permitted Investments.
Not later than the making of any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate (as defined in the Indenture)
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "Restricted Payments" were
computed.
LIMITATION ON INDEBTEDNESS. The Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume,
Guarantee, acquire, become liable, contingently or otherwise, with respect to,
or otherwise become responsible for payment of (collectively, "incur") any
Indebtedness; provided that the Company (but not its Subsidiaries) may incur
Indebtedness if (i) no Default or Event of Default shall have occurred and be
continuing and (ii) the Annualized Cash Flow Ratio of the Company as of the date
of such incurrence or issuance shall not exceed (x) 7.0 to 1.0 if such
incurrence or issuance occurs on or prior to the second anniversary of the Issue
Date and (y) 5.0 to 1.0 if such incurrence or issuance occurs thereafter.
The foregoing limitation will not apply to: (i) Indebtedness evidenced by
the Notes and the Indenture; (ii) the incurrence by the Company and its
Subsidiaries of the Existing Indebtedness, other than any Existing Indebtedness
required to be repaid with proceeds of the sale of the Units; (iii) the
incurrence by the Company and its Subsidiaries of Bank Indebtedness in an
aggregate principal amount at any one time outstanding not to exceed $25.0
million (such amount to be increased to $50.0 million simultaneously with the
payment by the Company of the Additional Consent Payments) (less the amount of
any then-outstanding Preferred Stock of Subsidiaries issued to refinance
Indebtedness to the extent such amount has not been applied to reduce the amount
of Indebtedness permitted under clause (vii) below) , as such amount may be
permanently reduced as specified in the "Limitation on Asset Sales" covenant
described below, and reduced by the amount of any outstanding Guarantee incurred
pursuant to clause (iv) below; provided that no Default or Event of Default
shall have occurred and be continuing at the time of such incurrence; (iv) the
Guarantee by the Subsidiaries of Bank Indebtedness permitted to be incurred by
the Company pursuant to the immediately preceding paragraph; (v) Indebtedness of
the Company issued to any Wholly-Owned Subsidiary; provided that (a) any such
Indebtedness is unsecured and is subordinated to the Notes and (b) that any
subsequent issuance or transfer of any Capital Stock which results in any
Wholly-Owned Subsidiary ceasing to be a Wholly-Owned Subsidiary or any transfer
of such Indebtedness to a Person not a Wholly-Owned Subsidiary will be deemed an
incurrence of such Indebtedness; (vi) Indebtedness of a Subsidiary issued to and
held by the Company or any Wholly-Owned Subsidiary of the Company; provided that
any subsequent issuance or transfer of any Capital Stock which results in a
Wholly-Owned Subsidiary ceasing to be a Wholly-Owned Subsidiary or any transfer
of such Indebtedness to a Person not a Wholly Owned Subsidiary of the Company
will be deemed an incurrence of such Indebtedness; (vii) upon the payment by the
Company of the Additional Consent Payments, the incurrence by the Company or its
Subsidiaries subsequent to November 30, 1996 of additional Indebtedness in an
aggregate principal amount not to exceed $15.0 million at any one time
outstanding (less the amount of any then-outstanding Preferred Stock of
Subsidiaries issued to refinance Indebtedness to the extent such amount has not
been applied to reduce the amount of Indebtedness permitted under clause (iii)
above); (viii) the incurrence (a "Permitted Refinancing") by the Company and its
Subsidiaries of Indebtedness
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issued in exchange for, or the proceeds of which are used to extend, refinance,
renew, replace or refund Indebtedness incurred pursuant to the Annualized Cash
Flow Ratio test above or pursuant to clauses (ii), (iii), (iv), (v) and (vii)
above and clause (xi) below ("Refinancing Indebtedness"), provided that: (a) the
net proceeds of such Refinancing Indebtedness shall not exceed the principal
amount of and required premium, if any, and accrued interest on the Indebtedness
so extended, refinanced, renewed, replaced, substituted or refunded (or if such
Indebtedness was issued at an original issue discount, the original issue price
plus amortization of the original issue discount at the time of the repayment of
such Indebtedness) and reasonable expenses incurred in connection therewith; (b)
the Refinancing Indebtedness shall have a final maturity later than, and a
Weighted Average Life to Maturity equal to or greater than, the final maturity
and remaining Weighted Average Life to Maturity of the Indebtedness being
extended, refinanced, renewed, replaced or refunded; and (c) if the Indebtedness
being extended, refinanced, renewed, replaced or refunded is subordinated in
right of payment to the Notes, the Refinancing Indebtedness shall be
subordinated in right of payment to the Notes on terms at least as favorable to
the Holders of Notes as those contained in the documentation governing the
Indebtedness being so extended, refinanced, renewed, replaced or refunded; (ix)
the incurrence of obligations in respect of Interest Rate Agreements relating to
Indebtedness to the extent that the notional principal amount of such obligation
does not exceed the aggregate principal amount of the Indebtedness to which such
Interest Rate Agreement relates; (x) the incurrence by the Company or any of its
Subsidiaries of Indebtedness owing to a Federal governmental authority relating
to the purchase of wireless cable channels in an auction or other sale (or
Indebtedness satisfying the requirements of (viii) (b) above issued in exchange
for, or the proceeds of which are used to extend, refinance, renew, replace or
refund, such Indebtedness) in an amount not to exceed in the aggregate $30
million at any one time outstanding; or (xi) simultaneously with or subsequent
to the payment by the Company of the Additional Consent Payments, Indebtedness
in an aggregate principal amount not to exceed $125.0 million, to be evidenced
by notes which shall have a final maturity later than and a Weighted Average
Life to Maturity greater than the final maturity and Weighted Average Life to
Maturity of the Notes. The Company and its Subsidiaries may incur Acquired Debt
only in compliance with this covenant.
LIMITATION ON LIENS. The Indenture provides that neither the Company nor
any of its Subsidiaries may directly or indirectly create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or on any
income or profits therefrom, or assign or convey any right to receive income
therefrom, except Permitted Liens.
The Indenture also provides that if the Company or any of its Subsidiaries
shall create, incur, assume or suffer to exist any Lien, other than a Permitted
Lien, on any assets or other property to secure Indebtedness in violation of
this covenant, the Company or such Subsidiary, as the case may be, shall make
effective provision for securing the Notes equally and ratably with such
Indebtedness as to such assets or other property for so long as such
Indebtedness shall be so secured; provided that the provision of such equal and
ratable security in favor of the Notes shall not cure any Default or Event of
Default arising from such violation of the provisions of this covenant.
LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK OF SUBSIDIARIES. The
Indenture provides that the Company will not sell any Capital Stock of a
Subsidiary, and will not permit any Subsidiary to issue or sell any Capital
Stock, or permit any Person, other than the Company and its Subsidiaries, to own
or hold any such interest, other than (i) any interest owned or held on the
Issue Date by, or issuable as of the Issue Date to, a Person other than the
Company and its Subsidiaries in any Capital Stock of any Subsidiary or (ii) any
interest owned or held by a Person at the time that such Subsidiary became a
Subsidiary (other than any such interest created or issued in anticipation of
the acquisition of such Subsidiary by the Company); provided that the foregoing
limitation shall not apply to (i) the sale of 100% of the Capital Stock of any
Subsidiary made in accordance with "Limitation on Asset Sales" and (ii)
issuances of Preferred Stock permitted pursuant to clauses (i) or (iii) of
"Limitation on Preferred Stock of Subsidiaries."
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LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. The Indenture provides that
the Company will not permit any of its Subsidiaries to issue, directly or
indirectly, any Preferred Stock, except (i) Preferred Stock of Subsidiaries
outstanding on the Issue Date, (ii) Preferred Stock issued to and held by the
Company or a Subsidiary, except that any subsequent issuance or transfer of any
Capital Stock which results in any Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any transfer of such Preferred Stock to a Person not
a Wholly-Owned Subsidiary will be deemed an issuance of Preferred Stock; (iii)
Preferred Stock issued by a Person prior to the time (a) such Person became a
Subsidiary, (b) such Person merges with or into a Subsidiary or (c) another
Person merges with or into such Person (in a transaction in which such Person
becomes a Subsidiary), in each case if such Preferred Stock was not issued in
anticipation of such transaction; and (iv) Preferred Stock issued in exchange
for, or the proceeds of which are used to refund Indebtedness or refinance
Preferred Stock referred to in clause (i) or issued pursuant to clauses (ii) or
(iii) (other than Preferred Stock which by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable) is
redeemable at the option of the holder thereof or is otherwise redeemable,
pursuant to sinking fund obligations or otherwise, prior to the date of
redemption or maturity of the Preferred Stock or Indebtedness being so refunded
or refinanced); provided that (a) the liquidation value of such Preferred Stock
so issued shall not exceed the principal amount or the liquidation value of the
Indebtedness or Preferred Stock, as the case may be, so refunded or refinanced
and (b) the Preferred Stock so issued (1) shall have a stated maturity not
earlier than the stated maturity of the Indebtedness or Preferred Stock being
refunded or refinanced and (2) shall have a Weighted Average Life to Maturity
equal to or greater than the remaining Weighted Average Life to Maturity of the
Indebtedness or Preferred Stock being refunded or refinanced.
LIMITATION ON ASSET SALES. The Indenture provides that the Company will
not, and will not permit any of its Subsidiaries to, consummate an Asset Sale
unless (i) the Company or the applicable Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the assets sold or otherwise disposed of (as determined in good
faith by the Company's Board of Directors or if the Fair Market Value of such
assets exceeds $20.0 million, the Company shall receive from an investment
banking firm of national standing a written opinion in customary form as to the
fairness, to the Company, of such Asset Sale) and (ii) at least 80% of the
consideration received by the Company or the Subsidiary, as the case may be,
from such Asset Sale shall be cash or Marketable Securities and is received at
the time of such disposition. Upon the consummation of an Asset Sale, the
Company may apply, or cause such Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 180 days of receipt thereof either (A) to
prepay any Bank Indebtedness and, in the case of any Bank Indebtedness under any
revolving credit facility, to effect a permanent reduction in the availability
under such revolving credit facility, (B) to reinvest in Wireless Cable Related
Assets (provided that, on and after the payment by the Company of the Additional
Consent Payments, such Wireless Cable Related Assets must be Permitted Assets)
or (C) to a combination of prepayment and investment permitted by the foregoing
clauses (A) and (B). On the 181st day after an Asset Sale or such earlier date,
if any, as the Board of Directors of the Company or of such Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as set
forth in clauses (A), (B) or (C) of the preceding sentence (each, a "Net
Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which
have not been applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses (A), (B) or (C) of the preceding sentence (each a "Net
Proceeds Offer Amount") shall be applied by the Company to make an offer to
purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment
Date") not less than 30 nor more than 45 days following the applicable Net
Proceeds Offer Trigger Date, from all Holders on a PRO RATA basis that amount of
Notes equal to the Net Proceeds Offer Amount at a price equal to 100% of the
principal amount of the Notes to be purchased, plus accrued and unpaid interest
thereon, if any, to the date of purchase; provided, however, that if at any time
any non-cash consideration received by the Company or any Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted into
or sold or otherwise disposed of for cash (other than interest received with
respect to any such non-cash
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consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this covenant.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than
$5.0 million, the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time as
such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds
Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date relating
to such initial Net Proceeds Offer Amount from all Asset Sales by the Company
and its Subsidiaries aggregates at least $5.0 million, at which time the Company
shall apply all Net Cash Proceeds constituting all Net Proceeds Offer Amounts
that have been so deferred to make a Net Proceeds Offer (the first date the
aggregate of all such deferred Net Proceeds Offer Amounts is equal to $5.0
million or more shall be deemed to be a Net Proceeds Offer Trigger Date).
Notwithstanding the two immediately preceding paragraphs, the Company and
its Subsidiaries will be permitted to consummate an Asset Sale without complying
with such paragraphs to the extent (i) at least 95% of the consideration for
such Asset Sale, other than cash consideration, constitutes assets used in the
business of the Company and its Subsidiaries on the date of such transaction
(provided that, on and after the payment by the Company of the Additional
Consent Payments, such assets must be Permitted Assets), (ii) such Asset Sale is
for Fair Market Value (as determined in good faith by the Company's Board of
Directors or if the Fair Market Value of such assets exceeds $20.0 million, the
Company shall receive from an investment banking firm of national standing a
written opinion in customary form as to the fairness, to the Company, of such
Asset Sale) and (iii) the assets acquired in such an Asset Sale have
historically generated revenues in an amount at least equal to (1) the revenues
attributable to the assets disposed of in such Asset Sale, multiplied by (2) a
fraction, the numerator of which is the amount of consideration other than cash
consideration received in such Asset Sale, and the denominator of which is the
total amount of consideration received in such Asset Sale (provided that the
requirements of this clause (iii) shall cease to be of any effect upon the
payment by the Company of the Additional Consent Payments); provided that any
consideration received by the Company or its Subsidiaries, as the case may be,
in an Asset Sale permitted to be consummated under this paragraph that does not
constitute assets to be used in the operations of the Company or its
Subsidiaries shall constitute Net Cash Proceeds which are subject to the
provisions of the two preceding paragraphs. In addition, notwithstanding the two
immediately preceding paragraphs, the Company will be permitted (i) to
consummate the Wireless One Transaction without complying with such paragraphs,
(ii) to sell the Call Markets to Wireless One or Wireless One LCC without
complying with such paragraphs, (iii) to sell any or all of the assets acquired
in the AWS Transaction, the CableMaxx Transaction or the TechniVision
Transaction on or prior to the first anniversary of the consummation of each
such Transaction without complying with such paragraphs, (iv) to sell any or all
of the assets acquired by way of an Investment permitted by clause (xv) of the
second paragraph of the "Limitation on Restricted Payments" covenant on or prior
to the first anniversary of the consummation of such acquisition without
complying with such paragraphs and (v) to sell, in a single transaction or a
series of transactions, assets for up to $25 million of non-cash consideration
(provided, that simultaneously with the payment by the Company of the Additional
Consent Payments, the $25 million amount referred to in this clause (v) shall be
computed only with respect to sales occurring after November 30, 1996),
provided, in the case of clauses (iii), (iv) and (v), that the Company receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors or if the Fair Market Value of such assets
exceed $20.0 million, the Company shall receive from an investment banking firm
of national standing a written opinion in customary form as to the fairness, to
the Company, of such Asset Sale).
Each Net Proceeds Offer will be mailed within 25 days following the Net
Proceeds Offer Trigger Date to the record Holders as shown on the register of
Holders, with a copy to the Trustee, and shall comply with the procedures set
forth in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders
may elect to tender their Notes in whole or in part in integral multiples of
$1,000 in exchange for cash. To
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the extent Holders properly tender Notes in an amount exceeding the Net Proceeds
Offer Amount, Notes of tendering Holders will be purchased on a pro rata basis
(based on amounts tendered). A Net Proceeds Offer shall remain open for a period
of 20 Business Days or such longer period as may be required by law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue
thereof.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The
Indenture provides that the Company and its Subsidiaries may not, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary (i) to pay
dividends or make any other distributions to the Company or any of its
Subsidiaries on or in respect of its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits, or pay any
Indebtedness or other obligation owed to the Company or any of its Subsidiaries;
(ii) to make loans or advances to the Company or any of its Subsidiaries or
Investments in Subsidiaries; or (iii) to transfer any of its properties or
assets to the Company or any of its Subsidiaries, except for such encumbrances
or restrictions existing under or by reason of: (a) any encumbrance or
restriction pursuant to the Notes or the Indenture; (b) applicable law; (c)
Existing Indebtedness, other than any Existing Indebtedness required to be
repaid with proceeds of the sale of the Units to be issued on the Issue Date;
(d) any instrument governing Acquired Debt as in effect at the time of
acquisition (except to the extent such Indebtedness was incurred in connection
with, or in contemplation of, such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired; (e) any encumbrance or restriction pursuant to an agreement effecting
a refinancing of Indebtedness pursuant to an agreement referred to in clause (c)
or (d) or contained in any amendment to an agreement referred to in clause (c)
or (d); provided, however, that the encumbrances and restrictions contained in
any such refinancing agreement or amendment are no more restrictive than
encumbrances or restrictions contained in the refinanced or amended agreements;
(f) with respect to clause (iii) above, by reason of customary non-assignment
provisions in leases entered into in the ordinary course of business; or (g)
with respect to clause (iii) above, purchase money obligations for property
acquired in the ordinary course of business, which obligations do not cover any
asset other than the asset acquired.
Merger, Consolidation or Sale of Assets. The Company will not, in a single
transaction or a series of related transactions, (i) consolidate with or merge
with or into any other Person, (ii) permit any other Person to consolidate with
or merge into (a) the Company or (b) any of its Subsidiaries in a transaction in
which such Subsidiary (or successor Person) remains (or becomes) a Subsidiary or
(iii) directly or indirectly, sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to another Person or Persons
or adopt a plan of liquidation, (iv) directly or indirectly, purchase, lease or
otherwise acquire all or substantially all of the property and assets of any
Person or any existing business (whether existing as a separate entity,
subsidiary, division, unit or otherwise) of any Person or acquire Equity
Interests or other ownership interests of any other Person such that such Person
becomes a Subsidiary or (v) permit any of its Subsidiaries to enter into any
such transaction unless (i) either (A) the Company or such Subsidiary shall be
the survivor of such merger or consolidation or (B) the surviving Person (if not
the Company or such Subsidiary) is a corporation, partnership or trust organized
and existing under the laws of the United States, any state thereof or the
District of Columbia and such surviving Person shall expressly assume all the
obligations of the Company or such Subsidiary, as the case may be, under the
Notes and the Indenture; (ii) immediately after giving effect to such
transaction (on a pro forma basis, including any Indebtedness incurred or
anticipated to be incurred in connection with such transaction), the Company or
the surviving Person is able to incur at least $1.00 of additional Indebtedness
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under the Annualized Cash Flow Ratio test in compliance with the "Limitation on
Indebtedness" covenant; (iii) immediately before and immediately after giving
effect to such transaction (including any Indebtedness incurred or anticipated
to be incurred in connection with the transaction), no Default or Event of
Default shall have occurred and be continuing; and (iv) the Company has
delivered to the Trustee an Officers' Certificate and Opinion of Counsel, each
stating that such consolidation, merger or transfer complies with the Indenture,
that the surviving Person agrees to be bound thereby and that all conditions
precedent in the Indenture relating to such transaction have been satisfied. For
purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties and assets of one or more Subsidiaries of
the Company, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company. The
foregoing will not be deemed to apply to Permitted Investments or Investments
permitted under the covenant "Limitation on Restricted Payments" above.
The Indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, the surviving entity shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture and the Notes with the same effect as if such surviving entity had
been named as such; provided that solely for purposes of computing amounts
described in clause (c) of the first paragraph of the covenant "Limitation on
Restricted Payments" above, any such surviving entity to the Company shall only
be deemed to have succeeded to and be substituted for the Company with respect
to periods subsequent to the effective time of such merger, consolidation,
combination or transfer of assets.
TRANSACTIONS WITH AFFILIATES. The Indenture provides that the Company and
its Subsidiaries may not sell, lease, transfer or otherwise dispose of any of
their respective properties or assets to, or purchase any property or assets
from, or enter into any contract, agreement, understanding, loan, advance or
Guarantee with, or for the benefit of, any Affiliate of the Company or any legal
or beneficial owner of 5% or more of any class of Capital Stock of the Company
or with an Affiliate of any such owner (each of the foregoing, an "Affiliate
Transaction"), unless: (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such Subsidiary
with an unrelated Person; and (ii) the Company delivers to the Trustee: (x) with
respect to any Affiliate Transaction involving aggregate payments in excess of
$250,000 but less than $3.0 million, a resolution of the Board of Directors of
the Company set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above, (y) with respect to any Affiliate
Transaction involving aggregate payments equal to or greater than $3.0 million
but less than $20.0 million, a resolution of the Board of Directors of the
Company set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested directors of the Board of
Directors of the Company, and (z) with respect to any Affiliate Transaction
involving aggregate payments equal to or greater than $20.0 million, a
resolution of the Board of Directors of the Company set forth in an Officers'
Certificate and certifying to the matters referred to in (i) above and a written
opinion as to the fairness to the Company or such Subsidiary from a financial
point of view issued by an independent investment banking firm of national
standing with respect to any such Affiliate Transaction. Notwithstanding the
foregoing, the following shall not be deemed Affiliate Transactions: (a) any
employment or option agreement entered into by the Company or any of its
Subsidiaries in the ordinary course of business that is approved by the
Compensation Committee of the Board of Directors of the Company; (b) the payment
by the Company of annual fees to Unity Hunt Resources, Inc. for the provision of
Mr. Holland's services to the Company in an amount equal to Mr. Holland's annual
base compensation from the Company, which amount is approved by the Compensation
Committee of the Board of Directors of the Company; (c) transactions between or
among the Company and one or more of its Wholly Owned Subsidiaries provided that
such transactions are not otherwise prohibited; (d) Restricted Payments,
Permitted Payments and Permitted Investments; (e) Affiliate Transactions in
existence on the Issue Date, including, without limitation, channel leases and
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options between the Company and any of its Subsidiaries, on the one hand, and
Messrs. Webb and Wheeler and their respective Affiliates, on the other hand, and
the lease with respect to the Company's operating offices in Durant, Oklahoma
and agreements between the Company, on the one hand, and U.S. Wireless and/or
USWS, on the other hand, as in effect on the Issue Date; (f) channel leases and
options with Affiliates entered into after the Issue Date; provided such leases
are no less beneficial to the Company or the applicable Subsidiary than any such
leases in effect on the Issue Date, meet the standard described in clause (i)
above and are approved by a majority of the disinterested directors of the Board
of Directors of the Company; (g) amendments to or renewals of the agreements and
leases referred to in clauses (d) and (e) above; provided that any such
amendments or renewals are no less beneficial to the Company or the applicable
Subsidiary than the agreement or lease being amended or renewed, meet the
standard described in clause (i) above and are approved by a majority of the
disinterested directors of the Board of Directors of the Company; (h) payment of
reasonable and customary compensation for director and Board of Director
observer fees, meeting expenses, insurance premiums and indemnities to the
extent permitted by law; and (i) the issuance of stock options (and shares of
stock upon the exercise thereof) pursuant to any stock option plan approved by
the Board of Directors and stockholders of the Company and loans or advances to
employees for relocation or travel related expenses consistent with ordinary
past practices.
CONDUCT OF BUSINESS. The Indenture provides that the Company and its
Subsidiaries may not, directly or indirectly, engage in any business other than
the Wireless Cable Business; provided that in the event a Change of Control
occurs in which a Strategic Equity Investor gains control of the Company this
covenant shall no longer be of force or effect.
PROVISION OF INFORMATION. The Company (at its own expense) shall file with
the Trustee within 15 days after it files them with the Commission copies of the
quarterly and annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may by
rules and regulations prescribe) to be filed pursuant to Section 13 or 15(d) of
the Exchange Act (without regard to whether the Company is subject to the
requirements of such Section 13 or 15(d) of the Exchange Act) ("SEC Reports").
Upon qualification of the Indenture under the Trust Indenture Act, the Company
shall also comply with the provisions of Trust Indenture Act Section 314(a). In
the event that the Company is not required or shall cease to be required to file
SEC Reports pursuant to the Exchange Act, the Company shall nevertheless
continue to file such reports with the Commission and the Trustee. If the
Trustee (at the Company's request and expense) is to mail the foregoing
information to the Holders, the Company shall supply such information to the
Trustee at least five days prior thereto. The Company shall provide to any
Holder any information concerning the Company reasonably requested by such
Holder (including financial statements) necessary in order to permit such Holder
to sell or transfer Notes in compliance with Rule 144A promulgated under the
Securities Act.
SECURITY
The Notes are secured, pending disbursement pursuant to the Escrow and
Disbursement Agreement, by a pledge of the Escrow Account, which initially
contained approximately $1.9 million of the net proceeds from the sale of the
Old Notes (the "Collateral"), representing funds sufficient to pay interest on
the Notes from April 15, 1996 through April 14, 1997.
The Company entered into the Escrow and Disbursement Agreement providing for
the grant by the Company to the Trustee for the benefit of the Holders of
security interests in the Collateral. All such security interests will secure
the payment and performance when due of all of the Obligations of the Company
under the Indenture with respect to the Notes and under such Notes, as provided
in the Escrow and Disbursement Agreement. The Liens created by the Escrow and
Disbursement Agreement will be first priority security interests in the
Collateral. The ability of Holders to realize upon any such funds or securities
may be subject to certain bankruptcy law limitations in the event of the
bankruptcy of the Company.
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Funds will be disbursed from the Escrow Account only to pay interest on the
Notes and, upon certain repurchases or redemptions of the Notes, to pay
principal of and premium, if any, thereon. Pending such disbursements, all funds
contained in the Escrow Account will be invested in Marketable Securities. Upon
the acceleration of the maturity of the Notes or the failure to pay principal at
maturity or upon certain redemptions and repurchases of the Notes, the Escrow
and Disbursement Agreement provides for the foreclosure by the Trustee upon the
net proceeds of the Escrow Account. Under the terms of the Indenture, the
proceeds of the Escrow Account shall be applied, first, to amounts owing to the
Trustee in respect of fees and expenses of the Trustee and second, to the
Obligations under the Notes and the Indenture.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default:
(i) the failure to pay interest on any Notes when the same becomes due
and payable and such default continues for a period of 30 days;
(ii) (a) the failure to pay the principal or premium when due on the
Notes at maturity, upon redemption, upon acceleration or otherwise or (b)
the failure to redeem or purchase the Notes when required pursuant to the
Indenture and the Notes (including, without limitation, failure to make
payments when due pursuant to a Change of Control Offer or Net Proceeds
Offer);
(iii) failure by the Company to comply with the provisions described
under "Offer to Purchase Upon Change of Control" or "Certain
Covenants--Limitation on Asset Sales," or the failure by the Company to
comply with the first sentence of the provision described under
"Disbursement of Funds --Escrow Account;"
(iv) failure to comply with the covenant described under "Certain
Covenants--Merger, Consolidation or Sale of Assets;"
(v) failure by the Company for 30 days after notice from the Trustee or
the Holders of at least 25% in principal amount of the Notes then
outstanding to comply with its agreements in the Indenture or the Notes or
in the Escrow and Disbursement Agreement (other than those referred to in
(i), (ii), (iii) or (iv) above);
(vi) a default in the payment of principal at final maturity under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness of the Company or
any of its Subsidiaries (or the payment of which is Guaranteed now or
hereafter by the Company or any of its Subsidiaries), whether such
Indebtedness or Guarantee now exists or shall be created hereafter, in a
principal amount of at least $3.0 million (after the expiration of any
applicable grace period with respect thereto);
(vii) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness (including any interest thereon) of the Company or its
Subsidiaries (or the payment of which is Guaranteed now or hereafter by the
Company or any of its Subsidiaries), whether such Indebtedness or Guarantee
now exists or shall be created hereafter, if (i) as a result of such event
of default the maturity of such Indebtedness has been accelerated prior to
its stated maturity and (ii) the principal amount of such Indebtedness,
together with the principal amount of any other Indebtedness of the Company
and its Subsidiaries the maturity of which has been accelerated, aggregates
$3.0 million or more;
(viii) one or more final judgments rendered against the Company or any
of its Subsidiaries (other than any judgment as to which a reputable
insurance company has accepted full liability in writing) aggregating in
excess of $3.0 million which judgments are not stayed within 60 days after
their entry;
(ix) certain events of bankruptcy or insolvency with respect to the
Company or any of its Subsidiaries; or
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(x) repudiation by the Company of its obligations under the Escrow and
Disbursement Agreement for any reason.
