As filed with the Securities and Exchange Commission on July 8, 1996
Registration No. 333-2907
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
HEARTLAND WIRELESS COMMUNICATIONS, INC.
(Exact name of registrant as specified in charter)
Delaware 4841 73-1435149
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation Classification Code Number) Identification
or organization) Number)
-------------
200 Chisholm Place, Suite 200
Plano, Texas 75075
(214) 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,
Chief Financial Officer, Treasurer
and Secretary
Heartland Wireless Communications, Inc.
200 Chisholm Place, Suite 200
Plano, Texas 75075
(214) 423-9494
(Name, address, including zip code, and telephone
number, including area code, of agent for service
of process)
-------------
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:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| _________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| _________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please 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 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JULY 8, 1996
PROSPECTUS
HEARTLAND WIRELESS COMMUNICATIONS, INC.
----------
600,000 Shares
of
Common Stock
($.001 par value)
----------
This Prospectus relates to an aggregate of 600,000 shares (the "Shares") of
common stock, par value $.001 per share (the "Common Stock"), of Heartland
Wireless Communications, Inc., a Delaware corporation (the "Company"), reserved
for issuance upon exercise of warrants (the "Warrants") that were issued by the
Company on April 26, 1995 pursuant to the Warrant Agreement, dated as of April
26, 1995 (the "Warrant Agreement"), between the Company and Bankers Trust
Company, as warrant agent. The Warrants became exercisable on the first
anniversary of the date of their issuance. The Warrants entitle the holders
thereof to purchase Shares at an exercise price of $19.525 per Share until the
expiration of the Warrants on April 26, 2000. Assuming all of the Warrants are
exercised, the Company will receive proceeds in the amount of $11,715,000 before
deducting expenses payable by the Company estimated at $55,000.
The Common Stock is traded on the Nasdaq Stock Market's National Market
under the symbol "HART". On July 2, 1996, the closing price of the Common Stock
was $23.75 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SHARES
OF COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer contained herein, 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 securities offered hereby in any jurisdiction in which
it is not lawful or to any person to whom it is not lawful to make any such
offer or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that information
herein is correct as of any time subsequent to the date hereof.
The date of this Prospectus is July __, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational 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 Securities and Exchange Commission (the "Commission"). Such
material filed by the Company with the Commission 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.
The Company has filed a registration statement on Form S-3 (together with
all amendments and exhibits thereto, including documents and information
incorporated by reference, the "Registration Statement") with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the Shares. This Prospectus does not contain all the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement. Statements contained in
this Prospectus as to the contents of any document are not necessarily complete,
and in each instance reference is made to such document itself, each such
statement being qualified in all respects by such reference.
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 Report on Form 10-Q for the quarter ended March 31,
1996; (iii) 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-K/A-2 dated February 23, 1996 (filed with the
Commission on April 29, 1996), and dated July 1, 1996 and (iv) the description
of the Company's Common Stock contained in Item 1 of the Company's Registration
Statement on Form 8-A, including any amendment or report filed for the purpose
of updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to April 26, 1996 and prior to the
termination of the offering of Common Stock shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the respective
dates of filing 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.
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). Requests for such
copies should be submitted in writing to the Company at 200 Chisholm Place,
Suite 200, Plano, Texas 75075, Attention: Secretary.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN.
THE COMPANY
The Company develops, owns and operates wireless cable television systems
primarily in small to mid-size markets located in the central United States. As
of March 31, 1996, assuming the consummation of the Atlanta Transaction (as
defined herein under the caption "Recent Events -- Atlanta Channel Rights"), the
Company had wireless cable channel rights in 78 markets, including 39 markets in
which the Company has systems in operation serving approximately 142,000
subscribers (the "Existing Systems"), representing approximately 8.2 million
households, approximately 6.7 million of which the Company believes can be
served by line-of-site ("LOS") transmissions (which generally require a direct,
unobstructed transmission path from the central transmitting antenna to the
antenna located on the subscriber's premises).
Certain of the wireless cable assets presently held by the Company are not
included in the discussion of the Company's business because such assets are not
a part of the Company's current long-term business plan. These assets include
wireless cable channel rights and related assets associated with certain Georgia
markets ("Disposition Assets"). The Company is currently a party to an agreement
relating to the disposition of such Georgia markets. See "Recent Events --
Atlanta Transaction."
The executive offices of the Company are located at 200 Chisholm Place,
Suite 200, Plano, Texas 75075 and its telephone number is (214) 423-9494.
3
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following information,
in addition to the other information contained in this Prospectus, before
exercising the Warrants to purchase the Shares offered hereby.
Limited Operating History; Net Losses Since Inception
Although the Company's business commenced in 1990, it did not generate any
revenues until April 1992. Potential investors, therefore, have limited
historical information about the Company upon which to base an evaluation of the
Company's performance and a decision to invest in the Company. As of March 31,
1996, the Company has recorded net losses of approximately $27.7 million since
inception, due primarily to 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 will tend to reduce net income, if any, or increase net losses. As a
result, the Company expects to continue to experience net losses while it
develops and expands its wireless cable systems even if mature individual
systems of the Company are profitable.
Substantial Indebtedness of The Company; Insufficiency of Earnings to Cover
Fixed Charges
As of March 31, 1996, the Company had approximately $158.0 million of
indebtedness and the Company's consolidated subsidiaries had approximately $53.2
million of total liabilities. For the years ended December 31, 1993, 1994 and
1995 and the three months ended March 31, 1995 and 1996, the Company's earnings
were insufficient to cover fixed charges by $406,000, $4,638,000, $20,187,000,
$2,350,000 and $9,795,000, respectively. The ability of the Company to make
payments of principal and interest on its indebtedness 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.
Management of Growth; Integration of Acquired Businesses
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. Effective on February 23, 1996, the Company acquired all of the
assets and liabilities of each of American Wireless Systems, Inc. ("AWS") and
CableMaxx, Inc. ("CMAX") and substantially all of the assets and certain of the
liabilities of each of Fort Worth Wireless Cable T.V. Associates (the "Fort
Worth Partnership"), Wireless Cable TV Associates #38 (the "Minneapolis
Partnership") and Three Sixty Corp. ("TSC"), the successor to Technivision, Inc.
("Technivision"). The foregoing acquisitions are referred to collectively herein
as the "Transactions." The consummation of the Transactions has resulted in
additional significant growth of the Company's operations. 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. Although the Company has retained the services of certain persons formerly
employed by other parties to the Transactions, the
4
<PAGE>
Company is primarily dependent upon the existing management of the Company to
perform the management functions formerly performed by management of each of the
parties to the Transactions. To the extent that the Company's existing
management is unable to assume or perform these combined duties, the Company
could be adversely affected. 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.
In addition, management of the Company must make and implement a number of
strategic and operational decisions regarding the integration of its various
operations and the exploitation of its assets and businesses. The timing and
manner of the implementation of decisions made with respect to the ongoing
business of the Company will materially affect the operations of the Company.
Given the range of potential outcomes arising from such decisions, and the
interrelationships among the decisions to be made, it is difficult to quantify
with precision the future composition of the Company. There can also be no
assurance that any acquired businesses will be integrated successfully into the
Company's business.
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. Although the Company believes that its
cash and cash equivalent assets will be sufficient to fund the Company's
operations and expansion through at least the end of 1996, there is no assurance
that additional funds will not 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 or that any such required additional funds would be
available on satisfactory terms and conditions, if at all. In addition, the
Company's capital needs will depend in part upon the success of the Company's
efforts to sell or otherwise dispose of the Disposition Assets and the nature of
any consideration received as a result of such dispositions. To the extent
assets and markets designated for disposition are not sold, or are not sold for
cash, the Company's requirements for additional funds will be increased. There
is also no assurance that 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, if
any, will depend upon a number of factors, including programming costs,
equipment costs, marketing expenses, staffing levels, subscriber growth and
competitive conditions, and any purchases or dispositions of assets, 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.
Potential Significant Industry Transactions
Significant industry transactions such as acquisitions and dispositions of
channel rights, joint ventures and other business transactions between and among
participants in the wireless cable television industry have occurred with some
frequency in the past, and the Company's management expects this trend to
continue in the foreseeable future. Although the Company regularly engages in
discussions concerning such industry transactions with other industry
participants, the Company is not currently subject to any material definitive
agreements in such regard except as disclosed herein or in those documents
incorporated herein by reference. Whether the Company proceeds with any of these
discussions and whether the Company ultimately negotiates and/or consummates any
additional significant industry transactions will depend, among other things,
upon the business and prospects of the Company, industry conditions, investment
and growth opportunities available to the Company, stock market conditions,
availability and suitability of financing for such transactions, regulatory and
legal considerations, and other plans and requirements of the Company. No
assurance can be given that, if consummated, any such significant industry
transactions could be successfully integrated into the Company's business.
Dependence on Existing Management; Key Employees
The Company is dependent in large part on the experience and knowledge of
existing management. The Company has not entered into any employment agreements
with, or obtained key-man life insurance for, any of its executive officers and
there can be no assurance that any of such persons will remain in the Company's
employ in
5
<PAGE>
the future. Thomas W. Dixon, the Company's Senior Vice President-Operations,
resigned as an executive officer, to join CS Wireless Systems, Inc. ("CS
Wireless") as its Senior Vice President-Operations. In addition, John R. Bailey,
the Senior Vice President-Finance, Chief Financial Officer, Treasurer and
Secretary of the Company, serves as Acting Chief Financial Officer of CS
Wireless until CS Wireless names a full-time Chief Financial Officer in addition
to performing his duties as an officer and employee of the Company. The
Company's success is also dependent upon its ability to attract and retain
qualified employees to develop and operate its wireless cable systems. There can
be no assurance that the Company will be able to attract and retain such
employees in the future.
Competition
The pay 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. Further, premium movie
services offered by cable television systems have encountered significant
competition from the home video cassette recorder industry. 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. In addition, within each
market, the Company initially must compete with others to acquire, from the
limited number of channel licenses issued, rights to a minimum number of
channels needed to establish a viable system. 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. In the Existing Systems, the Company has targeted its
marketing to households that are unpassed by traditional hard-wire cable and
that have limited access to local off-air VHF/UHF broadcast channels.
Accordingly, to date the Company has not encountered significant direct
competition from traditional hard-wire cable companies. It is likely, however,
given the markets acquired in the Transactions, that the Company will face
significant direct competition from traditional hard-wire cable companies in the
future. In addition, as the telecommunications industry continues to evolve, the
Company may face additional competition from new providers of entertainment and
data services. In particular, there are a rapidly growing number of information
and data service providers serving consumers via informal communications
networks, such as the Internet and World Wide Web. Although the Company is
unaware of any such provider delivering programming like that available over
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 in any or all of its
markets.
Government Regulation
The right to transmit on wireless cable channels is regulated by the
Federal Communications Commission (the "FCC") and the copyright for the
retransmission of local off-air VHF/UHF broadcasts is regulated by the United
States Copyright Office pursuant to the Copyright Act of 1976, as amended (the
"Copyright Act").
Cable Act. Pursuant to the Cable Television Consumer Protection and
Competition Act of 1992, as amended (the "Cable Act"), the FCC adopted rate
regulations exclusively for traditional hard-wire cable systems. Pursuant to the
Telecommunications Act of 1996, which was enacted in February 1996, all cable
rate regulation will be eliminated after three years, and for "small systems" as
defined in such 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.
6
<PAGE>
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 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 the Copyright Royalty Tribunal.
Regulation of Retransmission. Effective October 6, 1993, pursuant to the
Cable Act, local broadcasters 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 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.
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 instructional
television fixed service ("ITFS") and/or one to four multi-point distribution
service ("MDS") wireless cable 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 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 the renewal by
the FCC. MDS licenses generally 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 failure
to grant 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
7
<PAGE>
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.
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 have been refiled. The vast majority of such leases are in the form of
lease agreements with qualified non-profit educational organizations for ITFS
channels. These ITFS applications are expected to undergo review by the FCC's
engineers and staff attorneys over the next several months. There is no limit on
the time that may elapse between filing the application with the FCC for a
modification or new license and action thereon by the FCC. Once the FCC staff
determines that the applications meet 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 is based on a
set of objective criteria that includes whether an applicant is located in the
community to be served and the number of students that 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 current 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 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 are 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 been filed and/or (iii)
the grant of applications for new ITFS licenses, some of which have not 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.
8
<PAGE>
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 station signals. Pursuant to current FCC regulations, a
wireless cable license holder is generally protected from interference within 35
miles of the transmission site. 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, while 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.
Auction of Basic Trading Areas
As a result of legislation authorizing the FCC to utilize competitive
bidding (auctions) for the award of initial licenses or construction permits for
certain commercial services when mutually exclusive applications have been
filed, on June 15, 1995 the FCC adopted new rules replacing lottery procedures
with auctions for the awarding of commercial licenses where two or more parties
have filed applications for the same frequencies. Auctions under the new rules
began November 13, 1995 for the award of initial commercial licenses for "Basic
Trading Areas" or "BTAs" (as defined by Rand McNally) and ended March 28, 1996;
however, the new auction rules do not apply when a license is to be renewed. The
new rules are effective although pleadings have been filed which might result in
changes in the rules, and any auctions conducted pursuant thereto. BTA license
holders that obtain an MDS license via an auction must provide interference
protection to the 35-mile protected service area of existing license holders.
Under the statutory auction authority enacted in 1993, ITFS licenses are exempt
from the auction process and applications for ITFS licenses are expected to
continue to be awarded according to the FCC's objective criteria. The Company
has filed a long-form application (FCC Form 304) or a Statement of Intention
with the FCC for each of the 93 BTAs for which it was the winning bidder.
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 such 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
9
<PAGE>
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 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.
Possible Additional Capital Expenditures for Disposition Assets
No assurance can be given that the planned disposition of the Disposition
Assets will be consummated. Accordingly, the Company may be required to expend
additional capital to maintain certain assets and/or fund lease payments
attributable to the Disposition Assets. Further, no assurance can be given that
the disposition of the Disposition Assets will have the desired impact on the
Company's business or financial affairs.
Possible Adverse Tax Consequences Attributable To Certain Dispositions
The cash and promissory note portion of the consideration received by the
Company and/or its subsidiaries from the consummation of the sale and
contribution of certain assets to TruVision Cable, Inc. ("TruVision") and CS
Wireless, received upon the consummation of the Los Angeles Disposition (as
defined herein) and to be received upon the consummation of the Atlanta
Transaction will result in the recognition of gain for Federal income tax
purposes. The amount of any tax liability attributable thereto will depend upon
numerous factors, including the tax basis of the assets conveyed, the net
operating losses available to the Company and other factors. There can be no
assurance that sufficient tax bases and net operating losses will exist to
defray a material amount of any such gain, thereby requiring the Company to pay
certain tax liabilities to Federal and/or state authorities. Any such payments
would negatively impact the Company's cash flow.
Difficulties and Uncertainties of a New Industry
While wireless cable television is not a new technology, it is a relatively
new industry with a short operating history. Potential investors should be aware
of the difficulties and uncertainties that are normally associated with new
industries, such as lack of consumer acceptance, difficulty in obtaining
financing, increasing competition, advances in technology and changes in laws
and regulations. There can be no assurance that the wireless cable industry will
develop or continue as a viable or profitable industry.
Certain Subsidiaries Not Wholly Owned
The Company generally conducts its business through subsidiaries. The
Company's subsidiaries include non-operating subsidiaries that hold interests in
channels, subsidiaries that operate systems and subsidiaries that do both. The
Company also has an operating subsidiary that installs wireless cable systems in
various markets served by the Company and its subsidiaries. Certain of the
Company's subsidiaries are not wholly owned and most subsidiaries are indirectly
owned by the Company as a result of its majority ownership of other entities.
Although the Company has a sufficient interest in its subsidiaries to be able to
exercise control over them, the Company may owe a fiduciary duty to the holders
of various minority interests in its subsidiaries. Accordingly, the Company may
not exercise unfettered control over such subsidiaries and may be required to
deal with such subsidiaries on terms no less favorable to such subsidiaries than
could be obtained from unaffiliated third parties. The Company believes
10
<PAGE>
that all of its dealings with its subsidiaries have been on such terms. In
addition, dividends or other distributions paid or made by such subsidiaries
must be paid or made on a pro rata basis to all stockholders.
