As filed with the Securities and Exchange Commission on September 24, 1996
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
HEARTLAND WIRELESS COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 4841 73-1435149
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number)
Incorporation or Classification Code
Organization) Number)
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200 Chisholm Place, Suite 200
Plano, Texas 75075
(972) 423-9494
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
-----------------
John R. Bailey
Senior Vice President--Finance and
Chief Financial Officer
Heartland Wireless Communications, Inc.
200 Chisholm Place, Suite 200
Plano, Texas 75075
(972) 423-9494
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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Copy to:
Julie M. Allen, Esq.
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
(212) 408-2400
_____________
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE><CAPTION>
Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Each Class of to be Price Offering Registration
Securities to be Registered Registered Per Note Price(1) Fee
<S> <C> <C> <C> <C>
13% Series D Senior Notes due $15,000,000 100% $16,350,000 $5,638
2003 . . . . . . . . . . . . .
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
-----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE>
Subject to Completion, Dated September 24, 1996
PROSPECTUS
HEARTLAND WIRELESS COMMUNICATIONS, INC.
Offer to Exchange up to $15,000,000 of its
13% Series D Senior Notes due 2003
for any and all of its outstanding
13% Series C Senior Notes due 2003
-----------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1996, UNLESS EXTENDED.
------------------
Heartland Wireless Communications, Inc. (the "Company") hereby offers, upon
the terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange $1,000 principal amount of 13% Series D Senior Notes due
2003 (the "New Notes") of the Company for each $1,000 principal amount of the
issued and outstanding 13% Series C Senior Notes due 2003 (the "Old Notes" and
the Old Notes and the New Notes, collectively, the "Notes") of the Company from
the Holders (as defined herein) thereof. As of the date of this Prospectus,
there is $15,000,000 aggregate principal amount of the Old Notes outstanding.
The terms of the New Notes are identical in all material respects to the Old
Notes, except that the New Notes have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), and therefore will not bear legends
restricting their transfer and will not contain certain provisions providing for
an increase in the interest rate on the Old Notes under certain circumstances
relating to the Registration Rights Agreement (as defined herein), which
provisions will terminate as to all of the Notes upon the consummation of the
Exchange Offer.
Interest on the New Notes will accrue from March 28, 1996 and will be
payable semi-annually on April 15 and October 15 of each year, commencing
October 15, 1996. No interest will be payable on the Old Notes accepted for
exchange.
The New Notes will be senior obligations of the Company ranking pari passu
in right of payment to all existing and future indebtedness of the Company,
other than indebtedness that is expressly subordinated to the New Notes. The
Company has no senior indebtedness, other than $100,000,000 principal amount of
13% Series B Senior Notes due 2003 (the "Series B Notes") and the Notes.
However, subject to certain limitations set forth in the Indenture (as defined
herein), the Company and its subsidiaries may incur additional indebtedness
which is secured by assets of the Company and its subsidiaries. In addition,
the Company is a holding company that conducts substantially all of its business
through its subsidiaries. The Old Notes are, and the New Notes will be,
therefore, effectively subordinated to all liabilities of the Company's
subsidiaries, including trade payables. As of June 30, 1996, the outstanding
liabilities of the Company's consolidated subsidiaries, including all
liabilities of consolidated subsidiaries that are not wholly-owned by the
Company, were approximately $7.8 million. The Indenture permits the Company's
subsidiaries to incur additional indebtedness.
The Old Notes were not registered under the Securities Act in reliance upon
an exemption from the registration requirements thereof. In general, the Old
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act. The New Notes are being offered hereby in order to satisfy
certain obligations of the Company contained in the Registration Rights
Agreement. Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by any holder thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 promulgated under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business, such holder has no arrangement
with any person to participate in the distribution of such New Notes and neither
such holder nor any such other person is engaging in or intends to engage in a
distribution of such New Notes. Notwithstanding the foregoing, each broker-
dealer that receives New Notes for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a prospectus in connection with any
resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by such broker-dealer in connection with any resale of New Notes received
in exchange for such Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company). The
Company has agreed that, for a period of 120 days after the date of this
Prospectus, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale.
The Old Notes are designated for trading in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") market. There is no
established trading market for the New Notes. The Company does not currently
intend to list the New Notes on any securities exchange or to seek approval for
quotation through any automated quotation system. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Notes.
The Company will pay all of the expenses incident to the Exchange Offer.
Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn as provided
herein at any time prior to the Expiration Date (as defined herein). The
Exchange Offer is subject to certain customary conditions.
------------------
See "Risk Factors" beginning on page 12 for a discussion of certain factors
that should be considered by Holders priors to tendering Old Notes in the
Exchange Offer.
------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1996.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the New
Notes being offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted pursuant to the rules and regulations promulgated by the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With
respect to each such contract, agreement or other document filed or incorporated
by reference as an exhibit to the Registration Statement, reference is made to
such exhibit for a more complete description of the matter involved, and each
such statement is qualified in its entirety by such reference.
The Registration Statement may be inspected by anyone without charge at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material may also be obtained at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees. In
addition, the Company is required to file electronic versions of such material
with the Commission through the Commission's Electronic Data Gathering, Analysis
and Retrieval (EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov. that contains information regarding registrants that file
electronically with the Commission.
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and other
information with the Commission. Such material filed by the Company with the
Commission may be inspected, and copies thereof obtained, at the places, and in
the manner, set forth above.
In the event that the Company ceases to be subject to the informational
reporting requirements of the Exchange Act, the Company has agreed that, so long
as the Notes remain outstanding, it will file with the Commission and distribute
to holders of the Notes copies of the financial information that would have been
contained in annual reports and quarterly reports, including management's
discussion and analysis of financial condition and results of operations, that
the Company would have been required to file with the Commission pursuant to the
Exchange Act. Such financial information shall include annual reports
containing consolidated financial statements and notes thereto, together with an
opinion thereon expressed by an independent public accounting firm, as well as
quarterly reports containing unaudited condensed consolidated financial
statements for the first three quarters of each fiscal year. The Company will
also make such reports available to prospective purchasers of the Notes,
securities analysts and broker-dealers upon their request.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company which have been filed with the
Commission are hereby incorporated by reference in this Prospectus: (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1995; (ii)
the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31 and
June 30, 1996; and (iii) the Company's Current Reports on (A) Form 8-K dated
February 23, 1996, as amended by Form 8-K/A dated February 23, 1996 (filed with
the Commission on April 8, 1996) and Form 8-KA2 dated February 23, 1996 (filed
with the Commission on April 29, 1996), and (B) Form 8-K dated July 1, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to September 24, 1996 and prior to the
termination of the Exchange Offer shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective dates
of filing 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
2
<PAGE>
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. The Company will provide without charge to any
person to whom this Prospectus is delivered, upon the written or oral request of
such person, a copy of any and all of the foregoing documents incorporated
herein by reference (excluding exhibits unless specifically incorporated
therein). Such documents are available upon request from J. Curtis Henderson,
Vice President and General Counsel, Heartland Wireless Communications, Inc., 200
Chisholm Place, Suite 200, Plano, Texas 75075, (972) 423-9494. In order to
ensure timely delivery of such documents, any request should be made by
, 1996 (five business days prior to the Expiration Date).
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements (including the notes thereto)
appearing elsewhere in this Prospectus or in the documents incorporated by
reference herein. Unless the context otherwise requires, all references in this
Prospectus to the Company refer collectively to Heartland Wireless
Communications, Inc., its predecessors and its majority-owned subsidiaries.
The Company
Heartland Wireless Communications, Inc. develops, owns and operates
wireless cable television systems, primarily in small to mid-size markets
located in the central United States. At September 1, 1996, on a pro forma
basis (see "Recent Events"), the Company had wireless cable channel rights in
95 markets representing approximately 10.3 million households, approximately
9.2 million of which the Company believes can be served by line-of-sight ("LOS")
transmissions (which generally require a direct, unobstructed transmission path
from the central transmitting antenna to the antenna located on the subscriber's
premises).
The Company targets small to mid-size markets with significant numbers of
LOS households that are unpassed by traditional hard-wire cable. Many of these
households, particularly in rural areas, have limited access to local off-air
VHF/UHF channels (such as ABC, NBC, CBS and Fox), and typically do not have
access to pay television service except via satellite receivers. As a result,
the Company believes that its wireless cable television service is an attractive
alternative to existing choices for such households. The Company estimates that
within its 95 wireless cable markets, approximately 3.3 million LOS households,
or 36% of the Company's total LOS households, are unpassed by traditional hard-
wire cable systems, as compared to the 20 largest hard-wire cable markets in the
United States, in which only approximately 2% of all households are unpassed by
traditional hard-wire cable. The Company believes that it will ultimately
achieve a penetration rate of the unpassed LOS households in its markets that is
comparable to the average penetration rate achieved by traditional hard-wire
cable operators nationally, which Paul Kagan Associates, Inc. estimates to be
approximately 64% as of December 31, 1994.
At September 1, 1996, on a pro forma basis (see "Recent Events"), the
Company's 95 markets included 50 markets in which the Company has systems in
operation (the "Existing Systems") and 45 future launch markets where the
Company has aggregated sufficient wireless cable channel rights to commence
construction of a system or the Company has leases with or options from
applicants for channel licenses that the Company expects to be granted by the
Federal Communications Commission (the "FCC"). At September 1, 1996, the 50
Existing Systems were providing wireless cable service to approximately 193,000
subscribers.
The executive offices of the Company are located at 200 Chisholm Place,
Suite 200, Plano, Texas 75075, and the telephone number of the executive offices
is (972) 423-9494. The Company's operations are based in Durant, Oklahoma.
Wireless Cable Industry
Initially, most cable systems were hard-wire systems, using coaxial cable
and amplifiers to transmit television signals. In 1983, the FCC allocated a
portion of the radio spectrum from 2500 to 2700 megahertz ("Mhz"), which had
previously been allocated entirely for educational use, to commercial wireless
cable operation. Simultaneously, the FCC also modified its rules on the usage
of the remaining portion of such spectrum allocated for educational use.
Nevertheless, regulatory and other obstacles impeded the growth of the wireless
cable industry through the remainder of the 1980s. The FCC maintained
burdensome restrictions on the commercial use of educational channel capacity.
In addition, before the Cable Act passed by Congress on October 5, 1992 (the
"Cable Act") became effective, many program suppliers were unwilling to provide
programming to wireless cable operators on terms comparable to those offered to
traditional hard-wire cable operators, if at all. During the 1990s, several
factors have contributed to the growth of the wireless cable industry, including
(i) Congressional scrutiny of the rates
4
<PAGE>
and practices of the traditional hard-wire cable industry, (ii) improved
technology, particularly signal encryption, (iii) regulatory reforms by the FCC
to facilitate the growth and competitive impact of the wireless cable industry,
including permitting channel aggregation, (iv) increased availability of
programming for wireless cable systems, (v) consumer demand for alternatives to
traditional hard-wire cable service and (vi) increased availability of capital
to wireless cable operators in the public and private markets.
In each of the Company's markets, 32 channels of spectrum are available for
wireless cable transmission. Of these, 12 wireless cable channels can be owned
by for-profit entities ("MDS" channels) and the other 20 channels generally must
be owned by qualified non-profit educational organizations ("ITFS" channels).
ITFS channels must be used at least 20 hours per week for educational
programming, while the remaining "excess air time" may be leased to wireless
cable operators for commercial use. Certain commercially available programs,
such as The Discovery Channel and A&E, qualify as educational and thereby
facilitate full-time usage of an ITFS channel by commercial wireless cable
operators.
Wireless cable programming is transmitted through the air via microwave
frequencies from a transmission facility ("head-end") to a small receiving
antenna at each subscriber's location. To a subscriber, wireless cable provides
a high quality picture and a reliable signal. The Company can offer its
subscribers HBO, Showtime, Disney, ESPN, CNN, USA, WGN, WTBS, Discovery, the
Nashville Network, A&E and other programming services and pay-per-view, as well
as local off-air VHF/UHF channels.
Business Strategy
The Company's primary business objective is to develop, own and operate
wireless cable television systems in markets in which the Company believes it
can achieve positive cash flow and operating income rapidly after system launch
and then expand such system while increasing such system's operating income.
Rural Market Focus. The Company aggregates wireless cable channel rights
and locates operations in geographic clusters of small to mid-size markets that
have a substantial number of households not currently passed by traditional
hard-wire cable. The Company believes that this size market typically has a
stable economic base, less competition than alternative forms of entertainment
and terrain and other conditions conducive to wireless cable transmissions.
Managed Subscriber Penetration. The Company attempts to manage system
launch and subscriber growth in order to contain system launch costs and to
achieve positive cash flow rapidly. Typically, the Company's operating systems
achieve positive monthly operating cash flow upon obtaining an average of
approximately 1,200 to 1,500 subscribers. Within a system, the Company
initially directs its marketing at unpassed households, which typically have
limited access to local off-air VHF/UHF broadcast channels. Accordingly, the
Company believes it can launch service successfully in most of its markets with
only 12 channels of programming, allowing it to contain system launch costs and
achieve positive cash flow with a lower number of subscribers. Generally, once
a system achieves positive operating cash flow, the Company will expand the
channel offering and add subscribers while increasing such system's positive
operating cash flow. As of September 1, 1996, 39 of the Company's operating
systems were generating positive monthly operating cash flow. The remaining
operating systems that were not generating positive monthly operating cash flow
had not reached an average of 1,200 to 1,500 subscribers.
Low Cost Structure. Wireless cable systems typically cost significantly
less to build and operate than traditional hard-wire cable systems for several
reasons. First, while both traditional hard-wire cable operators and wireless
cable operators must construct a head-end, traditional hard-wire cable operators
must also install an extensive network of coaxial cable and amplifiers in order
to transmit signals from the head-end to subscribers. Once the head-end is
constructed, the Company estimates that each additional wireless cable
subscriber currently requires an incremental capital expenditure by the Company
of approximately $400, consisting of, on average, $220 of material, $140 of
installation labor and overhead charges and $40 of direct commission. Such
incremental capital expenditures are variable costs and are partially offset by
installation fees paid by subscribers. Second, without an extensive cable
network, wireless cable operators typically incur lower system maintenance costs
and depreciation
5
<PAGE>
expense. Third, programming is generally available to traditional hard-wire and
wireless cable operators on comparable terms, although operators that have a
smaller number of subscribers often are required to pay higher per-subscriber
fees. Fourth, the Company currently experiences a low rate of subscriber
turnover of on average approximately 1.5% per month, as compared to the "churn"
rate of approximately 3% per month typically experienced by traditional hard-
wire cable operators. Reduced subscriber turnover reduces installation and
marketing expenses. Finally, by locating its operations in geographic clusters,
the Company can further contain costs by taking advantage of economies of scale
in management, sales and customer service.
Acquisition of ITFS Channel Rights. Because the Company believes it can
launch service successfully in its markets with as few as 12 channels of
programming, the Company focuses on development of the 20 available ITFS
channels. The Company cooperates with many non-profit educational organizations
in obtaining ITFS licenses from the FCC. Once the Company has secured rights to
at least 12 ITFS channels in a market, the Company believes it can launch a
commercially viable system in such market. The Company believes that its
strategy of first developing the ITFS channels, in lieu of the MDS channels, has
resulted in aggregate leased license expense in its systems in operation that is
less than the industry-wide average leased license expense.
Company History
The Company's founders, David E. Webb, the President and Chief Executive
Officer, and L. Allen Wheeler, Vice Chairman of the Board of Directors, began
acquiring licenses, leases and options to wireless cable channels in 1989, both
individually and through various controlled entities. In September 1990,
Messrs. Webb and Wheeler formed Wireless Communications, Inc., an Oklahoma
corporation ("WCI"), and contributed to it certain of their direct and indirect
wireless cable assets and liabilities. In October 1993, Hunt Capital, a
principal stockholder of the Company and affiliate of J.R. Holland, Jr., the
Chairman of the Board of the Company, acquired a $988,000 10% promissory note
due September 14, 1994 payable by WCI (the "Hunt Note") from an affiliate of
Hunt Capital, which had entered into a loan agreement with WCI in September
1993.
The Company was incorporated in Delaware in October 1993 to succeed to the
wireless cable businesses previously conducted by Messrs. Webb and Wheeler,
directly and indirectly through various controlled entities, including WCI.
Messrs. Webb and Wheeler contributed all capital stock of entities engaged in
the wireless cable businesses owned by them to the Company for a 50% equity
interest. Hunt Capital contributed the Hunt Note, including accrued interest,
and $2.0 million to the Company for the remaining 50% equity interest. In
addition, Messrs. Webb and Wheeler leased all other wireless cable channel
license rights controlled, directly and indirectly, by them to the Company and
granted the Company an option to purchase such license rights at a nominal
price.
In April and June 1994, the Company sold 2.4 million shares of common
stock, $.001 par value per share (the "Common Stock"), in its initial public
offering at a per share price of $10.50 (the "Initial Public Offering"). The
aggregate net proceeds to the Company from the Initial Public Offering were
approximately $22.3 million. In November 1994, the Company consummated a
private placement (the "Sale of Convertible Notes") of $40.2 million in gross
proceeds of 9% Convertible Subordinated Discount Notes due 2004 (the
"Convertible Notes") to Jupiter Partners L.P. ("Jupiter") and an accredited
individual. On April 19, 1995, the Company consummated a private placement to
the Initial Purchaser and Lazard Freres & Co. of 100,000 Units (the "Units")
consisting of $100,000,000 principal amount of 13% Senior Notes due 2003 (the
"Series A Notes") and 600,000 warrants (the "Warrants") to purchase shares of
Common Stock. On March 13, 1996, the Company consummated an exchange offer
pursuant to which $100,000,000 principal amount of Series B Notes were issued in
exchange for an equal principal amount of Series A Notes, which were cancelled.
See "Description of Certain Indebtedness."
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<PAGE>
The Exchange Offer
Registration Rights Agreement The Old Notes were sold by the Company
on March 28, 1996 to BT Securities
Corporation (the "Initial Purchaser"),
who placed the Old Notes with
institutional investors. In connection
therewith, the Company and the Initial
Purchaser executed and delivered for the
benefit of the holders of the Old Notes
a registration rights agreement (the
"Registration Rights Agreement")
providing, among other things, for the
Exchange Offer.
The Exchange Offer New Notes are being offered in exchange
for a like principal amount of Old
Notes. As of the date hereof,
$15,000,000 aggregate principal amount
of Old Notes are outstanding. The
Company will issue the New Notes to
Holders promptly following the
Expiration Date. See "Risk Factors --
Consequences of Failure to Exchange."
Expiration Date 5:00 p.m., New York City time, on
, 1996, unless the
Exchange Offer is extended as provided
herein, in which case the term
"Expiration Date" means the latest date
and time to which the Exchange Offer is
extended.
Interest Each New Note will bear interest from
March 28, 1996, the date of the original
issuance of the Old Notes. No interest
will be paid on the Old Notes accepted
for exchange.
Conditions to the Exchange Offer The Exchange Offer is subject to certain
customary conditions, which may be
waived by the Company. The Company
reserves the right to amend, terminate
or extend the Exchange Offer at any time
prior to the Expiration Date upon the
occurrence of any such condition. See
"The Exchange Offer -- Conditions."
Procedures for Tendering Old
Notes Each Holder of Old Notes wishing to
accept the Exchange Offer must complete,
sign and date the Letter of Transmittal,
or a facsimile thereof, in accordance
with the instructions contained herein
and therein, and mail or otherwise
deliver such Letter of Transmittal, or
such facsimile, or an Agent's Message
(as defined herein) together with the
Old Notes and any other required
documentation to the exchange agent (the
"Exchange Agent") at the address set
forth herein. By executing the Letter
of Transmittal or delivering an Agent's
Message, each Holder will represent to
the Company, among other things, that
(i) the New Notes acquired pursuant to
the Exchange Offer by the Holder and any
beneficial owners of Old Notes are being
obtained in the ordinary course of
business of the person receiving such
New Notes, (ii) neither the Holder nor
such beneficial owner has an arrangement
with any person to participate in the
distribution of such New Notes, (iii)
neither the Holder nor such beneficial
owner nor any such other person is
engaging in or intends to engage in a
distribution of such New Notes and (iv)
neither the Holder nor such beneficial
owner is
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<PAGE>
an "affiliate," as defined under Rule
405 promulgated under the Securities
Act, of the Company. Each broker-dealer
that receives New Notes for its own
account in exchange for Old Notes, where
such Old Notes were acquired by such
broker-dealer as a result of market-
making activities or other trading
activities (other than Old Notes
acquired directly from the Company), may
participate in the Exchange Offer but
may be deemed an "underwriter" under the
Securities Act and, therefore, must
acknowledge in the Letter of Transmittal
that it will deliver a prospectus in
connection with any resale of such New
Notes. The Letter of Transmittal states
that by so acknowledging and by
delivering a prospectus, a broker-dealer
will not be deemed to admit that it is
an "underwriter" within the meaning of
the Securities Act. See "The Exchange
Offer -- Procedures for Tendering" and
"Plan of Distribution."
Special Procedures for Beneficial
Owners Any beneficial owner whose Old Notes are
registered in the name of a broker,
dealer, commercial bank, trust company
or other nominee and who wishes to
tender should contact such registered
Holder promptly and instruct such
registered Holder to tender on such
beneficial owner's behalf. If such
beneficial owner wishes to tender on
such beneficial owner's own behalf, such
beneficial owner must, prior to
completing and executing the Letter of
Transmittal or delivering an Agent's
Message and delivering his Old Notes,
either make appropriate arrangements to
register ownership of the Old Notes in
such beneficial owner's name or obtain a
properly completed bond power from the
registered Holder. The transfer of
registered ownership may take
considerable time. See "The Exchange
Offer -- Procedures for Tendering."
Guaranteed Delivery Procedures Holders of Old Notes who wish to tender
their Old Notes and whose Old Notes are
not immediately available or who cannot
deliver their Old Notes, the Letter of
Transmittal or an Agent's Message or any
other documents required by the Letter
of Transmittal to the Exchange Agent
prior to the Expiration Date must tender
their Old Notes according to the
guaranteed delivery procedures set forth
in "The Exchange Offer -- Guaranteed
Delivery Procedures."
Withdrawal Rights Tenders may be withdrawn as provided
herein at any time prior to 5:00 p.m.,
New York City time, on the Expiration
Date. See "The Exchange Offer --
Withdrawal of Tenders."
Acceptance of Old Notes and Delivery
of New Notes The Company will accept for exchange any
and all Old Notes which are properly
tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the
Expiration Date. The New Notes issued
pursuant to the Exchange Offer will be
delivered promptly following the
Expiration Date. See "The Exchange
Offer -- Terms of the Exchange Offer."
8
<PAGE>
Exchange Agent Bankers Trust Company is serving as
Exchange Agent in connection with the
Exchange Offer. See "The Exchange Offer
-- Exchange Agent."
Use of Proceeds There will be no cash proceeds to the
Company from the exchange pursuant to
the Exchange Offer.
Federal Income Tax Consequences The exchange of Old Notes for New Notes
will not be a taxable exchange for
Federal income tax purposes. See
"Certain Federal Income Tax
Considerations."
Consequences of Failure to Exchange Holders of Old Notes who do not exchange
their Old Notes for New Notes pursuant
to the Exchange Offer will continue to
be subject to the restrictions on
transfer of such Old Notes as set forth
in the legend thereon as a consequence
of the issuance of the Old Notes
pursuant to exemptions from, or in
transactions not subject to, the
registration requirements of the
Securities Act and applicable state
securities laws. In general, Old Notes
may not be offered or sold unless
registered under the Securities Act,
except pursuant to an exemption from, or
in a transaction not subject to, the
Securities Act and applicable state
securities laws.
Summary Description of the New Notes
The Exchange Offer applies to $15,000,000 aggregate principal amount of Old
Notes. The terms of the New Notes are identical in all material respects to the
Old Notes, except that the New Notes have been registered under the Securities
Act and, therefore, will not bear legends restricting their transfer and will
not contain certain provisions providing for an increase in the interest rate on
the Old Notes under certain circumstances relating to the Registration Rights
Agreement, which provisions will terminate as to all of the Notes upon the
consummation of the Exchange Offer. The New Notes will evidence the same debt
as the Old Notes and, except as set forth in the immediately preceding sentence,
will be entitled to the benefits of the Indenture, under which both the Old
Notes were, and the New Notes will be, issued. See "Description of Notes."
The New Notes $15,000,000 aggregate principal amount
of 13% Series D Senior Notes due 2003.
Maturity Date April 15, 2003.
Interest Rate and Payment Dates The New Notes will bear interest at the
rate of 13% per annum. Interest will be
payable semi-annually on April 15 and
October 15 of each year, commencing on
October 15, 1996.
Escrow and Disbursement
Agreement The Company placed approximately $1.9
million of the net proceeds realized
from the sale of the Old Notes to the
Initial Purchaser, representing funds
sufficient to pay interest on the Notes
from April 15, 1996 through April 14,
1997, into an Escrow Account (as defined
herein) to be held by the Escrow Agent
(as defined herein) for the benefit of
the holders of the Notes. Until
disbursed in accordance with the Escrow
and Disbursement Agreement (as defined
herein), the Escrow Account is designed
to secure a portion of the Company's
obligations under the Notes. Funds will
be disbursed from the
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<PAGE>
Escrow Account only to pay interest on
the Notes and, upon certain repurchases
or redemptions of the Notes, to pay
principal of and premium, if any,
thereon. Pending such disbursement, all
funds contained in the Escrow Account
will be invested in Marketable
Securities (as defined herein). See
"Description of Notes -- Disbursement of
Funds -- Escrow Account" and
"Description of Notes -- Security."
Optional Redemption The New Notes will be redeemable, in
whole or in part, at the option of the
Company at any time on or after April
15, 1999 at the redemption prices set
forth herein plus accrued and unpaid
interest thereon, if any, to the
redemption date. See "Description of
Notes -- Optional Redemption."
Repurchase Upon Sale of Capital
Stock to Strategic Equity Investor In the event of a sale by the Company
prior to April 15, 1998 of at least
$25.0 million of its Capital Stock (as
defined herein) (other than Disqualified
Stock (as defined herein)) to a
Strategic Equity Investor (as defined
herein) in a single transaction, up to
25% of the Notes may be redeemed at the
election of the Company upon not less
than 30 nor more than 45 days' prior
notice given within 30 days after such
sale from the net cash proceeds thereof
at the redemption price set forth herein
plus accrued and unpaid interest
thereon, if any, to the date of
redemption, provided that at least 75%
in aggregate principal amount of the
Notes originally issued remains
outstanding immediately after the
occurrence of such redemption. See
"Description of Notes -- Optional
Redemption."
Change of Control In the event of a Change of Control (as
defined herein), the Company will be
required, subject to certain conditions,
to make an offer to repurchase all of
the Notes at 101% of the principal
amount thereof plus accrued and unpaid
interest thereon, if any, to the date of
repurchase. There can be no assurance
that the Company will have the financial
resources necessary to repurchase the
Notes upon a Change of Control. See
"Description of Notes -- Offer to
Purchase Upon Change of Control."
Ranking The New Notes will be senior obligations
of the Company ranking pari passu in
right of payment to all existing and
future indebtedness of the Company,
other than indebtedness that is
expressly subordinated to the New Notes.
The Company has no senior indebtedness,
other than the Series B Notes and the
Notes. The Notes are senior in right of
payment to the Convertible Notes, which
are expressly subordinated to the Notes.
However, subject to certain limitations
set forth in the Indenture, the Company
and its subsidiaries may incur
additional indebtedness which is secured
by assets of the Company and its
subsidiaries. In addition, the Company
is a holding company that conducts
substantially all of its business
through its subsidiaries and, therefore,
the Notes are effectively subordinated
to all liabilities of the Company's
subsidiaries, including trade payables.
As of June 30, 1996, the Company's
10
<PAGE>
consolidated subsidiaries had
approximately $7.8 million of
liabilities. The Indenture permits the
Company's subsidiaries to incur
additional indebtedness. See
"Description of Notes -- General" and
"Description of Notes -- Certain
Covenants--Limitation on Indebtedness."
Certain Covenants The Indenture contains certain covenants
that, among other things, limit the
ability of the Company and its
subsidiaries to make restricted
payments, to incur indebtedness, to
create liens, to issue preferred or
other capital stock of subsidiaries, to
sell assets, to permit restrictions on
dividends and other payments by
subsidiaries to the Company, to
consolidate, merge or sell all or
substantially all of its assets, to
engage in transactions with affiliates
or to engage in certain businesses.
These covenants are subject to important
exceptions and qualifications. See
"Description of Notes -- Certain
Covenants."
Bond Premium The Notes were issued with bond premium
for Federal income tax purposes. See
"Certain Federal Income Tax
Considerations."
For additional information regarding the Notes, see "Description of Notes."
Risk Factors
See "Risk Factors" for a discussion of certain factors that should be
considered by Holders prior to tendering Old Notes in the Exchange Offer.
11
<PAGE>
RISK FACTORS
Holders should carefully consider the following risk factors, as well as
the other information included or incorporated by reference in this Prospectus,
prior to making a decision to tender their Old Notes in the Exchange Offer.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange the Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate
that it will register the Old Notes under the Securities Act. Based on
interpretations by the staff of the Commission set forth in no-action letters
issued to third parties, the Company believes that the New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold or otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
promulgated under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business, such holder
has no arrangement with any person to participate in the distribution of such
New Notes and neither such holder nor any such other person is engaging in or
intends to engage in a distribution of such New Notes. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resale of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). The Company has agreed that, for a period of 120 days from
the date of this Prospectus, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution." However, the ability of any Holder to resell the New Notes is
subject to applicable state securities laws as described in "Risk Factors--Blue
Sky Restrictions on Resale of New Notes."
Necessity to Comply with Exchange Offer Procedures
To participate in the Exchange Offer, and to avoid the restrictions on
transfer of the Old Notes, Holders of Old Notes must transmit a properly
completed Letter of Transmittal or an Agent's Message, including all other
documents required by such Letter of Transmittal, to the Exchange Agent at one
of the addresses set forth below under "The Exchange Offer -- Exchange Agent" on
or prior to the Expiration Date. In addition, either (i) certificates for such
Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal or (ii) a timely confirmation of a book-entry transfer of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company pursuant to the procedure for book-entry transfer
described herein, must be received by the Exchange Agent prior to the Expiration
Date or (iii) the Holder must comply with the guaranteed delivery procedures
described herein. See "The Exchange Offer."
Blue Sky Restrictions on Resale of New Notes
In order to comply with the securities laws of certain jurisdictions, the
New Notes may not be offered or resold by any Holder unless they have been
registered or qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and the requirements of such
exemption have been satisfied. The Company does not currently intend to
register or qualify the resale of the New Notes in any such jurisdictions.
However, an exemption is generally available for sales to registered broker-
dealers and certain institutional buyers. Other exemptions under applicable
state securities laws may also be available.
12
<PAGE>
Substantial Indebtedness of the Company; Insufficiency of Earnings to Cover
Fixed Charges
The Company has a substantial amount of indebtedness. As of June 30, 1996,
the Company had approximately $163.3 million of Indebtedness (as defined herein)
and the Company's consolidated subsidiaries had approximately $7.8 million of
total liabilities. The Indenture limits, but does not prohibit, the incurrence
of additional indebtedness, secured or unsecured, by the Company and its
subsidiaries. As a result, although funds sufficient to pay interest on the
Series B Notes through April 14, 1997 have been placed in escrow and funds
sufficient to pay interest on the Notes from April 15, 1996 through April 14,
1997, have been placed into the Escrow Account, thereafter a substantial portion
of the Company's cash flow will be devoted to debt service. In addition,
although the Convertible Notes accrete to face value and no cash interest is
payable thereunder prior to the earlier of November 30, 1999 and the occurrence
of certain events of default (the "Applicable Date"), a substantial portion of
the Company's earnings will be reduced by non-cash debt service. The debt
service requirements of any additional indebtedness could make it more difficult
for the Company to make principal and interest payments on the Notes. For the
years ended December 31, 1993, 1994 and 1995 and for the six months ended June
30, 1995 and 1996, earnings were insufficient to cover fixed charges by
$406,101, $4.6 million, $20.2 million, $6.6 million and $23.5 million,
respectively. The ability of the Company to make payments of principal and
interest will be largely dependent upon its future financial performance. Many
factors, some of which will be beyond the Company's control (such as prevailing
economic conditions), will affect its financial performance. There can be no
assurance that the Company will be able to generate sufficient cash flow to
cover required interest and principal payments. If the Company is unable to
meet interest and principal payments in the future, it may, depending upon the
circumstances which then exist, seek additional equity or debt financing,
attempt to refinance its existing indebtedness or sell all or part of its
business or assets to raise funds to repay its indebtedness. There can be no
assurance that sufficient equity or debt financing will be available, or, if
available, that it will be on terms acceptable to the Company, that the Company
will be able to refinance its existing indebtedness or that sufficient funds
could be raised through asset sales. The Company's high level of indebtedness
has several important consequences, including, but not limited to: (i)
significant interest expense and principal repayment obligations resulting in
substantial annual fixed charges; (ii) significant limitations on the Company's
ability to obtain financing, make capital expenditures and acquisitions and take
advantage of other business opportunities that may arise; and (iii) increased
vulnerability to adverse general economic and industry conditions. There can be
no assurance that the Company will be profitable in the future. See "Risk
Factors -- Holding Company Structure; Dependence of Company on Subsidiaries for
Repayment of Notes," "Risk Factors -- Ranking of Notes" and "Description of
Notes."
Holding Company Structure; Dependence of Company on Subsidiaries for Repayment
of New Notes
The New Notes will be obligations of the Company exclusively.
Substantially all of the operations of the Company are conducted through direct
and indirect subsidiaries. The Company's cash flow and, consequently, its
ability to service debt, including the New Notes, is dependent upon the cash
flow of its subsidiaries and the payment of funds by those subsidiaries to the
Company in the form of loans, dividends or otherwise. The subsidiaries are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the New Notes or to make any funds
available therefor, whether in the form of loans, dividends or otherwise. In
addition, certain of the Company's subsidiaries may become parties to credit
agreements, which may contain limitations on the ability of such subsidiaries to
pay dividends or to make loans or advances to the Company. The Indenture limits
the ability of the Company to create or permit restrictions on dividends and
other payments by its subsidiaries. See "Description of Notes -- Certain
Covenants -- Dividend and Other Payment Restrictions Affecting Subsidiaries."
Because the Company is a holding company that conducts its business through
its subsidiaries, all existing and future liabilities of the Company's
subsidiaries, including trade payables, will be effectively senior to the New
Notes. As of June 30, 1996, the Company's consolidated subsidiaries, including
those that are not wholly-owned by the Company, had aggregate liabilities of
approximately $7.8 million. The Indenture limits, but does not prohibit, the
incurrence of additional indebtedness by the Company and its subsidiaries. See
"Description of Notes -- Certain Covenants -- Limitation on Indebtedness."
13
<PAGE>
Ranking of Notes
The New Notes will not be secured by any of the assets of the Company
except to the limited extent provided for by the Escrow and Disbursement
Agreement and will become general unsecured obligations of the Company upon
disbursement in full of the funds in the Escrow Account. The Company and its
subsidiaries are permitted to incur secured indebtedness. See "Description of
Notes -- Disbursement of Funds -- Escrow Account" and "Description of Notes --
Certain Covenants -- Limitation on Indebtedness." Any holders of secured
indebtedness of the Company would be entitled to payment of their indebtedness
out of the proceeds of their collateral prior to the holders of any general
unsecured obligations of the Company, including the New Notes.
The New Notes will be senior obligations of the Company ranking pari passu
in right of payment as to all existing and future indebtedness of the Company,
other than indebtedness that is expressly subordinated to the New Notes. The
Company has no senior indebtedness, other than the Series B Notes and the Notes.
The New Notes will be senior in right of payment to the Convertible Notes, which
are expressly subordinated to the New Notes. However, the Company and its
subsidiaries may incur additional indebtedness which is secured by assets of the
Company and its subsidiaries. In the event of any distribution or payment of
the assets of the Company in any foreclosure, dissolution, winding-up,
liquidation or reorganization, holders of secured indebtedness will have a
secured prior claim to the assets of the Company that constitute their
collateral. In the event of bankruptcy, liquidation or reorganization of the
Company, except to the extent assets are available to holders of the New Notes
under the Escrow and Disbursement Agreement, holders of the New Notes will
participate ratably with all holders of indebtedness of the Company which is
unsecured and all other general creditors of the Company, based upon the
respective amounts owed to each holder or creditor, in the remaining assets of
the Company, and there is no assurance that there will be sufficient assets to
pay amounts due on the New Notes.
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 February 23, 1996, the Company acquired all 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 Forth Worth Wireless Cable T.V. Associates (the "Fort
Worth Partnership"), Wireless Cable T.V. 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 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 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, in light of the Transactions, management of the Company must
make and implement a number of strategic and operational decisions regarding the
integration of the entity's 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. There can also be no assurance that any of the
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. The Company believes that its cash
and cash equivalent assets and cash generated from operations will be sufficient
to fund the Company's operations and expansion through approximately the end of
1996. Additional funds will be necessary to complete the launch, build-out and
expansion
14
<PAGE>
of all of the Company's wireless cable systems and to bring such systems to a
mature state. These activities may be financed in whole or in part directly by
the Company and/or by its existing or future subsidiaries, through debt or
equity financings, joint ventures or other arrangements. As in the past, the
Company may also finance its system construction, development, launch and
expansion activities or the acquisition of additional markets through the sale
and/or exchange of its existing portfolio of wireless cable channel rights.
Although the Company believes that cash provided by operating activities, the
sale of wireless cable channel rights that are not a part of the Company's
current strategic plan and proceeds from additional public or private debt or
equity offerings will be sufficient for the Company to complete its planned
system construction, development, launch and expansion activities in 1997 and
beyond, there can be no assurance that the Company will achieve positive cash
flow from operations, that the Company will consummate the sale of any wireless
cable channel rights or that sufficient debt or equity financing will be
available on satisfactory terms and conditions, if at all. In addition, there
is also no assurance that, subject to certain limitations set forth in the
Indenture, the Company will not pursue, from time to time, other opportunities
to acquire additional wireless cable channel rights and businesses that may
utilize the capital currently expected to be available for its current markets.
The amount and timing of the Company's future capital requirements will depend
upon a number of factors, including programming costs, equipment costs,
marketing expenses, staffing levels, subscriber growth and competitive
conditions, many of which are not within the Company's control. Failure to
obtain any required additional financing could materially adversely affect the
growth, cash flow or earnings of the Company.
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 by reference herein. 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 transaction could be successfully integrated into
the Company's business.
Limited Operating History; Net Losses Since Inception
Although the Company's business commenced in 1990, it did not generate any
revenues until April 1992. Holders, therefore, have limited historical
financial information about the Company upon which to base an evaluation of the
Company's performance and a decision to tender Old Notes in the Exchange Offer.
As of June 30, 1996, the Company had recorded net losses of approximately $38.1
million since inception, due primarily to start-up costs, interest expense and
charges for depreciation and amortization of capital expenditures to develop its
wireless cable systems. Until such time as the Company substantially increases
its subscriber base, resulting in higher subscription fee revenues, it will
continue to experience losses. Because of the costs associated with launching a
wireless cable television system and expanding its subscriber base, continued
growth by the Company will tend to reduce net income, if any, or increase net
losses. As a result, the Company expects to continue to experience net losses
for an indefinite period while it develops and expands its wireless cable
systems even if mature individual systems of the Company are profitable.
15
<PAGE>
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 the future. The Company's success is also dependent upon its ability
to attract and retain qualified employees to develop and operate its wireless
cable systems.
Competition
The subscription television industry is highly competitive. Wireless cable
television systems face or may face competition from several sources, such as
traditional hard-wire cable companies, Satellite Master Antenna Television
systems, Direct Broadcast Satellites and other alternative methods of
distributing and receiving television transmissions. 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, given the
markets acquired in the Transactions, that the Company will face significant
direct competition from traditional hard-wire cable companies in the future.
The basic programming package offered in each of the Existing Systems is
comparable to that offered by the local traditional hard-wire cable operators.
However, certain of such local traditional hard-wire cable operators currently
offer more premium, pay-per-view and public access channels than the Company.
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 on-line services and communications
networks, such as the Internet and World Wide Web. Although the Company is
unaware of any such provider delivering programming like that available on
wireless cable television, there can be no assurance that continuing advances in
technology will not make such delivery possible. Even if such direct
competition does not exist in the future, however, the Company's services will
compete, indirectly, with entertainment services generally, including those
provided by operators using evolving technology. Many actual and potential
competitors have greater financial, marketing and other resources than the
Company. No assurance can be given that the Company will compete successfully.
Government Regulation
The right to transmit on wireless cable channels is regulated by the FCC
and the copyright for the retransmission of local off-air VHF/UHF broadcasts is
regulated by the United States Copyright Office (the "U.S. Copyright Office")
pursuant to the Copyright Act of 1976, as amended (the "Copyright Act").
Federal Legislation. Pursuant to the Cable Act, the FCC adopted rate
regulations exclusively for traditional hard-wire cable systems. Pursuant to
the Telecommunications Act of 1996, which was enacted in February 1996, all
cable rate regulation will be eliminated after three years, and for "small
systems" as defined in the Act, and under certain other circumstances, rate
regulation will be eliminated immediately. The Company cannot predict precisely
what effect these regulations or other governmental regulations may have on
traditional hard-wire cable operators as to price and service. While current
FCC regulations are intended to promote the development of a competitive pay
television industry, the rules and regulations affecting the wireless cable
industry may change, and any future changes in FCC rules, regulations, policies
and procedures could have an adverse effect on the industry as a whole and on
the Company in particular.
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<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 has adopted legislation
extending the compulsory copyright licensing system to include wireless cable
systems. As a result of this action, wireless cable operators may engage in
secondary transmissions of distant programming without the copyright holder's
approval, provided that such operators file certain reports and pay certain fees
set by 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 ITFS and one
to four MDS channels each. Generally, ITFS channels may only be owned by
qualified non-profit educational organizations and in general must use a minimum
of 20 hours per week per channel for educational programming. The remaining
excess ITFS channel air time may be leased to wireless cable operators for
commercial use without further restriction. MDS channels may be owned by
commercial entities and allow full-time usage without programming restrictions.
Under the rules of the FCC, the term of an ITFS channel lease cannot exceed ten
years. There is no such restriction for MDS channel leases. ITFS licenses
generally are granted for a term of ten years and are subject to renewal by the
FCC. MDS licenses 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 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
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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 will be refiled. The vast majority of such leases are in the form of
lease agreements with qualified non-profit educational organizations for ITFS
channels. 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 an 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 is necessary to offer a commercially viable wireless
cable system in most rural markets and that more channels are required in more
competitive markets, such as those well served by traditional cable television
systems. In some of its long-term launch markets, the Company does not
currently have the right to operate 12 channels from the same transmitter site.
In those markets, the Company is dependent upon (i) the grant of pending
applications for modification of existing licenses for unbuilt ITFS stations,
(ii) the grant of such license modification applications which have not 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.
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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, 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
The FCC has concluded an auction (the "BTA Auction") of available
commercial wireless cable spectrum in 487 "basic trading areas ("BTAs") and six
additional BTA-like geographic areas around the country. The winner of a BTA
has the right to develop the vacant MDS frequencies throughout the BTA,
consistent with certain specified interference criteria that protects existing
ITFS and MDS channels. Existing ITFS and MDS channel rights holders also must
protect the BTA winner's spectrum from interference caused by power increases or
tower relocations. The Company was the winning bidder in 93 BTAs at a total
cost of approximately $19.8 million. Under the terms of the BTA Auction, the
Company remitted a $1.0 million deposit at the commencement of the BTA Auction
and subsequently has remitted 20% of the total committed amount (less the $1.0
million deposit), or approximately $3.0 million. The remaining 80% of the
committed amount, or approximately $15.8 million, bears interest at 9.5% and
will be paid over a 10-year period commencing in the fourth quarter of 1996.
The Company will be required to make quarterly interest-only payments for the
first two years and quarterly payments of principal and interest over the
remaining eight years. Pursuant to a Participation Agreement consummated among
the Company, CS Wireless Systems, Inc. ("CS Wireless") and CAI Wireless, Inc. in
February 1996, CS Wireless will reimburse the Company for all amounts paid in
the BTA Auction relating to 12 BTAs at a total cost of approximately $5.3
million. As of September 24, 1996, CS Wireless had reimbursed the Company
approximately $1.1 million, representing all amounts paid by the Company in
connection with the award of the 12 BTAs. The net result of the Company's
acquisition of 93 BTAs in the BTA Auction and the CS Wireless reimbursement, is
that the Company acquired 81 BTAs in the BTA Auction for a net cost of
approximately $14.5 million. The Company will have certain post-auction filing
obligations, including, but not limited to, applications that propose new
transmission facilities, exhibits concerning their involvement in bidding
consortia, and their plans to build-out two-thirds of the market over a five-
year period. Due to the unique nature of the BTA Auction, there is no prior
regulatory history regarding the scope and nature of the information the FCC
will require, or how the FCC will treat the information.
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 and began to
expire in 1995. 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
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the Company's subscribers. The likelihood that program material will be
unavailable to the Company is significantly mitigated by the Cable Act and
various FCC regulations issued thereunder, which, among other things, impose
limits on exclusive programming contracts and generally prohibit cable
programmers in which a cable operator has an attributable interest from
discriminating against cable competitors with respect to the price and terms and
conditions of sale of programming. Only a few of the major cable television
programming services carried by the Company are not currently directly owned by
a vertically integrated cable operator, and the Company historically has not had
difficulty in arranging satisfactory contracts for these services. The Cable
Act is the subject of various legal challenges and if it were found to be
unconstitutional, program suppliers might raise their prices or make their
program material unavailable to the Company.
Physical Limitations of Wireless Cable Transmission
Wireless cable programming is transmitted through the air via microwave
frequencies from a transmission facility to a small receiving antenna at each
subscriber's location, which generally requires a direct, unobstructed line-of-
sight from the transmission facility to the subscriber's receiving antenna.
Therefore, in communities with tall trees, hilly terrain, tall buildings or
other obstructions in the transmission path, wireless cable transmission can be
difficult or impossible to receive at certain locations without the use of
signal boosters. Consequently, the Company may not be able to supply services
to certain potential subscribers. In addition, in limited circumstances,
extremely adverse weather can damage transmission and receiving antennas as well
as transmit site equipment.
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. Holders 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.
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 or disposition
of certain assets held for sale 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.
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 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.
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Wireless One and CS Wireless Minority Investments
The Company owns approximately 21% of the outstanding common stock of
Wireless One, Inc., a Delaware corporation ("Wireless One"). Although David E.
Webb and J. R. Holland, Jr., directors of the Company, serve as directors of
Wireless One, the Company cannot exercise unfettered control over this
substantial investment. The Company does not control the management of Wireless
One, and is dependent upon the skill, expertise and managerial efforts of the
management of Wireless One to achieve a return on the Company's substantial
investment in Wireless One. To the extent that Wireless One proves unsuccessful
in its business, the value of the Company's investment therein will be adversely
affected. Similarly, the Company owns approximately 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
that CS Wireless proves unsuccessful in its business, the value of the Company's
investment therein will be adversely affected.
Agreement to Vote for Board Designee of Jupiter; Co-Sale Right
David E. Webb, the President and Chief Executive Officer of the Company, L.