If any Event of Default occurs and is continuing under the Indenture, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately by
notice in writing to the Company and the Trustee specifying the respective Event
of Default and that it is a "notice of acceleration" (the "Acceleration
Notice"). Upon such declaration, the principal of, and premium, if any, and
interest on the Notes shall become due and payable immediately. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company or any of its Subsidiaries,
the foregoing amount shall ipso facto become due and payable without further
action or notice. No premium is payable upon acceleration of the Notes except
that in the case of an Event of Default that is the result of an action or
inaction by the Company or any of its Subsidiaries intended to avoid premiums
related to redemptions of the Notes contained in the Indenture or the Notes, the
amount declared due and payable will include the premium that would have been
applicable on a voluntary prepayment of the Notes or, if voluntary prepayment is
not then permitted, the premium set forth in the Indenture.
No Holder has the right to institute any proceeding with respect to the
Indenture or any remedy thereunder, unless the Holders of at least 25% in
principal amount of the outstanding Notes have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as Trustee,
the Trustee has failed to institute such proceeding within 15 days after receipt
of such notice, and the Trustee has not within such 15-day period received
directions inconsistent with such written request by Holders of a majority in
principal amount of the outstanding Notes. Such limitations do not apply,
however, to suits instituted by a Holder for the enforcement of the payment of
the principal of, premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. In case an Event of
Default shall occur and be continuing, the Trustee will exercise such of its
rights and powers under the Indenture, and use the same degree of care and skill
in their exercise, as a prudent Person would exercise or use under the
circumstances in the conduct of his or her own affairs. Subject to certain
provisions of the Indenture, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any of the
Holders unless they have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request. The Trustee may withhold from Holders notice of
any continuing default (except a default in payment) if it determines in good
faith that the withholding of such notice is in the interest of such Holders.
The Indenture provides that, at any time after a declaration of acceleration
with respect to the Notes as described in the preceding paragraph, the Holders
of a majority in principal amount of the Notes may rescind and cancel such
declaration and its consequences (i) if the rescission would not conflict with
any judgment or decree, (ii) if all existing Events of Default have been cured
or waived except nonpayment of principal or interest that has become due solely
because of the acceleration, (iii) to the extent the payment of such interest is
lawful, interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such declaration of acceleration, has
been paid, (iv) if the Company has paid the Trustee its reasonable compensation
and reimbursed the Trustee for its expenses, disbursements and advances and (v)
in the event of the cure or waiver of an Event of Default of the type described
in clause (viii) of the description above of Events of Default, the Trustee
shall have received an Officer's Certificate and an Opinion of Counsel that such
Event of Default has been cured or waived.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding, by notice to the Trustee, may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture, except a continuing Default or Event of Default in the
payment of interest or premium on, or the principal of, the Notes, or in respect
of a covenant or a provision which cannot be amended or modified without the
consent of all Holders.
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The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS AND
STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes or the Indenture or the Escrow and Disbursement Agreement or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
Holder of Notes by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the Federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the outstanding
Notes, except for:
(i) the rights of Holders of outstanding Notes to receive solely from
trust funds payments in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due, or on the redemption
date, as the case may be;
(ii) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost
or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(iii) the rights, powers, trust, duties and immunities of the Trustee,
and the Company's obligations in connection therewith; and
(iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including nonpayment, bankruptcy, receivership,
reorganization and insolvency events) described above under "Events of Default"
will no longer constitute Events of Default with respect to the Notes. In the
event of Legal Defeasance or Covenant Defeasance, the security interests
described above under "Security" will be released.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust for
the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
U.S. Government Securities or a combination thereof, in such amounts as will
be sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest
on the outstanding Notes, on the stated maturity or on the applicable
optional redemption date, as the case may be, without reinvestment of the
deposited U.S. Government Securities and other deposited monies;
(b) in the case of Legal Defeasance, the Company must deliver to the
Trustee an Opinion of Counsel in the United States reasonably satisfactory
to the Trustee confirming that (x) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (y) since
the date of the Indenture, there has been a change in the applicable Federal
income tax law, in either
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case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such
legal defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(c) in the case of Covenant Defeasance, the Company must deliver to the
Trustee an Opinion of Counsel in the United States reasonably satisfactory
to the Trustee confirming that the Holders of the outstanding Notes will not
recognize income, gain or loss for Federal income tax purposes as a result
of such Covenant Defeasance and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default with
respect to the Indenture resulting from the incurrence of Indebtedness, all
or a portion of which will be used to defease the Notes concurrently with
such incurrence) or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the
123rd day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, the Indenture or any
other material agreement or instrument to which the Company is a party or by
which the Company is bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Notes over the other creditors of the
Company or with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with;
(h) the Company delivers to the Trustee an Opinion of Counsel to the
effect that (i) the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company under the Investment Company
Act of 1940, (ii) the Holders have a valid first priority perfected security
interest in the trust funds, and (iii) after passage of 123 days following
the deposit (or, with respect to any trust funds for the account of any
Holder who may be deemed to be an "insider" for purposes of the Bankruptcy
Code, after one year following the deposit), the trust funds will not be
subject to the effect of Section 547 of the Bankruptcy Code or Section 15 of
the New York Debtor and Creditor Law in a case commenced by or against the
Company under either such statute, and either (A) the trust funds will no
longer remain the property of the Company (and therefore, will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally) or (B)
if a court were to rule under any such law in any case or proceeding that
the trust funds remained in the possession of the Trustee prior to such
court ruling to the extent not paid to Holders, the Trustee will hold, for
the benefit of the Holders, a valid first priority perfected security
interest in such trust funds that is not avoidable in bankruptcy or
otherwise except for the effect of Section 552(b) of the Bankruptcy Code on
interest on the trust funds accruing after the commencement of a case under
such statute and (y) the Holders will be entitled to receive adequate
protection of their interests in such trust funds if such trust funds are
used in such case or proceeding; and
(i) certain other customary conditions precedent are satisfied.
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SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable or will become due and payable within
one year and the Company has irrevocably deposited or caused to be deposited
with the Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest on the Notes to
the date of deposit together with irrevocable instructions from the Company
directing the Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be; (ii) the Company has paid all other sums payable
under the Indenture by the Company; and (iii) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel stating that all
conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Trustee or Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company is not required to transfer or exchange any Note selected for
redemption. Also, the Company is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
MODIFICATION OF INDENTURE OR NOTES
From time to time, the Company and the Trustee, without the consent of the
Holders of the Notes, may amend the Indenture for certain specified purposes,
including curing ambiguities, defects or inconsistencies, so long as such change
does not adversely affect the rights of any of the Holders. The Trustee will be
entitled to rely on such evidence as it deems appropriate, including, without
limitation, solely on an Opinion of Counsel in executing any supplemental
indenture. Other modifications and amendments of the Indenture may be made with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes issued under the Indenture, except that, without the consent
of each Holder of the Notes affected thereby, no amendment may:
(i) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(ii) reduce the principal of or change or have the effect of changing
the fixed maturity of any Note or change the date on which any Note may be
subject to redemption or repurchase, or reduce the redemption or repurchase
price thereof;
(iii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Notes;
(iv) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default relating
solely to the principal or interest that has become due solely because of
the acceleration);
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(v) make any Note payable in money other than that stated in the Notes;
(vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or interest on the Notes on or after the due date
thereof or to bring suit to enforce such payment;
(vii) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the captions
"Offer to Purchase Upon Change of Control" and "Certain Covenants
--Limitation on Asset Sales");
(viii) amend, change or modify in any material respect the obligation of
the Company to make and consummate a Change of Control Offer in the event of
a Change of Control or make and consummate a Net Proceeds Offer with respect
to any Asset Sale that has been consummated or modify any of the provisions
or definitions with respect thereto;
(ix) make any change in the foregoing amendment and waiver provisions;
or
(x) directly or indirectly release Liens on all or substantially all of
the Collateral except as permitted by the Escrow and Disbursement Agreement.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
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. The Indenture will contain certain limitations on the rights
of the Trustee, should the Trustee become a creditor of the Company, to obtain
payment of claims in certain cases, or to realize on certain property received
in respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions with the Company; however, if the
Trustee acquires any conflicting interest, it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue as Trustee or
resign.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used herein and in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Acquired Debt" means, with respect to any specified Person, Indebtedness of
any other Person existing at the time such other Person merged with or into or
became a Subsidiary of such specified Person or Indebtedness incurred by such
Person in connection with the acquisition of assets, including, without
limitation, Indebtedness incurred or assumed in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person or the acquisition of such assets, as the
case may be.
"Additional Consent Payments" means payments to Holders of $55 for each
$1000 principal amount of Notes with respect to which such Holders have
delivered consents pursuant to, and prior to the expiration date set forth in,
the Consent Solicitation Statement of the Company dated October 29, 1996, as
thereafter amended.
"Affiliate" of any specified Person means (i) any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified Person or (ii) any other Person who is a
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director or officer (A) of such specified Person, (B) of any Subsidiary of such
specified Person or (C) of any Person described in clause (i) above or (iii) any
Person in which such Person has, directly or indirectly, a 5% or greater voting
or economic interest or the power to control. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause the
direction of the management or policies of such Person whether through the
ownership of voting securities or by contract or otherwise and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Annualized Cash Flow Ratio" with respect to any Person means the ratio of
the Consolidated Indebtedness of such Person to the Annualized EBITDA of such
Person for the relevant period.
"Annualized EBITDA" as of any date of determination means the aggregate
amount of EBITDA for the most recent fiscal quarter for which financial
information has been filed with the Commission multiplied by four; provided,
however, that (i) if the Company or any Subsidiary of the Company has incurred
any Indebtedness (including Acquired Debt) that remains outstanding on the date
of such determination or if the transaction giving rise to the need to calculate
the Annualized EBITDA is an incurrence of Indebtedness (including Acquired
Debt), EBITDA for such fiscal quarter will be calculated after giving effect on
a pro forma basis to (a) such Indebtedness, as if such Indebtedness had been
incurred on the first day of such fiscal quarter and (b) the discharge of any
other Indebtedness repaid, repurchased, defeased or otherwise discharged with
the proceeds of such new Indebtedness as if such discharge had occurred on the
first day of such fiscal quarter, (ii) if since the beginning of such fiscal
quarter the Company or any Subsidiary of the Company has made any Asset Sale,
EBITDA for such fiscal quarter will be (a) reduced by an amount equal to EBITDA
(if positive) directly attributable to the assets which are the subject of such
Asset Sale for such fiscal quarter or (b) increased by an amount equal to EBITDA
(if negative) directly attributable thereto for such fiscal quarter and (iii) if
since the beginning of such period the Company or any Subsidiary of the Company
(by merger or otherwise) has made an Investment in any Person which becomes a
Subsidiary of the Company as a result of such Investment or an Investment in an
existing Subsidiary with the result that such Investment will result in the
consolidation of a greater percentage of such Subsidiary's Consolidated Net
Income (other than a transfer of operating assets from the Company or one
Subsidiary to another Subsidiary) or has made an acquisition of assets (other
than from the Company or another Subsidiary of the Company), including any
acquisition of assets occurring in connection with a transaction causing a
calculation of Annualized EBITDA to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA for such fiscal
quarter will be calculated after giving pro forma effect thereto (including the
incurrence of any Indebtedness (including Acquired Debt)) as if such Investment
or acquisition occurred on the first day of such fiscal quarter. For purposes of
this definition, whenever pro forma effect is to be given to an acquisition of
assets or an Investment, the pro forma calculations will be determined in good
faith by a responsible financial or accounting officer of the Company; provided,
however, that such officer shall apply in his calculations the historical EBITDA
associated with such assets for the most recent fiscal quarter for which
financial information is available. If any Indebtedness (including Acquired
Debt) bears a floating rate of interest and is being given pro forma effect, the
interest on such Indebtedness will be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period.
"Asset Sale" means any sale, lease, transfer or other disposition (or series
of related sales, leases, transfers or dispositions) of shares of Capital Stock
of a Subsidiary (other than directors' qualifying shares), property or other
assets (each referred to for the purposes of this definition as a "disposition")
by the Company or any of its Subsidiaries, including any disposition by means of
a merger, consolidation or similar transaction, other than (i) a disposition of
property or assets at Fair Market Value in the ordinary course of business, (ii)
a disposition that constitutes a Restricted Payment and (iii) a disposition by a
Subsidiary to the Company or by the Company or a Subsidiary to a Wholly-Owned
Subsidiary.
"AWS Transaction" means the acquisition by the Company of the capital stock
of American Wireless Cable Systems, Inc., a Delaware corporation, and the
acquisition by the Company of the assets of Wireless
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Cable TV Associates #38 and of Fort Worth Wireless Cable TV Associates for
consideration comprised of Equity Interests of the Company.
"Bankruptcy Code" means Title 11, United States Code, as amended.
"Bank Indebtedness" means loans made by banks, trust companies and other
institutions principally engaged in the business of lending money to businesses
to the Company or a Subsidiary under a credit facility, loan agreement or
similar agreement.
"Beneficial Owner" means a beneficial owner as defined in Rules 13d-3 and
13d-5 under the Exchange Act (or any successor rules), including the provision
of such Rules that a Person shall be deemed to have beneficial ownership of all
securities that such Person has a right to acquire within 60 days; provided that
a Person will not be deemed a beneficial owner of, or to own beneficially, any
securities if such beneficial ownership (i) arises solely as a result of a
revocable proxy delivered in response to a proxy or consent solicitation made
pursuant to, and in accordance with, the Exchange Act and (ii) is not also then
reportable on Schedule 13D or Schedule 13G (or any successor schedule) under the
Exchange Act.
"Business Day" means any day that is not a Saturday, Sunday or a day on
which banking institutions are required to close in the State of New York or
Texas.
"CableMaxx Transaction" means the acquisition by the Company of the capital
stock of CableMaxx, Inc., a Delaware corporation ("CableMaxx"), for
consideration comprised of Equity Interests of the Company or the acquisition by
the Company of the assets of CableMaxx related to the Amarillo, Athens, Lubbock
and Sherman/Denison, Texas markets for either $2.4 million or the fair market
value of such assets in cash.
"Call Markets" means Fanning Springs, Florida; Leesburg, Florida; and Lake
City, Florida.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on the balance sheet in accordance
with GAAP.
"Capital Stock" means any and all shares, interests, participations,
warrants, options, rights or other equivalents of or interests in (however
designated and whether voting or non-voting) corporate stock of a corporation
and any and all equivalent ownership interests in a Person (other than a
corporation), in each case whether outstanding on the date of issuance of the
Notes or thereafter issued, including any Preferred Stock.
"Change of Control" means the occurrence of any of the following events:
(i) any Person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than the Permitted Holders, is or becomes the
Beneficial Owner, directly or indirectly, of (a) more than 35% of the total
Voting Stock or Equity Market Capitalization of the Company or (b) a greater
percentage of the voting power of the total Voting Stock of the Company than
that represented by the voting power of the Voting Stock of the Company then
beneficially owned, in the aggregate, by the Permitted Holders; or
(ii) the Company consolidates with, or merges with or into, another
Person or sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which immediately after the consummation
thereof the stockholders of the Company immediately prior to the date of
such transaction cease to own, directly or indirectly, a majority of the
Voting Stock of the surviving or transferee corporation, or Persons owning a
majority of the Voting Stock of the Company immediately prior to such
transaction cease to own, directly or indirectly, a majority of the Voting
Stock of the surviving or transferee corporation; or
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(iii) 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 new directors whose election by such Board of Directors
or whose nomination for election by the stockholders of the Company was
approved by a vote of 662/3% 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; or
(iv) the Company adopts a plan of liquidation or dissolution.
"Closing Price" on any Trading Day with respect to the per share price of
any shares of Capital Stock means the last reported sale price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the Nasdaq
National Market or, if such shares are not listed or admitted to trading on any
national securities exchange or quoted on such automated quotation system, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm that is selected from time
to time by the Company for that purpose and is reasonably acceptable to the
Trustee.
"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 Income Tax Expense" for any Person for any period means,
without duplication, the aggregate amount of net taxes based on income or
profits for such period of the operations of such Person and its consolidated
Subsidiaries with respect to such period in accordance with GAAP.
"Consolidated Indebtedness" means, with respect to any Person, as of any
date of determination, the aggregate amount of Indebtedness of such Person and
its Subsidiaries as of such date determined on a consolidated basis in
accordance with GAAP.
"Consolidated Interest Expense" means, for any Person, for any period, the
aggregate of the following for such Person for such period determined on a
consolidated basis in accordance with GAAP: the amount of interest in respect of
Indebtedness (including amortization of original issue discount and non-cash
interest payments on any Indebtedness and the interest portion of any deferred
payment obligation and after taking into account the effect of elections made
under any Interest Rate Agreement, however denominated, with respect to such
Indebtedness), and the interest component of any Capital Lease Obligation paid,
in each case whether accrued or scheduled to be paid or accrued by such Person
during such period to the extent such amounts were deducted in computing
Consolidated Net Income, determined on a consolidated basis in accordance with
GAAP, provided that each of the foregoing shall only be included in the
calculation of Consolidated Interest Expense to the extent such amounts reduce
Consolidated Net Income for such period. For purposes of this definition,
interest on a Capital Lease Obligation shall be deemed to accrue at an interest
rate reasonably determined by such Person to be the rate of interest implicit in
such Capital Lease Obligation in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its consolidated Subsidiaries
for such period determined in accordance with GAAP, provided that there shall be
excluded (i) the Net Income of any Person (other than a consolidated Subsidiary)
in which such Person or any of its consolidated Subsidiaries has a joint
interest with a third party, including, without limitation, interests accounted
for on the equity method, except to the extent of the amount of dividends or
distributions actually paid to such Person or its consolidated Subsidiary during
such period; (ii) except to the extent includable pursuant to the foregoing
clause (i), the
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Net Income of any Person accrued prior to the date it becomes a Subsidiary of
such Person or is merged into or consolidated with such Person or any of its
Subsidiaries or that Person's assets are acquired by such Person or any of its
Subsidiaries; (iii) the Net Income (if positive), or any portion thereof, of any
Subsidiary of such Person to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary to such Person or to any
other Subsidiary of such Net Income is not at the time permitted by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary, except
that (A) the Company's equity in the Net Income of any such Subsidiary for such
period shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Subsidiary during such period to the
Company or another Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution to a Subsidiary, to the limitation
contained in this clause) and (B) the Company's equity in a net loss of any such
Subsidiary for such period shall be included in determining such Consolidated
Net Income; (iv) without duplication, any gains or losses attributable to Asset
Sales; (v) Net Income (if positive), arising from the adoption of changes in
accounting policy to comply with GAAP or voluntarily by the Company with the
consent of its independent auditors that so qualify under Regulation S-X of the
Securities Act; (vi) Net Income arising for periods prior to the date of a
transaction in connection with the accounting treatment for a merger,
combination or consolidation under the pooling of interests method; and (vii)
foreign currency translation gains and losses.
"Contributed Markets" means Bedias/Huntsville, Texas; Freeport, Texas;
Milano, Texas; Baton Rouge, Louisiana; Ferriday, Louisiana; Holly Ridge,
Louisiana; Jena, Louisiana; Leesville, Louisiana; Monroe, Louisiana;
Natchitoches, Louisiana; Ruston, Louisiana; Alberta/Salem, Alabama; Ariton,
Alabama; Bankston, Alabama; Bucks, Alabama; Six Mile, Alabama; Society Hill,
Alabama; Tharpton, Alabama; Village Springs, Alabama; Charing, Georgia;
Groveland, Georgia; Hoggards Mill, Georgia; Jeffersonville, Georgia; Mathews,
Georgia; Tarboro, Georgia; Valdosta, Georgia; Ocala, Florida; and Tallahassee,
Florida.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date on which the Notes mature; provided, however, that any Capital Stock that
would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require the Company to repurchase or redeem such
Capital Stock upon the occurrence of a Change of Control occurring prior to the
final maturity of the Notes shall not constitute Disqualified Stock if (i) the
change of control provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the provisions applicable to
the Notes contained in the covenant described under "Offer to Purchase Upon
Change of Control" and (ii) such Capital Stock specifically provides that the
Company will not repurchase or redeem any such stock pursuant to such provisions
prior to the Company's repurchase of such Notes as are required to be
repurchased pursuant to the covenant described under "Offer to Purchase Upon
Change of Control."
"EBITDA" for any period means the Consolidated Net Income for such period
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) Consolidated Income Tax Expense, (ii) Consolidated Interest Expense,
(iii) depreciation and amortization expense determined on a consolidated basis
for such Person and its consolidated Subsidiaries in accordance with GAAP for
such period and (iv) all other non-cash charges (other than noncash charges
which require an accrual of or reserve for cash charges in future periods), and
less any non-cash items which have the effect of increasing Consolidated Net
Income for such period.
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"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A" (or higher) according to S&P or
Moody's at the time as of which any investment or rollover therein is made.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock or that are measured by the value of Capital
Stock (but excluding any debt security that is convertible into or exchangeable
for Capital Stock).
"Equity Market Capitalization" of any Person means, as of any day of
determination, the product of (a) the aggregate number of outstanding shares of
Common Stock of such Person on such day (which shall not include any options or
warrants on, or securities convertible or exchangeable into, shares of Common
Stock of such Person) and (b) the average Closing Price of such Common Stock
over the 20 consecutive Trading Days immediately preceding such day. If no such
Closing Price exists with respect to shares of any such class, the value of such
shares for purposes of clause (ii) of the preceding sentence shall be determined
by an independent investment banking firm of national repute.
"Escrow Account" means an escrow account for the deposit of approximately
$1.9 million of the net proceeds from the sale of the Old Notes under the Escrow
and Disbursement Agreement.
"Escrow Agent" means Bankers Trust Company, as Escrow Agent under the Escrow
and Disbursement Agreement, or any successor thereto appointed pursuant to such
agreement.
"Escrow and Disbursement Agreement" means the Escrow and Disbursement
Agreement, dated as of the date of the Indenture, by and among the Escrow Agent,
the Trustee and the Company, governing the disbursement of funds from the Escrow
Account, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended (or any
successor act), and the rules and regulations promulgated thereunder.
"Existing Indebtedness" means the Notes and any other Indebtedness of the
Company and its Subsidiaries in existence on the Issue Date.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of
determination.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation or such other Person
(whether arising by virtue of partnership arrangements, or by agreement to
keepwell, to purchase assets, goods, securities or services, to take-or-pay or
to maintain financial statement conditions or otherwise) or (ii) entered into
the purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposits in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The amount of any Guarantee shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee is made (unless such Guarantee shall be
expressly limited to a lesser amount, in which case such lesser amount shall
apply) or, if not stated or
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determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith.
"Indebtedness" of any Person means, without duplication: (i) the principal
of and premium (if any) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all Capital Lease Obligations of such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of such Person
for the reimbursement of any obligor or any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with respect to
letters of credit securing obligations (other than obligations described in (i)
through (iii) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third Business
Day following receipt by such Person of a demand for reimbursement following
payment on the letter of credit); (v) the amount of all obligations of such
Person with respect to the redemption, repayment or other repurchase of any
Disqualified Stock (the amount of Indebtedness represented by any Disqualified
Stock will be the liquidation preference, plus accrued and unpaid dividends);
(vi) to the extent not otherwise included, Interest Rate Agreements; (vii) all
obligations of the type referred to in clauses (i) through (vi) of other Persons
and all dividends of other Persons for the payment for which, in either case,
such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee; and (viii) all
obligations of the type referred to in clauses (i) through (vii) of other
Persons secured by any Lien on any property or asset of such Person (whether or
not such obligation is assumed by such Person); provided that if recourse with
respect to such Indebtedness is limited to such asset, the amount of such
Indebtedness shall be deemed to be the lesser of the value of such property or
assets or the amount of the obligation so secured.
"Interest Rate Agreement" means, with respect to any Person, the obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Investments" means, with respect to any Person on any date of
determination, the outstanding amount of (i) all investments by such Person in
other Persons (including Affiliates) in the forms of loans, Guarantees, advances
or capital contributions (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities of any other Person and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP
and (ii) all acquisitions by such Person of assets to be used in the Wireless
Cable Business (other than any such acquisitions of equipment made in the
ordinary course of such Person's business and other than any acquisition or
lease (and any deposit required to be made in connection therewith) of
additional channel rights on or after the Issue Date in any wireless cable
market listed in the offering memorandum relating to the issuance of the Units
or any wireless cable market or "Basic Trading Area" (as defined by Rand
McNally) in which the Company and its Subsidiaries (A) as of the date of the
Indenture, have channel rights, whether by way of license, lease with a channel
license holder, lease with a channel license applicant, lease with a qualified,
non-profit educational organization that plans to apply for a channel license or
option to acquire any of the foregoing (provided, however, that simultaneously
with the payment by the Company of the Additional Consent Payments, the
immediately preceding references to "Issue Date" and "date of the Indenture"
shall become "November 30, 1996"), or (B) as of the date of such acquisition or
lease, have rights with respect to at least eight wireless cable channels,
whether by way of license, lease with a channel license holder, lease with a
channel license applicant, lease with a qualified, non-profit educational
organization that plans to apply for a channel license or option to acquire any
of the
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foregoing; provided, however, that until the date on which the ratio of
annualized EBITDA to Consolidated Interest Expense equals or exceeds 1.75 to
1.00, or until the payment by the Company of the Additional Consent Payments,
the aggregate amount of such acquisitions, and leases (and deposits) of such
additional channel rights shall not exceed $12.5 million.