Wireless One and CS Wireless Minority Investments
The Company owns approximately 26% 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 the Company's substantial
investment in Wireless One. To the extent Wireless One proves unsuccessful in
its business, the value of the Company's investment therein will be adversely
affected. Similarly, the Company owns approximately 35% 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 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 and a member 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 Company
Common Stock. Pursuant to the terms of a Stockholders' Agreement (the
"Stockholders' Agreement"), entered into in connection with the private
placement of $40.2 million of 9% Convertible Subordinated Discount Notes due
2004 (the "Convertible Notes"), each of Hunt Capital, David E. Webb and L. Allen
Wheeler, have agreed to vote their shares of the Company Common Stock (i) in
favor of the election to the Company's Board of Directors of one designee of
Jupiter Partners, L.P.,the purchaser of $40 million of the Convertible Notes
("Jupiter"), and (ii) in favor of the Company's Board of Directors consisting of
at least three and not more than seven members, for so long as Jupiter retains a
25% interest in the Convertible Notes originally purchased by it and/or the
shares of the Company Common Stock issued or issuable upon conversion thereof
(the "Conversion Shares") originally issuable to it. 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 the Company Common Stock by any such stockholder to a non-affiliate
for aggregate consideration greater than $15 million or representing in excess
of 5% of the then outstanding shares of Company Common Stock, 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 owned by Jupiter.
Limited Trading Volume and Possible Volatility of the Company Common Stock
During 1994 and 1995, the average trading volume of shares of the Company
Common Stock on Nasdaq National Market was approximately 22,800 and 33,600
shares per day, respectively. Prior to the consummation of the Transactions on
February 23, 1996, approximately 12,611,131 shares of the Company's Common Stock
were issued and outstanding, including 8,141,801 shares (of which 225,400 shares
were subject to exercisable options) held by executive officers, directors and
their affiliates. As a result of the Transactions, the Company issued
approximately 6,757,141 additional shares of Common Stock (of which 10,252
shares are held by the Company as treasury shares), resulting in substantial
increases both in the number of outstanding shares of Company Common
11
<PAGE>
Stock held by persons other than executive officers, directors and their
affiliates, and in the average daily trading volume of the Company's Common
Stock on Nasdaq National Market. The market price of the Company Common Stock
could fluctuate substantially in the future for a variety of reasons, including
the anticipated increased trading volume and anticipated dispositions resulting
from the Transactions, the performance of the Company, investor expectations for
the Company and the wireless cable television industry, general economic
conditions and fluctuations in the overall stock market.
No Company Common Stock Dividends
The Company has not paid dividends on the Company Common Stock since its
inception and does not anticipate paying any dividends in the foreseeable
future. In addition, provisions relating to the Company's indebtedness prohibit
the payment or accrual of dividends or any other distribution with respect to
the Company's Common Stock until such debt is paid in full.
Possible 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-size markets in the
central United States. In addition, 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 the Company Common Stock, 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 Company may pay
for such acquisitions in cash or by issuing equity or debt securities. 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.
Certain Rescission Rights
On February 23, 1996, American Wireless Systems, Inc. ("AWS") became a
wholly owned subsidiary of the Company. See "Recent Events - The Transactions."
Prior to February 23, 1996, a predecessor of AWS, through an affiliate,
participated in the offer and sale of approximately $29 million of general
partnership interests in three general partnerships without registration under
any federal or state securities laws. Following an investigation by the
Commission, AWS, Steven G. Johnson, then a director and officer of AWS, Jeffrey
D. Howes, formerly a director and officer of AWS, and Dexter S. Cohen and Kevin
C. King, each of whom then owned greater than five percent of AWS common stock,
without admitting or denying any wrongdoing, consented to an SEC order to cease
and desist from committing or causing any violation and any future violations of
the securities registration provisions of the Securities Act and the
broker-dealer registration provisions of the Exchange Act. In addition,
securities administrators in 22 states also have investigated or are presently
investigating the activities related to the unregistered sale of the general
partnership interests described above. The actions taken by the various state
securities administrators range from no action taken to the issuance of 15 cease
and desist orders and consent orders pursuant to which AWS, the issuing general
partnerships and Messrs. Johnson and Howes, as officers of AWS, were required to
cease selling general partnership interests without registration, to offer
rescission to individuals who purchased general partnership interests and, in
certain cases, to pay administrative penalties. In certain cases, such parties
have entered into consent decrees with state regulatory authorities, including
an order in Arizona requiring AWS to offer to purchase such general partnership
interests sold to residents of Arizona or to pay the Arizona Corporation
Commission an amount equal to the amount of the investment made by all general
partners who are Arizona residents, or approximately $566,000, plus interest
from the time of investment. AWS has advised the Arizona Corporation Commission
that it does not intend to make such offer to purchase.
12
<PAGE>
On September 29, 1995, AWS and one of the general partnerships in which
interests were sold (the "Pittsburgh Partnership") jointly sold (the "Pittsburgh
Sale") their respective interest in the joint venture operating the wireless
cable television system in Pittsburgh, Pennsylvania to CAI Wireless Systems,
Inc. ("CAI"). General partners holding approximately 72% of the general
partnership interests of the Pittsburgh Partnership (the "Pittsburgh Partners")
executed and delivered written consents to such sale, each of which included a
release of certain contingent claims including claims arising from the offer and
sale of the general partnership interests to the Pittsburgh Partners. On
February 23, 1996, in connection with the consummation of the Transactions, Fort
Worth Wireless Cable T.V. Associates, another of the general partnerships in
which interests were sold (the "FTW Partnership") sold (the "FTW Transaction")
its interest in the joint venture operating the wireless cable television system
in Fort Worth, Texas to the Company. General partners holding in excess of 78%
of the general partnership interests of the FTW Partnership (the "FTW Partners")
executed and delivered written consents to such sale, each of which included a
release of certain contingent claims including claims arising from the offer and
sale of the general partnership interests to the FTW Partners. On February 23,
1996, in connection with the consummation of the Transactions, Wireless Cable TV
Associates #38, another of the general partnerships in which interests were sold
(the "Minneapolis Partnership"), sold (the "Minneapolis Transaction") its
interest in the limited liability company operating the wireless cable
television system in Minneapolis, Minnesota to the Company. General partners
holding in excess of 88% of the general partnership interests of the Minneapolis
Partnership (the "Minneapolis Partners") executed and delivered written consents
to such sale, each of which included an assignment to the Company of certain
related parties from certain contingent claims against AWS and certain related
parties, including claims arising from the offer and sale of the general
partnership interests to the Minneapolis Partners.
There can be no assurance that the Minneapolis Partners, the FTW Partners
or the Pittsburgh Partners who did not vote in favor of the Minneapolis
Transaction, the FTW Transaction, the Pittsburgh Sale, respectively, or any
governmental agency will not institute proceedings against AWS or the Company,
as the successor to AWS, based on a failure to register the general partnership
interests in connection with a public offering or for damages based on alleged
omissions or misrepresentations of material information in connection with the
sale of such interests. No assurance can be given that a successful claim
against the predecessors of AWS could not be asserted against the Company based
on a number of theories involving successor liability. The institution of legal
action against the Company arising out of the offer and sale of general
partnership interests by AWS' predecessors could result in substantial defense
costs to the Company and the diversion of efforts by the Company's management,
and the imposition of liabilities against the Company could have an adverse
effect on the Company.
THE COMPANY
The Company develops, owns and operates wireless cable television systems,
primarily in small to mid-size markets located in the central United States. As
of March 31, 1996, assuming the consummation of the Atlanta Transaction, the
Company had wireless cable channel rights in 78 markets, representing
approximately 8.2 million households, approximately 6.7 million of which the
Company believes can be serviced by line-of-sight 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 further estimates that within these markets, approximately 3.0
million LOS households, or approximately 36% of the Company's total LOS
households, are currently unpassed by traditional hard-wire cable systems. As of
March 31, 1996, the Company's 78 markets included (i) 39 markets in which the
Company has wireless cable television systems in operation, (ii) eight markets
in which the Company has wireless cable television systems under construction,
and (iii) 31 future launch markets, including 27 in which the Company has
aggregated sufficient wireless cable channel rights to commence construction of
a system and four in which the Company has leases with or options from
applicants for channel licenses that the Company expects to be granted by the
FCC. As of March 31, 1996, the 39 Existing Systems were providing wireless cable
service to approximately 142,000 subscribers.
13
<PAGE>
Certain of the wireless cable assets presently held by the Company are not
included in the discussion of the Company's business because such assets are not
a part of the Company's current long-term business plan. These assets include
wireless cable channel rights and related assets associated with the Los
Angeles, California market. The Company is currently a party to an agreement
relating to the disposition of the Los Angeles market.
The table below provides information regarding the 78 markets in which
Heartland has wireless cable channel rights that it currently intends to retain
and develop as of March 31, 1996, assuming the consummation of the Atlanta
Transaction.
Number of
Subscribers
Estimated Estimated at
Total Line-of-Sight Current March 31,
Market Households(1) Households(1) Channels(2) 1996
------ ------------- ------------- ----------- -----------
EXISTING SYSTEMS
Ada, OK 27,950 20,693 32 5,712
Wichita Falls, TX 78,290 74,376 28 6,149
Midland, TX 120,037 114,035 26 4,851
Abilene, TX 86,676 82,344 23 3,818
Lawton, OK 97,023 92,172 27 7,639
Laredo, TX 313,406(3) 297,736(3) 27 6,359
Enid, OK 76,602 72,772 21 4,365
Lindsay, OK 52,266 42,646 32 3,699
Ardmore, OK 61,416 52,976 20 3,542
Mt. Pleasant, TX 33,589 26,871 16 2,357
Lufkin, TX 117,534 88,150 12 -- (4)
Shaw, KS 47,223 42,763 30 4,176
Texarkana, TX 118,204 94,563 20 2,190
Stillwater, OK 54,562 40,922 20 6,912
Lubbock, TX 123,934 105,323 34 6,593
McLeansboro, IL 80,136 60,102 18 1,437
Vandalia, IL 73,593 55,195 20 1,997
Olney, IL 67,812 50,859 20 1,888
Lykens, OH 210,800 168,640 24 736
Paragould, AR 77,523 58,500 21 2,969
Sikeston, MO 69,837 52,378 24 3,207
Taylorville, IL 159,596 119,697 20 2,023
Peoria, IL 276,446 248,801 22 1,231
Manhattan, KS 56,473 42,355 20 1,487
O'Donnell, TX 68,940 65,493 20 1,727
Olton, TX 32,548 30,921 20 1,529
Monroe City/Lakenan, MO 46,376 34,782 27 1,816
Paris, TX 55,445 41,584 20 1,623
Sherman/Denison, TX 100,000 90,000 31 6,154
Harper/Freeport, IL 125,269 93,952 20 719
Corsicana/Athens, TX 69,161 62,245 23 711
Strawn/Ranger, TX 34,488 25,866 20 508
Hamilton, TX 28,551 21,413 20 456
Champaign, IL 164,992 148,493 23 2,236
Austin, TX 360,000 250,000 31 12,572
Temple/Killeen, TX 110,000 80,000 35 6,907
Waco, TX 100,000 80,000 35 4,404
Marion, KS 53,881 40,411 19 -- (5)
Corpus Christi, TX 135,000 108,000 31 15,490
--------- --------- -------
Total--Existing Systems 3,965,579 3,278,029 142,189
--------- --------- -------
14
<PAGE>
Estimated Estimated Estimated
Total Line-of-Sight Channels at
Market Households Households Launch(2)(6)
------ ---------- ---------- ------------
SYSTEMS UNDER CONSTRUCTION(7)
Anthony, KS 15,798 11,845 16
Forrest City, AR 55,642 41,732 21
Peaksville, MO 48,157 36,118 15
Purdin, MO 25,001 18,751 20
Sterling, KS 45,213 38,431 24
Stromsburg, NE 34,813 29,591 20
Tulsa, OK 321,922 321,922 273,634 16
Walnut Grove, IL 84,226 63,170 20
------- -------
Total--Systems Under Construction 630,772 513,272
------- -------
FUTURE LAUNCH MARKETS(8)
Altus, OK 30,653 29,120 16
Amarillo, TX 106,670 101,337 26
Bellflower, MO 63,384 57,046 20
Bluffs, IL 46,389 34,792 20
Burnet, TX 24,917 18,688 16
Charlotte, TX 32,771 24,578 16
Columbia, MO 149,622 127,179 18
Crow, TX 71,421 57,137 12
Des Moines, LA 267,279 240,551 16
El Dorado, AR 54,727 38,310 16
El Paso, TX 200,000 180,000 27
Elk City, OK 26,379 21,103 16
Fischer, TX 317,039 237,779 20
Henryetta, OK 31,968 25,574 16
Holdenville, OK 50,637 45,573 20
Ingram, TX 26,235 19,679 20
Kossuth, TX 52,490 39,368 20
Lenapah, OK 51,921 38,941 12
Mayfield, KY 175,948 155,972 21
McAlester, OK 36,475 25,533 20
Miami, OK 70,820 60,197 15
Muskogee, OK 66,510 53,208 20
Portsmouth, NH 384,389 288,292 27
Sabinal, TX 15,795 11,846 20
Seminole, OK 42,204 35,873 19
Shreveport, LA 214,315 182,168 24
Springfield, MO 139,706 118,750 16
Topeka, KS 211,762 190,586 16
Tyler, TX 233,416 186,734 14
Weatherford, OK 31,445 29,873 16
Wick, OH 336,098 268,878 20
--------- ---------
Total--Future Launch Markets 3,563,385 2,944,662
--------- ---------
Total--All Company Markets 8,159,736 6,735,963
========= =========
- ----------
(1) Does not include LOS households acquired by the Company through the FCC's
BTA auction, which ended March 28, 1996. The Company estimates that it
acquired an additional approximately 1.4 million net new households and
approximately 1.5 million net new LOS households in the BTA auction that
are not included in the table. The Company plans to reengineer its markets
to reflect the addition of new LOS households in its 78 existing markets
and to add new markets where the Company acquired sufficient channel rights
in the BTA auction to commence construction of a system.
(2) Includes local off-air VHF/UHF channels, some of which are retransmitted by
the Company over wireless cable channels.
(3) Includes households located in Mexico, to which the Company would be
permitted to provide service in conjunction with a Mexican-owned company.
15
<PAGE>
(4) Construction of the Lufkin System was completed in December 1994. The
Company is not actively marketing its service in the Lufkin System because
it is awaiting action by the FCC to grant licenses, which would increase
the number of wireless cable channels available to the Company.
(5) The Marion system was launched on March 28, 1996.
(6) The Company's business strategy is generally to launch a market with
approximately 12 wireless cable channels. Although the Company has no
current intention to launch any market with less than 12 channels, the
Company will launch certain markets with more than 12 channels and may, at
some point in the future, launch one or more markets with less than 12
channels due to FCC construction deadlines or competitive considerations in
such markets. Expected channels at launch includes channels with respect to
which the Company has a lease with or an option from a channel license
holder, an applicant for a channel license or an entity that has had an
application for a channel license returned without prejudice by the FCC and
which will be refiled. In certain markets, the Company has rights to
additional wireless cable channels but does not expect to utilize such
channels upon system launch.
(7) Systems in which the system head-end is under construction. Expected
channels at launch for such systems include channels with respect to which
the Company has a lease with or an option from a channel license holder or
an applicant for a channel license.
(8) Such markets include 27 markets with respect to which the Company has
aggregated sufficient wireless cable channel rights to commence
construction of a system and four markets with respect to which the Company
has a lease with or an option from an applicant for a channel license or an
entity that has had an application for a channel license returned without
prejudice by the FCC and which will be refiled. The Company expects a
substantial number of such licenses to be granted by the FCC.
RECENT EVENTS
Los Angeles Disposition
Effective June 20, 1996, the Company sold to Pacific Telesis Group
("Pacific Telesis") the wireless cable assets and related liabilities of the
Company in the Los Angeles, California market for $8.2 million cash and the
reimbursement of certain prepaid expenses (the "Los Angeles Disposition").
Atlanta Transaction
Effective May 9, 1996, the Company and CS Wireless reached an agreement in
principle, pursuant to which the Company will sell to CS Wireless all of the
outstanding capital stock of a subsidiary of the Company owning the wireless
cable assets and related liabilities associated with the Adairsville, Powers
Crossroads and Rutledge, Georgia markets for $7.2 million (the "Atlanta
Transaction"). This purchase price will be paid either in cash or in a
combination of $5.0 million cash and a $2.2 million note. Consummation of this
transaction is expected to occur on or before July 31, 1996. The Atlanta
Transaction is subject to customary closing conditions, including, without
limitation, satisfactory due diligence review by CS Wireless. No assurance can
be given that such conditions will be satisfied. If such conditions are not
satisfied, the Company will actively seek one or more disposition opportunities
for these assets for cash, promissory notes, equity interests or a combination
thereof.