Allen Wheeler, Vice Chairman of the Board of Directors of the Company, and Hunt
Capital Group ("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 40.6% of the outstanding Common Stock. Pursuant
to the terms of a Stockholders' Agreement (the "Stockholders' Agreement"), for
so long as Jupiter, the purchaser of $40.0 million gross proceeds of the
Convertible Notes, retains a 25% interest in the Convertible Notes originally
purchased by it and/or the shares of Common Stock issued or issuable upon
conversion thereof (the "Conversion Shares") originally issuable to it, each of
Hunt Capital, David E. Webb and L. Allen Wheeler, have agreed to vote their
shares (i) in favor of the election to the Company's Board of Directors of one
designee of Jupiter and (ii) in favor of the Company's Board of Directors
consisting of at least three and not more than seven members. The agreement of
such stockholders to elect Jupiter's designee to the Board of Directors may
restrict the ability of such stockholders to elect their preferred slate of
directors to manage the Company, which may result in a member of the Board of
Directors having interests that conflict with those of the other stockholders of
the Company. In addition, under the terms of the Stockholders' Agreement, each
of Hunt Capital, David E. Webb and L. Allen Wheeler have agreed that, for so
long as Jupiter holds such 25% interest, in the event of any proposed sale or
series of sales of Common Stock by any such stockholder to a non-affiliate for
aggregate consideration greater than $15.0 million or representing in excess of
5% of the outstanding Common Stock at such time, such stockholder shall not
effect such sale unless Jupiter is permitted to participate in such sale on a
pro rata basis with such stockholder. The co-sale right may reduce the
likelihood of a change in control of the Company, because any potential
purchaser of stock held by the controlling stockholders may also be required to
purchase shares by Jupiter.
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-sized markets in the
central United States. In addition, subject to limitations set forth in the
Indenture, it is possible that the Company might make one or more acquisitions
outside of the business of providing wireless cable television services. Any
such acquisitions may be made for cash, securities, including Common Stock, 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.
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Certain Rescission Rights
On February 23, 1996, AWS became a wholly-owned subsidiary of the Company.
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.
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, the
Fort Worth Partnership, another of the general partnerships in which interests
were sold, 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, the Minneapolis
Partnership, another of the general partnerships in which interests were sold,
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.
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Lack of Public Market for the New Notes
The Old Notes are designated for trading in the PORTAL market. There is no
established trading market for the New Notes. Although the Initial Purchaser
has advised the Company that it currently intends to make a market in the New
Notes, it is not obligated to do so and it may discontinue such market-making at
any time without notice. The Company does not currently intend to list the New
Notes on any securities exchange or to seek approval for quotation through any
automated quotation system. Accordingly, there can be no assurance as to the
development of any market or the liquidity of any market that may develop for
the New Notes. If such a market were to exist, no assurance can be given as to
the trading prices of the New Notes. Future trading prices of the New Notes
will depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
Possible Volatility of Price of the New Notes
The market price of the Common Stock could be subject to wide fluctuations
in response to quarterly variations in the Company's results of operations,
changes in earnings estimates by analysts, conditions in the wireless cable
industry or general market or economic conditions. In addition, in recent years
the stock market has experienced extreme price and volume fluctuations. These
fluctuations have had a substantial effect on the market prices for many
emerging growth companies, often unrelated to the operating performance of the
specific companies. Such market fluctuations could adversely affect the price
of the Common Stock and, to the extent that the Company's business requires
additional financing, the price of the New Notes.
RECENT EVENTS
The Company has executed an agreement to sell wireless cable assets in New
Hampshire and has executed a letter of intent to acquire two wireless cable
operating systems in Oklahoma. In addition, the Company has reached an
agreement in principle to acquire one wireless cable operating system in Iowa
and wireless cable assets in one market in each of Nebraska and Montana. The
markets to be divested and acquired represent approximately 186,500 net
households, 171,340 net LOS households and 1,680 net subscribers. The
agreement to sell wireless cable assets in New Hampshire is subject to customary
closing conditions, including completion of due diligence satisfactory to the
purchaser. Agreements for the five markets to be acquired also will be subject
to customary closing conditions. There can be no assurance that any of these
transactions will be consummated.
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The Old Notes were sold by the Company on March 28, 1996 to the Initial
Purchaser, who placed the Old Notes with institutional investors. In connection
therewith, the Company and the Initial Purchaser entered into the Registration
Rights Agreement, pursuant to which the Company agreed, for the benefit of the
Holders of the Old Notes, that the Company would, at its sole cost, (i) within
180 days following the original issuance of the Old Notes, file with the
Commission the Registration Statement (of which this Prospectus is a part) under
the Securities Act with respect to an issue of a series of new notes of the
Company identical in all material respects to the series of Old Notes (except
that such New Notes would not contain terms with respect to transfer
restrictions) and (ii) cause such Registration Statement to be declared
effective under the Securities Act within 270 days following the original
issuance of the Old Notes. Upon the effectiveness of the Registration
Statement, the Company will offer, pursuant to this Prospectus, to the Holders
of the Old Notes the opportunity to exchange their Old Notes for a like
principal amount of New Notes, to be issued without a restrictive legend and
which may, generally, be reoffered and resold by the holder without restrictions
or limitations under the Securities Act. The term "Holder" with respect to the
Exchange Offer means any person in whose name Old Notes are registered on the
books of the Company or any other person who has obtained a properly completed
bond power from the registered holder.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Instead, based on interpretations by the staff of the
Commission set forth in no-action letters issued to third parties, the Company
believes that New Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by any
holder of such New Notes (other than any such holder that is an "affiliate" of
the Company within the meaning of Rule 405 promulgated under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes are acquired in the ordinary
course of such Holder's business, such Holder has no arrangement or
understanding with any person to participate in the distribution of such New
Notes and neither such Holder nor any other such person is engaging in or
intends to engage in a distribution of such New Notes. Since the Commission has
not considered the Exchange Offer in the context of a no-action letter, there
can be no assurance that the staff of the Commission would make a similar
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determination with respect to the Exchange Offer. Any Holder who is an
affiliate of the Company or who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes cannot rely on such
interpretations by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a resale transaction.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company). The
Company has agreed that, for a period of 120 days after the date of this
Prospectus, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution."
In the event that (i) any changes in law or the applicable interpretations
of the staff of the Commission do not permit the Company to effect the Exchange
Offer, (ii) the Exchange Offer is not consummated within 300 days of the Issue
Date, (iii) in certain circumstances, the Initial Purchaser so requests within
270 days after the consummation of the Exchange Offer or (iv) in the case of any
Holder that participates in the Exchange Offer, such Holder does not receive New
Notes on the date of the exchange that may be sold without restriction under
state and Federal securities laws (other than due solely to the status of such
Holder as an affiliate of the Company within the meaning of the Securities Act)
and so notifies the Company within 60 days after such Holder first becomes aware
of such restriction and provides the Company with a reasonable basis for its
conclusion, in the case of each of clauses (i)-(iv) of this sentence, then the
Company will promptly deliver to the Holders and the Trustee written notice
thereof (the "Shelf Notice") and, at its cost, (a) as promptly as practicable,
file a shelf registration statement covering resales of the Notes (the "Shelf
Registration Statement"), (b) use all reasonable efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act by the
60th day after the delivery of the Shelf Notice (or promptly in the event of a
request by the Initial Purchaser) and (c) use all reasonable efforts to keep the
Shelf Registration Statement effective until three years after its effective
date, or such shorter period ending when (i) all Notes covered by the Shelf
Registration Statement have been sold in the manner set forth and as
contemplated therein or (ii) a subsequent Shelf Registration Statement covering
all unregistered Old Notes has been declared effective under the Securities Act.
The Company will, in the event of the filing of a Shelf Registration Statement,
provide to each Holder of the Old Notes copies of the prospectus which is a part
of the Shelf Registration Statement, notify each such Holder when the Shelf
Registration Statement for the Old Notes has become effective and take certain
other actions as are required to permit unrestricted resales of the Old Notes.
A Holder of Old Notes that sells such Old Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such a
Holder (including certain indemnification obligations). In addition, each
Holder of the Old Notes will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have its Old Notes included in the
Shelf Registration Statement and to benefit from the provisions regarding
liquidated damages set forth in the following paragraph.
In the event that either (i) the Registration Statement is not filed with
the Commission on or prior to the 180th calendar day following the Issue Date,
(ii) the Registration Statement is not declared effective on or prior to the
270th calendar day following the Issue Date, or (iii) (A) the Exchange Offer is
not consummated, (B) the Shelf Registration Statement is not declared effective
on or prior to the 60th calendar day following the delivery of the Shelf Notice
or (C) the Shelf Registration Statement ceases to be effective (each such event
referred to in clauses (i) through (iii), a "Registration Default"), the Company
will pay increased cash interest to each Holder of the Old Notes during the
first 90 day period immediately following the occurrence of such Registration
Default in an amount equal to 0.50% per annum on the Old Notes. The amount of
the cash interest will increase by an additional 0.50% per annum for each
subsequent 90 day period until the Registration Statement is filed, the
Registration Statement is declared effective, the Exchange Offer is consummated
or the Shelf Registration Statement is declared effective
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<PAGE>
or again became effective, as the case may be, up to a maximum amount of
additional cash interest of 2.00% per annum. All accrued cash interest shall be
paid to record holders of the Old Notes by wire transfer of immediately
available funds or by federal funds check by the Company on each Interest
Payment Date. Upon (x) the filing of the Registration Statement in the case of
clause (i) above, (y) the effectiveness of the Registration Statement in the
case of clause (ii) above or (z) the consummation of the Exchange Offer or the
effectiveness of a Shelf Registration Statement, as the case may be, in the case
of clause (iii) above, and provided that none of the conditions set forth in
clauses (i), (ii) and (iii) above continues to exist, such additional interest
shall cease to accrue on the Old Notes from the date of such filing,
effectiveness or consummation.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
The Old Notes are designated for trading in the PORTAL market. To the
extent Old Notes are tendered and accepted in the Exchange Offer, the principal
amount of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, Holders of Old Notes who were eligible to participate in the Exchange
Offer but who did not tender their Old Notes will not be entitled to certain
rights under the Registration Rights Agreement and such Old Notes will continue
to be subject to certain restrictions on transfer. Accordingly, the liquidity
of the market for the Old Notes could be adversely affected.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only
in integral multiples of $1,000.
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the New Notes have
been registered under the Securities Act and therefore will not bear legends
restricting their transfer and will not contain certain provisions providing for
an increase in the interest rate on the Old Notes under certain circumstances
relating to the Registration Rights Agreement, which provisions will terminate
upon the consummation of the Exchange Offer. The New Notes will evidence the
same debt as the Old Notes and will be entitled to the benefits of the Indenture
under which the Old Notes were, and the New Notes will be, issued.
As of the date of this Prospectus, $15,000,000 aggregate principal amount
of the Old Notes are outstanding. The Company has fixed the close of business
on , 1996 as the record date for the Exchange Offer for
purposes of determining the persons to whom this Prospectus, together with the
Letter of Transmittal, will initially be sent. As of such date, there were
registered Holders of the Old Notes.
Holders of the Old Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law (the "DGCL") or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral notice (confirmed in writing) oral or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering Holders for the purpose of the exchange of Old Notes.
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<PAGE>
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Old Notes will be returned, without expense, to
the tendering Holder thereof as promptly as practicable after the Expiration
Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"The Exchange Offer -- Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral notice (confirmed in writing) or written notice
and will make a public announcement thereof prior to 9:00 a.m., New York City
time, on the next business day after each previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or, if any of the
conditions set forth below under "The Exchange Offer -- Conditions" shall not
have been satisfied, to terminate the Exchange Offer, by giving oral notice
(confirmed in writing) or written notice of such delay, extension or termination
to the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any
manner. Any such delay in acceptance, extension, termination or amendment will
be followed as promptly as practicable by a public announcement thereof. If the
Exchange Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered Holders, and
the Company will extend the Exchange Offer for a period of five to 10 business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five- to 10-business-day period.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
Interest on the New Notes
The New Notes will bear interest from March 28, 1996, the date of original
issuance of the Old Notes. No interest will be paid on the Old Notes accepted
for exchange.
Procedures for Tendering
The tender of Old Notes by a Holder thereof pursuant to one of the
procedures set forth below and the acceptance thereof by the Company will
constitute a binding agreement between such Holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal. This Prospectus, together with the Letter of Transmittal, will
first be sent on or about , 1996, to all Holders of Old
Notes known to the Company and the Exchange Agent.
Only a Holder of the Old Notes may tender such Old Notes in the Exchange
Offer. A Holder who wishes to tender any Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, or a facsimile thereof, or an Agent's Message, including any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) the certificates for such
Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal or (ii) a timely confirmation of a book-entry transfer (a "Book-
Entry Confirmation") of such Old Notes,
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<PAGE>
if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the Holder must comply with
the guaranteed delivery procedures described below. To be tendered effectively,
the Old Notes, Letter of Transmittal or Agent's Message and other required
documents must be received by the Exchange Agent at the address set forth below
under "Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration
Date.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering Old Notes which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such participant.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the Holder. Instead of delivery by mail, it is recommended that Holders use an
overnight or hand delivery service. If sent by mail, it is recommended that
registered mail, return receipt requested, be used and proper insurance be
obtained. In all cases, sufficient time should be allowed to assure delivery to
the Exchange Agent before the Expiration Date. No Letter of Transmittal or Old
Notes should be sent to the Company.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's own behalf, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal or delivering an Agent's Message and delivering such beneficial
owner's Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such beneficial owner's name or obtain a properly completed
bond power from the registered Holder. The transfer of registered ownership may
take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined herein)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
Holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures
on a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers,Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 promulgated under the Exchange Act (an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered Holder as such registered Holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, adminstrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions
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<PAGE>
in the Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
must be cured within such time as the Company shall determine. Although the
Company intends to notify Holders of defects or irregularities with respect to
tenders of Old Notes, neither the Company, the Exchange Agent nor any other
person shall incur any liability for failure to give such notification. Tenders
of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that the Company determines are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
By tendering, each Holder will represent to the Company, among other
things, that (i) the New Notes acquired by the Holder and any beneficial owners
of Old Notes pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the persons receiving such New Notes, (ii) neither the
Holder nor such beneficial owner has an arrangement with any person to
participate in the distribution of such New Notes, (iii) neither the Holder nor
such beneficial owner nor any such other person is engaging in or intends to
engage in a distribution of such New Notes and (iv) neither the Holder nor any
such other person is an "affiliate," as defined under Rule 405 promulgated under
the Securities Act, of the Company. Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities (other than Old Notes acquired directly from the Company),
may participate in the Exchange Offer but may be deemed an "underwriter" under
the Securities Act and, therefore, must acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. See "Plan of
Distribution."
Book-Entry Transfer
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the Book-
Entry Transfer Facility to transfer such Old Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of Old
Notes may be effected through book-entry transfer at the Book-Entry Transfer
Facility, the Letter of Transmittal or facsimile thereof, or an Agent's Message,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "The Exchange Offer -- Exchange Agent" on or
prior to the Expiration Date or the guaranteed delivery procedures described
below must be complied with.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) or an Agent's Message, together with
the certificate(s) representing the Old Notes, or a Book-Entry
Confirmation, and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
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<PAGE>
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof) or an Agent's Message, as well as the certificate(s)
representing all tendered Old Notes in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, and all other document required by
the Letter of Transmittal are received by the Exchange Agent within three
New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
Withdrawal of Tenders
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the Holder
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Old Notes register the transfer of such Old Notes into the name
of the persons withdrawing the tender and (iv) specify the name in which any
such Old Notes are to be registered, if different from that of the Depositor.
If certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the withdrawing
Holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old
Notes have been tendered pursuant to the procedure for book-entry transfer
described above, any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Old Notes and otherwise comply with the procedures of such facility.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company in its sole
discretion, which determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no New Notes will be issued with respect
thereto unless the Old Notes so withdrawn are validly retendered. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described above under "The Exchange Offer -- Procedures for Tendering" at any
time prior to the Expiration Date.
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable to the Holder thereof without cost
to such Holder (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described above, such Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for the
Old Notes).
Conditions
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate the Exchange Offer as provided herein before the acceptance of
such Old Notes, if:
(a) the Exchange Offer shall violate applicable law or any applicable
interpretation of the staff of the Commission; or
(b) any action or proceeding is instituted or threatened in any court
or by any governmental agency that might materially impair the ability of
the Company to proceed with the Exchange Offer or any material adverse
development has occurred in any existing action or proceeding with respect
to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall deem necessary for the consummation of the Exchange
Offer.
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If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering Holders (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the Book-
Entry Transfer Facility pursuant to the book-entry transfer procedures described
above, such Old Notes will be credited to an account maintained with such Book-
Entry Transfer Facility), (ii) extend the Exchange Offer and retain all Old
Notes tendered prior to the expiration of the Exchange Offer, subject, however,
to the rights of Holders to withdraw such Old Notes (see "The Exchange Offer --
Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect
to the Exchange Offer and accept all properly tendered Old Notes which have not
been withdrawn. If such waiver constitutes a material change to the Exchange
Offer, the Company will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered Holders, and the Company
will extend the Exchange Offer for a period of five to 10 business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered Holders, if the Exchange Offer would otherwise expire during such
five- to 10-business-day period.
Exchange Agent
Bankers Trust Company has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
Mail: By Facsimile: Hand/Overnight
Bankers Trust Company (212) 250-6961 Delivery:
Corporate Trust and (212) 250-6392 Bankers Trust Company
Agency Group Corporate Trust and
Reorganization Dept. Agency Group
P.O. Box 1458 Receipt & Delivery
Church Street Station Window
New York, New York 123 Washington Street,
10008-1458 1st Floor
New York, New York
10006
Confirm by
Telephone:
(212) 250-6270
Fees and Expenses
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
Holder or any other person) will be payable by the tendering Holder. If
satisfactory
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<PAGE>
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering Holder.
Accounting Treatment
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value less accrued original issue discount, as reflected in the
Company's accounting records on the date of the exchange. Accordingly, no gain
or loss for accounting purposes will be recognized. The expenses of the
Exchange Offer and the unamortized expenses related to the issuance of the Old
Notes will be amortized over the term of the New Notes.
DESCRIPTION OF NOTES
General
The Old Notes were, and the New Notes will be, issued under an Indenture
(the "Indenture") between the Company and First Trust of New York, National
Association, as trustee (the "Trustee"). The terms of the New Notes are
identical in all material respects to the Old Notes, except that the New Notes
have been registered under the Securities Act and, therefore, will not bear
legends restricting their transfer and will not contain certain provisions
providing for an increase in the interest rate on the Old Notes under certain
circumstances relating to the Registration Rights Agreement, which provisions
will terminate upon the consummation of the Exchange Offer.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended and as in effect on the date of the qualification of the Indenture under
the Trust Indenture Act (the "Trust Indenture Act"). The Notes are subject to
all such terms, and holders of Notes (the "Holders") are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Indenture, including the definitions therein of certain terms used below. The
definitions of certain terms used in the following summary are set forth below
under "Certain Definitions." As used in this section, the term "Company" refers
only to Heartland Wireless Communications, Inc. and not to its subsidiaries and
the term "Holder" refers to a holder of a Note.
The Notes are secured by a first priority security interest in the Escrow
Account described under "Disbursement of Funds -- Escrow Account." The Notes are
senior obligations of the Company ranking pari passu in right of payment to all
existing and future Indebtedness of the Company, other than Indebtedness that is
expressly subordinated to the Notes. The Company has no senior Indebtedness,
other than the Series B Notes and the Notes. The Notes are senior in right of
payment to the Convertible Notes, which are expressly subordinated to the Notes.
However, subject to certain limitations set forth in the Indenture, the Company
and its Subsidiaries may incur Indebtedness which is secured by assets of the
Company and its Subsidiaries. In addition, the operations of the Company are
conducted through its subsidiaries and, therefore, the Company will be dependent
upon the cash flow of its subsidiaries to meet its obligations under the Notes.
As a result, the Notes are effectively subordinated to all existing liabilities
and future Indebtedness and other liabilities and commitments of the Company's
subsidiaries. Any right of the Company to receive assets of the Company's
Subsidiaries or any future Subsidiaries of the Company, upon the latter's
liquidation or reorganization (and the consequent right of the Holders to
participate in those assets), will be effectively subordinated to the claims of
that Subsidiary's creditors, except to the extent that the Company is itself
recognized as a creditor of such Subsidiary, although other creditors of such
Subsidiary may be secured by certain assets of such Subsidiary. As of June 30,
1996, the outstanding liabilities of the Company's consolidated subsidiaries,
including all the liabilities of consolidated subsidiaries that are not wholly-
owned by the Company, were approximately $7.8 million. The Indenture permits
the Company's subsidiaries to incur additional indebtedness in the future.
The Notes will constitute a new issue of securities for which there is
currently no trading market. See "Risk Factors -- Lack of Public Market."
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The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, Bankers
Trust Company will act as Paying Agent and Registrar for the Notes. The Notes
may be presented for registration or transfer and exchange at the offices of the
Registrar, which will be the Registrar's corporate trust office. The Company
may change any Paying Agent and Registrar without notice to the Holders. The
Company will pay principal (and premium, if any) on the Notes at the Paying
Agent's corporate office in New York, New York. At the Company's option,
interest may be paid by check mailed to the registered addresses of Holders.
Principal, Maturity and Interest
The Notes are limited in aggregate principal amount to $15 million and will
mature on April 15, 2003. Interest on the Notes will accrue at the rate of 13%
per annum and will be payable semiannually in cash on each April 15 and October
15 commencing on April 15, 1996, to the Persons who are registered Holders at
the close of business on the April 1 and October 1 immediately preceding the
applicable interest payment date. Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of issuance.
Optional Redemption
Optional Redemption. The Notes will not be redeemable at the Company's
option prior to April 15, 1999. Thereafter, the Notes will be subject to
redemption at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on April 15 of the years indicated below:
Year Percentage
1999 . . . . 105.571%
2000 . . . . 103.714%
2001 . . . . 101.857%
2002 and
thereafter . 100.000%
Optional Redemption Upon Sale of Equity to Strategic Equity Investor.
Notwithstanding the foregoing, in the event of the sale by the Company prior to
April 15, 1998 of at least $25.0 million of its Capital Stock (other than
Disqualified Stock) to a Strategic Equity Investor in a single transaction, the
Company may, at its option, use the net cash proceeds of such sale of Capital
Stock to redeem up to 25% of the Notes at a redemption price equal to 113% of
the principal amount thereof plus accrued and unpaid interest thereon, if any,
to the date of redemption; provided that at least 75% of the initial principal
amount of the Notes remains outstanding immediately after such redemption. In
order to effect the foregoing redemption with the proceeds of any such sale of
Capital Stock (other than Disqualified Stock), the Company shall make such
redemption not more than 120 days after the consummation of any such sale of
Capital Stock.
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Mandatory Redemption
Except as set forth below under "Offer to Purchase Upon Change of Control"
and "Certain Covenants
-- Limitation on Asset Sales," the Company will not be required to make
mandatory redemption or sinking fund payments with respect to the Notes.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee or Registrar in compliance with
the requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate,
provided that no Notes with a principal amount of $1,000 or less shall be
redeemed in part. Notice of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at its registered address. If any Note is to be redeemed
in part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount to be redeemed. A new Note in principal amount
equal to the unredeemed portion will be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the redemption date,
interest will cease to accrue on the Notes or portions of the Notes called for
redemption.
Offer to Purchase Upon Change of Control
The Indenture provides that upon the occurrence of a Change of Control,
each Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase.
Within 30 days following the date upon which a Change of Control occurs,
the Company must send, by first class mail, a notice to each Holder, with a copy
to the Trustee and Paying Agent, which notice shall govern the terms of the
Change of Control Offer. Such notice shall state, among other things, the
purchase date, which must be no earlier than 30 days nor later than 45 days from
the date such notice is mailed, other than as may be required by law (the
"Change of Control Payment Date"). Holders electing to have a Note purchased
pursuant to a Change of Control Offer will be required to surrender the Note,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, to the Paying Agent at the address specified in the Note
prior to the close of business on the third Business Day prior to the Change of
Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, the Indenture limits
the Company's ability to incur Indebtedness (see "Certain Covenants--Limitation
on Indebtedness") and there can be no assurance that the Company would be able
to obtain such financing.
The definition of "Change of Control" includes a disposition of all or
substantially all of the property and assets of the Company. With respect to
the disposition of property or assets, the phrase "all or substantially all" as
used in the Indenture (including as set forth under "Certain Covenants--Merger,
Consolidation and Sale of Assets" below) varies according to the facts and
circumstances of the subject transaction, has no clearly established meaning
under New York law (which is the governing law under the Indenture) and is
subject to judicial interpretation. Accordingly, in certain circumstances there
may be a degree of uncertainty in ascertaining whether a particular transaction
would involve a disposition of "all or substantially all" of the property or
assets of the Company, and therefore it may be unclear as to whether a Change of
Control has occurred and whether the Company is required to make a Change of
Control Offer.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability
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of the Company and its Subsidiaries to incur additional Indebtedness, to grant
liens on its property, to make Restricted Payments and to make Asset Sales may
also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management or Permitted Holders of the Company.
Consummation of any such transaction in certain circumstances may require
redemption or repurchase of the Notes, and there can be no assurance that the
Company or the acquiring party will have sufficient financial resources to
effect such redemption or repurchase. Such restrictions and the restrictions on
transactions with Affiliates may, in certain circumstances, make more difficult
or discourage any leveraged buyout of the Company or any of its Subsidiaries by
the management or Permitted Holders of the Company. While such restrictions
cover a wide variety of arrangements which have traditionally been used to
effect highly leveraged transactions, the Indenture may not afford the Holders
of Notes protection in all circumstances from the adverse aspects of a highly
leveraged transaction, reorganization, restructuring, merger or similar
transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities law and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
Disbursement of Funds -- Escrow Account
The Company placed approximately $1.9 million of the net proceeds realized
from the sale of the Notes, representing funds sufficient to pay interest on the
Notes from April 15, 1996 through April 14, 1997, in the Escrow Account held by
the Escrow Agent for the benefit of the Trustee under the Indenture in
accordance with the Escrow and Disbursement Agreement. The Company entered into
the Escrow and Disbursement Agreement, which provides, among other things, that
funds may be disbursed from the Escrow Account only to pay interest on the Notes
(or, if a portion of the Notes has been retired by the Company, funds
representing the interest payment on the retired Notes may be paid to the
Company) and, upon certain repurchases or redemptions thereof, to pay principal
of and premium, if any, thereon. Pending such disbursement, the Company will
cause all funds contained in the Escrow Account to be invested in Marketable
Securities. Interest earned on these Marketable Securities will be added to the
Escrow Account.
The Notes are secured by a first priority security interest in the Escrow
Account. See "Security" below.
Certain Covenants
Limitation on Restricted Payments. The Indenture provides that the Company
and its Subsidiaries may not, directly or indirectly (i) declare or pay any
dividend or make any distribution on account of any Equity Interests of the
Company or any of its Subsidiaries other than dividends or distributions payable
(A) in Equity Interests of the Company that are not Disqualified Stock or (B) to
the Company or any Wholly-Owned Subsidiary of the Company; (ii) purchase, redeem
or otherwise acquire or retire for value any Equity Interests of the Company or
any of its Subsidiaries (other than any such Equity Interests owned by the
Company or a Wholly-Owned Subsidiary); (iii) purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is pari passu or
subordinated in right of payment to the Notes, except in accordance with the
scheduled repayment provisions set forth in the original documentation governing
such Indebtedness; or (iv) in a single transaction or a series of related
transactions, until the date on which the ratio of Annualized EBITDA to
Consolidated Interest Expense equals or exceeds 1.75 to 1.00, make Investments
in a cumulative amount for the Company and all of its Subsidiaries, in excess of
(A) the sum of (1) $10 million and (2) 100% of the Net Proceeds received by the
Company from the issue or sale of Equity Interests of the Company (other than
Equity Interests sold to a Subsidiary of the Company or to an employee stock
ownership plan or similar trust and other than Disqualified Stock) less (B) the
cumulative amount of Net Proceeds received by the Company from the issue or sale
of Equity Interests of the Company that has been applied to make Restricted
Payments (all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"), unless, at
the time of such Restricted Payment: (a) no Default or Event of Default shall
have occurred and be continuing or would occur as a consequence thereof; (b)
after giving effect to such Restricted Payment on a pro forma basis as if such
Restricted Payment had been made
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at the beginning of the applicable fiscal quarter, the Company could incur $1.00
of additional Indebtedness pursuant to the Annualized Cash Flow Ratio test
described below under "Certain Covenants -- Limitation on Indebtedness"; and (c)
such Restricted Payment, together with the aggregate of all other Restricted
Payments made by the Company and its Subsidiaries after the Issue Date, is less
than the sum of: (x) 50% of the Consolidated Net Income (or if Consolidated Net
Income shall be a loss, minus 100% of such loss) of the Company earned from the
first day of the fiscal quarter during which the Issue Date occurs to the end of
the most recent fiscal quarter ending prior to the date of such Restricted
Payment, plus (y) 100% of the aggregate Net Cash Proceeds received by the
Company from the issue or sale of Equity Interests of the Company (other than
Equity Interests sold to a Subsidiary of the Company or to an employee stock
ownership plan or similar trust and other than Disqualified Stock or the Net
Proceeds from the sale of Equity Interests applied to make Investments in
accordance with this covenant) since the Issue Date.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit (i) the payment of any dividend within 60
days after the date of declaration thereof, if at such date of declaration such
payment would have complied with the provisions of the Indenture; (ii) so long
as no Default or Event of Default shall have occurred and be continuing, the
redemption, repurchase, retirement or other acquisition of any Equity Interests
of the Company in exchange for, or out of the net proceeds of, the substantially
concurrent sale for cash or Marketable Securities (other than to a Subsidiary of
the Company) of other Equity Interests of the Company that are not Disqualified
Stock; (iii) so long as no Default or Event of Default shall have occurred and
be continuing, the repurchase of Capital Stock of the Company (including
options, warrants or other rights to acquire such Capital Stock) from employees
or former employees of the Company or any Subsidiary thereof pursuant to any
employment agreement, management equity subscription agreement or stock option
plan or similar agreement in effect as of the Issue Date or entered into in the
ordinary course of business for consideration which, when added to all loans
made pursuant to clause (iv) below during the fiscal year and then outstanding,
does not exceed $0.5 million in the aggregate in any fiscal year or $2.5 million
in the aggregate over the life of the Notes; (iv) so long as no Default or Event
of Default shall have occurred and be continuing, the making of loans and
advances to employees of the Company or any Subsidiary thereof in the ordinary
course of business which, when added to the aggregate consideration paid
pursuant to clause (iii) above during the same fiscal year, does not exceed $0.5
million in any fiscal year or $2.5 million in the aggregate over the life of the
Notes; provided that upon repayment of such loans or advances made after the
Issue Date, such repaid amounts shall no longer be included in the principal
amount of loans and advances made to employees; (v) so long as no Default or
Event of Default shall have occurred and be continuing, a Permitted Refinancing;
(vi) so long as no Default or Event of Default shall have occurred and be
continuing, the redemption, repurchase, retirement or other acquisition of
Equity Interests of a Subsidiary of the Company for (A) Equity Interests of the
Company that are not Disqualified Stock or (B) up to $1.0 million in the
aggregate over the life of the Notes of cash consideration; (vii) the payment of
funds to satisfy or discharge any liability or obligation incurred by the
Company as a result of its joint and several liability as a general partner for
all third-party liabilities and obligations of RuralVision Joint Venture, if
any; (viii) the acquisition by the Company of the Cross Country Sale Assets;
(ix) the acquisition by the Company of the Tulsa, Oklahoma wireless cable market
from USWS; (x) the acquisition by the Company of the Amarillo, Texas market from
U.S. Wireless; (xi) the payment of dividends on Preferred Stock of Subsidiaries
outstanding on the Issue Date; (xii) the redemption, repurchase, retirement or
other acquisition of Capital Stock of the Company from U.S. Wireless for
consideration comprised of the note receivable related to the U.S. Wireless
Loan; (xiii) Investments in Wireless Cable Related Assets made with the Net Cash
Proceeds from an Asset Sale made in compliance with the first paragraph of the
"Limitation on Asset Sales" covenant (whether such Asset Sale shall have been
consummated prior to or after the Issue Date) or otherwise permitted by the
"Limitation on Asset Sales" covenant, provided that if such Investment had been
acquired in a simultaneous swap or exchange for the assets disposed of in such
Asset Sale, such swap or exchange would have complied with the provisions of the
third paragraph under the "Limitation on Asset Sales" covenant; (xiv)
Investments that constitute part of an Asset Sale transaction consummated in
compliance with or otherwise permitted by the provisions of the third paragraph
under the "Limitation on Asset Sales" covenant; (xv) Investments in the Wireless
Cable Business acquired in consideration for the issuance of Equity Interests of
the Company (other than Disqualified Stock) and cash paid in lieu of the
issuance of fractional shares and in satisfaction of any applicable dissenter's
or appraisal rights; and (xvi) the consummation of any of the Transactions. The
amounts referred to in clauses (i), (ii), (iii), (iv) and (vi) shall be included
as Restricted Payments in any computation made pursuant to clause (c) above.
Restricted Payments shall be deemed not to include Permitted Payments and
Permitted Investments.
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Not later than the making any Restricted Payment, the Company shall deliver
to the Trustee an Officers' Certificate (as defined in the Indenture) stating
that such Restricted Payment is permitted and setting forth the basis upon which
the calculations required by the covenant "Restricted Payments" were computed.
Limitation on Indebtedness. The Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume,
Guarantee, acquire, become liable, contingently or otherwise, with respect to,
or otherwise become responsible for payment of (collectively, "incur") any
Indebtedness; provided that the Company (but not its Subsidiaries) may incur
Indebtedness if (i) no Default or Event of Default shall have occurred and be
continuing and (ii) the Annualized Cash Flow Ratio of the Company as of the date
of such incurrence or issuance shall not exceed (x) 7.0 to 1.0 if such
incurrence or issuance occurs on or prior to the second anniversary of the Issue
Date and (y) 5.0 to 1.0 if such incurrence or issuance occurs thereafter.
The foregoing limitation will not apply to: (i) Indebtedness evidenced by
the Notes and the Indenture; (ii) the incurrence by the Company and its
Subsidiaries of the Existing Indebtedness, other than any Existing Indebtedness
required to be repaid with proceeds of the sale of the Units; (iii) the
incurrence by the Company and its Subsidiaries of Bank Indebtedness in an
aggregate principal amount at any one time outstanding not to exceed $25.0
million (less the amount of any then-outstanding Preferred Stock of Subsidiaries
issued to refinance Indebtedness to the extent such amount has not been applied
to reduce the amount of Indebtedness permitted under clause (vii) below) , as
such amount may be permanently reduced as specified in the "Limitation on Asset
Sales" covenant described below, and reduced by the amount of any outstanding
Guarantee incurred pursuant to clause (iv) below; provided that no Default or
Event of Default shall have occurred and be continuing at the time of such
incurrence; (iv) the Guarantee by the Subsidiaries of Bank Indebtedness
permitted to be incurred by the Company pursuant to the immediately preceding
paragraph; (v) Indebtedness of the Company issued to any Wholly-Owned
Subsidiary; provided that (a) any such Indebtedness is unsecured and is
subordinated to the Notes and (b) that any subsequent issuance or transfer of
any Capital Stock which results in any Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any transfer of such Indebtedness to a Person not a
Wholly-Owned Subsidiary will be deemed an incurrence of such Indebtedness; (vi)
Indebtedness of a Subsidiary issued to and held by the Company or any Wholly-
Owned Subsidiary of the Company; provided that any subsequent issuance or
transfer of any Capital Stock which results in a Wholly-Owned Subsidiary ceasing
to be a Wholly-Owned Subsidiary or any transfer of such Indebtedness to a Person
not a Wholly Owned Subsidiary of the Company will be deemed an incurrence of
such Indebtedness; (vii) the incurrence (a "Permitted Refinancing") by the
Company and its Subsidiaries of Indebtedness issued in exchange for, or the
proceeds of which are used to extend, refinance, renew, replace or refund
Indebtedness incurred pursuant to the Annualized Cash Flow Ratio test above or
pursuant to clauses (ii), (iii), (iv) and (v) above ("Refinancing
Indebtedness"), provided that: (a) the net proceeds of such Refinancing
Indebtedness shall not exceed the principal amount of and required premium, if
any, and accrued interest on the Indebtedness so extended, refinanced, renewed,
replaced, substituted or refunded (or if such Indebtedness was issued at an
original issue discount, the original issue price plus amortization of the
original issue discount at the time of the repayment of such Indebtedness) and
reasonable expenses incurred in connection therewith; (b) the Refinancing
Indebtedness shall have a final maturity later than, and a Weighted Average Life
to Maturity equal to or greater than, the final maturity and remaining Weighted
Average Life to Maturity of the Indebtedness being extended, refinanced,
renewed, replaced or refunded; and (c) if the Indebtedness being extended,
refinanced, renewed, replaced or refunded is subordinated in right of payment to
the Notes, the Refinancing Indebtedness shall be subordinated in right of
payment to the Notes on terms at least as favorable to the Holders of Notes as
those contained in the documentation governing the Indebtedness being so
extended, refinanced, renewed, replaced or refunded; (viii) the incurrence of
obligations in respect of Interest Rate Agreements relating to Indebtedness to
the extent that the notional principal amount of such obligation does not exceed
the aggregate principal amount of the Indebtedness to which such Interest Rate
Agreement relates; or (ix) the incurrence by the Company or any of its
Subsidiaries of Indebtedness owing to a Federal governmental authority relating
to the purchase of wireless cable channels in an auction or other sale (or
Indebtedness satisfying the requirements of (vii) (b) above issued in exchange
for, or the proceeds of which are used to extend, refinance, renew, replace or
refund, such Indebtedness) in an amount not to exceed in the aggregate $30
million at any one time outstanding. The Company and its Subsidiaries may incur
Acquired Debt only in compliance with this covenant.
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Limitation on Liens. The Indenture provides that neither the Company nor
any of its Subsidiaries may directly or indirectly create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or on any
income or profits therefrom, or assign or convey any right to receive income
therefrom, except Permitted Liens.
The Indenture also provides that if the Company or any of its Subsidiaries
shall create, incur, assume or suffer to exist any Lien, other than a Permitted
Lien, on any assets or other property to secure Indebtedness in violation of
this covenant, the Company or such Subsidiary, as the case may be, shall make
effective provision for securing the Notes equally and ratably with such
Indebtedness as to such assets or other property for so long as such
Indebtedness shall be so secured; provided that the provision of such equal and
ratable security in favor of the Notes shall not cure any Default or Event of
Default arising from such violation of the provisions of this covenant.
Limitation on Issuance and Sale of Capital Stock of Subsidiaries. The
Indenture provides that the Company will not sell any Capital Stock of a
Subsidiary, and will not permit any Subsidiary to issue or sell any Capital
Stock, or permit any Person, other than the Company and its Subsidiaries, to own
or hold any such interest, other than (i) any interest owned or held on the
Issue Date by, or issuable as of the Issue Date to, a Person other than the
Company and its Subsidiaries in any Capital Stock of any Subsidiary or (ii) any
interest owned or held by a Person at the time that such Subsidiary became a
Subsidiary (other than any such interest created or issued in anticipation of
the acquisition of such Subsidiary by the Company); provided that the foregoing
limitation shall not apply to (i) the sale of 100% of the Capital Stock of any
Subsidiary made in accordance with "Limitation on Asset Sales" and (ii)
issuances of Preferred Stock permitted pursuant to clauses (i) or (iii) of
"Limitation on Preferred Stock of Subsidiaries."
Limitation on Preferred Stock of Subsidiaries. The Indenture provides that
the Company will not permit any of its Subsidiaries to issue, directly or
indirectly, any Preferred Stock, except (i) Preferred Stock of Subsidiaries
outstanding on the Issue Date, (ii) Preferred Stock issued to and held by the
Company or a Subsidiary, except that any subsequent issuance or transfer of any
Capital Stock which results in any Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any transfer of such Preferred Stock to a Person not
a Wholly-Owned Subsidiary will be deemed an issuance of Preferred Stock; (iii)
Preferred Stock issued by a Person prior to the time (a) such Person became a
Subsidiary, (b) such Person merges with or into a Subsidiary or (c) another
Person merges with or into such Person (in a transaction in which such Person
becomes a Subsidiary), in each case if such Preferred Stock was not issued in
anticipation of such transaction; and (iv) Preferred Stock issued in exchange
for, or the proceeds of which are used to refund Indebtedness or refinance
Preferred Stock referred to in clause (i) or issued pursuant to clauses (ii) or
(iii) (other than Preferred Stock which by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable) is
redeemable at the option of the holder thereof or is otherwise redeemable,
pursuant to sinking fund obligations or otherwise, prior to the date of
redemption or maturity of the Preferred Stock or Indebtedness being so refunded
or refinanced); provided that (a) the liquidation value of such Preferred Stock
so issued shall not exceed the principal amount or the liquidation value of the
Indebtedness or Preferred Stock, as the case may be, so refunded or refinanced
and (b) the Preferred Stock so issued (1) shall have a stated maturity not
earlier than the stated maturity of the Indebtedness or Preferred Stock being
refunded or refinanced and (2) shall have a Weighted Average Life to Maturity
equal to or greater than the remaining Weighted Average Life to Maturity of the
Indebtedness or Preferred Stock being refunded or refinanced.
Limitation on Asset Sales. The Indenture provides that the Company will
not, and will not permit any of its Subsidiaries to, consummate an Asset Sale
unless (i) the Company or the applicable Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the assets sold or otherwise disposed of (as determined in good
faith by the Company's Board of Directors or if the Fair Market Value of such
assets exceeds $20.0 million, the Company shall receive from an investment
banking firm of national standing a written opinion in customary form as to the
fairness, to the Company, of such Asset Sale) and (ii) at least 80% of the
consideration received by the Company or the Subsidiary, as the case may be,
from such Asset Sale shall be cash or Marketable Securities and is received at
the time of such disposition. Upon the consummation of an Asset Sale, the
Company may apply, or cause such Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 180 days of receipt thereof either (A) to
prepay any Bank Indebtedness and, in the case of any Bank Indebtedness under any
revolving credit facility, to effect a permanent reduction in the availability
under such revolving credit facility, (B) to reinvest in Wireless Cable Related
Assets or (C) to a combination of prepayment
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and investment permitted by the foregoing clauses (A) and (B). On the 181st day
after an Asset Sale or such earlier date, if any, as the Board of Directors of
the Company or of such Subsidiary determines not to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in clauses (A), (B) or (C) of the
preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate
amount of Net Cash Proceeds which have not been applied on or before such Net
Proceeds Offer Trigger Date as permitted in clauses (A), (B) or (C) of the
preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by the
Company to make an offer to purchase (the "Net Proceeds Offer") on a date (the
"Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders on a
pro rata basis that amount of Notes equal to the Net Proceeds Offer Amount at a
price equal to 100% of the principal amount of the Notes to be purchased, plus
accrued and unpaid interest thereon, if any, to the date of purchase; provided,
however, that if at any time any non-cash consideration received by the Company
or any Subsidiary of the Company, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash (other
than interest received with respect to any such non-cash consideration), then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than
$5.0 million, the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time as
such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds
Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date relating
to such initial Net Proceeds Offer Amount from all Asset Sales by the Company
and its Subsidiaries aggregates at least $5.0 million, at which time the Company
shall apply all Net Cash Proceeds constituting all Net Proceeds Offer Amounts
that have been so deferred to make a Net Proceeds Offer (the first date the
aggregate of all such deferred Net Proceeds Offer Amounts is equal to $5.0
million or more shall be deemed to be a Net Proceeds Offer Trigger Date).
Notwithstanding the two immediately preceding paragraphs, the Company and
its Subsidiaries will be permitted to consummate an Asset Sale without complying
with such paragraphs to the extent (i) at least 95% of the consideration for
such Asset Sale, other than cash consideration, constitutes assets used in the
business of the Company and its Subsidiaries on the date of such transaction,
(ii) such Asset Sale is for Fair Market Value (as determined in good faith by
the Company's Board of Directors or if the Fair Market Value of such assets
exceeds $20.0 million, the Company shall receive from an investment banking firm
of national standing a written opinion in customary form as to the fairness, to
the Company, of such Asset Sale) and (iii) the assets acquired in such an Asset
Sale have historically generated revenues in an amount at least equal to (1) the
revenues attributable to the assets disposed of in such Asset Sale, multiplied
by (2) a fraction, the numerator of which is the amount of consideration other
than cash consideration received in such Asset Sale, and the denominator of
which is the total amount of consideration received in such Asset Sale; provided
that any consideration received by the Company or its Subsidiaries, as the case
may be, in an Asset Sale permitted to be consummated under this paragraph that
does not constitute assets to be used in the operations of the Company or its
Subsidiaries shall constitute Net Cash Proceeds which are subject to the
provisions of the two preceding paragraphs. In addition, notwithstanding the
two immediately preceding paragraphs, the Company will be permitted (i) to
consummate the Wireless One Transaction without complying with such paragraphs,
(ii) to sell the Call Markets to Wireless One or Wireless One LCC without
complying with such paragraphs, (iii) to sell any or all of the assets acquired
in the AWS Transaction, the CableMaxx Transaction or the TechniVision
Transaction on or prior to the first anniversary of the consummation of each
such Transaction without complying with such paragraphs, (iv) to sell any or all
of the assets acquired by way of an Investment permitted by clause (xv) of the
second paragraph of the "Limitation on Restricted Payments" covenant on or prior
to the first anniversary of the consummation of such acquisition without
complying with such paragraphs and (v) to sell, in a single transaction or a
series of transactions, assets for up to $25 million of non-cash consideration,
provided, in the case of clauses (iii), (iv) and (v), that the Company receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors or if the Fair Market Value of such assets
exceed $20.0 million, the Company shall receive from an investment banking firm
of national standing a written opinion in customary form as to the fairness, to
the Company, of such Asset Sale).
Each Net Proceeds Offer will be mailed within 25 days following the Net
Proceeds Offer Trigger Date to the record Holders as shown on the register of
Holders, with a copy to the Trustee, and shall comply with the procedures set
forth in the Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender
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their Notes in whole or in part in integral multiples of $1,000 in exchange for
cash. To the extent Holders properly tender Notes in an amount exceeding the
Net Proceeds Offer Amount, Notes of tendering Holders will be purchased on a pro
rata basis (based on amounts tendered). A Net Proceeds Offer shall remain open
for a period of 20 Business Days or such longer period as may be required by
law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue
thereof.
Dividend and Other Payment Restrictions Affecting Subsidiaries. The
Indenture provides that the Company and its Subsidiaries may not, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary (i) to pay
dividends or make any other distributions to the Company or any of its
Subsidiaries on or in respect of its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits, or pay any
Indebtedness or other obligation owed to the Company or any of its Subsidiaries;
(ii) to make loans or advances to the Company or any of its Subsidiaries or
Investments in Subsidiaries; or (iii) to transfer any of its properties or
assets to the Company or any of its Subsidiaries, except for such encumbrances
or restrictions existing under or by reason of: (a) any encumbrance or
restriction pursuant to the Notes or the Indenture; (b) applicable law; (c)
Existing Indebtedness, other than any Existing Indebtedness required to be
repaid with proceeds of the sale of the Units to be issued on the Issue Date;
(d) any instrument governing Acquired Debt as in effect at the time of
acquisition (except to the extent such Indebtedness was incurred in connection
with, or in contemplation of, such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired; (e) any encumbrance or restriction pursuant to an agreement effecting
a refinancing of Indebtedness pursuant to an agreement referred to in clause (c)
or (d) or contained in any amendment to an agreement referred to in clause (c)
or (d); provided, however, that the encumbrances and restrictions contained in
any such refinancing agreement or amendment are no more restrictive than
encumbrances or restrictions contained in the refinanced or amended agreements;
(f) with respect to clause (iii) above, by reason of customary non-assignment
provisions in leases entered into in the ordinary course of business; or (g)
with respect to clause (iii) above, purchase money obligations for property
acquired in the ordinary course of business, which obligations do not cover any
asset other than the asset acquired.