"Issue Date" means the date on which Notes are first authenticated and
issued.
"Lien" means, with respect to any asset, any mortgage, deed of trust, lien,
pledge, charge, security interest, lease, easement, restriction, covenant,
right-of-way, charge, encumbrance or other similar lien of any kind in respect
of such asset, whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"Marketable Securities" means (i) U.S. Government Securities maturing not
more than two years after the date of acquisition; (ii) any certificate of
deposit maturing not more than 270 days after the date of acquisition issued by,
or time deposit of, an Eligible Institution; (iii) commercial paper maturing not
more than 270 days after the date of acquisition issued by a corporation (other
than an Affiliate of the Company) with a rating, at the time as of which any
investment therein is made, of "A-1" (or higher) according to S&P or "P-1" (or
higher) according to Moody's; (iv) any banker's acceptances or money market
deposit accounts issued or offered by an Eligible Institution; and (v) any fund
investing exclusively in investments of the types described in clauses (i)
through (iv) above.
"Moody's" means Moody's Investors Service Inc. and its successors.
"Net Cash Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (excluding,
without limitation, any consideration received in the form of assumption by the
acquiring Person of Indebtedness or other obligations relating to such property
or assets or received in any other noncash form), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees and sales commissions), any relocation expenses
incurred as a result thereof, Federal, state, provincial, foreign and local
taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), title and
recording tax expenses, and in each case net of appropriate amounts to be
provided by the Company or its Subsidiaries as a reserve, in accordance with
GAAP, against any liabilities associated with such assets and retained by the
Company or any Subsidiary after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities and liabilities related to
environmental matters and the after-tax cost 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 Sale (but excluding any payments, which by the terms of the indemnities
will not, under any circumstances, be made during the term of the Notes) and net
of all payments made on any Indebtedness which is secured by any assets subject
to such Asset Sale, in accordance with the terms of any Lien upon or other
security agreement of any kind with respect to such assets, or which must by its
terms, or in order to obtain a release of such Lien or a necessary consent to
such Asset Sale, or by applicable law be repaid out of the proceeds from such
Asset Sale, and net of all distributions and other payments required to be made
to minority interests holders in Subsidiaries or joint ventures as a result of
such Asset Sale. Net Cash Proceeds shall exclude any non-cash proceeds received
from any Asset Sale, but shall include such proceeds when and as converted by
the Company or any Subsidiary to cash.
"Net Income" of any person for any period means the net income (loss) of
such Person for such period, determined in accordance with GAAP, except that
extraordinary gains and losses as determined in accordance with GAAP shall be
excluded.
"Net Proceeds" means, with respect to any issuance or sale of Equity
Interests, the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees,
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discounts and commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Opinion of Counsel" means an opinion in writing signed by legal counsel
reasonably satisfactory to the Trustee.
"Permitted Assets" means Wireless Cable Related Assets related to wireless
cable systems (i) in the United States and containing a maximum of 250,000
households within a 35-mile radius of the licensed transmission site associated
with such system, at least 15% of which households are unpassed by traditional
hard-wire cable (as supported by an officer's certificate), (ii) owned by the
Company as of November 30, 1996 or (iii) owned by Television Interactiva del
norte, SA de C.V. (but only, with respect to Investments in assets named in this
clause (iii), up to the amount of $3 million after November 30, 1996).
"Permitted Designee" means (i) a spouse, child or grandchild (whether such
relationship arises from birth, adoption or through marriage) of a Permitted
Holder, (ii) any trust, corporation, partnership or other entity, a majority in
interest of the beneficiaries, stockholders, partners or owners (direct or
beneficial) of which are Permitted Holders and/or Persons of the type referred
to in clause (i) above or (iii) any Person so long as a Permitted Holder owns at
least 50% of the Voting Stock of such Person.
"Permitted Holders" means Hunt Capital Group L.L.C. and its Affiliates,
David E. Webb and L. Allen Wheeler and their Permitted Designees.
"Permitted Investment" means (a) any Investments by the Company in a
Subsidiary (provided that, in the case of Wholly-Owned Subsidiaries, if such
Wholly-Owned Subsidiary ceases to be a Wholly-Owned Subsidiary (except by reason
of the sale by the Company or its Wholly-Owned Subsidiary of the Equity
Interests therein), then any Investment in such Subsidiary will be deemed to be
a Restricted Payment at the time of such event determined in accordance with the
"Limitation on Restricted Payments" covenant); and (b) any Investments in
Marketable Securities.
"Permitted Liens" means:
(i) Liens on (x) the Escrow Account and all funds and securities therein
securing only the Notes equally and ratably or (y) other assets of the
Company or any Subsidiary thereof securing only the Notes equally and
ratably;
(ii) Liens to secure Bank Indebtedness incurred by the Company or the
Subsidiaries in compliance with the "Limitation on Indebtedness" covenant
and Guarantees incurred by the Subsidiaries in compliance with clause (iv)
of the second paragraph of "Certain Covenants--Limitation on Indebtedness"
executed in connection therewith;
(iii) Liens on the property of the Company or its Subsidiaries created
solely for the purpose of securing purchase money obligations incurred in
compliance with the Indenture; provided that (a) such property so acquired
is for use in lines of business related to the Company's or its
Subsidiaries' business as it exists immediately prior to the issuance of the
related Indebtedness, (b) no such Lien shall extend to or cover other
property or assets of the Company and its Subsidiaries other than the
respective property so acquired and (c) the principal amount of Indebtedness
secured by any such Lien shall at no time exceed the original purchase price
of such property or assets;
(iv) Liens on the property or assets of a Subsidiary acquired after the
Issue Date or on property or assets acquired in an asset purchase
transaction with a Person that is not an Affiliate created solely to secure
the obligations that financed the acquisition of such Subsidiary or such
property and assets; provided that (a) no such Lien shall extend to or cover
property or assets of the Company and its Subsidiaries other than the
property or assets of the Subsidiary so acquired or the property or assets
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so acquired and (b) no such Lien shall extend to the Capital Stock of any
Subsidiary so acquired and (c) the principal amount of Indebtedness secured
by any such Lien shall not exceed the original purchase price of such
Subsidiary or such property or assets;
(v) Liens on the assets of any entity existing at the time such entity
or assets are acquired by the Company or any of its Subsidiaries, whether by
merger, consolidation, purchase of assets or otherwise; provided that such
Liens (a) are not created, incurred or assumed in connection with, or in
contemplation of, such assets being acquired by the Company or any of its
Subsidiaries and (b) do not extend to any other property of the Company or
any of its Subsidiaries;
(vi) Liens to secure the performance of statutory obligations, surety or
appeal bonds or performance bonds or landlords', carriers', warehousemen's,
mechanics', suppliers', materialmen's or other like Liens, in any case
incurred in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate process of
law, if a reserve or other appropriate provision, if any, as required by
GAAP shall have been made therefor;
(vii) Liens existing on the date of the Indenture;
(viii) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(ix) Liens in favor of any Federal governmental authority on any
wireless cable channels or "Basic Trading Area" (as defined by Rand McNally)
licenses acquired by the Company or any of its Subsidiaries in an auction or
other sale, provided that such wireless cable channels or "Basic Trading
Area" licenses are within the United States;
(x) Liens on any escrow account, and all funds and securities therein,
securing indebtedness incurred by the Company or the Subsidiaries pursuant
to clause (xi) of the covenant entitled "Limitation on Indebtedness"; and
(xi) extensions or renewals of any Liens referred to in clauses (i)
through (ix) above, provided that such extension or renewal does not extend
to any assets or secure any Indebtedness not securing or secured by the
Liens being extended or renewed.
Notwithstanding the foregoing, Permitted Liens may not extend to the Escrow
Account or the Escrow and Disbursement Agreement.
"Permitted Payments" means, with respect to the Company or any of its
Subsidiaries, (a) any dividend on shares of Capital Stock payable solely in
shares of Capital Stock (other than Disqualified Stock) or in options, warrants
or other rights to purchase Capital Stock (other than Disqualified Stock); (b)
any dividend, other distribution, loan or advance to the Company by any of its
Subsidiaries or by a Subsidiary to another Subsidiary; (c) any defeasance,
redemption, repurchase or other acquisition for value of any Indebtedness of the
Company with the proceeds from the issuance of (i) Indebtedness which is
subordinate to the Notes at least to the extent and in the manner as the
Indebtedness to be defeased, redeemed, repurchased or otherwise acquired is
subordinate in right of payment to the Notes; provided that (1) such
newly-issued subordinated Indebtedness provides for no payments of principal by
way of sinking fund, mandatory redemption, defeasance or otherwise by the
Company or its Subsidiaries (including, without limitation, at the option of the
holder thereof other than an option given to a holder pursuant to a Change of
Control covenant which (x) is no more favorable to the holders of such
Indebtedness than the provisions in favor of the Holders and (y) such
Indebtedness provides that the Company or its Subsidiaries will not repurchase
such Indebtedness pursuant to such provisions prior to the Company's repurchase
of the Notes required to be repurchased by the Company upon a Change of Control)
prior to the maturity of the Indebtedness being replaced and (2) the proceeds of
such new Indebtedness are
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utilized for such purpose within 45 days of issuance or (ii) Capital Stock
(other than Disqualified Stock) issued in accordance with the provisions of the
Indenture; and (d) the redemption or repurchase by a Wholly-Owned Subsidiary of
its Capital Stock owned by the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"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 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.
"Strategic Equity Investor" means any Person that, both as of the Trading
Day immediately before the day of such sale and the Trading Day immediately
after the day of such sale, has an Equity Market Capitalization of at least $2
billion and is engaged in the business of (i) transmitting video, voice or data
through wireless and other transmission facilities, (ii) creating, developing or
packaging entertainment or communication programming or (iii) evaluating,
participating or pursuing any other activity or opportunity that is related to
those identified in (i) or (ii) above.
"Subsidiary" means any corporation, association or other business entity of
which more than 50% of the total voting power of the outstanding Voting Stock
(or other interests, including partnership interests) is owned directly or
indirectly by any Person or one or more of the other Subsidiaries of that Person
or a combination thereof.
"S&P" means Standard & Poor's Corporation and its successors.
"TechniVision Transaction" means the acquisition by the Company of the
assets of TechniVision, Inc. for consideration comprised of Equity Interests of
the Company.
"Trading Day," with respect to a securities exchange or automated quotation
system, means a day on which such exchange or system is open for a full day of
trading.
"Transactions" means the AWS Transaction, the CableMaxx Transaction, the
TechniVision Transaction and the Wireless One Transaction, collectively.
"U.S. Government Securities" means securities that are (x) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt.
"Voting Stock" of any Person means all outstanding classes of Capital Stock
of any entity entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
or Preferred Stock, as the case may be, at any date, the number of years
obtained by dividing (i) the then outstanding principal amount or stated value
of such Indebtedness or Preferred Stock, as the case may be, into (ii) the total
of
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the product obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, or preference in respect
thereof, by (y) the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment.
"Wholly-Owned Subsidiary" means any Subsidiary of the Company, all of the
outstanding Capital Stock (other than directors' qualifying shares), or in the
case of a non-corporate Subsidiary, other equity interests having ordinary
voting power for the election of directors or other governing body of such
Subsidiary, of which is owned by the Company or another Wholly-Owned Subsidiary
of the Company or a combination thereof.
"Wireless Cable Business" means, when used in reference to any Person, that
such Person, directly or indirectly, is engaged primarily in the business of (i)
transmitting video, voice or data primarily through wireless transmission
facilities, (ii) utilizing wireless cable channels for any commercial purpose
permitted by the FCC, (iii) creating, developing and packaging programming that
may be used to satisfy educational programming requirements for ITFS channels
and advertising, that, in either case, is transmitted over one or more of the
Company's wireless cable channels or (iv) evaluating, participating or pursuing
any other activity or opportunity that is related to those identified in (i),
(ii) or (iii) above.
"Wireless Cable Related Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used in connection
with a Wireless Cable Business.
"Wireless One Transaction" means either (i) the transaction contemplated by
the Letter of Intent dated July 17, 1995, between the Company and Wireless One
Operating Company, a Delaware corporation ("Old Wireless One"), whereby, among
other things, Wireless One, Inc., a newly-formed Delaware corporation ("Wireless
One"), will acquire (A) all of the outstanding capital stock of Old Wireless One
(which will retain all of its assets and liabilities except its wireless cable
assets and certain related liabilities with respect to the Springfield, Missouri
market which the Company will acquire) for consideration comprised of the Common
Stock, $.01 par value per share (the "Wireless One Common Stock"), of Wireless
One and (B) the wireless cable assets and related liabilities of certain
Subsidiaries of the Company with respect to the Contributed Markets for
consideration comprised of Wireless One Common Stock and promissory notes of
Wireless One, or (ii) the transaction contemplated by the Letter Agreement dated
September 11, 1995 between the Company and Old Wireless One, whereby, among
other things, a newly-formed limited liability company ("Wireless One LLC") will
acquire (x) all of the assets of Old Wireless One for consideration comprised of
interests in Wireless One LLC and (y) all of the wireless cable assets and
related liabilities of certain Subsidiaries of the Company with respect to the
Contributed Markets for consideration comprised of interests in Wireless One LLC
and promissory notes of Wireless One LLC.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
On November 30, 1994, the Company consummated the private placement of
$40,150,000 in gross proceeds of the Convertible Notes, representing an
aggregate principal amount payable at maturity of $62,351,722 to Jupiter and an
accredited individual pursuant to the terms of the Note Purchase Agreement. The
Convertible Notes were issued with an original issue discount of approximately
35.607% from the principal amount at the maturity thereof. The Convertible Notes
mature November 1, 2004. The yield to maturity of the Convertible Notes will be
9% per annum (computed on a semi-annual bond equivalent basis). No periodic
interest payments are due on the Convertible Notes prior to the Applicable Date,
after which interest will be payable in cash semi-annually in arrears on each
May 1 and November 1, commencing with the first such date after the Applicable
Date, which shall be no later than November 30, 1999. The Convertible Notes may
be converted to Common Stock at the option of the holders thereof at any time
prior to maturity, unless previously redeemed by the Company, into the number of
shares of Common Stock computed by dividing the accreted value thereof (or, if
after the Applicable Date, the principal amount at maturity thereof plus accrued
and unpaid interest) (the "Applicable Amount") by the Conversion Price of
$15.34. The Conversion Price will not be adjusted for accrued original issue
discount, but will be subject to adjustment upon the occurrence of certain
events affecting the Common Stock. The Convertible Notes are redeemable, in
whole or in part, at the option of the Company at any time on or after November
30, 1999, at a redemption price equal to the principal amount at maturity
thereof plus accrued and unpaid interest, except that no such redemption may be
made unless the market price of the Common Stock for 20 trading days within a
period of 30 consecutive trading days ending no later than the fifth trading day
preceding the redemption notice, which 20 trading days must include the
thirtieth trading day of such period, exceeds 150% of the Conversion Price on
each of such 20 trading days. The Note Purchase Agreement contains certain
covenants that, among other things, limit or prohibit the ability of the Company
and its subsidiaries to pay dividends, to liquidate or dissolve, to merge or
sell all or substantially all of its assets, to sell or lease channel rights, to
enter into a new business, to make certain acquisitions and to incur certain
indebtedness.
On April 19, 1995, the Company consummated a private placement to the
Initial Purchaser and Lazard Freres & Co. of 100,000 Units consisting of
$100,000,000 principal amount of Series A Notes and 600,000 Warrants to purchase
shares of Common Stock. On March 13, 1996, the Company consummated an exchange
offer pursuant to which $100,000,000 principal amount of Series B Notes were
issued in exchange for an equal principal amount of Series A Notes, which were
all cancelled. The terms of the Series A Notes and the Series B Notes are
identical in all material respects to the terms of the Notes, except that (i)
the Series B Notes have been registered under the Securities Act and therefore
do not have legends restricting their transfer and the Series A Notes contain
provisions providing for an increase in the interest rate on the Series A Notes
under certain circumstances and (ii) the Series B Notes contain a provision
which permits the incurrence by the Company of $15,000,000 principal amount of
indebtedness, pursuant to which the Old Notes were offered.
On December 20, 1996, the Company consummated a private placement to the
Initial Purchaser, Alex. Brown & Sons Incorporated and Gerard Klauer Mattison &
Co., LLC of $125,000,000 principal amount of 14% Senior Notes due 2004. The
Company placed approximately $25 million of the net proceeds realized from the
sale of the 14% Notes, representing funds sufficient to pay the first three
interest payments on the 14% Notes, into an escrow account for the benefit of
the holders of the 14% Notes to pay interest on the 14% Notes and, upon certain
repurchases or redemptions of the 14% Notes, to pay principal of and premium, if
any, thereon. Interest on the 14% Notes will accrue from December 20, 1996, and
will be payable semi-annually on April 15 and October 15 of each year,
commencing April 15, 1997, at the rate of 14% per annum. The 14% Notes are
redeemable, in whole or in part, on or after October 15, 2002 at the option of
the Company, at the redemption prices specified in the indenture governing the
14% Notes (the "14% Indenture"). In addition, in the event of a sale by the
Company prior to October 15, 1999 of at least $25 million of its Capital Stock
(other than Disqualified Stock) to a
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Strategic Equity Investor (as such terms are defined in the 14% Indenture) in a
single transaction, up to 35% of the 14% Notes may be redeemed at the election
of the Company from the net cash proceeds thereof at the redemption prices set
forth in the 14% Indenture, plus accrued and unpaid interest thereon, if any, to
the date of redemption, PROVIDED that at least 65% in aggregate principal amount
of the 14% Notes originally issued remains outstanding immediately after the
occurrence of such redemption. In the event of a Change of Control (as defined
in the 14% Indenture), the Company will be required, subject to certain
conditions, to make an offer to repurchase all of the 14% Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the date of repurchase. In addition, the Company will be obligated, subject to
the rights of the holders of the Series B Notes and the Notes, to make an offer
to repurchase all or a portion of the 14% Notes at a price equal to 100% of the
principal amount of the 14% Notes to be purchased, plus accrued and unpaid
interest thereon, if any, to the date of repurchase in the event of certain
asset sales. The 14% Indenture contains certain covenants that, among other
things, limit the ability of the Company and its subsidiaries to make restricted
payments, to incur additional indebtedness, to create liens, to issue preferred
or other capital stock of subsidiaries, to consummate certain asset sales, to
permit restrictions on dividends and other payments by subsidiaries to the
Company, to consolidate, merge or sell all or substantially all of its assets,
to engage in transactions with affiliates and to engage in certain businesses.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain Federal income tax
consequences of the exchange of Old Notes for New Notes pursuant to the Exchange
Offer and of the ownership of New Notes. The discussion is based upon the Code,
Treasury Regulations, Internal Revenue Service ("IRS") 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 Notes. The following discussion assumes that holders will hold the
New Notes, and have held the Old Notes, as capital assets.
The Company has not sought and will not seek any rulings from the IRS with
respect to the positions of the Company discussed below. There can be no
assurance that the IRS will not take a different position concerning the tax
consequences of the Exchange Offer or of the purchase, ownership or disposition
of the New Notes or that any such different position would not be sustained.
The tax treatment of a holder of New Notes may vary depending on his or its
particular situation or status. This summary does not address the tax
consequences to taxpayers who are subject to special rules such as insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign entities and individuals, persons holding New Notes as a part of a
hedging or conversion transaction or a straddle and holders whose "functional
currency" is not the U.S. dollar, or aspects of Federal income taxation that may
be relevant to a holder based upon such holder's particular tax situation. In
addition, the description does not consider the effect of any applicable
foreign, state, local or other tax laws.
EACH HOLDER SHOULD CONSULT HIS OR ITS OWN TAX ADVISER AS TO THE PARTICULAR
TAX CONSEQUENCES TO HIM OR IT OF THE EXCHANGE OF OLD NOTES FOR NEW NOTES
PURSUANT TO THE EXCHANGE OFFER AND OF THE OWNERSHIP OF THE NEW NOTES, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
Although the matter is not entirely free from doubt, the exchange of an Old
Note for a New Note pursuant to the Exchange Offer should not be treated as an
exchange or otherwise as a taxable event for Federal income tax purposes.
Accordingly, the New Notes should have the same issue price as the Old Notes and
each holder should have the same adjusted basis and holding period in the New
Notes as it had in the Old Notes immediately before the Exchange Offer. It is
assumed, for purposes of the following discussion, that the consummation of the
Exchange Offer will not be treated as a taxable event and that the New Notes and
the Old Notes will be treated as the same instruments for Federal income tax
purposes.
NEW NOTES
Payments of Interest; Bond Premium. Except as otherwise described below
under Bond Premium, holders of the New Notes will be required to include
payments of qualified stated interest (as defined below) received thereon in
taxable income in accordance with their respective methods of accounting.
BOND PREMIUM. The Old Notes were originally issued at a price that exceeded
their stated redemption prices at maturity. Accordingly, a holder will be
considered to have purchased the Old Notes, and therefore the New Notes, at a
"premium". A holder who is treated as having purchased a New Note at such a
premium may elect to amortize such bond premium over the term of the New Note.
If a holder makes this election, each interest payment on the New Note will be
offset by the portion of the bond premium allocable to such interest payment,
and will therefore, reduce the amount of interest on the New Note that the
holder would otherwise have to include in income. Bond premium is amortized on a
constant yield to maturity basis (except to the extent regulations may provide
otherwise). Amortized bond premium will reduce a holder's adjusted tax basis in
the New Note. A holder that elects to amortize bond premium on a New Note, will
generally be required to amortize bond premium on all other debt instruments
that it acquired at a premium in such year, and in subsequent years.
Additionally, the manner of amortizing bond
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premium of a New Note may be affected by the Company's rights to redeem the New
Notes prior to maturity. Holders should consult with their tax advisor before
electing to amortize bond premium with respect to the New Notes.
ACQUISITION PREMIUM OF A SUBSEQUENT PURCHASER. An acquisition premium will
exist if a subsequent purchaser purchases a New Note at a cost that exceeds the
stated redemption price at maturity. In such case, a holder will be able to
elect to amortize the premium, and offset interest income on the New Notes in
the same fashion as a holder who purchased the New Notes for a premium at
original issuance.
MARKET DISCOUNT OF A SUBSEQUENT HOLDER. If a subsequent holder of a New
Note that was purchased at a "market discount" thereafter realizes gain upon its
disposition or retirement, such gain will be taxed as ordinary income to the
extent of the market discount that has accrued on a straight-line basis (or on a
constant interest rate basis, if such basis of accrual has been elected by the
holder under Section 1276(b) of the Code) while the debt instrument was held by
such holder. "Market discount" with respect to a New Note is the amount by which
the stated redemption price at Maturity of a New Note exceeds the holder's basis
in the New Note immediately after acquisition (unless such excess is less than
0.25% of the stated redemption price at maturity of the New Note multiplied by
the number of complete years from acquisition by such holder to maturity, in
which case there is no "market discount"). If a subsequent holder makes a gift
of a New Note, accrued market discount, if any, will be recognized as if such
holder had sold such New Note for a price equal to its fair market value. The
market discount rules also provide that a holder who acquires a New Note at a
market discount may be required to defer a portion of any interest expense that
otherwise may be deductible on any indebtedness incurred or maintained to
purchase or carry such New Note until the holder disposes of the New Note in a
taxable transaction.
The New Notes provide for optional redemption, in whole or in part, and, in
the case of Change of Control, a mandatory offer to redeem, prior to maturity.
If the New Notes were redeemed, a holder generally would be required to include
in gross income as ordinary income, for Federal income tax purposes, the portion
of the payment that is attributable to accrued market discount on the New Notes,
if any.
A holder of New Notes acquired at a market discount may elect to include
market discount in gross income as the discount accrues either on a
straight-line basis or on a constant interest rate basis. This current inclusion
election, once made, applies to all market discount obligations acquired on or
after the first day of the first taxable year to which the election applies, and
may not be revoked without the consent of the IRS. If a holder of New Notes
makes such an election, the foregoing rules with respect to the recognition of
ordinary income on sales and other dispositions of such debt instruments, and
with respect to the deferral of interest deductions on indebtedness incurred or
maintained to purchase or carry such debt instruments, would not apply.
SALE, EXCHANGE, REDEMPTION, RETIREMENT OR OTHER DISPOSITION OF NEW
NOTES. In general, subject to the market discount provisions discussed above,
the holder of a New Note will recognize gain or loss upon the sale, exchange,
redemption, retirement or other disposition of such debt instrument measured by
the difference between (i) the amount of cash and fair market value of property
received in exchange therefor and (ii) the holder's adjusted tax basis in such
debt instrument.
The holder's initial tax basis in a New Note which is generally equal to the
price paid therefore will be increased from time to time by the accrual of
market discount, if any, that the holder has previously elected to include in
gross income on an annual basis and decreased from time to time to reflect any
amortized premium.
Any gain or loss on the sale, exchange, redemption, retirement or other
disposition of a New Note should be capital gain or loss (except as discussed in
"Market Discount of a Subsequent Holder" above). Any capital gain or loss will
be long-term capital gain or loss if the debt instrument had been held for more
than one year and otherwise will be short-term capital gain or loss.
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BACKUP WITHHOLDING
The backup withholding rules require a payor to deduct and withhold a tax if
(i) the payee fails to furnish a taxpayer identification number ("TIN") to the
payor, (ii) the IRS notifies the payor that the TIN furnished by the payee is
incorrect, (iii) the payee has failed to report properly the receipt of
"reportable payments" on several occasions and the IRS has notified the payor
that withholding is required or (iv) there has been a failure of the payee to
certify under the penalty of perjury that the payee is not subject to
withholding under Section 3406 of the Code. If any one of the events discussed
above occurs, the Company, its paying agent or other withholding agent will be
required to withhold a tax equal to 31% of any "reportable payment" made in
connection with the New Notes. A "reportable payment" includes, among other
things, interest actually paid and amounts paid through brokers in retirement of
a New Note. Any amounts withheld from a payment to a holder under the backup
withholding rules will be allowed as a refund or credit against such holder's
Federal income tax, provided that the required information is furnished to the
IRS. Certain holders (including, among others, corporations and certain tax
exempt organizations) are not subject to the backup withholding and information
reporting requirements. A holder should consult his or its tax advisor as to his
or its qualification for exemption from backup withholding and the procedure for
obtaining such an exemption.
PLAN OF DISTRIBUTION
Based on interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that the New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any holder thereof
(other than any such holder that is an "affiliate" of the Company within the
meaning of Rule 405 promulgated under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business, such holder has no arrangement with any person to participate
in the distribution of such New Notes and neither such holder nor any such other
person is engaging in or intends to engage in a distribution of such New Notes.