Memphis Transaction
On May 6, 1996, the Company consummated the sale of the Memphis and
Flippin, Tennessee wireless cable markets to TruVision for approximately $5.4
million in cash. Upon consummation of the sale, TruVision dismissed a lawsuit
against the Company and AWS without prejudice and each party entered into a
Settlement Agreement and Release in connection therewith.
USE OF PROCEEDS
Assuming that all of the Warrants are exercised, the Company will receive
proceeds of approximately $11,715,000 before deducting expenses payable by the
Company estimated at $55,000. The net proceeds to the Company from the sale of
any Shares upon exercise of the Warrants will be used for working capital and
other general corporate purposes.
16
<PAGE>
DESCRIPTION OF WARRANTS AND PLAN OF DISTRIBUTION
The Shares offered hereby are being offered by the Company to holders of
Warrants. Such Shares will be offered directly by the Company, without the use
of an underwriter or placement agent. The Warrants entitle the holders thereof
to purchase Shares at an exercise price of $19.525 per Share, subject to
adjustment under certain circumstances, payable in cash or by certified or
official bank check. The warrants expire on April 26, 2000. A Warrant can be
exercised by surrendering the certificate representing the Warrant (the "Warrant
Certificate") to the Warrant Agent accompanied by payment of the exercise price
for each Share as to which the Warrant is being exercised. The Company will pay
all documentary stamp taxes attributable to the issue of the Shares issuable
upon the exercise of Warrants; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issue of any Warrant Certificates or any certificates for Shares
issued upon the exercise of the Warrants in a name other than that of the holder
of a Warrant Certificate surrendered upon the exercise of a Warrant, and the
Company shall not be required to issue or deliver such Warrant Certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. A certificate or
certificates representing the Shares purchased will be issued by the Company
following the time of exercise, together with a new Warrant Certificate if less
than all of the Shares covered by the Warrant Certificate are being purchased.
The date of exercise of any Warrant will be the date the Warrant Certificate is
duly presented to the Warrant Agent accompanied by payment of the exercise
price.
The Warrant Agreement provides for adjustment of the exercise price and the
number of shares of Common Stock purchasable upon exercise of the Warrants to
protect the Warrant holders against dilution in certain events, including stock
dividends, distributions of the Company Common Stock, stock splits,
reorganizations, reclassifications, subdivisions and combinations of Common
Stock, the merger, consolidation or disposition of all or substantially all of
the assets of the Company, or the distribution pro rata to all holders of Common
Stock of assets or debt securities.
The Company and the Warrant Agent may from time to time supplement or amend
the Warrant Agreement or the provisions of the Warrant Certificates without the
approval of any holders of the Warrants in order to cure any ambiguity, to
correct or supplement any provision contained therein that may be defective or
inconsistent with the other provisions therein, or to make any other provisions
in regard to matters or questions arising thereunder that are not inconsistent
with the provisions of the Warrant Certificates and do not adversely affect the
interest of the Warrant holders.
The Company is not required to issue any Warrant Certificate evidencing a
fraction of a Warrant or to issue fractions of Shares of Common Stock on the
exercise of the Warrants. If any fraction (calculated to the nearest
one-hundredth) of a Share of Common Stock would otherwise be issuable on the
exercise of any Warrant, the Company will purchase such fraction for an amount
in cash equal to the current value of such fraction. By accepting a Warrant
Certificate, the holder thereof has waived any right to receive a Warrant
Certificate evidencing any fraction of a Warrant or to receive any fractional
share of Common Stock upon exercise of a Warrant.
The Warrant holders as such are not entitled to vote, receive dividends or
exercise any of the rights of holders of Shares of Common Stock for any purpose
until such Warrants have been duly exercised and payment of the purchase price
has been made.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain Federal income tax
considerations relevant to the ownership, exercise and disposition of the
Warrants, but does not purport to be a complete analysis of all potential tax
effects. 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
17
<PAGE>
legislative, judicial or administrative action. Any such changes may be applied
retroactively in a manner that could adversely affect a holder of the Warrants.
The following discussion assumes that holders will hold the Warrants 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 described herein or that any such position would not be sustained.
The tax treatment of a holder of Warrants 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 or
foreign entities, or aspects of Federal income taxation that may be relevant to
a particular 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 HOLDING, EXERCISING AND DISPOSING OF THE
WARRANTS, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN
TAX LAWS.
Exercise
No gain or loss will be recognized for Federal income tax purposes by
holders of the Warrants upon the exercise thereof in exchange for Shares (except
to the extent of cash, if any, received in lieu of the issuance of fractional
shares of Common Stock). A holder's tax basis in the Shares will equal the sum
of the adjusted tax basis in the Warrants plus the exercise price paid on the
exercise thereof. The holding period of the Shares received on the exercise of
the Warrants will not include the period during which the Warrants were held by
such holder. If any cash is received in lieu of fractional shares, the holder
will recognize gain or loss, and the character and the amount of such gain or
loss will be determined as if the holder had received such fractional shares and
then immediately sold them for cash.
Sale of Warrants
The sale of a Warrant ordinarily will result in the recognition of gain or
loss to the holder for Federal income tax purposes in an amount equal to the
difference between the amount realized on such sale or exchange and the holder's
tax basis in the Warrant. Such gain or loss will be capital gain or loss,
provided the Shares would have been a capital asset in the hands of the Warrant
holder had the Warrant been exercised, and will be long-term capital gain or
loss with respect to Warrants held for more than one year.
Similarly, gain or loss will generally be recognized upon a sale of the
Shares received upon exercise of a Warrant in an amount equal to the difference
between the amount realized on the transfer and the holder's adjusted tax basis
in the Shares. Such gain or loss will be capital gain or loss, provided the
Shares are held as a capital asset, and will be long-term capital gain or loss
with respect to Shares with a more than one-year holding period.
Lapse
If the Warrants lapse without exercise, the holder will recognize a capital
loss (assuming the sale or exchange of the Warrants by the holder would have
given rise to capital gain or loss) equal to the holder's tax basis in the
Warrants. Any such capital loss would be long-term if the holding period for the
Warrants exceeds one year.
Adjustments
The conversion ratio and exercise price of the Warrants are subject to
adjustments under certain circumstances. Under Section 305 of the Code and the
Treasury Regulations issued thereunder, holders of the
18
<PAGE>
Warrants will be treated as having received a constructive distribution,
resulting in ordinary income (subject to a possible dividends-received deduction
in the case of corporate holders) to the extent of the Company's current and/or
accumulated earnings and profits, if, and to the extent that, certain
adjustments in the conversion ratio and exercise price that may occur in limited
circumstances, increase the proportionate interest of a holder of a Warrant in
the earnings and profits of the Company. Thus, under certain circumstances that
may or may not occur, such adjustment may be treated as taxable distributions to
holders of Warrants without regard to whether such holders receive any cash or
other property.
THE DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE
IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO A WARRANT
HOLDER'S PARTICULAR TAX SITUATION. WARRANT HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF WARRANTS, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
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 been audited by Coopers &
Lybrand L.L.P., independent certified public accountants, as indicated in their
report with respect thereto, which includes
19
<PAGE>
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 TV 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.
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon for the
Company by O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, 41st Floor,
New York, New York 10112.
20
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
SEC Registration Fee........................................... $ 4,040
Accounting Fees and Expenses................................... $18,000
Legal Fees and Expenses........................................ $28,000
Miscellaneous.................................................. $ 4,960
-------
Total.. $55,000
=======
All fees and expenses other than the SEC registration fee are estimated.
The expenses listed above will be paid by the Company.
Item 15. 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 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 16. List of Exhibits
(a) Exhibits
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)
II-1
<PAGE>
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 "February 1995 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 February 1995 Form S-4 and
incorporated herein by reference)
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 February 1995 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 February 1995 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 February 1995
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 February 1995 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 February 1995 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 February
1995 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 February
1995 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 February 1995 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. 33-65357, (the "January 1996 Form S-4")
and incorporated herein by reference)
II-2
<PAGE>
2.21 Asset Purchase Agreement between United States Wireless Systems, Inc.
and Robert R. Story, Inc. (filed as Exhibit 2.21 to the January 1996
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 1996 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 1996 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 1996 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 1996 Form S-4 and
incorporated herein by reference)
2.26 Amended and Restated Asset 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 1996 Form S-4 and incorporated
herein by reference)
2.27 Participation Agreement dated as of December 12, 1995, by and among
Registrant, CAS Wireless Systems, Inc. and CS Wireless Systems, Inc.
(the "Participation Agreement") (filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated December 12, 1995 and
incorporated herein by reference)
2.28 Amendment No. 1 to Participation Agreement dated February 22, 1996
(filed as Exhibit 2.7 to the Registrant's Current Report on Form 8-K
dated February 23, 1996 and incorporated herein by reference)
4.1* Warrant Agreement dated as of April 26, 1995, between the Registrant
and Bankers Trust Company, as Warrant Agent
5** Opinion of O'Sullivan Graev & Karabell, LLP (including the consent of
such firm) regarding legality of securities being offered
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 (Heartland Wireless Communications, Inc.)
23.3* Consent of KPMG Peat Marwick LLP, independent certified public
accountants (Technivision, Inc.)
23.4* Consent of Arthur Andersen LLP, independent certified public
accountants (American Wireless Systems, Inc., Wireless Cable TV
Associates #38, and Fort Worth Wireless Cable T.V. Associates)
23.5* Consent of Coopers & Lybrand LLP, independent certified public
accountants (CableMaxx, Inc.)
II-3
<PAGE>
23.6* Consent of KPMG Peat Marwick, LLP, independent certified public
accountants (Cross Country Division)
24** Powers of Attorney
- ----------
* Filed herewith.
** Previously filed.
Item 17. Undertakings
(a) Rule 415 Offering. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(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. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective 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.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the Registration Statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Filings incorporating subsequent Exchange Act documents by reference.
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities
II-4
<PAGE>
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Request for acceleration of effective date. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the Company's
Certificate of Incorporation, Bylaws 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.
(i) Rule 430A. 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 the 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 that time shall be deemed to be the
initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and 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 Dallas, State of Texas, on the 3rd day of July,
1996.
HEARTLAND WIRELESS
COMMUNICATIONS, INC.
By: /s/ John R. Bailey
--------------------------------------
John R. Bailey
Senior Vice President-Finance,
Chief Financial Officer, Treasurer and
Secretary (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 3rd day of July, 1996,
by the following persons in the capacities indicated:
Signatures Title
---------- -----
/s/ J. R. Holland, Jr.* Chairman of the Board and Director
- --------------------------
J. R. Holland, Jr.
/s/ L. Allen Wheeler* Vice Chairman of the Board and Director
- --------------------------
L. Allen Wheeler
/s/ David E. Webb* President, Chief Executive Officer and Director
- -------------------------- (Principal Executive Officer)
David E. Webb
/s/ John R. Bailey Senior Vice President-Finance, Chief Financial
- -------------------------- Officer, Treasurer and Secretary
John R. Bailey (Principal Financial Officer)
/s/ David D. Hagey* Vice President, Controller and Assistant Secretary
- -------------------------- (Principal Accounting Officer)
David D. Hagey
/s/ Dennis M. O'Rourke* Director
- --------------------------
Dennis M. O'Rourke
/s/ John A. Sprague* Director
- --------------------------
John A. Sprague
II-6
<PAGE>
/s/ Wes W. Watkins* Director
- --------------------------
Wes W. Watkins
/s/ Alvin H. Lane, Jr.* Director
- --------------------------
Alvin H. Lane, Jr.
* By /s/ John R. Bailey
- ------------------------------------
Attorney-in-Fact
II-7
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
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 "February 1995 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 February 1995 Form S-4 and
incorporated herein by reference)
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 February 1995 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 February 1995 Form S-4 and incorporated herein by
reference)
<PAGE>
2.14 Letter Agreement among the Registrant, Cross Country Wireless, Inc. and
RuralVision Joint Venture (filed as Exhibit 2.14 to the February 1995
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 February 1995 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 February 1995 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 February
1995 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 February
1995 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 February 1995 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. 33-65357, (the "January 1996 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 1996
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 1996 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 1996 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 1996 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 1996 Form S-4 and
incorporated herein by reference)
2.26 Amended and Restated Asset Purchase Agreement dated as of October 19,
1995, between Three Sixty Corp., Technivision, Inc. and the Registrant
(filed as Exhibit to the January 1996 Form S-4 and incorporated herein
by reference)
<PAGE>
2.27 Participation Agreement dated as of December 12, 1995, by and among
Registrant, CAS Wireless Systems, Inc. and CS Wireless Systems, Inc.
(the "Participation Agreement") (filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated December 12, 1995 and
incorporated herein by reference)
2.28 Amendment No. 1 to Participation Agreement dated February 22, 1996
(filed as Exhibit 2.7 to the Registrant's Current Report on Form 8-K
dated February 23, 1996 and incorporated herein by reference)
4.1* Warrant Agreement dated as of April 26, 1995, between the Registrant
and Bankers Trust Company, as Warrant Agent
5** Opinion of O'Sullivan Graev & Karabell, LLP (including the consent of
such firm) regarding legality of securities being offered
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 (Heartland Wireless Communications, Inc.)
23.3* Consent of KPMG Peat Marwick LLP, independent certified public
accountants (Technivision, Inc.)
23.4* Consent of Arthur Andersen LLP, independent certified public
accountants (American Wireless Systems, Inc., Wireless Cable TV
Associates #38, and Fort Worth Wireless Cable T.V. Associates)
23.5* Consent of Coopers & Lybrand LLP, independent certified public
accountants (CableMaxx, Inc.)
23.6* Consent of KPMG Peat Marwick, LLP, independent certified public
accountants (Cross Country Division)
24** Powers of Attorney
- ----------
* Filed herewith.
** Previously filed.
EXECUTION COPY
HEARTLAND WIRELESS COMMUNICATIONS, INC.
and
BANKERS TRUST COMPANY,
as Warrant Agent
------------------------------------
WARRANT AGREEMENT
Dated as of April 26, 1995
<PAGE>
WARRANT AGREEMENT
TABLE OF CONTENTS
Page
SECTION 1. Certain Definitions.............................................. 1
SECTION 2. Issuance, Form, Execution, Delivery and
Registration of Warrant Certificates................................. 3
2.1 Issuance of Warrants............................................ 3
2.2 Form of Warrant Certificates.................................... 4
2.3 Execution of Warrant Certificates............................... 4
2.4 Countersignature and Delivery................................... 5
2.5 Temporary Warrant Certificates.................................. 5
2.6 Separation of Warrants and Notes................................ 6
2.7 Registration.................................................... 6
2.8 Registration of Transfers and Exchanges......................... 7
2.9 Lost, Stolen, Destroyed, Defaced or Mutilated
Warrant Certificates........................................ 14
2.10 Offices for Exercise, etc...................................... 15
SECTION 3. Terms of Warrants; Exercise of Warrants.......................... 15
SECTION 4. Payment of Taxes................................................. 17
SECTION 5. Reservation of Warrant Shares.................................... 18
SECTION 6. Obtaining Stock Exchange Listings................................ 19
SECTION 7. Adjustment of Exercise Price and Number of
Warrant Shares Issuable.............................................. 19
(a) Stock Splits, Combinations, etc................................. 19
(b) Reclassification, Combinations, Mergers, etc.................... 19
(c) Issuance of Options or Convertible Securities................... 21
(d) Dividends and Distributions..................................... 22
(e) Self-Tenders.................................................... 22
(f) Issuance of Additional Shares of Common Stock.................. 23
(g) Current Market Price............................................ 23
(h) Certain Distributions........................................... 24
(i) Consideration Received.......................................... 24
(j) Deferral of Certain Adjustments................................. 25
(k) Changes in Options and Convertible Securities................... 25
(l) Expiration of Options and Convertible Securities................ 25
(m) Other Adjustments............................................... 26
(n) Other Action Affecting Common Stock............................. 26
SECTION 8. Statement on Warrants............................................ 26
SECTION 9. Fractional Interest.............................................. 27
SECTION 10. When Adjustment Not Required.................................... 27
SECTION 11. Escrow of Warrant Stock......................................... 27
- i -
<PAGE>
Page
SECTION 12. Challenge to Good Faith Determination........................... 27
SECTION 13. Treasury Stock.................................................. 28
SECTION 14. Notices to Warrant Holders...................................... 28
SECTION 15. Merger, Consolidation or Change of Name of
Warrant Agent........................................................ 29
SECTION 16. Warrant Agent................................................... 30
SECTION 17. Resignation and Removal of Warrant Agent;
Appointment of Successor..................................................... 33
SECTION 18. Registration.................................................... 34
18.1 Warrant Shares Registration Statement.......................... 34
18.2 Registration Expenses.......................................... 35
18.3 Limitations on Obligations Under Registration
Covenants................................................... 35
SECTION 19. Reports......................................................... 36
SECTION 20. Notices to Company and Warrant Agent............................ 36
SECTION 21. Supplements and Amendments...................................... 37
SECTION 22. Severability.................................................... 37
SECTION 23. Successors...................................................... 38
SECTION 24. Termination..................................................... 38
SECTION 25. GOVERNING LAW................................................... 38
SECTION 26. Benefits of This Agreement...................................... 38
SECTION 27. Entire Agreement................................................ 39
SECTION 28. Counterparts.................................................... 39
EXHIBIT A....................................................................A-1
EXHIBIT B....................................................................B-1
EXHIBIT C....................................................................C-1
- ii -
<PAGE>
WARRANT AGREEMENT dated as of April 26, 1995 (the "Agreement") between
Heartland Wireless Communications, Inc., a Delaware corporation (the "Company"),
and Bankers Trust Company, as warrant agent (in such capacity, the "Warrant
Agent").