Merger, Consolidation or Sale of Assets. The Company will not, in a single
transaction or a series of related transactions, (i) consolidate with or merge
with or into any other Person, (ii) permit any other Person to consolidate with
or merge into (a) the Company or (b) any of its Subsidiaries in a transaction in
which such Subsidiary (or successor Person) remains (or becomes) a Subsidiary or
(iii) directly or indirectly, sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to another Person or Persons
or adopt a plan of liquidation, (iv) directly or indirectly, purchase, lease or
otherwise acquire all or substantially all of the property and assets of any
Person or any existing business (whether existing as a separate entity,
subsidiary, division, unit or otherwise) of any Person or acquire Equity
Interests or other ownership interests of any other Person such that such Person
becomes a Subsidiary or (v) permit any of its Subsidiaries to enter into any
such transaction unless (i) either (A) the Company or such Subsidiary shall be
the survivor of such merger or consolidation or (B) the surviving Person (if not
the Company or such Subsidiary) is a corporation, partnership or trust organized
and existing under the laws of the United States, any state thereof or the
District of Columbia and such surviving Person shall expressly assume all the
obligations of the Company or such Subsidiary, as the case may be, under the
Notes and the Indenture; (ii) immediately after giving effect to such
transaction (on a pro forma basis, including any Indebtedness incurred or
anticipated to be incurred in connection with such transaction), the Company or
the surviving Person is able to incur at least $1.00 of additional Indebtedness
under the Annualized Cash Flow Ratio test in compliance with the "Limitation on
Indebtedness" covenant; (iii) immediately before and immediately after giving
effect to such transaction (including any Indebtedness incurred or anticipated
to be incurred in connection with the transaction), no Default or Event of
Default shall have occurred and be continuing; and (iv) the Company has
delivered to the Trustee an Officers' Certificate and Opinion of Counsel, each
stating that such consolidation, merger or transfer complies with the Indenture,
that the surviving Person agrees to be bound thereby
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and that all conditions precedent in the Indenture relating to such transaction
have been satisfied. For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties and assets of one or
more Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company. The foregoing will not be deemed to apply to Permitted Investments
or Investments permitted under the covenant "Limitation on Restricted Payments"
above.
The Indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, the surviving entity shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture and the Notes with the same effect as if such surviving entity had
been named as such; provided that solely for purposes of computing amounts
described in clause (c) of the first paragraph of the covenant "Limitation on
Restricted Payments" above, any such surviving entity to the Company shall only
be deemed to have succeeded to and be substituted for the Company with respect
to periods subsequent to the effective time of such merger, consolidation,
combination or transfer of assets.
Transactions with Affiliates. The Indenture provides that the Company and
its Subsidiaries may not sell, lease, transfer or otherwise dispose of any of
their respective properties or assets to, or purchase any property or assets
from, or enter into any contract, agreement, understanding, loan, advance or
Guarantee with, or for the benefit of, any Affiliate of the Company or any legal
or beneficial owner of 5% or more of any class of Capital Stock of the Company
or with an Affiliate of any such owner (each of the foregoing, an "Affiliate
Transaction"), unless: (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such Subsidiary
with an unrelated Person; and (ii) the Company delivers to the Trustee: (x) with
respect to any Affiliate Transaction involving aggregate payments in excess of
$250,000 but less than $3.0 million, a resolution of the Board of Directors of
the Company set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above, (y) with respect to any Affiliate
Transaction involving aggregate payments equal to or greater than $3.0 million
but less than $20.0 million, a resolution of the Board of Directors of the
Company set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested directors of the Board of
Directors of the Company, and (z) with respect to any Affiliate Transaction
involving aggregate payments equal to or greater than $20.0 million, a
resolution of the Board of Directors of the Company set forth in an Officers'
Certificate and certifying to the matters referred to in (i) above and a written
opinion as to the fairness to the Company or such Subsidiary from a financial
point of view issued by an independent investment banking firm of national
standing with respect to any such Affiliate Transaction. Notwithstanding the
foregoing, the following shall not be deemed Affiliate Transactions: (a) any
employment or option agreement entered into by the Company or any of its
Subsidiaries in the ordinary course of business that is approved by the
Compensation Committee of the Board of Directors of the Company; (b) the payment
by the Company of annual fees to Unity Hunt Resources, Inc. for the provision of
Mr. Holland's services to the Company in an amount equal to Mr. Holland's annual
base compensation from the Company, which amount is approved by the Compensation
Committee of the Board of Directors of the Company; (c) transactions between or
among the Company and one or more of its Wholly Owned Subsidiaries provided that
such transactions are not otherwise prohibited; (d) Restricted Payments,
Permitted Payments and Permitted Investments; (e) Affiliate Transactions in
existence on the Issue Date, including, without limitation, channel leases and
options between the Company and any of its Subsidiaries, on the one hand, and
Messrs. Webb and Wheeler and their respective Affiliates, on the other hand, and
the lease with respect to the Company's operating offices in Durant, Oklahoma
and agreements between the Company, on the one hand, and U.S. Wireless and/or
USWS, on the other hand, as in effect on the Issue Date; (f) channel leases and
options with Affiliates entered into after the Issue Date; provided such leases
are no less beneficial to the Company or the applicable Subsidiary than any such
leases in effect on the Issue Date, meet the standard described in clause (i)
above and are approved by a majority of the disinterested directors of the Board
of Directors of the Company; (g) amendments to or renewals of the agreements and
leases referred to in clauses (d) and (e) above; provided that any such
amendments or renewals are no less beneficial to the Company or the applicable
Subsidiary than the agreement or lease being amended or renewed, meet the
standard described in clause (i) above and are approved by a majority of the
disinterested directors of the Board of Directors of the Company; (h) payment of
reasonable and customary
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compensation for director and Board of Director observer fees, meeting expenses,
insurance premiums and indemnities to the extent permitted by law; and (i) the
issuance of stock options (and shares of stock upon the exercise thereof)
pursuant to any stock option plan approved by the Board of Directors and
stockholders of the Company and loans or advances to employees for relocation or
travel related expenses consistent with ordinary past practices.
Conduct of Business. The Indenture provides that the Company and its
Subsidiaries may not, directly or indirectly, engage in any business other than
the Wireless Cable Business; provided that in the event a Change of Control
occurs in which a Strategic Equity Investor gains control of the Company this
covenant shall no longer be of force or effect.
Provision of Information. The Company (at its own expense) shall file with
the Trustee within 15 days after it files them with the Commission copies of the
quarterly and annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may by
rules and regulations prescribe) to be filed pursuant to Section 13 or 15(d) of
the Exchange Act (without regard to whether the Company is subject to the
requirements of such Section 13 or 15(d) of the Exchange Act) ("SEC Reports").
Upon qualification of the Indenture under the Trust Indenture Act, the Company
shall also comply with the provisions of Trust Indenture Act Section 314(a). In
the event that the Company is not required or shall cease to be required to file
SEC Reports pursuant to the Exchange Act, the Company shall nevertheless
continue to file such reports with the Commission and the Trustee. If the
Trustee (at the Company's request and expense) is to mail the foregoing
information to the Holders, the Company shall supply such information to the
Trustee at least five days prior thereto. The Company shall provide to any
Holder any information concerning the Company reasonably requested by such
Holder (including financial statements) necessary in order to permit such Holder
to sell or transfer Notes in compliance with Rule 144A promulgated under the
Securities Act.
Security
The Notes are secured, pending disbursement pursuant to the Escrow and
Disbursement Agreement, by a pledge of the Escrow Account, which initially
contained approximately $1.9 million of the net proceeds from the sale of the
Old Notes (the "Collateral"), representing funds sufficient to pay interest on
the Notes from April 15, 1996 through April 14, 1997.
The Company entered into the Escrow and Disbursement Agreement providing
for the grant by the Company to the Trustee for the benefit of the Holders of
security interests in the Collateral. All such security interests will secure
the payment and performance when due of all of the Obligations of the Company
under the Indenture with respect to the Notes and under such Notes, as provided
in the Escrow and Disbursement Agreement. The Liens created by the Escrow and
Disbursement Agreement will be first priority security interests in the
Collateral. The ability of Holders to realize upon any such funds or securities
may be subject to certain bankruptcy law limitations in the event of the
bankruptcy of the Company.
Funds will be disbursed from the Escrow Account only to pay interest on the
Notes and, upon certain repurchases or redemptions of the Notes, to pay
principal of and premium, if any, thereon. Pending such disbursements, all
funds contained in the Escrow Account will be invested in Marketable Securities.
Upon the acceleration of the maturity of the Notes or the failure to pay
principal at maturity or upon certain redemptions and repurchases of the Notes,
the Escrow and Disbursement Agreement provides for the foreclosure by the
Trustee upon the net proceeds of the Escrow Account. Under the terms of the
Indenture, the proceeds of the Escrow Account shall be applied, first, to
amounts owing to the Trustee in respect of fees and expenses of the Trustee and
second, to the Obligations under the Notes and the Indenture.
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Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default:
(i) the failure to pay interest on any Notes when the same becomes due
and payable and such default continues for a period of 30 days;
(ii) (a) the failure to pay the principal or premium when due on the
Notes at maturity, upon redemption, upon acceleration or otherwise or (b)
the failure to redeem or purchase the Notes when required pursuant to the
Indenture and the Notes (including, without limitation, failure to make
payments when due pursuant to a Change of Control Offer or Net Proceeds
Offer);
(iii) failure by the Company to comply with the provisions described
under "Offer to Purchase Upon Change of Control" or "Certain Covenants --
Limitation on Asset Sales," or the failure by the Company to comply with
the first sentence of the provision described under "Disbursement of Funds
-- Escrow Account;"
(iv) failure to comply with the covenant described under "Certain
Covenants -- Merger, Consolidation or Sale of Assets;"
(v) failure by the Company for 30 days after notice from the Trustee
or the Holders of at least 25% in principal amount of the Notes then
outstanding to comply with its agreements in the Indenture or the Notes or
in the Escrow and Disbursement Agreement (other than those referred to in
(i), (ii), (iii) or (iv) above);
(vi) a default in the payment of principal at final maturity under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness of the Company or
any of its Subsidiaries (or the payment of which is Guaranteed now or
hereafter by the Company or any of its Subsidiaries), whether such
Indebtedness or Guarantee now exists or shall be created hereafter, in a
principal amount of at least $3.0 million (after the expiration of any
applicable grace period with respect thereto);
(vii) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness (including any interest thereon) of the Company
or its Subsidiaries (or the payment of which is Guaranteed now or hereafter
by the Company or any of its Subsidiaries), whether such Indebtedness or
Guarantee now exists or shall be created hereafter, if (i) as a result of
such event of default the maturity of such Indebtedness has been
accelerated prior to its stated maturity and (ii) the principal amount of
such Indebtedness, together with the principal amount of any other
Indebtedness of the Company and its Subsidiaries the maturity of which has
been accelerated, aggregates $3.0 million or more;
(viii) one or more final judgments rendered against the Company or any
of its Subsidiaries (other than any judgment as to which a reputable
insurance company has accepted full liability in writing) aggregating in
excess of $3.0 million which judgments are not stayed within 60 days after
their entry;
(ix) certain events of bankruptcy or insolvency with respect to the
Company or any of its Subsidiaries; or
(x) repudiation by the Company of its obligations under the Escrow and
Disbursement Agreement for any reason.
If any Event of Default occurs and is continuing under the Indenture, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately by
notice in writing to the Company and the Trustee specifying the respective Event
of Default and that it is a "notice of acceleration" (the "Acceleration
Notice"). Upon such declaration, the principal of, and premium, if any,
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and interest on the Notes shall become due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Company or any of
its Subsidiaries, the foregoing amount shall ipso facto become due and payable
without further action or notice. No premium is payable upon acceleration of
the Notes except that in the case of an Event of Default that is the result of
an action or inaction by the Company or any of its Subsidiaries intended to
avoid premiums related to redemptions of the Notes contained in the Indenture or
the Notes, the amount declared due and payable will include the premium that
would have been applicable on a voluntary prepayment of the Notes or, if
voluntary prepayment is not then permitted, the premium set forth in the
Indenture.
No Holder has the right to institute any proceeding with respect to the
Indenture or any remedy thereunder, unless the Holders of at least 25% in
principal amount of the outstanding Notes have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as Trustee,
the Trustee has failed to institute such proceeding within 15 days after receipt
of such notice, and the Trustee has not within such 15-day period received
directions inconsistent with such written request by Holders of a majority in
principal amount of the outstanding Notes. Such limitations do not apply,
however, to suits instituted by a Holder for the enforcement of the payment of
the principal of, premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. In case an Event of
Default shall occur and be continuing, the Trustee will exercise such of its
rights and powers under the Indenture, and use the same degree of care and skill
in their exercise, as a prudent Person would exercise or use under the
circumstances in the conduct of his or her own affairs. Subject to certain
provisions of the Indenture, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any of the
Holders unless they have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request. The Trustee may withhold from Holders notice of
any continuing default (except a default in payment) if it determines in good
faith that the withholding of such notice is in the interest of such Holders.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration, (iii) to the extent the payment
of such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (viii) of the description above
of Events of Default, the Trustee shall have received an Officer's Certificate
and an Opinion of Counsel that such Event of Default has been cured or waived.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding, by notice to the Trustee, may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture, except a continuing Default or Event of Default in the
payment of interest or premium on, or the principal of, the Notes, or in respect
of a covenant or a provision which cannot be amended or modified without the
consent of all Holders.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees, Incorporators and
Stockholders
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes or the Indenture or the Escrow and Disbursement Agreement or for any claim
based on, in respect of or by reason of such obligations or their creation.
Each Holder of Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the
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consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the Federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the outstanding
Notes, except for:
(i) the rights of Holders of outstanding Notes to receive solely from
trust funds payments in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due, or on the redemption
date, as the case may be;
(ii) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost
or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(iii) the rights, powers, trust, duties and immunities of the Trustee,
and the Company's obligations in connection therewith; and
(iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including nonpayment, bankruptcy, receivership,
reorganization and insolvency events) described above under "Events of Default"
will no longer constitute Events of Default with respect to the Notes. In the
event of Legal Defeasance or Covenant Defeasance, the security interests
described above under "Security" will be released.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust
for the benefit of the Holders of the Notes, cash in U.S. dollars, non-
callable U.S. Government Securities or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest on the outstanding Notes, on the stated maturity or on
the applicable optional redemption date, as the case may be, without
reinvestment of the deposited U.S. Government Securities and other
deposited monies;
(b) in the case of Legal Defeasance, the Company must deliver to the
Trustee an Opinion of Counsel in the United States reasonably satisfactory
to the Trustee confirming that (x) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (y) since
the date of the Indenture, there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for Federal
income tax purposes as a result of such legal defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance had
not occurred;
(c) in the case of Covenant Defeasance, the Company must deliver to
the Trustee an Opinion of Counsel in the United States reasonably
satisfactory to the Trustee confirming that the Holders of the outstanding
Notes will not recognize income, gain or loss for Federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
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(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default with respect to the Indenture resulting from the incurrence of
Indebtedness, all or a portion of which will be used to defease the Notes
concurrently with such incurrence) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 123rd day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, the Indenture or any
other material agreement or instrument to which the Company is a party or
by which the Company is bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Notes over the other creditors of the
Company or with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with;
(h) the Company delivers to the Trustee an Opinion of Counsel to the
effect that (i) the trust resulting from the deposit does not constitute,
or is qualified as, a regulated investment company under the Investment
Company Act of 1940, (ii) the Holders have a valid first priority perfected
security interest in the trust funds, and (iii) after passage of 123 days
following the deposit (or, with respect to any trust funds for the account
of any Holder who may be deemed to be an "insider" for purposes of the
Bankruptcy Code, after one year following the deposit), the trust funds
will not be subject to the effect of Section 547 of the Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law in a case commenced by
or against the Company under either such statute, and either (A) the trust
funds will no longer remain the property of the Company (and therefore,
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally) or
(B) if a court were to rule under any such law in any case or proceeding
that the trust funds remained in the possession of the Trustee prior to
such court ruling to the extent not paid to Holders, the Trustee will hold,
for the benefit of the Holders, a valid first priority perfected security
interest in such trust funds that is not avoidable in bankruptcy or
otherwise except for the effect of Section 552(b) of the Bankruptcy Code on
interest on the trust funds accruing after the commencement of a case under
such statute and (y) the Holders will be entitled to receive adequate
protection of their interests in such trust funds if such trust funds are
used in such case or proceeding; and
(i) certain other customary conditions precedent are satisfied.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable or will become due and payable within
one year and the Company has irrevocably deposited or caused to be deposited
with the Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest on the Notes to
the date of deposit together with irrevocable instructions from the Company
directing the Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be; (ii) the Company has paid all other sums payable
under the Indenture by the Company; and (iii) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel stating that all
conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with.
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Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Trustee or Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company is not required to transfer or exchange any Note selected for
redemption. Also, the Company is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
Modification of Indenture or Notes
From time to time, the Company and the Trustee, without the consent of the
Holders of the Notes, may amend the Indenture for certain specified purposes,
including curing ambiguities, defects or inconsistencies, so long as such change
does not adversely affect the rights of any of the Holders. The Trustee will be
entitled to rely on such evidence as it deems appropriate, including, without
limitation, solely on an Opinion of Counsel in executing any supplemental
indenture. Other modifications and amendments of the Indenture may be made with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes issued under the Indenture, except that, without the consent
of each Holder of the Notes affected thereby, no amendment may:
(i) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(ii) reduce the principal of or change or have the effect of changing
the fixed maturity of any Note or change the date on which any Note may be
subject to redemption or repurchase, or reduce the redemption or repurchase
price thereof;
(iii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Notes;
(iv) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment default
relating solely to the principal or interest that has become due solely
because of the acceleration);
(v) make any Note payable in money other than that stated in the
Notes;
(vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or interest on the Notes on or after the due date
thereof or to bring suit to enforce such payment;
(vii) waive a redemption payment with respect to any Note (other than
a payment required by one of the covenants described above under the
captions "Offer to Purchase Upon Change of Control" and "Certain Covenants
-- Limitation on Asset Sales");
(viii) amend, change or modify in any material respect the obligation
of the Company to make and consummate a Change of Control Offer in the
event of a Change of Control or make and consummate a Net Proceeds Offer
with respect to any Asset Sale that has been consummated or modify any of
the provisions or definitions with respect thereto;
(ix) make any change in the foregoing amendment and waiver provisions;
or
(x) directly or indirectly release Liens on all or substantially all
of the Collateral except as permitted by the Escrow and Disbursement
Agreement.
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Governing Law
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
Trustee
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. The Indenture will contain certain limitations on the rights
of the Trustee, should the Trustee become a creditor of the Company, to obtain
payment of claims in certain cases, or to realize on certain property received
in respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions with the Company; however, if the
Trustee acquires any conflicting interest, it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue as Trustee or
resign.
Certain Definitions
Set forth below are certain defined terms used herein and in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Acquired Debt" means, with respect to any specified Person, Indebtedness
of any other Person existing at the time such other Person merged with or into
or became a Subsidiary of such specified Person or Indebtedness incurred by such
Person in connection with the acquisition of assets, including, without
limitation, Indebtedness incurred or assumed in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person or the acquisition of such assets, as the
case may be.
"Affiliate" of any specified Person means (i) any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified Person or (ii) any other Person who is a director or
officer (A) of such specified Person, (B) of any Subsidiary of such specified
Person or (C) of any Person described in clause (i) above or (iii) any Person in
which such Person has, directly or indirectly, a 5% or greater voting or
economic interest or the power to control. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause the
direction of the management or policies of such Person whether through the
ownership of voting securities or by contract or otherwise and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Annualized Cash Flow Ratio" with respect to any Person means the ratio of
the Consolidated Indebtedness of such Person to the Annualized EBITDA of such
Person for the relevant period.
"Annualized EBITDA" as of any date of determination means the aggregate
amount of EBITDA for the most recent fiscal quarter for which financial
information has been filed with the Commission multiplied by four; provided,
however, that (i) if the Company or any Subsidiary of the Company has incurred
any Indebtedness (including Acquired Debt) that remains outstanding on the date
of such determination or if the transaction giving rise to the need to calculate
the Annualized EBITDA is an incurrence of Indebtedness (including Acquired
Debt), EBITDA for such fiscal quarter will be calculated after giving effect on
a pro forma basis to (a) such Indebtedness, as if such Indebtedness had been
incurred on the first day of such fiscal quarter and (b) the discharge of any
other Indebtedness repaid, repurchased, defeased or otherwise discharged with
the proceeds of such new Indebtedness as if such discharge had occurred on the
first day of such fiscal quarter, (ii) if since the beginning of such fiscal
quarter the Company or any Subsidiary of the Company has made any Asset Sale,
EBITDA for such fiscal quarter will be (a) reduced by an amount equal to EBITDA
(if positive) directly attributable to the assets which are the subject of such
Asset Sale for such fiscal quarter or (b) increased by an amount equal to EBITDA
(if negative) directly attributable thereto for such fiscal quarter and (iii) if
since the beginning of such period the Company or any Subsidiary of the Company
(by merger or otherwise) has made an Investment in any Person which becomes a
Subsidiary of the Company as a result of such Investment or an Investment in an
existing Subsidiary with the result
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that such Investment will result in the consolidation of a greater percentage of
such Subsidiary's Consolidated Net Income (other than a transfer of operating
assets from the Company or one Subsidiary to another Subsidiary) or has made an
acquisition of assets (other than from the Company or another Subsidiary of the
Company), including any acquisition of assets occurring in connection with a
transaction causing a calculation of Annualized EBITDA to be made hereunder,
which constitutes all or substantially all of an operating unit of a business,
EBITDA for such fiscal quarter will be calculated after giving pro forma effect
thereto (including the incurrence of any Indebtedness (including Acquired Debt))
as if such Investment or acquisition occurred on the first day of such fiscal
quarter. For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets or an Investment, the pro forma calculations
will be determined in good faith by a responsible financial or accounting
officer of the Company; provided, however, that such officer shall apply in his
calculations the historical EBITDA associated with such assets for the most
recent fiscal quarter for which financial information is available. If any
Indebtedness (including Acquired Debt) bears a floating rate of interest and is
being given pro forma effect, the interest on such Indebtedness will be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period.
"Asset Sale" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) of shares of Capital
Stock of a Subsidiary (other than directors' qualifying shares), property or
other assets (each referred to for the purposes of this definition as a
"disposition") by the Company or any of its Subsidiaries, including any
disposition by means of a merger, consolidation or similar transaction, other
than (i) a disposition of property or assets at Fair Market Value in the
ordinary course of business, (ii) a disposition that constitutes a Restricted
Payment and (iii) a disposition by a Subsidiary to the Company or by the Company
or a Subsidiary to a Wholly-Owned Subsidiary.
"AWS Transaction" means the acquisition by the Company of the capital stock
of American Wireless Cable Systems, Inc., a Delaware corporation, and the
acquisition by the Company of the assets of Wireless Cable TV Associates #38 and
of Fort Worth Wireless Cable TV Associates for consideration comprised of Equity
Interests of the Company.
"Bankruptcy Code" means Title 11, United States Code, as amended.
"Bank Indebtedness" means loans made by banks, trust companies and other
institutions principally engaged in the business of lending money to businesses
to the Company or a Subsidiary under a credit facility, loan agreement or
similar agreement.
"Beneficial Owner" means a beneficial owner as defined in Rules 13d-3 and
13d-5 under the Exchange Act (or any successor rules), including the provision
of such Rules that a Person shall be deemed to have beneficial ownership of all
securities that such Person has a right to acquire within 60 days; provided that
a Person will not be deemed a beneficial owner of, or to own beneficially, any
securities if such beneficial ownership (i) arises solely as a result of a
revocable proxy delivered in response to a proxy or consent solicitation made
pursuant to, and in accordance with, the Exchange Act and (ii) is not also then
reportable on Schedule 13D or Schedule 13G (or any successor schedule) under the
Exchange Act.
"Business Day" means any day that is not a Saturday, Sunday or a day on
which banking institutions are required to close in the State of New York or
Texas.
"CableMaxx Transaction" means the acquisition by the Company of the capital
stock of CableMaxx, Inc., a Delaware corporation ("CableMaxx"), for
consideration comprised of Equity Interests of the Company or the acquisition by
the Company of the assets of CableMaxx related to the Amarillo, Athens, Lubbock
and Sherman/Denison, Texas markets for either $2.4 million or the fair market
value of such assets in cash.
"Call Markets" means Fanning Springs, Florida; Leesburg, Florida; and Lake
City, Florida.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on the balance sheet in accordance
with GAAP.
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"Capital Stock" means any and all shares, interests, participations,
warrants, options, rights or other equivalents of or interests in (however
designated and whether voting or non-voting) corporate stock of a corporation
and any and all equivalent ownership interests in a Person (other than a
corporation), in each case whether outstanding on the date of issuance of the
Notes or thereafter issued, including any Preferred Stock.
"Change of Control" means the occurrence of any of the following events:
(i) any Person (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than the Permitted Holders, is or becomes the
Beneficial Owner, directly or indirectly, of (a) more than 35% of the total
Voting Stock or Equity Market Capitalization of the Company or (b) a
greater percentage of the voting power of the total Voting Stock of the
Company than that represented by the voting power of the Voting Stock of
the Company then beneficially owned, in the aggregate, by the Permitted
Holders; or
(ii) the Company consolidates with, or merges with or into, another
Person or sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which immediately after the consummation
thereof the stockholders of the Company immediately prior to the date of
such transaction cease to own, directly or indirectly, a majority of the
Voting Stock of the surviving or transferee corporation, or Persons owning
a majority of the Voting Stock of the Company immediately prior to such
transaction cease to own, directly or indirectly, a majority of the Voting
Stock of the surviving or transferee corporation; or
(iii) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the stockholders of the Company was
approved by a vote of 662/3% of the directors then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in
office; or
(iv) the Company adopts a plan of liquidation or dissolution.
"Closing Price" on any Trading Day with respect to the per share price of
any shares of Capital Stock means the last reported sale price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the Nasdaq
National Market or, if such shares are not listed or admitted to trading on any
national securities exchange or quoted on such automated quotation system, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm that is selected from time
to time by the Company for that purpose and is reasonably acceptable to the
Trustee.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Income Tax Expense" for any Person for any period means,
without duplication, the aggregate amount of net taxes based on income or
profits for such period of the operations of such Person and its consolidated
Subsidiaries with respect to such period in accordance with GAAP.
"Consolidated Indebtedness" means, with respect to any Person, as of any
date of determination, the aggregate amount of Indebtedness of such Person and
its Subsidiaries as of such date determined on a consolidated basis in
accordance with GAAP.
"Consolidated Interest Expense" means, for any Person, for any period, the
aggregate of the following for such Person for such period determined on a
consolidated basis in accordance with GAAP: the amount of interest
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in respect of Indebtedness (including amortization of original issue discount
and non-cash interest payments on any Indebtedness and the interest portion of
any deferred payment obligation and after taking into account the effect of
elections made under any Interest Rate Agreement, however denominated, with
respect to such Indebtedness), and the interest component of any Capital Lease
Obligation paid, in each case whether accrued or scheduled to be paid or accrued
by such Person during such period to the extent such amounts were deducted in
computing Consolidated Net Income, determined on a consolidated basis in
accordance with GAAP, provided that each of the foregoing shall only be included
in the calculation of Consolidated Interest Expense to the extent such amounts
reduce Consolidated Net Income for such period. For purposes of this
definition, interest on a Capital Lease Obligation shall be deemed to accrue at
an interest rate reasonably determined by such Person to be the rate of interest
implicit in such Capital Lease Obligation in accordance with GAAP consistently
applied.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its consolidated Subsidiaries
for such period determined in accordance with GAAP, provided that there shall be
excluded (i) the Net Income of any Person (other than a consolidated Subsidiary)
in which such Person or any of its consolidated Subsidiaries has a joint
interest with a third party, including, without limitation, interests accounted
for on the equity method, except to the extent of the amount of dividends or
distributions actually paid to such Person or its consolidated Subsidiary during
such period; (ii) except to the extent includable pursuant to the foregoing
clause (i), the Net Income of any Person accrued prior to the date it becomes a
Subsidiary of such Person or is merged into or consolidated with such Person or
any of its Subsidiaries or that Person's assets are acquired by such Person or
any of its Subsidiaries; (iii) the Net Income (if positive), or any portion
thereof, of any Subsidiary of such Person to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary to such Person
or to any other Subsidiary of such Net Income is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary, except that (A) the Company's equity in the Net Income of any such
Subsidiary for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by such Subsidiary during
such period to the Company or another Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to a
Subsidiary, to the limitation contained in this clause) and (B) the Company's
equity in a net loss of any such Subsidiary for such period shall be included in
determining such Consolidated Net Income; (iv) without duplication, any gains or
losses attributable to Asset Sales; (v) Net Income (if positive), arising from
the adoption of changes in accounting policy to comply with GAAP or voluntarily
by the Company with the consent of its independent auditors that so qualify
under Regulation S-X of the Securities Act; (vi) Net Income arising for periods
prior to the date of a transaction in connection with the accounting treatment
for a merger, combination or consolidation under the pooling of interests
method; and (vii) foreign currency translation gains and losses.
"Contributed Markets" means Bedias/Huntsville, Texas; Freeport, Texas;
Milano, Texas; Baton Rouge, Louisiana; Ferriday, Louisiana; Holly Ridge,
Louisiana; Jena, Louisiana; Leesville, Louisiana; Monroe, Louisiana;
Natchitoches, Louisiana; Ruston, Louisiana; Alberta/Salem, Alabama; Ariton,
Alabama; Bankston, Alabama; Bucks, Alabama; Six Mile, Alabama; Society Hill,
Alabama; Tharpton, Alabama; Village Springs, Alabama; Charing, Georgia;
Groveland, Georgia; Hoggards Mill, Georgia; Jeffersonville, Georgia; Mathews,
Georgia; Tarboro, Georgia; Valdosta, Georgia; Ocala, Florida; and Tallahassee,
Florida.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date on which the Notes mature; provided, however, that any Capital Stock that
would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require the Company to repurchase or redeem such
Capital Stock upon the occurrence of a Change of Control occurring prior to the
final maturity of the Notes shall not constitute Disqualified Stock if (i) the
change of control provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the provisions applicable to
the Notes contained in the covenant described under "Offer to Purchase Upon
Change of Control" and (ii) such Capital Stock specifically provides that the
Company will not repurchase or redeem any such stock pursuant
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to such provisions prior to the Company's repurchase of such Notes as are
required to be repurchased pursuant to the covenant described under "Offer to
Purchase Upon Change of Control."
"EBITDA" for any period means the Consolidated Net Income for such period
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) Consolidated Income Tax Expense, (ii) Consolidated Interest Expense,
(iii) depreciation and amortization expense determined on a consolidated basis
for such Person and its consolidated Subsidiaries in accordance with GAAP for
such period and (iv) all other non-cash charges (other than noncash charges
which require an accrual of or reserve for cash charges in future periods), and
less any non-cash items which have the effect of increasing Consolidated Net
Income for such period.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A" (or higher) according to S&P or
Moody's at the time as of which any investment or rollover therein is made.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock or that are measured by the value of Capital
Stock (but excluding any debt security that is convertible into or exchangeable
for Capital Stock).
"Equity Market Capitalization" of any Person means, as of any day of
determination, the product of (a) the aggregate number of outstanding shares of
Common Stock of such Person on such day (which shall not include any options or
warrants on, or securities convertible or exchangeable into, shares of Common
Stock of such Person) and (b) the average Closing Price of such Common Stock
over the 20 consecutive Trading Days immediately preceding such day. If no such
Closing Price exists with respect to shares of any such class, the value of such
shares for purposes of clause (ii) of the preceding sentence shall be determined
by an independent investment banking firm of national repute.
"Escrow Account" means an escrow account for the deposit of approximately
$1.9 million of the net proceeds from the sale of the Old Notes under the Escrow
and Disbursement Agreement.
"Escrow Agent" means Bankers Trust Company, as Escrow Agent under the
Escrow and Disbursement Agreement, or any successor thereto appointed pursuant
to such agreement.
"Escrow and Disbursement Agreement" means the Escrow and Disbursement
Agreement, dated as of the date of the Indenture, by and among the Escrow Agent,
the Trustee and the Company, governing the disbursement of funds from the Escrow
Account, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended (or
any successor act), and the rules and regulations promulgated thereunder.
"Existing Indebtedness" means the Notes and any other Indebtedness of the
Company and its Subsidiaries in existence on the Issue Date.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of
determination.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the purchase
or
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payment of) such Indebtedness or other obligation or such other Person (whether
arising by virtue of partnership arrangements, or by agreement to keepwell, to
purchase assets, goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise) or (ii) entered into the purposes
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposits in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The amount of any Guarantee shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee is made (unless such Guarantee shall be
expressly limited to a lesser amount, in which case such lesser amount shall
apply) or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good faith.
"Indebtedness" of any Person means, without duplication: (i) the principal
of and premium (if any) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all Capital Lease Obligations of such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of such Person
for the reimbursement of any obligor or any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with respect to
letters of credit securing obligations (other than obligations described in (i)
through (iii) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third Business
Day following receipt by such Person of a demand for reimbursement following
payment on the letter of credit); (v) the amount of all obligations of such
Person with respect to the redemption, repayment or other repurchase of any
Disqualified Stock (the amount of Indebtedness represented by any Disqualified
Stock will be the liquidation preference, plus accrued and unpaid dividends);
(vi) to the extent not otherwise included, Interest Rate Agreements; (vii) all
obligations of the type referred to in clauses (i) through (vi) of other Persons
and all dividends of other Persons for the payment for which, in either case,
such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee; and (viii) all
obligations of the type referred to in clauses (i) through (vii) of other
Persons secured by any Lien on any property or asset of such Person (whether or
not such obligation is assumed by such Person); provided that if recourse with
respect to such Indebtedness is limited to such asset, the amount of such
Indebtedness shall be deemed to be the lesser of the value of such property or
assets or the amount of the obligation so secured.
"Interest Rate Agreement" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Investments" means, with respect to any Person, (i) all investments by
such Person in other Persons (including Affiliates) in the forms of loans,
Guarantees, advances or capital contributions (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities of any other Person and all other items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP and (ii) all acquisitions by such Person of assets to be
used in the Wireless Cable Business (other than any such acquisitions of
equipment made in the ordinary course of such Person's business and other than
any acquisition or lease (and any deposit required to be made in connection
therewith) of additional channel rights on or after the Issue Date in any
wireless cable market listed in the offering memorandum relating to the issuance
of the Units or any wireless cable market or "Basic Trading Area" (as defined by
Rand McNally) in which the Company and its Subsidiaries (A) as of the date of
the Indenture, have channel rights, whether by way of license, lease with a
channel license holder, lease with a channel license applicant, lease with a
qualified, non-profit educational organization that plans to apply for a channel
license or option to acquire any of the foregoing, or (B) as of the date of such
acquisition or lease, have rights with respect to at least eight wireless cable
channels, whether by way of license, lease with a channel license holder, lease
with a channel license applicant, lease with a qualified, non-profit educational
organization that plans to apply for a channel license or option to acquire any
of the foregoing; provided, however,
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that until the date on which the ratio of annualized EBITDA to Consolidated
Interest Expense equals or exceeds 1.75 to 1.00, the aggregate amount of such
acquisitions, and leases (and deposits) shall not exceed $12.5 million.
"Issue Date" means the date on which Notes are first authenticated and
issued.
"Lien" means, with respect to any asset, any mortgage, deed of trust, lien,
pledge, charge, security interest, lease, easement, restriction, covenant,
right-of-way, charge, encumbrance or other similar lien of any kind in respect
of such asset, whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"Marketable Securities" means (i) U.S. Government Securities maturing not
more than two years after the date of acquisition; (ii) any certificate of
deposit maturing not more than 270 days after the date of acquisition issued by,
or time deposit of, an Eligible Institution; (iii) commercial paper maturing not
more than 270 days after the date of acquisition issued by a corporation (other
than an Affiliate of the Company) with a rating, at the time as of which any
investment therein is made, of "A-1" (or higher) according to S&P or "P-1" (or
higher) according to Moody's; (iv) any banker's acceptances or money market
deposit accounts issued or offered by an Eligible Institution; and (v) any fund
investing exclusively in investments of the types described in clauses (i)
through (iv) above.
"Moody's" means Moody's Investors Service Inc. and its successors.
"Net Cash Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (excluding,
without limitation, any consideration received in the form of assumption by the
acquiring Person of Indebtedness or other obligations relating to such property
or assets or received in any other noncash form), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees and sales commissions), any relocation expenses
incurred as a result thereof, Federal, state, provincial, foreign and local
taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), title and
recording tax expenses, and in each case net of appropriate amounts to be
provided by the Company or its Subsidiaries as a reserve, in accordance with
GAAP, against any liabilities associated with such assets and retained by the
Company or any Subsidiary after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities and liabilities related to
environmental matters and the after-tax cost of any indemnification payments
(fixed or contingent) attributable to the seller's indemnities to the purchaser
undertaken by the Company or any of its Subsidiaries in connection with such
Asset Sale (but excluding any payments, which by the terms of the indemnities
will not, under any circumstances, be made during the term of the Notes) and net
of all payments made on any Indebtedness which is secured by any assets subject
to such Asset Sale, in accordance with the terms of any Lien upon or other
security agreement of any kind with respect to such assets, or which must by its
terms, or in order to obtain a release of such Lien or a necessary consent to
such Asset Sale, or by applicable law be repaid out of the proceeds from such
Asset Sale, and net of all distributions and other payments required to be made
to minority interests holders in Subsidiaries or joint ventures as a result of
such Asset Sale. Net Cash Proceeds shall exclude any non-cash proceeds received
from any Asset Sale, but shall include such proceeds when and as converted by
the Company or any Subsidiary to cash.
"Net Income" of any person for any period means the net income (loss) of
such Person for such period, determined in accordance with GAAP, except that
extraordinary gains and losses as determined in accordance with GAAP shall be
excluded.
"Net Proceeds" means, with respect to any issuance or sale of Equity
Interests, the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts and
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
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"Opinion of Counsel" means an opinion in writing signed by legal counsel
reasonably satisfactory to the Trustee.
"Permitted Designee" means (i) a spouse, child or grandchild (whether such
relationship arises from birth, adoption or through marriage) of a Permitted
Holder, (ii) any trust, corporation, partnership or other entity, a majority in
interest of the beneficiaries, stockholders, partners or owners (direct or
beneficial) of which are Permitted Holders and/or Persons of the type referred
to in clause (i) above or (iii) any Person so long as a Permitted Holder owns at
least 50% of the Voting Stock of such Person.
"Permitted Holders" means Hunt Capital Group L.L.C. and its Affiliates,
David E. Webb and L. Allen Wheeler and their Permitted Designees.
"Permitted Investment" means (a) any Investments by the Company in a
Subsidiary (provided that, in the case of Wholly-Owned Subsidiaries, if such
Wholly-Owned Subsidiary ceases to be a Wholly-Owned Subsidiary (except by reason
of the sale by the Company or its Wholly-Owned Subsidiary of the Equity
Interests therein), then any Investment in such Subsidiary will be deemed to be
a Restricted Payment at the time of such event determined in accordance with the
"Limitation on Restricted Payments" covenant); and (b) any Investments in
Marketable Securities.
"Permitted Liens" means:
(i) Liens on (x) the Escrow Account and all funds and securities
therein securing only the Notes equally and ratably or (y) other assets of
the Company or any Subsidiary thereof securing only the Notes equally and
ratably;
(ii) Liens to secure Bank Indebtedness incurred by the Company or the
Subsidiaries in compliance with the "Limitation on Indebtedness" covenant
and Guarantees incurred by the Subsidiaries in compliance with clause (iv)
of the second paragraph of "Certain Covenants--Limitation on Indebtedness"
executed in connection therewith;
(iii) Liens on the property of the Company or its Subsidiaries created
solely for the purpose of securing purchase money obligations incurred in
compliance with the Indenture; provided that (a) such property so acquired
is for use in lines of business related to the Company's or its
Subsidiaries' business as it exists immediately prior to the issuance of
the related Indebtedness, (b) no such Lien shall extend to or cover other
property or assets of the Company and its Subsidiaries other than the
respective property so acquired and (c) the principal amount of
Indebtedness secured by any such Lien shall at no time exceed the original
purchase price of such property or assets;
(iv) Liens on the property or assets of a Subsidiary acquired after
the Issue Date or on property or assets acquired in an asset purchase
transaction with a Person that is not an Affiliate created solely to secure
the obligations that financed the acquisition of such Subsidiary or such
property and assets; provided that (a) no such Lien shall extend to or
cover property or assets of the Company and its Subsidiaries other than the
property or assets of the Subsidiary so acquired or the property or assets
so acquired and (b) no such Lien shall extend to the Capital Stock of any
Subsidiary so acquired and (c) the principal amount of Indebtedness secured
by any such Lien shall not exceed the original purchase price of such
Subsidiary or such property or assets;
(v) Liens on the assets of any entity existing at the time such entity
or assets are acquired by the Company or any of its Subsidiaries, whether
by merger, consolidation, purchase of assets or otherwise; provided that
such Liens (a) are not created, incurred or assumed in connection with, or
in contemplation of, such assets being acquired by the Company or any of
its Subsidiaries and (b) do not extend to any other property of the Company
or any of its Subsidiaries;
(vi) Liens to secure the performance of statutory obligations, surety
or appeal bonds or performance bonds or landlords', carriers',
warehousemen's, mechanics', suppliers', materialmen's or
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other like Liens, in any case incurred in the ordinary course of business
and with respect to amounts not yet delinquent or being contested in good
faith by appropriate process of law, if a reserve or other appropriate
provision, if any, as required by GAAP shall have been made therefor;
(vii) Liens existing on the date of the Indenture;
(viii) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; and
(ix) extensions or renewals of any Liens referred to in clauses (i)
through (viii) above, provided that such extension or renewal does not
extend to any assets or secure any Indebtedness not securing or secured by
the Liens being extended or renewed.
Notwithstanding the foregoing, Permitted Liens may not extend to the Escrow
Account or the Escrow and Disbursement Agreement.
"Permitted Payments" means, with respect to the Company or any of its
Subsidiaries, (a) any dividend on shares of Capital Stock payable solely in
shares of Capital Stock (other than Disqualified Stock) or in options, warrants
or other rights to purchase Capital Stock (other than Disqualified Stock); (b)
any dividend, other distribution, loan or advance to the Company by any of its
Subsidiaries or by a Subsidiary to another Subsidiary; (c) any defeasance,
redemption, repurchase or other acquisition for value of any Indebtedness of the
Company with the proceeds from the issuance of (i) Indebtedness which is
subordinate to the Notes at least to the extent and in the manner as the
Indebtedness to be defeased, redeemed, repurchased or otherwise acquired is
subordinate in right of payment to the Notes; provided that (1) such newly-
issued subordinated Indebtedness provides for no payments of principal by way of
sinking fund, mandatory redemption, defeasance or otherwise by the Company or
its Subsidiaries (including, without limitation, at the option of the holder
thereof other than an option given to a holder pursuant to a Change of Control
covenant which (x) is no more favorable to the holders of such Indebtedness than
the provisions in favor of the Holders and (y) such Indebtedness provides that
the Company or its Subsidiaries will not repurchase such Indebtedness pursuant
to such provisions prior to the Company's repurchase of the Notes required to be
repurchased by the Company upon a Change of Control) prior to the maturity of
the Indebtedness being replaced and (2) the proceeds of such new Indebtedness
are utilized for such purpose within 45 days of issuance or (ii) Capital Stock
(other than Disqualified Stock) issued in accordance with the provisions of the
Indenture; and (d) the redemption or repurchase by a Wholly-Owned Subsidiary of
its Capital Stock owned by the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to payment of dividends or as to the distribution of assets upon
any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"Strategic Equity Investor" means any Person that, both as of the Trading
Day immediately before the day of such sale and the Trading Day immediately
after the day of such sale, has an Equity Market Capitalization of at least $2
billion and is engaged in the business of (i) transmitting video, voice or data
through wireless and other transmission facilities, (ii) creating, developing or
packaging entertainment or communication programming or (iii) evaluating,
participating or pursuing any other activity or opportunity that is related to
those identified in (i) or (ii) above.
"Subsidiary" means any corporation, association or other business entity of
which more than 50% of the total voting power of the outstanding Voting Stock
(or other interests, including partnership interests) is owned
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directly or indirectly by any Person or one or more of the other Subsidiaries of
that Person or a combination thereof.
"S&P" means Standard & Poor's Corporation and its successors.
"TechniVision Transaction" means the acquisition by the Company of the
assets of TechniVision, Inc. for consideration comprised of Equity Interests of
the Company.
"Trading Day," with respect to a securities exchange or automated quotation
system, means a day on which such exchange or system is open for a full day of
trading.
"Transactions" means the AWS Transaction, the CableMaxx Transaction, the
TechniVision Transaction and the Wireless One Transaction, collectively.
"U.S. Government Securities" means securities that are (x) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt.
"Voting Stock" of any Person means all outstanding classes of Capital Stock
of any entity entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
or Preferred Stock, as the case may be, at any date, the number of years
obtained by dividing (i) the then outstanding principal amount or stated value
of such Indebtedness or Preferred Stock, as the case may be, into (ii) the total
of the product obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, or preference in respect
thereof, by (y) the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment.
"Wholly-Owned Subsidiary" means any Subsidiary of the Company, all of the
outstanding Capital Stock (other than directors' qualifying shares), or in the
case of a non-corporate Subsidiary, other equity interests having ordinary
voting power for the election of directors or other governing body of such
Subsidiary, of which is owned by the Company or another Wholly-Owned Subsidiary
of the Company or a combination thereof.
"Wireless Cable Business" means, when used in reference to any Person, that
such Person, directly or indirectly, is engaged primarily in the business of (i)
transmitting video, voice or data primarily through wireless transmission
facilities, (ii) utilizing wireless cable channels for any commercial purpose
permitted by the FCC, (iii) creating, developing and packaging programming that
may be used to satisfy educational programming requirements for ITFS channels
and advertising, that, in either case, is transmitted over one or more of the
Company's wireless cable channels or (iv) evaluating, participating or pursuing
any other activity or opportunity that is related to those identified in (i),
(ii) or (iii) above.
"Wireless Cable Related Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used in connection
with a Wireless Cable Business.
"Wireless One Transaction" means either (i) the transaction contemplated by
the Letter of Intent dated July 17, 1995, between the Company and Wireless One
Operating Company, a Delaware corporation ("Old Wireless
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One"), whereby, among other things, Wireless One, Inc., a newly-formed Delaware
corporation ("Wireless One"), will acquire (A) all of the outstanding capital
stock of Old Wireless One (which will retain all of its assets and liabilities
except its wireless cable assets and certain related liabilities with respect to
the Springfield, Missouri market which the Company will acquire) for
consideration comprised of the Common Stock, $.01 par value per share (the
"Wireless One Common Stock"), of Wireless One and (B) the wireless cable assets
and related liabilities of certain Subsidiaries of the Company with respect to
the Contributed Markets for consideration comprised of Wireless One Common Stock
and promissory notes of Wireless One, or (ii) the transaction contemplated by
the Letter Agreement dated September 11, 1995 between the Company and Old
Wireless One, whereby, among other things, a newly-formed limited liability
company ("Wireless One LLC") will acquire (x) all of the assets of Old Wireless
One for consideration comprised of interests in Wireless One LLC and (y) all of
the wireless cable assets and related liabilities of certain Subsidiaries of the
Company with respect to the Contributed Markets for consideration comprised of
interests in Wireless One LLC and promissory notes of Wireless One LLC.