Accordingly, any holder who is an affiliate of the Company or any holder using
the Exchange Offer to participate in a distribution of the New Notes will not be
able to rely on such interpretation by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a resale transaction. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer 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 any resale 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 (other than Old Notes acquired directly
from the Company). The Company has agreed that, for a period of 120 days from
the date of this Prospectus, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until March 23, 1997 (90 days from the date of this
Prospectus), all dealers effecting transactions in the New Notes may be required
to deliver a prospectus.
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 and/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-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
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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 as required, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of 120 days from the date of this Prospectus, the Company will
send a reasonable number of 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. The Company will pay all the
expenses incident to the Exchange Offer (which shall not include the expenses of
any holder in connection with resales of the New Notes). The Company has agreed
to indemnify the Initial Purchasers and any broker-dealers participating in the
Exchange Offer against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the New Notes will be
passed upon for the Company by O'Sullivan Graev & Karabell, LLP, New York, New
York.
EXPERTS
The consolidated financial statements and schedule of Heartland Wireless
Communications, Inc. as of December 31, 1995 and 1994, and for each of the years
in the three-year period ended December 31, 1995, have been incorporated by
reference herein and in the Registration Statement 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 refers to a change
in 1995 by the Company in the method of accounting for the direct costs and
installation fees related to subscriber installations.
The financial statements of Technivision, Inc. as of May 31, 1995 and 1994,
and for each of the years in the three-year period ended May 31, 1995, have been
incorporated by reference herein and in the Registration Statement 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
contains an explanatory paragraph that states that Technivision, Inc.'s
recurring losses from operations and excess of current liabilities over current
assets raise substantial doubt about the entity's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
The balance sheets of Cross Country Division as of December 31, 1993 and
1994, and the related statements of operations and division equity and cash
flows for the year ended December 31, 1993, the period from January 1, 1994 to
August 18, 1994 and the period from August 19, 1994 to December 31, 1994 have
been incorporated by reference herein and in the Registration Statement 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
contains an explanatory paragraph that refers to a business combination in 1994
accounted for as a purchase involving assets comprising a portion of Cross
Country Division. As a result of the acquisition, financial information of Cross
Country Division for periods after August 18, 1994 is presented on a different
cost basis than that for periods before August 18, 1994 and, therefore, such
information is not comparable.
The consolidated balance sheets as of June 30, 1994 and 1995 and the
consolidated statements of operations, stockholders' equity and cash flows of
CableMaxx, Inc. for the period December 18, 1992 to June 30, 1993 and the fiscal
years ended June 30, 1994 and 1995, and the consolidated statements of
operations and cash flows of Supreme Cable Co., Inc. and its subsidiaries (the
"Predecessor") for the period commencing July 1, 1992 to December 17, 1992,
incorporated by reference in this Prospectus have
67
<PAGE>
been audited by Coopers & Lybrand L.L.P., independent certified public
accountants, as indicated in their report with respect thereto, which includes
an explanatory paragraph which states that specified circumstances raise
substantial doubt about CableMaxx, Inc.'s ability to continue as a going
concern, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing.
The financial statements of American Wireless Systems, Inc. incorporated by
reference in this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving said report.
Reference is made to said report which includes an explanatory paragraph that
describes factors raising substantial doubt about the Company's ability to
continue as a going concern.
The consolidated financial statements of Fort Worth Wireless Cable T.V.
Associates incorporated by reference in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said report.
Reference is made to said report which includes an explanatory paragraph that
describes factors raising substantial doubt about the Company's ability to
continue as a going concern.
The consolidated financial statements of Wireless Cable T.V. Associates #38
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said report. Reference is made to
said report which includes an explanatory paragraph that describes factors
rasing substantial doubt about the Company's ability to continue as a going
concern.
68
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT
RELATES NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information........................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Prospectus Summary.............................. 4
Risk Factors.................................... 14
Recent Events................................... 23
The Exchange Offer.............................. 24
Description of Notes............................ 33
Description of Certain Indebtedness............. 62
Certain Federal Income Tax Considerations....... 64
Plan of Distribution............................ 66
Legal Matters................................... 67
Experts......................................... 67
</TABLE>
------------------------
UNTIL MARCH 23, 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
---------------------
PROSPECTUS
---------------------
HEARTLAND WIRELESS
COMMUNICATIONS, INC.
$15,000,000
13% SERIES D SENIOR NOTES
DUE 2003
DECEMBER 23, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law (the
"DGCL"), Article VI of the Registrant's Restated Certificate of Incorporation
(the "Certificate of Incorporation") eliminates the liability of the
Registrant's directors to the Registrant or its stockholders, except for
liabilities related to breach of duty of loyalty, actions not in good faith and
certain other liabilities.
Section 145 of the DGCL provides for indemnification by the Registrant of
its directors and officers. In addition, Article IX, Section 1 of the
Registrant's Restated By-Laws (the "By-laws") requires the Registrant to
indemnify any current or former director or officer to the fullest extent
permitted by the DGCL. In addition, the Registrant has entered into indemnity
agreements with its directors, which obligate the Registrant to indemnify such
directors to the fullest extent permitted by the DGCL. The Registrant has also
obtained officers' and directors' liability insurance which insures against
liabilities that officers and directors of the Registrant may incur in such
capacities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Letter Agreement regarding formation of the Registrant (filed as Exhibit 2.1 to the Registrant's
Registration Statement on Form S-1, File No. 33-74244 (the "Form S-1"), and incorporated herein by
reference)
2.2 Supplement to Letter Agreement regarding formation of the Registrant (filed as Exhibit 2.2 to the Form
S-1 and incorporated herein by reference)
2.3 Asset Purchase Agreement among RuralVision Joint Venture, RuralVision Central, Inc. and RuralVision
South, Inc. (filed as Exhibit 2.3 to the Registrant's Registration Statement on Form S-1, File No.
33-84408 (the "November Form S-1") and incorporated herein by reference)
2.4 Supplemental Agreement to the Asset Purchase Agreement among RuralVision Joint Venture, RuralVision
Central, Inc. and RuralVision South, Inc. (filed as Exhibit 2.4 to the November Form S-1 and
incorporated herein by reference)
2.5 Closing Agreement amending the Supplemental Agreement among RuralVision Joint Venture, RuralVision
Central, Inc. and RuralVision South, Inc. (filed as Exhibit 2.5 to the November Form S-1 and
incorporated herein by reference)
2.6 Asset Purchase Agreement between RuralVision Joint Venture and Cable Equity Partners, Inc. (filed as
Exhibit 2.6 to the November Form S-1 and incorporated herein by reference)
2.7 Letter Agreement amending Asset Purchase Agreement between RuralVision Joint Venture and Cable Equity
Partners, Inc. (filed as Exhibit 2.7 to the November Form S-1 and incorporated herein by reference)
2.8 Letter Agreement between the Registrant and Cross Country Wireless, Inc. (filed as Exhibit 2.8 to the
November Form S-1 and incorporated herein by reference)
2.9 Letter Agreement between the Registrant and Cable Equity Partners, Inc. (filed as Exhibit 2.9 to the
Registrant's Registration Statement on Form S-4, File No. 33-87076 (the "Form S-4"), and incorporated
herein by reference)
2.10 Lease Purchase Agreement between the Registrant and Choice Television of Iowa, L.C. (filed as Exhibit
2.10 to the Form S-4 and incorporated herein by reference)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
2.11 Asset Purchase Agreement between the Registrant and RuralVision Joint Venture (filed as Exhibit 2.11 to
the Form 8-K Current Report dated as of December 1, 1994 and filed with the Commission on December 14,
1994 (the "Form 8-K"), and incorporated herein by reference)
2.12 Agreement for Purchase and Sales of Assets between the Registrant and REC Services, Inc. (filed as
Exhibit 2.12 to the Form S-4 and incorporated herein by reference)
2.13 Letter Agreement among the Registrant, United States Wireless Cable, Inc. and United States Wireless
Cable Systems, Inc. (filed as Exhibit 2.13 to the Form S-4 and incorporated herein by reference)
2.14 Letter Agreement among the Registrant, Cross Country Wireless, Inc. and RuralVision Joint Venture
(filed as Exhibit 2.14 to the Form S-4 and incorporated herein by reference)
2.15 Extension Agreement among the Registrant, Cross Country Wireless, Inc., Cross Country Wireless Cable
West, L.P., RuralVision Joint Venture, RuralVision Central, Inc., RuralVision South, Inc. and Selling
Shareholders of RuralVision Central, Inc. and RuralVision South, Inc. (filed as Exhibit 2.15 to the
Form S-4 and incorporated herein by reference)
2.16 Note Modification Agreement among the Registrant, Cross Country Wireless, Inc., Cross Country Wireless
Cable West, L.P., RuralVision Joint Venture, RuralVision Central, Inc., RuralVision South, Inc., the
Selling Shareholders of RuralVision Central, Inc. and RuralVision South, Inc., the Larry D. Hudson
Trust and Jerri Hudson Bell (filed as Exhibit 2.16 to the Form S-4 and incorporated herein by
reference)
2.17 Asset Purchase Agreement between Heartland Wireless Paducah, Inc. and Cross Country Wireless, Inc.
(filed as Exhibit 2.17 to the Form S-4 and incorporated herein by reference)
2.18 First Amendment to Joint Venture Agreement between the Registrant and Cross Country Wireless, Inc.
(filed as Exhibit 2.18 to the Form S-4 and incorporated herein by reference)
2.19 Venture Distribution Agreement between the Registrant and RuralVision Joint Venture (filed as Exhibit
2.19 to the Form S-4 and incorporated herein by reference)
2.20 Stock Purchase Agreement between Wireless Communications, Inc. and Robert R. Story (filed as Exhibit
2.20 to the Registrant's Registration Statement on Form S-4, File No. 33-65337 (the "January Form
S-4"), and incorporated herein by reference)
2.21 Asset Purchase Agreement between United States Wireless Systems, Inc. and Robert R. Story, Inc. (filed
as Exhibit 2.21 to the January Form S-4 and incorporated herein by reference)
2.22 Amended and Restated Agreement and Plan of Merger dated as of September 11, 1995, between American
Wireless Systems, Inc. (Heartland Merger Sub, Inc. and the Registrant (filed as Exhibit 2.22 to the
January Form S-4 and incorporated herein by reference)
2.23 Amended and Restated Asset Purchase Agreement dated as of October 4, 1995, between Fort Worth Wireless
Cable T.V. Associates and the Registrant (filed as Exhibit 2.23 to the January Form S-4 and
incorporated herein by reference)
2.24 Amended and Restated Asset Purchase Agreement dated as of October 4, 1995, between Wireless Cable TV
Associates #38 and the Registrant (filed as Exhibit 2.24 to the January Form S-4 and incorporated
herein by reference)
2.25 Amended and Restated Agreement and Plan of Merger dated as of September 11, 1995, between CableMaxx,
Inc., Heartland Merger Sub 2, Inc. and the Registrant (filed as Exhibit 2.25 to the January Form S-4
and incorporated herein by reference)
2.26 Amended and Restated Assets Purchase Agreement dated as of October 19, 1995, between Three Sixty Corp.,
Technivision, Inc. and the Registrant (filed as Exhibit 2.26 to the January Form S-4 and incorporated
herein by reference)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
4.1 1994 Employee Stock Option Plan of the Registrant, as amended (filed as Exhibit 4.1 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995 (the "Form 10-K") and incorporated
herein by reference)
4.2 Revised Form of Nontransferable Incentive Stock Option Agreement under the 1994 Employee Stock Option
Plan of the Registrant (filed as Exhibit 4.2 to the Registrant's Registration Statement on Form S-4,
File No. 33-91930 (the "February Form S-4"), and incorporated herein by reference)
4.3 Revised Form of Nontransferable Non-Qualified Stock Option Agreement under the 1994 Employee Stock
Option Plan of the Registrant (filed as Exhibit 4.3 to the February Form S-4 and incorporated herein by
reference)
4.4 1994 Stock Option Plan for Non-Employee Directors of the Registrant (filed as Exhibit 4.4 to the Form
S-1 and incorporated herein by reference)
4.5 Form of Stock Option Agreement under the 1994 Stock Option Plan for Non-Employee Directors of the
Registrant (filed as Exhibit 4.5 to the Form S-1 and incorporated herein by reference)
4.6 Warrant Agreement between the Registrant and Gerard Klauer Mattison & Co., Inc. (including form of
warrant certificate) (filed as Exhibit 4.6 to the Form S-1 and incorporated herein by reference)
4.7 Registration Rights Agreement among the Registrant, Jupiter Partners L.P. and Thomas R. Haack (filed as
Exhibit 4.7 to the Form S-4 and incorporated herein by reference)
4.8 Stockholders Agreement among the Registrant, Hunt Capital Group, L.L.C., David E. Webb, L. Allen
Wheeler and Jupiter Partners L.P. (filed as Exhibit 4.8 to the Form S-4 and incorporated herein by
reference)
4.9 Note Purchase Agreement among the Registrant, Jupiter Partners L.P. and Thomas R. Haack (filed as
Exhibit 4.9 to the Form S-4 and incorporated herein by reference)
4.10 First Amendment to Note Purchase Agreement among the Registrant, Jupiter Partners L.P. and Thomas R.
Haack (filed as Exhibit 4.10 to the Form 10-K Annual Report filed with the Commission on March 31, 1995
(the "Form 10-K"), and incorporated herein by reference)
4.11 Second Amendment to Note Purchase Agreement among the Registrant, Jupiter Partners L.P. and Thomas R.
Haack (filed as Exhibit 4.11 to the February Form S-4 and incorporated herein by reference)
4.12 Indenture between the Registrant and First Trust of New York, National Association, as Trustee (the
"Trustee") (filed as Exhibit 4.12 to the February Form S-4 and incorporated herein by reference)
4.13 Supplemental Indenture dated October 2, 1995, between the Registrant and the Trustee (filed as Exhibit
4.13 to the February Form S-4 and incorporated herein by reference)
*4.14 Supplemental Indenture dated as of December , 1996, between the Registrant and the Trustee
4.15 Registration Rights Agreement among the Registrant, BT Securities Corporation ("BT Securities") and
Lazard Freres & Co. ("Lazard") (filed as Exhibit 4.14 to the February Form S-4 and incorporated herein
by reference)
4.16 Securityholders' and Registration Rights Agreement among the Registrant, BT Securities and Lazard
(filed as Exhibit 4.15 to the February Form S-4 and incorporated herein by reference)
4.17 Warrant Agreement between the Registrant and Bankers Trust Company, as Warrant Agent (filed as Exhibit
4.16 to the February Form S-4 and incorporated herein by reference)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
4.18 Unit Agreement among the Registrant, Bankers Trust Company, as Unit Agent and Warrant Agent, and the
Trustee (filed as Exhibit 4.17 to the February S-4 and incorporated herein by reference)
4.19 Escrow and Disbursement Agreement among the Registrant, Bankers Trust Company, as Escrow Agent, and the
Trustee (filed as Exhibit 4.18 to the February Form S-4 and incorporated herein by reference)
**4.20 Indenture between the Registrant and First Trust of New York, National Association, as Trustee (the
"Trustee")
*4.21 Supplemental Indenture dated as of December , 1996, between the Registrant and the Trustee
**4.22 Registration Rights Agreement among the Registrant and BT Securities Corporation ("BT Securities")
**4.23 Escrow and Disbursement Agreement among the Registrant, Bankers Trust Company, as Escrow Agent, and the
Trustee
*5 Opinion of O'Sullivan Graev & Karabell, LLP (including the consent of such firm) regarding legality of
securities being offered
*8 Opinion of O'Sullivan Graev & Karabell, LLP regarding the material United Stated Federal income tax
consequences to the holders of the securities being offered
**12.1 Statement re: Computation of Consolidated Earnings to Fixed Charges
**21 List of Subsidiaries
*23.1 Consent of O'Sullivan Graev & Karabell, LLP (included as part of its opinion filed as Exhibit 5 hereto)
*23.2 Consent of KPMG Peat Marwick LLP, independent certified public accountants (Registrant)
*23.3 Consent of KPMG Peat Marwick LLP, independent certified public accountants (Technivision)
*23.4 Consent of KPMG Peat Marwick LLP, independent certified public accountants (Cross Country Division)
*23.5 Consent of Coopers & Lybrand L.L.P., independent accountants
*23.6 Consent of Arthur Andersen LLP, independent public accountants
**24 Powers of Attorney
**25 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of First
Trust of New York, National Association, as Trustee
*99.1 Form of Letter of Transmittal
*99.2 Form of Notice of Guaranteed Delivery
*99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees
*99.4 Form of Letter to Clients
*99.5 Form of Exchange Agent Agreement between the Registrant and Bankers Trust Company, as Exchange Agent
</TABLE>
- ------------------------
* Filed herewith.
** Previously filed.
Schedules have been omitted because they are either not applicable or the
required information has been disclosed in the financial statements or notes
thereto.
II-4
<PAGE>
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the DGCL, the Certificate of
Incorporation and By-laws, 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.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of that time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
II-5
<PAGE>
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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 Act.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Plano,
State of Texas, on the 20th day of December, 1996.
HEARTLAND WIRELESS COMMUNICATIONS, INC.
By /s/ JOHN R. BAILEY
-----------------------------------------
John R. Bailey
SENIOR VICE PRESIDENT--FINANCE, CHIEF
FINANCIAL OFFICER (PRINCIPAL FINANCIAL
OFFICER)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed on the 20th day of December,
1996, by or on behalf of the following persons in the capacities indicated:
SIGNATURE TITLE
- ------------------------------ --------------------------
*
- ------------------------------ Chairman of the Board and
J.R. Holland, Jr. Director
*
- ------------------------------ Vice Chairman of the Board
L. Allen Wheeler and Director
President, Chief Executive
* Officer and Director
- ------------------------------ (Principal Executive
David E. Webb Officer)
Senior Vice
/s/ JOHN R. BAILEY President--Finance and
- ------------------------------ Chief Financial Officer
John R. Bailey (Principal Financial
Officer)
Vice President--Finance,
* Treasurer and Assistant
- ------------------------------ Secretary (Principal
David D. Hagey Accounting Officer)
- ------------------------------ Director
Alvin H. Lane, Jr.
- ------------------------------ Director
Dennis M. O'Rourke
II-7
<PAGE>
<TABLE>
<C> <S>
*
- ------------------------------ Director
John A. Sprague
- ------------------------------ Director
Wes W. Watkins
</TABLE>
*By: /s/ JOHN R. BAILEY
-------------------------
John R. Bailey
ATTORNEY-IN-FACT
II-8
<PAGE>
EXHIBIT 4.14
SECOND SUPPLEMENTAL INDENTURE dated as of December , 1996 between
Heartland Wireless Communications, Inc., a Delaware corporation (the "Company"),
and First Trust of New York, National Association, as trustee (the "Trustee")
under the Indenture dated as of April 26, 1995 (as amended by the supplemental
indenture dated October 7, 1995, and as further amended, supplemented or
modified from time to time, the "Indenture").
Pursuant to the Indenture, the Company has issued its 13% Senior Notes due
2003 (the "Notes"). Section 10.02 of the Indenture provides, INTER ALIA, that
the Company and the Trustee may amend or supplement the Indenture with the
written consent of the Holders of Notes of not less than a majority in aggregate
principal amount of the Notes then outstanding (the "Required Consent"). The
Company has solicited consents to the substance of this Supplemental
Indenture upon the terms and subject to the conditions set forth in its
Consent Solicitation Statement dated October 29, 1996, as amended by the
Supplements to Consent Solicitation Statement dated November 13, 1996,
November 18, 1996, November 21, 1996 and November 27, 1996 (hereinafter
referred to collectively as the "Consent Solicitation"). The Company has
obtained the Required Consent to the substance of this Second Supplemental
Indenture.
In order to effect the amendments contemplated by the Consent Solicitation
in accordance with Section 10.02 of the Indenture, the Company and the Trustee
agree as follows for the benefit of each other and for the equal and ratable
benefit of the Holders of the Notes:
ARTICLE 1
AMENDMENTS TO THE INDENTURE
SECTION 1.1. AMENDMENTS TO SECTION 1.01. (a) Section 1.01 of the
Indenture is hereby amended by adding thereto the following definitions, to be
inserted therein in alphabetical order:
"Additional Consent Payments" means payments to Holders of $55 for each
$1000 principal amount of Notes with respect to which such Holders have
delivered consents pursuant to, and prior to the Expiration Date set forth
in, the Consent Solicitation Statement of the Company dated October 29,
1996, as thereafter amended.
"Permitted Assets" means Wireless Cable Related Assets related to
wireless cable systems (i) in the United States and containing a maximum of
250,000 households within a 35-mile radius of the licensed transmission
site associated with such system, at least 15% of which households are
unpassed
<PAGE>
-2-
by traditional hard-wire cable (as supported by an Officer's Certificate),
(ii) owned by the Company as of November 30, 1996 or (iii) owned by
Television Interactiva del norte, SA de C.V. (but only, with respect to
Investments in assets named in this clause (iii), up to the amount of $3.0
million after November 30, 1996).
(b) Section 1.01 of the Indenture is hereby further amended by deleting
therefrom the definition of "Investments" in its entirety and substituting
therefor the following:
"Investments" means with respect to any Person on any date of
determination, the outstanding amount of, (i) all investments by such
Person in other Persons (including Affiliates) in the forms of loans,
Guarantees, advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course
of business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities of any other Person and
all other items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP and (ii) all acquisitions by such
Person of assets to be used in the Wireless Cable Business (other than any
such acquisitions of equipment made in the ordinary course of such Person's
business) and other than any acquisition or lease (and any deposit required
to be made in connection therewith) of additional channel rights on or
after the Issue Date in any wireless cable market or "Basic Trading Area"
(as defined by Rand McNally) in which the Company and its Subsidiaries (A)
as of the date of the Indenture, have channel rights, whether by way of
license, lease with a channel license holder, lease with a channel license
applicant, lease with a qualified, non-profit educational organization that
plans to apply for a channel license or option to acquire any of the
foregoing (provided, however, that simultaneously with the payment of the
Additional Consent Payments, the immediately preceding references to "Issue
Date" and "date of the Indenture" shall become "November 30, 1996"), or (B)
as of the date of such acquisition or lease, have rights with respect to at
least eight wireless cable channels, whether by way of license, lease with
a channel license holder, lease with a channel license applicant, lease
with a qualified, non-profit educational organization that plans to apply
for a channel license or option to acquire any of the foregoing); PROVIDED,
HOWEVER, that until the date on which the ratio of Annualized EBITDA to
Consolidated Interest Expense equals or exceeds 1.75 to 1.00, or until the
payment by the Company of the Additional Consent Payments, the aggregate
amount of such acquisitions and leases (and deposits) of such additional
channel rights shall not exceed $12.5 million.
<PAGE>
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(c) Section 1.01 of the Indenture is hereby further amended by deleting
therefrom the definition of "Permitted Liens" in its entirety and substituting
therefor the following:
"Permitted Liens" means:
(i) Liens on (x) the Escrow Account and all funds and securities
therein securing only the Notes equally and ratably or (y) other assets of
the Company or any Subsidiary thereof securing only the Notes equally and
ratably;
(ii) Liens to secure Bank Indebtedness incurred by the Company or
the Subsidiaries in compliance with Section 4.08 and Guarantees incurred by
the Subsidiaries in compliance with clause (iv) of the second paragraph of
Section 4.08 executed in connection therewith;
(iii) Liens on the property of the Company or its Subsidiaries
created solely for the purpose of securing purchase money obligations
incurred in compliance with this Indenture; provided that (a) such property
so acquired is for use in lines of business related to the Company's or its
Subsidiaries' business as it exists immediately prior to the issuance of
the related Indebtedness, (b) no such Lien shall extend to or cover other
property or assets of the Company and its Subsidiaries other than the
respective property so acquired and (c) the principal amount of
Indebtedness secured by any such Lien shall at no time exceed the original
purchase price of such property or assets;
(iv) Liens on the property or assets of a Subsidiary acquired after
the Issue Date or on property or assets acquired in an asset purchase
transaction with a Person that is not an Affiliate created solely to secure
the obligations that financed the acquisition of such Subsidiary or such
property and assets; provided that (a) no such Lien shall extend to or
cover property or assets of the Company and its Subsidiaries other than the
property or assets of the Subsidiary so acquired or the property or assets
so acquired and (b) no such Lien shall extend to the Capital Stock of any
Subsidiary so acquired and (c) the principal amount of Indebtedness secured
by any such Lien shall not exceed the original purchase price of such
Subsidiary or such property or assets;
(v) Liens on the assets of any entity existing at the time such
entity or assets are acquired by the Company or any of its Subsidiaries,
whether by
<PAGE>
-4-
merger, consolidation, purchase of assets or otherwise; provided that such
Liens (a) are not created, incurred or assumed in connection with, or in
contemplation of, such assets being acquired by the Company or any of its
Subsidiaries and (b) do not extend to any other property of the Company or
any of its Subsidiaries;
(vi) Liens to secure the performance of statutory obligations,
surety or appeal bonds or performance bonds or landlords', carriers',
warehousemen's mechanics', suppliers', materialmen's or other like Liens,
in any case incurred in the ordinary course of business and with respect
to amounts not yet delinquent or being contested in good faith by
appropriate process of law, if a reserve or other appropriate provision,
if any, as required by GAAP shall have been made therefor;
(vii) Liens existing on the date of this Indenture;
(viii) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings instituted and diligently concluded, provided that
any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor;
(ix) Liens in favor of any Federal governmental authority on any
wireless cable channels or "Basic Trading Area" (as defined by Rand
McNally) licenses acquired by the Company or any of its Subsidiaries in an
auction or other sale, provided that such wireless cable channels or "Basic
Trading Area" licenses are within the United States; and
(x) Liens on any escrow account, and all funds and securities
therein, securing indebtedness incurred by the Company or the Subsidiaries
pursuant to clause (xi) of Section 4.08; and
(xi) extensions or renewals of any Liens referred to in clauses (i)
through (ix) above, provided that such extension or renewal does not extend
to any assets or secure any Indebtedness not securing or secured by the
Liens being extended or renewed.
Notwithstanding the foregoing, Permitted Liens may not extend to the
Escrow Account or the Escrow and Disbursement Agreement.
<PAGE>
-5-
SECTION 1.2. AMENDMENT TO SECTION 4.07. Section 4.07 of the Indenture is
hereby amended by deleting the text thereof in its entirety and substituting
therefor the following:
SECTION 4.07. LIMITATION ON RESTRICTED PAYMENTS.