WHEREAS, the Company proposes to issue warrants, as hereinafter described
(the "Warrants"), to purchase up to an aggregate of 600,000 shares of Common
Stock (as defined below), in connection with an offering of an aggregate of
$100,000,000 principal amount of the Company's 13% Senior Notes due 2003 (the
"Notes") and 600,000 Warrants, each Warrant entitling the holder thereof to
purchase one (1) share of Common Stock. The Notes and Warrants will be sold in
Units (the "Units"), each Unit consisting of $1,000 principal amount of Notes
and six Warrants.
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance of Warrant Certificates (as defined below) and other matters as
provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, and for the purpose of defining the respective rights and
obligations of the Company, the Warrant Agent and the Holders (as defined
below), the parties hereto agree as follows:
SECTION 1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Affiliate" of any person means any person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such person. For purposes of this definition, "control" when used with respect
to any person means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"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.
"Commission" means the Securities and Exchange Commission.
"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
<PAGE>
2
Person, to shares of Capital Stock of any other class of such Person.
"Company" means Heartland Wireless Communications, Inc., a Delaware
corporation, and its successors and assigns.
"Convertible Securities" mean any shares of stock or securities which are
convertible or exchangeable, either immediately or upon the occurrence of a
specified date or a specified event, for shares of Common Stock.
"Distribution" has the meaning specified in Section 7(c).
"Exchange Act" means the Securities Exchange Act of 1934, as amended (or
any successor act), and the rules and regulations promulgated thereunder.
"Exercisability Date" means April 26, 1996 (the first anniversary of the
Issue Date).
"Exercise Price" means the purchase price per share of Common Stock to be
paid upon the exercise of each Warrant in accordance with the terms hereof,
which price shall initially be $19.525 per share, subject to adjustment from
time to time pursuant to Section 7 hereof.
"Expiration Date" means April 26, 2000 (the fifth anniversary of the Issue
Date).
"Expiration Time" means the last time tenders or exchanges may be made
pursuant to the tender or exchange offer.
"Holder" means the registered holder of a Warrant.
"Majority Holders" means the Holders of Warrants exercisable for in excess
of 50% of the aggregate number of shares of Common Stock then receivable upon
exercise of all Warrants, whether or not then exercisable.
"Issue Date" means the date on which Notes are first authenticated and
issued.
"Nasdaq National Market" means the Nasdaq Stock Market National Market.
"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.
"Purchased Shares" has the meaning specified in Section 7(e).
<PAGE>
3
"Purchasers" mean BT Securities Corporation and Lazard Freres & Co., as
initial Purchasers of the Units.
"SEC Reports" has the meaning specified in Section 19(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Separability Date" has the meaning specified in Section 2.6.
"Time of Determination" has the meaning specified in Section 7(g).
"Transfer Agent" has the meaning specified in Section 5.
"Unit" means the $1,000 principal amount of Notes and six Warrants that
comprise each Unit.
"Warrant Agent" means Bankers Trust Company or the successor or successors
of such Warrant Agent appointed in accordance with the terms hereof.
"Warrant Certificates" means the certificates evidencing the warrants to be
delivered pursuant to this Agreement, substantially in the form of Exhibit A
hereto.
"Warrants" shall mean this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, any thereof. All Warrants
shall at all times be identical as to terms and conditions and date, except as
to the number of shares of Common Stock for which they may be exercised.
"Warrant Shares" has the meaning specified in Section 2.1 hereof.
SECTION 2. Issuance, Form, Execution, Delivery and Registration of Warrant
Certificates.
2.1 Issuance of Warrants. Warrants comprising part of the Units shall be
originally issued in connection with the issuance of the Units and such Warrants
shall not be separately transferable from the Notes until on or after the
Separability Date as provided in Section 2.6 hereof.
Each Warrant Certificate shall evidence the number of Warrants specified
therein, and each Warrant evidenced thereby shall represent the right, subject
to the provisions contained herein and therein, to purchase from the Company
(and the Company shall issue and sell to such holder of the Warrant) one (1)
fully paid and non-assessable share of the Company's Common Stock (the
<PAGE>
4
shares purchasable upon exercise of a Warrant being hereinafter referred to as
the "Warrant Shares" and, where appropriate, such term shall also mean the other
securities or property purchasable and deliverable upon exercise of a Warrant as
provided in Section 7 at the price specified herein and therein, in each case
subject to adjustment as provided herein and therein).
2.2 Form of Warrant Certificates. The Warrant Certificates will initially
be issued either in global form (the "Global Warrants"), substantially in the
form of Exhibit A hereto (including footnote 1 thereto) or in registered form as
definitive Warrant Certificates (the "Definitive Warrants"). The Warrant
Certificates evidencing the Global Warrants or the Definitive Warrants to be
delivered pursuant to this Agreement shall be substantially in the form set
forth in Exhibit A attached hereto. Such Global Warrants shall represent such of
the outstanding Warrants as shall be specified therein and each shall provide
that it shall represent the aggregate amount of outstanding Warrants from time
to time endorsed thereon and that the aggregate amount of outstanding Warrants
represented thereby may from time to time be decreased or increased, as
appropriate. Any endorsement of a Global Warrant to reflect the amount of any
increase or decrease in the amount of outstanding Warrants represented thereby
shall be made by the Warrant Agent and Depositary (as defined below) in
accordance with instructions given by the holder thereof. The Depository Trust
Company shall act as the Depositary (the "Depositary") with respect to the
Global Warrants until a successor shall be appointed by the Company. Upon
written request, and subject to Section 2.8 hereof, a Warrant holder may receive
from the Warrant Agent Definitive Warrants as set forth in Section 2.8 hereof.
2.3 Execution of Warrant Certificates. The Warrant Certificates shall be
executed on behalf of the Company by the chairman of its Board of Directors, its
president or any vice president and attested by its secretary or assistant
secretary, under its corporate seal. Such signatures may be the manual or
facsimile signatures of the present or any future such officers. The seal of the
Company may be in the form of a facsimile thereof and may be impressed, affixed,
imprinted or otherwise reproduced on the Warrant Certificates. Typographical and
other minor errors or defects in any such reproduction of the seal or any such
signature shall not affect the validity or enforceability of any Warrant
Certificate that has been duly countersigned and delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer before the Warrant Certificate so
signed shall be countersigned and delivered by the Warrant Agent or disposed of
by the Company, such Warrant Certificate nevertheless may be countersigned and
delivered or disposed of as though the person who signed such Warrant
Certificate had not ceased to be such officer of the Company; and any Warrant
Certificate may be signed
<PAGE>
5
on behalf of the Company by such persons as, at the actual date of the execution
of such Warrant Certificate, shall be the proper officers of the Company,
although at the date of the execution and delivery of this Agreement any such
person was not such an officer.
2.4 Countersignature and Delivery. Subject to the immediately following
paragraph, Warrant Certificates shall be countersigned by manual signature and
dated the date of countersignature by the Warrant Agent and shall not be valid
for any purpose unless so countersigned and dated. The Warrant Certificates
shall be numbered and shall be registered in the Warrant Register (as defined in
Section 2.7 hereof).
Upon the receipt by the Warrant Agent of a written order of the Company set
forth in an Officers' Certificate, which order shall be signed by the chairman
of its Board of Directors, its president or any vice president and attested by
its secretary or assistant secretary, and shall specify the amount of Warrants
to be countersigned, whether the Warrants are to be Global Warrants or
Definitive Warrants, whether the Warrants are to bear the legend set forth in
Section 2.8(g), the date of such Warrants and such other information as the
Warrant Agent may reasonably request, without any further action by the Company,
the Warrant Agent is authorized, upon receipt from the Company at any time and
from time to time of the Warrant Certificates, duly executed as provided in
Section 2.3 hereof, to countersign the Warrant Certificates and deliver them.
Such countersignature shall be by a duly authorized signatory of the Warrant
Agent (although it shall not be necessary for the same signatory to sign all
Warrant Certificates).
In case any authorized signatory of the Warrant Agent who shall have
countersigned any of the Warrant Certificates shall cease to be such authorized
signatory before the Warrant Certificate shall be disposed of by the Company,
such Warrant Certificate nevertheless may be delivered or disposed of as though
the person who countersigned such Warrant Certificate had not ceased to be such
authorized signatory of the Warrant Agent; and any Warrant Certificate may be
countersigned on behalf of the Warrant Agent by such persons as, at the actual
time of countersignature of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time of the
execution and delivery of this Agreement any such person is not such an
authorized signatory.
The Warrant Agent's countersignature on all Warrant Certificates shall be
in substantially the form set forth in Exhibit A hereto.
2.5 Temporary Warrant Certificates. Pending the preparation of definitive
Warrant Certificates, the Company may execute, and the Warrant Agent shall
countersign and deliver, temporary Warrant Certificates, which are printed,
lithographed,
<PAGE>
6
typewritten or otherwise produced, substantially of the tenor of the definitive
Warrant Certificates in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Warrant Certificates may determine, as evidenced by their
execution of such Warrant Certificates.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay. After
the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates at any office or agency
maintained by the Company for that purpose pursuant to Section 2.10 hereof.
Subject to the provisions of Section 4 hereof, such exchange shall be without
charge to the holder. Upon surrender for cancellation of any one or more
temporary Warrant Certificates, the Company shall execute, and the Warrant Agent
shall countersign and deliver in exchange therefor, one or more definitive
Warrant Certificates representing in the aggregate a like number of Warrants.
Until so exchanged, the holder of a temporary Warrant Certificate shall in all
respects be entitled to the same benefits under this Agreement as a holder of a
definitive Warrant Certificate.
2.6 Separation of Warrants and Notes. The Notes and Warrants will not be
separately transferable until the Separability Date. "Separability Date" shall
mean the earliest to occur of: (i) July 25, 1995 (90 days after the Issue Date),
(ii) the date a registration statement under the Securities Act, with respect to
a registered exchange offer for the Notes is declared effective under the
Securities Act and the Company has furnished to the Warrant Agent an Officers'
Certificate to such effect and (iii) such date as may be determined by the
Purchasers and specified to the Company, the Trustee, the Warrant Agent and the
Unit Agent in writing. The surrender of a Unit Certificate for separate Warrant
and Note certificates is herein referred to as a "Separation" and the related
Warrants being referred to as "Separated."
2.7 Registration. The Company will keep, at the office or agency maintained
by the Company for such purpose, a register or registers in which, subject to
such reasonable regulations as it may prescribe, the Company shall provide for
the registration of, and registration of transfer and exchange of, Warrants as
provided in Sections 2.8 and 2.9. Each person designated by the Company from
time to time as a person authorized to register the transfer and exchange of the
Warrants is hereinafter called, individually and collectively, the "Registrar."
The Company hereby initially appoints the Warrant Agent as Registrar. Upon
written notice to the Warrant Agent and any acting Registrar, the Company may
appoint a successor Registrar for such purposes.
<PAGE>
7
The Company will at all times designate one person (who may be the Company
and who need not be a Registrar) to act as repository of a master list of names
and addresses of the holders of Warrants (the "Warrant Register"). The Warrant
Agent will act as such repository unless and until some other person is, by
written notice from the Company to the Warrant Agent and the Registrar,
designated by the Company to act as such. In the event the Registrar is not the
repository, the Company shall cause the Registrar to furnish to such repository,
on a current basis, such information as to all registrations of transfer and
exchanges effected by the Registrar, as may be necessary to enable such
repository to maintain the Warrant Register on as current a basis as is
practicable.
2.8 Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Definitive Warrants. When Definitive Warrants
are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number of Definitive
Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as requested
if the requirements under this Warrant Agreement as set forth in this Section
2.8 hereof for such transactions are met; provided, however, that the Definitive
Warrants presented or surrendered for registration of transfer or exchange:
(x) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Company and the Warrant Agent,
duly executed by the holder thereof or by his attorney, duly
authorized in writing; and
(y) in the case of Warrants the offer and sale of which have not been
registered under the Securities Act and are presented for transfer or
exchange prior to (x) the date which is three years after the later of
the date of original issue and the last date on which the Company or
any affiliate of the Company was the owner of such Warrant, or any
predecessor thereto and (y) such later date, if any, as may be
required by any subsequent change in applicable law (the "Resale
Restriction Termination Date"), such Warrants shall be accompanied, in
the sole discretion of the Company, by the following additional
information and documents, as applicable, however, it being understood
that the Warrant Agent need not determine which of clauses (A) through
(D) below is applicable:
<PAGE>
8
(A) if such Warrant is being delivered to the Warrant Agent by a
holder for registration in the name of such holder, without
transfer, a certification from such holder to that effect (in
substantially the form of Exhibit B hereto); or
(B) if such Warrant is being transferred to a qualified institutional
buyer (as defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act or pursuant to
an exemption from registration in accordance with Rule 144 or
Regulation S under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a certification
to that effect (in substantially the form of Exhibit B hereto);
or
(C) if such Warrant is being transferred to an institutional
"accredited investor" within the meaning of subparagraphs (a)(1),
(a)(2), (a)(3) or (a)(7) of Rule 501 under the Securities Act,
delivery of a Certificate of Transfer in the form of Exhibit C
hereto and an opinion of counsel and/or other information
satisfactory to the Company to the effect that such transfer is
in compliance with the Securities Act; or
(D) if such Warrant is being transferred in reliance on another
exemption from the registration requirements of the Securities
Act, a certification to that effect (in substantially the form of
Exhibit B hereto) and an opinion of counsel reasonably acceptable
to the Company to the effect that such transfer is in compliance
with the Securities Act.
(b) Restrictions on Transfer of a Definitive Warrant for a Beneficial
Interest in a Global Warrant. A Definitive Warrant may not be exchanged for a
beneficial interest in a Global Warrant except upon satisfaction of the
requirements set forth below. Upon receipt by the Warrant Agent of a Definitive
Warrant, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Warrant Agent, together with:
(A) certification, substantially in the form of Exhibit B hereto, that
such Definitive Warrant is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities
Act) in accordance with Rule 144A under the Securities Act; and
(B) written instructions directing the Warrant Agent to make, or to direct
the Depositary to make, an
<PAGE>
9
endorsement on the Global Warrant to reflect an increase in the
aggregate amount of the Warrants represented by the Global Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or direct
the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the number of
Warrants represented by the Global Warrant to be increased accordingly. If no
Global Warrant is then outstanding, the Company shall issue and the Warrant
Agent shall countersign a new Global Warrant in the appropriate amount.
(c) Transfer and Exchange of Global Warrants. The transfer and exchange of
Global Warrants or beneficial interests therein shall be effected through the
Depositary, in accordance with this Warrant Agreement (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
(d) Transfer of a Beneficial Interest in a Global Warrant for a Definitive
Warrant.
(i) Any person having a beneficial interest in a Global Warrant may upon
request exchange such beneficial interest for a Definitive Warrant.