DESCRIPTION OF CERTAIN INDEBTEDNESS
On November 30, 1994, the Company consummated the private placement of
$40,150,000 in gross proceeds of the Convertible Notes, representing an
aggregate principal amount payable at maturity of $62,351,722 to Jupiter and an
accredited individual pursuant to the terms of the Note Purchase Agreement. The
Convertible Notes were issued with an original issue discount of approximately
35.607% from the principal amount at the maturity thereof. The Convertible
Notes mature November 1, 2004. The yield to maturity of the Convertible Notes
will be 9% per annum (computed on a semi-annual bond equivalent basis). No
periodic interest payments are due on the Convertible Notes prior to the
Applicable Date, after which interest will be payable in cash semi-annually in
arrears on each May 1 and November 1, commencing with the first such date after
the Applicable Date, which shall be no later than November 30, 1999. The
Convertible Notes may be converted to Common Stock at the option of the holders
thereof at any time prior to maturity, unless previously redeemed by the
Company, into the number of shares of Common Stock computed by dividing the
accreted value thereof (or, if after the Applicable Date, the principal amount
at maturity thereof plus accrued and unpaid interest) (the "Applicable Amount")
by the Conversion Price of $15.34. The Conversion Price will not be adjusted
for accrued original issue discount, but will be subject to adjustment upon the
occurrence of certain events affecting the Common Stock. The Convertible Notes
are redeemable, in whole or in part, at the option of the Company at any time on
or after November 30, 1999, at a redemption price equal to the principal amount
at maturity thereof plus accrued and unpaid interest, except that no such
redemption may be made unless the market price of the Common Stock for 20
trading days within a period of 30 consecutive trading days ending no later than
the fifth trading day preceding the redemption notice, which 20 trading days
must include the thirtieth trading day of such period, exceeds 150% of the
Conversion Price on each of such 20 trading days. The Note Purchase Agreement
contains certain covenants that, among other things, limit or prohibit the
ability of the Company and its subsidiaries to pay dividends, to liquidate or
dissolve, to merge or sell all or substantially all of its assets, to sell or
lease channel rights, to enter into a new business, to make certain acquisitions
and to incur certain indebtedness.
On April 19, 1995, the Company consummated a private placement to the
Initial Purchaser and Lazard Freres & Co. of 100,000 Units consisting of
$100,000,000 principal amount of Series A Notes and 600,000 Warrants to purchase
shares of Common Stock. On March 13, 1996, the Company consummated an exchange
offer pursuant to which $100,000,000 principal amount of Series B Notes were
issued in exchange for an equal principal amount of Series A Notes, which were
all cancelled. The terms of the Series A Notes and the Series B Notes are
identical in all material respects to the terms of the Notes, except that (i)
the Series B Notes have been registered under the Securities Act and therefore
do not have legends restricting their transfer and the Series A Notes contain
provisions providing for an increase in the interest rate on the Series A Notes
under certain circumstances and (ii) the Series B Notes contain a provision
which permits the incurrence by the Company of $15,000,000 principal amount of
indebtedness, pursuant to which the Old Notes were offered.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain Federal income tax
consequences of the exchange of Old Notes for New Notes pursuant to the Exchange
Offer and of the ownership of New Notes. The discussion is based upon the Code,
Treasury Regulations, Internal Revenue Service ("IRS") rulings and
pronouncements and judicial decisions now in effect, all of which are subject to
change at any time by legislative, judicial or administrative action. Any such
changes may be applied retroactively in a manner that could adversely affect a
holder of the Notes. The following discussion assumes that holders will hold
the New Notes, and have held the Old Notes, as capital assets.
The Company has not sought and will not seek any rulings from the IRS with
respect to the positions of the Company discussed below. There can be no
assurance that the IRS will not take a different position concerning the tax
consequences of the Exchange Offer or of the purchase, ownership or disposition
of the New Notes or that any such different position would not be sustained.
The tax treatment of a holder of New Notes may vary depending on his or its
particular situation or status. This summary does not address the tax
consequences to taxpayers who are subject to special rules such as insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign entities and individuals, persons holding New Notes as a part of a
hedging or conversion transaction or a straddle and holders whose "functional
currency" is not the U.S. dollar, or aspects of Federal income taxation that may
be relevant to a holder based upon such holder's particular tax situation. In
addition, the description does not consider the effect of any applicable
foreign, state, local or other tax laws.
EACH HOLDER SHOULD CONSULT HIS OR ITS OWN TAX ADVISER AS TO THE PARTICULAR
TAX CONSEQUENCES TO HIM OR IT OF THE EXCHANGE OF OLD NOTES FOR NEW NOTES
PURSUANT TO THE EXCHANGE OFFER AND OF THE OWNERSHIP OF THE NEW NOTES, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
Although the matter is not entirely free from doubt, the exchange of an Old
Note for a New Note pursuant to the Exchange Offer should not be treated as an
exchange or otherwise as a taxable event for Federal income tax purposes.
Accordingly, the New Notes should have the same issue price as the Old Notes and
each holder should have the same adjusted basis and holding period in the New
Notes as it had in the Old Notes immediately before the Exchange Offer. It is
assumed, for purposes of the following discussion, that the consummation of the
Exchange Offer will not be treated as a taxable event and that the New Notes and
the Old Notes will be treated as the same instruments for Federal income tax
purposes.
New Notes
Payments of Interest; Bond Premium. Except as otherwise described below
under Bond Premium, holders of the New Notes will be required to include
payments of qualified stated interest (as defined below) received thereon in
taxable income in accordance with their respective methods of accounting.
Bond Premium. The Old Notes were originally issued at a price that
exceeded their stated redemption prices at maturity. Accordingly, a holder will
be considered to have purchased the Old Notes, and therefore the New Notes, at a
"premium". A holder who is treated as having purchased a New Note at such a
premium may elect to amortize such bond premium over the term of the New Note.
If a holder makes this election, each interest payment on the New Note will be
offset by the portion of the bond premium allocable to such interest payment,
and will therefore, reduce the amount of interest on the New Note that the
holder would otherwise have to include in income. Bond premium is amortized on a
constant yield to maturity basis (except to the extent regulations may provide
otherwise). Amortized bond premium will reduce a holder's adjusted tax basis in
the New Note. A holder that elects to amortize bond premium on a New Note, will
generally be required to amortize bond premium on all other debt instruments
that it acquired at a premium in such year, and in subsequent years.
Additionally, the manner of amortizing bond premium of a New Note may be
affected by the Company's rights to redeem the New Notes prior to maturity.
Holders should consult with their tax advisor before electing to amortize bond
premium with respect to the New Notes.
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Acquisition Premium of a Subsequent Purchaser. An acquisition premium will
exist if a subsequent purchaser purchases a New Note at a cost that exceeds the
stated redemption price at maturity. In such case, a holder will be able to
elect to amortize the premium, and offset interest income on the New Notes in
the same fashion as a holder who purchased the New Notes for a premium at
original issuance.
Market Discount of a Subsequent Holder. If a subsequent holder of a New
Note that was purchased at a "market discount" thereafter realizes gain upon its
disposition or retirement, such gain will be taxed as ordinary income to the
extent of the market discount that has accrued on a straight-line basis (or on a
constant interest rate basis, if such basis of accrual has been elected by the
holder under Section 1276(b) of the Code) while the debt instrument was held by
such holder. "Market discount" with respect to a New Note is the amount by
which the stated redemption price at Maturity of a New Note exceeds the holder's
basis in the New Note immediately after acquisition (unless such excess is less
than 0.25% of the stated redemption price at maturity of the New Note multiplied
by the number of complete years from acquisition by such holder to maturity, in
which case there is no "market discount"). If a subsequent holder makes a gift
of a New Note, accrued market discount, if any, will be recognized as if such
holder had sold such New Note for a price equal to its fair market value. The
market discount rules also provide that a holder who acquires a New Note at a
market discount may be required to defer a portion of any interest expense that
otherwise may be deductible on any indebtedness incurred or maintained to
purchase or carry such New Note until the holder disposes of the New Note in a
taxable transaction.
The New Notes provide for optional redemption, in whole or in part, and, in
the case of Change of Control, a mandatory offer to redeem, prior to maturity.
If the New Notes were redeemed, a holder generally would be required to include
in gross income as ordinary income, for Federal income tax purposes, the portion
of the payment that is attributable to accrued market discount on the New Notes,
if any.
A holder of New Notes acquired at a market discount may elect to include
market discount in gross income as the discount accrues either on a straight-
line basis or on a constant interest rate basis. This current inclusion
election, once made, applies to all market discount obligations acquired on or
after the first day of the first taxable year to which the election applies, and
may not be revoked without the consent of the IRS. If a holder of New Notes
makes such an election, the foregoing rules with respect to the recognition of
ordinary income on sales and other dispositions of such debt instruments, and
with respect to the deferral of interest deductions on indebtedness incurred or
maintained to purchase or carry such debt instruments, would not apply.
Sale, Exchange, Redemption, Retirement or Other Disposition of New Notes.
In general, subject to the market discount provisions discussed above, the
holder of a New Note will recognize gain or loss upon the sale, exchange,
redemption, retirement or other disposition of such debt instrument measured by
the difference between (i) the amount of cash and fair market value of property
received in exchange therefor and (ii) the holder's adjusted tax basis in such
debt instrument.
The holder's initial tax basis in a New Note which is generally equal to
the price paid therefore will be increased from time to time by the accrual of
market discount, if any, that the holder has previously elected to include in
gross income on an annual basis and decreased from time to time to reflect any
amortized premium.
Any gain or loss on the sale, exchange, redemption, retirement or other
disposition of a New Note should be capital gain or loss (except as discussed in
"Market Discount of a Subsequent Holder" above). Any capital gain or loss will
be long-term capital gain or loss if the debt instrument had been held for more
than one year and otherwise will be short-term capital gain or loss.
Backup Withholding
The backup withholding rules require a payor to deduct and withhold a tax
if (i) the payee fails to furnish a taxpayer identification number ("TIN") to
the payor, (ii) the IRS notifies the payor that the TIN furnished by the payee
is incorrect, (iii) the payee has failed to report properly the receipt of
"reportable payments" on several occasions and the IRS has notified the payor
that withholding is required or (iv) there has been a failure of the payee to
certify under the penalty of perjury that the payee is not subject to
withholding under Section 3406 of the Code. If any one of the events discussed
above occurs, the Company, its paying agent or other withholding agent will be
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required to withhold a tax equal to 31% of any "reportable payment" made in
connection with the New Notes. A "reportable payment" includes, among other
things, interest actually paid and amounts paid through brokers in retirement of
a New Note. Any amounts withheld from a payment to a holder under the backup
withholding rules will be allowed as a refund or credit against such holder's
Federal income tax, provided that the required information is furnished to the
IRS. Certain holders (including, among others, corporations and certain tax
exempt organizations) are not subject to the backup withholding and information
reporting requirements. A holder should consult his or its tax advisor as to
his or its qualification for exemption from backup withholding and the procedure
for obtaining such an exemption.
PLAN OF DISTRIBUTION
Based on interpretation by the staff of the Commission set forth in no-
action letters issued to third parties, the Company believes that the New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by any holder thereof (other than
any such holder that is an "affiliate" of the Company within the meaning of Rule
405 promulgated under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business, such holder has no arrangement with any person to participate in the
distribution of such New Notes and neither such holder nor any such other person
is engaging in or intends to engage in a distribution of such New Notes.
Accordingly, any holder who is an affiliate of the Company or any holder using
the Exchange Offer to participate in a distribution of the New Notes will not be
able to rely on such interpretation by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a resale transaction. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with any resale of New Notes received in exchange for Old
Notes where such Old Notes were acquired as a result of market-making activities
or other trading activities (other than Old Notes acquired directly from the
Company). The Company has agreed that, for a period of 120 days from the date
of this Prospectus, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 1997 (90 days from the date of this
Prospectus), all dealers effecting transactions in the New Notes may be required
to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers, New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker-dealer that participates in a distribution of such
New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver, and by delivering, a
prospectus as required, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 120 days from the date of this Prospectus, the Company will
send a reasonable number of additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company will pay all the
expenses incident to the Exchange Offer (which shall not include the expenses of
any holder in connection with resales of the New Notes). The Company has agreed
to indemnify the Initial Purchasers and any broker-dealers participating in the
Exchange Offer against certain liabilities, including liabilities under the
Securities Act.
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LEGAL MATTERS
Certain legal matters with respect to the validity of the New Notes will be
passed upon for the Company by O'Sullivan Graev & Karabell, LLP, New York, New
York.
EXPERTS
The consolidated financial statements and schedule of Heartland Wireless
Communications, Inc. as of December 31, 1995 and 1994, and for each of the years
in the three-year period ended December 31, 1995, have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing. The report of KPMG Peat Marwick LLP refers to a change
in 1995 by the Company in the method of accounting for the direct costs and
installation fees related to subscriber installations.
The financial statements of Technivision, Inc. as of May 31, 1995 and 1994,
and for each of the years in the three-year period ended May 31, 1995, have been
incorporated by reference herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP
contains an explanatory paragraph that states that Technivision, Inc.'s
recurring losses from operations and excess of current liabilities over current
assets raise substantial doubt about the entity's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
The balance sheets of Cross Country Division as of December 31, 1993 and
1994, and the related statements of operations and division equity and cash
flows for the year ended December 31, 1993, the period from January 1, 1994 to
August 18, 1994 and the period from August 19, 1994 to December 31, 1994 have
been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP
contains an explanatory paragraph that refers to a business combination in 1994
accounted for as a purchase involving assets comprising a portion of Cross
Country Division. As a result of the acquisition, financial information of
Cross Country Division for periods after August 18, 1994 is presented on a
different cost basis than that for periods before August 18, 1994 and,
therefore, such information is not comparable.
The consolidated balance sheets as of June 30, 1994 and 1995 and the
consolidated statements of operations, stockholders' equity and cash flows of
CableMaxx, Inc. for the period December 18, 1992 to June 30, 1993 and the fiscal
years ended June 30, 1994 and 1995, and the consolidated statements of
operations and cash flows of Supreme Cable Co., Inc. and its subsidiaries (the
"Predecessor") for the period commencing July 1, 1992 to December 17, 1992,
incorporated by reference in this Prospectus have been audited by Coopers &
Lybrand L.L.P., independent certified public accountants, as indicated in their
report with respect thereto, which includes an explanatory paragraph which
states that specified circumstances raise substantial doubt about CableMaxx,
Inc.'s ability to continue as a going concern, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
The financial statements of American Wireless Systems, Inc. incorporated by
reference in this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving said report.
Reference is made to said report which includes an explanatory paragraph that
describes factors raising substantial doubt about the Company's ability to
continue as a going concern.
The consolidated financial statements of Fort Worth Wireless Cable T.V.
Associates incorporated by reference in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority
61
<PAGE>
of said firm as experts in giving said report. Reference is made to said report
which includes an explanatory paragraph that describes factors raising
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements of Wireless Cable T.V. Associates #38
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said report. Reference is made to
said report which includes an explanatory paragraph that describes factors
rasing substantial doubt about the Company's ability to continue as a going
concern.
62
<PAGE>
No dealer, salesperson or
any other person has been ------------------------------
authorized to give any
information or make any PROSPECTUS
representations in ------------------------------
connection with the offer
contained herein other than
those contained in this
Prospectus, and, if given
or made, such information
or representations must not
be relied upon as having
been authorized by the HEARTLAND WIRELESS
Company. This Prospectus COMMUNICATIONS, INC.
does not constitute an
offer to sell or a
solicitation of an offer to
buy any security other than
those to which it relates
nor does it constitute an
offer to sell, or a
solicitation of an offer to
buy, to any person in any
jurisdiction in which such
offer or solicitation is $15,000,000
not authorized, or in which 13% Series D Senior Notes
the person making such due 2003
offer or solicitation is
not qualified to do so, or
to any person to whom it is
unlawful to make such offer
or solicitation. Neither
the delivery of this
Prospectus nor any sale
made hereunder shall, under
any circumstances, create
any implication that there
has been no change in the
affairs of the Company
since the date hereof or
that the information
contained herein is correct
as of any time subsequent
to the date hereof.
-----------------------
TABLE OF CONTENTS
Page
----
Available Information 2
Incorporation of Certain
Documents by Reference
2
Prospectus Summary . 4
Risk Factors . . . . 12
The Exchange Offer . 23
Description of Notes 31
Description of Certain
Indebtedness . . . . 57
Certain Federal Income Tax
Considerations . 58
Plan of Distribution 60
Legal Matters . . . . 61
Experts . . . . . . . 61
Until , 1997
(90 days after the date of
this Prospectus), all , 1996
dealers effecting
transactions in the New
Notes offered hereby,
whether or not
participating in this
distribution, may be
required to deliver a
Prospectus.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law (the
"DGCL"), Article VI of the Registrant's Restated Certificate of Incorporation
(the "Certificate of Incorporation") eliminates the liability of the
Registrant's directors to the Registrant or its stockholders, except for
liabilities related to breach of duty of loyalty, actions not in good faith and
certain other liabilities.
Section 145 of the DGCL provides for indemnification by the Registrant of
its directors and officers. In addition, Article IX, Section 1 of the
Registrant's Restated By-Laws (the "By-laws") requires the Registrant to
indemnify any current or former director or officer to the fullest extent
permitted by the DGCL. In addition, the Registrant has entered into indemnity
agreements with its directors, which obligate the Registrant to indemnify such
directors to the fullest extent permitted by the DGCL. The Registrant has also
obtained officers' and directors' liability insurance which insures against
liabilities that officers and directors of the Registrant may incur in such
capacities.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit
No. Description of Exhibit
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)
II-1
<PAGE>
2.9 Letter Agreement between the Registrant and Cable
Equity Partners, Inc. (filed as Exhibit 2.9 to the
Registrant's Registration Statement on Form S-4, File
No. 33-87076 (the "Form S-4"), and incorporated herein
by reference)
2.10 Lease Purchase Agreement between the Registrant and
Choice Television of Iowa, L.C. (filed as Exhibit 2.10
to the Form S-4 and incorporated herein by reference)
2.11 Asset Purchase Agreement between the Registrant and
RuralVision Joint Venture (filed as Exhibit 2.11 to
the Form 8-K Current Report dated as of December 1,
1994 and filed with the Commission on December 14,
1994 (the "Form 8-K"), and incorporated herein by
reference)
2.12 Agreement for Purchase and Sales of Assets between the
Registrant and REC Services, Inc. (filed as Exhibit
2.12 to the Form S-4 and incorporated herein by
reference)
2.13 Letter Agreement among the Registrant, United States
Wireless Cable, Inc. and United States Wireless Cable
Systems, Inc. (filed as Exhibit 2.13 to the Form S-4
and incorporated herein by reference)
2.14 Letter Agreement among the Registrant, Cross Country
Wireless, Inc. and RuralVision Joint Venture (filed as
Exhibit 2.14 to the Form S-4 and incorporated herein
by reference)
2.15 Extension Agreement among the Registrant, Cross
Country Wireless, Inc., Cross Country Wireless Cable
West, L.P., RuralVision Joint Venture, RuralVision
Central, Inc., RuralVision South, Inc. and Selling
Shareholders of RuralVision Central, Inc. and
RuralVision South, Inc. (filed as Exhibit 2.15 to the
Form S-4 and incorporated herein by reference)
2.16 Note Modification Agreement among the Registrant,
Cross Country Wireless, Inc., Cross Country Wireless
Cable West, L.P., RuralVision Joint Venture,
RuralVision Central, Inc., RuralVision South, Inc.,
the Selling Shareholders of RuralVision Central, Inc.
and RuralVision South, Inc., the Larry D. Hudson Trust
and Jerri Hudson Bell (filed as Exhibit 2.16 to the
Form S-4 and incorporated herein by reference)
2.17 Asset Purchase Agreement between Heartland Wireless
Paducah, Inc. and Cross Country Wireless, Inc. (filed
as Exhibit 2.17 to the Form S-4 and incorporated
herein by reference)
2.18 First Amendment to Joint Venture Agreement between the
Registrant and Cross Country Wireless, Inc. (filed as
Exhibit 2.18 to the Form S-4 and incorporated herein
by reference)
2.19 Venture Distribution Agreement between the Registrant
and RuralVision Joint Venture (filed as Exhibit 2.19
to the Form S-4 and incorporated herein by reference)
2.20 Stock Purchase Agreement between Wireless
Communications, Inc. and Robert R. Story (filed as
Exhibit 2.20 to the Registrant's Registration
Statement on Form S-4, File No. 33-65337 (the "January
Form S-4"), and incorporated herein by reference)
2.21 Asset Purchase Agreement between United States
Wireless Systems, Inc. and Robert R. Story, Inc.
(filed as Exhibit 2.21 to the January Form S-4 and
incorporated herein by reference)
2.22 Amended and Restated Agreement and Plan of Merger
dated as of September 11, 1995, between American
Wireless Systems, Inc. (Heartland Merger Sub, Inc. and
the Registrant (filed as Exhibit 2.22 to the January
Form S-4 and incorporated herein by reference)
2.23 Amended and Restated Asset Purchase Agreement dated as
of October 4, 1995, between Fort Worth Wireless Cable
T.V. Associates and the Registrant (filed as Exhibit
2.23 to the January Form S-4 and incorporated herein
by reference)
II-2
<PAGE>
2.24 Amended and Restated Asset Purchase Agreement dated as
of October 4, 1995, between Wireless Cable TV
Associates #38 and the Registrant (filed as Exhibit
2.24 to the January Form S-4 and incorporated herein
by reference)
2.25 Amended and Restated Agreement and Plan of Merger
dated as of September 11, 1995, between CableMaxx,
Inc., Heartland Merger Sub 2, Inc. and the Registrant
(filed as Exhibit 2.25 to the January Form S-4 and
incorporated herein by reference)
2.26 Amended and Restated Assets Purchase Agreement dated
as of October 19, 1995, between Three Sixty Corp.,
Technivision, Inc. and the Registrant (filed as
Exhibit 2.26 to the January Form S-4 and incorporated
herein by reference)
4.1 1994 Employee Stock Option Plan of the Registrant, as
amended (filed as Exhibit 4.1 to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1995 (the "Form 10-K") and incorporated herein by
reference)
4.2 Revised Form of Nontransferable Incentive Stock Option
Agreement under the 1994 Employee Stock Option Plan of
the Registrant (filed as Exhibit 4.2 to the
Registrant's Registration Statement on Form S-4, File
No. 33-91930 (the "February Form S-4"), and
incorporated herein by reference)
4.3 Revised Form of Nontransferable Non-Qualified Stock
Option Agreement under the 1994 Employee Stock Option
Plan of the Registrant (filed as Exhibit 4.3 to the
February Form S-4 and incorporated herein by
reference)
4.4 1994 Stock Option Plan for Non-Employee Directors of
the Registrant (filed as Exhibit 4.4 to the Form S-1
and incorporated herein by reference)
4.5 Form of Stock Option Agreement under the 1994 Stock
Option Plan for Non-Employee Directors of the
Registrant (filed as Exhibit 4.5 to the Form S-1 and
incorporated herein by reference)
4.6 Warrant Agreement between the Registrant and Gerard
Klauer Mattison & Co., Inc. (including form of warrant
certificate) (filed as Exhibit 4.6 to the Form S-1 and
incorporated herein by reference)
4.7 Registration Rights Agreement among the Registrant,
Jupiter Partners L.P. and Thomas R. Haack (filed as
Exhibit 4.7 to the Form S-4 and incorporated herein by
reference)
4.8 Stockholders Agreement among the Registrant, Hunt
Capital Group, L.L.C., David E. Webb, L. Allen Wheeler
and Jupiter Partners L.P. (filed as Exhibit 4.8 to the
Form S-4 and incorporated herein by reference)
4.9 Note Purchase Agreement among the Registrant, Jupiter
Partners L.P. and Thomas R. Haack (filed as Exhibit
4.9 to the Form S-4 and incorporated herein by
reference)
4.10 First Amendment to Note Purchase Agreement among the
Registrant, Jupiter Partners L.P. and Thomas R. Haack
(filed as Exhibit 4.10 to the Form 10-K Annual Report
filed with the Commission on March 31, 1995 (the "Form
10-K"), and incorporated herein by reference)
4.11 Second Amendment to Note Purchase Agreement among the
Registrant, Jupiter Partners L.P. and Thomas R. Haack
(filed as Exhibit 4.11 to the February Form S-4 and
incorporated herein by reference)
4.12 Indenture between the Registrant and First Trust of
New York, National Association, as Trustee (the
"Trustee") (filed as Exhibit 4.12 to the February Form
S-4 and incorporated herein by reference)
II-3
<PAGE>
4.13 Supplemental Indenture dated October 2, 1995, between
the Registrant and the Trustee (filed as Exhibit 4.13
to the February Form S-4 and incorporated herein by
reference)
4.14 Registration Rights Agreement among the Registrant, BT
Securities Corporation ("BT Securities") and Lazard
Freres & Co. ("Lazard") (filed as Exhibit 4.14 to the
February Form S-4 and incorporated herein by
reference)
4.15 Securityholders' and Registration Rights Agreement
among the Registrant, BT Securities and Lazard (filed
as Exhibit 4.15 to the February Form S-4 and
incorporated herein by reference)
4.16 Warrant Agreement between the Registrant and Bankers
Trust Company, as Warrant Agent (filed as Exhibit 4.16
to the February Form S-4 and incorporated herein by
reference)
4.17 Unit Agreement among the Registrant, Bankers Trust
Company, as Unit Agent and Warrant Agent, and the
Trustee (filed as Exhibit 4.17 to the February S-4 and
incorporated herein by reference)
4.18 Escrow and Disbursement Agreement among the
Registrant, Bankers Trust Company, as Escrow Agent,
and the Trustee (filed as Exhibit 4.18 to the February
Form S-4 and incorporated herein by reference)
*4.19 Indenture between the Registrant and First Trust of
New York, National Association, as Trustee (the
"Trustee")
*4.20 Registration Rights Agreement among the Registrant and
BT Securities Corporation ("BT Securities")
*4.21 Escrow and Disbursement Agreement among the
Registrant, Bankers Trust Company, as Escrow Agent,
and the Trustee
**5 Opinion of O'Sullivan Graev & Karabell, LLP (including
the consent of such firm) regarding legality of
securities being offered
**8 Opinion of O'Sullivan Graev & Karabell, LLP regarding
the material United Stated Federal income tax
consequences to the holders of the securities being
offered
*12.1 Statement re: Computation of Consolidated Earnings to Fixed Charges
**21 List of Subsidiaries
**23.1 Consent of O'Sullivan Graev & Karabell, LLP (included
as part of its opinion filed as Exhibit 5 hereto)
*23.2 Consent of KPMG Peat Marwick LLP, independent
certified public accountants (Registrant)
*23.3 Consent of KPMG Peat Marwick LLP, independent
certified public accountants (Technivision)
*23.4 Consent of KPMG Peat Marwick LLP, independent
certified public accountants (Cross Country Division)
*23.5 Consent of Coopers & Lybrand L.L.P., independent
accountants
*23.6 Consent of Arthur Andersen LLP, independent public
accountants
*24 Powers of Attorney (included on page II-8)
*25 Form T-1 Statement of Eligibility and Qualification
under the Trust Indenture Act of 1939 of First Trust
of New York, National Association, as Trustee
**99.1 Form of Letter of Transmittal
**99.2 Form of Notice of Guaranteed Delivery
**99.3 Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees
**99.4 Form of Letter to Clients
II-4
<PAGE>
**99.5 Form of Exchange Agent Agreement between the
Registrant and Bankers Trust Company, as Exchange
Agent
- ----------------
* Filed herewith.
** To be filed by amendment.
Schedules have been omitted because they are either not applicable or the
required information has been disclosed in the financial statements or notes
thereto.
Item 22. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the DGCL, the Certificate of
Incorporation and By-laws, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under
II-5
<PAGE>
the Securities Act shall be deemed to be part of this registration
statement as of that time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Plano, State of Texas, on
the 24th day of September, 1996.
Heartland Wireless Communications, Inc.
By /s/ John R. Bailey
------------------------------------------------
John R. Bailey
Senior Vice President--Finance, Chief
Financial Officer (Principal Financial
Officer)
POWER OF ATTORNEY
We, the undersigned directors and officers of HEARTLAND WIRELESS
COMMUNICATIONS, INC., do hereby constitute and appoint J. R. HOLLAND, JR. and
JOHN R. BAILEY, or either of them, our true and lawful attorneys and agents, to
do any and all acts and things in our name and on our behalf in our capacities
as directors and officers and to execute any and all instruments for us and in
our names in the capacities indicated below, which said attorneys and agents, or
either of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
Registration Statement, including specifically, but without limitation, power
and authority to sign for us or any of us in our names in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto; and we do hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 24th day of September, 1996, by
the following persons in the capacities indicated:
Signature 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
- -------------------------------
David E. Webb Director (Principal Executive Officer)
/s/ John R. Bailey Senior Vice President -- Finance and
- -------------------------------
John R. Bailey Chief Financial Officer (Principal
Financial Officer)
II-7
<PAGE>
/s/ David D. Hagey Vice President -- Finance, Treasurer and
- -------------------------------
David D. Hagey Assistant Secretary (Principal
Accounting Officer)
- -------------------------------
Alvin H. Lane, Jr. Director
Director
- -------------------------------
Dennis M. O'Rourke
/s/ Wes W. Watkins Director
- -------------------------------
John A. Sprague
Director
- -------------------------------
Wes W. Watkins
II-8
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
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)
<PAGE>
2.9 Letter Agreement between the Registrant and Cable
Equity Partners, Inc. (filed as Exhibit 2.9 to the
Registrant's Registration Statement on Form S-4, File
No. 33-87076 (the "Form S-4"), and incorporated herein
by reference)
2.10 Lease Purchase Agreement between the Registrant and
Choice Television of Iowa, L.C. (filed as Exhibit 2.10
to the Form S-4 and incorporated herein by reference)
2.11 Asset Purchase Agreement between the Registrant and
RuralVision Joint Venture (filed as Exhibit 2.11 to
the Form 8-K Current Report dated as of December 1,
1994 and filed with the Commission on December 14,
1994 (the "Form 8-K"), and incorporated herein by
reference)
2.12 Agreement for Purchase and Sales of Assets between the
Registrant and REC Services, Inc. (filed as Exhibit
2.12 to the Form S-4 and incorporated herein by
reference)
2.13 Letter Agreement among the Registrant, United States
Wireless Cable, Inc. and United States Wireless Cable
Systems, Inc. (filed as Exhibit 2.13 to the Form S-4
and incorporated herein by reference)
2.14 Letter Agreement among the Registrant, Cross Country
Wireless, Inc. and RuralVision Joint Venture (filed as
Exhibit 2.14 to the Form S-4 and incorporated herein
by reference)
2.15 Extension Agreement among the Registrant, Cross
Country Wireless, Inc., Cross Country Wireless Cable
West, L.P., RuralVision Joint Venture, RuralVision
Central, Inc., RuralVision South, Inc. and Selling
Shareholders of RuralVision Central, Inc. and
RuralVision South, Inc. (filed as Exhibit 2.15 to the
Form S-4 and incorporated herein by reference)
2.16 Note Modification Agreement among the Registrant,
Cross Country Wireless, Inc., Cross Country Wireless
Cable West, L.P., RuralVision Joint Venture,
RuralVision Central, Inc., RuralVision South, Inc.,
the Selling Shareholders of RuralVision Central, Inc.
and RuralVision South, Inc., the Larry D. Hudson Trust
and Jerri Hudson Bell (filed as Exhibit 2.16 to the
Form S-4 and incorporated herein by reference)
2.17 Asset Purchase Agreement between Heartland Wireless
Paducah, Inc. and Cross Country Wireless, Inc. (filed
as Exhibit 2.17 to the Form S-4 and incorporated
herein by reference)
2.18 First Amendment to Joint Venture Agreement between the
Registrant and Cross Country Wireless, Inc. (filed as
Exhibit 2.18 to the Form S-4 and incorporated herein
by reference)
2.19 Venture Distribution Agreement between the Registrant
and RuralVision Joint Venture (filed as Exhibit 2.19
to the Form S-4 and incorporated herein by reference)
2.20 Stock Purchase Agreement between Wireless
Communications, Inc. and Robert R. Story (filed as
Exhibit 2.20 to the Registrant's Registration
Statement on Form S-4, File No. 33-65337 (the "January
Form S-4"), and incorporated herein by reference)
2.21 Asset Purchase Agreement between United States
Wireless Systems, Inc. and Robert R. Story, Inc.
(filed as Exhibit 2.21 to the January Form S-4 and
incorporated herein by reference)
2.22 Amended and Restated Agreement and Plan of Merger
dated as of September 11, 1995, between American
Wireless Systems, Inc. (Heartland Merger Sub, Inc. and
the Registrant (filed as Exhibit 2.22 to the January
Form S-4 and incorporated herein by reference)
2.23 Amended and Restated Asset Purchase Agreement dated as
of October 4, 1995, between Fort Worth Wireless Cable
T.V. Associates and the Registrant (filed as Exhibit
2.23 to the January Form S-4 and incorporated herein
by reference)
<PAGE>
2.24 Amended and Restated Asset Purchase Agreement dated as
of October 4, 1995, between Wireless Cable TV
Associates #38 and the Registrant (filed as Exhibit
2.24 to the January Form S-4 and incorporated herein
by reference)
2.25 Amended and Restated Agreement and Plan of Merger
dated as of September 11, 1995, between CableMaxx,
Inc., Heartland Merger Sub 2, Inc. and the Registrant
(filed as Exhibit 2.25 to the January Form S-4 and
incorporated herein by reference)
2.26 Amended and Restated Assets Purchase Agreement dated
as of October 19, 1995, between Three Sixty Corp.,
Technivision, Inc. and the Registrant (filed as
Exhibit 2.26 to the January Form S-4 and incorporated
herein by reference)
4.1 1994 Employee Stock Option Plan of the Registrant, as
amended (filed as Exhibit 4.1 to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1995 (the "Form 10-K") and incorporated herein by
reference)
4.2 Revised Form of Nontransferable Incentive Stock Option
Agreement under the 1994 Employee Stock Option Plan of
the Registrant (filed as Exhibit 4.2 to the
Registrant's Registration Statement on Form S-4, File
No. 33-91930 (the "February Form S-4"), and
incorporated herein by reference)
4.3 Revised Form of Nontransferable Non-Qualified Stock
Option Agreement under the 1994 Employee Stock Option
Plan of the Registrant (filed as Exhibit 4.3 to the
February Form S-4 and incorporated herein by
reference)
4.4 1994 Stock Option Plan for Non-Employee Directors of
the Registrant (filed as Exhibit 4.4 to the Form S-1
and incorporated herein by reference)
4.5 Form of Stock Option Agreement under the 1994 Stock
Option Plan for Non-Employee Directors of the
Registrant (filed as Exhibit 4.5 to the Form S-1 and
incorporated herein by reference)
4.6 Warrant Agreement between the Registrant and Gerard
Klauer Mattison & Co., Inc. (including form of warrant
certificate) (filed as Exhibit 4.6 to the Form S-1 and
incorporated herein by reference)
4.7 Registration Rights Agreement among the Registrant,
Jupiter Partners L.P. and Thomas R. Haack (filed as
Exhibit 4.7 to the Form S-4 and incorporated herein by
reference)
4.8 Stockholders Agreement among the Registrant, Hunt
Capital Group, L.L.C., David E. Webb, L. Allen Wheeler
and Jupiter Partners L.P. (filed as Exhibit 4.8 to the
Form S-4 and incorporated herein by reference)
4.9 Note Purchase Agreement among the Registrant, Jupiter
Partners L.P. and Thomas R. Haack (filed as Exhibit
4.9 to the Form S-4 and incorporated herein by
reference)
4.10 First Amendment to Note Purchase Agreement among the
Registrant, Jupiter Partners L.P. and Thomas R. Haack
(filed as Exhibit 4.10 to the Form 10-K Annual Report
filed with the Commission on March 31, 1995 (the "Form
10-K"), and incorporated herein by reference)
4.11 Second Amendment to Note Purchase Agreement among the
Registrant, Jupiter Partners L.P. and Thomas R. Haack
(filed as Exhibit 4.11 to the February Form S-4 and
incorporated herein by reference)
4.12 Indenture between the Registrant and First Trust of
New York, National Association, as Trustee (the
"Trustee") (filed as Exhibit 4.12 to the February Form
S-4 and incorporated herein by reference)
<PAGE>
4.13 Supplemental Indenture dated October 2, 1995, between
the Registrant and the Trustee (filed as Exhibit 4.13
to the February Form S-4 and incorporated herein by
reference)
4.14 Registration Rights Agreement among the Registrant, BT
Securities Corporation ("BT Securities") and Lazard
Freres & Co. ("Lazard") (filed as Exhibit 4.14 to the
February Form S-4 and incorporated herein by
reference)
4.15 Securityholders' and Registration Rights Agreement
among the Registrant, BT Securities and Lazard (filed
as Exhibit 4.15 to the February Form S-4 and
incorporated herein by reference)
4.16 Warrant Agreement between the Registrant and Bankers
Trust Company, as Warrant Agent (filed as Exhibit 4.16
to the February Form S-4 and incorporated herein by
reference)
4.17 Unit Agreement among the Registrant, Bankers Trust
Company, as Unit Agent and Warrant Agent, and the
Trustee (filed as Exhibit 4.17 to the February S-4 and
incorporated herein by reference)
4.18 Escrow and Disbursement Agreement among the
Registrant, Bankers Trust Company, as Escrow Agent,
and the Trustee (filed as Exhibit 4.18 to the February
Form S-4 and incorporated herein by reference)
*4.19 Indenture between the Registrant and First Trust of
New York, National Association, as Trustee (the
"Trustee")
*4.20 Registration Rights Agreement among the Registrant and
BT Securities Corporation ("BT Securities")
*4.21 Escrow and Disbursement Agreement among the
Registrant, Bankers Trust Company, as Escrow Agent,
and the Trustee
**5 Opinion of O'Sullivan Graev & Karabell, LLP (including
the consent of such firm) regarding legality of
securities being offered
**8 Opinion of O'Sullivan Graev & Karabell, LLP regarding
the material United Stated Federal income tax
consequences to the holders of the securities being
offered
*12.1 Statement re: Computation of Consolidated Earnings to Fixed Charges
**21 List of Subsidiaries
**23.1 Consent of O'Sullivan Graev & Karabell, LLP (included
as part of its opinion filed as Exhibit 5 hereto)
*23.2 Consent of KPMG Peat Marwick LLP, independent
certified public accountants (Registrant)
*23.3 Consent of KPMG Peat Marwick LLP, independent
certified public accountants (Technivision)
*23.4 Consent of KPMG Peat Marwick LLP, independent
certified public accountants (Cross Country Division)
*23.5 Consent of Coopers & Lybrand L.L.P., independent
accountants
*23.6 Consent of Arthur Andersen LLP, independent public
accountants
*24 Powers of Attorney (included on page II-8)
*25 Form T-1 Statement of Eligibility and Qualification
under the Trust Indenture Act of 1939 of First Trust
of New York, National Association, as Trustee
**99.1 Form of Letter of Transmittal
**99.2 Form of Notice of Guaranteed Delivery
**99.3 Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees
**99.4 Form of Letter to Clients
<PAGE>
**99.5 Form of Exchange Agent Agreement between the
Registrant and Bankers Trust Company, as Exchange
Agent
- ----------------
* Filed herewith.
** To be filed by amendment.
Schedules have been omitted because they are either not applicable or the
required information has been disclosed in the financial statements or notes
thereto.
EXHIBIT 4.19
================================================================================
HEARTLAND WIRELESS COMMUNICATIONS, INC.
13% SERIES C SENIOR NOTES DUE 2003
___________________________________
_______________
INDENTURE
Dated as of March 28, 1996
_______________
_______________
First Trust of New York, National Association
Trustee
_______________
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 12.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03; 12.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.02
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03, 11.04, 11.05
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05, 12.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . 17
Section 1.03. Incorporation by Reference of Trust Indenture Act . . . . 18
Section 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . 18
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . 19
Section 2.02. Execution and Authentication; Aggregate Principal
Amount . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . 20
Section 2.04. Paying Agent To Hold Assets in Trust . . . . . . . . . . 21
Section 2.05. Noteholder Lists . . . . . . . . . . . . . . . . . . . . 21
Section 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . . . 22
Section 2.07. Replacement Notes. . . . . . . . . . . . . . . . . . . . 22
Section 2.08. Outstanding Notes. . . . . . . . . . . . . . . . . . . . 23
Section 2.09. Treasury Notes . . . . . . . . . . . . . . . . . . . . . 23
Section 2.10. Temporary Notes . . . . . . . . . . . . . . . . . . . . . 23
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . 24
Section 2.13. CUSIP Number . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.14. Deposit of Monies . . . . . . . . . . . . . . . . . . . . 25
Section 2.15. Restrictive Legends . . . . . . . . . . . . . . . . . . . 25
Section 2.16. Book-Entry Provisions for Global Security . . . . . . . . 27
Section 2.17. Special Transfer Provisions . . . . . . . . . . . . . . . 29
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . 31
Section 3.02. Selection of Notes to Be Redeemed . . . . . . . . . . . . 31
Section 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . 31
Section 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . 32
Section 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . 32
-i-
<PAGE>
Page
----
Section 3.06. Notes Redeemed in Part . . . . . . . . . . . . . . . . . 33
Section 3.07. Optional Redemption. . . . . . . . . . . . . . . . . . . 33
Section 3.08. Mandatory Redemption . . . . . . . . . . . . . . . . . . 34
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes . . . . . . . . . . . . . . . . . . . . 34
Section 4.02. Maintenance of Office or Agency . . . . . . . . . . . . . 34
Section 4.03. Reports . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.04. Compliance Certificate . . . . . . . . . . . . . . . . . 35
Section 4.05. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.06. Stay, Extension and Usury Laws . . . . . . . . . . . . . 36
Section 4.07. Limitation on Restricted Payments . . . . . . . . . . . . 37
Section 4.08. Limitation on Indebtedness . . . . . . . . . . . . . . . 39
Section 4.09. Limitation on Liens . . . . . . . . . . . . . . . . . . . 40
Section 4.10. Limitation on Issuance and Sale of Capital Stock
of Subsidiaries . . . . . . . . . . . . . . . . . . 41
Section 4.11. Limitation on Preferred Stock of Subsidiaries . . . . . . 41
Section 4.12. Limitation on Asset Sales . . . . . . . . . . . . . . . . 41
Section 4.13. Dividend and Other Payment Restrictions Affecting
Subsidiaries . . . . . . . . . . . . . . . . . . . . 45
Section 4.14. Transactions with Affiliates . . . . . . . . . . . . . . 45
Section 4.15. Conduct of Business . . . . . . . . . . . . . . . . . . . 47
Section 4.16. Change of Control . . . . . . . . . . . . . . . . . . . . 47
Section 4.17. Disbursement of Funds; Escrow Account . . . . . . . . . . 49
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation or Sale of Assets . . . . . . . . . 49
Section 5.02. Successor Corporation Substituted . . . . . . . . . . . . 50
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . 50
Section 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . 52
Section 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . 53
Section 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . 53
Section 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . 54
Section 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . 54
Section 6.07. Rights of Holders of Notes to Receive Payment . . . . . . 54
-ii-
<PAGE>
Page
----
Section 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . 55
Section 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . 55
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . 56
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . 56
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . 56
Section 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . 58
Section 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . 58
Section 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . 59
Section 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . 59
Section 7.06. Reports by Trustee to Holders of the Notes . . . . . . . 59
Section 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . 59
Section 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . 60
Section 7.09. Successor Trustee by Merger, etc. . . . . . . . . . . . . 61
Section 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . 62
Section 7.11. Preferential Collection of Claims Against Company . . . . 62
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance . . . . . . . . . . . . . . . . . . . . . 62
Section 8.02. Legal Defeasance and Discharge . . . . . . . . . . . . . 62
Section 8.03. Covenant Defeasance . . . . . . . . . . . . . . . . . . . 63
Section 8.04. Conditions to Legal or Covenant Defeasance . . . . . . . 63
Section 8.05. Deposited Money and U.S. Government Securities to
be Held in Trust; Other Miscellaneous
Provisions . . . . . . . . . . . . . . . . . . . . . 66
Section 8.06. Repayment to Company . . . . . . . . . . . . . . . . . . 66
Section 8.07. Reinstatement . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 9
SATISFACTION AND DISCHARGE
Section 9.01. Satisfaction and Discharge of Indenture . . . . . . . . . 67
Section 9.02. Application of Monies for Satisfaction and
Discharge . . . . . . . . . . . . . . . . . . . . . 68
-iii-
<PAGE>
Page
----
ARTICLE 10
AMENDMENT, SUPPLEMENT AND WAIVER
Section 10.01. Without Consent of Holders of Notes . . . . . . . . . . . 68
Section 10.02. With Consent of Holders of Notes . . . . . . . . . . . . 69
Section 10.03. Compliance with Trust Indenture Act . . . . . . . . . . . 71
Section 10.04. Revocation and Effect of Consents . . . . . . . . . . . . 71
Section 10.05. Notation on or Exchange of Notes . . . . . . . . . . . . 72
Section 10.06. Trustee to Sign Amendments, etc. . . . . . . . . . . . . 72
ARTICLE 11
COLLATERAL AND SECURITY
Section 11.01. Escrow and Disbursement Agreement . . . . . . . . . . . . 72
Section 11.02. Recording and Opinions . . . . . . . . . . . . . . . . . 73
Section 11.03. Release of Collateral . . . . . . . . . . . . . . . . . . 73
Section 11.04. Certificates of the Company . . . . . . . . . . . . . . . 74
Section 11.05. Authorization of Actions to be Taken by the
Trustee Under the Escrow and Disbursement
Agreement . . . . . . . . . . . . . . . . . . . . . 75
Section 11.06. Authorization of Receipt of Funds by the Trustee
Under the Escrow and Disbursement Agreement . . . . 75
Section 11.07. Termination of Security Interest . . . . . . . . . . . . 75
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls . . . . . . . . . . . . . . 76
Section 12.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 12.03. Communication by Holders of Notes with Other
Holders of Notes . . . . . . . . . . . . . . . . . . 77
Section 12.04. Certificate and Opinion as to Conditions
Precedent . . . . . . . . . . . . . . . . . . . . . 77
Section 12.05. Statements Required in Certificate or Opinion . . . . . . 77
Section 12.06. Rules by Trustee and Agents . . . . . . . . . . . . . . . 78
Section 12.07. No Personal Liability of Partners, Directors,
Officers, Employees and Stockholders . . . . . . . . 78
Section 12.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . 78
Section 12.09. No Adverse Interpretation of Other Agreements . . . . . . 78
Section 12.10. Successors . . . . . . . . . . . . . . . . . . . . . . . 79
Section 12.11. Severability . . . . . . . . . . . . . . . . . . . . . . 79
-iv-
<PAGE>
Page
----
Section 12.12. Counterpart Originals . . . . . . . . . . . . . . . . . . 79
Section 12.13. Table of Contents, Headings, Etc. . . . . . . . . . . . . 79
EXHIBITS
Exhibit A Form of Initial Note
Exhibit B Form of Exchange Note
Exhibit C Form of Certificate to be Delivered in Connection with Transfers to
Non-QIB Accredited Investors
Exhibit D Form of Certificate to be Delivered in Connection with Transfers
Pursuant to Regulation S
Exhibit E Form of Escrow and Disbursement Agreement
-v-
<PAGE>
INDENTURE, dated as of March 28, 1996, between Heartland Wireless
Communications, Inc., a Delaware Corporation (the "Company"), and First Trust of
New York, National Association, as trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 13% Series
C Senior Notes due 2003 (the "Initial Notes") and 13% Senior Notes due 2003 to
be issued in exchange for the Initial Notes pursuant to the Registration Rights
Agreement (the "Exchange Notes" and, together with the Initial Notes, the
"Notes") and, to provide therefor, the Company has duly authorized the execution
and delivery of this Indenture. All things necessary to make the Notes, when
duly issued and executed by the Company, and authenticated and delivered
hereunder, the valid obligations of the Company, and to make this Indenture a
valid and binding agreement of the Company, have been done.
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the Notes:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"Acquired Debt" means, with respect to any specified Person,
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person or Indebtedness
incurred by such Person in connection with the acquisition of assets, including,
without limitation, Indebtedness incurred or assumed in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person or the acquisition of such assets, as the
case may be.
"Affiliate" of any specified Person means (i) any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified Person or (ii) any other Person who is a director or
officer (A) of such specified Person, (B) of any Subsidiary of such specified
Person or (C) of any Person described in clause (i) above or (iii) any Person in
which such Person has, directly or indirectly, a 5% or greater voting or
economic interest or the power to control. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause the
direction of the management or policies of such Person whether through the
ownership of voting securities or by contract or otherwise and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar or Paying Agent.
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"Annualized Cash Flow Ratio" with respect to any Person means the
ratio of the Consolidated Indebtedness of such Person to the Annualized EBITDA
of such Person for the relevant period.