The Company and its Subsidiaries may not, directly or indirectly (i)
declare or pay any dividend or make any distribution on account of any
Equity Interests of the Company or any of its Subsidiaries other than
dividends or distributions payable (A) in Equity Interests of the Company
that are not Disqualified Stock or (B) to the Company or any Wholly-Owned
Subsidiary of the Company; (ii) purchase, redeem or otherwise acquire or
retire for value any Equity Interests of the Company or any of its
Subsidiaries (other than any such Equity Interests owned by the Company
or a Wholly-Owned Subsidiary); (iii) purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is
pari passu or subordinated in right of payment to the Notes, except in
accordance with the scheduled repayment provisions set forth in the original
documentation governing such Indebtedness; or (iv) in a single transaction
or a series of related transactions, until the date on which the ratio of
Annualized EBITDA to Consolidated Interest Expense equals or exceeds 1.75
to 1.00, make Investments in a cumulative amount for the Company and all
of its Subsidiaries, in excess of (A) the sum of (1) $10.0 million, and
(2) 100% of the Net Proceeds received by the Company from the issue or sale
of Equity Interests of the Company (other than Equity Interests sold to a
Subsidiary of the Company or to an employee stock ownership plan or similar
trust and other than Disqualified Stock) (provided, however, that
simultaneously with the payment of the Additional Consent Payments,
Investments made prior to November 30, 1996 shall be excluded from clause
(iv), the $10.0 million amount shall be increased to $15.0 million and
the Net Proceeds referred to in (2) above shall relate only to the issue
or sale of Equity Interests subsequent to November 30, 1996) less (B) the
cumulative amount of Net Proceeds received by the Company from the issue
or sale of Equity Interests of the Company that has been applied to make
Restricted Payments (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; (b) after giving effect to such
Restricted Payment on a pro forma basis as if such Restricted Payment had
been made at the beginning of the applicable fiscal quarter, the Company
could incur $1.00 of additional Indebtedness pursuant to the Annualized
Cash Flow Ratio test in Section 4.08; and (c) such Restricted
<PAGE>
-6-
Payment, together with the aggregate of all other Restricted Payments made
by the Company and its Subsidiaries after the Issue Date, is less than the
sum of: (x) 50% of the Consolidated Net Income (or if Consolidated Net
Income shall be a loss, minus 100% of such loss) of the Company earned from
the first day of the fiscal quarter during which the Issue Date occurs to
the end of the most recent fiscal quarter ending prior to the date of such
Restricted Payment, plus (y) 100% of the aggregate Net Cash Proceeds
received by the Company from the issue or sale of Equity Interests of the
Company (other than Equity Interests sold to a Subsidiary of the Company or
to an employee stock ownership plan or similar trust and other than
Disqualified Stock or the Net Proceeds from the sale of Equity Interests
applied to make Investments in accordance with this covenant) since the
Issue Date. Notwithstanding the foregoing, the Company and its
Subsidiaries may not, subsequent to the payment by the Company of the
Additional Consent Payments, directly or indirectly, make any Investment in
Wireless Cable Related Assets other than Permitted Assets, except as
permitted under clause (xv) of the following paragraph.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at such
date of declaration such payment would have complied with the provisions of
this Indenture: (ii) so long as no Default or Event of Default shall have
occurred and be continuing, the redemption, repurchase, retirement or
other acquisition of any Equity Interests of the Company in exchange for,
or out of the net proceeds of, the substantially concurrent sale for cash
or Marketable Securities (other than to a Subsidiary of the Company) of
other Equity Interests of the Company that are not Disqualified Stock;
(iii) so long as no Default or Event of Default shall have occurred and
be continuing, the purchase of Capital Stock of the Company (including
options, warrants or other rights to acquire such Capital Stock) from
employees or former employees or former employees of the Company or any
Subsidiary thereof pursuant to any employment agreement, management
equity subscription agreement or stock option plan or similar agreement
in effect as of the Issue Date or entered into in the ordinary course of
business for consideration which, when added to all loans made pursuant
to clause (iv) below during the fiscal year and then outstanding, does not
exceed $0.5 million in the aggregate in any fiscal year or $2.5 million
in the aggregate over the life of the Notes; (iv) so long as no Default
or Event of Default shall have occurred and be continuing, the making of
loans and advances to employees of the Company or any Subsidiary thereof
in the ordinary course of
<PAGE>
-7-
business which, when added to the aggregate consideration paid pursuant to
clause (iii) above during the same fiscal year, does not exceed $0.5
million in any fiscal year or $2.5 million in the aggregate over the life
of the Notes: provided that upon repayment of such loans or advances made
after the Issue Date, such repaid amounts shall no longer be included in
the principal amount of loans and advances made to employees; (v) so long
as no Default or Event of Default shall have occurred and be continuing, a
Permitted Refinancing; (vi) so long as no Default or Event of Default shall
have occurred and be continuing, the redemption, repurchase, retirement or
other acquisition of Equity Interests of a Subsidiary of the Company for
(A) Equity Interests of the Company that are not Disqualified Stock or
(B) up to $1.0 million in the aggregate over the life of the Notes of cash
consideration; (vii) the payment of funds to satisfy or discharge any
liability or obligation incurred by the Company as a result of its joint
and several liability as a general partner for all third-party liabilities
and obligations of RuralVision Joint Venture, if any; (viii) the
acquisition by the Company of the Cross Country Sale Assets; (ix) the
acquisition by the Company of the Tulsa, Oklahoma wireless cable market
from USWS; (x) the acquisition by the Company of the Amarillo, Texas market
from U.S. Wireless; (xi) the payment of dividends on Preferred Stock of
Subsidiaries outstanding on the Issue Date; (xii) the redemption,
repurchase, retirement or other acquisition of Capital Stock of the Company
from U.S. Wireless for a consideration comprised of the note receivable
related to the U.S. Wireless Loan; (xiii) Investments in Wireless Cable
Related Assets made with the Net Cash Proceeds from an Asset Sale made in
compliance with the first paragraph of Section 4.12 (whether such Asset Sale
shall have been consummated prior to or after the Issue Date) or otherwise
permitted by Section 4.12, provided that if such Investment had been
acquired in a simultaneous swap or exchange for the assets disposed of in
such Asset Sale, such swap or exchange would have complied with the
provisions of the third paragraph under Section 4.12; (xiv) Investments that
constitute part of an Asset Sale transaction consummated in compliance with
or otherwise permitted by the provisions of the third paragraph under
Section 4.12; (xv) Investments in the Wireless Cable Business acquired in
consideration for the issuance of Equity Interests of the Company (other
than Disqualified Stock) and cash paid in lieu of the issuance of
fractional shares and in satisfaction of any applicable dissenter's or
appraisal rights (provided that such Investments need not be in Permitted
Assets); and (xvi) the consummation of any of the Transactions. The
amounts referred to in clauses (i), (ii), (iii), (iv) and (vi) shall be
included as Restricted Payments in any computation made pursuant to clause
(c) above.
<PAGE>
-8-
Restricted Payments shall be deemed not to include Permitted Payments and
Permitted Investments.
Not later than the making of any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by Section 4.07 were computed.
SECTION 1.3. AMENDMENT OF SECTION 4.08. Section 4.08 of the Indenture is
hereby amended by deleting the text thereof in its entirety and substituting
therefor the following:
SECTION 4.08. LIMITATION ON INDEBTEDNESS.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume, Guarantee, acquire, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, "incur") any Indebtedness;
provided that the Company (but not its Subsidiaires) may incur Indebtedness
if (i) no Default or Event of Default shall have occurred and be continuing
and (ii) the Annualized Cash Flow Ratio of the Company as of the date of
such incurrence or issuance shall not exceed (x) 7.0 to 1.0 if such
incurrence or issuance occurs on or prior to the second anniversary of the
Issue Date and (y) 5.0 to 1.0 if such incurrence or issuance occurs
thereafter.
The foregoing limitation will not apply to: (i) Indebtedness
evidenced by the Notes and this Indenture; (ii) the incurrence by the
Company and its Subsidiaries of the Existing Indebtedness, other than any
Existing Indebtedness required to be repaid with proceeds of the sale of
the Units; (iii) the incurrence by the Company and its Subsidiaries of Bank
Indebtedness in an aggregate principal amount at any one time outstanding
not to exceed $25.0 million (such amount to be increased to $50.0 million
simultaneously with the payment by the Company of the Additional Consent
Payments) (less the amount of any then-outstanding Preferred Stock of
Subsidiaries issued to refinance Indebtedness to the extent such amount has
not been applied to reduce the amount of Indebtedness permitted under
clause (vii) below), as such amount may be permanently reduced as specified
in Section 4.12, and reduced by the amount of any outstanding Guarantee
incurred pursuant to clause (iv) below; provided that no Default or Event
of Default shall have occurred and be continuing at the time of such
incurrence; (iv) the Guarantee by the Subsidiaries of Bank Indebtedness
permitted to be incurred by the Company
<PAGE>
-9-
pursuant to the immediately preceding paragraph; (v) Indebtedness of the
Company issued to any Wholly-Owned Subsidiary; provided that (a) any such
Indebtedness is unsecured and is subordinated to the Notes and (b) that any
subsequent issuance or transfer of any Capital Stock which results in any
Wholly-Owned Subsidiary ceasing to be a Wholly-Owned Subsidiary or any
transfer of such Indebtedness to a Person not a Wholly-Owned Subsidiary
will be deemed an incurrence of such Indebtedness; (vi) Indebtedness of a
Subsidiary issued to and held by the Company or any Wholly-Owned Subsidiary
of the Company; provided that any subsequent issuance or transfer of any
Capital Stock which results in a Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any transfer of such Indebtedness to a Person
not a Wholly-Owned Subsidiary of the Company will be deemed an incurrence
of such Indebtedness; (vii) the incurrence by the Company or its
Subsidiaries of additional Indebtedness in an aggregate principal amount
not to exceed $ 15.0 million at any one time outstanding (less the amount
of any then-outstanding Preferred Stock of Subsidiaries issued to refinance
Indebtedness to the extent such about has not been applied to reduce the
amount of Indebtedness permitted under clause (iii) above) (provided,
however, that simultaneously with the payment by the Company of the
Additional Consent Payments, only the incurrence of indebtedness subsequent
to November 30,1996 shall be included in the computation of the $15.0
million amount set forth in this clause (vii)); (viii) the incurrence
(a "Permitted Refinancing") by the Company and its Subsidiaries of
Indebtedness issued in exchange for, or the proceeds of which are used to
extend, refinance, renew, replace or refund Indebtedness incurred pursuant
to the Annualized Cash Flow Ratio test above or pursuant to clauses (ii),
(iii), (iv), (v) and (vii) above and clause (xi) below ("Refinancing
Indebtedness"), provided that: (a) the net proceeds of such Refinancing
Indebtedness shall not exceed the principal amount of and required premium,
if any, and accrued interest on the Indebtedness so extended, refinanced,
renewed, replaced, substituted or refunded (or if such Indebtedness was
issued at an original issue discount, the original issue price plus
amortization of the original issue discount at the time of the repayment
of such Indebtedness) and reasonable expenses incurred in connection
therewith; (b) the Refinancing Indebtedness shall have a final maturity
later than, and a Weighted Average Life to Maturity equal to or
greater than, the final maturity and remaining Weighted Average Life to
Maturity of the Indebtedness being extended, refinanced, renewed, replaced
or refunded; and (c) if the Indebtedness being extended, refinanced,
renewed, replaced or refunded is subordinated in right of payment to the
Notes, the Refinancing Indebtedness shall be subordinated in right of
payment to the Notes on terms at least as
<PAGE>
-10-
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being so extended, refinanced, renewed, replaced
or refunded; (ix) the incurrence of obligations in respect of Interest Rate
Agreements relating to Indebtedness to the extent that the notional
principal amount of such obligation does not exceed the aggregate principal
amount of the Indebtedness to which such Interest Rate Agreement relates;
(x) the incurrence by the Company or any of its Subsidiaries of
Indebtedness owing to a Federal governmental authority relating to the
purchase of wireless cable channels in an auction or other sale (or
Indebtedness satisfying the requirements of (viii)(b) above issued in
exchange for, or the proceeds of which are used to extend, refinance,
renew, replace or refund, such Indebtedness) in an amount not to exceed in
the aggregate $30.0 million at any one time outstanding; or (xi)
simultaneously with or subsequent to the payment by the Company of the
Additional Consent Payments, Indebtedness, in an aggregate principal amount
not to exceed $125.0 million, to be evidenced by notes which shall have a
final maturity later than and a Weighted Average Life to Maturity greater
than the final maturity and Weighted Average Life to Maturity of the
Notes. The Company and its Subsidiaries may incur Acquired Debt only in
compliance with this covenant.
SECTION 1.4. AMENDMENT OF SECTION 4.12. Section 4.12 of the Indenture is
hereby amended by deleting the text thereof in its entirety and substituting
therefor the following:
Section 4.12. Limitation on Asset Sales.
(a) The Company will not, and will not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company or the
applicable Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors or if the Fair Market Value of such assets
exceeds $20.0 million, the Company shall receive from an investment banking
firm of national standing a written opinion in customary form as to the
fairness, to the Company, of such Asset Sale) and (ii) at least 80% of the
consideration received by the Company or the Subsidiary, as the case may
be, from such Asset Sale shall be cash or Marketable Securities and is
received at the time of such disposition. Upon the consummation of an
Asset Sale, the Company may apply, or cause such Subsidiary to apply, the
Net Cash Proceeds relating to such Asset Sale within 180 days of receipt
thereof either (A) to prepay any Bank Indebtedness and, in the case of any
Bank Indebtedness under any revolving credit facility, to effect
<PAGE>
-11-
a permanent reduction in the availability under such revolving credit
facility, (B) to reinvest in Wireless Cable Related Assets (provided that,
on and after the payment by the Company of the Additional Consent Payments,
such Wireless Cable Related Assets must be Permitted Assets) or (C) to a
combination of prepayment and investment permitted by the foregoing clauses
(A) and (B). On the 181st day after an Asset Sale or such earlier date,
if any, as the Board of Directors of the Company or of such Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale
as set forth in clauses (A), (B) or (C) of the preceding sentence (each, a
"Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash
Proceeds which have not been applied on or before such Net Proceeds Offer
Trigger Date as permitted in clauses (A), (B) or (C) of the preceding
sentence (each a "Net Proceeds Offer Amount") shall be applied by the
Company to make an offer to purchase (the "Net Proceeds Offer") on a
date (the "Net Proceeds Offer Payment Date") not less than 30 nor more
than 45 days following the applicable Net Proceeds Offer Trigger Date,
from all Holders on a PRO RATA basis that amount of Notes equal to the
Net Proceeds Offer Amount at a price equal to 100% of the principal
amount of the Notes to be purchased, plus accrued and unpaid interest
thereon, if any, to the date of purchase; PROVIDED, HOWEVER, that if
at any time any non-cash consideration received by the Company or any
Subsidiary of the Company, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Cash
Proceeds thereof shall be applied in accordance with this covenant.
(b) Notwithstanding the foregoing, if a Net Proceeds Offer Amount
is less than $5.0 million, the application of the Net Cash Proceeds
constituting such Net Proceeds Offer Amount to a Net Proceeds Offer may be
deferred until such time as such Net Proceeds Offer Amount plus the
aggregate amount of all Net Proceeds Offer Amounts arising subsequent to
the Net Proceeds Offer Trigger Date relating to such initial Net Proceeds
Offer Amount from all Asset Sales by the Company and its Subsidiaries
aggregates at least $5.0 million, at which time the Company shall apply all
Net Cash Proceeds constituting all Net Proceeds Offer Amounts that have
been so deferred to make a Net Proceeds Offer (the first date the aggregate
of all such deferred Net Proceeds Offer Amounts is equal to $5.0 million or
more shall be deemed to be a Net Proceeds Offer Trigger Date).
<PAGE>
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(c) Notwithstanding the two immediately preceding paragraphs (a)
and (b), the Company and its Subsidiaries will be permitted to consummate
an Asset Sale without complying with such paragraphs to the extent (i) at
least 95% of the consideration for such Asset Sale, other than cash
consideration, constitutes assets used in the business of the Company and
its Subsidiaries on the date of such transaction (provided that, on and
after the payment by the Company of the Additional Consent Payments, such
assets must be Permitted Assets), (ii) such Asset Sale is for Fair Market
Value (as determined in good faith by the Company's Board of Directors or
if the Fair Market Value of such assets exceeds $20.0 million, the Company
shall receive from an investment banking firm of national standing a
written opinion in customary form as to the fairness, to the Company, of
such Asset Sale) and (iii) the assets acquired in such an Asset Sale have
historically generated revenues in an amount at least equal to (1) the
revenues attributable to the assets disposed of in such Asset Sale,
multiplied by (2) a fraction, the numerator of which is the amount of
consideration other than cash consideration received in such Asset Sale,
and the denominator of which is the total amount of consideration received
in such Asset Sale (provided that the requirements of this clause (iii)
shall cease to be of any effect simultaneously with the payment of the
Additional Consent Payments); provided that any consideration received by
the Company or its Subsidiaries, as the case may be, in an Asset Sale
permitted to be consummated under this paragraph that does not constitute
assets to be used in the operations of the Company or its Subsidiaries
shall constitute Net Cash Proceeds which are subject to the provisions of
the two preceding paragraphs. In addition, notwithstanding the two
immediately preceding paragraphs, the Company will be permitted (i) to
consummate the Wireless One Transaction without complying with such
paragraphs, (ii) to sell the Call Markets to Wireless One or Wireless One
LCC without complying with such paragraphs, (iii) to sell any or all of the
RuralVision Sale Assets on or prior to December 31, 1995 without complying
with such paragraphs, (iv) to sell any or all of the assets acquired in the
AWS Transaction, the CableMaxx Transaction or the TechniVision Transaction
on or prior to the first anniversary of the consummation of each such
Transaction without complying with such paragraphs, (v) to sell any or all
of the assets acquired by way of an Investment permitted by clause (xv) of
the second paragraph of Section 4.07 on or prior to the first anniversary
of the consummation of such acquisition without complying with such
paragraphs and (vi) to sell, in a single transaction or a series of
transactions, assets for up to $25.0 million of non-cash consideration
(provided, that simultaneously with the payment of the Additional Consent
Payments, the $25.0 million amount referred to in this
<PAGE>
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clause (vi) shall be computed only with respect to sales occurring after
November 30, 1996), provided, in the case of clauses (iii), (iv), (v) and
(vi) that the Company receives consideration at the time of such Asset Sale
at least equal to the Fair Market Value of the assets sold or otherwise
disposed of (as determined in good faith by the Company's Board of
Directors or if the Fair Market Value of such assets exceeds $20.0 million,
the Company shall receive from an investment banking firm of national
standing a written opinion in customary form as to the fairness, to the
Company, of such Asset Sale).
(d) Each Net Proceeds Offer will be mailed within 25 days
following the Net Proceeds Offer Trigger Date to the record Holders as
shown on the register of Holders, at their last registered addresses as of
a date within 15 days of the mailing of such notice, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary
to enable such Holders to tender Notes pursuant to the Net Proceeds Offer
and shall state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to Section
4.12 and that all Notes tendered will be accepted for payment; PROVIDED,
HOWEVER, that if the aggregate principal amount of Notes tendered in a Net
Proceeds Offer plus accrued interest at the expiration of such offer
exceeds the aggregate amount of the Net Proceeds Offer, the Company shall
select the Notes to be purchased on a pro rata basis (with such adjustments
as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000 or multiples thereof shall be purchased);
(2) The purchase price (including the amount of accrued interest)
and the purchase date (which shall be 20 Business Days from the date of
mailing of notice of such Net Proceeds Offer, or such longer period as
required by law) (the "Proceeds Purchase Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Proceeds Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to a
Net Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to
<PAGE>
-14-
the Paying Agent at the address specified in the notice prior to the close
of business on the third Business Day prior to the Proceeds Purchase Date;
(6) that holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the second Business Day prior to
the Proceeds Purchase Date, a facsimile transmission or written letter,
signature guaranteed, setting forth the name of the Holder, the principal
amount of the Notes the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Note purchased; and
(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; PROVIDED, HOWEVER, that each Note purchased and each
new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof.
On or before the Proceeds Purchase Date, the Company shall (i) accept
for payment Notes or portions thereof tendered pursuant to the Net Proceeds
Offer which are to be purchased in accordance with item (b)(1) above, (ii)
deposit with the Paying Agent, in accordance with Section 2.14, U.S. Legal
Tender sufficient to pay the purchase price plus accrued interest, if any,
of all Notes to be purchased, (iii) deliver to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company and (iv) deliver to the
Paying Agent an Officers' Certificate specifying the Notes or portions
thereof being purchased by the Company and the payees of the purchase
price. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price plus accrued
interest, if any. For purposes of this Section 4.12, the Trustee shall act
as the Paying Agent.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
foregoing provisions of this Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the foregoing provisions of this Indenture
by virtue thereof.
<PAGE>
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ARTICLE 2
MISCELLANEOUS
SECTION 2.1 INCORPORATION OF SECOND SUPPLEMENTAL INDENTURE, RATIFICATION
OF INDENTURE. All of the provisions of this Second Supplemental Indenture shall
be deemed to be incorporated in, and made a part of, the Indenture; and the
Indenture, as supplemented and amended by this Second Supplemental Indenture,
shall be read, taken and construed as one and the same instrument. Except as
otherwise expressly modified herein, the Indenture shall remain in full force
and effect and is hereby ratified.
SECTION 2.2 HEADINGS. The headings of the Articles and Sections of this
Second Supplemental Indenture have been inserted for convenience of reference
only and are not to be considered a part of this Second Supplemental Indenture
and shall in no way modify or restrict any of the terms or provisions
hereof.
SECTION 2.3 COUNTERPART ORIGINALS. The parties may sign any number of
copies of this Second Supplemental Indenture. Each signed copy shall be an
original, but all of them taken together represent the same agreement.
SECTION 2.4 CONFLICT WITH TRUST INDENTURE ACT. If any provision of this
Second Supplemental Indenture limits, qualifies or conflicts with the duties
imposed on TIA Section 318(c), the imposed duties shall control.
SECTION 2.5. SUCCESSORS. All agreements of the Company in this Second
Supplemental Indenture shall bind its successors. All agreements of the Trustee
in this Second Supplemental Indenture shall bind its successors.
SECTION 2.6. BENEFITS OF SUPPLEMENTAL INDENTURE. Nothing in this
Second Supplemental Indenture, express or implied, shall give to any person,
other than the parties hereto and their successors hereunder and the Holders,
any benefit or any legal or equitable right, remedy or claim under this Second
Supplemental Indenture.
SECTION 2.7. DEFINED TERMS. Unless otherwise defined in this Second
Supplemental Indenture, all terms used in this Second Supplemental Indenture
which are defined in the Indenture shall have the meanings ascribed to them in
the Indenture.
SECTION 2.8 NO REPRESENTATION. The Trustee makes no representation as to
the validity or sufficiency of the Consent Solicitation, the Consents or this
Second Supplemental
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Indenture. The recitals contained herein are recitals of the Company, and the
Trustee makes no representation with respect thereto and shall have no
responsibility therefor.
SECTION 2.9 GOVERNING LAW. The Internal law of the State of New York
shall govern and be used to construe this Second Supplemental Indenture without
regard to principles of conflict of laws.
IN WITNESS WHEREOF, the Company and the Trustee have caused this Second
Supplemental Indenture to be duly executed and attested, all as of the day and
year first above written.
HEARTLAND WIRELESS
COMMUNICATIONS, INC.
[SEAL] By:/s/David D. Hagey
-----------------
Name: David D. Hagey
Attest: Title: Vice President & Controller
/s/J. Curtis Henderson
- ----------------------
Name: J. Curtis Henderson
Title: Vice President & General Counsel
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
[SEAL] By:
-------------------------------
Name:
Attest: Title:
___________________________
Name:
Title:
<PAGE>
Exhibit 4.21
SUPPLEMENTAL INDENTURE dated as of December , 1996, between Heartland
Wireless Communications, Inc., a Delaware corporation (the "Company"), and First
Trust of New York, National Association, as trustee (the "Trustee") under the
Indenture dated as of March 28, 1996 (as amended by the supplemental indenture
dated October 7, 1995, and as further amended, supplemented or modified from
time to time, the "Indenture").
Pursuant to the Indenture, the Company has issued its 13% Series C Senior
Notes due 2003 (the "Notes"). Section 10.02 of the Indenture provides, INTER
ALIA, that the Company and the Trustee may amend or supplement the Indenture
with the written consent of the Holders of Notes of not less than a majority in
aggregate principal amount of the Notes then outstanding (the "Required
Consent"). The Company has solicited consents to the substance of this
Supplemental Indenture upon the terms and subject to the conditions set forth in
its Consent Solicitation Statement dated October 29, 1996, as amended by the
Supplements to Consent Solicitation Statement dated November 13, 1996, November
18, 1996, November 21, 1996 and November 27, 1996 (hereinafter referred to
collectively as the "Consent Solicitation"). The Company has obtained the
Required Consent to the substance of this Supplemental Indenture.
In order to effect the amendments contemplated by the Consent Solicitation
in accordance with Section 10.02 of the Indenture, the Company and the Trustee
agree as follows for the benefit of each other and for the equal and ratable
benefit of the Holders of the Notes:
ARTICLE 1
AMENDMENTS TO THE INDENTURE
SECTION 1.1. AMENDMENTS TO SECTION 1.01. (a) Section 1.01 of the Indenture
is hereby amended by adding thereto the following definitions, to be inserted
therein in alphabetical order:
"Additional Consent Payments" mean payments to Holders of $55 for each
$1000 principal amount of Notes with respect to which such Holders have
delivered consents pursuant to, and prior to the Expiration Date set forth
in, the Consent Solicitation Statement of the Company dated October 29,
1996, as thereafter amended.
"Permitted Assets" means Wireless Cable Related Assets related to
wireless cable systems (i) in the United States and containing a maximum of
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250,000 households within a 35-mile radius of the licensed transmission
site associated with such system, at least 15% of which households are
unpassed by traditional hard-wire cable (as supported by an Officer's
Certificate), (ii) owned by the Company as of November 30, 1996 or (iii)
owned by Television Interactiva del norte, SA de C.V. (but only, with
respect to Investments in assets named in this clause (iii), up to the
amount of $3.0 million after November 30, 1996).