Upon receipt by the Warrant Agent of written instructions or such
other form of instructions as is customary for the Depositary from the
Depositary or its nominee on behalf of any person having a beneficial
interest in a Global Warrant and upon receipt by the Warrant Agent of
a written order or such other form of instructions as is customary for
the Depositary or the person designated by the Depositary as having
such a beneficial interest containing registration instructions and,
in the case of any such transfer or exchange prior to the Resale
Restriction Termination Date, the following additional information and
documents, however, it being understood that the Warrant Agent need
not determine which of clauses (A) through (D) below is applicable:
(A) if such beneficial interest is being transferred to the person
designated by the Depositary as being the beneficial owner, a
certification from such person to that effect (in substantially
the form of Exhibit B hereto); or
(B) if such beneficial interest is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Securities
Act) in accordance with Rule 144A under the Securities Act or
pursuant to an exemption from registration in accordance with
Rule 144 or Regulation S under the Securities Act or pursuant to
an effective
<PAGE>
10
registration statement under the Securities Act, a certification
to that effect from the transferee or transferor (in
substantially the form of Exhibit B hereto); or
(C) if such beneficial interest is being transferred to an
institutional "accredited investor" within the meaning of
subparagraphs (a)(1), (a)(2), (a)(3) or (a)(7) of Rule 501 under
the Securities Act, delivery of a Certificate of Transfer in the
form of Exhibit C hereto and an opinion of counsel and/or other
information satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(D) if such beneficial interest is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect from the
transferee or transferor (in substantially the form of Exhibit B
hereto) and an opinion of counsel from the transferee or
transferor reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act,
then the Warrant Agent will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Warrant Agent, the aggregate amount of the Global Warrant to be
reduced and, following such reduction, the Company will execute and,
upon receipt of a countersignature order in the form of an Officers'
Certificate (as defined in Section 2.8(f)), the Warrant Agent will
authenticate and deliver to the transferee a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial interest
in a Global Warrant pursuant to this Section 2.8(d) shall be
registered in such names and in such authorized denominations as
the Depositary, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Warrant
Agent in writing. The Warrant Agent shall deliver such Definitive
Warrants to the persons in whose names such Warrants are so
registered.
(e) Restrictions on Transfer and Exchange of Global Warrants.
Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 2.8), a Global Warrant
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
<PAGE>
11
(f) Countersignature of Definitive Warrants in Absence of Depositary. If at
any time:
(i) the Depositary for the Warrants notifies the Company that the
Depositary is unwilling or unable to continue as Depositary for the
Global Warrant and a successor Depositary for the Global Warrant is
not appointed by the Company within 90 days after delivery of such
notice; or
(ii) the Company, at its sole discretion, notifies the Warrant Agent in
writing that it elects to cause the issuance of Definitive Warrants in
place of the Global Warrant under this Warrant Agreement,
then the Company will execute, and the Warrant Agent, upon receipt of an
officers' certificate signed by two officers of the Company (one of whom must be
the principal executive officer, principal financial officer or principal
accounting officer) (an "Officers' Certificate") requesting the countersignature
and delivery of Definitive Warrants, will authenticate and deliver Definitive
Warrants, in an aggregate number equal to the aggregate number of Warrants
represented by the Global Warrant, in exchange for such Global Warrant.
(g) Legends.
(i) Except as permitted by the following paragraph (ii), each Warrant
Certificate evidencing the Global Warrants and the Definitive Warrants
(and all Warrants issued in exchange therefor or substitution thereof)
shall bear a legend substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN THREE
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY, EXCEPT (A) TO THE ISSUER THEREOF, OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE
SECURITIES
<PAGE>
12
ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHED (OR HAS FURNISHED ON
ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE OR REGISTRAR), (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
PROMULGATED UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT DATED AS OF APRIL
26, 1995 AMONG BT SECURITIES CORPORATION, LAZARD FRERES & CO. AND
HEARTLAND WIRELESS COMMUNICATIONS, INC. (THE "COMPANY"), A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(ii) Upon any sale or transfer of a Warrant pursuant to Rule 144 under the
Securities Act in accordance with Section 2.8 hereof or an effective
registration statement under the Securities Act:
(A) in the case of any Warrant that is a Definitive Warrant, the
Warrant Agent upon the written direction of the Company shall
permit the holder thereof to exchange such Warrant for a
Definitive Warrant that does not bear the first two paragraphs of
the legend set forth above and rescind any related restriction on
the transfer of such Warrant; and
<PAGE>
13
(B) any such Warrant represented by a Global Warrant shall not be
subject to the provisions set forth in (i) above (such sales or
transfers being subject only to the provisions of Section 2.8(c)
hereof); provided, however, that with respect to any request for
an exchange of a Warrant that is represented by a Global Warrant
for a Definitive Warrant that does not bear the first two
paragraphs of the legend set forth above, which request is made
in reliance upon Rule 144 under the Securities Act, the holder
thereof shall certify in writing to the Warrant Agent that such
request is being made pursuant to Rule 144 under the Securities
Act (such certification to be substantially in the form of
Exhibit B hereto).
(h) Cancellation and/or Adjustment of a Global Warrant. At such time as all
beneficial interests in a Global Warrant have either been exchanged for
Definitive Warrants, redeemed, repurchased or cancelled, such Global Warrant
shall be returned to or retained and cancelled by the Warrant Agent. At any time
prior to such cancellation, if any beneficial interest in a Global Warrant is
exchanged for Definitive Warrants, redeemed, repurchased or cancelled, the
number of Warrants represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant, by the Warrant Agent to
reflect such reduction.
(i) Obligations with Respect to Transfers and Exchanges of Definitive
Warrants.
(i) To permit registrations of transfers and exchanges, the Company shall
deliver to the Warrant Agent, upon execution of this Agreement and
from time to time thereafter, sufficient inventory of executed
Definitive Warrants and Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued upon any
registration, transfer or exchange of Definitive Warrants or Global
Warrants shall be the valid obligations of the Company, entitled to
the same benefits under this Warrant Agreement as the Definitive
Warrants or Global Warrants surrendered upon the registration of
transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any Warrant,
the Warrant Agent and the Company may deem and treat the person in
whose name any Warrant is registered as the absolute owner of such
Warrant, and neither the Warrant Agent nor the Company shall be
affected by notice to the contrary.
(j) Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the initial issuance of
<PAGE>
14
the Warrants and the Warrant Shares issuable upon the exercise of Warrants;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue of
any Warrant Certificates or any certificates for the Warrant Shares in a name
other than that of the registered holder of a Warrant Certificate surrendered
upon the exercise of a Warrant, and the Company shall not be required to issue
or deliver such Warrant Certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
(k) General. The Warrant Agent shall be under no duty to monitor compliance
with any federal, state or other securities laws.
2.9 Lost, Stolen, Destroyed, Defaced or Mutilated Warrant Certificates.
Upon receipt by the Company and the Warrant Agent (or any agent of the Company
or the Warrant Agent, if requested by the Company) of evidence satisfactory to
them of the loss, theft, destruction, defacement, or mutilation of any Warrant
Certificate and of indemnity satisfactory to them (which may include posting a
bond) and, in the case of mutilation or defacement, upon surrender thereof to
the Warrant Agent for cancellation, then, in the absence of notice to the
Company or the Warrant Agent that such Warrant Certificate has been acquired by
a bona fide purchaser or holder in due course, the Company shall execute, and an
authorized signatory of the Warrant Agent shall manually countersign and
deliver, in exchange for or in lieu of the lost, stolen, destroyed, defaced or
mutilated Warrant Certificate, a new Warrant Certificate representing a like
number of Warrants, bearing a number or other distinguishing symbol not
contemporaneously outstanding. Upon the issuance of any new Warrant Certificate
under this Section, the Company may require the payment from the holder of such
Warrant Certificate of a sum sufficient to cover any tax, stamp tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Warrant Agent and the
Registrar) in connection therewith. Every substitute Warrant Certificate
executed and delivered pursuant to this Section in lieu of any lost, stolen or
destroyed Warrant Certificate shall constitute an additional contractual
obligation of the Company, whether or not the lost, stolen or destroyed Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled to
the benefits of (but shall be subject to all the limitations of rights set forth
in) this Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Section 2.9 are exclusive with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Warrant Certificates and shall preclude (to the
extent lawful) any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with
<PAGE>
15
respect to the replacement of lost, stolen, destroyed, defaced or mutilated
Warrant Certificates.
The Warrant Agent is hereby authorized to countersign in accordance with
the provisions of this Agreement, and deliver the new Warrant Certificates
required pursuant to the provisions of this Section.
2.10 Offices for Exercise, etc. So long as any of the Warrants remain
outstanding, the Company will designate and maintain in the Borough of
Manhattan, The City of New York: (a) an office or agency where the Warrant
Certificates may be presented for exercise, (b) an office or agency where the
Warrant Certificates may be presented for registration of transfer and for
exchange (including the exchange of temporary Warrant Certificates for
definitive Warrant Certificates pursuant to Section 2.5 hereof), and (c) an
office or agency where notices and demands to or upon the Company in respect of
the Warrants or of this Agreement may be served. The Company may from time to
time change or rescind such designation, as it may deem desirable or expedient;
provided, however, that an office or agency shall at all times be maintained in
the Borough of Manhattan, The City of New York, as provided in the first
sentence of this Section. In addition to such office or offices or agency or
agencies, the Company may from time to time designate and maintain one or more
additional offices or agencies within or outside The City of New York, where
Warrant Certificates may be presented for exercise or for registration of
transfer or for exchange, and the Company may from time to time change or
rescind such designation, as it may deem desirable or expedient. The Company
will give to the Warrant Agent written notice of the location of any such office
or agency and of any change of location thereof. The Company hereby designates
the Warrant Agent at its corporate trust office in the Borough of Manhattan, The
City of New York (the "Warrant Agent Office"), as the initial agency maintained
for each such purpose. In case the Company shall fail to maintain any such
office or agency or shall fail to give such notice of the location or of any
change in the location thereof, presentations and demands may be made and notice
may be served at the Warrant Agent Office and the Company appoints the Warrant
Agent as its agent to receive all such presentations, surrenders, notices and
demands.
SECTION 3. Terms of Warrants; Exercise of Warrants. Subject to the terms of
this Agreement, each Warrant Holder shall have the right, which may be exercised
commencing at the opening of business on the Exercisability Date and until 5:00
p.m., New York City time on the Expiration Date, to receive from the Company the
number of fully paid and nonassessable Warrant Shares which the Holder may at
the time be entitled to receive on exercise of such Warrants and payment of the
Exercise Price then in effect for such Warrant Shares. Each Warrant not
exercised prior to 5:00 p.m., New York City time, on the Expiration Date shall
become void and all rights thereunder and all rights in
<PAGE>
16
respect thereof under this Agreement shall cease as of such time. No adjustments
as to dividends will be made upon exercise of the Warrants.
Until the earliest to occur of (i) 90 days after the issuance of the Units,
(ii) the date upon which a registration statement under the Securities Act with
respect to a registered exchange offer for the Notes is declared effective under
the Securities Act and (iii) such date as the Purchasers may in their discretion
deem appropriate (which is specified to the Company and the Warrant Agent in
writing), each $1,000 principal amount of Notes, and Warrants which comprise
each Unit, may not be separately transferred or exchanged. The Warrant Agent
shall coordinate its activities hereunder with the Trustee under the Indenture
and the Unit Agent under the Unit Agreement, and may rely upon information
provided by such Trustee regarding ownership or transfer of the Notes and/or by
the Unit Agent regarding ownership or transfer of the Units.
The Company shall give notice not less than 90, and not more than 120, days
prior to the Expiration Date to the Holders of all then outstanding Warrants to
the effect that the Warrants will terminate and become void as of 5:00 p.m., New
York City time, on the Expiration Date; provided, however, that the failure by
the Company to give such notice as provided in this Section shall not affect
such termination and becoming void of the Warrants as of 5:00 p.m., New York
City time, on the Expiration Date.
A Warrant may be exercised at anytime on or after the Exercisabilty Date
and prior to the Expiration Date upon surrender to the Company at the principal
office of the Warrant Agent of the certificate or certificates evidencing the
Warrant to be exercised with the form of election to purchase on the reverse
thereof duly filled in and signed, which signature shall be guaranteed by a bank
or trust company having an office or correspondent in the United States or a
broker or dealer which is a member of a registered securities exchange or the
National Association of Securities Dealers, Inc., and upon payment to the
Warrant Agent for the account of the Company of the Exercise Price, as adjusted
as herein provided, for each of the Warrant Shares in respect of which such
Warrant is then exercised. Payment of the aggregate Exercise Price shall be made
in cash or by certified or official bank check payable to the order of the
Company.
Subject to the provisions of Section 4 hereof, upon surrender of Warrants
and payment of the Exercise Price as provided above, the Warrant Agent shall
thereupon promptly notify the Company, and the Company shall transfer to the
Holder of such Warrant Certificate appropriate evidence of ownership of any
Warrant Shares or other securities or property (including any money) to which
the Holder is entitled, registered or otherwise placed in, or payable to the
order of, such name or names as may
<PAGE>
17
be directed in writing by the Holder, and shall deliver such evidence of
ownership and any other securities or property (including any money) to the
person or persons entitled to receive the same, together with an amount in cash
in lieu of any fraction of a share as provided in Section 9. Any such evidence
of ownership shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the surrender of such Warrants and payment of
the Exercise Price.
The Warrants shall be exercisable commencing on the Exercisability Date, at
the election of the Holders thereof, either in full or from time to time in part
and, in the event that a certificate evidencing Warrants is exercised in respect
of fewer than all of the Warrant Shares issuable on such exercise at any time
prior to the date of expiration of the Warrants, a new certificate evidencing
the remaining Warrant or Warrants will be issued, and the Warrant Agent is
hereby irrevocably authorized to countersign and to deliver the required new
Warrant Certificate or Certificates pursuant to the provisions of this Section
and of Section 2.3 hereof, and the Company, whenever required by the Warrant
Agent, will supply the Warrant Agent with Warrant Certificates duly executed on
behalf of the Company for such purpose.
All Warrant Certificates surrendered for the purpose of exercise (in whole
or in part), exchange, substitution or transfer shall, if surrendered to the
Company or to any of its agents, be delivered to the Warrant Agent for
cancellation or in cancelled form, or if surrendered to the Warrant Agent shall
be cancelled by it, and no Warrant Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Agreement. If the
Company purchases or acquires Warrants and if the Company so chooses, the
Company may deliver to the Warrant Agent for cancellation and retirement, and
the Warrant Agent shall so cancel and retire, the Warrant Certificates
evidencing said Warrants. The Warrant Agent shall destroy such cancelled Warrant
Certificates, and in such case shall upon the written request of the Company
deliver a certificate of destruction thereof to the Company. The Warrant Agent
shall account promptly to the Company with respect to Warrants exercised and
concurrently pay to the Company all monies received by the Warrant Agent for the
purchase of the Warrant Shares through the exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any notices given
or received hereunder by or from the Company available for inspection by the
Holders during normal business hours at its office. The Company shall supply the
Warrant Agent from time to time with such numbers of copies of this Agreement as
the Warrant Agent may request.
SECTION 4. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the initial issuance of
<PAGE>
18
the Warrants and the Warrant Shares issuable upon the exercise of Warrants;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue of
any Warrant Certificates or any certificates for Warrant Shares in a name other
than that of the Holder of a Warrant Certificate surrendered upon the exercise
of a Warrant, and the Company shall not be required to issue or deliver such
Warrant Certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
SECTION 5. Reservation of Warrant Shares. The Company will at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock or its authorized and issued Common
Stock held in its treasury, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of Warrants, the maximum number
of shares of Common Stock which may then be deliverable upon the exercise of all
outstanding Warrants.
The Company or, if appointed, the transfer agent for the Common Stock (the
"Transfer Agent") and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
The Company will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from
time to time from such Transfer Agent the stock certificates required to honor
outstanding Warrants upon exercise thereof in accordance with the terms of this
Agreement. The Company will supply such Transfer Agent with duly executed
certificates for such purposes and will provide or otherwise make available any
cash which may be payable as provided in Section 9. The Company will furnish
such Transfer Agent a copy of all notices of adjustments and certificates
related thereto, transmitted to each Holder of the Warrants pursuant to Section
14 hereof. As of the date of this Agreement, the Transfer Agent is Bank One,
Texas, N.A.
Before taking any action which would cause an adjustment pursuant to
Section 7 hereof to reduce the Exercise Price below the then par value (if any)
of the Warrant Shares, the Company will take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon issue and payment
<PAGE>
19
of the Exercise Price therefor, be duly and validly issued, fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens, charges
and security interests with respect to the issue thereof.
SECTION 6. Obtaining Stock Exchange Listings. The Company will from time to
time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed on
the principal securities exchanges and markets (including, without limitation,
the Nasdaq National Market) within the United States of America, if any, on
which other shares of Common Stock are then listed.
SECTION 7. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The number and kind of shares purchasable upon the exercise of
Warrants and the Exercise Price shall be subject to adjustment from time to time
as follows:
(a) Stock Splits, Combinations, etc. In case the Company shall hereafter
(A) pay a dividend or make a distribution on its Common Stock in shares of its
capital stock (whether shares of Common Stock or of capital stock of any other
class), (B) subdivide its outstanding shares of Common Stock or (C) combine its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such action shall be adjusted so that the
Holder of any Warrant thereafter exercised shall be entitled to receive the
number of shares of Capital Stock of the Company which such Holder would have
owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this paragraph shall
become effective immediately after the record date in the case of a dividend and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this paragraph, the Holder of any Warrant thereafter exercised
shall become entitled to receive shares of two or more classes of Capital Stock
of the Company, the Board of Directors of the Company (whose determination shall
be conclusive) shall determine the allocation of the adjusted Exercise Price
between or among shares of such classes of Capital Stock.