"Annualized EBITDA" as of any date of determination means the
aggregate amount of EBITDA for the most recent fiscal quarter for which
financial information has been filed with the Commission multiplied by four;
provided, however, that (i) if the Company or any Subsidiary of the Company has
incurred any Indebtedness (including Acquired Debt) that remains outstanding on
the date of such determination or if the transaction giving rise to the need to
calculate the Annualized EBITDA is an incurrence of Indebtedness (including
Acquired Debt), EBITDA for such fiscal quarter will be calculated after giving
effect on a pro forma basis to (a) such Indebtedness, as if such Indebtedness
had been incurred on the first day of such fiscal quarter and (b) the discharge
of any other Indebtedness repaid, repurchased, defeased or otherwise discharged
with the proceeds of such new Indebtedness as if such discharge had occurred on
the first day of such fiscal quarter, (ii) if since the beginning of such fiscal
quarter the Company or any Subsidiary of the Company has made any Asset Sale,
EBITDA for such fiscal quarter will be (a) reduced by an amount equal to EBITDA
(if positive) directly attributable to the assets which are the subject of such
Asset Sale for such fiscal quarter or (b) increased by an amount equal to EBITDA
(if negative) directly attributable thereto for such fiscal quarter and (iii) if
since the beginning of such period the Company or any Subsidiary of the Company
(by merger or otherwise) has made an Investment in any Person which becomes a
Subsidiary of the Company as a result of such Investment or an Investment in an
existing Subsidiary with the result that such Investment will result in the
consolidation of a greater percentage of such Subsidiary's Consolidated Net
Income (other than a transfer of operating assets from the Company or one
Subsidiary to another Subsidiary) or has made an acquisition of assets (other
than from the Company or another Subsidiary of the Company), including any
acquisition of assets occurring in connection with a transaction causing a
calculation of Annualized EBITDA to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA for such fiscal
quarter will be calculated after giving pro forma effect thereto (including the
incurrence of any Indebtedness (including Acquired Debt)) as if such Investment
or acquisition occurred on the first day of such fiscal quarter. For purposes of
this definition, whenever pro forma effect is to be given to an acquisition of
assets or an Investment, the pro forma calculations will be determined in good
faith by a responsible financial or accounting officer of the Company; provided,
however, that such officer shall apply in his calculations the historical EBITDA
associated with such assets for the most recent fiscal quarter for which
financial information is available. If any Indebtedness (including Acquired
Debt) bears a floating rate of interest and is being given pro forma effect, the
interest on such Indebtedness will be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period.
"Asset Sale" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) of shares of Capital
Stock of a Subsidiary (other
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than directors' qualifying shares), property or other assets (each referred to
for the purposes of this definition as a "disposition") by the Company or any of
its Subsidiaries, including any disposition by means of a merger, consolidation
or similar transaction, other than (i) a disposition of property or assets at
Fair Market Value in the ordinary course of business, (ii) a disposition that
constitutes a Restricted Payment and (iii) a disposition by a Subsidiary to the
Company or by the Company or a Subsidiary to a Wholly-Owned Subsidiary.
"AWS Transaction" means the acquisition by the Company of the capital
stock of American Cable Systems, Inc., a Delaware corporation, and the
acquisition by the Company of the assets of Wireless Cable TV Associates #38 and
of Fort Worth Wireless Cable TV Associates for consideration comprised of Equity
Interests of the Company.
"Bankruptcy Code" means Title 11, United States Code, as amended.
"Bank Indebtedness" means loans made by banks, trust companies and
other institutions principally engaged in the business of lending money to
businesses to the Company or a Subsidiary under a credit facility, loan
agreement or similar agreement.
"Beneficial Owner" means a beneficial owner as defined in Rules 13d-3
and 13d-5 under the Exchange Act (or any successor rules), including the
provision of such Rules that a Person shall be deemed to have beneficial
ownership of all securities that such Person has a right to acquire within 60
days; provided that a Person will not be deemed a beneficial owner of, or to own
beneficially, any securities if such beneficial ownership (i) arises solely as a
result of a revocable proxy delivered in response to a proxy or consent
solicitation made pursuant to, and in accordance with, the Exchange Act and (ii)
is not also then reportable on Schedule 13D or Schedule 13G (or any successor
schedule) under the Exchange Act.
"Business Day" means any day that is not a Saturday, Sunday or a day
on which banking institutions are required to close in the State of New York or
Texas.
"CableMaxx Transaction" means the acquisition by the Company of the
capital stock of CableMaxx, Inc., a Delaware corporation ("CableMaxx"), for
consideration comprised of Equity Interests of the Company.
"Call Markets" means Fanning Springs, Florida; Leesburg, Florida; and
Lake City, Florida.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on the balance sheet in
accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations,
warrants, options, rights or other equivalents of or interests in (however
designated and whether voting
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or non-voting) corporate stock of a corporation and any and all equivalent
ownership interests in a Person (other than a corporation), in each case whether
outstanding on the date of issuance of the Notes or thereafter issued, including
any Preferred Stock.
"Change of Control" means the occurrence of any of the following
events:
(i) any Person (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than the Permitted Holders, is or becomes
the Beneficial Owner, directly or indirectly, of (a) more than 35% of
the total Voting Stock or Equity Market Capitalization of the Company
or (b) a greater percentage of the voting power of the total Voting
Stock of the Company than that represented by the voting power of the
Voting Stock of the Company then beneficially owned, in the aggregate,
by the Permitted Holders; or
(ii) the Company consolidates with, or merges with or into,
another Person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any
Person, or any Person consolidates with, or merges with or into, the
Company, in any such event pursuant to a transaction in which
immediately after the consummation thereof the stockholders of the
Company immediately prior to the date of such transaction cease to
own, directly or indirectly, a majority of the Voting Stock of the
surviving or transferee corporation, or Persons owning a majority of
the Voting Stock of the Company immediately prior to such transaction
cease to own, directly or indirectly, a majority of the Voting Stock
of the surviving or transferee corporation; or
(iii) during any consecutive two-year period, individuals who at
the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board
of Directors or whose nomination for election by the stockholders of
the Company was approved by a vote of 66 2/3% of the directors then
still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board
of Directors of the Company then in office; or
(iv) the Company adopts a plan of liquidation or dissolution.
"Closing Price" on any Trading Day with respect to the per share price
of any shares of Capital Stock means the last reported sale price regular way
or, in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or
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admitted to trading on any national securities exchange, on the Nasdaq National
Market or, if such shares are not listed or admitted to trading on any national
securities exchange or quoted on such automated quotation system, the average of
the closing bid and asked prices in the over-the-counter market as furnished by
any New York Stock Exchange member firm that is selected from time to time by
the Company for that purpose and is reasonably acceptable to the Trustee.
"Collateral" has the meaning ascribed to such term in the Escrow and
Disbursement Agreement.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Income Tax Expense" for any Person for any period means,
without duplication, the aggregate amount of net taxes based on income or
profits for such period of the operations of such Person and its consolidated
Subsidiaries with respect to such period in accordance with GAAP.
"Consolidated Indebtedness" means, with respect to any Person, as of
any date of determination, the aggregate amount of Indebtedness of such Person
and its Subsidiaries as of such date determined on a consolidated basis in
accordance with GAAP.
"Consolidated Interest Expense" means, for any Person, for any period,
the aggregate of the following for such Person for such period determined on a
consolidated basis in accordance with GAAP: the amount of interest in respect of
Indebtedness (including amortization of original issue discount and non-cash
interest payments on any Indebtedness and the interest portion of any deferred
payment obligation and after taking into account the effect of elections made
under any Interest Rate Agreement, however denominated, with respect to such
Indebtedness), and the interest component of any Capital Lease Obligation paid,
in each case whether accrued or scheduled to be paid or accrued by such Person
during such period to the extent such amounts were deducted in computing
Consolidated Net Income, determined on a consolidated basis in accordance with
GAAP, provided that each of the foregoing shall only be included in the
calculation of Consolidated Interest Expense to the extent such amounts reduce
Consolidated Net Income for such period. For purposes of this definition,
interest on a Capital Lease Obligation shall be deemed to accrue at an interest
rate reasonably determined by such Person to be the rate of interest implicit in
such Capital Lease Obligation in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its consolidated
Subsidiaries for such period determined in accordance with GAAP, provided that
there shall be excluded (i) the Net
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Income of any Person (other than a consolidated Subsidiary) in which such Person
or any of its consolidated Subsidiaries has a joint interest with a third party,
including, without limitation, interests accounted for on the equity method,
except to the extent of the amount of dividends or distributions actually paid
to such Person or its consolidated Subsidiary during such period; (ii) except to
the extent includable pursuant to the foregoing clause (i), the Net Income of
any Person accrued prior to the date it becomes a Subsidiary of such Person or
is merged into or consolidated with such Person or any of its Subsidiaries or
that Person's assets are acquired by such Person or any of its Subsidiaries;
(iii) the Net Income (if positive), or any portion thereof, of any Subsidiary of
such Person to the extent that the declaration or payment of dividends or
similar distributions by that Subsidiary to such Person or to any other
Subsidiary of such Net Income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary, except
that (A) the Company's equity in the Net Income of any such Subsidiary for such
period shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Subsidiary during such period to the
Company or another Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution to a Subsidiary, to the limitation
contained in this clause) and (B) the Company's equity in a net loss of any such
Subsidiary for such period shall be included in determining such Consolidated
Net Income; (iv) without duplication, any gains or losses attributable to Asset
Sales; (v) Net Income (if positive), arising from the adoption of changes in
accounting policy to comply with GAAP or voluntarily by the Company with the
consent of its independent auditors that so qualify under Regulation S-X of the
Securities Act; (vi) Net Income arising for periods prior to the date of a
transaction in connection with the accounting treatment for a merger,
combination or consolidation under the pooling of interests method; and (vii)
foreign currency translation gains and losses.
"Contributed Markets" means Bedias/Huntsville, Texas; Freeport, Texas;
Milano, Texas; Baton Rouge, Louisiana; Ferriday, Louisiana; Holly Ridge,
Louisiana; Jena, Louisiana; Leesville, Louisiana; Monroe, Louisiana;
Natchitoches, Louisiana; Ruston, Louisiana; Alberta/Salem, Alabama; Ariton,
Alabama; Bankston, Alabama; Bucks, Alabama; Six Mile, Alabama; Society Hill,
Alabama; Tharpton, Alabama; Village Springs, Alabama; Charing, Georgia;
Groveland, Georgia; Hoggards Mill, Georgia; Jeffersonville, Georgia; Mathews,
Georgia; Tarboro, Georgia; Valdosta, Georgia; Ocala, Florida; and Tallahassee,
Florida.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 or such other address as to which the Trustee
may give notice to the Company.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
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"Depository" means The Depository Trust Company, or its nominee or
successors and assigns.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date on which the Notes mature; provided, however, that any Capital Stock that
would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require the Company to repurchase or redeem such
Capital Stock upon the occurrence of a Change of Control occurring prior to the
final maturity of the Notes shall not constitute Disqualified Stock if (i) the
change of control provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the provisions applicable to
the Notes contained in Section 4.16 and (ii) such Capital Stock specifically
provides that the Company will not repurchase or redeem any such stock pursuant
to such provisions prior to the Company's repurchase of such Notes as are
required to be repurchased pursuant to Section 4.16.
"EBITDA" for any period means the Consolidated Net Income for such
period plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) Consolidated Income Tax Expense, (ii) Consolidated
Interest Expense, (iii) depreciation and amortization expense determined on a
consolidated basis for such Person and its consolidated Subsidiaries in
accordance with GAAP for such period and (iv) all other non-cash charges (other
than non-cash charges which require an accrual of or reserve for cash charges in
future periods), and less any non-cash items which have the effect of increasing
Consolidated Net Income for such period.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A" (or higher) according to S&P or
Moody's at the time as of which any investment or rollover therein is made.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock or that are measured by the value of
Capital Stock (but excluding any debt security that is convertible into or
exchangeable for Capital Stock).
"Equity Market Capitalization" of any Person means, as of any day of
determination, the product of (a) the aggregate number of outstanding shares of
Common Stock of such Person on such day (which shall not include any options or
warrants on, or securities convertible or exchangeable into, shares of Common
Stock of such Person) and (b) the average Closing Price of such Common Stock
over the 20 consecutive Trading Days immediately preceding such day. If no such
Closing Price exists with respect to shares of any
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such class, the value of such shares for purposes of clause (ii) of the
preceding sentence shall be determined by an independent investment banking firm
of national repute.
"Escrow Account" means an escrow account for the deposit of
$1,878,784.91 of the net proceeds from the sale of the Notes (the "Escrow
Amount") under the Escrow and Disbursement Agreement.
"Escrow Agent" means Bankers Trust Company, as Escrow Agent under the
Escrow and Disbursement Agreement, or any successor thereto appointed pursuant
to such agreement.
"Escrow and Disbursement Agreement" means the Escrow and Disbursement
Agreement, dated as of the date of this Indenture, by and among the Escrow
Agent, the Trustee and the Company, governing the disbursement of funds from the
Escrow Account, as amended, in substantially the form set forth as Exhibit E
hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
(or any successor act), and the rules and regulations promulgated thereunder.
"Exchange Notes" has the meaning provided in the preamble to this
Indenture.
"Existing Indebtedness" means the Notes and any other Indebtedness of
the Company and its Subsidiaries in existence on the Issue Date.
"Fair Market Value" means, with respect to any asset or property, the
sale value that would be obtained in an arm's length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of
determination.
"Global Note" has the meaning provided in Section 2.01.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation or such other
Person (whether arising by virtue of partnership arrangements,
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or by agreement to keep well, to purchase assets, goods, securities or services,
to take-or-pay or to maintain financial statement conditions or otherwise) or
(ii) entered into the purposes of assuring in any other manner the obligee of
such Indebtedness or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided,
however, that the term "Guarantee" shall not include endorsements for collection
or deposits in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning. The amount of any Guarantee shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee is made (unless such Guarantee
shall be expressly limited to a lesser amount, in which case such lesser amount
shall apply) or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" of any Person means, without duplication: (i) the
principal of and premium (if any) in respect of (A) indebtedness of such Person
for money borrowed and (B) indebtedness evidenced by notes, debentures,bonds or
other similar instruments for the payment of which such Person is responsible or
liable; (ii) all Capital Lease Obligations of such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of such Person
for the reimbursement of any obligor or any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with respect to
letters of credit securing obligations (other than obligations described in (i)
through (iii) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third Business
Day following receipt by such Person of a demand for reimbursement following
payment on the letter of credit); (v) the amount of all obligations of such
Person with respect to the redemption, repayment or other repurchase of any
Disqualified Stock (the amount of Indebtedness represented by any Disqualified
Stock will be the liquidation preference, plus accrued and unpaid dividends);
(vi) to the extent not otherwise included, Interest Rate Agreements; (vii) all
obligations of the type referred to in clauses (i) through (vi) of other Persons
and all dividends of other Persons for the payment for which, in either case,
such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee; and (viii) all
obligations of the type referred to in clauses (i) through (vii) of other
Persons secured by any Lien on any property or asset of such Person (whether or
not such obligation is assumed by such Person); provided that if recourse with
respect to such Indebtedness is limited to such asset, the amount of such
Indebtedness shall be deemed to be the lesser of the value of such property or
assets or the amount of the obligation so secured.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
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"Initial Notes" has the meaning provided in the preamble to this
Indenture.
"Initial Purchasers" means BT Securities Corporation.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Rate Agreement" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Investment Grade" means a rating of at least BBB-, in the case of
S&P, or Baa3, in the case of Moody's.
"Investments" means, with respect to any Person, (i) all investments
by such Person in other Persons (including Affiliates) in the forms of loans,
Guarantees, advances or capital contributions (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities of any other Person and all other items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP and (ii) all acquisitions by such Person of assets to be
used in the Wireless Cable Business (other than any such acquisitions of
equipment made in the ordinary course of such Person's business and other than
any acquisition or lease (and any deposit required to be made in connection
therewith) of additional channel rights on or after the Issue Date in any
wireless cable market listed in the offering memorandum relating to the issuance
of the Notes or any wireless cable market or "Basic Trading Area" (as defined by
Rand McNally) in which the Company and its Subsidiaries (A) as of the date of
the Indenture, have channel rights, whether by way of license, lease with a
channel license holder, lease with a channel license applicant, lease with a
qualified, non-profit educational organization that plans to apply for a channel
license or option to acquire any of the foregoing, or (B) as of the date of such
acquisition or lease, have rights with respect to at least eight wireless cable
channels, whether by way of license, lease with a channel license holder, lease
with a channel license applicant, lease with a qualified, non-profit educational
organization that plans to apply for a channel license or option to acquire any
of the foregoing; provided, however, that until the date on which the ratio of
Annualized EBITDA to Consolidated Interest Expense equals or exceeds 1.75 to
1.00, the aggregate amount of such acquisitions and leases (and deposits) shall
not exceed $12.5 million).
"Issue Date" means the date on which Notes are first authenticated and
issued.
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"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, deed of trust,
lien, pledge, charge, security interest, lease, easement, restriction, covenant,
right-of-way, charge, encumbrance or other similar lien of any kind in respect
of such asset, whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"Marketable Securities" means (i) U.S. Government Securities maturing
not more than two years after the date of acquisition; (ii) any certificate of
deposit maturing not more than 270 days after the date of acquisition issued by,
or time deposit of, an Eligible Institution; (iii) commercial paper maturing not
more than 270 days after the date of acquisition issued by a corporation (other
than an Affiliate of the Company) with a rating, at the time as of which any
investment therein is made, of "A-1" (or higher) according to S&P or "P-1" (or
higher) according to Moody's; (iv) any banker's acceptances or money market
deposit accounts issued or offered by an Eligible Institution; and (v) any fund
investing exclusively in investments of the types described in clauses (i)
through (iv) above.
"Moody's" means Moody's Investors Service Inc. and its successors.
"Net Cash Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (excluding,
without limitation, any consideration received in the form of assumption by the
acquiring Person of Indebtedness or other obligations relating to such property
or assets or received in any other non-cash form), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees and sales commissions), any relocation expenses
incurred as a result thereof, Federal, state, provincial, foreign and local
taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), title and
recording tax expenses, and in each case net of appropriate amounts to be
provided by the Company or its Subsidiaries as a reserve, in accordance with
GAAP, against any liabilities associated with such assets and retained by the
Company or any Subsidiary after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities and liabilities related to
environmental matters and the after-tax cost of any indemnification payments
(fixed or contingent) attributable to the seller's indemnities to the purchaser
undertaken by the Company or any of its Subsidiaries in connection with such
Asset Sale (but excluding any payments, which by the terms of the indemnities
will not, under any circumstances, be made
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during the term of the Notes) and net of all payments made on any Indebtedness
which is secured by any assets subject to such Asset Sale, in accordance with
the terms of any Lien upon or other security agreement of any kind with respect
to such assets, or which must by its terms, or in order to obtain a release of
such Lien or a necessary consent to such Asset Sale, or by applicable law be
repaid out of the proceeds from such Asset Sale, and net of all distributions
and other payments required to be made to minority interests holders in
Subsidiaries or joint ventures as a result of such Asset Sale. Net Cash Proceeds
shall exclude any non-cash proceeds received from any Asset Sale, but shall
include such proceeds when and as converted by the Company or any Subsidiary to
cash.
"Net Income" of any person for any period means the net income (loss)
of such Person for such period, determined in accordance with GAAP, except that
extraordinary gains and losses as determined in accordance with GAAP shall be
excluded.
"Net Proceeds" means, with respect to any issuance or sale of Equity
Interests, the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts and
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Notes" mean the Initial Notes and the Exchange Notes treated as a
single class of securities, as amended or supplemented from time to time in
accordance with the terms hereof, that are issued pursuant to this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering Memorandum" means the Offering Memorandum dated March 25,
1996 of the Company relating to the offering of the Notes.
"Officer" means, with respect to any Person, other than the Trustee,
Authenticating Agent, Paying Agent, or Registrar, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice President of such Person.
"Officers' Certificate" means a certificate signed by two Officers of
the Company, one of whom must be the principal executive officer, principal
financial officer, treasurer or principal accounting officer of the Company.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel reasonably satisfactory to the Trustee.
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"Permitted Designee" means (i) a spouse, child or grandchild (whether
such relationship arises from birth, adoption or through marriage) of a
Permitted Holder, (ii) any trust, corporation, partnership or other entity, a
majority in interest of the beneficiaries, stockholders, partners or owners
(direct or beneficial) of which are Permitted Holders and/or Persons of the type
referred to in clause (i) above or (iii) any Person so long as a Permitted
Holder owns at least 50% of the Voting Stock of such Person.
"Permitted Holders" means Hunt Capital Group L.L.C. and its
Affiliates, David E. Webb and L. Allen Wheeler and their Permitted Designees.
"Permitted Investment" means (a) any Investments by the Company in a
Subsidiary (provided that, in the case of Wholly-Owned Subsidiaries, if such
Wholly-Owned Subsidiary ceases to be a Wholly-Owned Subsidiary (except by reason
of the sale by the Company or its Wholly-Owned Subsidiary of the Equity
Interests therein), then any Investment in such Subsidiary will be deemed to be
a Restricted Payment at the time of such event determined in accordance with
Section 4.07); and (b) any Investments in Marketable Securities.
"Permitted Liens" means:
(i) Liens on (x) the Escrow Account and all funds and securities
therein securing only the Notes equally and ratably or (y) other
assets of the Company or any Subsidiary thereof securing only the
Notes equally and ratably;
(ii) Liens to secure Bank Indebtedness incurred by the Company or
the Subsidiaries in compliance with Section 4.08 and Guarantees
incurred by the Subsidiaries in compliance with clause (iv) of the
second paragraph of Section 4.08 executed in connection therewith;
(iii) Liens on the property of the Company or its
Subsidiaries created solely for the purpose of securing purchase money
obligations incurred in compliance with this Indenture; provided that
(a) such property so acquired is for use in lines of business related
to the Company's or its Subsidiaries' business as it exists
immediately prior to the issuance of the related Indebtedness, (b) no
such Lien shall extend to or cover other property or assets of the
Company and its Subsidiaries other than the respective property so
acquired and (c) the principal amount of Indebtedness secured by any
such Lien shall at no time exceed the original purchase price of such
property or assets;
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(iv) Liens on the property or assets of a Subsidiary acquired
after the Issue Date or on property or assets acquired in an asset
purchase transaction with a Person that is not an Affiliate created
solely to secure the obligations that financed the acquisition of such
Subsidiary or such property and assets; provided that (a) no such Lien
shall extend to or cover property or assets of the Company and its
Subsidiaries other than the property or assets of the Subsidiary so
acquired or the property or assets so acquired and (b) no such Lien
shall extend to the Capital Stock of any Subsidiary so acquired and
(c) the principal amount of Indebtedness secured by any such Lien
shall not exceed the original purchase price of such Subsidiary or
such property or assets;
(v) Liens on the assets of any entity existing at the time such
entity or assets are acquired by the Company or any of its
Subsidiaries, whether by merger, consolidation, purchase of assets or
otherwise; provided that such Liens (a) are not created, incurred or
assumed in connection with, or in contemplation of, such assets being
acquired by the Company or any of its Subsidiaries and (b) do not
extend to any other property of the Company or any of its
Subsidiaries;
(vi) Liens to secure the performance of statutory
obligations,surety or appeal bonds or performance bonds or landlords',
carriers', warehousemen's, mechanics', suppliers', materialmen's or
other like Liens, in any case incurred in the ordinary course of
business and with respect to amounts not yet delinquent or being
contested in good faith by appropriate process of law, if a reserve or
other appropriate provision,if any, as required by GAAP shall have
been made therefor;
(vii) Liens existing on the date of this Indenture;
(viii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good
faith by appropriate proceedings promptly instituted and diligently
concluded, provided that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made
therefor; and
(ix) extensions or renewals of any Liens referred to in clauses
(i) through (viii) above, provided that such extension or renewal does
not extend to any assets or secure any Indebtedness not securing or
secured by the Liens being extended or renewed.
Notwithstanding the foregoing, Permitted Liens may not extend to the Escrow
Account or the Escrow and Disbursement Agreement.
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"Permitted Payments" means, with respect to the Company or any of its
Subsidiaries, (a) any dividend on shares of Capital Stock payable solely in
shares of Capital Stock (other than Disqualified Stock) or in options, warrants
or other rights to purchase Capital Stock (other than Disqualified Stock); (b)
any dividend, other distribution, loan or advance to the Company by any of its
Subsidiaries or by a Subsidiary to another Subsidiary; (c) any defeasance,
redemption, repurchase or other acquisition for value of any Indebtedness of the
Company with the proceeds from the issuance of (i) Indebtedness which is
subordinate to the Notes at least to the extent and in the manner as the
Indebtedness to be defeased, redeemed, repurchased or otherwise acquired is
subordinate in right of payment to the Notes; provided that (1) such
newly-issued subordinated Indebtedness provides for no payments of principal by
way of sinking fund, mandatory redemption, defeasance or otherwise by the
Company or its Subsidiaries (including, without limitation, at the option of the
holder thereof other than an option given to a holder pursuant to a Change of
Control covenant which (x) is no more favorable to the holders of such
Indebtedness than the provisions in favor of the Holders and (y) such
Indebtedness provides that the Company or its Subsidiaries will not repurchase
such Indebtedness pursuant to such provisions prior to the Company's repurchase
of the Notes required to be repurchased by the Company upon a Change of Control)
prior to the maturity of the Indebtedness being replaced and (2) the proceeds of
such new Indebtedness are utilized for such purpose within 45 days of issuance
or (ii) Capital Stock (other than Disqualified Stock) issued in accordance with
the provisions of this Indenture; and (d) the redemption or repurchase by a
Wholly-Owned Subsidiary of its Capital Stock owned by the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Physical Notes" has the meaning provided in Section 2.01.
"Preferred Stock," as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes (however designated)
that ranks prior, as to payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.15.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement dated on or about the Issue Date between the Company and the Initial
Purchasers for the
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benefit of themselves and the Holders as the same may be amended from time to
time in accordance with the terms thereof.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
-------- -------
entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Note constitutes a Restricted Security.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Corporation and its successors.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended (or any
successor act), and the rules and regulations thereunder.
"Strategic Equity Investor" means any Person that, both as of the
Trading Day immediately before the day of such sale and the Trading Day
immediately after the day of such sale, has an Equity Market Capitalization of
at least $2 billion and is engaged in the business of (i) transmitting video,
voice or data through wireless and other transmission facilities, (ii) creating,
developing or packaging entertainment or communication programming or (iii)
evaluating, participating or pursuing any other activity or opportunity that is
related to those identified in (i) or (ii) above.
"Subsidiary" means any corporation, association or other business
entity of which more than 50% of the total voting power of the outstanding
Voting Stock (or other interests, including partnership interests) is owned
directly or indirectly by any Person or one or more of the other Subsidiaries of
that Person or a combination thereof.
"S&P" means Standard & Poor's Corporation and its successors.
"TechniVision Transaction" means the acquisition by the Company of the
assets of TechniVision, Inc. for consideration comprised of Equity Interests of
the Company.
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"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sec.Sec.
77aaa-bbbb), as it may be amended from time to time.
"Trading Day," with respect to a securities exchange or automated
quotation system, means a day on which such exchange or system is open for a
full day of trading.
"Transactions" means the AWS Transaction, the CableMaxx Transaction,
the TechniVision Transaction and the Wireless One Transaction, collectively.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"U.S. Government Securities" means securities that are (x) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt.
"U.S. Physical Notes" has the meaning provided in Section 2.01.
"Voting Stock" of any Person means all outstanding classes of Capital
Stock of any entity entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Preferred Stock, as the case may be, at any date, the number of
years obtained by dividing (i) the then outstanding principal amount or stated
value of such Indebtedness or Preferred Stock, as the case may be, into (ii) the
total of the product obtained by multiplying (x) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at final maturity, or preference in respect
thereof, by (y) the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment.
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"Wholly-Owned Subsidiary" means any Subsidiary of the Company, all of
the outstanding Capital Stock (other than directors' qualifying shares), or in
the case of a non-corporate Subsidiary, other equity interests having ordinary
voting power for the election of directors or other governing body of such
Subsidiary, of which is owned by the Company or another Wholly-Owned Subsidiary
of the Company or a combination thereof.
"Wireless Cable Business" means, when used in reference to any
Person,that such Person, directly or indirectly, is engaged primarily in the
business of (i) transmitting video, voice or data primarily through wireless
transmission facilities, (ii) utilizing wireless cable channels for any
commercial purpose permitted by the FCC, (iii) creating, developing and
packaging programming that may be used to satisfy educational programming
requirements for ITFS channels and advertising, that, in either case, is
transmitted over one or more of the Company's wireless cable channels or (iv)
evaluating, participating or pursuing any other activity or opportunity that is
related to those identified in (i), (ii) or (iii) above.
"Wireless Cable Related Assets" means all assets, rights (contractual
or otherwise) and properties, whether tangible or intangible, used in connection
with a Wireless Cable Business.
"Wireless One Transaction" means the transaction consummated pursuant
to the Contribution Agreement dated October 24, 1995, between the Company and
Wireless One Operating Company, a Delaware corporation ("Old Wireless One"),
whereby, among other things, Wireless One, Inc., a newly-formed Delaware
corporation ("Wireless One"), acquired (A) all of the outstanding capital stock
of Old Wireless One (which retained all of its assets and liabilities except its
wireless cable assets and certain related liabilities with respect to the
Springfield, Missouri market which the Company acquired) for consideration
comprised of the Common Stock, $.01 par value per share (the "Wireless One
Common Stock"), of Wireless One and (B) the wireless cable assets and related
liabilities of certain Subsidiaries of the Company with respect to the
Contributed Markets for consideration comprised of Wireless One Common Stock and
promissory notes of Wireless One.
Section 1.02. Other Definitions.
Defined in
Term Section
"Affiliate Transaction" 4.14
"Bankruptcy Law" 4.01
"Change of Control Offer" 4.16
"Change of Control Payment" 4.16
"Change of Control Payment Date" 4.16
"Covenant Defeasance" 8.03
"Custodian" 6.01
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"Event of Default" 6.01
"incur" 4.08
"Legal Defeasance" 8.02
"Net Cash Proceeds Offer" 4.12
"Net Proceeds Offer Payment Date" 4.12
"Net Proceeds Offer Trigger Date" 4.12
"Paying Agent" 2.03
"Permitted Refinancing" 4.08
"Purchase Date" 4.12
"Refinancing Indebtedness" 4.08
"Registrar" 2.03
"Restricted Payments" 4.07
"SEC Reports" 4.03
Section 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture shall be governed by the provisions of the TIA.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company and any successor obligor
upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
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(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
The Initial Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of Exhibit A hereto. The
Exchange Notes and the Trustee's certificate of authentication relating thereto
shall be substantially in the form of Exhibit B hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
depository rule or usage. The Company shall approve the form of the Notes and
any notation, legend or endorsement on them and shall furnish the same to the
Trustee, which shall be in form and substance satisfactory to the Trustee. Each
Note shall be dated the date of its authentication.
The terms and provisions contained in the Notes, annexed hereto as
Exhibits A and B, shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Company and the Trustee, by
their execution and delivery of this indenture, expressly agree to such terms
and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Notes in registered form,
substantially in the form set forth in Exhibit A (the "Global Note"), deposited
with Bankers Trust Company, as custodian for the Depository, duly executed by
the Company and authenticated by the Trustee as hereinafter provided and shall
bear the legend set forth in Section 2.15. The aggregate principal amount of
the Global Note may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depository, as
hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A (the "Offshore
Physical Notes"). Notes offered and sold in reliance on any other exemption
from registration under the Securities Act other than as
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described in the preceding paragraph shall be issued, and Notes offered and sold
in reliance on Rule 144A may be issued, in the form of permanent certificated
Notes in registered form, in substantially the form set forth in Exhibit A (the
"U.S. Physical Notes"). The Offshore Physical Notes and the U.S. Physical Notes
are sometimes collectively herein referred to as the "Physical Notes."
Section 2.02. Execution and Authentication; Aggregate Principal
Amount.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature.
If an Officer or Assistant Secretary whose signature is on a Note was
an Officer or Assistant Secretary at the time of such execution but no longer
holds that office or position at the time the Trustee authenticates the Note,
the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount not to exceed $15,000,000, and (ii) Exchange
Notes from time to time for issue in the aggregate amount not to exceed
$15,000,000 for issuance in exchange for a like principal amount of Initial
Notes pursuant to an exchange offer registration statement under the Securities
Act or pursuant to a Private Exchange (as defined in the Registration Rights
Agreement), in each case upon a written order of the Company in the form of an
Officers' Certificate. Exchange Notes may have such distinctive series
designation as, and such changes in the form thereof, as are specified in the
written order referred to in the preceding sentence. The Officers' Certificate
shall specify the amount of Notes to be authenticated and the date on which the
Notes are to be authenticated, whether the Notes are to be Initial Notes or
Exchange Notes, whether the Notes are to be issued as Physical Notes or a Global
Note and whether or not the Notes shall bear the Private Placement Legend, or
such other information as the Trustee may reasonably request. The aggregate
principal amount of Notes outstanding at any time may not exceed $15,000,000,
except as provided in Section 2.07.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Company or with any Affiliate of the Company. The Trustee
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initially appoints, and the Company approves the appointment of, Bankers Trust
Company, as Authenticating Agent.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be located
in the Borough of Manhattan in the City of New York, State of New York) where
(a) Notes may be presented or surrendered for registration of transfer or for
exchange ("Registrar"), (b) Notes may be presented or surrendered for payment
("Paying Agent") and (c) notices and demands to or upon the Company in respect
of the Notes and this Indenture may be served. The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company, upon
prior written notice to the Trustee, may have one or more additional paying
agents reasonably acceptable to the Trustee. The term "Paying Agent" includes
any additional Paying Agent. The Company may act as its own Paying Agent,
except that for the purposes of payments on the Notes pursuant to Sections
3.07(b), 4.12 and 4.16 neither the Company nor any Affiliate of the Company may
act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Company shall notify the Trustee, in advance, of the name
and address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such.
The Company initially appoints Bankers Trust Company as Registrar,
Paying Agent, Authenticating Agent and agent for service of demands and notices
in connection with the Notes, until such time as Bankers Trust Company has
resigned or a successor has been appointed. Any of the Registrar, the Paying
Agent, Authenticating Agent or any other agent may resign upon 30 days' written
notice to the Company.
Section 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, or interest on, the Notes (whether such assets have been
distributed to it by the Company or any other obligor on the Notes), and the
Company and the Paying Agent shall notify the Trustee of any Default by the
Company (or any other obligor on the Notes) in making any such payment. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the
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continuance of any Payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Company to the Paying Agent, the
Paying Agent shall have no further liability for such assets.
Section 2.05. Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. The Company shall furnish or cause the Registrar to furnish to the
Trustee promptly after each Record Date and as of such Record Date at such other
times as the Trustee may reasonably request in writing a list as of such date
and in such form as the Trustee may reasonably require of the names and
addresses of the Holders, which list may be conclusively relied upon by the
Trustee.
Section 2.06. Transfer and Exchange.
Subject to Section 2.17 hereof, when Notes are presented to the
Registrar with a request to register the transfer of such Notes or to exchange
such Notes for an equal principal amount of Notes of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested if its requirements for such transaction are met; provided, however,
that the Notes presented or surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. To permit registrations of
transfer and exchanges, the Company shall execute and the Trustee shall
authenticate Notes at the Registrar's request. No service charge shall be made
for any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchanges or transfers pursuant to
Sections 2.10, 3.06, 3.07(b), 4.12, 4.16 or 10.05, in which event the Company
shall be responsible for the payment of such taxes).
The Registrar shall not be required to register the transfer of or
exchange of any Note (i) during a period beginning at the opening of business 15
days before the mailing of a notice of redemption of Notes and ending at the
close of business on the day of such mailing and (ii) selected for redemption in
whole or in part pursuant to Article Three, except the unredeemed portion of any
Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Notes may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that
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ownership of a beneficial interest in the Note shall be required to be reflected
in a book entry system.
Section 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or an Agent or if
the Holder of a Note claims that the Note has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Note if the Trustee's requirements are met. Such Holder must provide an
indemnity bond or other indemnity of reasonable tenor, sufficient in the
reasonable judgment of the Company, such Agent and the Trustee, to protect the
Company, the Trustee or any Agent from any loss which any of them may suffer if
a Note is replaced. Every replacement Note shall constitute an additional
obligation of the Company.
Section 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to it
for cancellation and those described in this Section as not outstanding.
Subject to the provisions of Section 2.09, a Note does not cease to be
outstanding because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned by
the Company or an Affiliate shall be considered as though they are not outstand-
ing, except that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Notes as to
which a Responsible Officer of the Trustee has received written notice of such
ownership shall be so considered. The Company shall notify the Trustee, in
writing, when it or any of its Affiliates repurchases or otherwise acquires
Notes, of the aggregate principal amount of such Notes so repurchased or
otherwise acquired.
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Section 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon receipt of a written
order of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated, the
date on which the temporary Notes are to be authenticated, whether such Notes
are Initial Notes or Exchange Notes and whether such Notes shall bear the
Private Placement Legend. Temporary Notes shall be substantially in the form of
definitive Notes but may have variations that the Company considers appropriate
for temporary Notes and so indicates in the Officers' Certificate. Without
unreasonable delay, the Company shall prepare and the Trustee shall authenticate
upon receipt of a written order of the Company pursuant to Section 2.02
definitive Notes in exchange for temporary Notes.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying Agent, and no
one else, shall cancel and, at the written direction of the Company, shall
dispose of all Notes surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue new Notes to
replace Notes that it has paid or delivered to the Trustee for cancellation. If
the Company shall acquire any of the Notes, such acquisition shall not operate
as a redemption or satisfaction of the Indebtedness represented by such Notes
unless and until the same are surrendered to the Trustee for cancellation
pursuant to this Section 2.11.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which special record date shall be the fifteenth day next
preceding the date fixed by the Company for the payment of defaulted interest or
the next succeeding Business Day if such date is not a Business Day. The
Company shall notify the Trustee and Paying Agent in writing of the amount of
defaulted interest proposed to be paid on each Note and the date of the proposed
payment (a "Default Interest Payment Date"), and at the same time the Company
shall deposit with the Trustee or Paying Agent an amount of money equal to the
aggregate amount proposed to be paid in respect of such defaulted interest or
shall make arrangements satisfactory to the Trustee or Paying Agent for such
deposit prior to the date of the proposed payment, such money when deposited to
be held in trust for the benefit of the Persons entitled to such defaulted
interest as in this Section provided; provided that in no event shall the
Company deposit monies proposed to be paid in respect of defaulted interest
later than 10:00 a.m. New York time on the proposed Default Interest Payment
Date. At least 15 days before the subsequent special
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record date, the Company shall mail (or cause to be mailed) to each Holder, as
of a recent date selected by the Company, with a copy to the Trustee and Paying
Agent, a notice that states the subsequent special record date, the payment date
and the amount of defaulted interest, and interest payable on such defaulted
interest, if any, to be paid. Notwithstanding the foregoing, any interest which
is paid prior to the expiration of the 30-day period set forth in Section
6.01(a) shall be paid to Holders as of the regular record date for the Interest
Payment Date for which interest has not been paid. Notwithstanding the
foregoing, the Company may make payment of any defaulted interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange.
Section 2.13. CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number, and, if so,
the Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided, however, that no representation is hereby
deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes. The Company
shall promptly notify the Trustee of any change in the CUSIP number.
Section 2.14. Deposit of Monies.
Prior to 10:00 a.m. New York City time on each Interest Payment Date,
Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds
Offer Payment Date, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control
Payment Date and Net Proceeds Offer Payment Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date, Maturity Date, Redemption Date, Change of Control
Payment Date and Net Proceeds Offer Payment Date, as the case may be.
Section 2.15. Restrictive Legends.
Each Global Note and Physical Note that constitutes a Restricted
Security shall bear the following legend (the "Private Placement Legends") on
the face thereof until March 28, 1999, unless otherwise agreed by the Company
and the Holder thereof and unless specified in an Officers' Certificate
delivered to the Trustee and Registrar:
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
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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 RESELL OR OTHERWISE TRANSFER THIS SECURITY, EXCEPT (A)
TO THE ISSUER, OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER
THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (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 GIVE 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
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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 TRANSACTIONS,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE
OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE DEPOSITORY,
OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY
OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITORY. 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 IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS
MADE TO CEDE & CO. OR TO 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.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE &
CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE
AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN
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ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE
INDENTURE.
Section 2.16. Book-Entry Provisions for Global Security.
(a) The Global Note initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Section 2.15.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the Company, the Trustee and
any Agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any Agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.
(b) Transfers of the Global Note shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Note may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.17. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in the Global Note if (i) the Depository notifies the Company that it
is unwilling or unable to continue as Depository for the Global Note and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Physical Notes of like tenor and amount.
(d) In connection with the transfer of the entire Global Note to
beneficial owners pursuant to paragraph (b), the Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its
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beneficial interest in the Global Note, an equal aggregate principal amount of
Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered
in exchange for an interest in the Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.17, bear the legend regarding transfer restrictions applicable to the Physical
Notes set forth in Section 2.15.
(f) The Holder of the Global Note may grant proxies and otherwise
authorize any person, including Agent members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
Section 2.17. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the Trustee and Registrar have received
both an Opinion of Counsel and an Officers' Certificate directing transfer
without a Private Placement Legend, (y) the requested transfer is after
March 28, 1999 or (z) (1) in the case of a transfer to an Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the
proposed transferee has delivered to the Registrar a certificate
substantially in the form of Exhibit C hereto or (2) in the case of a
transfer to a Non-U.S. Person, the proposed transferor has delivered to the
Registrar a certificate substantially in the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of
(x) the certificates required by paragraph (i) above and (y) written
instructions given in accordance with the Depository's and the Registrar's
procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
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(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for on
the form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Global Note, upon receipt by the Registrar
of written instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Global Note
in an amount equal to the principal amount of the Physical Notes to be
transferred, and the Trustee shall cancel the Physical Notes so
transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the requested transfer is after March 28, 1999, or (ii) there is
delivered to the Registrar and the Trustee an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
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The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time during the
Registrar's normal business hours upon the giving of reasonable written notice
to the Registrar.
The Trustee shall be under no duty to monitor compliance with any
federal, state or other securities laws.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07, it shall furnish to the Trustee,
Registrar and Paying Agent, at least 45 days (unless a shorter period is
acceptable to the Trustee) but not more than 60 days before a redemption date,
an Officers' Certificate setting forth (i) the redemption date, (ii) the
principal amount at maturity of Notes to be redeemed and (iii) the redemption
price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed, the Registrar or
Trustee shall select the Notes to be redeemed among the Holders of the Notes on
a pro rata basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate, provided that no Notes of $1,000 or less shall
be redeemed in part. In the event of partial redemption by lot, the particular
Notes to be redeemed shall be selected, unless otherwise provided herein, not
less than 30 nor more than 60 days prior to the redemption date by the Registrar
or Trustee from the outstanding Notes not previously called for redemption.
The Registrar shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount at maturity thereof to be redeemed. Notes and
portions of them selected shall be in amounts of $1,000 or whole multiples of
$1,000. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 4.12, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
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The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount at maturity of such Note to be redeemed and that, after
the redemption date upon surrender of such Note, a new Note or Notes in
principal amount at maturity equal to the principal amount at maturity of
the unredeemed portion shall be issued;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) the CUSIP number, and that no representation is made as to the
correctness or accuracy of the CUSIP number, if any, listed in such notice
or printed on the Notes.
At the Company's request, the Registrar shall give the notice of
redemption in the Company's name and at the Company's expense; provided,
however, that the Company shall have delivered to the Trustee and Registrar, at
least 45 days prior to the redemption date, an Officers' Certificate requesting
that the Trustee give such notice and setting forth the information to be stated
in such notice as provided in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption become due and payable on the redemption date at
the redemption price.
Section 3.05. Deposit of Redemption Price.
Prior to 10:00 a.m. New York time on any redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption
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price of and accrued interest on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company upon its
written request any money deposited with the Trustee or the Paying Agent by the
Company in excess of the amounts necessary to pay the redemption price of, and
accrued interest on, all Notes to be redeemed.
On and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder of the Notes at the
expense of the Company a new Note equal in principal amount to the unredeemed
portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Optional Redemption. The Notes will not be redeemable at the
Company's option prior to April 15, 1999. Thereafter, the Notes will be subject
to redemption at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on April 15 of the years indicated below:
Year Percentage
---- ----------
1999 . . . . . . . . . . . . . . . . . . . . 105.571%
2000 . . . . . . . . . . . . . . . . . . . . 103.714%
2001 . . . . . . . . . . . . . . . . . . . . 101.857%
2002 and thereafter . . . . . . . . . . . . . . 100.00%
(b) Optional Redemption Upon Sale of Equity to Strategic Equity Investor.
Notwithstanding the foregoing, in the event of the sale by the Company prior to
April 15, 1998 of at least $25.0 million of its Capital Stock
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(other than Disqualified Stock) to a Strategic Equity Investor in a single
transaction, the Company may, at its option, use the net cash proceeds of such
sale of Capital Stock to redeem up to 25% of the Notes at a redemption price
equal to 113% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of redemption; provided that at least 75% of the
initial principal amount of the Notes remains outstanding immediately after such
redemption. In order to effect the foregoing redemption with the proceeds of
any such sale of Capital Stock (other than Disqualified Stock), the Company
shall make such redemption not more than 120 days after the consummation of any
such sale of Capital Stock.
Section 3.08. Mandatory Redemption.
Except as set forth under Sections 4.12 and 4.16 of this Indenture,
the Company shall not be required to make mandatory redemption payments with
respect to the Notes. There are no sinking fund payments with respect to the
Notes.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company, holds as of 10:00 a.m.
Eastern Time on the due date money deposited by the Company in immediately
available funds and designated for and sufficient to pay all principal, premium,
if any, and interest then due.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal and on overdue
installments of interest (without regard to any applicable grace period) from
time to time on demand at the rate borne by the Notes plus 2% per annum, to the
extent lawful.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain an office or agency (which may be an office
of the Trustee or Registrar or an affiliate of the Trustee or Registrar) where
Notes may be surrendered for registration of transfer, exchange or conversion
and where notices and demands to or upon the Company in respect of the Notes and
this Indenture may be served.
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The Company shall give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency for such purposes.
The Company shall give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
Section 4.03. Reports.
The Company (at its own expense) shall file with the Trustee within 15
days after it files them with the Commission copies of the quarterly and annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and regulations
prescribe) to be filed pursuant to Section 13 or 15(d) of the Exchange Act
(without regard to whether the Company is subject to the requirements of such
Section 13 or 15(d) of the Exchange Act) ("SEC Reports"). Upon qualification of
this Indenture under the TIA, the Company shall also comply with the provisions
of Sec. 314(a). In the event that the Company is not required or shall cease to
be required to file SEC Reports pursuant to the Exchange Act, the Company shall
nevertheless continue to file such reports with the Commission and the Trustee.
If the Trustee (at the Company's request and expense) is to mail the foregoing
information to the Holders, the Company shall supply such information to the
Trustee at least five days prior thereto. The Company shall provide to any
Holder any information concerning the Company reasonably requested by such
Holder (including financial statements) necessary in order to permit such Holder
to sell or transfer Notes in compliance with Rule 144A promulgated under the
Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled, and
has caused each of its Subsidiaries to keep,
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observe, perform and fulfill, its obligations under this Indenture and the
Escrow and Disbursement Agreement, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled, and has caused each of its
Subsidiaries to keep, observe, perform and fulfill, each and every covenant
contained in this Indenture and the Escrow and Disbursement Agreement and no
such Person is in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture or the Escrow and Disbursement
Agreement to be performed or observed by it, without regard to any period of
grace or requirement of notice provided under this Indenture, including, without
limitation, a default in the performance or breach of Sections 4.07 through 4.17
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action each is taking or proposes to take with respect thereto) and that to the
best of his or her knowledge no event has occurred and remains in existence by
reason of which payments on account of the principal of or interest, if any, on
the Notes is prohibited or if such event has occurred, a description of the
event and what action each is taking or proposes to take with respect thereto.