(b) Section 1.01 of the Indenture is hereby further amended by deleting
therefrom the definition of "Investments" in its entirety and substituting
therefor the following:
"Investments" means with respect to any Person on any date of
determination, the outstanding amount of, (i) all investments by such
Person in other Persons (including Affiliates) in the forms of loans,
Guarantees, advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course
of business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities of any other Person and
all other items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP and (ii) all acquisitions by such
Person of assets to be used in the Wireless Cable Business (other than any
such acquisitions of equipment made in the ordinary course of such Person's
business) and other than any acquisition or lease (and any deposit
required to be made in connection therewith) of additional channel rights
on or after the Issue Date in any wireless cable market or "Basic Trading
Area" (as defined by Rand McNally) in which the Company and its Subsidiaries
(A) as of the date of the Indenture, have channel rights, whether by way of
license, lease with a channel license holder, lease with a channel license
applicant, lease with a qualified, non-profit educational organization that
plans to apply for a channel license or option to acquire any of the
foregoing; PROVIDED, HOWEVER, that simultaneously with the payment of the
Additional Consent Payments, the immediately preceding references to "Issue
Date" and "date of the Indenture" shall become "November 30, 1996"), or (B)
as of the date of such acquisition or lease, have rights with respect to at
least eight wireless cable channels, whether by way of license, lease with
a channel license holder, lease with a channel license applicant, lease
with a qualified, non-profit educational organization that plans to apply
for a channel license or option to acquire any of the foregoing; PROVIDED,
HOWEVER, that until the date on which the ratio of Annualized EBITDA to
Consolidated Interest Expense equals or exceeds 1.75 to 1.00, or until the
payment by the Company of the Additional Consent Payments, the aggregate
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amount of such acquisitions and leases (and deposits) of such additional
channel rights shall not exceed $12.5 million.
(c) Section 1.01 of the Indenture is hereby further amended by deleting
therefrom the definition of "Permitted Liens" in its entirety and substituting
therefor the following:
"Permitted Liens" means:
(i) Liens on (x) the Escrow Account and all funds and securities
therein securing only the Notes equally and ratably or (y) other assets of
the Company or any Subsidiary thereof securing only the Notes equally and
ratably;
(ii) Liens to secure Bank Indebtedness incurred by the Company or
the Subsidiaries in compliance with Section 4.08 and Guarantees incurred by
the Subsidiaries in compliance with clause (iv) of the second paragraph of
Section 4.08 executed in connection therewith;
(iii) Liens on the property of the Company or its Subsidiaries
created solely for the purpose of securing purchase money obligations
incurred in compliance with this Indenture; provided that (a) such property
so acquired is for use in lines of business related to the Company's or its
Subsidiaries' business as it exists immediately prior to the issuance of
the related Indebtedness, (b) no such Lien shall extend to or cover other
property or assets of the Company and its Subsidiaries other than the
respective property so acquired and (c) the principal amount of
Indebtedness secured by any such Lien shall at no time exceed the original
purchase price of such property or assets;
(iv) Liens on the property or assets of a Subsidiary acquired after
the Issue Date or on property or assets acquired in an asset purchase
transaction with a Person that is not an Affiliate created solely to secure
the obligations that financed the acquisition of such Subsidiary or such
property and assets; provided that (a) no such Lien shall extend to or
cover property or assets of the Company and its Subsidiaries other than the
property or assets of the Subsidiary so acquired or the property or assets
so acquired and (b) no such Lien shall extend to the Capital Stock of any
Subsidiary so acquired and (c) the principal amount of Indebtedness secured
by any such Lien shall not exceed the original purchase price of such
Subsidiary or such property or assets;
<PAGE>
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(v) Liens on the assets of any entity existing at the time such
entity or assets are acquired by the Company or any of its Subsidiaries,
whether by merger, consolidation, purchase of assets or otherwise; provided
that such Liens (a) are not created, incurred or assumed in connection
with, or in contemplation of, such assets being acquired by the Company or
any of its Subsidiaries and (b) do not extend to any other property of the
Company or any of its Subsidiaries;
(vi) Liens to secure the performance of statutory obligations,
surety or appeal bonds or performance bonds or landlords', carriers',
warehousemen's, mechanics', suppliers', materialmen's or other like Liens,
in any case incurred in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate
process of law, if a reserve or other appropriate provision, if any, as
required by GAAP shall have been made therefor;
(vii) Liens existing on the date of this Indenture;
(viii) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(ix) Liens in favor of any Federal governmental authority on any
wireless cable channels or "Basic Trading Area" (as defined by Rand
McNally) licenses acquired by the Company or any of its Subsidiaries in an
auction or other sale, provided that such wireless cable channels or "Basic
Trading Area" licenses are within the United States;
(x) Liens on any escrow account, and all funds and securities
therein, securing indebtedness incurred by the Company or the Subsidiaries
pursuant to clause (xi) of Section 4.08; and
(xi) extensions or renewals of any Liens referred to in clauses (i)
through (ix) above, provided that such extension or renewal does not extend
to any assets or secure any Indebtedness not securing or secured by the
Liens being extended or renewed.
<PAGE>
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Notwithstanding the foregoing, Permitted Liens may not extend to the
Escrow Account or the Escrow and Disbursement Agreement.
SECTION 1.2. AMENDMENT TO SECTION 4.07. Section 4.07 of the
Indenture is hereby amended by deleting the text thereof in its entirety and
substituting therefor the following:
SECTION 4.07. LIMITATION ON RESTRICTED PAYMENTS.
The Company and its Subsidiaries may not, directly or indirectly (i)
declare or pay any dividend or make any distribution on account of any
Equity Interests of the Company or any of its Subsidiaries other than
dividends or distributions payable (A) in Equity Interests of the Company
that are not Disqualified Stock or (B) to the Company or any Wholly-Owned
Subsidiary of the Company; (ii) purchase, redeem or otherwise acquire or
retire for value any Equity Interests of the Company or any of its
Subsidiaries (other than any such Equity Interests owned by the Company or
a Wholly-Owned Subsidiary); (iii) purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness that is PARI PASSU or
subordinated in right of payment to the Notes, except in accordance with
the scheduled repayment provisions set forth in the original documentation
governing such Indebtedness; or (iv) in a single transaction or a series of
related transactions, until the date on which the ratio of Annualized
EBITDA to Consolidated Interest Expense equals or exceeds 1.75 to 1.00,
make Investments in a cumulative amount for the Company and all of its
Subsidiaries, in excess of (A) the sum of (1) $10.0 million, and (2) 100%
of the Net Proceeds received by the Company from the issue or sale of
Equity Interests of the Company (other than Equity Interests sold to a
Subsidiary of the Company or to an employee stock ownership plan or similar
trust and other than Disqualified Stock) (PROVIDED, HOWEVER, that
simultaneously with the payment of the Additional Consent Payments,
Investments made prior to November 30, 1996 shall be excluded from clause
(iv), the $10.0 million amount shall be increased to $15.0 million and the
Net Proceeds referred to in (2) above shall relate only to the issue or
sale of Equity Interests subsequent to November 30, 1996) less (B) the
cumulative amount of Net Proceeds received by the Company from the issue or
sale of Equity Interests of the Company that has been applied to make
Restricted Payments (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of such Restricted Payment: (a) no Default
or Event of Default shall have occurred and be continuing or would occur as
a consequence thereof; (b)
<PAGE>
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after giving effect to such Restricted Payment on a pro forma basis as if
such Restricted Payment had been made at the beginning of the applicable
fiscal quarter, the Company could incur $1.00 of additional Indebtedness
pursuant to the Annualized Cash Flow Ratio test in Section 4.08; and (c)
such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the
Issue Date, is less than the sum of: (x) 50% of the Consolidated Net Income
(or if Consolidated Net Income shall be a loss, minus 100% of such loss) of
the Company earned from the first day of the fiscal quarter during which
the Issue Date occurs to the end of the most recent fiscal quarter ending
prior to the date of such Restricted Payment, plus (y) 100% of the
aggregate Net Cash Proceeds received by the Company from the issue or sale
of Equity Interests of the Company (other than Equity Interests sold to a
Subsidiary of the Company or to an employee stock ownership plan or
similar trust and other than Disqualified Stock or the Net Proceeds from
the sale of Equity Interests applied to make Investments in accordance with
this covenant) since the Issue Date. Notwithstanding the foregoing, the
Company and its Subsidiaries may not, subsequent to the payment by the
Company of the Additional Consent Payments, directly or indirectly, make
any Investment in Wireless Cable Related Assets other than Permitted
Assets, except as permitted under clause (xv) of the following paragraph.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at such
date of declaration such payment would have complied with the provisions of
this Indenture; (ii) so long as no Default or Event of Default shall have
occurred and be continuing, the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out
of the net proceeds of, the substantially concurrent sale for cash or
Marketable Securities (other than to a Subsidiary of the Company) of other
Equity Interests of the Company that are not Disqualified Stock; (iii) so
long as no Default or Event of Default shall have occurred and be
continuing, the purchase of Capital Stock of the Company (including
options, warrants or other rights to acquire such Capital Stock) from
employees or former employees of the Company or any Subsidiary thereof
pursuant to any employment agreement, management equity subscription
agreement or stock option plan or similar agreement in effect as of the
Issue Date or entered into in the ordinary course of business for
consideration which, when added to all loans made pursuant to clause (iv)
below during the fiscal year and then outstanding, does not exceed $0.5
<PAGE>
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million in aggregate in any fiscal year or $2.5 million in the aggregate
over the life of the Notes; (iv) so long as no Default or Event of Default
shall have occurred and be continuing, the making of loans and advances to
employees of the Company or any Subsidiary thereof in the ordinary course
of business which, when added to the aggregate consideration paid pursuant
to clause (iii) above during the same fiscal year, does not exceed $0.5
million in any fiscal year or $2.5 million in the aggregate over the life
of the Notes; provided that upon repayment of such loans or advances made
after the Issue Date, such repaid amounts shall no longer be included in
the principal amount of loans and advances made to employees; (v) so long
as no Default or Event of Default shall have occurred and be continuing, a
Permitted Refinancing; (vi) so long as no Default or Event of Default shall
have occurred and be continuing, the redemption, repurchase, retirement or
other acquisition of Equity Interests of a Subsidiary of the Company for
(A) Equity Interests of the Company that are not Disqualified Stock or (B)
up to $1.0 million in the aggregate over the life of the Notes of cash
consideration; (vii) the payment of funds to satisfy or discharge any
liability or obligation incurred by the Company as a result of its joint
and several liability as a general partner for all third-party liabilities
and obligations of RuralVision Joint Venture, if any; (viii) the
acquisition by the Company of the Cross Country Sale Assets; (ix) the
acquisition by the Company of the Tulsa, Oklahoma wireless cable market
from USWS; (x) the acquisition by the Company of the Amarillo, Texas market
from U.S. Wireless; (xi) the payment of dividends on Preferred Stock of
Subsidiaries outstanding on the Issue Date; (xii) the redemption,
repurchase, retirement or other acquisition of Capital Stock of the Company
from U.S. Wireless for consideration comprised of the note receivable
related to the U.S. Wireless Loan; (xiii) Investments in Wireless Cable
Related Assets made with the Net Cash Proceeds from an Asset Sale made in
compliance with the first paragraph of Section 4.12 (whether such Asset
Sale shall have been consummated prior to or after the Issue Date) or
otherwise permitted by Section 4.12, provided that if such Investment had
been acquired in a simultaneous swap or exchange for the assets disposed of
in such Asset Sale, such swap or exchange would have complied with the
provisions of the third paragraph under Section 4.12; (xiv) Investments
that constitute part of an Asset Sale transaction consummated in compliance
with or otherwise permitted by the provisions of the third paragraph under
Section 4.12; (xv) Investments in the Wireless Cable Business acquired in
consideration for the issuance of Equity Interests of the Company (other
than Disqualified Stock) and cash paid in lieu of the issuance of
fractional shares and in satisfaction of any applicable dissenter's or
appraisal rights (provided that such Investments need not be in
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Permitted Assets); and (xvi) the consummation of any of the Transactions.
The amounts referred to in clauses (i), (ii), (iii), (iv) and (vi) shall be
included as Restricted Payments in any computation made pursuant to clause
(c) above. Restricted Payments shall be deemed not to include Permitted
Payments and Permitted Investments.
Not later than the making of any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by Section 4.07 were computed.
SECTION 1.3. AMENDMENT OF SECTION 4.08. SECTION 4.08 of the Indenture is
hereby amended by deleting the text thereof in its entirety and substituting
therefor the following:
SECTION 4.08. LIMITATION ON INDEBTEDNESS.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume, Guarantee, acquire, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, "incur") any Indebtedness;
provided that the Company (but not its Subsidiaries) may incur Indebtedness
if (i) no Default or Event of Default shall have occurred and be continuing
and (ii) the Annualized Cash Flow Ratio of the Company as of the date of
such incurrence or issuance shall not exceed (x) 7.0 to 1.0 if such
incurrence or issuance occurs on or prior to the second anniversary of the
Issue Date and (y) 5.0 to 1.0 if such incurrence or issuance occurs
thereafter.
The foregoing limitation will not apply to: (i) Indebtedness evidenced
by the Notes and this Indenture; (ii) the incurrence by the Company and its
Subsidiaries of the Existing Indebtedness, other than any Existing
Indebtedness required to be repaid with proceeds of the sale of the Notes;
(iii) the incurrence by the Company and its Subsidiaries of Bank
Indebtedness in an aggregate principal amount at any one time outstanding
not to exceed $25.0 million (such amount to be increased to $50.0 million
simultaneously with the payment by the Company of the Additional Consent
Payments) (less the amount of any then-outstanding Preferred Stock of
Subsidiaries issued to refinance Indebtedness to the extent such amount has
not been applied to reduce the amount of Indebtedness permitted under
clause (vii) below), as such amount may be permanently reduced as specified
in Section 4.12, and reduced by the amount of any outstanding Guarantee
incurred pursuant to clause (iv)
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below; provided that no Default or Event of Default shall have occurred and
be continuing at the time of such incurrence; (iv) the Guarantee by the
Subsidiaries of Bank Indebtedness permitted to be incurred by the Company
pursuant to the immediately preceding paragraph; (v) Indebtedness of the
Company issued to any Wholly-Owned Subsidiary; provided that (a) any such
Indebtedness is unsecured and is subordinated to the Notes and (b) that any
subsequent issuance or transfer of any Capital Stock which results in any
Wholly-Owned Subsidiary ceasing to be a Wholly-Owned Subsidiary or any
transfer of such Indebtedness to a Person not a Wholly-Owned Subsidiary
will be deemed an incurrence of such Indebtedness; (vi) Indebtedness of a
Subsidiary issued to and held by the Company or any Wholly-Owned Subsidiary
of the Company; provided that any subsequent issuance or transfer of any
Capital Stock which results in a Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any transfer of such Indebtedness to a Person
not a Wholly-Owned Subsidiary of the Company will be deemed an incurrence
of such Indebtedness; (vii) upon the payment by the Company of the
Additional Consent Payments, the incurrence by the Company or its
Subsidiaries subsequent to November 30, 1996 of additional Indebtedness in
an aggregate principal amount not to exceed $15.0 million at any one time
outstanding (less the amount of any then-outstanding Preferred Stock of
Subsidiaries issued to refinance Indebtedness to the extent such amount has
not been applied to reduce the amount of Indebtedness permitted under
clause (iii) above); (viii) the incurrence (a "Permitted Refinancing") by
the Company and its Subsidiaries of Indebtedness issued in exchange for, or
the proceeds of which are used to extend, refinance, renew, replace or
refund Indebtedness incurred pursuant to the Annualized Cash Flow Ratio
test above or pursuant to clauses (ii), (iii), (iv), (v) and (vii) above
and clause (xi) below ("Refinancing Indebtedness"), provided that: (a) the
net proceeds of such Refinancing Indebtedness shall not exceed the
principal amount of and required premium, if any, and accrued interest on
the Indebtedness so extended, refinanced, renewed, replaced, substituted or
refunded (or if such Indebtedness was issued at an original issue discount,
the original issue price plus amortization of the original issue discount
at the time of the repayment of such Indebtedness) and reasonable expenses
incurred in connection therewith; (b) the Refinancing Indebtedness shall
have a final maturity later than, and a Weighted Average Life to Maturity
equal to or greater than, the final maturity and remaining Weighted Average
Life to Maturity of the Indebtedness being extended, refinanced, renewed,
replaced or refunded; and (c) if the Indebtedness being extended,
refinanced, renewed, replaced or refunded is subordinated in right of
payment to the Notes, the Refinancing Indebtedness shall be subordinated in
<PAGE>
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right of payment to the Notes on terms at least as favorable to the Holders
of Notes as those contained in the documentation governing the Indebtedness
being so extended, refinanced, renewed, replaced or refunded; (ix) the
incurrence of obligations in respect of Interest Rate Agreements relating
to Indebtedness to the extent that the notional principal amount of such
obligation does not exceed the aggregate principal amount of the
Indebtedness to which such Interest Rate Agreement relates; (x) the
incurrence by the Company or any of its Subsidiaries of Indebtedness owing
to a Federal governmental authority relating to the purchase of wireless
cable channels in an auction or other sale (or Indebtedness satisfying the
requirements of (viii)(b) above issued in exchange for, or the proceeds of
which are used to extend, refinance, renew, replace or refund, such
Indebtedness) in an amount not to exceed in the aggregate $30.0 million at
any one time outstanding; or (xi) simultaneously with or subsequent to the
payment by the Company of the Additional Consent Payments, Indebtedness, in
an aggregate principal amount not to exceed $125.0 million, to be evidenced
by notes which shall have a final maturity later than and a Weighted
Average Life to Maturity greater than the final maturity and Weighted
Average Life to Maturity of the Notes. The Company and its Subsidiaries
may incur Acquired Debt only in compliance with this covenant.
SECTION 1.4. AMENDMENT OF SECTION 4.12. Section 4.12 of the Indenture is
hereby amended by deleting the text thereof in its entirety and substituting
therefor the following:
SECTION 4.12 LIMITATION ON ASSET SALES.
(a) The Company will not, and will not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company or the
applicable Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors or if the Fair Market Value of such assets
exceeds $20.0 million, the Company shall receive from an investment banking
firm of national standing a written opinion in customary form as to the
fairness, to the Company, of such Asset Sale) and (ii) at least 80% of the
consideration received by the Company or the Subsidiary, as the case may
be, from such Asset Sale shall be cash or Marketable Securities and is
received at the time of such disposition. Upon the consummation of an
Asset Sale, the Company may apply, or cause such Subsidiary to apply, the
Net Cash Proceeds relating to such Asset Sale within 180 days of receipt
thereof either (A) to prepay any Bank Indebtedness and, in
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the case of any Bank Indebtedness under any revolving credit facility, to
effect a permanent reduction in the availability under such revolving
credit facility, (B) to reinvest in Wireless Cable Related Assets (provided
that, on and after the payment by the Company of the Additional Consent
Payments, such Wireless Cable Related Assets must be Permitted Assets) or
(C) to a combination of prepayment and investment permitted by the
foregoing clauses (A) and (B). On the 181st day after an Asset Sale or
such earlier date, if any, as the Board of Directors of the Company or of
such Subsidiary determines not to apply the Net Cash Proceeds relating to
such Asset Sale as set forth in clauses (A), (B) or (C) of the preceding
sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount
of Net Cash Proceeds which have not been applied on or before such Net
Proceeds Offer Trigger Date as permitted in clauses (A), (B) or (C) of the
preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by
the Company to make an offer to purchase (the "Net Proceeds Offer") on a
date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than
45 days following the applicable Net Proceeds Offer Trigger Date, from all
Holders on a PRO RATA basis that amount of Notes equal to the Net Proceeds
Offer Amount at a price equal to 100% of the principal amount of the Notes
to be purchased, plus accrued and unpaid interest thereon, if any, to the
date of purchase; PROVIDED, HOWEVER, that if at any time any non-cash
consideration received by the Company or any Subsidiary of the Company, as
the case may be, in connection with any Asset Sale is converted into or
sold or otherwise disposed of for cash (other than interest received with
respect to any such non-cash consideration), then such conversion or
disposition shall be deemed to constitute an Asset Sale hereunder and the
Net Cash Proceeds thereof shall be applied in accordance with this
covenant.
(b) Notwithstanding the foregoing, if a Net Proceeds Offer Amount
is less than $5.0 million, the application of the Net Cash Proceeds
constituting such Net Proceeds Offer Amount to a Net Proceeds Offer may be
deferred until such time as such Net Proceeds Offer Amount plus the
aggregate amount of all Net Proceeds Offer Amounts arising subsequent to
the Net Proceeds Offer Trigger Date relating to such initial Net Proceeds
Offer Amount from all Asset Sales by the Company and its Subsidiaries
aggregates at least $5.0 million, at which time the Company shall apply all
Net Cash Proceeds constituting all Net Proceeds Offer Amounts that have
been so deferred to make a Net Proceeds Offer (the first date the aggregate
of all such deferred Net Proceeds Offer Amounts is equal to $5.0 million or
more shall be deemed to be a Net Proceeds Offer Trigger Date).
<PAGE>
-12-
(c) Notwithstanding the two immediately preceding paragraphs (a)
and (b), the Company and its Subsidiaries will be permitted to consummate an
Asset Sale without complying with such paragraphs to the extent (i) at
least 95% of the consideration for such Asset Sale, other than cash
consideration, constitutes assets used in the business of the Company and
its Subsidiaries on the date of such transaction (provided that, on and
after the payment by the Company of the Additional Consent Payments, such
assets must be Permitted Assets), (ii) such Asset Sale is for Fair Market
Value (as determined in good faith by the Company's Board of Directors or
if the Fair Market Value of such assets exceeds $20.0 million, the Company
shall receive from an investment banking firm of national standing a
written opinion in customary form as to the fairness, to the Company, of
such Asset Sale) and (iii) the assets acquired in such an Asset Sale have
historically generated revenues in an amount at least equal to (1) the
revenues attributable to the assets disposed of in such Asset Sale,
multiplied by (2) a fraction, the numerator of which is the amount of
consideration other than cash consideration received in such Asset Sale,
and the denominator of which is the total amount of consideration received
in such Asset Sale (provided that the requirements of this clause (iii)
shall cease to be of any effect simultaneously with the payment of the
Additional Consent Payments); provided that any consideration received by
the Company or its Subsidiaries, as the case may be, in an Asset Sale
permitted to be consummated under this paragraph that does not constitute
assets to be used in the operations of the Company or its Subsidiaries
shall constitute Net Cash Proceeds which are subject to the provisions of
the two preceding paragraphs. In addition, notwithstanding the two
immediately preceding paragraphs, the Company will be permitted (i) to
consummate the Wireless One Transaction without complying with such
paragraphs, (ii) to sell the Call Markets to Wireless One without complying
with such paragraphs, (iii) to sell any or all of the assets acquired in
the AWS Transaction, the CableMaxx Transaction or the TechniVision
Transaction on or prior to the first anniversary of the consummation of
each such Transaction without complying with such paragraphs, (iv) to sell
any or all of the assets acquired by way of an Investment permitted by
clause (xv) of the second paragraph of Section 4.07 on or prior to the
first anniversary of the consummation of such acquisition without complying
with such paragraphs and (v) to sell, in a single transaction or a series
of transactions, assets for up to $25.0 million of non-cash consideration
(provided, that simultaneously with the payment by the Company of the
Additional Consent Payments, the $25.0 million amount referred to in this
clause (v) shall be computed only with respect to sales occurring after
November 30, 1996), provided, in the case of clauses (iii), (iv) and (v)
that
<PAGE>
-13-
the Company receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the assets sold or otherwise disposed of
(as determined in good faith by the Company's Board of Directors or if the
Fair Market Value of such assets exceeds $20.0 million, the Company shall
receive from an investment banking firm of national standing a written
opinion in customary form as to the fairness, to the Company, of such Asset
Sale).
(d) Each Net Proceeds Offer will be mailed within 25 days
following the Net Proceeds Offer Trigger Date to the record Holders as
shown on the register of Holders, at their last registered addresses as of
a date within 15 days of the mailing of such notice, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary
to enable such Holders to tender Notes pursuant to the Net Proceeds Offer
and shall state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to Section
4.12 and that all Notes tendered will be accepted for payment; provided,
however, that if the aggregate principal amount of Notes tendered in a Net
Proceeds Offer plus accrued interest at the expiration of such offer
exceeds the aggregate amount of the Net Proceeds Offer, the Company shall
select the Notes to be purchased on a pro rata basis (with such adjustments
as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000 or multiples thereof shall be purchased);
(2) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be 20 Business Days from the date of
mailing of notice of such Net Proceeds Offer, or such longer period as
required by law) (the "Proceeds Purchase Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Proceeds Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to a
Net Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice prior
to the close of business on the third Business Day prior to the Proceeds
Purchase Date;
<PAGE>
-14-
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the second Business Day prior to
the Proceeds Purchase Date, a facsimile transmission or written letter,
signature guaranteed, setting forth the name of the Holder, the principal
amount of the Notes the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Note purchased; and
(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; PROVIDED, HOWEVER, that each Note purchased and each
new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof.
On or before the Proceeds Purchase Date, the Company shall (i) accept
for payment Notes or portions thereof tendered pursuant to the Net Proceeds
Offer which are to be purchased in accordance with item (b)(1) above, (ii)
deposit with the Paying Agent, in accordance with Section 2.14, U.S. Legal
Tender sufficient to pay the purchase price plus accrued interest, if any,
of all Notes to be purchased, (iii) deliver to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company and (iv) deliver to the
Paying Agent an Officers' Certificate specifying the Notes or portions
thereof being purchased by the Company and the payees of the purchase
price. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price plus accrued
interest, if any. For purposes of this Section 4.12, the Trustee shall act
as the Paying Agent.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
foregoing provisions of this Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the foregoing provisions of this Indenture
by virtue thereof.
<PAGE>
-15-
ARTICLE 2
MISCELLANEOUS
SECTION 2.1. INCORPORATION OF SUPPLEMENTAL INDENTURE, RATIFICATION OF
INDENTURE. All of the provisions of this Supplemental Indenture shall be deemed
to be incorporated in, and made a part of, the Indenture; and the Indenture, as
supplemented and amended by this Supplemental Indenture, shall be read, taken
and construed as one and the same instrument. Except as otherwise expressly
modified herein, the Indenture shall remain in full force and effect and is
hereby ratified.
SECTION 2.2. HEADINGS. The headings of the Articles and Sections of this
Supplemental Indenture have been inserted for convenience of reference only and
are not to be considered a part of this Supplemental Indenture and shall in no
way modify or restrict any of the terms or provisions hereof.