(b) Reclassification, Combinations, Mergers, etc. In case of any
reclassification or change of outstanding shares of Common Stock issuable upon
exercise of the Warrants (other than as set forth in paragraph (a) above and
other than a change in par value, or from par value to no par value, or from no
par value to par value or as a result of a subdivision or combination), or in
case of any consolidation or merger of the Company with or into another
corporation (other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of the
then outstanding shares of Common Stock or other Capital Stock
<PAGE>
20
issuable upon exercise of the Warrants (other than a change in par value, or
from par value to no par value, or from no par value to par value or as a result
of a subdivision or combination)) or in case of any sale or conveyance to
another corporation of all or substantially all of the assets of the Company,
then, as a condition of such reclassification, change, consolidation, merger,
sale or conveyance, the Company or such a successor or purchasing corporation,
as the case may be, shall forthwith make lawful and adequate provision whereby
the Holder of such Warrant then outstanding shall have the right thereafter to
receive on exercise of such Warrant the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock issuable upon exercise of such Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance and enter
into a supplemental warrant agreement so providing. Such provisions shall
include provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 7. If the issuer of
securities deliverable upon exercise of Warrants under the supplemental warrant
agreement is an Affiliate of the formed, surviving or transferee corporation,
that issuer shall join in the supplemental warrant agreement. The above
provisions of this paragraph (b) shall similarly apply to successive
reclassifications and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
In case of any such reorganization, reclassification, merger, consolidation
or disposition of assets, the successor or acquiring corporation (if other than
the Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant Agreement
to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of shares of the Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 7. For purposes of
this Section 7(b) "shares of stock and other securities" of a successor or
acquiring corporation shall include stock of such corporation of any class which
is not preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 7(b) shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
<PAGE>
21
(c) Issuance of Options or Convertible Securities. In the event the Company
shall, at any time or from time to time after the date hereof, issue, sell,
distribute or otherwise grant in any manner (including by assumption) to all
holders of the Common Stock any rights to subscribe for or to purchase, or any
warrants or options for the purchase of, Common Stock or any stock or securities
convertible into or exchangeable for Common Stock (any such rights, warrants or
options being herein called "Options" and any such convertible or exchangeable
stock or securities being herein called "Convertible Securities") or any
Convertible Securities (other than upon exercise of any Option), whether or not
such Options or the rights to convert or exchange such Convertible Securities
are immediately exercisable, and the price per share at which Common Stock is
issuable upon the exercise of such Options or upon the conversion or exchange of
such Convertible Securities (determined by dividing (i) the aggregate amount, if
any, received or receivable by the Company as consideration for the issuance,
sale, distribution or granting of such Options or any such Convertible Security,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Options or upon conversion or
exchange of all such Convertible Securities, plus, in the case of Options to
acquire Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the conversion or exchange of all such
Convertible Securities, by (ii) the total maximum number of shares of Common
Stock issuable upon the exercise of all such Options or upon the conversion or
exchange of all such Convertible Securities or upon the conversion or exchange
of all Convertible Securities issuable upon the exercise of all such Options)
shall be less than the current market price per share of Common Stock
(determined pursuant to Section 7(g)) on the record date for the issuance, sale,
distribution or granting of such Options (any such event being herein called a
"Distribution") then, effective upon such Distribution, the Exercise Price shall
be reduced to the price (calculated to the nearest 1/1,000 of one cent)
determined by multiplying the Exercise Price in effect immediately prior to such
Distribution by a fraction, the numerator of which shall be the sum of (i) the
number of shares of Common Stock outstanding (exclusive of any treasury shares)
immediately prior to such Distribution multiplied by the current market price
per share of Common Stock on the date of such Distribution plus (ii) the
consideration, if any, received by the Company upon such Distribution, and the
denominator of which shall be the product of (A) the total number of shares of
Common Stock outstanding (exclusive of any treasury shares) immediately after
such Distribution multiplied by (B) the current market price per share of Common
Stock on the record date for such Distribution. For purposes of the foregoing,
the total maximum number of shares of Common Stock issuable upon exercise of all
such Options or upon conversion or exchange of all such Convertible Securities
or upon the conversion or exchange of the total maximum amount of the
Convertible Securities issuable upon the exercise of all such Options shall be
deemed to have been issued as of the date of
<PAGE>
22
such Distribution and thereafter shall be deemed to be outstanding and the
Company shall be deemed to have received as consideration therefor such price
per share, determined as provided above. Except as provided in paragraphs (j)
and (k) below, no additional adjustment of the Exercise Price shall be made upon
the actual exercise of such Options or upon conversion or exchange of the
Convertible Securities or upon the conversion or exchange of the Convertible
Securities issuable upon the exercise of such Options.
(d) Dividends and Distributions. In the event the Company shall, at any
time or from time to time after the date hereof, distribute to all the holders
of Common Stock any dividend or other distribution of cash, evidences of its
indebtedness, other securities or other properties or assets (in each case other
than (i) dividends payable in Common Stock, Options or Convertible Securities
and (ii) any cash dividend from current or retained earnings), or any options,
warrants or other rights to subscribe for or purchase any of the foregoing, then
(A) the Exercise Price shall be decreased to a price determined by multiplying
the Exercise Price then in effect by a fraction, the numerator of which shall be
the current market price per share of Common Stock on the record date for such
distribution less the sum of (X) the cash portion, if any, of such distribution
per share of Common Stock outstanding (exclusive of any treasury shares) on the
record date for such distribution plus (Y) the then fair market value (as
determined in good faith by the Board of Directors of the Company) per share of
Common Stock outstanding (exclusive of any treasury shares) on the record date
for such distribution of that portion, if any, of such distribution consisting
of evidences of indebtedness, other securities, properties, assets, options,
warrants or subscription or purchase rights, and the denominator of which shall
be such current market price per share of Common Stock and (B) the number of
shares of Common Stock purchasable upon the exercise of each Warrant shall be
increased to a number determined by multiplying the number of shares of Common
Stock so purchasable immediately prior to the record date for such distribution
by a fraction, the numerator of which shall be the Exercise Price in effect
immediately prior to the adjustment required by clause (A) of this sentence and
the denominator of which shall be the Exercise Price in effect immediately after
such adjustment. The adjustments required by this paragraph (d) shall be made
whenever any such distribution occurs retroactive to the record date for the
determination of stockholders entitled to receive such distribution.
(e) Self-Tenders. In case of the consummation of a tender or exchange offer
(other than an odd-lot tender offer) made by the Company or any subsidiary of
the Company for all or any portion of the Common Stock to the extent that the
cash and value of any other consideration included in such payment per share of
Common Stock exceeds the first reported sales price per share of Common Stock on
the trading day next succeeding the
<PAGE>
23
Expiration Time (as defined below), the Exercise Price shall be reduced so that
the same shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the Expiration Time by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding (including
any tendered or exchanged shares) at the Expiration Time multiplied by the first
reported sales price of the Common Stock on the trading day next succeeding the
Expiration Time, and the denominator shall be the sum of (A) the fair market
value (determined by the Board of Directors of the Company, whose determination
shall be conclusive and described in a resolution of the Board of Directors) of
the aggregate consideration payable to stockholders based on the acceptance (up
to any maximum specified in the terms of the tender or exchange offer) of all
shares validly tendered or exchanged and not withdrawn as of the Expiration Time
(the shares deemed so accepted, up to any such maximum, being referred to as the
"Purchased Shares") and (B) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) on the Expiration Time and the first
reported sales price of the Common Stock on the trading day next succeeding the
Expiration Time, such reduction to become effective immediately prior to the
opening of business on the day following the Expiration Time.
(f) Issuance of Additional Shares of Common Stock. If at any time the
Company shall (except as hereinafter provided) issue or sell any additional
shares of Common Stock for consideration in an amount per additional share of
Common Stock less than the Current Market Price, then the number of shares of
Common Stock for which this Warrant is exercisable shall be adjusted to equal
the product obtained by multiplying the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such issue or sale by a
fraction (A) the numerator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale, and (B) the denominator
of which shall be the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale, and (2) the aggregate
consideration received from the issuance or sale of the additional shares of
Common Stock divided by the Current Market Price. For the purposes of this
paragraph (f), the date as of which the Current Market Price per share of Common
Stock shall be computed shall be the earlier of (a) the date on which the
Company shall enter into a firm contract for the issuance of such additional
shares of Common Stock or (b) the date of actual issuance of such additional
shares of Common Stock.
(g) Current Market Price. For the purpose of any computation of current
market price under this Section 7 and Section 9, the current market price per
share of Common Stock at any date shall be (x) for purposes of Section 9, the
closing price on the business day immediately prior to the exercise of the
applicable Warrant pursuant to Section 3 and (y) in all other cases, the average
of the daily closing prices for the shorter of (i) the 20 consecutive trading
days ending on the last full
<PAGE>
24
trading day on the exchange or market specified in the second succeeding
sentence prior to the Time of Determination (as defined below) and (ii) the
period commencing on the date next succeeding the first public announcement of
the issuance, sale, distribution or granting in question through such last full
trading day prior to the Time of Determination. The term "Time of Determination"
as used herein shall be the time and date of the earlier to occur of (A) the
date as of which the current market price is to be computed and (B) the last
full trading day on such exchange or market before the commencement of
"ex-dividend" trading in the Common Stock relating to the event giving rise to
the adjustment required by paragraph (a), (b), (c) or (d). The closing price for
any day shall be the last reported sale price regular way or, in case no such
reported sale takes place on such day, the average of the closing bid and asked
prices regular way for such day, in each case (1) on the principal national
securities exchange on which the shares of Common Stock are listed or to which
such shares are admitted to trading or (2) if the Common Stock is not listed or
admitted to trading on a national securities exchange, in the over-the-counter
market as reported by the Nasdaq National Market or any comparable system or (3)
if the Common Stock is not listed on the Nasdaq National Market or a comparable
system, as furnished by two members of the NASD selected from time to time in
good faith by the Board of Directors of the Company for that purpose. In the
absence of all of the foregoing, or if for any other reason the current market
price per share cannot be determined pursuant to the foregoing provisions of
this paragraph (g), the current market price per share shall be the fair market
value thereof as determined in good faith by the Board of Directors of the
Company.
(h) Certain Distributions. If the Company shall pay a dividend or make any
other distribution payable in Options or Convertible Securities, then, for
purposes of paragraph (c) above, such Options or Convertible Securities shall be
deemed to have been issued or sold without consideration.
(i) Consideration Received. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for a consideration
other than cash, the amount of the consideration other than cash received by the
Company in respect thereof shall be deemed to be the then fair market value of
such consideration (as determined in good faith by the Board of Directors of the
Company). If any Options shall be issued in connection with the issuance and
sale of other securities of the Company, together comprising one integral
transaction in which no specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to have been issued without
consideration; provided, however, that if such Options have an exercise price
equal to or greater than the current market price of the Common Stock on the
date of issuance of such Options, then such Options shall be deemed to have been
issued for consideration equal to such exercise price.
<PAGE>
25
(j) Deferral of Certain Adjustments. No adjustment to the Exercise Price
(including the related adjustment to the number of shares of Common Stock
purchasable upon the exercise of each Warrant) shall be required hereunder
unless such adjustment, together with other adjustments carried forward as
provided below, would result in an increase or decrease of at least one percent
(1%) of the Exercise Price; provided that any adjustments which by reason of
this paragraph (j) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. No adjustment need be made for
a change in the par value of the Common Stock. All calculations under this
Section shall be made to the nearest 1/1,000 of one cent or to the nearest
1/1000th of a share, as the case may be.
(k) Changes in Options and Convertible Securities. If the exercise price
provided for in any Options referred to in paragraph (c) above, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in paragraph (c) above, or the rate at which
any Convertible Securities referred to in paragraph (c) above are convertible
into or exchangeable for Common Stock shall change at any time (other than under
or by reason of provisions designed to protect against dilution upon an event
which results in a related adjustment pursuant to this Section 7), the Exercise
Price then in effect and the number of shares of Common Stock purchasable upon
the exercise of each Warrant shall forthwith be readjusted (effective only with
respect to any exercise of any Warrant after such readjustment) to the Exercise
Price and number of shares of Common Stock so purchasable that would then be in
effect had the adjustment made upon the issuance, sale, distribution or granting
of such Options or Convertible Securities been made based upon such changed
purchase price, additional consideration or conversion rate, as the case may be,
but only with respect to such Options and Convertible Securities as then remain
outstanding.
(l) Expiration of Options and Convertible Securities. If, at any time after
any adjustment to the number of shares of Common Stock purchasable upon the
exercise of each Warrant shall have been made pursuant to paragraph (c) or (k)
above or this paragraph (l), any Options or Convertible Securities shall have
expired unexercised, the number of such shares so purchasable shall, upon such
expiration, be readjusted and shall thereafter be such as they would have been
had they been originally adjusted (or had the original adjustment not been
required, as the case may be) as if (i) the only shares of Common Stock deemed
to have been issued in connection with such Options or Convertible Securities
were the shares of Common Stock, if any, actually issued or sold upon the
exercise of such Options or Convertible Securities and (ii) such shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the aggregate consideration, if
any, actually received by the Company for the issuance, sale, distribution or
granting of all such Options or Convertible
<PAGE>
26
Securities, whether or not exercised; provided that no such readjustment shall
have the effect of decreasing the number of such shares so purchasable by an
amount (calculated by adjusting such decrease to account for all other
adjustments made pursuant to this Section 7 following the date of the original
adjustment referred to above) in excess of the amount of the adjustment
initially made in respect of the issuance, sale, distribution or granting of
such Options or Convertible Securities.
(m) Other Adjustments. In the event that at any time, as a result of an
adjustment made pursuant to this Section 7, the Holders shall become entitled to
receive any securities of the Company other than shares of Common Stock,
thereafter the number of such other securities so receivable upon exercise of
the Warrants and the Exercise Price applicable to such exercise shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares of Common Stock
contained in this Section 7.
(n) Other Action Affecting Common Stock. In case at any time or from time
to time the Company shall take any action in respect of its Common Stock, other
than any action described in this Section 7, then the number of shares of Common
Stock or other stock for which this Warrant is exercisable shall be adjusted in
such manner as may be equitable in the circumstances. If the Company shall at
any time and from time to time issue or sell (i) any shares of any class of
common stock other than Common Stock, (ii) any evidences of its indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for such shares of common stock, with or without the payment of additional
consideration in cash or property or (iii) any warrants or other rights to
subscribe for or purchase any such shares of common stock or any such evidences,
shares of stock or other securities, then in each such case such issuance shall
be deemed to be of, or in respect of, Common Stock for purposes of this Section
7; provided, however, that, without limiting the generality of the foregoing, if
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, common stock other than Common Stock, including shares of
non-voting common stock, then the number of shares of Common Stock for which
this Warrant is exercisable immediately after the occurrence of any such event
shall be adjusted to equal the aggregate number of shares of such common stock
and of Common Stock which a record holder of the same number of shares of Common
Stock for which this Warrant is exercisable immediately prior to the occurrence
of such event would own or be entitled to receive after the happening of such
event.
SECTION 8. Statement on Warrants. Irrespective of any adjustment in the
number or kind of shares issuable upon the exercise of the Warrants or the
Exercise Price, Warrants theretofore or thereafter issued may continue to
express the same
<PAGE>
27
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
SECTION 9. Fractional Interest. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Holder, the number of full shares of Common Stock which shall be issuable upon
such exercise shall be computed on the basis of the aggregate number of shares
of Common Stock acquirable on exercise of the Warrants so presented. If any
fraction of a share of Common Stock would, except for the provisions of this
Section, be issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall direct the Transfer Agent to pay an amount in cash
calculated by it to equal the then current market price per share (determined
pursuant to Section 7(g)) multiplied by such fraction computed to the nearest
whole cent. The Holders, by their acceptance of the Warrant Certificates,
expressly waive any and all rights to receive any fraction of a share of Common
Stock or a stock certificate representing a fraction of a share of Common Stock.
SECTION 10. When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
SECTION 11. Escrow of Warrant Stock. If after any property becomes
distributable pursuant to Section 7 by reason of the taking of any record of the
holders of Common Stock, but prior to the occurrence of the event for which such
record is taken, and the Holder exercises this Warrant, any additional shares of
Common Stock issuable upon exercise by reason of such adjustment shall be deemed
the last shares of Common Stock for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein) and such shares or
other property shall be held in escrow for the Holder by the Company to be
issued to the Holder upon and to the extent that the event actually takes place.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed property returned.