The Company's fiscal year ends on December 31 of each year.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention which would lead them to believe that the Company has violated
any provisions of Article Four or Article Five of this Indenture or, if any such
violation has occurred, specifying the nature and period of existence thereof,
it being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of (i) any
Default or Event of Default, (ii) any default under the Escrow and Disbursement
Agreement or (iii) any default under any Indebtedness referred to in Section
6.01(f), an Officers' Certificate specifying such Default, Event of Default or
default and what action the Company is taking or proposes to take with respect
thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except as contested in good faith and by appropriate proceedings or where
the failure to effect such payment is not adverse in any material respect to the
Holders of the Notes.
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Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
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Section 4.07. Limitation on Restricted Payments.
The Company and its Subsidiaries may not, directly or indirectly (i)
declare or pay any dividend or make any distribution on account of any Equity
Interests of the Company or any of its Subsidiaries other than dividends or
distributions payable (A) in Equity Interests of the Company that are not
Disqualified Stock or (B) to the Company or any Wholly-Owned Subsidiary of the
Company; (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any of its Subsidiaries (other than any such
Equity Interests owned by the Company or a Wholly-Owned Subsidiary); (iii)
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is pari passu or subordinated in right of payment to the
Notes, except in accordance with the scheduled repayment provisions set forth in
the original documentation governing such Indebtedness; or (iv) in a single
transaction or a series of related transactions, until the date on which the
ratio of Annualized EBITDA to Consolidated Interest Expense equals or exceeds
1.75 to 1.00, make Investments in a cumulative amount for the Company and all of
its Subsidiaries, in excess of (A) the sum of (1) $10 million and (2) 100% of
the Net Proceeds received by the Company from the issue or sale of Equity
Interests of the Company (other than Equity Interests sold to a Subsidiary of
the Company or to an employee stock ownership plan or similar trust and other
than Disqualified Stock) less (B) the cumulative amount of Net Proceeds received
by the Company from the issue or sale of Equity Interests of the Company that
has been applied to make Restricted Payments (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless, at the time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; (b) after giving effect to such Restricted
Payment on a pro forma basis as if such Restricted Payment had been made at the
beginning of the applicable fiscal quarter, the Company could incur $1.00 of
additional Indebtedness pursuant to the Annualized Cash Flow Ratio test in
Section 4.08; and (c) such Restricted Payment, together with the aggregate of
all other Restricted Payments made by the Company and its Subsidiaries after the
Issue Date, is less than the sum of: (x) 50% of the Consolidated Net Income (or
if Consolidated Net Income shall be a loss, minus 100% of such loss) of the
Company earned from the first day of the fiscal quarter during which the Issue
Date occurs to the end of the most recent fiscal quarter ending prior to the
date of such Restricted Payment, plus (y) 100% of the aggregate Net Cash
Proceeds received by the Company from the issue or sale of Equity Interests of
the Company (other than Equity Interests sold to a Subsidiary of the Company or
to an employee stock ownership plan or similar trust and other than Disqualified
Stock or the Net Proceeds from the sale of Equity Interests applied to make
Investments in accordance with this covenant) since the Issue Date.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at such
date of declaration such payment would have complied with the provisions of
this Indenture; (ii) so long as no Default or
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Event of Default shall have occurred and be continuing, the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Company in exchange for, or out of the net proceeds of, the substantially
concurrent sale for cash or Marketable Securities (other than to a
Subsidiary of the Company) of other Equity Interests of the Company that
are not Disqualified Stock; (iii) so long as no Default or Event of Default
shall have occurred and be continuing, the purchase of Capital Stock of the
Company (including options, warrants or other rights to acquire such
Capital Stock) from employees or former employees of the Company or any
Subsidiary thereof pursuant to any employment agreement, management equity
subscription agreement or stock option plan or similar agreement in effect
as of the Issue Date or entered into in the ordinary course of business for
consideration which, when added to all loans made pursuant to clause (iv)
below during the fiscal year and then outstanding, does not exceed $0.5
million in the aggregate in any fiscal year or $2.5 million in the
aggregate over the life of the Notes; (iv) so long as no Default or Event
of Default shall have occurred and be continuing, the making of loans and
advances to employees of the Company or any Subsidiary thereof in the
ordinary course of business which, when added to the aggregate
consideration paid pursuant to clause (iii) above during the same fiscal
year, does not exceed $0.5 million in any fiscal year or $2.5 million in
the aggregate over the life of the Notes; provided that upon repayment of
such loans or advances made after the Issue Date, such repaid amounts shall
no longer be included in the principal amount of loans and advances made to
employees; (v) so long as no Default or Event of Default shall have
occurred and be continuing, a Permitted Refinancing; (vi) so long as no
Default or Event of Default shall have occurred and be continuing, the
redemption, repurchase, retirement or other acquisition of Equity Interests
of a Subsidiary of the Company for (A) Equity Interests of the Company that
are not Disqualified Stock or (B) up to $1.0 million in the aggregate over
the life of the Notes of cash consideration; (vii) the payment of funds to
satisfy or discharge any liability or obligation incurred by the Company as
a result of its joint and several liability as a general partner for all
third-party liabilities and obligations of RuralVision Joint Venture, if
any; (viii) the acquisition by the Company of the Cross Country Sale
Assets; (ix) the acquisition by the Company of the Tulsa, Oklahoma wireless
cable market from USWS; (x) the acquisition by the Company of the Amarillo,
Texas market from U.S. Wireless; (xi) the payment of dividends on Preferred
Stock of Subsidiaries outstanding on the Issue Date; (xii) the redemption,
repurchase, retirement or other acquisition of Capital Stock of the Company
from U.S. Wireless for consideration comprised of the note receivable
related to the U.S. Wireless Loan; (xiii) Investments in Wireless Cable
Related Assets made with the Net Cash Proceeds from an Asset Sale made in
compliance with the first paragraph of Section 4.12 (whether such Asset
Sale shall have been consummated prior to or after the Issue Date) or
otherwise permitted by Section 4.12, provided that if such Investment had
been acquired in a simultaneous swap or exchange for the assets disposed of
in such Asset Sale, such swap or exchange would have complied with the
provisions of the third paragraph under Section 4.12; (xiv) Investments
that constitute
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part of an Asset Sale transaction consummated in compliance with or
otherwise permitted by the provisions of the third paragraph under Section
4.12; (xv) Investments in the Wireless Cable Business acquired in
consideration for the issuance of Equity Interests of the Company (other
than Disqualified Stock) and cash paid in lieu of the issuance of
fractional shares and in satisfaction of any applicable dissenter's or
appraisal rights; and (xvi) the consummation of any of the Transactions.
The amounts referred to in clauses (i), (ii), (iii), (iv) and (vi) shall be
included as Restricted Payments in any computation made pursuant to clause
(c) above. Restricted Payments shall be deemed not to include Permitted
Payments and Permitted Investments.
Not later than the making of any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by Section 4.07 were computed.
Section 4.08. Limitation on Indebtedness
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume, Guarantee, acquire, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, "incur") any Indebtedness; provided
that the Company (but not its Subsidiaries) may incur Indebtedness if (i) no
Default or Event of Default shall have occurred and be continuing and (ii) the
Annualized Cash Flow Ratio of the Company as of the date of such incurrence or
issuance shall not exceed (x) 7.0 to 1.0 if such incurrence or issuance occurs
on or prior to the second anniversary of the Issue Date and (y) 5.0 to 1.0 if
such incurrence or issuance occurs thereafter.
The foregoing limitation will not apply to: (i) Indebtedness
evidenced by the Notes and this Indenture; (ii) the incurrence by the Company
and its Subsidiaries of the Existing Indebtedness, other than any Existing
Indebtedness required to be repaid with proceeds of the sale of the Notes; (iii)
the incurrence by the Company and its Subsidiaries of Bank Indebtedness in an
aggregate principal amount at any one time outstanding not to exceed $25.0
million (less the amount of any then-outstanding Preferred Stock of Subsidiaries
issued to refinance Indebtedness to the extent such amount has not been applied
to reduce the amount of Indebtedness permitted under clause (vii) below), as
such amount may be permanently reduced as specified in Section 4.12, and reduced
by the amount of any outstanding Guarantee incurred pursuant to clause (iv)
below; provided that no Default or Event of Default shall have occurred and be
continuing at the time of such incurrence; (iv) the Guarantee by the
Subsidiaries of Bank Indebtedness permitted to be incurred by the Company
pursuant to the immediately preceding paragraph; (v) Indebtedness of the Company
issued to any Wholly-Owned Subsidiary; provided that (a) any such Indebtedness
is unsecured and is subordinated to the Notes and (b) that any subsequent
issuance or transfer of any
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Capital Stock which results in any Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any transfer of such Indebtedness to a Person not a
Wholly-Owned Subsidiary will be deemed an incurrence of such Indebtedness; (vi)
Indebtedness of a Subsidiary issued to and held by the Company or any
Wholly-Owned Subsidiary of the Company; provided that any subsequent issuance or
transfer of any Capital Stock which results in a Wholly-Owned Subsidiary ceasing
to be a Wholly-Owned Subsidiary or any transfer of such Indebtedness to a Person
not a Wholly-Owned Subsidiary of the Company will be deemed an incurrence of
such Indebtedness; (vii) the incurrence (a "Permitted Refinancing") by the
Company and its Subsidiaries of Indebtedness issued in exchange for, or the
proceeds of which are used to extend, refinance, renew, replace or refund
Indebtedness incurred pursuant to the Annualized Cash Flow Ratio test above or
pursuant to clauses (ii), (iii), (iv) and (v) above ("Refinancing
Indebtedness"), provided that (a) the net proceeds of such Refinancing
Indebtedness shall not exceed the principal amount of and required premium, if
any, and accrued interest on the Indebtedness so extended, refinanced, renewed,
replaced, substituted or refunded (or if such Indebtedness was issued at an
original issue discount, the original issue price plus amortization of the
original issue discount at the time of the repayment of such Indebtedness) and
reasonable expenses incurred in connection therewith; (b) the Refinancing
Indebtedness shall have a final maturity later than, and a Weighted Average Life
to Maturity equal to or greater than, the final maturity and remaining Weighted
Average Life to Maturity of the Indebtedness being extended, refinanced,
renewed, replaced or refunded; and (c) if the Indebtedness being extended,
refinanced, renewed, replaced or refunded is subordinated in right of payment to
the Notes, the Refinancing Indebtedness shall be subordinated in right of
payment to the Notes on terms at least as favorable to the Holders of Notes as
those contained in the documentation governing the Indebtedness being so
extended, refinanced, renewed, replaced or refunded; (ix) the incurrence of
obligations in respect of Interest Rate Agreements relating to Indebtedness to
the extent that the notional principal amount of such obligation does not exceed
the aggregate principal amount of the Indebtedness to which such Interest Rate
Agreement relates; or (x) the incurrence by the Company or any of its
Subsidiaries of Indebtedness owing to a Federal governmental authority relating
to the purchase of wireless cable channels in an auction or other sale (or
Indebtedness satisfying the requirements of (vii)(b) above issued in exchange
for, or the proceeds of which are used to extend, refinance, renew, replace or
refund, such Indebtedness) in an amount not to exceed in the aggregate $30
million at any one time outstanding. The Company and its Subsidiaries may incur
Acquired Debt only in compliance with this covenant.
Section 4.09. Limitation on Liens.
Neither the Company nor any of its Subsidiaries may directly or
indirectly create, incur, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired, or on any income or profits therefrom, or assign or
convey any right to receive income therefrom, except Permitted Liens.
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If the Company or any of its Subsidiaries shall create, incur, assume
or suffer to exist any Lien, other than a Permitted Lien, on any assets or other
property to secure Indebtedness in violation of this covenant, the Company or
such Subsidiary, as the case maybe, shall make effective provision for securing
the Notes equally and ratably with such Indebtedness as to such assets or other
property for so long as such Indebtedness shall be so secured; provided that the
provision of such equal and ratable security in favor of the Notes shall not
cure any Default or Event of Default arising from such violation of the
provisions of this covenant.
Section 4.10. Limitation on Issuance and Sale of Capital Stock of
Subsidiaries.
The Company will not sell any Capital Stock of a Subsidiary, and will
not permit any Subsidiary to issue or sell any Capital Stock, or permit any
Person, other than the Company and its Subsidiaries, to own or hold any such
interest, other than (i) any interest owned or held on the Issue Date by, or
issuable as of the Issue Date to, a Person other than the Company and its
Subsidiaries in any Capital Stock of any Subsidiary or (ii) any interest owned
or held by a Person at the time that such Subsidiary became a Subsidiary (other
than any such interest created or issued in anticipation of the acquisition of
such Subsidiary by the Company); provided that the foregoing limitation shall
not apply to (i) the sale of 100% of the Capital Stock of any Subsidiary made in
accordance with Section 4.12 and (ii) issuances of Preferred Stock permitted
pursuant to clauses (i) or (iii) of Section 4.11.
Section 4.11. Limitation on Preferred Stock of Subsidiaries.
The Company will not permit any of its Subsidiaries to issue, directly
or indirectly, any Preferred Stock, except (i) Preferred Stock of Subsidiaries
outstanding on the Issue Date, (ii) Preferred Stock issued to and held by the
Company or a Subsidiary, except that any subsequent issuance or transfer of any
Capital Stock which results in any Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any transfer of such Preferred Stock to a Person not
a Wholly-Owned Subsidiary will be deemed an issuance of Preferred Stock; (iii)
Preferred Stock issued by a Person prior to the time (a) such Person became a
Subsidiary, (b) such Person merges with or into a Subsidiary or (c) another
Person merges with or into such Person (in a transaction in which such Person
becomes a Subsidiary), in each case if such Preferred Stock was not issued in
anticipation of such transaction; and (iv) Preferred Stock issued in exchange
for, or the proceeds of which are used to refund Indebtedness or refinance
Preferred Stock referred to in clause (i) or issued pursuant to clauses (ii) or
(iii) (other than Preferred Stock which by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable) is
redeemable at the option of the holder thereof oris otherwise redeemable,
pursuant to sinking fund obligations or otherwise, prior to the date of
redemption or maturity of the Preferred Stock or Indebtedness being so refunded
or refinanced); provided that (a) the liquidation value of such
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Preferred Stock so issued shall not exceed the principal amount or the
liquidation value of the Indebtedness or Preferred Stock, as the case may be, so
refunded or refinanced and (b) the Preferred Stock so issued (1) shall have a
stated maturity not earlier than the stated maturity of the Indebtedness or
Preferred Stock being refunded or refinanced and (2) shall have a Weighted
Average Life to Maturity equal to or greater than the remaining Weighted Average
Life to Maturity of the Indebtedness or Preferred Stock being refunded or
refinanced.
Section 4.12. Limitation on Asset Sales.
(a) The Company will not, and will not permit any of its Subsidiaries
to, consummate an Asset Sale unless (i) the Company or the applicable
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the Fair Market Value of the assets sold or otherwise
disposed of (as determined in good faith by the Company's Board of Directors or
if the Fair Market Value of such assets exceeds $20.0 million, the Company shall
receive from an investment banking firm of national standing a written opinion
in customary form as to the fairness, to the Company, of such Asset Sale) and
(ii) at least 80% of the consideration received by the Company or the
Subsidiary, as the case may be, from such Asset Sale shall be cash or Marketable
Securities and is received at the time of such disposition. Upon the
consummation of an Asset Sale, the Company may apply, or cause such Subsidiary
to apply, the Net Cash Proceeds relating to such Asset Sale within 180 days of
receipt thereof either (A) to prepay any Bank Indebtedness and, in the case of
any Bank Indebtedness under any revolving credit facility, to effect a permanent
reduction in the availability under such revolving credit facility, (B) to
reinvest in Wireless Cable Related Assets or (C) to a combination of prepayment
and investment permitted by the foregoing clauses (A) and (B). On the 181st day
after an Asset Sale or such earlier date, if any, as the Board of Directors of
the Company or of such Subsidiary determines not to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in clauses (A), (B) or (C) of the
preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate
amount of Net Cash Proceeds which have not been applied on or before such Net
Proceeds Offer Trigger Date as permitted in clauses (A), (B) or (C) of the
preceding sentence (each, a "Net Proceeds Offer Amount") shall be applied by the
Company to make an offer to purchase (the "Net Proceeds Offer") on a date (the
"Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders on a
pro rata basis that amount of Notes equal to the Net Proceeds Offer Amount at a
price equal to 100% of the principal amount of the Notes to be purchased, plus
accrued and unpaid interest thereon, if any, to the date of purchase; provided,
however, that if at any time any non-cash consideration received by the Company
or any Subsidiary of the Company, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash (other
than interest received with respect to any such non-cash consideration), then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant.
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(b) Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less
than $5.0 million, the application of the Net Cash Proceeds constituting such
Net Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such
time as such Net Proceeds Offer Amount plus the aggregate amount of all Net
Proceeds Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date
relating to such initial Net Proceeds Offer Amount from all Asset Sales by the
Company and its Subsidiaries aggregates at least $5.0 million, at which time the
Company shall apply all Net Cash Proceeds constituting all Net Proceeds Offer
Amounts that have been so deferred to make a Net Proceeds Offer (the first date
the aggregate of all such deferred Net Proceeds Offer Amounts is equal to $5.0
million or more shall be deemed to be a Net Proceeds Offer Trigger Date).
(c) Notwithstanding the two immediately preceding paragraphs (a) and (b),
the Company and its Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 95% of the
consideration for such Asset Sale, other than cash consideration, constitutes
assets used in the business of the Company and its Subsidiaries on the date of
such transaction, (ii) such Asset Sale is for Fair Market Value (as determined
in good faith by the Company's Board of Directors or if the Fair Market Value of
such assets exceeds $20.0 million, the Company shall receive from an investment
banking firm of national standing a written opinion in customary form as to the
fairness, to the Company, of such Asset Sale) and (iii) the assets acquired in
such an Asset Sale have historically generated revenues in an amount at least
equal to (1) the revenues attributable to the assets disposed of in such Asset
Sale, multiplied by (2) a fraction, the numerator of which is the amount of
consideration other than cash consideration received in such Asset Sale, and the
denominator of which is the total amount of consideration received in such Asset
Sale; provided that any consideration received by the Company or its
Subsidiaries, as the case may be, in an Asset Sale permitted to be consummated
under this paragraph that does not constitute assets to be used in the
operations of the Company or its Subsidiaries shall constitute Net Cash Proceeds
which are subject to the provisions of the two preceding paragraphs. In
addition, notwithstanding the two immediately preceding paragraphs, the Company
will be permitted (i) to consummate the Wireless One Transaction without
complying with such paragraphs, (ii) to sell the Call Markets to Wireless One
without complying with such paragraphs, (iii) to sell any or all of the assets
acquired in the AWS Transaction, the CableMaxx Transaction or the TechniVision
Transaction on or prior to the first anniversary of the consummation of each
such Transaction without complying with such paragraphs, (iv) to sell any or all
of the assets acquired by way of an Investment permitted by clause (xv) of the
second paragraph of Section 4.07 on or prior to the first anniversary of the
consummation of such acquisition without complying with such paragraphs and (v)
to sell, in a single transaction or a series of transactions, assets for up to
$25 million of non-cash consideration, provided, in the case of clauses (iii),
(iv) and (v) that the Company receives consideration at the time of such Asset
Sale at least equal to the Fair Market Value of the assets sold or otherwise
disposed of (as determined in good faith by the Company's Board of Directors or
if the Fair Market Value of such assets exceeds $20.0 million, the Company shall
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receive from an investment banking firm of national standing a written opinion
in customary form as to the fairness, to the Company, of such Asset Sale).
(d) Each Net Proceeds Offer will be mailed within 25 days following the
Net Proceeds Offer Trigger Date to the record Holders as shown on the register
of Holders, at their last registered addresses as of a date within 15 days of
the mailing of such notice, with a copy to the Trustee. The notice shall
contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Net Proceeds Offer and shall state the following
terms:
(1) that the Net Proceeds Offer is being made pursuant to Section
4.12 and that all Notes tendered will be accepted for payment; provided,
however, that if the aggregate principal amount of Notes tendered in a Net
Proceeds Offer plus accrued interest at the expiration of such offer
exceeds the aggregate amount of the Net Proceeds Offer, the Company shall
select the Notes to be purchased on a pro rata basis (with such adjustments
as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000 or multiples thereof shall be purchased);
(2) the purchase price (including the amount of accrued interest) and
the purchase date (which shall be 20 Business Days from the date of mailing
of notice of such Net Proceeds Offer, or such longer period as required by
law) (the "Proceeds Purchase Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor, any
Note accepted for payment pursuant to the Net Proceeds Offer shall cease to
accrue interest after the Proceeds Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to a Net
Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice prior
to the close of business on the third Business Day prior to the Proceeds
Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Proceeds Purchase Date, a facsimile transmission or letter, signature
guaranteed, setting forth the name of the Holder, the principal amount of
the Notes the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased; and
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(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided, however, that each Note purchased and each
new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof.
On or before the Proceeds Purchase Date, the Company shall (i) accept
for payment Notes or portions thereof tendered pursuant to the Net Proceeds
Offer which are to be purchased in accordance with item (b)(1) above, (ii)
deposit with the Paying Agent, in accordance with Section 2.14, U.S. Legal
Tender sufficient to pay the purchase price plus accrued interest, if any, of
all Notes to be purchased, (iii) deliver to the Trustee Notes so accepted
together with an Officers' Certificate stating the Notes or portions thereof
being purchased by the Company and (iv) deliver to the Paying Agent an Officers'
Certificate specifying the Notes or portions thereof being purchased by the
Company and the payees of the purchase price. The Paying Agent shall promptly
mail to the Holders of Notes so accepted payment in an amount equal to the
purchase price plus accrued interest, if any. For purposes of this Section
4.12, the Trustee shall act as the Paying Agent.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the foregoing
provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the foregoing provisions of this Indenture by virtue thereof.
Section 4.13. Dividend and Other Payment Restrictions Affecting
Subsidiaries.
The Company and its Subsidiaries may not, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any such Subsidiary (i) to pay dividends or
make any other distributions to the Company or any of its Subsidiaries on or in
respect of its Capital Stock or with respect to any other interest or
participation in, or measured by, its profits, or pay any Indebtedness or other
obligation owed to the Company or any of its Subsidiaries; (ii) to make loans or
advances to the Company or any of its Subsidiaries or Investments in
Subsidiaries; or (iii) to transfer any of its properties or assets to the
Company or any of its Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of: (a) any encumbrance or restriction pursuant to
the Notes or this Indenture; (b) applicable law; (c) Existing Indebtedness,
other than any Existing Indebtedness required to be repaid with proceeds of the
sale of the Notes to be issued on the Issue Date; (d) any instrument governing
Acquired Debt as in effect at the time of acquisition (except to the extent such
Indebtedness was incurred in connection with, or in contemplation of, such
acquisition), which encumbrance or restriction
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is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired; (e)
any encumbrance or restriction pursuant to an agreement effecting a refinancing
of Indebtedness pursuant to an agreement referred to in clause (c) or (d) or
contained in any amendment to an agreement referred to in clause (c) or (d);
provided, however, that the encumbrances and restrictions contained in any such
refinancing agreement or amendment are no more restrictive than encumbrances or
restrictions contained in the refinanced or amended agreements; (f) with respect
to clause (iii) above, by reason of customary non-assignment provisions in
leases entered into in the ordinary course of business; or (g) with respect to
clause (iii) above, purchase money obligations for property acquired in the
ordinary course of business, which obligations do not cover any asset other than
the asset acquired.
Section 4.14. Transactions with Affiliates.
The Company and its Subsidiaries may not sell, lease, transfer or
otherwise dispose of any of their respective properties or assets to, or
purchase any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or Guarantee with, or for the benefit of, any
Affiliate of the Company or any legal or beneficial owner of 5% or more of any
class of Capital Stock of the Company or with an Affiliate of any such owner
(each of the foregoing, an "Affiliate Transaction"), unless: (i) such Affiliate
Transaction is on terms that are no less favorable to the Company or the
relevant Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Subsidiary with an unrelated Person; and (ii)
the Company delivers to the Trustee: (x) with respect to any Affiliate
Transaction involving aggregate payments in excess of $250,000 but less than
$3.0 million, a resolution of the Board of Directors of the Company set forth in
an Officers' Certificate certifying that such Affiliate Transaction complies
with clause (i) above, (y) with respect to any Affiliate Transaction involving
aggregate payments equal to or greater than $3.0 million but less than $20.0
million, a resolution of the Board of Directors of the Company set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved by a
majority of the disinterested directors of the Board of Directors of the
Company, and (z) with respect to any Affiliate Transaction involving aggregate
payments equal to or greater than $20.0 million, are solution of the Board of
Directors of the Company set forth in an Officers' Certificate and certifying to
the matters referred to in (i) above and a written opinion as to the fairness to
the Company or such Subsidiary from a financial point of view issued by an
independent investment banking firm of national standing with respect to any
such Affiliate Transaction. Notwithstanding the foregoing, the following shall
not be deemed Affiliate Transactions: (a) any employment or option agreement
entered into by the Company or any of its Subsidiaries in the ordinary course of
business that is approved by the Compensation Committee of the Board of
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Directors of the Company; (b) the payment by the Company of annual fees to Unity
Hunt Resources, Inc. for the provision of Mr. Holland's services to the Company
in an amount equal to Mr. Holland's annual base compensation from the
Company,which amount is approved by the Compensation Committee of the Board of
Directors of the Company; (c) transactions between or among the Company and one
or more of its Wholly Owned Subsidiaries provided that such transactions are not
otherwise prohibited; (d) Restricted Payments, Permitted Payments and Permitted
Investments; (e) Affiliate Transactions in existence on the Issue Date,
including, without limitation, channel leases and options between the Company
and any of its Subsidiaries, on the one hand, and Messrs. Webb and Wheeler and
their respective Affiliates, on the other hand, and the lease with respect to
the Company's operating offices in Durant, Oklahoma and agreements between the
Company, on the one hand, and U.S. Wireless and/or USWS, on the other hand, as
in effect on the Issue Date; (f) channel leases and options with Affiliates
entered into after the Issue Date; provided such leases are no less beneficial
to the Company or the applicable Subsidiary than any such leases in effect on
the Issue Date, meet the standard described in clause (i) above and are approved
by a majority of the disinterested directors of the Board of Directors of the
Company; (g) amendments to or renewals of the agreements and leases referred to
in clauses (d) and (e) above; provided that any such amendments or renewals are
no less beneficial to the Company or the applicable Subsidiary than the
agreement or lease being amended or renewed, meet the standard described in
clause (i) above and are approved by a majority of the disinterested directors
of the Board of Directors of the Company; (h) payment of reasonable and
customary compensation for director and Board of Director observer fees, meeting
expenses, insurance premiums and indemnities to the extent permitted by law; and
(i) the issuance of stock options (and shares of stock upon the exercise
thereof) pursuant to any stock option plan approved by the Board of Directors
and stockholders of the Company and loans or advances to employees for
relocation or travel related expenses consistent with ordinary past practices.
Section 4.15. Conduct of Business.
The Company and its Subsidiaries may not, directly or indirectly,
engage in any business other than the Wireless Cable Business; provided that in
the event a Change of Control occurs in which a Strategic Equity Investor gains
control of the Company this covenant shall no longer be of force or effect.
Section 4.16. Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall be
required to offer to repurchase (the "Change of Control Offer") all or a portion
of each Holder's Notes, in integral multiples of $1,000 pursuant to the offer
described in paragraph (b) below, at a purchase price equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest, if any, to
the date of repurchase. The Change of Control Offer shall remain open for at
least 20 Business Days and until the close of business on the second Business
Day prior to the Change of Control Payment Date.
(b) Within 30 days following the date upon which the Change of
Control occurred (the "Change of Control Date"), the Company shall send, by
first class mail, a notice
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to each Holder, with a copy to the Trustee and Paying Agent, which notice shall
govern the terms of the Change of Control Offer. The notice to the Holders
shall contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant
to this Section 4.16 and that all Notes tendered and not withdrawn
will be accepted for payment;
(2) the purchase price (including the amount of accrued
interest) and the purchase date (which shall be no earlier than 30
days nor later than 45 days from the date such notice is mailed, other
than as may be required by law) (the "Change of Control Payment
Date");
(3) that any Note not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that Holders electing to have a Note purchased pursuant
to a Change of Control Offer will be required to surrender the Note,
with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third
Business Day prior to the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the second
Business Day prior to the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter, signature guaranteed, setting
forth the name of the Holder, the principal amount of the Notes the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased;
(7) that Holders whose Notes are purchased only in part
will be issued new Notes in a principal amount equal to the
unpurchased portion of the Notes surrendered; provided, however, that
each Note purchased and each new Note issued shall be in an original
principal amount of $1,000 or integral multiples thereof; and
(8) the circumstances and relevant facts regarding such
Change of Control.
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On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent in accordance with Section
2.14 U.S. Legal Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Notes so tendered, (iii) deliver to the Trustee Notes
so accepted together with an Officers' Certificate stating the Notes or portions
thereof being purchased by the Company and (iv) deliver to the Paying Agent an
Officers' Certificate specifying the Notes or portions thereof being purchased
by the Company and the payees of the purchase price. Upon receipt by the Paying
Agent of the monies specified in clause (ii) above and a copy of the Officers'
Certificate specified in clause (iii) above, the Paying Agent shall promptly
mail to the Holders of Notes so accepted payment in an amount equal to the
purchase price plus accrued interest, if any, and the Trustee shall promptly
authenticate and mail to such Holders new Notes equal in principal amount to any
unpurchased portion of the Notes surrendered. Any Notes not so accepted shall
be promptly mailed by the Company to the Holder thereof. For purposes of this
Section 4.16, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Notes pursuant to a Change
of Control Offer shall be returned by the Paying Agent (i) to the Company upon
its written request if, immediately prior to such Change of Control Offer, the
balance of Available Funds in the Escrow Account equalled zero, or (ii) to the
Escrow Agent if Available Funds from the Escrow Account have been used, in whole
or in part, to make such Change of Control Offer and any such funds remain, as
the case may be.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the foregoing
provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the foregoing provisions of this Indenture by virtue thereof.
Section 4.17. Disbursement of Funds; Escrow Account.
The Company shall, on the date of this Indenture, enter into the
Escrow and Disbursement Agreement and, pursuant thereto, shall place the Escrow
Amount in the Escrow Account held by the Escrow Agent for the benefit of the
Holders of the Notes and the Trustee (in its capacity as such).
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ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation or Sale of Assets.
The Company will not, in a single transaction or a series of related
transactions, (i) consolidate with or merge with or into any other Person, (ii)
permit any other Person to consolidate with or merge into (a) the Company or (b)
any of its Subsidiaries in a transaction in which such Subsidiary (or successor
Person) remains (or becomes) a Subsidiary or (iii) directly or indirectly, sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its assets to another Person or Persons or adopt a plan of liquidation, (iv)
directly or indirectly, purchase, lease or otherwise acquire all or
substantially all of the property and assets of any Person or any existing
business (whether existing as a separate entity, subsidiary, division, unit or
otherwise) of any Person or acquire Equity Interests or other ownership
interests of any other Person such that such Person becomes a Subsidiary or (v)
permit any of its Subsidiaries to enter into any such transaction unless (i)
either (A) the Company or such Subsidiary shall be the survivor of such merger
or consolidation or (B) the surviving Person (if not the Company or such
Subsidiary) is a corporation, partnership or trust organized and existing under
the laws of the United States, any state thereof or the District of Columbia and
such surviving Person shall expressly assume by supplemental indenture all the
obligations of the Company or such Subsidiary, as the case may be, under the
Notes and this Indenture; (ii) immediately after giving effect to such
transaction (on a pro forma basis, including any Indebtedness incurred or
anticipated to be incurred in connection with such transaction), the Company or
the surviving Person is able to incur at least $1.00 of additional Indebtedness
under the Annualized Cash Flow Ratio test in compliance with Section 4.08; (iii)
immediately before and immediately after giving effect to such transaction
(including any Indebtedness incurred or anticipated to be incurred in connection
with the transaction), no Default or Event of Default shall have occurred and be
continuing; and (iv) the Company has delivered to the Trustee an Officers'
Certificate and Opinion of Counsel, each stating that such consolidation, merger
or transfer complies with this Indenture, that the surviving Person agrees to be
bound thereby and that all conditions precedent in this Indenture relating to
such transaction have been satisfied. For purposes of the foregoing, the
transfer (by lease, assignment, sale or otherwise, in a single transaction or
series of transactions) of all or substantially all of the properties and assets
of one or more Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company. The foregoing will not be deemed to apply
to Permitted Investments or Investments permitted under Section 4.07.
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Section 5.02. Successor Corporation Substituted.
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with Section
5.01, the surviving entity shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture and the Notes
with the same effect as if such surviving entity had been named as such;
provided that solely for purposes of computing amounts described in clause (c)
of the first paragraph of Section 4.07, any such surviving entity to the Company
shall only be deemed to have succeeded to and be substituted for the Company
with respect to periods subsequent to the effective time of such merger,
consolidation, combination or transfer of assets.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
Each of the following constitutes a "Event of Default":
(a) the failure to pay interest on any Notes when the same becomes
due and payable and such default continues for a period of 30 days;
(b) (i) the failure to pay the principal or premium when due on the
Notes at maturity, upon redemption, upon acceleration or otherwise or (ii) the
failure to redeem or purchase the Notes when required pursuant to this Indenture
and the Notes (including, without limitation, failure to make payments when due
pursuant to a Change of Control Offer or Net Proceeds Offer);
(c) failure by the Company to comply with the provisions of Sections
4.12 or 4.16 or the failure by the Company to comply with Section 4.17;
(d) failure to comply with the provisions of Article 5;
(e) failure by the Company for 30 days after notice from the Trustee
or the Holders of at least 25% in principal amount of the Notes then outstanding
to comply with its agreements in this Indenture or the Notes or in the Escrow
and Disbursement Agreement (other than those referred to in (a), (b), or (c) or
(d) above);
(f) a default in the payment of principal at final maturity under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness of the Company or any of its
Subsidiaries (or the payment of which is Guaranteed now or hereafter by the
Company or any of its Subsidiaries),
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whether such Indebtedness or Guarantee now exists or shall be created hereafter,
in a principal amount of at least $3.0 million (after the expiration of any
applicable grace period with respect thereto);
(g) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness (including any interest thereon) of the Company or its
Subsidiaries (or the payment of which is Guaranteed now or hereafter by the
Company or any of its Subsidiaries), whether such Indebtedness or Guarantee now
exists or shall be created hereafter, if (i) as a result of such event of
default the maturity of such Indebtedness has been accelerated prior to its
stated maturity and (ii) the principal amount of such Indebtedness, together
with the principal amount of any other Indebtedness of the Company and its
Subsidiaries the maturity of which has been accelerated, aggregates $3.0 million
or more;
(h) one or more final judgments rendered against the Company or any
of its Subsidiaries (other than any judgment as to which a reputable insurance
company has accepted full liability in writing) aggregating in excess of $3.0
million which judgments are not stayed within 60 days after their entry;
(i) the Company or any Subsidiary of the Company pursuant to or
within the meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in
an involuntary case;
(iii) consents to the appointment of a Custodian of it or for all
or substantially all of its property; or
(iv) makes a general assignment for the benefit of its creditors;
(j) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Subsidiary of the
Company in an involuntary case;
(ii) appoints a Custodian of the Company or any Subsidiary of the
Company or for all or substantially all of the property of the Company
or any Subsidiary of the Company; or
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(iii) orders the liquidation of the Company or any Subsidiary of
the Company,
and the order or decree remains unstayed and in effect for 60 consecutive days;
and
(k) repudiation by the Company of its obligations under the Escrow
and Disbursement Agreement for any reason.
The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
Section 6.02. Acceleration.
If any Event of Default occurs and is continuing under this Indenture,
the Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately by
notice in writing to the Company and the Trustee specifying the respective Event
of Default and that it is a "notice of acceleration" (the "Acceleration
Notice"). Upon such declaration, the principal of, and premium, if any, and
interest on the Notes shall become due and payable immediately. Notwithstanding
the foregoing, in the case of an Event of Default specified in clause (i) or (j)
of Section 6.01, the foregoing amount shall ipso facto become due and payable
without further action or notice. No premium is payable upon acceleration of the
Notes except that in the case of an Event of Default that is the result of an
action or inaction by the Company or any of its Subsidiaries intended to avoid
premiums related to redemptions of the Notes contained in this Indenture or the
Notes, the amount declared due and payable will include the premium that would
have been applicable on a voluntary prepayment of the Notes or, if voluntary
prepayment is not then permitted, the premium set forth in this Indenture.
At any time after a declaration of acceleration with respect to the
Notes as described in the preceding paragraph, the Holders of a majority in
principal amount of the Notes may rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any judgment or
decree, (ii) if all existing Events of Default have been cured or waived except
non payment of principal or interest that has become due solely because of the
acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances and (v) in
the event of the cure or waiver of an Event of Default specified in clause (h)
of Section 6.01, the Trustee shall have received an Officers' Certificate and an
Opinion of Counsel that such Event of Default has been cured or waived.
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Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture or the Escrow and Disbursement Agreement.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding, by notice to the Trustee, may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its consequences
under this Indenture, except a continuing Default or Event of Default in the
payment of interest or premium on, or the principal of, the Notes, or in respect
of a covenant or a provision which cannot be amended or modified without the
consent of all Holders.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Subject to 2.09, holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with the law or this Indenture that the Trustee
determines may be unduly prejudicial to the rights of other Holders of Notes or
that may involve the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
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(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 15 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 15-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any, and
interest on the Note, on or after the respective due dates expressed in the
Note, or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
Holder of the Note.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), the Company's creditors or the Company's
property and shall be entitled and empowered to collect, receive
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and distribute any money or other property payable or deliverable on any such
claims and any custodian in any such judicial proceeding is hereby authorized by
each Holder of a Note to make such payments to the Trustee, and in the event
that the Trustee shall consent to the making of such payments directly to the
Holders of the Notes, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section
7.07. To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 out of the estate in any such
proceeding, shall be denied for any reason, payment of the same shall be secured
by a Lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties which the Holders of the Notes may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder of a Note any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder of a
Note thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder of a Note in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, the Agents, and their agents and attorneys for
amounts due under Section 7.07, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes, for amounts due and unpaid on such Notes
for principal, premium, if any, and interest, ratably, without preference or
priority of any kind to the extent of moneys and securities collected under the
Escrow and Disbursement Agreement according to the amounts due and payable on
the Notes for principal, premium, if any, and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its
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discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 or a
suit by Holders of more than 10% in principal amount of the then outstanding
Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs:
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee and the Agents shall be determined
solely by the express provisions of this Indenture and the Trustee and the
Agents need perform only those duties that are specifically set forth in
this Indenture and no others, and no implied covenants or obligations shall
be read into this Indenture against the Trustee and the Agents, and
(ii) in the absence of bad faith on their part, the Trustee and the
Agents may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and the Agents and conforming to the
requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) neither the Trustee nor any Agent shall be liable for any error
of judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee or such Agent was negligent in ascertaining the
pertinent facts; and
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(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee or any Agent is subject to
paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to the Trustee against any loss,
liability or expense.
(f) Neither the Trustee nor any Agent shall be liable for interest on
any money received by it except as the Trustee or such Agent, as the case may
be, may agree in writing with the Company. Money held in trust by the Trustee
or such Agent, as the case may be, need not be segregated from other funds
except to the extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee and each Agent may conclusively rely upon any
document believed by them to be genuine and to have been signed or presented by
the proper Person. Neither the Trustee nor any Agent need investigate any fact
or matter stated in the document.
(b) Before the Trustee or any Agent acts or refrains from acting, it
may require an Officers' Certificate or an Opinion of Counsel or both. Neither
the Trustee nor any Agent shall be liable for any action it takes or omits to
take in good faith in reliance on such Officers' Certificate or Opinion of
Counsel. The Trustee or any Agent may consult with counsel and the advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection from liability in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee and any Agent may act through their attorneys and
agents and shall not be responsible for the misconduct or negligence of any
agent appointed with due care.
(d) The Trustee and any Agent shall not be liable for any action they
take or omit to take in good faith which they believe to be authorized or within
their rights or powers conferred upon it by this Indenture.
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(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by two Officers of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the Commission
for permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11.
Section 7.04. Trustee's Disclaimer.
The Trustee and the Agents shall not be responsible for and make no
representation as to the validity or adequacy of this Indenture or the Notes,
shall not be accountable for the Company's use of the proceeds from the Notes or
any money paid to the Company or upon the Company's direction under any
provision of this Indenture, shall not be responsible for the use or application
of any money received by any Paying Agent other than the Trustee and shall not
be responsible for any statement or recital herein or any statement in the Notes
or any other document in connection with the sale of the Notes or pursuant to
this Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders
of Notes a notice of the Default or Event of Default within 90 days after it
occurs. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, or interest on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.
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Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall mail to the Holders of the Notes a
brief report dated as of such reporting date that complies with TIA Sec. 313(a)
(but if no event described in TIA Sec. 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The
Trustee also shall comply with TIA Sec. 313(b)(2). The Trustee shall also
transmit by mail all reports as required by TIA Sec. 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed. The Company shall promptly notify the
Trustee when the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee and the Agents from time to time
reasonable compensation as agreed in writing from time to time for their
acceptance of this Indenture and services hereunder. The Trustee's and the
Agents' compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee and the
Agents promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by them in addition to the compensation for their
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's and the Agents' agents and counsel.
The Company shall indemnify the Trustee and the Agents against any and
all losses, liabilities or expenses incurred by them arising out of or in
connection with the acceptance or administration of their duties under this
Indenture, the Securities or the Escrow and Disbursement Agreement, except any
such loss, liability or expense as may be attributable to the negligence or bad
faith of the Trustee or such Agent. The Trustee or such Agent shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee or such Agent to so notify the Company shall not relieve the Company of
its obligations hereunder. The Company shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal, premium,
if any, and interest on particular Notes.
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Such lien shall survive the satisfaction and discharge or termination of this
Indenture (including any termination under any Bankruptcy Law) or the
resignation or removal of any Agent or the Trustee, as the case may be.
When the Trustee or any Agent incurs expenses or renders services
after an Event of Default specified in Section 6.01(i) or (j) occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of administration
under any Bankruptcy Law.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee after written request by any Holder of a Note who has
been a Holder of a
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Note for at least six months fails to comply with Section 7.10, such Holder of a
Note may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise corporate
trustee power, shall be subject to supervision or examination by Federal or
state authority and shall have a combined capital and surplus of at least $25
million as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Sec. 310(a)(1), (2) and (5). The Trustee is subject to TIA
Sec. 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Sec. 311(a), excluding any creditor
relationship listed in TIA Sec. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Sec. 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance.
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The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, with respect to
the Notes, elect to have either Section 8.02 or 8.03 be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 of the option
applicable to this Section 8.02, the Company shall be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below in Section 8.04 are satisfied (hereinafter,
"Legal Defeasance"). For this purpose, such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 and the other Sections of
this Indenture referred to in (a) and (b) below, and to have satisfied all its
other obligations under such Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder:
(a) the rights of Holders of outstanding Notes to receive solely from
the trust fund described in Section 8.04, and as more fully set forth in such
Section, payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due or on the redemption date, as the case
may be;
(b) the Company's obligations with respect to such Notes under
Sections 2.04, 2.06, 2.07, 2.10 and 4.02;
(c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith; and
(d) this Article Eight.
Subject to compliance with this Article Eight, the Company may
exercise its option under this Section 8.02 notwithstanding the prior exercise
of its option under Section 8.03 with respect to the Notes.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 of the option
applicable to this Section 8.03, the Company shall be released from its
obligations under the covenants contained in Sections 4.03, 4.04, 4.07, 4.08,
4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16 and 4.17 and Article Five with
respect to the outstanding Notes on and after the date the conditions set forth
below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes
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shall thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Sections 6.01(c),
but, except as specified above, the remainder of this Indenture and such Notes
shall be unaffected thereby. In addition, upon the Company's exercise under
Section 8.01 of the option applicable to this Section 8.03, Sections 6.01(d)
through 6.01(h) and Section 6.01(k) shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or Section 8.03 to the outstanding Notes:
(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.10 who shall agree to comply with the provisions of this
Article Eight applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes, (a) cash in
U.S. Dollars in an amount, or (b) non-callable U.S. Government Securities
which through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than one day
before the due date of any payment, cash in U.S. Dollars in an amount, or
(c) a combination thereof, in such amounts, as will be sufficient, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to
pay and discharge and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge the principal of, premium, if any,
and interest on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, of such principal or
installment of principal, premium, if any, or interest, without
reinvestment of the deposited U.S. Government Securities and other
deposited monies; provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such non-callable U.S.
Government Securities to said payments with respect to the Notes;
(b) In the case of an election under Section 8.02, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably satisfactory to the Trustee confirming that (i) the Company has
received from, or there
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has been published by, the Internal Revenue Service a ruling or (ii) since
the date hereof, there has been a change in the applicable Federal income
tax law, in either case to the effect that, and based thereon such opinion
shall confirm that, the Holders of the outstanding Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such
Legal Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(c) In the case of an election under Section 8.03, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably satisfactory to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for Federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to Federal income tax in the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance
had not occurred;
(d) No Default or Event of Default with respect to the Notes shall
have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the incurrence of Indebtedness,
all or a portion of which will be used to defease the notes concurrently
with such incurrence) or, insofar as Sections 6.01(i) and (j) are
concerned, at any time in the period ending on the 123rd day after the date
of such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(e) Such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which the Company is a party
or by which the Company is bound;
(f) In the case of an election under either Section 8.02 or 8.03, the
Company shall have delivered to the Trustee an Officers' Certificate
stating that the deposit made by the Company pursuant to its election under
Section 8.02 or 8.03 was not made by the Company with the intent of
preferring the Holders of Notes over other creditors of the Company or with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others;
(g) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Legal Defeasance under
Section 8.02 or the Covenant Defeasance under Section 8.03 (as the case may
be) have been complied with as contemplated by this Section 8.04; and
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(h) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (i) the trust resulting from the deposit does
not constitute, or is qualified as, a regulated investment company under
the Investment Company Act of 1940, (ii) the Holders of the Notes have a
valid first priority perfected security interest in the trust funds, and
(iii) after passage of 123 days following the deposit (except, with respect
to any trust funds for the account of any Holder who may be deemed to be an
"insider" for purposes of the Bankruptcy Code, after one year following the
deposit), the trust funds will not be subject to the effect of Section 547
of the Bankruptcy Code or Section 15 of the New York Debtor and Creditor
Law in a case commenced by or against the Company under either such
statute, and either (A) the trust funds will no longer remain the property
of the Company (and therefore, will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally) or (B) if a court were to rule under any such
law in any case or proceeding that the trust funds remained in the
possession of the Trustee prior to such court ruling to the extent not paid
to Holders, the Trustee will hold, for the benefit of the Holders, a valid
first priority perfected security interest in such trust funds that is not
avoidable in bankruptcy or otherwise except for the effect of Section
552(b) of the Bankruptcy Code on interest on the trust funds accruing after
the commencement of a case under such statute and (y) the Holders will be
entitled to receive adequate protection of their interests in such trust
funds if such trust funds are used in such case or proceeding.
Section 8.05. Deposited Money and U.S. Government Securities to be
Held in Trust; Other Miscellaneous Provisions.