SECTION 2.3. COUNTERPART ORIGINALS. The parties may sign any number of
copies of this Supplemental Indenture. Each signed copy shall be an original,
but all of them taken together represent the same agreement.
SECTION 2.4. CONFLICT WITH TRUST INDENTURE ACT. If any provision of this
Supplemental Indenture limits, qualifies or conflicts with the duties imposed on
TIA Section 318(c), the imposed duties shall control.
SECTION 2.5. SUCCESSORS. All agreements of the Company in this
Supplemental Indenture shall bind its successors. All agreements of the Trustee
in this Supplemental Indenture shall bind its successors.
SECTION 2.6. BENEFITS OF SUPPLEMENTAL INDENTURE. Nothing in this
Supplemental Indenture, express or implied, shall give to any person, other than
the parties hereto and their successors hereunder and the Holders, any benefit
or any legal or equitable right, remedy or claim under this Supplemental
Indenture.
SECTION 2.7. DEFINED TERMS. Unless otherwise defined in this
Supplemental Indenture, all terms used in this Supplemental Indenture which are
defined in the Indenture shall have the meanings ascribed to them in the
Indenture.
SECTION 2.8. NO REPRESENTATION. The Trustee makes no representation as
to the validity or sufficiency of the Consent Solicitation, the Consents or this
Supplemental
<PAGE>
-16-
Indenture. The recitals contained herein are recitals of the Company, and the
Trustee makes no representation with respect thereto and shall have no
responsibility therefor.
SECTION 2.9. GOVERNING LAW. The Internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture without regard
to principles of conflict of laws.
IN WITNESS WHEREOF, the Company and the Trustee have caused this
Supplemental Indenture to be duly executed and attested, all as of the day and
year first above written.
HEARTLAND WIRELESS
COMMUNICATIONS, INC.
[SEAL] By: /s/ David D. Hagey
-----------------------------
Name: David D. Hagey
Attest: Title: Vice President & Controller
/s/ J. Curtis Henderson
- -------------------------------
Name: J. Curtis Henderson
Title: Vice President & General Counsel
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
[SEAL] By:
-----------------------------
Name:
Attest: Title:
- --------------------------------------
Name:
Title:
<PAGE>
[LETTERHEAD]
December 20, 1996
Heartland Wireless
Communications, Inc.
200 Chisholm Place, Suite 200
Plano, Texas 75075
Heartland Wireless Communications, Inc.
13% Series D Senior Notes Due 2003
----------------------------------
Dear Sirs:
We have acted as counsel for Heartland Wireless Communications, Inc.,
a Delaware corporation (the "Company"), in connection with the preparation and
filing of the Registration Statement of the Company on Form S-4, as amended
(File No. 333-12577) (the "Registration Statement"), under the Securities Act of
1933, as amended (the "Securities Act").
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of rendering
the opinions set forth below. As to certain questions of fact material to the
opinions contained herein, we have relied upon certificates or statements of
officers of the Company and certificates of public officials. In such
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity to authentic
originals of all documents submitted to us as certified or photostatic copies.
Based upon the foregoing, we are of the opinion as follows:
1. The Company is a validly existing corporation under the laws of
the State of Delaware.
2. The 13% Series D Senior Notes Due 2003 (the "Series D Notes") of
the Company have been duly authorized and, when issued upon consummation of the
Exchange Offer (as definded in the Registration Statement) as contemplated by
the Registration Statement and the Indenture between the Company and First Trust
of New York, National Association, as trustee (the "Trustee"), as supplemented
from time to time, will be validly issued.
<PAGE>
[LETTERHEAD]
Heartland Wireless Communications, Inc.
December 20, 1996
Page 2
We are admitted to the Bar of the State of New York and we express no
opinion as to the laws of any other jurisdiction other than the Delaware General
Corporation Law.
We know that we are referred to under the heading "Legal Matters" in
the Prospectus forming a part of the Registration Statement, and we hereby
consent to such use of our name in said Registration Statement and to the use of
this opinion for filing with said Registration Statement as Exhibit 5 thereto.
Very truly yours,
/s/ O'Sullivan Graev & Karabell, LLP
<PAGE>
[LETTERHEAD]
December 20, 1996
Heartland Wireless
Communications, Inc.
200 Chisholm Place, Suite 200
Plano, Texas 75075
Heartland Wireless Communications, Inc.
13% Series D Senior Notes Due 2003
----------------------------------
Dear Sirs:
We have acted as counsel for Heartland Wireless Communications, Inc.,
a Delaware corporation (the "Company"), in connection with the preparation and
filing of the Registration Statement of the Company on Form S-4, as amended
(File No. 333-12577) (the "Registration Statement"), under the Securities Act of
1933, as amended (the "Securities Act"). All capitalized terms used herein and
not otherwise defined herein shall have the meanings set forth in the
Registration Statement.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of rendering
the opinions set forth below. As to certain questions of fact material to the
opinions contained herein, we have relied upon certificates or statements of
officers of the Company and certificates of public officials. In such
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity to authentic
originals of all documents submitted to us as certified or photostatic copies.
Based upon and subject to the foregoing, and subject to the
qualifications and limitations set forth therein, we are of the opinion that the
discussion in the Registration Statement entitled "CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS" fairly presents the material Federal income tax considerations
relevant to the exchange of Old Notes for New Notes pursuant to the Exchange
Offer.
<PAGE>
Heartland Wireless Communications, Inc.
December 20, 1996
Page 2
We know that we are referred to under the heading "Legal Matters" in
the Prospectus forming a part of the Registration Statement, and we hereby
consent to such use of our name in said Registration Statement and to the use of
this opinion for filing with said Registration Statement as Exhibit 8 thereto.
Very truly yours,
/s/ O'Sullivan Graev & Karabell, LLP
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Heartland Wireless Communications, Inc.;
We consent to (a) the incorporation by reference herein of our reports dated
March 8, 1996, on the consolidated balance sheets of Heartland Wireless
Communications, Inc. as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1995, and the
related schedule, which reports are included in the December 31, 1995 annual
report on Form 10-K of Heartland Wireless Communications, Inc. and (b) the
reference to our firm under the heading "Experts" in the prospectus.
Our report relating to the consolidated financial statements of Heartland
Wireless Communications, Inc. refers to a change in 1995 in the method of
accounting for direct costs and installation fees related to subscriber
installations.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Dallas, Texas
December 19, 1996
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Heartland Wireless Communications, Inc.;
We consent to (a) the incorporation by reference herein of our report dated
October 25, 1995, on the balance sheets of TechniVision, Inc. as of May 31, 1995
and 1994, and the related statements of operations, stockholders' deficit, and
cash flows for each of the years in the three-year period ended May 31, 1995,
which report is included in Form 8-K/A-2 of Heartland Wireless Communications,
Inc. filed with the Securities and Exchange Commission on April 26, 1996 and (b)
the reference to our firm under the heading "Experts" in the prospectus.
Our report relating to the consolidated statements of TechniVision, Inc.
contains an explanatory paragraph that states that TechniVision, Inc.'s
recurring losses from operations and excess of current liabilities over current
assets raise substantial doubt about the entity's 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
Dallas, Texas
December 19, 1996
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Heartland Wireless Communications, Inc.;
We consent to (a) the incorporation by reference herein of our report dated
July 28, 1995, on the balance sheets of Cross Country Division as of December
31, 1994 and 1993, and the related statements of operations, division equity,
and cash flows for the year ended December 31, 1993, the period from January 1,
1994 to August 18, 1994 and the period from August 19, 1994 to December 31,
1994, which report is included in Form 8-K/A-2 of Heartland Wireless
Communications, Inc. filed with the Securities and Exchange Commission on April
26, 1996 and (b) the reference to our firm under the heading "Experts" in the
prospectus.
Our report relating to the financial statements of Cross Country Division
contains an explanatory paragraph that refers to a business combination in 1994
accounted for as a purchase involving assets comprising a portion of Cross
Country Division. As a result of the acquisition, financial information of
Cross Country Division for periods after August 18, 1994 is presented on a
different cost basis than that for periods before August 18, 1994 and,
therefore, such information is not comparable.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Dallas, Texas
December 19, 1996
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 1 to Form S-4
to be filed by Heartland Wireless Communications, Inc., of our report, which
includes an explanatory paragraph which states that specified circumstances
raise substantial doubt about CableMaxx, Inc.'s ability to continue as a going
concern, dated August 25, 1995, on our audits of the consolidated balance sheets
of CableMaxx, Inc. as of June 30, 1994 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for the period
December 18, 1992 to June 30, 1993 and for the years ended June 30, 1994 and
1995, and of the consolidated statements of operations and cash flows of Supreme
Cable Co., Inc. and Subsidiaries (the "Predecessor") for the period from July 1,
1992 to December 17, 1992. We also consent to the reference to our firm under
the caption "Experts."
/s/ Coopers & Lybrand LLP
COOPERS & LYBRAND L.L.P.
Austin, Texas
December 20, 1996
<PAGE>
EXHIBIT 23.6
[LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement (File No. 333-12577) of our reports
dated February 23, 1996, included in Heartland Wireless Communications, Inc.'s
current report on Form 8-K/A-2 dated February 23, 1996 and to all references to
our firm included in or made part of this registration statement.
/s/ Arthur Andersen LLP
Phoenix, Arizona,
December 18, 1996.
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
13% SERIES C SENIOR NOTES DUE 2003
OF
HEARTLAND WIRELESS COMMUNICATIONS, INC.
PURSUANT TO THE PROSPECTUS DATED DECEMBER 23, 1996
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JANUARY 22, 1997, UNLESS EXTENDED.
To: Bankers Trust Company, as Exchange Agent
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND: BY OVERNIGHT MAIL OR COURIER:
BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc.
Reorganization Unit Corporate Trust and Agency Group Corporate Trust and Agency Group
P.O. Box 292737 Receipt & Delivery Window Reorganization Unit
Nashville, TN 37229-2737 123 Washington Street, 1st Floor 648 Grassmere Park Road
New York, NY 10006 Nashville, TN 37211
FOR INFORMATION CALL:
(800) 735-7777
Confirm: (615) 835-3572
Facsimile (615) 835-3701
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF
TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS
COMPLETED.
The undersigned acknowledges that he or she has received the Prospectus,
dated December 23, 1996 (the "Prospectus), of Heartland Wireless Communications,
Inc. (the "Company") and this Letter of Transmittal (the "Letter of
Transmittal"), which together constitute the Company's offer (the "Exchange
Offer") to exchange its 13% Series D Senior Notes due 2003 (the "New Notes") for
an equal principal amount of its 13% Series C Senior Notes due 2003 (the "Old
Notes" and, together with the New Notes, the "Notes"). 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 of 1933, as amended (the
"Securities Act"), and, therefore, will not bear legends restricting their
transfer and will not contain certain provisions providing for an increase in
the interest rate on the Old Notes under certain circumstances relating to the
Registration Rights Agreement (as defined in the Prospectus). The term
"Expiration Date" shall mean 5:00 p.m., New York City time, on January 22, 1997,
unless the Exchange Offer is extended as provided in the Prospectus, in which
case the term "Expiration Date" shall mean the latest date and time to which the
Exchange Offer is extended. Capitalized terms used but not defined herein have
the meanings given to them in the Prospectus.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal or an Agent's Message (as defined in the Prospectus) and any other
documents required by this Letter of Transmittal to the Exchange Agent prior to
the Expiration Date must tender their Old Notes according to the guaranteed
delivery procedures set forth under the caption "The Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus. See Instruction 5.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
<PAGE>
If the undersigned is a 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), the
undersigned may be deemed to be an "underwriter" under the Securities Act and
the undersigned acknowledges, therefore, that it will deliver a prospectus in
connection with any resale of such New Notes. 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.
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY
BEFORE COMPLETING THIS LETTER OF TRANSMITTAL
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF 13% SERIES C SENIOR NOTES DUE 2003
Name(s) and Aggregate Principal Amount
Address(es) of Principal Tendered (must
Registered Holder(s) Amount be in integral
(please fill in, if Certificate Represented by multiples
blank) Number(s) Certificate(s) of $1,000)*
TOTAL
* Unless indicated in the column labeled "Principal Amount Tendered," any tendering
Holder of
Old Notes will be deemed to have tendered the entire aggregate principal amount
represented by
the column labeled "Aggregate Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and principal
amounts on a
separate signed schedule and affix such schedule to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount. All other tenders must be in
integral
multiples of $1,000.
</TABLE>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE EXCHANGE AGENT'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY ("DTC") AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN DTC MAY DELIVER SHARES BY
BOOK-ENTRY TRANSFER) (SEE INSTRUCTION 4):
Name of Tendering Institution________________________________________________
Account No.__________________________________________________________________
Transaction Code Number______________________________________________________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING (SEE INSTRUCTION 5):
Name(s) of Registered Holder(s)______________________________________________
Window Ticket Number (if any)________________________________________________
Date of Execution of Notice of Guaranteed Delivery___________________________
Name of Institution which Guaranteed Delivery________________________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO AND COMPLETE THE FOLLOWING:
Name:________________________________________________________________________
Address:_____________________________________________________________________
______________________________________________________________________
<PAGE>
<TABLE>
<S> <C>
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 7, 8 AND 9) (SEE INSTRUCTIONS 7, 8 AND 9)
To be completed ONLY if certificates To be completed ONLY if certificates
for Old Notes in a principal amount not for Old Notes in a principal amount not
tendered, or New Notes issued in tendered, or New Notes issued in
exchange for Old Notes accepted for exchange for Old Notes accepted for
exchange, are to be issued in the name exchange, are to be sent to someone
of someone other than the undersigned. other than the undersigned, or to the
undersigned at an address other than
that shown above.
Issue certificate(s) to: Deliver certificate(s) to:
Name: Name:
(Please (Please Print)
Print) Address:
Address:
(Include Zip Code)
(Include Zip
Code) (Tax Identification or Social Security
No.)
(Tax Identification or Social
Security No.)
</TABLE>
<PAGE>
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Old Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Old Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Old Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Old Notes with
full power of substitution (i) to deliver certificates for such Old Notes to the
Company and deliver all accompanying evidences of transfer and authenticity to,
or upon the order of, the Company and (ii) to present such Old Notes for
transfer on the books of the Company, all in accordance with the terms of the
Exchange Offer. The power of attorney granted in this paragraph shall be deemed
to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, sell, assign and transfer the Old Notes tendered hereby
and that the Company will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim when the same are acquired by the Company. The undersigned and
any beneficial owner of Old Notes tendered hereby further represent and warrant
that (i) the New Notes acquired by the undersigned and any such beneficial owner
of Old Notes pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such New Notes, (ii) neither the
undersigned nor any such beneficial owner has an arrangement with any person to
participate in the distribution of such New Notes, (iii) neither the undersigned
nor any such beneficial owner nor any such other person is engaging in or
intends to engage in a distribution of such New Notes and (iv) neither the
undersigned nor any such other person is an "affiliate," as defined under Rule
405 promulgated under the Securities Act, of the Company. The undersigned and
each beneficial owner acknowledge and agree that any person who is an affiliate
of the Company or who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a resale transaction of the New Notes acquired by such person
and may not rely on the position of the staff of the Securities and Exchange
Commission set forth in the no-action letters discussed in the Prospectus under
the caption "The Exchange Offer-- Purpose and Effect of the Exchange Offer." The
undersigned and each beneficial owner will, upon request, execute and deliver
any additional documents deemed by the Exchange Agent or the Company to be
necessary or desirable to complete the sale, assignment and transfer of the Old
Notes tendered hereby.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given oral
notice (confirmed in writing) or written notice thereof to the Exchange Agent.
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer because of an invalid tender, the occurrence of certain other
events set forth in the Prospectus or otherwise, any such unaccepted Old Notes
will be returned, without expense, to the undersigned at the address shown below
or at a different address as may be indicated herein under "Special Delivery
Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer, subject only to withdrawal of
such tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders."
<PAGE>
Unless otherwise indicated under "Special Registration Instructions," please
issue the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and any certificates for Old Notes not tendered or
not exchanged, in the name(s) of the undersigned. Similarly, unless otherwise
indicated under "Special Delivery Instructions," please send the certificates
representing the New Notes issued in exchange for the Old Notes accepted for
exchange and any certificates for Old Notes not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the address shown
below the undersigned's signature(s). In the event that both "Special
Registration Instructions" and "Special Delivery Instructions" are completed,
please issue the certificates representing the New Notes issued in exchange for
the Old Notes accepted for exchange in the name(s) of, and return any
certificates for Old Notes not tendered or not exchanged to, the person(s) so
indicated. The undersigned understands that the Company has no obligation
pursuant to the "Special Registration Instructions" and "Special Delivery
Instructions" to transfer any Old Notes from the name of the registered
Holder(s) thereof if the Company does not accept for exchange any of the Old
Notes so tendered.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal and any other documents required by this Letter of Transmittal to
the Exchange Agent prior to the Expiration Date may tender their Old Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 5.
<PAGE>
<TABLE>
<S> <C>
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X Date:
X Date:
Signature(s) of Registered Holder(s) or Authorized Signatory
Area Code and Telephone Number:
THE ABOVE LINES MUST BE SIGNED BY THE REGISTERED HOLDER(S) AS HIS OR HER NAME(S) APPEAR(S)
ON THE OLD NOTES OR BY PERSON(S) AUTHORIZED TO BECOME REGISTERED HOLDER(S) BY A PROPERLY
COMPLETED BOND POWER FROM THE REGISTERED HOLDER(S), A COPY OF WHICH MUST BE TRANSMITTED WITH
THIS LETTER OF TRANSMITTAL. IF THE OLD NOTES TO WHICH THIS LETTER OF TRANSMITTAL RELATE ARE
HELD OF RECORD BY TWO OR MORE JOINT HOLDERS, THEN ALL SUCH HOLDERS MUST SIGN THIS LETTER OF
TRANSMITTAL. IF THIS LETTER OF TRANSMITTAL OR ANY OLD NOTES OR BOND POWERS ARE SIGNED BY A
TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR
OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, SUCH PERSON MUST (I) SO
INDICATE AND SET FORTH HIS OR HER FULL TITLE BELOW AND (II) UNLESS WAIVED BY THE COMPANY,
SUBMIT EVIDENCE SATISFACTORY TO THE COMPANY OF SUCH PERSON'S AUTHORITY TO SO ACT. SEE
INSTRUCTION 7.
Name(s):
(Please Print)
Capacity:
Address
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 7)
(Authorized Signature)
(Title)
(Name of Firm)
Date: , 199
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. PROCEDURES FOR TENDERING. This Letter of Transmittal or a facsimile
hereof, properly completed and duly executed, or an Agent's Message and any
other documents required by this Letter of Transmittal 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. In addition, either (i) certificates for tendered
Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal or (ii) a timely confirmation of a book-entry transfer (a "Book
Entry Confirmation") of such Old Notes, if such procedure is available, into the
Exchange Agent's account at DTC 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.
THE METHOD OF DELIVERY OF OLD NOTES AND THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY
MAIL, IT IS RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT OR HAND DELIVERY
SERVICE. IF SENT BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT
REQUESTED, BE USED AND PROPER INSURANCE BE OBTAINED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO 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 this Letter of
Transmittal) shall 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 be
under any duty to give any such notification, nor shall any of them 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 this Letter of
Transmittal, as soon as practicable following the Expiration Date.
2. TENDER BY HOLDER. Only a Holder of Old Notes may tender such Old Notes in
the Exchange Offer. 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
such registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's own behalf, such
beneficial owner must, prior to completing and executing this Letter of
Transmittal and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
<PAGE>
3. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in integral
multiples of $1,000. If less than the entire principal amount of any Old Notes
is tendered, the tendering Holder should fill in the principal amount tendered
in the fourth column of the box entitled "Description of 13% Series C Senior
Notes due 2003" above. The entire principal amount of any Old Notes delivered to
the Exchange Agent will be deemed to have been tendered unless otherwise
indicated. If the entire principal amount of all Old Notes is not tendered, then
Old Notes for the principal amount of Old Notes not tendered and a certificate
or certificates representing New Notes issued in exchange for any Old Notes
accepted will be sent to the Holder at his or her registered address, unless a
different address is provided in the appropriate box on this Letter of
Transmittal, promptly after the Old Notes are accepted for exchange.
4. BOOK-ENTRY TRANSFER. Any financial institution that is a participant in
DTC's system may make book-entry delivery of Old Notes by causing DTC to
transfer such Old Notes into the Exchange Agent's account at DTC in accordance
with DTC's procedures for transfer. However, although delivery of Old Notes may
be effected through book-entry transfer at DTC, this Letter of Transmittal or a
facsimile hereof, or an Agent's Message, with any required signature guarantees
and any other required documents, must, in any case, be transmitted to and
received by the Exchange Agent on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
5. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Old
Notes and (i) whose Old Notes are not immediately available or (ii) who cannot
deliver their Old Notes, this Letter of Transmittal or an Agent's Message or any
other documents required hereby to the Exchange Agent prior to the Expiration
Date must tender their Old Notes according to the guaranteed delivery procedures
set forth in the Prospectus. Pursuant to such procedure: (a) such tender must be
made through an Eligible Institution (as defined below); (b) prior to the
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder, the certificate number(s) of such Old Notes and the
principal amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange trading days
after the Expiration Date, this Letter of Transmittal (or facsimile hereof) or
an Agent's Message together with the certificate(s) representing the Old Notes,
or a Book-Entry Confirmation, and any other required documents will be deposited
by the Eligible Institution with the Exchange Agent; and (c) such properly
completed and executed Letter of Transmittal (or facsimile hereof) or an Agent's
Message, as well as the certificate(s) representing all tendered Old Notes in
proper form for transfer, or a Book-Entry Confirmation, as the case may be, and
all other documents required by this Letter of Transmittal must be received by
the Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date, all as provided in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures." Any Holder who wishes to tender
his or her Old Notes pursuant to the guaranteed delivery procedures described
above must ensure that the Exchange Agent receives the Notice of Guaranteed
Delivery prior to 5:00 p.m., New York City time, on the Expiration Date. Upon
request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to
Holders who wish to tender their Old Notes according to the guaranteed delivery
procedures set forth above.
<PAGE>
6. WITHDRAWAL OF TENDERS. To withdraw a tender of Old Notes in the Exchange
Offer, a written or facsimile transmission notice of withdrawal must be received
by the Exchange Agent 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
persons 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. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the withdrawing
Holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at DTC to be credited with the withdrawn Old Notes and otherwise comply with the
procedures of such facility. 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, which determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Properly withdrawn Old Notes may be retendered by following one of
the procedures described above in Instruction 1, under Procedures for Tendering,
at any time prior to the Expiration Date.
7. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile hereof) is
signed by the registered holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes tendered and the certificate or
certificates for New Notes issued in exchange therefor is to be issued (or any
untendered principal amount of Old Notes is to be reissued) to the registered
holder or holders and neither the "Special Delivery Instructions" nor the
"Special Registration Instructions" has been completed, then such holder or
holders need not and should not endorse any tendered Old Notes, nor provide a
separate bond power. In any other case, such holder or holders must either
properly endorse the Old Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal with the signatures on the
endorsement or bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or bond
powers are signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person must so indicate when signing, and,
unless waived by the Company, submit evidence satisfactory to the Company of
such person's authority to so act with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 7 must be guaranteed by an Eligible Institution which is a member of
(a) the Securities Transfer Agents Medallion Program, (b) the New York Stock
Exchange Medallion Signature Program or (c) the Stock Exchange Medallion
Program.
<PAGE>
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a firm that is a member of a registered
national securities exchange or the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an "Eligible
Institution"). Signatures on this Letter of Transmittal need not be guaranteed
if (a) this Letter of Transmittal is signed by the registered holder(s) of the
Old Notes tendered herewith and such holder(s) have not completed the box set
forth herein entitled "Special Registration Instructions" or the box set forth
herein entitled "Special Delivery Instructions" or (b) such Old Notes are
tendered for the account of an Eligible Institution.
8. Special Registration and Delivery Information. Tendering holders should
indicate, in the applicable box or boxes, the name and address to which New
Notes or substitute Old Notes for principal amounts not tendered or not accepted
for exchange are to be issued or sent, if different from the name and address of
the person singing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
9. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered in the name of, any person other than the registered holder of the
Old Notes tendered hereby, or if tendered Old Notes are registered in the name
of any person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or on any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with this Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
Except as provided in this Instruction 9, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
10. WAIVER OF CONDITIONS. The Company reserves the right, in its sole
discretion, to amend, waive or modify specified conditions in the Exchange Offer
in the case of any Old Notes tendered.
11. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instructions.
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address specified
herein. Holders may also contact their broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Exchange Offer.
<PAGE>
IMPORTANT TAX INFORMATION
The Holder is required to give the Exchange Agent the social security number
or employer identification number of the Holder of the Notes. If the Notes are
in more than one name or are not in the name of the actual owner, consult the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional guidance on which number to report.
PAYER'S NAME: HEARTLAND WIRELESS COMMUNICATIONS, INC.
<TABLE>
<S> <C> <C>
Name of Holder (if joint, list first and circle the name of
the person or entity whose number you enter in Part I below).
Address (if Holder does not complete, signature below will
constitute a certification that the above address is correct.)
SUBSTITUTE Part I--Please provide your
FORM W-9 TIN in the box at right and Social Security Number
DEPARTMENT OF THE TREASURY certify by signing and or
INTERNAL REVENUE SERVICE dating below. If you do not Employer Identification
have a number, see How to Number
Obtain a "TIN" in the
enclosed Guidelines.
Payer's Request for Taxpayer Part II--For Payees exempt from backup withholding, see
Identification Number (TIN) the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
CERTIFICATION. Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been notified by
the Internal Revenue Service (IRS) that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or the IRS has notified me
that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS. You must cross out item (2) above if you have been notified
by the IRS that you are subject to backup withholding because of underreported interest
or dividends on your tax return. However, if after being notified by the IRS that you
were subject to backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out item (2). (Also see
instructions in the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.)
Signature Date
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU UNDER THE NOTES. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<CAPTION>
CERTIFICATE SURRENDERED OLD NOTES TENDERED OLD NOTES ACCEPTED
<S> <C> <C>
</TABLE>
Delivery Prepared By
- --------------- Checked By
- --------------- Date
- ------------------------------
<PAGE>
HEARTLAND WIRELESS COMMUNICATIONS, INC.