SECTION 12. Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under Section 7, such determination may be
challenged in good faith by the Majority Holders, and any dispute shall be
<PAGE>
28
resolved by an investment banking firm of national standing selected by the
Company. The fee of such investment banking firm shall be paid by the Company,
unless such fair market value as determined by the investment banking firm is
more than 95% of the fair market value determined by the Board of Directors of
the Company, in which case the challenging Holders shall be jointly and
severally liable for such fee.
SECTION 13. Treasury Stock. The sale or other disposition of any issued
shares of Common Stock owned or held by or for the account of the Company shall
be deemed an issuance thereof and a repurchase thereof and designation of such
shares as treasury stock shall be deemed to be a redemption thereof for the
purposes of this Agreement.
SECTION 14. Notices to Warrant Holders. Upon any adjustment of the Exercise
Price pursuant to Section 7, the Company shall promptly thereafter (i) cause to
be filed with the Warrant Agent a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company (who may be the regular auditors of the Company) setting forth the
Exercise Price after such adjustment and setting forth in reasonable detail the
method of calculation and the facts upon which such calculations are based and
setting forth the number of Warrant Shares (or portion thereof) issuable after
such adjustment in the Exercise Price, upon exercise of a Warrant and payment of
the adjusted Exercise Price, which certificate shall be conclusive evidence of
the correctness of the matters set forth therein, and (ii) cause to be given to
each of the registered Holders of the Warrant Certificates at his address
appearing on the Warrant Register written notice of such adjustments by
first-class mail, postage prepaid. The Warrant Agent shall be entitled to
conclusively rely on the above-referenced accountant's certificate and shall be
under no duty or responsibility with respect to any such certificate, except to
exhibit the same from time to time to any Holder desiring an inspection thereof
during normal business hours upon reasonable notice. The Warrant Agent shall not
at any time be under any duty or responsibility to any Holder to determine
whether any facts exist that may require any adjustment of the number of shares
of Common Stock or other stock or property issuable on exercise of the Warrants
or the Exercise Price, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed in making such
adjustment or the validity or value (or the kind or amount) of any shares of
Common Stock or other stock or property which may be issuable on exercise of the
Warrants. The Warrant Agent shall not be responsible for any failure of the
Company to make any cash payment or to issue, transfer or deliver any shares of
Common Stock or stock certificates or other common stock or property upon the
exercise of any Warrant.
The Company shall, in addition, promptly notify the Holders of the Warrants
of any determination of its Board of
<PAGE>
29
Directors pursuant to Section 7(n) that any actions affecting its Common Stock
will not require an adjustment to the Exercise Price or the number of shares for
which a Warrant is exercisable, and shall specify in such notice the reasons for
such determination. In the event that the Majority Holders shall challenge any
of the calculations set forth in such notice within 20 days after the Company's
delivery thereof, the Company shall retain a firm of independent certified
public accountants of national standing selected by the Company to prepare and
execute a certificate verifying that no adjustment is required. The Company
shall promptly cause a signed copy of any certificate prepared pursuant to this
Section 14 to be delivered to each Holder in accordance with Section 20. The
Company shall keep at its office or agency designated pursuant to Section 2.10
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours upon reasonable notice by
any Holder or any prospective purchaser of a Warrant designated by a Holder
thereof.
SECTION 15. Merger, Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
business of the Warrant Agent, shall be the successor to the Warrant Agent
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor warrant agent under the provisions of
Section 17. In case at the time such successor to the Warrant Agent shall
succeed to the agency created by this Agreement, and in case at that time any of
the Warrant Certificates shall have been countersigned but not delivered, any
such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent; and in case at that time any of the Warrant Certificates
shall not have been countersigned, any successor to the Warrant Agent may
countersign such Warrant Certificates either in the name of the predecessor
Warrant Agent or in the name of the successor to the Warrant Agent; and in all
such cases such Warrant Certificates shall have the full force and effect
provided in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrant Certificates shall have been countersigned but not
delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
<PAGE>
30
SECTION 16. Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Warrants, by their acceptance
thereof, shall be bound:
(a) The statements contained herein and in the Warrant Certificates shall
be taken as statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of any of the same. The Warrant Agent assumes
no responsibility with respect to the distribution of the Warrant Certificates
except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel satisfactory to
it (who may be counsel for the Company) and the Warrant Agent shall incur no
liability or responsibility to the Company or to any holder of any Warrant
Certificate in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of any Warrant Certificate for any action taken in
reliance on any Warrant Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, opinion, direction or other paper, document
or instrument believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable compensation,
as agreed in writing from time to time, for all services rendered by the Warrant
Agent in connection with this Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind and
nature reasonably incurred by the Warrant Agent in connection with this
Agreement (including, without limitation, reasonable fees and expenses of
counsel) and to indemnify the Warrant Agent and its agents, employees,
directors, officers and affiliates and save it and them harmless against any and
all losses, liabilities and expenses of any nature whatsoever, including,
without limitation, judgments, costs and counsel fees and actual expenses, for
any action taken or omitted by the Unit Agent or arising in connection with this
Agreement and the exercise by the Warrant Agent of its rights hereunder and the
performance by the Warrant Agent of any of its obligations hereunder except as a
result of the Warrant Agent's gross negligence or bad faith or willful
misconduct.
<PAGE>
31
(f) The Warrant Agent shall be under no obligation to institute any action,
suit or legal proceeding or to take any other action likely to involve expense
unless the Company or one or more Holders of Warrant Certificates shall furnish
the Warrant Agent with reasonable security and indemnity satisfactory to the
Warrant Agent for any costs and expenses which may be incurred, but this
provision shall not affect the power of the Warrant Agent to take such action as
it may consider proper, whether with or without any such security or indemnity.
All rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrant
Certificates or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent and any recovery of judgment shall
be for the ratable benefit of the Holders of the Warrants, as their respective
rights or interests may appear.
(g) The Warrant Agent, and any stockholder, director, officer or employee
of it, may buy, sell or deal in any of the Warrants or other securities of the
Company or become pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to the Company or otherwise
act as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for the Company,
and its duties shall be determined solely by the provisions hereof. The Warrant
Agent shall not be liable for anything which it may do or refrain from doing in
connection with this Agreement except for its own willful misconduct, negligence
or bad faith.
(i) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of any Warrant Certificate to make or cause to be
made any adjustment of the Exercise Price or number of the Warrant Shares or
other securities or property deliverable as provided in this Agreement, or to
determine whether any facts exist which may require any of such adjustments, or
with respect to the nature or extent of any such adjustments, when made, or with
respect to the method employed in making the same. The Warrant Agent shall not
be accountable with respect to the validity or value or the kind or amount of
any Warrant Shares or of any securities or property which may at any time be
issued or delivered upon the exercise of any Warrant or with respect to whether
any such Warrant Shares or other securities will when issued be validly issued
and fully paid and nonassessable, and makes no representation with respect
thereto.
<PAGE>
32
(j) Before the Warrant Agent acts or refrains from acting with respect to
any matter contemplated by this Warrant Agreement, it may require:
(1) an Officers' Certificate (as defined in the Indenture) stating
that, in the opinion of the signers, all conditions precedent, if any,
provided for in this Warrant Agreement relating to the proposed action have
been complied with; and
(2) if reasonably necessary in the sole judgment of the Warrant Agent,
an opinion of counsel for the Company stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Each Officers' Certificate or, if requested, an opinion of counsel with
respect to compliance with a condition or covenant provided for in this Warrant
Agreement shall include:
(1) a statement that the person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person he or she has made
such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
The Warrant Agent shall not be liable for any action it takes or omits to
take in good faith in reliance on any such certificate or opinion.
(k) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, a Senior Vice President, the Secretary, an
Assistant Secretary, the Treasurer or an Assistant Treasurer of the Company, and
to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
<PAGE>
33
(l) The Warrant Agent shall not have any duty to calculate or determine any
adjustments with respect either to the Exercise Price or the kind and amount of
shares or other securities or any property receivable by holders of Warrant
Certificates upon the exercise or tender of Warrants required from time to time,
and the Warrant Agent shall have no duty or responsibility in determining the
accuracy or correctness of such calculations.
(m) The Company will perform, execute, acknowledge and deliver or cause to
be performed, executed, acknowledged and delivered all such further acts,
instruments and assurances as may be required by the Warrant Agent in order to
enable it to carry out or perform its duties under this Agreement.
SECTION 17. Resignation and Removal of Warrant Agent; Appointment of
Successor. (a) No resignation or removal of the Warrant Agent and no appointment
of a successor warrant agent shall become effective until the acceptance of
appointment by the successor warrant agent as provided herein. The Warrant Agent
may resign its duties and be discharged from all further duties and liability
hereunder (except liability arising as a result of the Warrant Agent's own gross
negligence, willful misconduct or bad faith) upon not less than 30 days' prior
written notice to the Company. The Company may remove the Warrant Agent upon
written notice, and the Warrant Agent shall thereupon in like manner be
discharged from all further duties and liabilities hereunder, except as
aforesaid. The Warrant Agent shall, at the Company's expense, cause to be mailed
(by first class mail, postage prepaid) to each Holder of a Warrant at his last
address as shown on the Warrant Register a copy of said notice of resignation or
notice of removal, as the case may be. Upon such resignation or removal, the
Company shall appoint in writing a new warrant agent. If the Company shall fail
to make such appointment within a period of 30 days after it has been notified
in writing of such resignation by the resigning Warrant Agent or after such
removal, then the resigning Warrant Agent or the Holder of any Warrant may apply
to any court of competent jurisdiction for the appointment of a new warrant
agent. Any new warrant agent, whether appointed by the Company or by such a
court, shall be a corporation doing business under the laws of the United States
or any state thereof, in good standing and having a combined capital and surplus
of not less than $50,000,000. The combined capital and surplus of any such new
warrant agent shall be deemed to be the combined capital and surplus as set
forth in the most recent annual report of its condition published by such
warrant agent prior to its appointment, provided that such reports are published
at least annually pursuant to law or to the requirements of a federal or state
supervising or examining authority. After
<PAGE>
34
acceptance in writing of such appointment by the new warrant agent, it shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be necessary
or expedient to execute and deliver any further assurance, conveyance, act or
deed, the same shall be done at the expense of the Company and shall be legally
and validly executed and delivered by the resigning or removed Warrant Agent.
Not later than the effective date of any such appointment, the Company shall
give notice thereof to the resigning or removed Warrant Agent. Failure to give
any notice provided for in this Section, however, or any defect therein, shall
not affect the legality or validity of the resignation of the Warrant Agent or
the appointment of a new warrant agent, as the case may be.
(b) Any corporation into which the Warrant Agent or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Warrant Agent or any new warrant agent shall be a party or any corporation to
which the Warrant Agent transfers substantially all of its corporate trust or
shareholder business shall be a successor Warrant Agent under this Agreement
without any further act, provided that such corporation (i) would be eligible
for appointment as successor to the Warrant Agent under the provisions of
Section 17(a) or (ii) is a wholly owned subsidiary of the Warrant Agent. Any
such successor Warrant Agent shall promptly cause notice of its succession as
Warrant Agent to be mailed (by first class mail, postage prepaid) to each Holder
at such Holder's last address as shown on the Warrant Register.
SECTION 18. Registration.
18.1 Warrant Shares Registration Statement. The Company agrees with and for
the benefit of the holders of Warrants that on or prior to the Exercisability
Date, the Company will have registered (the "Warrant Shares Registration
Statement") or otherwise qualified all Warrant Shares pursuant to the provisions
of the Securities Act and pursuant to all applicable state "Blue Sky" or
securities laws. So long as any unexpired and exercisable Warrants remain
outstanding, the Company will file such amendments and/or supplements to any
registration statement under the Securities Act or under any applicable state
securities laws covering the issuance of such Warrant Shares, and supplement and
keep current any prospectus forming a part of such registration statement, as
may be necessary to permit the Company to comply with the Securities Act and the
rules and regulations thereunder and as may be necessary to comply with all
applicable state "Blue Sky" or securities laws, and to permit the Company to
deliver to each Person exercising a Warrant a prospectus meeting the
requirements of Section
<PAGE>
35
10(a)(3) of the Securities Act and otherwise comply therewith; and the Company
will deliver such prospectus to each such Person. The Company shall, upon the
request of any holder of Warrants that may be required pursuant to the
Securities Act to deliver a prospectus in connection with any sale or other
disposition of Warrant Shares, include within the plan of distribution section
of the prospectus and in such other places in the prospectus as may be
necessary, all information necessary under the Securities Act to enable such
holder to deliver such prospectus in connection with sales or other dispositions
of such Warrant Shares, and the Company shall also take such action as may be
necessary under the Securities Act with respect to the related registration
statement to enable such holder to effect such delivery in connection with such
sale or other disposition. The Company further agrees to provide any holder who
may be required to deliver a prospectus upon the sale or other disposition of
such Warrant Shares, such number of copies of the prospectus as such holder
reasonably requests.
18.2 Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Section 18 will be borne by the Company,
including without limitation: (i) all registration and filing fees and expenses;
(ii) all fees and expenses of compliance with federal securities and state "Blue
Sky" or securities laws; (iii) all expenses of printing (including printing
certificates for the Warrant Shares and printing of prospectuses), messenger and
delivery services; (iv) all fees and disbursements of counsel for the Company;
(v) all fees and disbursements of independent certified public accountants of
the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance); and (vi) the Company's internal
expenses, the expenses of any annual or other audit and the fees and expenses of
any Person, including special experts, retained by the Company.
SECTION 19. Reports.
(a) So long as any of the Warrants remain outstanding, and to the extent
such documents are required to be sent by the Company to the holders of its
outstanding Common Stock, the Company shall cause copies of all quarterly and
annual financial 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) which the Company is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act ("SEC Reports")
to be filed with the Warrant Agent and mailed to the Holders of the Warrants at
their addresses appearing in the Warrant Register, in each case, within 15 days
of filing with the Commission. If the Company is not subject to the requirements
of Section 13 or 15(d) of
<PAGE>
36
the Exchange Act, the Company shall nevertheless continue to cause SEC Reports,
comparable to those which it would be required to file pursuant to Section 13 or
15(d) of the Exchange Act if it were subject to the requirements of either such
Section, to be so filed with the Commission (but only if the Commission permits
such filings) and, to the extent it is required to send such SEC Reports to the
holders of its outstanding Common Stock, with the Warrant Agent and mailed to
the holders, in each case, within the same time periods as would have applied
(including under the preceding sentence) had the Company been subject to the
requirements of Section 13 or 15(d) of the Exchange Act.
(b) The Company shall provide the Warrant Agent with a sufficient number of
copies of all SEC Reports that the Warrant Agent may be required to deliver to
the Holders of the Warrants under this Section 19.
SECTION 20. Notices to Company and Warrant Agent. Any notice or demand
authorized by this Agreement to be given or made by the Warrant Agent or by the
Holder of any Warrant Certificate to or on the Company shall be sufficiently
given or made (i) five business days after deposited in the mail, first class or
registered, postage prepaid, (ii) one business day after being timely delivered
to a next-day air courier or (ii) when receipt is acknowledged by the addressee,
if telecopied, addressed (until another address is filed in writing by the
Company with the Warrant Agent), as follows:
Heartland Wireless Communications Inc.
903 North Bowser, Suite 140
Richardson, Texas 75081
Telecopy: (214) 479-1023
Telephone: (214) 479-9244
Attention: Chief Financial Officer
In case the Company shall fail to maintain such office or agency or shall
fail to give such notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the Company or by the
Holder(s) of any Warrant Certificate to the Warrant Agent shall be sufficiently
given or made (i) five business days after deposited in the mail, first-class or
registered, postage prepaid, (ii) one business day after being timely delivered
to a next-day air courier or (ii) when receipt is acknowledged by the addressee,
if telecopied, addressed (until another address is filed in writing by the
Warrant Agent with the Company) to the Warrant Agent as follows:
<PAGE>
37
Banker Trust Company
Corporate Trust and Agency Group
Four Albany Street, Fourth Floor
New York, New York 10006
Attention: Trust Department
SECTION 21. Supplements and Amendments. The Company and the Warrant Agent
may from time to time supplement or amend this Agreement without the approval of
any holders of Warrant Certificates in order to cure any ambiguity or to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not in any way
adversely affect the interests of the holders of Warrant Certificates. Any
amendment or supplement to this Agreement that has a material adverse effect on
the interests of holders shall require the written consent of Majority Holders
representing a majority of the then outstanding Warrants. The consent of each
Holder of a Warrant affected shall be required for any amendment pursuant to
which the Exercise Price would be increased or the number of Warrant Shares
purchasable upon exercise of Warrants would be decreased. The Warrant Agent
shall be entitled to receive and, subject to Section 16, shall be fully
protected in relying upon, an officers' certificate and opinion of counsel as
conclusive evidence that any such amendment or supplement is authorized or
permitted hereunder, that it is not inconsistent herewith, and that it will be
valid and binding upon the Company in accordance with its terms. The Company may
not sign any amendment or supplement until the Company's Board of Directors
approves it.