Subject to Section 8.06, all money and U.S. Government Securities
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant
to Section 8.04 in respect of the outstanding Notes shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Trustee may determine, to
the Holders of such Notes of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or U.S. Government
Securities deposited pursuant to Section 8.04 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any
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money or U.S. Government Securities held by it as provided in Section 8.04
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee (which may be the opinion delivered under Section 8.04(a)), are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its written request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Note shall
thereafter, as a creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in The New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
Dollars or U.S. Government Securities in accordance with Section 8.02 or 8.03,
as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 until such time as the Trustee or Paying Agent is permitted
to apply all such money in accordance with Section 8.02 or 8.03, as the case may
be; provided, however, that, if the Company makes any payment of principal of,
premium, if any, or interest on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
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ARTICLE 9
SATISFACTION AND DISCHARGE
Section 9.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Notes herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute instruments in form and substance satisfactory to the
Trustee and the Company acknowledging satisfaction and discharge of this
Indenture, when
(1) either
(A) all Notes theretofore authenticated and issued (other than
(i) Notes which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 2.07 and (ii) Notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to
the Trustee or discharged from such trust, as provided in Section
2.04) have been delivered to the Trustee for cancellation; or
(B) all such Notes not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable; or
(ii) will become due and payable within one year,
and the Company, in the case of (B)(i) or (ii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust an
amount sufficient to pay and discharge the entire indebtedness on such
Notes not theretofore delivered to the Trustee for cancellation, for
principal of, premium, if any, and interest on the Notes to the date
of such deposit (in the case of Notes which have become due and
payable) together with irrevocable instructions from the Company
directing the Trustee to apply such funds to the payment thereof at
maturity or redemption, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.
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Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 7.07, the obligations of
the Trustee to any Authenticating Agent under Section 2.02 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section 9.01, the obligations of the Trustee under Section 7.05 and Section
8.06 shall survive.
Section 9.02. Application of Monies for Satisfaction and Discharge.
Subject to the provisions of Section 8.06, all money deposited with
the Trustee pursuant to Section 9.01 shall be held in trust and applied by it,
in accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal and interest for whose payment such money has
been deposited with the Trustee.
ARTICLE 10
AMENDMENT, SUPPLEMENT AND WAIVER
Section 10.01. Without Consent of Holders of Notes.
From time to time, the Company and the Trustee, without the consent of
the Holders of the Notes, may amend this Indenture for the following purposes,
so long as such change does not adversely affect the rights of any of the
Holders. The Trustee will be entitled to rely on such evidence as it deems
appropriate, including, without limitation, solely on an Opinion of Counsel that
such change does not adversely affect the rights of any Holder, in executing any
supplemental indenture.
Notwithstanding Section 10.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture, the Notes or the Escrow and
Disbursement Agreement without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Notes in the case of a merger or consolidation pursuant to
Article 5;
(d) to execute and deliver any documents necessary or appropriate to
release Liens on any Collateral as permitted by Section 11.03;
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(e) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Notes;
(f) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; or
(g) to provide for issuance of the Exchange Notes (which will have
terms identical in all material respects to the Initial Notes except that the
transfer restrictions contained in the Initial Notes will be modified or
eliminated, as appropriate), and which will be treated together with any
outstanding Initial Notes, as a single issue of Securities.
Upon the written request of the Company accompanied by a resolution of
the Board of Directors of the Company authorizing the execution of any such
amended or supplemental Indenture, and upon receipt by the Trustee of the
documents described in Section 10.06, the Trustee shall join with the Company in
the execution of any amended or supplemental Indenture authorized or permitted
by the terms of this Indenture and to make any further appropriate agreements
and stipulations which may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture which affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 10.02. With Consent of Holders of Notes.
The Company and the Trustee may amend or supplement this Indenture,
the Notes or the Escrow and Disbursement Agreement or any amended or
supplemental Indenture with the written consent of the Holders of Notes of not
less than a majority in aggregate principal amount of the Notes then
outstanding, and any existing Default and its consequences or compliance with
any provision of this Indenture, the Notes or the Escrow and Disbursement
Agreement may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes.
Upon the request of the Company accompanied by a resolution of the
Board of Directors of the Company authorizing the execution of any such amended
or supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 10.06, the
Trustee shall join with the Company in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental Indenture.
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It shall not be necessary for the consent of the Holders of Notes
under this Section 10.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected
thereby, an amendment or waiver may not (with respect to any Notes held by a
non-consenting Holder of Notes):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change or have the effect of changing
the fixed maturity of any Note or change the date on which any Note may be
subject to redemption or repurchase, or reduce the redemption or repurchase
price thereof;
(c) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Notes;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment default
relating solely to the principal or interest that has become due solely
because of the acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or interest on the Notes on or after the due date
thereof or to bring suit to enforce such payment;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Section 5.12 and 5.16);
(h) amend, change or modify in any material respect the obligation of
the Company to make and consummate a Change of Control Offer in the event
of a
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Change of Control or make and consummate a Net Proceeds Offer with respect
to any Asset Sale that has been consummated or modify any of the provisions
or definitions with respect thereto;
(i) make any change in the foregoing amendment and waiver provisions;
OR
(j) directly or indirectly release Liens on all or substantially all
of the collateral except as permitted by the Escrow and Disbursement
Agreement.
Section 10.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in an amended or supplemental Indenture that complies with the TIA as
then in effect.
Section 10.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder of a Note.
The Company may fix a record date for determining which Holders of the
Notes must consent to such amendment, supplement or waiver. If the Company
fixes a record date, the record date shall be fixed at (i) the later of 30 days
prior to the first solicitation of such consent or the date of the most recent
list of Holders of Notes furnished to the Trustee prior to such solicitation
pursuant to Section 2.05 or (ii) such other date as the Company shall designate.
Section 10.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
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Section 10.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 10 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
ARTICLE 11
COLLATERAL AND SECURITY
Section 11.01. Escrow and Disbursement Agreement.
The due and punctual payment of the principal of and interest on the
Notes when and as the same shall be due and payable, whether on an interest
payment date, at maturity, by acceleration, repurchase, redemption or otherwise,
and interest on the overdue principal of and interest (to the extent permitted
by law), if any, on the Notes and performance of all other obligations of the
Company to the Holders of Notes or the Trustee under this Indenture with respect
to the Notes and the Notes, according to the terms hereunder or thereunder,
shall be secured as provided in the Escrow and Disbursement Agreement which the
Company, the Escrow Agent and the Trustee have entered into simultaneously with
the execution of this Indenture. Each Holder of Notes, by its acceptance
thereof, consents and agrees to the terms of the Escrow and Disbursement
Agreement (including, without limitation, the provisions providing for
foreclosure and disbursement of Collateral) as the same may be in effect or may
be amended from time to time in accordance with its terms and authorizes and
directs the Escrow Agent and the Trustee to enter into the Escrow and
Disbursement Agreement and to perform its obligations and exercise its rights
thereunder in accordance therewith. The Company shall deliver to the Trustee
copies of the Escrow and Disbursement Agreement, and shall do or cause to be
done all such acts and things as may be necessary or proper, or as may be
required by the provisions of the Escrow and Disbursement Agreement, to assure
and confirm to the Trustee the security interest in the Collateral contemplated
by the Escrow and Disbursement Agreement or any part thereof, as from time to
time constituted, so as to render the same available for the security and
benefit of this Indenture with respect to, and of, the Notes, according to the
intent and purposes expressed in the Escrow and Disbursement Agreement. The
Company shall take any and all actions reasonably required to cause the Escrow
and Disbursement Agreement to create and maintain (to the extent possible under
applicable law), as security for the obligations of the Company hereunder, a
valid and enforceable perfected first priority Lien in and on all the
Collateral, in favor of the Trustee for the benefit of the Holders of Notes,
superior to and prior to the rights of all third Persons and subject to no other
Liens.
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Section 11.02. Recording and Opinions.
(a) The Company shall furnish to the Trustee simultaneously with the
execution and delivery of this Indenture an Opinion of Counsel either (i)
stating that in the opinion of such counsel all action has been taken with
respect to the recording, registering and filing of this Indenture, financing
statements or other instruments necessary to make effective the Lien intended to
be created by the Escrow and Disbursement Agreement, and reciting with respect
to the security interests in the Collateral, the details of such action, or (ii)
stating that, in the opinion of such counsel, no such action is necessary to
make such Lien effective.
(b) The Company shall furnish to the Escrow Agent and the Trustee on
March 28, 1997, and on each March 28 thereafter until the date upon which the
balance of Available Funds (as defined in the Escrow and Disbursement Agreement)
shall have been reduced to zero, an Opinion of Counsel, dated as of such date,
either (i) stating that (A) in the opinion of such counsel, action has been
taken with respect to the recording, registering, filing, re-recording,
re-registering and refiling of all supplemental indentures, financing
statements, continuation statements or other instruments of further assurance as
is necessary to maintain the Lien of the Escrow and Disbursement Agreement and
reciting with respect to the security interests in the Collateral the details of
such action or referring to prior Opinions of Counsel in which such details are
given and (B) based on relevant laws as in effect on the date of such Opinion of
Counsel, all financing statements and continuation statements have been executed
and filed that are necessary as of such date and during the succeeding 12 months
fully to preserve and protect, to the extent such protection and preservation
are possible by filing, the rights of the Holders of Notes and the Trustee
hereunder and under the Escrow and Disbursement Agreement with respect to the
security interests in the Collateral or (ii) stating that, in the opinion of
such counsel, no such action is necessary to maintain such Lien and assignment.
Section 11.03. Release of Collateral.
(a) Subject to subsections (b), (c) and (d) of this Section 11.03,
Collateral may be released from the Lien and security interest created by the
Escrow and Disbursement Agreement only in accordance with the provisions of the
Escrow and Disbursement Agreement.
(b) Except to the extent that any Lien on proceeds of Collateral is
automatically released by operation of Section 9-306 of the Uniform Commercial
Code or other similar law, no Collateral shall be released from the Lien and
security interest created by the Escrow and Disbursement Agreement pursuant to
the provisions of the Escrow and Disbursement Agreement, other than pursuant to
the terms thereof, unless there shall have been delivered to the Trustee the
certificate required by Section 11.03(d) and Section 11.04.
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(c) At any time when an Event of Default shall have occurred and be
continuing and the maturity of the Notes issued on the Issuance Date shall have
been accelerated (whether by declaration or otherwise), no Collateral shall be
released pursuant to the provisions of the Escrow and Disbursement Agreement,
and no release of Collateral in contravention of this Section 11.03(c) shall be
effective as against the Holders of Notes, except for the disbursement of all
Available Funds (as defined in the Escrow and Disbursement Agreement) to the
Trustee pursuant to Section 6(b) of the Escrow and Disbursement Agreement.
(d) The release of any Collateral from the Liens and security
interests created by this Indenture and the Escrow and Disbursement Agreement
shall not be deemed to impair the security under this Indenture in contravention
of the provisions hereof if and to the extent the Collateral is released
pursuant to the terms hereof or, subject to complying with the requirements of
this Section 11.03, pursuant to the terms of the Escrow and Disbursement
Agreement. To the extent applicable, the Company shall cause TIA Sec. 314(d)
relating to the release of property or securities from the Lien and security
interest of the Escrow and Disbursement Agreement to be complied with. Any
certificate or opinion required by TIA Sec. 314(d) may be made by an Officer of
the Company except in cases where TIA Sec. 314(d) requires that such certificate
or opinion be made by an independent Person, which Person shall be an
independent engineer, appraiser or other expert selected or approved by the
Trustee in the exercise of reasonable care.
Section 11.04. Certificates of the Company.
The Company shall furnish to the Trustee, prior to any proposed
release of Collateral other than pursuant to the express terms of the Escrow and
Disbursement Agreement, (i) all documents required by Section 314(d) of the TIA
and (ii) an Opinion of Counsel, which may be rendered by internal counsel to the
Company, to the effect that such accompanying documents constitute all documents
required by Section 314(d) of the TIA. The Trustee may, to the extent permitted
by Sections 7.01 and 7.02, accept as conclusive evidence of compliance with the
foregoing provisions the appropriate statements contained in such documents and
such Opinion of Counsel.
Section 11.05. Authorization of Actions to be Taken by the Trustee
Under the Escrow and Disbursement Agreement.
Subject to the provisions of Section 7.01 and 7.02, the Trustee may,
without the consent of the Holders of Notes, on behalf of the Holders of Notes,
take all actions it deems necessary or appropriate in order to (a) enforce any
of the terms of the Escrow and Disbursement Agreement and (b) collect and
receive any and all amounts payable in respect of the Obligations of the Company
hereunder. The Trustee shall have power to institute and maintain such suits
and proceedings as it may deem expedient to prevent any impairment of the
Collateral by any acts that may be unlawful or in violation of the Escrow and
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Disbursement Agreement or this Indenture, and such suits and proceedings as the
Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders of Notes in the Collateral (including power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the security
interest hereunder or be prejudicial to the interests of the Holders of Notes or
of the Trustee).
Section 11.06. Authorization of Receipt of Funds by the Trustee Under
the Escrow and Disbursement Agreement.
The Trustee is authorized to receive any funds for the benefit of the
Holders of Notes disbursed under the Escrow and Disbursement Agreement, and to
make further distributions of such funds to the Holders of Notes according to
the provisions of this Indenture.
Section 11.07. Termination of Security Interest.
Upon the earliest to occur of (i) the date upon which the balance of
Available Funds (as defined in the Escrow and Disbursement Agreement) shall have
been reduced to zero, (ii) the payment in full of all obligations of the Company
under this Indenture and the Notes, (iii) Legal Defeasance pursuant to Section
8.02 and (iv) Covenant Defeasance pursuant to Section 8.03, the Trustee shall,
at the written request of the Company, release the Liens pursuant to this
Indenture and the Escrow and Disbursement Agreement upon the Company's
compliance with the provisions of the TIA pertaining to release of collateral.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Sec. 318(c), the imposed duties shall control.
Section 12.02. Notices.
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in Person or mailed by first class
mail (registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the other's address:
If to the Company:
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Heartland Wireless Communications, Inc.
903 North Bowser, Suite 140
Richardson, Texas 75081
Telecopier No.: (214) 479-1023
Attention: Chief Financial Officer
If to the Trustee:
First Trust of New York, National Association
100 Wall Street, Suite 1600
New York, New York 10005
Telecopier No.: (212) 809-5459
Attention: Corporate Trust Administration
The Company or the Trustee, by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders of
Notes) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder of a Note shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA Sec. 313(c), to the extent required by the
TIA. Failure to mail a notice or communication to a Holder of a Note or any
defect in it shall not affect its sufficiency with respect to other Holders of
Notes.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders of Notes, it
shall mail a copy to the Trustee and each Agent at the same time.
Section 12.03. Communication by Holders of Notes with Other Holders
of Notes.
Holders of the Notes may communicate pursuant to TIA Sec. 312(b) with
other Holders of Notes with respect to their rights under this Indenture or the
Notes. The
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Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Sec. 312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee or any
Agent to take any action under this Indenture, the Company shall furnish to the
Trustee or such Agent:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee or such Agent (which shall include the
statements set forth in Section 12.05) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for in
this Indenture relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee or such Agent (which shall include the
statements set forth in Section 12.05) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been satisfied.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
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Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders of Notes. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
Section 12.07. No Personal Liability of Partners, Directors,
Officers, Employees and Stockholders.
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes, this Indenture or the Escrow and Disbursement Agreement or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of the Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Notes.
Section 12.08. Governing Law.
The internal law of the State of New York shall govern and be used to
construe this Indenture and the Notes without regard to principles of conflict
of laws. Each of the parties hereto agrees to submit to the jurisdiction of the
courts of the State of New York in any action or proceeding arising out of or
relating to this Indenture.
Section 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
Section 12.10. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successor.
Section 12.11. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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Section 12.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 12.13. Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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SIGNATURES
Dated as of March 28, 1996 HEARTLAND WIRELESS
COMMUNICATIONS, INC.
(SEAL)
By: /s/ David D. Hagey
------------------------------------
Attest: Name: David D. Hagey
Title: Vice President-Controller
By: /s/ John R. Bailey
- ----------------------------------- ------------------------------------
Name: Name:
Title: Title:
Dated as of March 28, 1996 FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
(SEAL)
By:
------------------------------------
Name:
Title:
<PAGE>
SIGNATURES
Dated as of March 28, 1996 HEARTLAND WIRELESS
COMMUNICATIONS, INC.
(SEAL)
By:
------------------------------------
Attest: Name:
Title:
By:
- ----------------------------------- ------------------------------------
Name: Name:
Title: Title:
Dated as of March 28, 1996 FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
(SEAL)
By: /s/ Alfia Monastra
------------------------------------
Name: ALFIA MONASTRA
Title: Assistant Vice President
<PAGE>
EXHIBIT A
---------
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, THIS
SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE PREMIUM: FOR EACH $1,000 PRINCIPAL
AMOUNT OF THIS SECURITY, (1) THE ISSUE PRICE IS $1090; (2) THE AMOUNT OF
ORIGINAL ISSUE PREMIUM IS $90; (3) THE ISSUE DATE IS MARCH 28, 1996; AND (4) THE
YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY) IS 11.1 %.
CUSIP No.: 42235WAD0
HEARTLAND WIRELESS COMMUNICATIONS, INC.
13% SERIES C SENIOR NOTE DUE 2003
No. 1
HEARTLAND WIRELESS COMMUNICATIONS, INC., a Delaware corporation (the
"Company", which term includes any successor entity), for value received
promises to pay to or registered assigns, the
principal sum of Dollars, on April, 15, 2003.
Interest Payment Dates: April 15 and October 15
Record Dates (whether or not a Business Day): April 1 and October 1
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted herein.
HEARTLAND WIRELESS COMMUNICATIONS, INC.
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
Dated:
A-1
<PAGE>
Certificate of Authentication
This is one of the 13% Series C Senior Notes due 2003 referred to in
the within-mentioned Indenture.
FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, as Trustee
By:_____________________________________
Authorized Signatory
or
FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, as Trustee
By: BANKERS TRUST COMPANY, as
Authenticating
Agent
By:_____________________________________
Authorized Signatory
A-2
<PAGE>
(REVERSE OF SECURITY)
13% Senior Note due 2003
1. Interest. HEARTLAND WIRELESS COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above. If the Company fails to fulfill
its obligations under Section 2 or Section 3 of the Registration Rights
Agreement, the Company shall pay, as liquidated damages, additional interest on
the Notes ("Additional Interest") as follows (each such event referred to in
-------------------
clauses (i) through (iii) below, a "Registration Default" and each of which
--------------------
shall be given independent effect):
(i) if the Exchange Offer Registration Statement (as defined in the
Registration Rights Agreement) has not been filed on or prior to the 180th
calendar day following the Issue Date, then commencing on the 181st day
after the Issue Date, Additional Interest shall accrue on the Notes over
and above the accrued interest at a rate of .50% per annum for the first 90
days immediately following such 180th calendar day;
(ii) if the Exchange Offer Registration Statement is not declared
effective by the SEC on or prior to the 270th day following the Issue Date,
then commencing on the 271st day after the Issue Date, Additional Interest
shall accrue on the Notes included or which should have been included in
such Exchange Offer Registration Statement over and above the accrued
interest at a rate of .50% per annum for the first 90 days immediately
following such 270th day; and
(iii) if (A) the Company has not exchanged Exchange Notes for all Notes
validly tendered in accordance with the terms of the Exchange Offer, (B)
the Shelf Registration Statement (as defined in the Registration Rights
Agreement) is not declared effective on or prior to the 60th calendar day
following the delivery of the Shelf Notice or (C) if applicable, the Shelf
Registration Statement has been declared effective and ceases to be
effective, then Additional Interest shall accrue on the Notes over and
above the accrued interest at a rate of .50% per annum for the first 90
days commencing on the day after such Registration Default;
such Additional Interest rate, in the case of each of (i), (ii) and (iii) above,
to increase by an additional .50% per annum at the beginning of each subsequent
90-day period; provided, however, that in no event shall the amount of
-------- -------
Additional Interest exceed 2.00% in the aggregate; provided further, that (1)
-------- -------
upon the filing of the Exchange Offer Registration Statement (in the case of
clause (i) above), (2) upon the effectiveness of the Exchange Offer Registration
Statement (in the case of clause (ii) above), or (3) upon the exchange of
Exchange Notes for all Notes tendered (in the case of clause (iii)(A) above), or
upon the effectiveness of the Shelf Registration Statement (in the case of
clause (iii)(B) above), or
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<PAGE>
upon the effectiveness of the Shelf Registration Statement which had ceased to
remain effective (in the case of clause (iii)(C) above), Additional Interest on
the Notes as a result of such clause (or the relevant subclause thereof), as the
case may be, shall cease to accrue.
Interest on the Notes will accrue from the most recent date on which
interest has been paid or, if no interest has been paid, from March 28, 1996.
The Company will pay interest and Additional Interest, if any, semi-annually in
arrears on each Interest payment Date, commencing April 15, 1996. Interest will
be computed on the basis of a 360-year of twelve 30-day months and, in the case
of a partial month, the actual number of days elapsed. The Company shall
pay interest on overdue principal and on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the rate borne by the Notes plus 2% per annum, to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) or on Additional Interest, if any, in respect of the
Notes to the Persons who are the registered Holders at the close of business on
the Record Date immediately preceding the Interest Payment Date even if the
Notes are cancelled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Notes to a Paying Agent to
collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by its check payable in such U.S. Legal Tender.
The Company may deliver any such interest payment to the Paying Agent or to a
Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, Bankers Trust Company
will act as Paying Agent and Registrar. The Company may change any Paying Agent
or Registrar without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture,
dated as of March 28, 1996 (the "Indenture"), between the Company and First
Trust of New York, National Association, as Trustee (the "Trustee"). This Note
is one of a duly authorized issue of Initial Notes of the Company designated as
its 13% Series C Senior Notes due 2003 (the "Initial Notes"). The Notes are
limited in aggregate principal amount to $15,000,000. The Notes include the
Initial Notes and the Exchange Notes, as defined below, issued in exchange for
the Notes pursuant to the Indenture. The Initial Notes and the Exchange Notes
are treated as a single class of securities under the Indenture. Capitalized
terms herein are used as defined in the Indenture unless otherwise defined
herein. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code Sec.Sec. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and said Act for a statement of them. The Notes are not secured by any of the
assets of the Company except to the limited extent provided for by the Escrow
and Disbursement Agreement, and will become general
A-4
<PAGE>
unsecured obligations of the Company upon disbursement in full of the funds in
the Escrow Account.
5. Optional Redemption. (a) Optional Redemption. The Notes will
-------------------
not be redeemable at the Company's option prior to April 15, 1999. Thereafter,
the Notes will be subject to redemption at the option of the Company, in whole
or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on April 15 of the years
indicated below:
Year Percentage
---- ----------
1999 . . . . . . . . . . . . . . 105.571%
2000 . . . . . . . . . . . . . . 103.714%
2001 . . . . . . . . . . . . . . 101.857%
2002 and thereafter . . . . . . . . . . . . . . . . 100.000%
(b) Optional Redemption Upon Sale of Equity to Strategic Equity
-----------------------------------------------------------
Investor. Notwithstanding the foregoing, in the event of the sale by the
- --------
Company prior to April 15, 1998 of at least $25.0 million of its Capital
Stock (other than Disqualified Stock) to a Strategic Equity Investor in a single
transaction, the Company may, at its option, use the net cash proceeds of such
sale of Capital Stock to redeem up to 25% of the Notes at a redemption price
equal to 113% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of redemption; provided that at least 75% of the
initial principal amount of the Notes remains outstanding immediately after such
redemption. In order to effect the foregoing redemption with the proceeds of
any such sale of Capital Stock (other than Disqualified Stock), the Company
shall make such redemption not more than 120 days after the consummation of any
such sale of Capital Stock.
The Notes are not entitled to the benefit of any sinking fund.
6. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to
A-5
<PAGE>
bear interest from and after such Redemption Date and the only right of the
Holders of such Notes will be to receive payment of the Redemption Price plus
accrued interest, if any.
7. Offers to Purchase. Sections 4.12 and 4.16 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture) subject to
further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
8. Registration Rights. Pursuant to the Registration Rights
Agreement among the Company and the Holders of the Initial Notes, the Company
will be obligated to consummate an exchange offer pursuant to which the Holder
of this Note shall have the right to exchange this Note for the Company's 13%
Senior Notes due 2003 (the "Exchange Notes"), which have been registered under
the Securities Act, in like principal amount and having terms identical in all
material respects as the Initial Notes. The Holders of the Initial Notes shall
be entitled to receive certain additional interest payments in the event such
exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
9. Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years after such principal or interest has
become due and payable, the Trustee and the Paying Agent will pay such money
back to the Company. After that, all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company at any
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
13. Amendment; Supplement; Waiver. Subject to certain exceptions set
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the
A-6
<PAGE>
written consent of the Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding, and any past Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of not less than a majority in aggregate principal amount
of the Notes then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or comply
with Article Five of the Indenture or make any other change that does not
adversely affect the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, make certain Investments, incur liens, enter into
transactions with Affiliates, create dividend or other payment restrictions
affecting Subsidiaries, issue Preferred Stock of its Subsidiaries, merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.04 of the Indenture, the
Company must annually report to the Trustee on compliance with such limitations.
15. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of Notes then outstanding may declare all the Notes to be due
and payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. The Trustee is not obligated to enforce the
Indenture or the Notes unless it has received indemnity reasonably satisfactory
to it. The Indenture permits, subject to certain limitations therein provided,
Holders of a majority in aggregate principal amount of the Notes then
outstanding to direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Notes notice of any continuing Default or
Event of Default (except a Default in payment of principal or interest when due,
for any reason or a Default in compliance with Article Five of the Indenture) if
it determines that withholding notice is in their interest.
17. Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
A-7
<PAGE>
18. No Recourse Against Others. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
19. Authentication. This Note shall not be valid until the Trustee
or Authentication Agent manually signs the certificate of authentication on this
Note.
20. Governing Law. This Note and the Indenture shall be governed by
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws.
21. Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. Indenture. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: Heartland Wireless Communications, Inc.,
903 North Bowser, Suite 140, Richardson, Texas 75081, Attn: Chief Financial
Officer.
A-8
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ______________________________________, agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Dated: _____________ Signed: ________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee: _____________________________
A-9
<PAGE>
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) April 26, 1998, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer:
[Check One]
---------
(1) ___ to the Company or a subsidiary thereof; or
(2) ___ pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
(3) ___ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter containing
certain representations and agreements (the form of which letter can
be obtained from the Trustee); or
(4) ___ outside the United States to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as amended;
or
(5) ___ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, as amended; or
(6) ___ pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(7) ___ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided, however, that if box (3), (4), (5) or (7)
-------- -------
is checked, the Company or the Trustee may require, prior to registering any
such transfer of the Notes, in its sole discretion, such written legal opinions,
certifications (including an investment letter in the case of box (3) or (4))
and other information as the Trustee or the Company has reasonably requested 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
of 1933, as amended.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the
A-10
<PAGE>
conditions to any such transfer of registration set forth herein and in Section
2.17 of the Indenture shall have been satisfied.
Dated: __________________ Signed: ___________________________
(Sign exactly as name appears on the other side of
this Security)
Signature Guarantee: ____________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: __________________ ___________________________________
NOTICE: To be executed by an executive officer
A-11
<PAGE>
<TABLE><CAPTION>
[TO BE ATTACHED TO GLOBAL NOTE]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been made:
Principal Amount of
Amount of decrease Amount of increase this Global Note Signature of authorized
Date of in Principal Amount in Principal Amount following such officer of Trustee
Exchange of this Global Note of this Global Note decrease or increase or Custodian
----------- -------------------- ------------------- -------------------- ------------------------
<S> <C> <C> <C> <C>
</TABLE>
A-12
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.12 or 4.16 of the Indenture, check the appropriate box:
Section 4.12 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.12 or 4.16 of the Indenture, state the amount you
elect to have purchased:
$_______________________
Dated: __________________ ___________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the face of
the within Note in every particular without alteration
or enlargement or any change whatsoever and be
guaranteed by the endorser's bank or broker.
Signature Guarantee: ____________________________________
A-13
<PAGE>
EXHIBIT B
---------
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, THIS
SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE PREMIUM: FOR EACH $1,000 PRINCIPAL
AMOUNT OF THIS SECURITY, (1) THE ISSUE PRICE IS $1,090; (2) THE AMOUNT OF
ORIGINAL ISSUE PREMIUM IS $90; (3) THE ISSUE DATE IS MARCH 28, 1996; AND (4) THE
YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY) IS 11.1 %.
CUSIP No.:
HEARTLAND WIRELESS COMMUNICATIONS, INC.
13% SERIES D SENIOR NOTE DUE 2003
No. 1
HEARTLAND WIRELESS COMMUNICATIONS, INC., a Delaware corporation (the
"Company", which term includes any successor entity), for value received
promises to pay to or registered assigns, the
principal sum of Dollars, on April, 15, 2003.
Interest Payment Dates: April 15 and October 15
Record Dates (whether or not a Business Day): April 1 and October 1
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted herein.
HEARTLAND WIRELESS COMMUNICATIONS, INC.
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
Dated:
B-1
<PAGE>
Certificate of Authentication
This is one of the 13% Series D Senior Notes due 2003 referred to in
the within-mentioned Indenture.
FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, as Trustee
By:____________________________________
Authorized Signatory
or
FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, as Trustee
By: BANKERS TRUST COMPANY, as
Authenticating Agent
By:_____________________________________
Authorized Signatory
B-2
<PAGE>
(REVERSE OF SECURITY)
13% D Senior Note due 2003
1. Interest. HEARTLAND WIRELESS COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above.
Interest on the Notes will accrue from the most recent date on which
interest has been paid or, if no interest has been paid, from March 28, 1996.
The Company will pay interest semi-annually in arrears on each Interest payment
Date, commencing April 15, 1996. Interest will be computed on the basis of a
360-year of twelve 30-day months and, in the case of a partial month, the actual
number of days elapsed. The Company shall pay interest on overdue
principal and on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the rate borne by the
Notes plus 2% per annum, to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, Bankers Trust Company
will act as Paying Agent and Registrar. The Company may change any Paying Agent
or Registrar without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture,
dated as of March 28, 1996 (the "Indenture"), between the Company and First
Trust of New York, National Association, as Trustee (the "Trustee"). This Note
is one of a duly authorized issue of Exchange Notes of the Company designated as
its 13% Series D Senior Notes due 2003 (the "Exchange Notes"). The Notes are
limited in aggregate principal amount to $15,000,000. The Notes include the
Initial Notes and the Exchange Notes, as defined below, issued in
B-3
<PAGE>
exchange for the Notes pursuant to the Indenture. The Initial Notes and the
Exchange Notes are treated as a single class of securities under the Indenture.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S. Code Sec.Sec. 77aaa-77bbbb) (the "TIA"), as in effect on the date
of the Indenture. Notwithstanding anything to the contrary herein, the Notes
are subject to all such terms, and Holders of Notes are referred to the
Indenture and said Act for a statement of them. The Notes are not secured by
any of the assets of the Company except to the limited extent provided for by
the Escrow and Disbursement Agreement, and will become general unsecured
obligations of the Company upon disbursement in full of the funds in the Escrow
Account.
5. Optional Redemption. (a) Optional Redemption. The Notes will
-------------------
not be redeemable at the Company's option prior to April 15, 1999. Thereafter,
the Notes will be subject to redemption at the option of the Company, in whole
or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on April 15 of the years
indicated below:
Year Percentage
---- ----------
1999 . . . . . . . . . . . . . . 105.571%
2000 . . . . . . . . . . . . . . 103.714%
2001 . . . . . . . . . . . . . . 101.857%
2002 and thereafter . . . . . . . . . . . . . . . . 100.00%
(b) Optional Redemption Upon Sale of Equity to Strategic Equity
-----------------------------------------------------------
Investor. Notwithstanding the foregoing, in the event of the sale by the
- --------
Company prior to April 15, 1998 of at least $25.0 million of its Capital
Stock (other than Disqualified Stock) to a Strategic Equity Investor in a single
transaction, the Company may, at its option, use the net cash proceeds of such
sale of Capital Stock to redeem up to 25% of the Notes at a redemption price
equal to 113% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of redemption; provided that at least 75% of the
initial principal amount of the Notes remains outstanding immediately after such
redemption. In order to effect the foregoing redemption with the proceeds of
any such sale of Capital Stock
B-4
<PAGE>
(other than Disqualified Stock), the Company shall make such redemption not more
than 120 days after the consummation of any such sale of Capital Stock.
The Notes are not entitled to the benefit of any sinking fund.
6. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.
7. Offers to Purchase. Sections 4.12 and 4.16 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture) subject to
further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
8. Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
9. Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years after such principal or interest has
become due and payable, the Trustee and the Paying Agent will pay such money
back to the Company. After that, all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
B-5
<PAGE>
11. Discharge Prior to Redemption or Maturity. If the Company at any
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
12. Amendment; Supplement; Waiver. Subject to certain exceptions set
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of not less than a majority
in aggregate principal amount of the Notes then outstanding, and any past
Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Notes in addition to or in place of certificated
Notes, or comply with Article Five of the Indenture or make any other change
that does not adversely affect the rights of any Holder of a Note.
13. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, make certain Investments, incur liens, enter into
transactions with Affiliates, create dividend or other payment restrictions
affecting Subsidiaries, issue Preferred Stock of its Subsidiaries, merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.04 of the Indenture, the
Company must annually report to the Trustee on compliance with such limitations.
14. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
15. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of Notes then outstanding may declare all the Notes to be due
and payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. The Trustee is not obligated to enforce the
B-6
<PAGE>
Indenture or the Notes unless it has received indemnity reasonably satisfactory
to it. The Indenture permits, subject to certain limitations therein provided,
Holders of a majority in aggregate principal amount of the Notes then
outstanding to direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Notes notice of any continuing Default or
Event of Default (except a Default in payment of principal or interest when due,
for any reason or a Default in compliance with Article Five of the Indenture) if
it determines that withholding notice is in their interest.
16. Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
17. No Recourse Against Others. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
18. Authentication. This Note shall not be valid until the Trustee
or Authentication Agent manually signs the certificate of authentication on this
Note.
19. Governing Law. This Note and the Indenture shall be governed by
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws.
20. Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
21. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
B-7
<PAGE>
22. Indenture. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: Heartland Wireless Communications, Inc.,
903 North Bowser, Suite 140, Richardson, Texas 75081, Attn: Chief Financial
Officer.
B-8
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ______________________________________, agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Dated: _____________ Signed: ________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee: _____________________________
B-9
<PAGE>
[TO BE ATTACHED TO GLOBAL NOTE]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been
made:
<TABLE><CAPTION>
Principal Amount of
Amount of decrease Amount of increase this Global Note Signature of authorized
Date of in Principal Amount in Principal Amount following such officer of Trustee
Exchange of this Global Note of this Global Note decrease or increase or Custodian
----------- -------------------- ------------------- -------------------- ------------------------
<S> <C> <C> <C> <C>
</TABLE>
B-10
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.12 or 4.16 of the Indenture, check the appropriate box:
Section 4.12 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.12 or 4.16 of the Indenture, state the amount you
elect to have purchased:
$_______________________
Dated: __________________ ___________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the face of
the within Note in every particular without alteration
or enlargement or any change whatsoever and be
guaranteed by the endorser's bank or broker.
Signature Guarantee: ____________________________________
B-11
<PAGE>
EXHIBIT C
---------
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
____________, _____
First Trust of New York, National Association
100 Wall Street, Suite 1600
New York, New York 10005
Attention: Corporate Trust Department
Re: Heartland Wireless Communications, Inc.
(the "Company") 13% Series C Senior Notes due 2003
(the "Notes")
------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $________ aggregate
principal amount of the Notes, we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated March 28, 1996, relating to the Notes and such other
information as we deem necessary in order to make our investment decision.
We acknowledge that we have read and agreed to the matters stated in the
section entitled "Transfer Restrictions" of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
dated as of March 28, 1996 relating to the Notes (the "Indenture") and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities
Act").
3. We understand that the Notes have not been registered under the
Securities Act, and that the Notes may not be offered or sold except as
permitted in the following sentence. We agree, on our own behalf and on
behalf of any accounts
C-1
<PAGE>
for which we are acting as hereinafter stated, that if we should sell any
Notes within three years after the original issuance of the Notes, we will
do so only (A) to the Company or any subsidiary thereof, (B) inside the
United States in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (C) inside the United
States to an "institutional accredited investor" (as defined below) that,
prior to such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you a signed letter substantially in the form of this
letter, (D) outside the United States in accordance with Rule 904 of
Regulation S 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 we further agree to provide to any person purchasing any of the
Notes from us a notice advising such purchaser that resales of the Notes
are restricted as stated herein.
4. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Company such certification, written
legal opinions and other information as you and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
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
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment, as the case may be.
6. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You, the Agents, the Company and counsel for the Company are entitled
to rely upon this letter and are irrevocably authorized to produce this letter
or a copy hereof to
C-2
<PAGE>
any interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By: _______________________________
Authorized Signature
C-3
<PAGE>
EXHIBIT D
---------
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
------------------------
_________________, ____
First Trust of New York, National Association
100 Wall Street, Suite 1600
New York, New York 10005
Attention: Corporate Trust Department
Re: Heartland Wireless Communications, Inc.
(the "Company") 13% Series C Senior Notes due 2003
(the "Notes")
----------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $_____________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been pre-
arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
<PAGE>
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You, the Company and counsel for the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: _______________________________
Authorized Signature
EXHIBIT 4.20
REGISTRATION RIGHTS AGREEMENT
Dated as of March 28, 1996
Among
HEARTLAND WIRELESS COMMUNICATIONS, INC.
as Issuer
and
BT SECURITIES CORPORATION
as Initial Purchaser
<PAGE>
TABLE OF CONTENTS Page
----
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Shelf Registration . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. Additional Interest . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . 12
6. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . 21
7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8. Rules 144 and 144A . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9. Underwritten Registrations . . . . . . . . . . . . . . . . . . . . . . 27
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . 27
(b) Adjustments Affecting Registrable Notes . . . . . . . . . . . . . 27
(c) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . 27
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(e) Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 29
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(h) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(i) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(j) Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . 30
(k) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 30
(l) Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . 30
(m) Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-i-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
March 28, 1996, between Heartland Wireless Communications, Inc., a Delaware
corporation (the "Company"), and BT Securities Corporation (the "Initial
------- -------
Purchaser").
- ---------
This Agreement is entered into in connection with the Purchase
Agreement, dated March 25, 1996, between the Company and the Initial Purchaser
(the "Purchase Agreement") which provides for the sale by the Company to the
------------------
Initial Purchaser of $15,000,000 aggregate principal amount of the Company's
13% Series C Senior Notes due 2003 (the "Notes"). In order to induce the
-----
Initial Purchaser to enter into the Purchase Agreement, the Company has agreed
to provide the registration rights set forth in this Agreement for the benefit
of the Initial Purchaser and its direct and indirect transferees and assigns.
The execution and delivery of this Agreement is a condition to the Initial
Purchaser's obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a) hereof.
-------------------
Advice: See the last paragraph of Section 5 hereof.
------
Agreement: See the introductory paragraphs hereto.
---------
Applicable Period: See Section 2(b) hereof.
-----------------
Company: See the introductory paragraphs hereto.
-------
Effectiveness Date: The 270th day after the Issue Date.
------------------
Effectiveness Period: See Section 3(a) hereof.
--------------------
Event Date: See Section 4(b) hereof.
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
--------------
Exchange Offer: See Section 2(a) hereof.
--------------
<PAGE>
2
Exchange Offer Registration Statement: See Section 2(a) hereof.
-------------------------------------
Filing Date: The 180th day after the Issue Date.
-----------
Holder: Any holder of a Registrable Note or Registrable Notes.
------
Indemnified Person: See Section 7(c) hereof.
------------------
Indemnifying Person: See Section 7(c) hereof.
-------------------
Indenture: The Indenture, dated as of March 28, 1996 between the
---------
Company and First Trust of New York, National Association, as Trustee, pursuant
to which the Notes are being issued, as amended or supplemented from time to
time in accordance with the terms thereof.
Initial Purchaser: See the introductory paragraphs hereto.
-----------------
Inspectors: See Section 5(o) hereof.
----------
Issue Date: The date on which the original Notes were sold to the
----------
Initial Purchaser pursuant to the Purchase Agreement.
NASD: See Section 5(t) hereof.
----
Notes: See the introductory paragraphs hereto.
-----
Participant: See Section 7(a) hereof.
-----------
Participating Broker-Dealer: See Section 2(b) hereof.
---------------------------
Person: An individual, trustee, corporation, partnership, joint stock
------
company, trust, unincorporated association, union, business association, firm or
other legal entity.
Private Exchange: See Section 2(b) hereof.
----------------
Private Exchange Notes: See Section 2(b) hereof.
----------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
<PAGE>
3
Purchase Agreement: See the introductory paragraphs hereto.
------------------
Records: See Section 5(o) hereof.
-------
Registrable Notes: Each Note upon original issuance of the Notes and
-----------------
at all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv)
hereof is applicable upon original issuance and at all times subsequent thereto
and each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until in the case of any such Note, Exchange Note or Private
Exchange Note, as the case may be, the earliest to occur of (i) a Registration
Statement (other than, with respect to any Exchange Note as to which Section
2(c)(iv) hereof is applicable, the Exchange Offer Registration Statement) cov-
ering such Note, Exchange Note or such Private Exchange Note having been
declared effective by the SEC and such Note or such Private Exchange Note, as
the case may be, having been disposed of in accordance with such effective
Registration Statement, (ii) such Note, Exchange Note or Private Exchange Note,
as the case may be, being eligible for sale to the public pursuant to Rule 144,
(iii) such Note having been exchanged for an Exchange Note pursuant to an
Exchange Offer which may be resold without restriction under state and federal
securities laws, or (iv) such Note, Exchange Note or Private Exchange Note, as
the case may be, ceasing to be outstanding for purposes of the Indenture.
Registration Default: See Section 4(a) hereof.
--------------------
Registration Statement: Any registration statement of the Company,
----------------------
including, but not limited to, the Exchange Offer Registration Statement, filed
with the SEC pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration statement, including
post effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
---------
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
<PAGE>
4
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
------------
Shelf Registration Statement: See Section 3(a) hereof.
----------------------------
Subsequent Shelf Registration Statement: See Section 3(b) hereof.
---------------------------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
Trustee: The trustee under the Indenture and, if existent, the
-------
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
--------------
(a) The Company shall file with the SEC no later than the Filing
Date, a registration statement under the Securities Act with respect to a
registered offer to exchange (the "Exchange Offer") any and all of the
--------------
Registrable Notes (other than Private Exchange Notes, if any) for a like
aggregate principal amount of debt securities of the Company which are identical
in all material respects to the Notes (the "Exchange Notes"), except that the
--------------
Exchange Notes shall have been registered pursuant to an effective Registration
Statement under the Securities Act and shall contain no restrictive legend
thereon, and which are entitled to the benefits of the Indenture or a trust
indenture which is identical in all material respects to the Indenture (other
than such changes to the Indenture or any such identical trust indenture as are
necessary to comply with any requirements of the SEC to effect or maintain the
qualification thereof under the TIA) and which, in either case, has been
qualified under the TIA. The Exchange Offer shall be registered under the
Securities Act on an appropriate form (the "Exchange Offer Registration
---------------------------
Statement") and shall comply with all applicable tender offer rules and
- ---------
regulations under the Exchange Act. The Company shall cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act on or
before the Effectiveness Date. Upon the Exchange Offer Registration Statement
being declared effective, the Company will offer the Exchange Notes in exchange
for surrender of the Notes. The Company will keep the
<PAGE>
5
Exchange Offer open for at least 30 calendar days (or longer if required by
applicable law) after the date that notice of the Exchange Offer is mailed to
Holders. For purposes of this Section 2(a) only, if after such Exchange Offer
Registration Statement is initially declared effective by the SEC, the Exchange
Offer or the issuance of the Exchange Notes thereunder is interfered with by any
stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court, such Exchange Offer Registration Statement shall
be deemed not to have become effective for purposes of this Agreement. Each
Holder who participates in the Exchange Offer will be required to represent that
any Exchange Notes received by it will be acquired in the ordinary course of its
business, that at the time of the consummation of the Exchange Offer such Holder
will have no arrangement or understanding with any Person to participate in the
distribution of the Exchange Notes in violation of the provisions of the
Securities Act, and that such Holder is not an affiliate of the Company within
the meaning of the Securities Act. Upon consummation of the Exchange Offer in
accordance with this Section 2, the provisions of this Agreement shall continue
to apply, mutatis mutandis, solely with respect to Registrable Notes that are
------- --------
Private Exchange Notes and Exchange Notes held by Participating Broker-Dealers,
and the Company shall have no further obligation to register Registrable Notes
pursuant to Section 3 hereof (other than Private Exchange Notes and other than
in respect of any Exchange Notes as to which clause 2(c)(iv) hereof applies).
No securities other than the Exchange Notes shall be included in the Exchange
Offer Registration Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchaser, which shall contain a summary
statement of the positions taken or policies made by the Staff of the Division
of Corporation Finance of the SEC (the "Staff") with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such
broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"), whether
---------------------------
such positions or policies have been publicly disseminated by the Staff or such
positions or policies, in the judgment of the Initial Purchaser, represent the
prevailing views of the Staff. Such "Plan of Distribution" section shall also
expressly permit the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including all
Participating Broker-Dealers, and include a statement describing the means by
which Participating Broker-Dealers may resell the Exchange Notes.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all Persons subject to the prospectus delivery requirements of the Securities
Act for
<PAGE>
6
such period of time as is necessary to comply with applicable law in connection
with any resale of the Exchange Notes; provided, however, that such period shall
-------- -------
not exceed 120 days after the Exchange Offer Registration Statement is declared
effective (or such longer period if extended pursuant to the last paragraph of
Section 5 hereof) (the "Applicable Period").
-----------------
If, prior to consummation of the Exchange Offer, the Initial Purchaser
holds any Notes acquired by it and having, or which are reasonably likely to be
determined to have, the status of an unsold allotment in the initial
distribution, or any other Holder is not entitled to participate in the Exchange
Offer, the Company upon the request of the Initial Purchaser or any such Holder
shall simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to the Initial Purchaser and any such Holder, in
exchange (the "Private Exchange") for such Notes held by the Initial Purchaser
----------------
and any such Holder, a like principal amount of debt securities of the Company
that are identical in all material respects to the Exchange Notes (the "Private
-------
Exchange Notes") (and which are issued pursuant to the same indenture as the
- --------------
Exchange Notes); provided, however, the Company shall not be required to effect
-------- -------
such exchange if, in the written opinion of counsel for the Company (a copy of
which shall be delivered to the Initial Purchaser and any Holder affected
thereby), such exchange cannot be effected without registration under the
Securities Act. The Private Exchange Notes shall bear the same CUSIP number as
the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or (ii) if the
Notes are surrendered for exchange on a date in a period which includes the
record date for an interest payment date to occur on or after the date of such
exchange and as to which interest will be paid, the date of such interest
payment date or (B) if no interest has been paid on the Notes, from the Issue
Date.
In connection with the Exchange Offer, the Company shall:
(1) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(3) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the
<PAGE>
7
last business day on which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(1) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or the Private Exchange,
as the case may be, does not violate applicable law or any applicable
interpretation of the Staff, (ii) no action or proceeding is instituted or
threatened in any court or by any governmental agency which might materially
impair the ability of the Company to proceed with the Exchange Offer or the
Private Exchange and no material adverse development has occurred in any
existing action or proceeding with respect to the Company and (iii) all
governmental approvals have been obtained, which approvals the Company deems
necessary for the consummation of the Exchange Offer or Private Exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to the
Indenture, which in either event shall provide that the Exchange Notes shall not
be subject to the transfer restrictions set forth in the Indenture. The
Indenture or such indenture shall provide that the Exchange Notes, the Private
Exchange Notes and the Notes shall vote and consent together on all matters as
one class and that neither the Exchange Notes, the Private Exchange Notes or the
Notes will have the right to vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the Staff, the Company is not permitted to effect an Exchange
Offer, (ii) the Exchange Offer is not consummated within 300 days of the Issue
Date, (iii) any holder of Private Exchange Notes so requests within 270 days
after the consummation of the Private Exchange, or (iv) in the case of any
Holder that participates in the Exchange Offer, such Holder does not receive
Exchange Notes on the date of the
<PAGE>
8
exchange that may be sold without restriction under state and federal securities
laws (other than due solely to the status of such Holder as an affiliate of the
Company within the meaning of the Securities Act) and so notifies the Company
within 60 days after such Holder first becomes aware of any such restriction and
provides the Company with a reasonable basis for its conclusion, in the case of
each of clauses (i), (ii), (iii) and (iv) of this sentence, then the Company
shall promptly deliver to the Holders of Registrable Notes and the Trustee
written notice thereof (the "Shelf Notice") and shall file a Shelf Registration
------------
pursuant to Section 3 hereof.