NOTICE OF GUARANTEED DELIVERY
OF
13% SERIES C SENIOR NOTES DUE 2003
As set forth in the Prospectus dated December 23, 1996 (the "Prospectus"),
of Heartland Wireless Communications, Inc. (the "Company") under the caption
"The Exchange Offer--Guaranteed Delivery Procedures," this form must be used to
accept the Company's offer to exchange its 13% Series D Senior Notes due 2003
(the "New Notes") for an equal principal amount of its 13% Series C Senior Notes
due 2003 (the "Old Notes"), by Holders who wish to tender their Old Notes and
(i) whose Old Notes are not immediately available or (ii) who cannot deliver
their Old Notes, the Letter of Transmittal or an Agent's Message (as defined in
the Prospectus) and any other documents required by the Letter of Transmittal to
the Exchange Agent prior to the Expiration Date. This form must be delivered by
an Eligible Institution by mail or hand delivery or transmitted, via facsimile,
to the Exchange Agent at its address set forth below not later than the
Expiration Date. All capitalized terms used herein but not defined herein shall
have the meanings ascribed to them in the Prospectus.
THE EXCHANGE AGENT IS:
BANKERS TRUST COMPANY
<TABLE>
<CAPTION>
BY MAIL: BY HAND: BY OVERNIGHT MAIL OR COURIER:
<S> <C> <C>
BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc.
Reorganization Unit Corporate Trust and Agency Group Corporate Trust and Agency Group
P.O. Box 292737 Receipt & Delivery Window Reorganization Unit
Nashville, TN 37229-2737 123 Washington St., 1st Floor 648 Grassmere Park Road
New York, NY 10006 Nashville, TN 37211
FOR INFORMATION CALL:
(800) 735-7777
Confirm: (615) 835-3572
Facsimile: (615) 835-3701
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders for exchange to the Company, upon the terms
and subject to the conditions set forth in the Prospectus and the Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer--Guaranteed
Delivery Procedures."
The undersigned understands and acknowledges that the Exchange Offer will
expire at 5:00 p.m., New York City time, on January 22, 1997, unless extended by
the Company. The term "Expiration Date" shall mean 5:00 p.m., New York City
time, on January 22, 1997, unless the Exchange Offer is extended as provided in
the Prospectus, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
<PAGE>
HEARTLAND WIRELESS COMMUNICATIONS, INC.
Offer to Exchange up to $15,000,000 of its
13% Series D Senior Notes due 2003
for any and all of its outstanding
13% Series C Senior Notes due 2003
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON JANUARY 22,
1997, UNLESS EXTENDED.
To Brokers, Dealers, Commercial Banks, December 23, 1996
Trust Companies and Other Nominees:
Heartland Wireless Communications, Inc., a Delaware corporation (the
"Company"), is offering, upon the terms and subject to the conditions set forth
in the Prospectus dated December 23, 1996 (the "Prospectus") and the
accompanying Letter of Transmittal enclosed herewith (which together constitute
the "Exchange Offer"), to exchange its 13% Series D Senior Notes due 2003 (the
"New Notes") for an equal principal amount of its 13% Series C Senior Notes due
2003 (the "Old Notes" and together with the New Notes, the "Notes"). As set
forth in the Prospectus, 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 of 1933, as amended, and therefore will not
bear legends restricting their transfer and will not contain certain provisions
providing for an increase in the interest rate on the Old Notes under certain
circumstances relating to the Registration Rights Agreement (as defined in the
Prospectus). Old Notes may be tendered only in integral multiples of $1,000.
THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CUSTOMARY CONDITIONS. SEE "THE
EXCHANGE OFFER -- CONDITIONS" IN THE PROSPECTUS.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. the Prospectus, dated December 23, 1996;
2. the Letter of Transmittal for your use and for the information of
your clients (facsimile copies of the Letter of Transmittal may be used to
tender Old Notes);
3. a form of letter which may be sent to your clients for whose accounts
you hold Old Notes registered in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with regard to
the Exchange Offer;
4. a Notice of Guaranteed Delivery;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. a return envelope addressed to Bankers Trust Company, the Exchange
Agent.
YOUR PROMPT ACTION IS REQUESTED. PLEASE NOTE THE EXCHANGE OFFER WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON JANUARY 22, 1997, UNLESS EXTENDED. PLEASE
FURNISH COPIES OF THE ENCLOSED MATERIALS TO THOSE OF YOUR CLIENTS FOR WHOM YOU
HOLD OLD NOTES REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE AS QUICKLY
AS POSSIBLE.
In all cases, exchanges of Old Notes accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
(a) certificates representing such Old Notes, or a Book-Entry Confirmation (as
defined in the Prospectus), as the case may be, (b) the Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, or an Agent's
Message (as defined in the Prospectus) and (c) any other required documents.
<PAGE>
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or an Agent's Message and any other documents required by the Letter
of Transmittal to the Exchange Agent prior to the Expiration Date must tender
their Old Notes according to the guaranteed delivery procedures set forth under
the caption "The Exchange Offer--Guaranteed Delivery Procedures" in the
Prospectus.
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Old Notes residing in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction.
The Company will not pay any fees or commissions to brokers, dealers or
other persons for soliciting exchanges of Notes pursuant to the Exchange Offer.
The Company will, however, upon request, reimburse you for customary clerical
and mailing expenses incurred by you in forwarding any of the enclosed materials
to your clients. The Company will pay or cause to be paid any transfer taxes
payable on the transfer of Notes to it, except as otherwise provided in
Instruction 9 of the Letter of Transmittal.
Questions and requests for assistance with respect to the Exchange Offer or
for copies of the Prospectus and Letter of Transmittal may be directed to the
Exchange Agent at its address set forth in the Prospectus or at 1-800-735-7777.
Very truly yours,
HEARTLAND WIRELESS COMMUNICATIONS, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE COMPANY, OR ANY AFFILIATE THEREOF, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
HEARTLAND WIRELESS COMMUNICATIONS, INC.
Offer to Exchange up to $15,000,000 of its
13% Series D Senior Notes due 2003
for any and all of its outstanding
13% Series C Senior Notes due 2003
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JANUARY 22,
1997, UNLESS EXTENDED.
To Our Clients:
Enclosed for your consideration is a Prospectus dated December 23, 1996 (he
"Prospectus") and a Letter of Transmittal (which together constitute the
"Exchange Offer") relating to the offer by Heartland Wireless Communications,
Inc. (the "Company") to exchange its 13% Series D Senior Notes due 2003 (the
"New Notes") for an equal principal amount of its 13% Series C Senior Notes due
2003 (the "Old Notes" and together with the New Notes, the "Notes"). As set
forth in the Prospectus, 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 of 1933, as amended, and therefore will not
bear legends restricting their transfer and will not contain certain provisions
providing for an increase in the interest rate on the Old Notes under certain
circumstances relating to the Registration Rights Agreement (as defined in the
Prospectus). Old Notes may be tendered only in integral multiples of $1,000.
The enclosed material is being forwarded to you as the beneficial owner of
Old Notes carried by us for your account or benefit but not registered in your
name. An exchange of any Old Notes may only be made by us as the registered
Holder and pursuant to your instructions. Therefore, the Company urges
beneficial owners of Old Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee to contact such Holder promptly
if they wish to exchange Old Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to exchange
any or all such Old Notes held by us for your account or benefit, pursuant to
the terms and conditions set forth in the Prospectus and Letter of Transmittal.
We urge you to read carefully the Prospectus and Letter of Transmittal before
instructing us to exchange your Old Notes.
Your instructions to us should be forwarded as promptly as possible in order
to permit us to exchange Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. THE EXCHANGE OFFER EXPIRES AT 5:00 P.M., NEW
YORK CITY TIME, ON JANUARY 22, 1997, UNLESS EXTENDED. The term "Expiration Date"
shall mean 5:00 p.m., New York City time, on January 22, 1997, unless the
Exchange Offer is extended as provided in the Prospectus, in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended. A tender of Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for the exchange of $1,000 principal amount of
the New Notes for each $1,000 principal amount of the Old Notes, of which
$15,000,000 aggregate principal amount was outstanding as of December 23,
1996. 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 of 1933, as amended, and therefore will not bear legends
restricting their transfer and will not contain certain provisions providing
for an increase in the interest rate on the Old Notes under certain
circumstances relating to the Registration Rights Agreement.
2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CUSTOMARY CONDITIONS. SEE
"THE EXCHANGE OFFER -- CONDITIONS" IN THE PROSPECTUS.
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m.,
New York City time, on January 22, 1997, unless extended.
<PAGE>
4. The Company has agreed to pay the expenses of the Exchange Offer.
5. Any transfer taxes incident to the transfer of Old Notes from the
tendering Holder to the Company will be paid by the Company, except as
provided in the Prospectus and the Letter of Transmittal.
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Old Notes residing in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction.
If you wish us to tender any or all of your Old Notes held by us for your
account or benefit, please so instruct us by completing, executing and returning
to us the attached instruction form. THE ACCOMPANYING LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR INFORMATIONAL PURPOSES ONLY AND MAY NOT BE USED BY YOU TO
EXCHANGE OLD NOTES HELD BY US AND REGISTERED IN OUR NAME FOR YOUR ACCOUNT OR
BENEFIT.
2
<PAGE>
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer of Heartland
Wireless Communications, Inc.
This will instruct you to tender for exchange the aggregate principal amount
of Old Notes indicated below (or, if no aggregate principal amount is indicated
below, all Old Notes) held by you for the account or benefit of the undersigned,
pursuant to the terms of and conditions set forth in the Prospectus and the
Letter of Transmittal.
Aggregate Principal Amount of Old Notes to be tendered for exchange
$
----------------------------
<TABLE>
<S> <C>
*I (WE) UNDERSTAND THAT IF I (WE) SIGN THIS
INSTRUCTION FORM WITHOUT INDICATING AN AGGREGATE
PRINCIPAL AMOUNT OF OLD NOTES IN THE SPACE ABOVE, ALL
OLD NOTES HELD BY YOU FOR MY (OUR) ACCOUNT WILL BE
TENDERED FOR EXCHANGE. ------------------------------------------------------
------------------------------------------------------
SIGNATURE(S)
------------------------------------------------------
CAPACITY (FULL TITLE), IF SIGNING IN A FIDUCIARY OR
REPRESENTATIVE CAPACITY
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
NAME(S) AND ADDRESS, INCLUDING ZIP CODE
DATE: ------------------------------------------------
------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER
------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.
</TABLE>
<PAGE>
BANKERS TRUST COMPANY
EXCHANGE AGENT AGREEMENT
December 23, 1996
Bankers Trust Company
Corporate Trust and
Agency Group
Four Albany Street, 4th Floor
New York, New York 10006
Attention: Corporate Market Services
Ladies and Gentlemen:
Heartland Wireless Communications, Inc., a Delaware corporation (the
"Company"), is offering to exchange (the "Exchange Offer") its 13% Series D
Senior Notes due 2003 (the "New Notes") for an equal principal amount of its 13%
Series C Senior Notes due 2003 (the "Old Notes" and, together with the New
Notes, the "Notes"), pursuant to a prospectus (the "Prospectus") included in the
Company's Registration Statement on Form S-4 (File No. 333-12577), as amended
(the "Registration Statement"), filed with the Securities and Exchange
Commission (the "SEC"). The term "Expiration Date" shall mean 5:00 p.m., New
York City time, on January 22, 1997, unless the Exchange Offer is extended as
provided in the Prospectus, in which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange Offer is extended. Upon
execution of this Agreement, Bankers Trust Company will act as the Exchange
Agent for the Exchange Offer (the "Exchange Agent"). A copy of the Prospectus
is attached hereto as EXHIBIT A. Capitalized terms used and not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Prospectus.
A copy of each of the form of the letter of transmittal (the "Letter
of Transmittal"), the form of the notice of guaranteed delivery (the "Notice of
Guaranteed Delivery"), the form of letter to brokers and the form of letter to
clients (collectively, the "Tender Documents") to be used by Holders of Old
Notes to surrender Old Notes in order to receive New Notes pursuant to the
Exchange Offer are attached hereto as EXHIBIT B.
The Company hereby appoints you to act as Exchange Agent in connection
with the Exchange Offer. In carrying out your duties as Exchange Agent, you are
to act in accordance with the following provisions of this Agreement:
1. You are to mail the Prospectus and the Tender Documents to all of
the Holders and participants on the day that you are notified by the Company
that the Registration Statement has become effective under the Securities Act of
1933, as amended, or as soon as practicable thereafter, and to make subsequent
mailings thereof to any persons who become Holders
<PAGE>
prior to the Expiration Date and to any persons as may from time to time be
requested by the Company. All mailings pursuant to this Section 1 shall be by
first class mail, postage prepaid, unless otherwise specified by the Company.
You shall also accept and comply with telephone requests for information
relating to the Exchange Offer provided that such information shall relate only
to the procedures for tendering Old Notes in (or withdrawing tenders of Old
Notes from) the Exchange Offer. All other requests for information relating to
the Exchange Offer shall be directed to the Company, Attention: J. Curtis
Henderson, Vice President and General Counsel, 200 Chisholm Place, Suite 200,
Plano, Texas 75075, telephone (972) 423-9494.
2. You are to examine the Letters of Transmittal and the Old Notes
and other documents delivered or mailed to you, by or for the Holders, prior to
the Expiration Date, to ascertain whether (i) the Letters of Transmittal are
properly executed and completed in accordance with the instructions set forth
therein, (ii)the Old Notes are in proper form for transfer and (iii) all other
documents submitted to you are in proper form. In each case where a Letter of
Transmittal or other document has been improperly executed or completed or, for
any other reason, is not in proper form, or some other irregularity exists, you
are authorized to endeavor to take such action as you consider appropriate to
notify the tendering Holder of such irregularity and as to the appropriate means
of resolving the same. Determination of questions as to the proper completion
or execution of the Letters of Transmittal, or as to the proper form for
transfer of the Old Notes or as to any other irregularity in connection with the
submission of Letters of Transmittal and/or Old Notes and other documents in
connection with the Exchange Offer, shall be made by the officers of, or counsel
for, the Company at their written instructions or oral direction confirmed by
facsimile. Any determination made by the Company on such questions shall be
final and binding.
3. At the written request of the Company or its counsel, O'Sullivan
Graev & Karabell, LLP, you shall notify tendering Holders of Old Notes in the
event of any extension, termination or amendment of the Exchange Offer. In the
event of any such termination, you will return all tendered Old Notes to the
persons entitled thereto, at the request and expense of the Company or its
counsel, O'Sullivan Graev & Karabell, LLP.
4. Tender of the Old Notes may be made only as set forth in the
Letter of Transmittal. Notwithstanding the foregoing, tenders which the Company
shall approve in writing as having been properly tendered shall be considered to
be properly tendered. Letters of Transmittal and Notices of Guaranteed Delivery
shall be recorded by you as to the date and time of receipt and shall be
preserved and retained by you at the Company's expense for six years. New Notes
are to be issued in exchange for Old Notes pursuant to the Exchange Offer only
(i)
-2-
<PAGE>
against deposit with you prior to the Expiration Date or, in the case of a
tender in accordance with the guaranteed delivery procedures outlined in
Instruction 5 of the Letter of Transmittal, within three New York Stock Exchange
trading days after the Expiration Date of the Exchange Offer, together with
executed Letters of Transmittal and any other documents required by the Exchange
Offer or (ii) in the event that the Holder is a participant in the Depository
Trust Company ("DTC") system, by the utilization of DTC's Automated Tender Offer
Program ("ATOP") and any evidence required by the Exchange Offer.
You are hereby directed to establish an account with respect to the
Old Notes at The Depositary Trust Company (the "Book Entry Transfer Facility")
within two days after the Effective Date of the Exchange Offer in accordance
with SEC Regulation 240.17 Ad. Any financial institution that is a participant
in the Book Entry Transfer Facility system may, until the Expiration Date, make
book-entry delivery of the Shares by causing the Book Entry Facility to transfer
such Notes into your account in accordance with the procedure for such transfer
established by the Book Entry Transfer Facility. In every case, however, a
Letter of Transmittal (or a manually executed facsimile thereof) or an Agent's
Message, properly completed and duly executed, with any required signature
guarantees and any other required documents must be transmitted to and received
by you prior to the Expiration Date or the guaranteed delivery procedures
described in the Offer must be complied with.
5. Upon the oral or written request of the Company (with written
confirmation of any such oral request thereafter), you will transmit by
telephone, and promptly thereafter confirm in writing, to (i) J. Curtis
Henderson, Vice President and General Counsel, Heartland Wireless
Communications, Inc., 200 Chisholm Place, Suite 200, Plano, Texas 75075,
telephone (972) 423-9494, and (ii) Julie M. Allen, Esq., O'Sullivan Graev &
Karabell, LLP, 30 Rockefeller Plaza, New York, New York 10112, telephone (212)
408-2400, or such other persons as the Company may reasonably request, the
aggregate number and principal amount of Old Notes tendered to you and the
number and principal amount of Old Notes properly tendered that day. In
addition, you will also inform the aforementioned persons, upon oral request
made from time to time (with written confirmation of such request thereafter)
prior to the Expiration Date, of such information as they or any of them may
reasonably request.
6. Upon the terms and subject to the conditions of the Exchange
Offer, delivery of New Notes to be issued in exchange for accepted Old Notes
will be made by you promptly after acceptance of the tendered Old Notes. You
will hold all items which are deposited for tender with you after 5:00 p.m., New
York City time, on the Expiration Date pending further instructions from an
officer of the Company.
-3-
<PAGE>
7. If any Holder shall report to you that his or her failure to
surrender Old Notes registered in his or her name is due to the loss or
destruction of a certificate or certificates, you shall request such Holder (i)
to furnish to you an affidavit of loss and, if required by the Company, a bond
of indemnity in an amount and evidenced by such certificate or certificates of a
surety, as may be satisfactory to you and the Company, and (ii) to execute and
deliver an agreement to indemnify the Company and you in such form as is
acceptable to you and the Company. The obligees to be named in each such
indemnity bond shall include the Company and you. You shall report to the
Company the names of all Holders who claim that their Old Notes have been lost
or destroyed and the principal amount of such Old Notes.
8. As soon as practicable after the Expiration Date, you shall mail
or deliver to a Holder the New Notes that such Holder may be entitled to receive
and you shall arrange for cancellation of the Old Notes submitted to you or
returned by DTC in connection with ATOP. Such Old Notes shall be forwarded to
First Trust of New York, National Association, as trustee (the "Trustee"), under
the Indenture dated as of March 28, 1996, as supplemented from time to time,
governing the Notes, for cancellation and retirement as you are instructed by
the Company (or a representative designated by the Company) in writing.
9. For your services as the Exchange Agent hereunder, the Company
shall pay you in accordance with the schedule of fees attached hereto as EXHIBIT
C. The Company also will reimburse you for your reasonable out-of-pocket
expenses (including, but not limited to, reasonable attorneys' fees not
previously paid to you as set forth in EXHIBIT C) in connection with your
services promptly after submission to the Company of itemized statements.
10. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other person or
to engage or utilize any person to solicit tenders.
11. As the Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth herein or in the Exhibits attached hereto or as
may be subsequently requested in writing of you by the Company and
agreed to by you in writing with respect to the Exchange Offer;
(b) will be regarded as making no representations and having no
responsibilities as to the validity, accuracy, sufficiency, value or
genuineness of any Old Notes deposited with you hereunder or any New
Notes, any Tender Documents or other documents prepared by the Company
in connection with the Exchange Offer or any
-4-
<PAGE>
signatures or endorsements other than your own, and will not be
required to make and will not make any representations as to the
validity, sufficiency, value or genuineness of the Exchange Offer or
any other disclosure materials in connection therewith; PROVIDED,
HOWEVER, that in no way will your general duty to act in good faith be
discharged by the foregoing;
(c) shall not be obligated to take any legal action hereunder
which might in your judgment involve any expense or liability unless
you shall have been furnished with an indemnity reasonably
satisfactory to you;
(d) may rely on, and shall be fully protected and indemnified as
provided in Section 12 hereof in acting upon, the written or oral
instructions with respect to any matter relating to your acting as
Exchange Agent specifically covered by this Agreement or supplementing
or qualifying any such action of any officer or agent of such other
person or persons as may be designated or whom you reasonably believe
have been designated by the Company;
(e) may consult with counsel satisfactory to you, including
counsel for the Company, and the advice of such counsel shall be full
and complete authorization and protection in respect of any action
taken, suffered or omitted by you hereunder in good faith and in
accordance with such advice of such counsel;
(f) shall not at any time advise any person as to the wisdom of
the Exchange Offer or as to the market value or decline or
appreciation in market value of any Old Notes or New Notes; and
(g) shall not be liable for any action which you may do or
refrain from doing in connection with this Agreement except for your
gross negligence, willful misconduct or bad faith.
12. The Company covenants and agrees to indemnify and hold harmless
Bankers Trust Company and its officers, directors, employees, agents and
affiliates (collectively, the "Indemnified Parties" and each an "Indemnified
Party") against any loss, liability or reasonable expense of any nature
(including reasonable attorneys' and other fees and expenses) incurred in
connection with the administration of the duties of the Indemnified Parties
hereunder in accordance with this Agreement; PROVIDED, HOWEVER, such Indemnified
Party shall use its best effort to notify the Company by letter, or by cable,
telex or telecopier confirmed by letter, of the written assertion of a claim
against such Indemnified Party, or of any action commenced
-5-
<PAGE>
against such Indemnified Party, promptly after but in any event within 10 days
of the date such Indemnified Party shall have received any such written
assertion of a claim or shall have been served with a summons, or other legal
process, giving information as to the nature and basis of the claim; PROVIDED,
HOWEVER, that failure to so notify the Company shall not relieve the Company of
any liability which it may otherwise have hereunder except such liability that
is a direct result of such Indemnified Party's failure to so notify the Company.
The Company shall be entitled to participate at its own expense in the defense
of any such claim or legal action and if the Company so elects or if the
Indemnified Party in such notice to the Company so directs, the Company shall
assume the defense of any suit brought to enforce any such claim. In the event
the Company assumes such defense, the Company shall not be liable for any fees
and expenses thereafter incurred by such Indemnified Party, except for any
reasonable fees and expenses of such Indemnified Party incurred as a result of
the need to have separate representation because of a conflict of interest
between such Indemnified Party and the Company. You shall not enter into a
settlement or other compromise with respect to any indemnified loss, liability
or expense without the prior written consent of the Company, which shall not be
unreasonably withheld or delayed if not adverse to the Company's interests.
13. This Agreement and your appointment as the Exchange Agent shall
be construed and enforced in accordance with the laws of the State of New York
and shall inure to the benefit of, and the obligations created hereby shall be
binding upon, the successors and assigns of the parties hereto. No other person
shall acquire or have any rights under or by virtue of this Agreement.
14. The parties hereto hereby irrevocably submit to the venue and
jurisdiction of any New York State or federal court sitting in the Borough of
Manhattan in New York City in any action or proceeding arising out of or
relating to this Agreement, and the parties hereby irrevocably agree that all
claims in respect of such action or proceeding arising out of or relating to
this Agreement, shall be heard and determined in such a New York State or
federal court. The parties hereby consent to and grant to any such court
jurisdiction over the persons of such parties and over the subject matter of any
such dispute and agree that delivery or mailing of any process or other papers
in the manner provided herein, or in such other manner as may be permitted by
law, shall be valid and sufficient service thereof.
15. This Agreement may not be modified, amended or supplemented
without an express written agreement executed by the parties hereto. Any
inconsistency between this Agreement and the Tender Documents, as they may from
time to time be supplemented or amended, shall be resolved in favor of the
latter, except with
-6-
<PAGE>
respect to the duties, liabilities and indemnification of you as Exchange Agent.
16. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
17. In case any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
18. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, Sections 9 and 12 shall survive the termination of this Agreement.
Upon any termination of this Agreement, you shall promptly deliver to the
Trustee any certificates for Old Notes or New Notes, funds or property then held
by you as Exchange Agent under this Agreement.
19. All notices and communications hereunder shall be in writing and
shall be deemed to be duly given if delivered or mailed first class certified or
registered mail, postage prepaid, or telecopied as follows:
If to Company: Heartland Wireless Communications, Inc.
200 Chisholm Place
Suite 200
Plano, Texas 75075
Attn: J. Curtis Henderson
Telephone: (972) 423-9494
Telecopy: (972) 633-0074
and a copy to: O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attn: Julie M. Allen, Esq.
Telephone: (212) 408-2400
Telecopy: (212) 408-2420
If to you: Bankers Trust Company
Corporate Trust and Agency Group
Four Albany Street - 4th Floor
New York, New York 10006
Attn: Mr. Kevin Weeks or Ms. Jenna Kaufman
Telephone: (212) 250-6531
Telecopy: (212) 250-6961
-7-
<PAGE>
and a copy to: Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attn: Marilyn Feuer, Esq.
Telephone: (212) 715-9100
Telecopy: (212) 715-8000
or such other address or telecopy number as any of the above may have furnished
to the other parties in writing for such purpose.
20. This Letter Agreement and all of the obligations hereunder shall
be assumed by any and all successors and assigns of the Company.
-8-
<PAGE>
If the foregoing is in accordance with your understanding, would you
please indicate your agreement by signing and returning the enclosed copy of
this Agreement to the Company.
Very truly yours,
HEARTLAND WIRELESS COMMUNICATIONS, INC.
By:
-------------------------------------
Title:
Agreed to this 23rd day of December, 1996
BANKERS TRUST COMPANY
By:
---------------------------
Title:
-9-
<PAGE>
EXHIBIT A
PROSPECTUS
<PAGE>
EXHIBIT B
TENDER DOCUMENTS
<PAGE>
EXHIBIT C
SCHEDULE OF FEES
Covers review of the Letter of Transmittal, DTC ATOP Voluntary
Offering Instruction, the Exchange Agent Agreement and other related
documentation, if any, as required by the Exchange Offer; set-up of records and
accounts; distribution of materials; all operational and administrative charges
and time in connection with the review, receipt and processing of Letters of
Transmittal/VOI, Processing Delivery of Guarantees, Legal Items, Withdrawals,
record keeping, and answering securityholders' inquiries pertaining to the
Exchange Offer.
FLAT FEE: $5,000.00
---------
---------
NOTE
These fees are also subject to change should circumstances warrant.
Reimbursement for all out-of-pocket expenses, disbursements (including
postage, telex, fax, photocopying and advertising costs), and fees of
counsel (including their disbursements and expenses) incurred in the
performance of our duties will be added to the billed fees. Once
appointed, if the deal should fail to close for reasons beyond our control,
we reserve the right to charge a fee not to exceed the amount of our
acceptance fee and we will require reimbursement in full for our legal fees
and any out-of-pocket expenses related to the deal.
Fees for any services not specifically covered in this or any other
applicable schedule will be based on the appraisal of services rendered