SECTION 22. Severability. Wherever possible, each provision of this Warrant
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Warrant Agreement.
SECTION 23. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Warrant Agent shall bind and inure
to the benefit of their respective successors and assigns hereunder.
SECTION 24. Termination. This Agreement (other than the Company's
obligations with respect to Warrants previously exercised) shall terminate at
5:00 p.m., New York City time on the Expiration Date.
<PAGE>
38
SECTION 25. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF SAID STATE. THE COMPANY CONSENTS TO PERSONAL JURISDICTION,
WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREES NOT TO ASSERT ANY
DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF NEW YORK, STATE
OF NEW YORK. Service of process on the Company or Holder in any action arising
out of or relating to this Agreement shall be effective if mailed to such party
in accordance with the procedures and requirements set forth in Section 20.
Nothing herein shall preclude any Holder or the Company from bringing suit or
taking other legal action in any other jurisdiction.
SECTION 26. Benefits of This Agreement. (a) Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Warrant Agent and the holders of the Warrant Certificates any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the holders of
the Warrant Certificates.
(b) Prior to the exercise of the Warrants, no Holder of a Warrant
Certificate, as such, shall be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to receive dividends or
subscription rights, the right to vote, to consent, to exercise any preemptive
right, to receive any notice of meetings of stockholders for the election of
directors of the Company, to share in the assets of the Company in the event of
the liquidation, dissolution or winding up of the Company's affairs or any other
matter or to receive any notice of any proceedings of the Company, except as may
be specifically provided for herein.
(c) All rights of action in respect of this Agreement are vested in the
Holders of the Warrants, and any Holder of any Warrant, without the consent of
the Warrant Agent or the Holder of any other Warrant, may, on such Holder's own
behalf and for such Holder's own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company suitable to enforce,
or otherwise in respect of, such Holder's rights hereunder, including the right
to exercise, exchange or surrender for purchase such Holder's Warrants in the
manner provided in this Agreement.
SECTION 27. Entire Agreement. This Agreement, together with the Unit
Agreement, dated as of April 26, 1995 among the Company, the Warrant Agent,
Bankers Trust Company, as Unit Agent, and First Trust of New York, National
<PAGE>
39
Association (the "Trustee"), and the Indenture, dated as of April 26, 1995,
between the Company and the Trustee, is intended by the parties as a final
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. Such agreements supersede all
prior agreements and understandings between the parties with respect to such
subject matter.
SECTION 28. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
(Signature Page Follows)
<PAGE>
40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
HEARTLAND WIRELESS COMMUNICATIONS, INC.
By________________________
Title_____________________
BANKERS TRUST COMPANY
By________________________
Title_____________________
<PAGE>
EXHIBIT A
[Unless and until it is exchanged in whole or in part for Warrants in
certificated form, this Warrant may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the issuer
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as is requested by an authorized representative
of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co.,
has an interest herein.] (1)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY,
EXCEPT (A) TO THE ISSUER THEREOF, OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
PROMULGATED UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHED (OR
HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE OR REGISTRAR), (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 PROMULGATED UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
- --------
(1) This paragraph is to be included only if the Warrant is in
global form.
A-1
<PAGE>
IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A SECURITYHOLDERS'
AND REGISTRATION RIGHTS AGREEMENT DATED AS OF APRIL 26, 1995 AMONG BT SECURITIES
CORPORATION, LAZARD FRERES & CO. AND HEARTLAND WIRELESS COMMUNICATIONS, INC.
(THE "COMPANY"), A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
EXERCISABLE ON OR AFTER APRIL 26, 1996
AND BEFORE APRIL 26, 2000
CUSIP No.42235W116
No._______ __ Warrants
Warrant Certificate
HEARTLAND WIRELESS COMMUNICATIONS, INC.
This Warrant Certificate certifies that ___________, or registered assigns,
is the registered holder of Warrants expiring April 26, 2000 (the "Warrants") to
purchase Common Stock, par value $.001 (the "Common Stock"), of Heartland
Wireless Communications, Inc., a Delaware corporation (the "Company"). Each
Warrant entitles the registered holder upon exercise on or before 5:00 p.m. New
York City Time on April 26, 2000, to receive from the Company _____ fully paid
and nonassessable shares of Common Stock (each such share a "Warrant Share") at
the initial exercise price (the "Exercise Price") of $19.525 per share payable
in lawful money of the United States of America upon surrender of this Warrant
Certificate and payment of the Exercise Price at the office or agency of the
Warrant Agent, but only subject to the conditions set forth herein and in the
Warrant Agreement referred to on the reverse hereof. The Exercise Price and
number of Warrant Shares issuable upon exercise of the Warrants are subject to
adjustment upon the occurrence of certain events set forth in the Warrant
Agreement.
As provided in the Warrant Agreement until the earliest of (i) 90 days
after the issuance of the Units (as defined in the Warrant Agreement), (ii) the
date upon which a registration statement under the Securities Act with respect
to a registered exchange offer for the Notes (as defined in the Warrant
A-2
<PAGE>
Agreement) is declared effective under the Securities Act and (iii) such date as
the Purchasers (as defined in the Warrant Agreement) may in its discretion deem
appropriate, each $1,000 principal amount of Notes (as defined in the Warrant
Agreement) and Warrant which comprise each Unit may not be transferred or
exchanged separately.
No Warrant may be exercised after 5:00 p.m., New York City Time on April
26, 2000, and to the extent not exercised by such time such Warrants shall
become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed and construed in accordance with
the internal laws of the State of New York.
IN WITNESS WHEREOF, Heartland Wireless Communications, Inc. has caused this
Warrant Certificate to be signed by its President and by its Secretary and has
caused its corporate seal to be affixed hereunto or imprinted hereon.
Dated:
HEARTLAND WIRELESS COMMUNICATIONS, INC.
By________________________
President
By________________________
Secretary
Countersigned:
BANKERS TRUST COMPANY
as Warrant Agent
By____________________________
Authorized Signature
A-3
<PAGE>
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring April 26, 2000 entitling the Holder on
exercise to receive shares of Common Stock, par value $.001, of the Company (the
"Common Stock"), and are issued or to be issued pursuant to a Warrant Agreement
dated as of April 26, 1995 (the "Warrant Agreement"), duly executed and
delivered by the Company to Bankers Trust Company, as warrant agent (the
"Warrant Agent"), which Warrant Agreement is hereby incorporated by reference in
and made a part of this instrument and is hereby referred to for a description
of the rights, limitation of rights, obligations, duties and immunities
thereunder of the Warrant Agent, the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company.
Warrants may be exercised at any time on or after April 26, 1996 and on or
before 5:00 p.m., New York City time on April 26, 2000. The holder of Warrants
evidenced by this Warrant Certificate may exercise them by surrendering this
Warrant Certificate, with the form of election to purchase set forth hereon
properly completed and executed, together with payment of the Exercise Price in
cash at the office of the Warrant Agent. In the event that upon any exercise of
Warrants evidenced hereby the number of Warrants exercised shall be less than
the total number of Warrants evidenced hereby, there shall be issued to the
holder hereof or his assignee a new Warrant Certificate evidencing the number of
Warrants not exercised. No adjustment shall be made for any dividends on any
Common Stock issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price set forth on the face hereof and/or the number of shares of
Common Stock issuable upon the exercise of each Warrant shall, subject to
certain conditions, be adjusted. No fractions of a share of Common Stock will be
issued upon the exercise of any Warrant, but the Company will pay the cash value
thereof determined as provided in the Warrant Agreement.
The Company is party to a Securityholders and Registration Rights Agreement
pursuant to which it has certain registration obligations with respect to the
Common Stock issuable upon exercise of the Warrants.
Warrant Certificates, when surrendered at the office of the Warrant Agent
by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations
A-4
<PAGE>
provided in the Warrant Agreement, but without payment of any service charge,
for another Warrant Certificate or Warrant Certificates of like tenor evidencing
in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-5
<PAGE>
(FORM OF ELECTION TO EXERCISE)
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise of the _____ Warrants
represented by this Warrant Certificate and purchase the whole number of Warrant
Shares issuable upon the exercise of such Warrants and herewith tenders payment
for such Warrant Shares in the amount of $__________ in cash or by certified or
official bank check, in accordance with the terms hereof. The undersigned
requests that a certificate representing such Warrant Shares be registered in
the name of __________ whose address is _________ and that such certificate be
delivered to __________ whose address is __________. Any cash payments to be
paid in lieu of a fractional Warrant Share should be made to __________ whose
address is __________ and the check representing payment thereof should be
delivered to __________ whose address is __________.
Dated _________________, 19__
Name of holder of Warrant Certificate:_________________________________
(Please Print)
Tax Identification or Social Security Number:__________________________
Address:_______________________________________________________________
_______________________________________________________________
Signature:_____________________________________________________________
Note: The above signature must correspond with
the name as written upon the face of
this Warrant Certificate in every
particular, without alteration or
enlargement or any change whatever and
if the certificate representing the
Warrant Shares or any Warrant
Certificate representing Warrants not
exercised is to be registered in a name
other than that in which this Warrant
Certificate is registered, or if any
cash payment to be paid in lieu of a
fractional share is to be made to a
person other than the registered holder
of this Warrant Certificate, the
signature of the holder hereof must be
guaranteed as provided in the Warrant
Agreement.
Dated ____________________, 19__
Signature Guaranteed:___________________________________________
A-6
<PAGE>
[FORM OF ASSIGNMENT]
For value received _________________ hereby sells, assigns and transfers
unto _________________ the within Warrant Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
________________ attorney, to transfer said Warrant Certificate on the books of
the within-named Company, with full power of substitution in the premises.
Dated _________________, 199__
Signature:______________________________________________________
Note: The above signature must correspond
with the name as written upon the
face of this Warrant Certificate in
every particular, without alteration
or enlargement or any change
whatever.
Signature Guaranteed:___________________________________________
A-7
<PAGE>
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL WARRANTS (2)
The following increases or decreases in this Global Warrant have been made:
Date of Amount of Amount of Number of Signature of
Exchange decrease in increase in Warrants of authorized
Number of Number of this Global officer of
Warrants of this Warrants of Warrant Warrant Agent
Global Warrant this following
Global Warrant such decrease
or increase
- --------------------------------------------------------------------------------
- --------
(2) This is to be included only if the Warrant is in global form.
A-8
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of
Heartland Wireless Communications, Inc.
This Certificate relates to __________ Warrants held in* _____ book-entry
or* _____certificated form by _________ (the "Transferor").
The Transferor:*
|_| has requested the Warrant Agent by written order to deliver in exchange
for its beneficial interest in the Global Warrant held by the Depositary a
Warrant or Warrants in definitive, registered form of authorized denominations
and an aggregate number equal to its beneficial interest in such Global Warrant
(or the portion thereof indicated above); or
|_| has requested the Warrant Agent by written order to exchange or
register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such Warrant, the
Transferor does hereby certify that Transferor is familiar with the Warrant
Agreement relating to the above captioned Warrants and the restrictions on
transfers thereof as provided in Section 2.8 of such Warrant Agreement, and that
the transfer of this Warrant does not require registration under the Securities
Act of 1933, as amended (the "Act") because[*]:
|_| Such Warrant is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.8(a)(y)(A) or Section
2.8(d)(i)(A) of the Warrant Agreement).
|_| Such Warrant is being transferred to a qualified institutional buyer
(as defined in Rule 144A under the Act), in reliance on Rule 144A or in
accordance with Regulation S under the Act.
|_| Such Warrant is being transferred in accordance with Rule 144 under the
Act.
|_| Such Warrant is being transferred in reliance on and in compliance with
an exemption from the registration requirements of the Act, other than Rule 144A
or Rule 144 or
B-1
<PAGE>
Regulation S under the Act. An opinion of counsel to the effect that such
transfer does not require registration under the Act accompanies this
Certificate.
---------------------------
(INSERT NAME OF TRANSFEROR]
By:
---------------------------
Date:
----------------------
*Check applicable box.
B-2
<PAGE>
EXHIBIT C
Transferee Letter of Representation
Heartland Wireless Communications, Inc.
903 North Bowser, Suite 140
Richardson, Texas 75081
Ladies and Gentlemen:
In connection with our proposed purchase of Warrants to purchase Common
Stock, par value $.001 per share (the "Securities"), of Heartland Wireless
Communications, Inc. (the "Company") we confirm that:
1. We understand that the Securities have not been registered under
the Securities Act of 1933, as amended (the "Securities Act") and, unless
so registered, may not be sold except as permitted in the following
sentence. We agree on our own behalf and on behalf of any investor account
for which we are purchasing Securities to offer, sell or otherwise transfer
such Securities prior to the date which is three years after the later of
the date of original issue and the last date on which the Company or any
affiliate of the Company was the owner of such Securities, or any
predecessor thereto (the "Resale Restriction Termination Date") only (a) to
the Company, (b) pursuant to a registration statement which has been
declared effective under the Securities Act, (c) so long as the Securities
are eligible for resale pursuant to Rule 144A under the Securities Act, to
a person we reasonably believe is a qualified institutional buyer under
Rule 144A (a "QIB") that purchases for its own account or for the account
of a QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) pursuant to offers and sales that occur outside
the United States within the meaning of Regulation S under the Securities
Act, (e) to an institutional "accredited investor" within the meaning of
subparagraphs (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act
that is purchasing for his own account or for the account of such an
institutional "accredited investor," for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act or (f) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject
in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or
accounts be at all times within our or their control and to compliance with
any applicable state securities laws. The foregoing restrictions on resale
will not apply subsequent to the Resale Restriction Termination Date. If
any resale or other transfer of the Securities is proposed to be made
pursuant to clause (e) above prior to the Resale Restriction
C-1
<PAGE>
Termination Date, the transferor shall deliver a letter from the transferee
substantially in the form of this letter to the Warrant Agent under the
Warrant Agreement pursuant to which the Securities were issued (the
"Warrant Agent") which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the meaning of
subparagraphs (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act
and that it is acquiring such Securities for investment purposes and not
for distribution in violation of the Securities Act. The Warrant Agent and
the Company reserve the right prior to any offer, sale or other transfer
prior to the Resale Restriction Termination Date of the Securities pursuant
to clauses (c), (d), (e) or (f) above to require the delivery of a written
opinion of counsel, certifications and or other information satisfactory to
the Company and the Warrant Agent.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
purchasing for our own account or for the account of such an institutional
"accredited investor," and we are acquiring the Securities for investment
purposes and not with a view to, or for offer or sale in connection with,
any distribution in violation of the Securities Act and we have such
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and
we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment for an indefinite period.
3. We are acquiring the Securities purchased by us for our own account
or for one or more accounts as to each of which we exercise sole investment
discretion.
4. You and your counsel are entitled to rely upon this letter and you
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
--------------------
(Name of Purchasers)
By:_________________
Date:_______________
C-2
<PAGE>
Upon transfer the Securities would be registered in the name of the new
beneficial owner as follows:
Name:
----------------------------
Address:
-------------------------
Taxpayer ID Number:
--------------
C-3
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Heartland Wireless Communications, Inc.:
We consent to 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 appears in the Form 8-K/A-2 of Heartland Wireless Communications, Inc.
filed with the Securities and Exchange Commission on April 26, 1996.
Our report relating to the financial 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.
KPMG Peat Marwick LLP
Dallas, Texas
July 1, 1996
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Heartland Wireless Communications, Inc.:
We consent to 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.
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.
KPMG Peat Marwick LLP
Dallas, Texas
July 1, 1996
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement 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
July 1, 1996.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this First Amendment to Form S-3
(File No. 333-2907) 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 L.L.P.
COOPERS & LYBRAND L.L.P.
Austin, Texas
July 2, 1996
EXHIBIT 23.6
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Heartland Wireless Communications, Inc.:
We consent to 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 appears in the Form 8-K/A-2 of Heartland Wireless Communications, Inc.
filed with the Securities and Exchange Commission on April 26, 1996.
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.
KPMG Peat Marwick LLP
Dallas, Texas
July 1, 1996