3. Shelf Registration
------------------
If a Shelf Notice is delivered as contemplated by Section 2(c) hereof,
then:
(a) Shelf Registration. The Company shall file with the SEC a
------------------
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes (the "Shelf Registration
------------------
Statement"). If the Company shall not have filed an Exchange Offer Registration
- ---------
Statement, the Company shall use its diligent best efforts to file with the SEC
the Shelf Registration Statement as promptly as practicable, but no later than
30 days from the delivery of the Shelf Notice. The Shelf Registration Statement
shall be on Form S-1 or another appropriate form permitting registration of such
Registrable Notes for resale by Holders in the manner or manners designated by
them (including, without limitation, one or more underwritten offerings). The
Company shall not permit any securities other than the Registrable Notes to be
included in the Shelf Registration Statement or any Subsequent Shelf
Registration Statement.
The Company shall use all reasonable efforts to cause the initial
Shelf Registration Statement to be declared effective under the Securities Act
by the 60th day after the delivery of the Shelf Notice and to keep the Shelf
Registration Statement continuously effective under the Securities Act until the
third anniversary of its effective date, subject to extension pursuant to the
last paragraph of Section 5 hereof (the "Effectiveness Period"), or such shorter
--------------------
period ending when (i) all Registrable Notes covered by the Shelf Registration
Statement have been sold in the manner set forth and as contemplated in the
initial Shelf Registration Statement or (ii) a Subsequent Shelf Registration
Statement covering all of the Registrable Notes has been declared effective
under the Securities Act.
(b) Subsequent Shelf Registrations. If the initial Shelf
------------------------------
Registration Statement or any Subsequent Shelf Registration Statement ceases to
be effective for any reason at any time during the Effectiveness Period (other
than because of the sale of all of the securities registered thereunder), the
Company shall use all reasonable efforts to obtain the prompt withdrawal
<PAGE>
9
of any order suspending the effectiveness thereof, and in any event shall within
30 days of such cessation of effectiveness amend the Shelf Registration
Statement in a manner to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration Statement
pursuant to Rule 415 covering all of the Registrable Notes (a "Subsequent Shelf
----------------
Registration Statement"). If a Subsequent Shelf Registration Statement is
- ----------------------
filed, the Company shall use its best efforts to cause the Subsequent Shelf
Registration to be declared effective under the Securities Act as soon as
practicable after such filing and to keep such Registration Statement
continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the Shelf
Registration Statement or any Subsequent Shelf Registration was previously
continuously effective. As used herein the term "Shelf Registration Statement"
----------------------------
means the Shelf Registration Statement and any Subsequent Shelf Registration
Statement.
(c) Supplements and Amendments. The Company shall promptly
--------------------------
supplement and amend the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration Statement, if required by the Securities Act, or if
reasonably requested by the Holders of a majority in aggregate principal amount
of the Registrable Notes covered by such Registration Statement or by any
underwriter of such Registrable Notes.
(d) Hold-Back Agreements
--------------------
(1) Restrictions on Public Sale by Holders of Registrable Notes.
-----------------------------------------------------------
Each Holder of Registrable Notes whose Registrable Notes are covered by a
Shelf Registration Statement filed pursuant to this Section 3 (which
Registrable Notes are not being sold in the underwritten offering described
below) agrees, if requested (pursuant to a timely written notice) by the
Company or the managing underwriter or underwriters in an underwritten
offering, not to effect any public sale or distribution of any of the
Registrable Notes or a similar security of the Company, including a sale
pursuant to Rule 144 or Rule 144A (except as part of such underwritten
offering), during the period beginning 20 days prior to, and ending 90 days
after, the closing date of each underwritten offering made pursuant to such
Shelf Registration Statement, to the extent timely notified in writing by
the Company or by the managing underwriter or underwriters; provided,
--------
however, that each holder of Registrable Notes shall be subject to the
-------
hold-back restrictions of this Section 3(d)(1) only once during the term of
this Agreement.
The foregoing provisions shall not apply to any Holder if such Holder
is prevented by applicable statute or regulation from entering into any
such agreement; provided,
--------
<PAGE>
10
however, that any such Holder shall undertake, in its request to
-------
participate in any such underwritten offering, not to effect any public
sale or distribution of the class of securities covered by such Shelf
Registration Statement (except as part of such underwritten offering)
during such period unless it has provided 30 days' prior written notice of
such sale or distribution to the Company or the managing underwriter or
underwriters, as the case may be.
(2) Restrictions on the Company and Others. The Company agrees (A)
--------------------------------------
not to effect any public or private sale or distribution (including,
without limitation, a sale pursuant to Regulation D under the Securities
Act) of any securities the same as or similar to those covered by a Shelf
Registration Statement filed pursuant to this Section 3, or any securities
convertible into or exchangeable or exercisable for such securities, during
the 10 days prior to, and during the 90-day period beginning on, the
commencement of an underwritten public distribution of Registrable Notes,
where the managing underwriter or underwriters so requests; (B) to include
in any agreements entered into by the Company on or after the date of this
Agreement (other than any underwriting agreement relating to a public
offering registered under the Securities Act) pursuant to which the Company
issues or agrees to issue securities the same as or similar to the Notes a
provision that each holder of such securities that are the same as or
similar to Notes issued at any time on or after the date of this Agreement
agrees not to effect any public or private sale or distribution, or request
or demand the registration, of any such securities (or any securities
convertible into or exchangeable or exercisable for such securities) during
the period referred to in clause (A) of this Section 3(d)(2), including any
sale pursuant to Rule 144 or Rule 144A; and (C) not to grant or agree to
grant any "piggy back registration" or other similar rights to any holder
of the Company's or any of their respective subsidiaries' securities issued
on or after the date of this Agreement with respect to any Registration
Statement.
4. Additional Interest
-------------------
(a) The Company and the Initial Purchaser agree that the Holders of
Notes will suffer damages if the Company fails to fulfill its obligations under
Section 2 or Section 3 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the Company agrees to pay,
as liquidated damages, additional interest on the Notes ("Additional Interest")
-------------------
under the circumstances and to the extent set forth below (each such event
referred to in clauses (i) through (iii) below, a "Registration Default" and
--------------------
each of which shall be given independent effect):
<PAGE>
11
(i) if the Exchange Offer Registration Statement has not been filed
on or prior to the 180th day following the Issue Date, then commencing on
the 181st day after the Issue Date, Additional Interest shall accrue on the
Notes over and above the accrued interest at a rate of .50% per annum for
the first 180 days immediately following such 180th day;
(ii) if the Exchange Offer Registration Statement is not declared
effective by the SEC on or prior to the 270th day following the Issue Date,
then commencing on the 271st day after the Issue Date, Additional Interest
shall accrue on the Notes included or which should have been included in
such Registration Statement over and above the accrued interest at a rate
of .50% per annum for the first 90 days immediately following such 270th
day; and
(iii) if (A) the Company has not exchanged Exchange Notes for all Notes
validly tendered in accordance with the terms of the Exchange Offer, (B)
the Shelf Registration Statement is not declared effective on or prior to
the 60th day following the delivery of the Shelf Notice or (C) if
applicable, the Shelf Registration Statement has been declared effective
and ceases to be effective, then Additional Interest shall accrue on the
Notes over and above the accrued interest at a rate of .50% per annum for
the first 90 days commencing on the day after such Registration Default;
such Additional Interest rate, in the case of each of (i), (ii) and (iii) above,
to increase by an additional .50% per annum at the beginning of each subsequent
90-day period; provided, however; that in no event shall the amount of
-------- -------
Additional Interest exceed 2.00% in the aggregate pursuant to this Section 4;
provided further, that (1) upon the filing of the Exchange Offer Registration
- -------- -------
Statement (in the case of clause (i) of this Section 4(a)), (2) upon the
effectiveness of the Exchange Offer Registration Statement (in the case of
clause (ii) of this Section 4(a)), or (3) upon the exchange of Exchange Notes
for all Notes tendered (in the case of clause (iii)(A) of this Section 4(a)), or
upon the effectiveness of the Shelf Registration Statement (in the case of
clause (iii)(B) of this Section 4(a)), or upon the effectiveness of the Shelf
Registration Statement which had ceased to remain effective (in the case of
clause (iii)(C) of this Section 4(a)), Additional Interest on the Notes as a
result of such clause (or the relevant subclause thereof), as the case may be,
shall cease to accrue.
(b) The Company shall notify the Trustee within one business day
after each Registration Default (an "Event Date"). Any amounts of Additional
----------
Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be
payable in cash semi-annually on each April 15 and October 15 (to the holders of
record on the April 1 and October 1 immediately preceding such dates),
commencing with the first such date occurring after any
<PAGE>
12
such Additional Interest commences to accrue. The amount of Additional Interest
will be determined by multiplying the applicable Additional Interest rate by the
principal amount of the Registrable Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360.
5. Registration Procedures
-----------------------
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company shall effect such registrations to permit
the sale of the securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in connection
with any Registration Statement filed by the Company hereunder the Company
shall:
(a) Prepare and file with the SEC on or prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Sections 2 or
3 hereof, and use its diligent best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein; provided,
--------
however, that, if (1) such filing is pursuant to Section 3 hereof, or (2) a
- -------
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, before filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall furnish to and afford the
Holders of the Registrable Notes covered by such Registration Statement or each
such Participating Broker-Dealer, as the case may be, one counsel selected by
the Holders of a majority in aggregate principal amount of the Registrable Notes
(the "Holders' Counsel"), counsel for such Participating Broker-Dealer and the
managing underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (in each case
at least five business days prior to such filing, or such later date as is
reasonable under the circumstances). The Company shall not file any
Registration Statement or Prospectus or any amendments or supplements thereto if
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement and the Holders' Counsel, or any such
Participating Broker-Dealer and its counsel, as the case may be, or the managing
underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer Registration
Statement, as the case may be, as may
<PAGE>
13
be necessary to keep such Registration Statement continuously effective for the
Effectiveness Period or the Applicable Period, as the case may be; cause the
related Prospectus to be supplemented by any Prospectus supplement required by
applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any
similar provisions then in force) promulgated under the Securities Act; and
comply with the provisions of the Securities Act and the Exchange Act applicable
to it with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so supplemented
and with respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus. The Company shall
be deemed not to have used its diligent best efforts to keep a Registration
Statement effective during the Applicable Period if it voluntarily takes any
action that would result in selling Holders of the Registrable Notes covered
thereby or Participating Broker-Dealers seeking to sell Exchange Notes not being
able to sell such Registrable Notes or such Exchange Notes during that period
unless (i) such action is required by applicable law or (ii) such action is
taken by the Company in good faith and for valid business reasons (not including
avoidance of the Company's obligations hereunder), including the acquisition or
divestiture of assets.
(c) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, notify the selling Holders
of Registrable Notes and Holders' Counsel, or each such Participating
Broker-Dealer and their counsel, as the case may be, and the managing
underwriters, if any, promptly (but in any event within two business days), (i)
when a Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may, upon request,
obtain, at the sole expense of the Company, one conformed copy of such Regis-
tration Statement or post-effective amendment including financial statements and
schedules, documents incorporated or deemed to be incorporated by reference and
exhibits), (ii) of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the initiation of any
proceedings for that purpose, (iii) if at any time when a prospectus is required
by the Securities Act to be delivered in connection with sales of the
Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers
the representations and warranties of the Company contained in any agreement
(including any underwriting agreement), contemplated by Section 5(n) hereof, to
the knowledge of the Company, cease to be true and correct in all material
respects, (iv) of the receipt by
<PAGE>
14
the Company of any notification with respect to the suspension of the qualifica-
tion or exemption from qualification of a Registration Statement or any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event, or any information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Company's determination that a post--
effective amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, use its reasonable best
efforts to prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of a
Prospectus or suspending the qualification (or exemption from qualification) of
any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any such
order is issued, to use its best efforts to obtain the withdrawal of any such
order at the earliest possible moment.
(e) If a Shelf Registration Statement is filed pursuant to Section 3
and if requested by the managing underwriter or underwriters (if any), the
Holders of a majority in aggregate principal amount of the Registrable Notes
being sold in connection with an underwritten offering or any Participating
Broker-Dealer, (i) promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters (if any), their counsel, such Holders, Holders' Counsel, any Par-
ticipating Broker-Dealer or their counsel determine is reasonably necessary to
be included therein, (ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
prospectus supplement or
<PAGE>
15
post-effective amendment, and (iii) supplement or make amendments to such
Registration Statement.
(f) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes, Holders' Counsel and to each such Participating
Broker-Dealer who so requests and its counsel and each managing underwriter, if
any, at the sole expense of the Company, one conformed copy of the Registration
Statement or Registration Statements and each post-effective amendment thereto,
including financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, deliver to each selling
Holder of Registrable Notes and Holders' counsel, or each such Participating
Broker-Dealer and its counsel, as the case may be, and the underwriters, if any,
at the sole expense of the Company, as many copies of the Prospectus or
Prospectuses (including each form of preliminary prospectus) and each amendment
or supplement thereto and any documents incorporated by reference therein as
such Persons may reasonably request; and, subject to the last paragraph of this
Section 5, the Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders of Registrable
Notes or each such Participating Broker-Dealer, as the case may be, and the
underwriters or agents, if any, and dealers (if any), in connection with the
offering and sale of the Registrable Notes covered by, or the sale by
Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus
and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Offer Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its best efforts to cooperate with the selling Holders of
Registrable Notes and Holders' counsel or each such Participating Broker-Dealer
and its counsel, as the case may be, the managing underwriter or underwriters,
if any, and their counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable Notes
for offer and sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any selling Holder, Participating Broker-Dealer, or
the managing underwriter
<PAGE>
16
or underwriters reasonably request; provided, however, that where Exchange Notes
-------- -------
held by Participating Broker-Dealers or Registrable Notes are offered other than
through an underwritten offering, the Company agrees to cause the Company's
counsel to perform Blue Sky investigations and file registrations and quali-
fications required to be filed pursuant to this Section 5(h); keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes held by Participating
Broker-Dealers or the Registrable Notes covered by the applicable Registration
Statement; provided, however, that the Company shall not be required (A) to
-------- -------
qualify generally to do business in any jurisdiction where it is not then so
qualified, (B) to take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or (C) to
subject itself to taxation in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.
(i) If a Shelf Registration Statement is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which cer-
tificates shall not bear any restrictive legends and shall be in a form eligible
for deposit with The Depository Trust Company; and enable such Registrable Notes
to be in such denominations and registered in such names as the managing
underwriter or underwriters, if any, or Holders may request.
(j) Use its best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to enable
the seller or sellers thereof or the underwriter or underwriters, if any, to
consummate the disposition of such Registrable Notes, except as may be required
solely as a consequence of the nature of such selling Holder's business, in
which case the Company will cooperate in all reasonable respects with the filing
of such registration statement and the granting of such approvals.
(k) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as
practicable prepare and (subject to Section 5(a) hereof) file with the SEC, at
the sole expense of the Company, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated
<PAGE>
17
or deemed to be incorporated therein by reference, or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Notes being sold thereunder or to the purchasers of the Exchange Notes to whom
such Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(l) Use its best efforts to cause the Registrable Notes covered by a
Registration Statement or the Exchange Notes, as the case may be, to be rated
with the appropriate rating agencies, if so requested by the Holders of a
majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement or the Exchange Notes, as the case may be, or the
managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates for
the Registrable Notes in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes.
(n) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration Statement, enter into an underwriting agreement
as is customary in underwritten offerings of debt securities similar to the
Notes and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Notes and, in such
connection, (i) make such representations and warranties to, and covenants with,
the underwriters with respect to the business of the Company and its
subsidiaries (including any acquired business, properties or entity, if
applicable) and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case, as
are customarily made by issuers to underwriters in underwritten offerings of
debt securities similar to the Notes, and confirm the same in writing if and
when requested; (ii) use reasonable best efforts to obtain the written opinions
of counsel to the Company and written updates thereof in form, scope and
substance reasonably satisfactory to the managing underwriter or underwriters,
addressed to the underwriters covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may be
reasonably requested by the managing underwriter or underwriters; (iii) use
reasonable best efforts to obtain "cold comfort" letters and updates thereof in
form, scope and substance reasonably satisfactory to the managing underwriter or
underwriters from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial
<PAGE>
18
statements and financial data are, or are required to be, included or
incorporated by reference in the Registration Statement), addressed to each of
the underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested by the
managing underwriter or underwriters as permitted by the Statement on Auditing
Standards No. 72; and (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less favorable
than those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement and the managing
underwriter or underwriters or agents) with respect to all parties to be
indemnified pursuant to said Section. The above shall be done at each closing
under such underwriting agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Notes being sold, or each
such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or each
such Participating Broker-Dealer, as the case may be, or underwriter (collec-
tively, the "Inspectors"), at the offices where normally kept, during reasonable
----------
business hours, all financial and other records, pertinent corporate documents
and instruments of the Company and its subsidiaries (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise any
-------
applicable due diligence responsibilities, and cause the officers, directors and
employees of the Company and its subsidiaries to supply all information
reasonably requested by any such Inspector in connection with such Registration
Statement; provided, however, that all information shall be kept confidential by
-------- -------
each such Inspector, except to the extent that (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction, (iii)
disclosure of such information is, in the opinion of counsel for any Inspector,
necessary or advisable in connection with any action, claim, suit or proceeding,
directly or indirectly, involving or potentially involving such Inspector and
arising out of, based upon, relating to, or involving this Agreement, or any
transactions contemplated hereby or arising hereunder; provided, however, that
-------- -------
prior notice be provided as soon as practicable to the Company of the potential
disclosure of any information by such Inspector
<PAGE>
19
pursuant to clause (ii) or this clause (iii) to permit the Company to obtain a
protective order (or waive the provisions of this paragraph (o)) and that such
Inspector shall take such actions as are reasonably necessary to protect the
confidentiality of such information (if practicable) to the extent such action
is otherwise not inconsistent with, an impairment of or in derogation of the
rights and interests of the Holders or any Inspector, or (iv) the information in
such Records has been made generally available to the public. Each selling
Holder of such Registrable Securities and each such Participating Broker-Dealer
will be required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Issuer unless and
until such information is generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating Broker-Dealer will
be required to further agree that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company to undertake appropriate action to prevent
disclosure of the Records deemed confidential at the Company's sole expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange Offer
or the first Registration Statement relating to the Registrable Notes; and in
connection therewith, cooperate with the trustee under any such indenture and
the Holders of the Registrable Notes, to effect such changes to such indenture
as may be required for such indenture to be so qualified in accordance with the
terms of the TIA; and execute, and use its reasonable best efforts to cause such
trustee to execute, all documents as may be required to effect such changes, and
all other forms and documents required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
<PAGE>
20
(r) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, that the Exchange Notes or Private Exchange Notes,
as the case may be, and the related indenture constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to customary exceptions and
qualifications.
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to such
other Person as directed by the Company) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Company shall mark, or cause
to be marked, on such Registrable Notes that such Registrable Notes are being
cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; in no event shall such Registrable Notes be marked as paid or
otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement, Holders' Counsel and each underwriter, if any,
participating in the disposition of such Registrable Notes and its counsel in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc. (the "NASD").
----
(u) Use its diligent best efforts to take all other steps necessary
or advisable to effect the registration of the Exchange Notes and/or Registrable
Notes covered by a Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Notes as the
Company may, from time to time, reasonably request. The Company may exclude
from such registration the Registrable Notes of any seller who fails to furnish
such information within a reasonable time after receiving such request. Each
seller as to which any registration pursuant to a Shelf Registration Statement
is being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such seller not materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon actual receipt
of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
<PAGE>
21
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
------
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto and, if so directed by the Company, such Holder or
Participating Broker-Dealer, as the case may be, will deliver to the Company all
copies, other than permanent file copies, then in such Holder's or Participating
Broker-Dealer's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Notes covered by such Registration State-
ment or Exchange Notes to be sold by such Participating Broker-Dealer, as the
case may be, shall have received (x) the copies of the supplemented or amended
Prospectus contemplated by Section 5(k) hereof or (y) the Advice.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Exchange Offer or a Shelf Registration Statement is filed or
becomes effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel in
connection with Blue Sky qualifications of the Registrable Notes or Exchange
Notes and determination of the eligibility of the Registrable Notes or Exchange
Notes for investment under the laws of such jurisdictions (x) where the holders
of Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange
Notes to be sold by a Participating Broker-Dealer during the Applicable
Period)), (ii) printing expenses, including, without limitation, expenses of
printing certificates for Registrable Notes or Exchange Notes in a form eligible
for deposit with The Depository Trust Company and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriter or
underwriters, if any, by the Holders of a majority in aggregate principal amount
of the Registrable Notes included in any Registration Statement or in respect of
Registrable Notes or Exchange Notes to be sold by any Participating
Broker-Dealer during the Applicable Period, as the case may be, (iii) messenger,
telephone and delivery expenses, (iv) fees and
<PAGE>
22
disbursements of counsel for the Company and reasonable fees and disbursements
of Holders' Counsel (subject to the provisions of Section 6(b) hereof), (v) fees
and disbursements of all independent certified public accountants referred to in
Section 5(n)(iii) hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) rating agency fees, (vii) Securities Act liability insurance,
if the Company desires such insurance, (viii) fees and expenses of all other
Persons retained by the Company, (ix) internal expenses of the Company
(including, without limitation, all salaries and expenses of officers and
employees of the Company performing legal or accounting duties), (x) the expense
of any annual audit, (xi) the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange, if
applicable, and (xii) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, securities
sales agreements, indentures and any other documents necessary in order to
comply with this Agreement.
(b) The Company shall reimburse the Holders of the Registrable Notes
being registered in a Shelf Registration Statement for the reasonable fees and
disbursements, not to exceed $25,000, of Holders' Counsel (in addition to
appropriate local counsel) and other out-of-pocket expenses of such Holders of
Registrable Notes incurred in connection with the registration and sale of the
Registrable Notes.
7. Indemnification
---------------
(a) In the event of a Shelf Registration Statement or in connection
with any delivery by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, the Company agrees to indemnify and
hold harmless each Holder of Registrable Notes and each Participating
Broker-Dealer selling Exchange Notes during the Applicable Period, the officers
and directors of each such Person, and each Person, if any, who controls any
such Person within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (each, a "Participant"), from and against any and
-----------
all losses, claims, damages and liabilities (including, without limitation, and
subject to Section 7(c) below, the reasonable legal fees and other expenses
actually incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) or Prospectus (as amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) or
any preliminary Prospectus, or caused by, arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the case of the
Prospectus in the light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims,
<PAGE>
23
damages or liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to any Participant furnished to the Company in writing by
such Participant expressly for use therein; provided, however, that the Company
-------- -------
shall not be required to indemnify any such Person if such untrue statement or
omission or alleged untrue statement or omission was contained or made in any
preliminary prospectus and corrected in the Prospectus or any amendment or
supplement thereto and the Prospectus does not contain any other untrue
statement or omission or alleged untrue statement or omission of a material fact
that was the subject matter of the related proceeding and any such loss,
liability, claim, damage or expense suffered or incurred by the Participants
resulted from any action, claim or suit by any Person who purchased Registrable
Notes or Exchange Notes which are the subject thereof from such Participant and
it is established in the related proceeding that such Participant failed to
deliver or provide a copy of the Prospectus (as amended or supplemented) to such
Person with or prior to the confirmation of the sale of such Registrable Notes
or Exchange Notes sold to such Person if required by applicable law, unless such
failure to deliver or provide a copy of the Prospectus (as amended or
supplemented) was a result of noncompliance by the Company with Section 5 of
this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each Person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to each Participant,
but only with reference to information relating to such Participant furnished to
the Company in writing by such Participant expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of Registrable
Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
------------------
notify the Person against whom such indemnity may be sought (the "Indemnifying
------------
Person") in writing, and the Indemnifying Person, upon request of the
- ------
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
-------- -------
Indemnifying Person shall not relieve it of any
<PAGE>
24
obligation or liability which it may have hereunder or otherwise (unless and
only to the extent that such failure directly results in the loss or compromise
of any material rights or defenses by the Company and the Company was not
otherwise aware of such action or claim). In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed in writing to the contrary, (ii) the Indemnifying Person shall
have failed within a reasonable period of time to retain counsel reasonably
satisfactory to the Indemnified Person or (iii) the named parties in any such
proceeding (including any impleaded parties) include both the Indemnifying
Person and the Indemnified Person or any affiliate and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that, unless there exists a
conflict among Indemnified Persons, the Indemnifying Person shall not, in
connection with any one such proceeding or separate but substantially similar
related proceeding in the same jurisdiction arising out of the same general
allegations, be liable for the fees and expenses of more than one separate firm
(in addition to any appropriate local counsel) for all Indemnified Persons, and
that all such fees and expenses shall be reimbursed promptly after receipt of
the invoice therefor as they are incurred. Any such separate firm for the
Participants and such control Persons of Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable Notes and
Exchange Notes sold by all such Participants and any such separate firm for the
Company, its directors, its officers and such control Persons of the Company
shall be designated in writing by the Company. The Indemnifying Person shall
not be liable for any settlement of any proceeding effected without its prior
written consent (which consent shall not be unreasonably withheld), but if set-
tled with such consent or if there be a final judgment for the plaintiff for
which the Indemnified Person is entitled to indemnification pursuant to this
Agreement, the Indemnifying Person agrees to indemnify and hold harmless each
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for reasonable fees and expenses actually incurred by
counsel as contemplated by the second sentence of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its prior written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of the
aforesaid request and (ii) such Indemnifying Person shall not have reimbursed
the Indemnified Person in accordance with such request prior to the date of such
settlement; provided, however, that the Indemnifying Person shall not be liable
-------- -------
for any settlement effected without its consent pursuant to this sentence if the
Indemnifying Person is contesting, in good faith, the
<PAGE>
25
request for reimbursement. No Indemnifying Person shall, without the prior
written consent of the Indemnified Persons (which consent shall not be
unreasonably withheld), effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, or indemnity could have been sought hereunder by such Indem-
nified Person, unless such settlement or compromise (A) includes an uncondi-
tional written release of such Indemnified Person, in form and substance
reasonably satisfactory to such Indemnified Person, from all liability on claims
that are the subject matter of such proceeding and (B) does not include any
statement as to an admission of fault, culpability or failure to act by or on
behalf of any Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to (other than by
reason of exceptions provided therein), or insufficient to hold harmless, an
Indemnified Person in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder and in order to provide
for just and equitable contribution, shall contribute to the amount paid or pay-
able by such Indemnified Person as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other from the offering of the Notes or
(ii) if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the Indemnifying Person or Persons on the one hand and the Indemnified Person or
Persons on the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Participants on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (net of discounts and
commissions but before deducting expenses) of the Notes received by the Company
bears to the total proceeds received by such Participant from the sale of
Registrable Notes or Exchange Notes, as the case may be. The relative fault of
the parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or such Participant or such other Indemnified Person, as the
case may be, on the other, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission,
and any other equitable considerations appropriate in the circumstances.
<PAGE>
26
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
------------------
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner in accordance with
the requirements of the Securities Act and the Exchange Act and, if at any time
the Company is not required to file such reports, it will, upon the request of
Holders of a majority in aggregate principal amount of Registrable Notes, make
publicly available annual reports and such information, documents and other
reports of the type specified in Sections 13 and 15(d) of the Exchange Act. The
Company further covenants, for so long as any Registrable Notes remain
outstanding, to make available to any Holder or beneficial owner of Registrable
Notes in connection with any sale thereof and any prospective purchaser of such
Registrable Notes from such Holder or beneficial owner, the information required
by Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Registrable Notes pursuant to Rule 144A.
9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the investment banker or
investment bankers and manager
<PAGE>
27
or managers that will manage the offering will be selected by the Holders of a
majority in aggregate principal amount of such Registrable Notes included in
such offering and reasonably acceptable to the Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
-------------
(a) No Inconsistent Agreements. The Company has not, as of the date
--------------------------
hereof, and the Company shall not after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements. The Company has not entered and will not
enter into any agreement with respect to any of its securities which will grant
to any Person piggy-back registration rights with respect to a Registration
Statement.
(b) Adjustments Affecting Registrable Notes. The Company shall not,
---------------------------------------
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (A) the Holders of not less than a majority in aggregate principal
amount of the then outstanding Registrable Notes and (B) in circumstances that
would adversely affect the Participating Broker-Dealers, the Participating
Broker-Dealers holding not less than a majority in aggregate principal amount of
the Exchange Notes held by all Participating Broker-Dealers; provided, however,
-------- -------
that Section 7 and this Section 10(c) may not be amended, modified or
supplemented without the prior written consent of each Holder and each
Participating Broker-Dealer (including any person who was a Holder or
Participating BrokerDealer of Registrable Notes or Exchange Notes, as the case
may be, disposed of pursuant to any Registration Statement). Notwithstanding
the foregoing, a waiver or consent to depart from
<PAGE>
28
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Notes whose securities are being sold pursuant
to a Registration Statement and that does not directly or indirectly affect,
impair, limit or compromise the rights of other Holders of Registrable Notes may
be given by Holders of at least a majority in aggregate principal amount of the
Registrable Notes being sold by such Holders pursuant to such Registration
Statement.
(d) Notices. All notices and other communications (including without
-------
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(1) if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchaser as follows:
BT SECURITIES CORPORATION
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No: (212) 250-7200
Attention: Corporate Finance
Department
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Facsimile No: (212) 455-2502
Attention: John B. Tehan, Esq.
(2) if to the Initial Purchaser, at the address
specified in Section 10(d)(1);
(3) if to the Company, at the addresses as follows:
Heartland Wireless Communications, Inc.
903 North Bowser, Suite 140
Richardson, Texas 75081
Facsimile No: (214) 479-9244
Attention: John R. Bailey
with copies to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
<PAGE>
29
Facsimile No: (212) 408-2420
Attention: Julie M. Allen, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers; provided, however,
-------- -------
that this Agreement shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless such successor or assign holds
Registrable Notes.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without
<PAGE>
30
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(j) Third Party Beneficiaries. Holders of Registrable Notes and
-------------------------
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
(k) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial Purchaser on the
one hand and the Company on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
(l) Underwriting Agreement. Notwithstanding the provisions of
----------------------
Sections 3(d), 5, 6 and 7, in the event of a Shelf Registration pursuant to
Section 3 hereof, to the extent that the Holders of Registrable Notes shall
enter into an underwriting or similar agreement, which agreement contains
provisions covering one or more issues addressed in such Sections with
substantially similar effect, the provisions contained in such Sections
addressing such issue or issues shall be of no force or effect with respect to
the registration of securities being effected in connection with such
underwriting or similar agreement.
(m) Termination. This Agreement shall terminate and be of no further
-----------
force or effect when there shall not be any Registrable Notes, except that the
provisions of Section 4, 6, 7 and Sections 10(h) and (j) shall survive any such
termination.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
HEARTLAND WIRELESS COMMUNICATIONS, INC.
By: /s/ David D. Hagey
-------------------------------------
Name: David D. Hagey
Title:
BT SECURITIES CORPORATION
By:
------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
HEARTLAND WIRELESS COMMUNICATIONS, INC.
By:
-------------------------------------
Name: David D. Hagey
Title:
BT SECURITIES CORPORATION
By: /s/ Christine B. Foggia
------------------------------
Name:
Title:
EXHIBIT 4.1
ESCROW AND DISBURSEMENT AGREEMENT
This ESCROW AND DISBURSEMENT AGREEMENT (this "Agreement"), dated as of
---------
March 28, 1996, among Bankers Trust Company, as escrow agent (in such capacity,
the "Escrow Agent"), First Trust of New York, National Association, as Trustee
------------
(in such capacity, the "Trustee") under the Indenture (as defined herein), and
-------
Heartland Wireless Communications, Inc., a Delaware corporation (the "Company").
-------
RECITALS
A. Pursuant to the Indenture, dated as of March 28, 1996 (the
"Indenture"), between the Company and the Trustee, the Company is issuing
---------
$15,000,000 aggregate principal amount of its 13% Series C Senior Notes due 2003
(the "Notes").
-----
B. As security for its obligations under the Notes and the Indenture,
the Company hereby grants to the Trustee, for the benefit of the holders of the
Notes, a security interest, subject to and pending disbursement pursuant to this
Agreement, in the Escrow Account (as defined herein).
C. The parties have entered into this Agreement in order to set forth
the conditions upon which, and the manner in which, funds will be disbursed from
the Escrow Account and released from the security interest and lien described
above.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms. In addition to any other defined terms used herein,
-------------
the following terms shall constitute defined terms for purposes of this
Agreement and shall have the meanings set forth below:
"Affiliate" of any specified person means (i) any other person which,
---------
directly or indirectly, is in control of, is controlled by or is under common
control with such specified person or (ii) any other person who is a director or
officer (A) of such specified person, (B) of any subsidiary of such specified
person or (C) of any person described in clause (i) above or (iii) any person in
which such person has, directly or indirectly, a 5% or greater voting or
economic interest or the power to control. For purposes of this definition,
control of a person means the power, direct or indirect, to direct or cause the
direction of the management or policies of such person whether through the
ownership of voting securities or by contract
<PAGE>
2
or otherwise and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Applied" means that disbursed funds have been applied (i) to the
-------
payment of interest on the Notes, (ii) to the payment of principal of and
premium, if any, on the Notes, upon a repurchase or redemption thereof in
accordance with Section 3.07 (a) or Section 4.16 of the Indenture; or (iii) to
any combination of the foregoing.
"Available Funds" means (A) the sum of (i) the Initial Escrow Amount
---------------
and (ii) interest earned or dividends paid on the funds in the Escrow Account
(including holdings of Marketable Securities), less (B) the aggregate
disbursements previously made pursuant to this Agreement.
"Collateral" shall have the meaning given in Section 5(a) hereof.
----------
"Eligible Institution" means a commercial banking institution that has
--------------------
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A" (or higher) according to Standard &
Poor's ("S&P") or Moody's Investors Service, Inc. ("Moody's") at the time as of
which any investment or rollover therein is made.
"Escrow Account" shall mean an escrow account established pursuant to
--------------
Section 2 hereof.
"Escrow Account Statement" shall have the meaning given in Section
------------------------
2(f) hereof.
"Initial Escrow Amount" shall mean $1,878,784.91 of the net proceeds
---------------------
from the offering of the Notes.
"Interest Payment Date" means April 15 and October 15 of each year,
---------------------
commencing on April 15, 1996.
"Issue Date" means March 28, 1996.
----------
"Marketable Securities" means
---------------------
(i) U.S. Government Securities (as defined in the Indenture);
(ii) Other Government Securities;
(iii) any certificate of deposit maturing not more than 270 days
after the date of acquisition issued by, or time deposit of,
an Eligible Institution;
(iv) commercial paper maturing not more than 270 days after the
date of acquisition issued by a
<PAGE>
3
corporation (other than an Affiliate of the Company) with a
rating, at the time as of which any investment therein is
made, of "A-1" (or higher) according to S&P or "P-1" (or
higher) according to Moody's;
(v) any banker's acceptances or money market deposit accounts
issued or offered by an Eligible Institution; and
(vi) any fund investing exclusively in investments of the types
described in clauses (i) through (v) above.
"Other Government Securities" means any security issued or guaranteed
---------------------------
as to principal and interest by the United States of America or by a person
controlled or supervised by and acting as an instrumentality of the government
of the United States pursuant to authority granted by the Congress of the United
States; or any certificate of deposit for any of the foregoing.
"Payment Notice and Disbursement Request" means a notice sent by the
---------------------------------------
Trustee to the Escrow Agent notifying the Escrow Agent of an upcoming Interest
Payment Date or other payment date in respect of the Notes and requesting a
disbursement, in substantially the form of Exhibit A hereto. Each Payment
Notice and Disbursement Request shall be signed by an officer of the Trustee
designated in a certificate of the Trustee setting forth specimen signatures of
authorized officers delivered to the Escrow Agent.
2. Escrow Account; Escrow Agent.
----------------------------
(a) Appointment of Escrow Agent. The Company and the Trustee hereby
---------------------------
appoint the Escrow Agent, and the Escrow Agent hereby accepts appointment, as
escrow agent, under the terms and conditions of this Agreement.
(b) Establishment of Escrow Account. Concurrently with the execution
-------------------------------
and delivery hereof, the Escrow Agent shall establish the Escrow Account at its
office located at Four Albany Street, New York, N.Y. 10006. Subject to Section
3, Section 5 and the other terms and conditions of this Agreement, all funds
accepted by the Escrow Agent pursuant to this Agreement shall be held for the
benefit of the holders of the Notes. All such funds shall be held in the Escrow
Account until disbursed in accordance with the terms hereof. The Escrow Account
shall be under the sole dominion and control of the Escrow Agent for the benefit
of the holders of the Notes. Concurrently with the execution and delivery
hereof, the Company shall deliver the Initial Escrow Amount to the Escrow Agent
for deposit into the Escrow Account against the Escrow Agent's written
acknowledgement and receipt of the Initial Escrow Amount.
<PAGE>
4
(c) Escrow Agent Compensation. The Company shall pay to the Escrow
-------------------------
Agent such compensation for services to be performed by it under this Agreement
as the Company and the Escrow Agent may agree in writing from time to time. The
Escrow Agent shall be entitled to disburse from the Escrow Account all such
amounts due to the Escrow Agent as agreed upon by the Company and the Escrow
Agent (including the reasonable expenses described in the next succeeding
paragraph).
The Company shall reimburse the Escrow Agent upon request for all
reasonable expenses, disbursements, and advances incurred or made by the Escrow
Agent in implementing any of the provisions of this Agreement, including
compensation and the reasonable expenses and disbursements of its counsel,
except any such expense, disbursement, or advance as may arise from its gross
negligence or willful misconduct.
(d) Investment of Funds in Escrow Account. Funds deposited in the
-------------------------------------
Escrow Account shall be invested and reinvested upon the following terms and
conditions:
(i) Acceptable Investments. All funds deposited in the Escrow
----------------------
Account shall be initially invested by the Escrow Agent in cash items
(including, without limitation, interest bearing deposit accounts) and
Marketable Securities in accordance with the Company's written instructions
to the Escrow Agent. Thereafter, the Escrow Agent shall invest all funds
(including proceeds of any such investments at maturity and interest earned
and dividends paid on any such investments) in the Escrow Account in cash
items or Marketable Securities designated by the Company in writing from
time to time. All Marketable Securities shall be assigned to and held in
the possession of, or, in the case of Marketable Securities maintained in
book entry form with the Federal Reserve Bank, transferred to a book entry
account in the name of, the Escrow Agent, for the benefit of the holders of
the Notes (subject to Section 3 and Section 5), with such guarantees as are
customary, except that Marketable Securities maintained in book entry form
with the Federal Reserve Bank shall be transferred to a book entry account
in the name of the Escrow Agent at the Federal Reserve Bank that includes
only Marketable Securities held by the Escrow Agent for its customers and
segregated by separate recordation in the books and records of the Escrow
Agent, subject to the provisions of Section 5 hereof.
(ii) Security Interest in Investments. No investment of funds in
--------------------------------
the Escrow Account shall be made unless the Company has certified to the
Escrow Agent and the Trustee that, upon such investment, the Trustee will
have a first perfected security interest in the applicable investment. A
certificate as to a class of investments need not be issued with respect to
individual investments in securities in that class if the certificate
applicable to
<PAGE>
5
the class remains accurate with respect to such individual investments. On
the date hereof, and on each anniversary of the Issue Date thereafter until
the date upon which the balance of the Available Funds shall have been
reduced to zero, each of the Trustee and the Escrow Agent shall receive an
Opinion of Counsel (as such term is defined in the Indenture) to the
Company, dated the date hereof or thereof, as the case may be, to the
effect that the Escrow Agreement creates a valid, perfected first priority
security interest in the Escrow Account and the Collateral in favor of the
Trustee. Such opinion shall meet the requirements of Section 314(b) of the
Trust Indenture Act of 1939, as amended (the "TIA").
(iii) Interest and Dividends. All interest earned and dividends
----------------------
paid on funds invested in Marketable Securities shall be deposited in the
Escrow Account as additional Collateral for the benefit of the holders of
the Notes (subject to Section 3 and Section 5) and shall be reinvested in
accordance with the terms hereof at the Company's written instruction.
(iv) Limitation on Escrow Agent's Responsibilities. The Escrow
---------------------------------------------
Agent's sole responsibilities under this Section 2 shall be (A) to retain
possession of certificated Marketable Securities (except, however, that the
Escrow Agent may surrender possession to the issuer of any such Marketable
Security for the purposes of effecting assignment, crediting interest, or
reinvesting such security or reducing such security to cash) and to be the
registered or designated owner of Marketable Securities which are not
certificated, (B) to follow the Company's written instructions given in
accordance with Section 2(d)(i) hereof, (C) to invest and reinvest funds
pursuant to this Section 2(d) and (D) to use reasonable efforts to reduce
to cash such Marketable Securities as may be required to fund any
disbursement in accordance with Section 3 hereof. In connection with
Clause (A) above, the Escrow Agent will maintain continuous possession in
the State of New York of certificated Marketable Securities and cash
included in the Collateral and will cause uncertificated Marketable
Securities to be registered in the book-entry system of, and transferred to
an account of the Escrow Agent or a sub-agent of the Escrow Agent at, the
Federal Reserve Bank of New York.
(e) Substitution of Escrow Agent. The Escrow Agent may resign by
----------------------------
giving no less than 30 days' prior written notice to the Company and the
Trustee. Such resignation shall take effect upon the later to occur of (i)
delivery of all funds and Marketable Securities maintained by the Escrow Agent
hereunder and copies of all books, records, plans and other documents in the
Escrow Agent's possession relating to such funds or Marketable Securities or
this Agreement to a successor escrow
<PAGE>
6
agent mutually approved by the Company and the Trustee (which approvals shall
not be unreasonably withheld) and (ii) the Company, the Trustee and such
successor escrow agent entering into this Agreement or any written successor
agreement no less favorable to the interests of the holders of the Notes and the
Trustee than this Agreement; and the Escrow Agent shall thereupon be discharged
of all obligations under this Agreement and shall have no further duties,
obligations or responsibilities in connection herewith. If a successor escrow
agent has not been appointed or has not accepted such appointment within 30 days
after notice of resignation is given to the Company, the Escrow Agent may apply
to a court of competent jurisdiction for the appointment of a successor escrow
agent.
(f) Escrow Account Statement. Each month, the Escrow Agent shall
------------------------
deliver to the Company and the Trustee a statement in a form satisfactory to the
Company and the Trustee setting forth with reasonable particularity the balance
of funds then in the Escrow Account and the manner in which such funds are
invested ("Escrow Account Statement"). The parties hereto irrevocably instruct
------------------------
the Escrow Agent that on the first date upon which the balance in the Escrow
Account (including the holdings of all Marketable Securities) is reduced to
zero, the Escrow Agent shall deliver to the Company and to the Trustee a notice
that the balance in the Escrow Account has been reduced to zero.
3. Disbursements.
-------------
(a) Payment Notice and Disbursement Request; Disbursements. The
------------------------------------------------------
Trustee shall, five business days prior to the Interest Payment Dates falling on
October 15, 1996 and April 15, 1997 or to a date of redemption or repurchase
pursuant to Section 3.07(a) or Section 4.16 of the Indenture in respect of the
Notes, submit to the Escrow Agent a completed Payment Notice and Disbursement
Request substantially in the form of Exhibit A hereto.
The Escrow Agent's disbursement pursuant to any Payment Notice and
Disbursement Request shall be subject to the satisfaction of the applicable
conditions set forth in Section 3(b) hereof. Provided such Payment Notice and
Disbursement Request is not rejected by it, the Escrow Agent, within two (2)
business days following receipt of such Payment Notice and Disbursement Request,
shall disburse the funds requested in such Payment Notice and Disbursement
Request by wire or book-entry transfer of immediately available funds to the
account of the Trustee for the benefit of the holders of the Notes. The Escrow
Agent shall notify the Trustee as soon as reasonably possible (but not later
than two (2) business days from the date of receipt of the Payment Notice and
Disbursement Request) if any Payment Notice and Disbursement Request is rejected
and the reason(s) therefor. In the event such rejection is based upon
nonsatisfaction of the condition in Section 3(b)(A) below, the
<PAGE>
7
Trustee shall thereupon resubmit the Payment Notice and Disbursement Request
with appropriate changes.
(b) Conditions Precedent to Disbursement. The Escrow Agent's payment
------------------------------------
of any disbursement shall be made only if: (A) the Trustee shall have
submitted, in accordance with the provisions of Section 3(a) herein, a completed
Payment Notice and Disbursement Request to the Escrow Agent substantially in the
form of Exhibit A with blanks appropriately filled in and (B) the Escrow Agent
shall not have received any notice from the Trustee that as a result of an Event
of Default (as defined in the Indenture) the indebtedness represented by the
Notes has been accelerated and has become due and payable (in which event the
Escrow Agent shall apply all Available Funds as required by Section 6(b)(iii)
hereof).
(c) Retired Notes. In the event a portion of the Notes has been
-------------
retired by the Company, funds representing the interest payments on the retired
Notes shall, upon the written request of the Company to the Escrow Agent and the
Trustee, be paid to the Company upon compliance with the release of collateral
provisions of the TIA and upon receipt of a notice relating thereto from the
Trustee.
4. Escrow Agent.
------------
Limitation of the Escrow Agent's Liability; Responsibilities of
---------------------------------------------------------------
the Escrow Agent. The Escrow Agent's responsibility and liability under this
- ----------------
Agreement shall be limited as follows: (i) the Escrow Agent does not represent,
warrant or guaranty to the holders of the Notes from time to time the
performance of the Company; (ii) the Escrow Agent shall have no responsibility
to the Company or the holders of the Notes or the Trustee from time to time as a
consequence of performance by the Escrow Agent hereunder, except for any gross
negligence or willful misconduct of the Escrow Agent; (iii) the Company shall
remain solely responsible for all aspects of the Company's business and conduct;
and (iv) the Escrow Agent is not obligated to supervise, inspect or inform the
Company or any third party of any matter referred to above.
No implied covenants or obligations shall be inferred from this
Agreement against the Escrow Agent, nor shall the Escrow Agent be bound by the
provisions of any agreement beyond the specific terms hereof. Specifically and
without limiting the foregoing, the Escrow Agent shall in no event have any
liability in connection with its investment, reinvestment or liquidation, in
good faith and in accordance with the terms hereof, of any funds or Marketable
Securities held by it hereunder, including without limitation any liability for
any delay not resulting from gross negligence or willful misconduct in such
investment, reinvestment or liquidation, or for any loss of principal or income
incident to any such delay.
<PAGE>
8
The Escrow Agent shall be entitled to rely upon any judicial order or
judgment, upon any written opinion of counsel or upon any certification,
instruction, notice, or other writing delivered to it by the Company or the
Trustee in compliance with the provisions of this Agreement without being
required to determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of service thereof. The Escrow Agent may
act in reliance upon any instrument comporting with the provisions of this
Agreement or signature believed by it to be genuine and may assume that any
person purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
At any time the Escrow Agent may request in writing an instruction in
writing from the Company, and may at its own option include in such request the
course of action it proposes to take and the date on which it proposes to act,
regarding any matter arising in connection with its duties and obligations
hereunder; provided, however, that the Escrow Agent shall state in such request
-------- -------
that it believes in good faith that such proposed course of action is consistent
with another identified provision of this Agreement. The Escrow Agent shall not
be liable to the Company for acting without the Company's consent in accordance
with such a proposal on or after the date specified therein if (i) the specified
date is at least two business days after the Company receives the Escrow Agent's
request for instructions and its proposed course of action, and (ii) prior to so
acting, the Escrow Agent has not received the written instructions requested
from the Company.
The Escrow Agent may act pursuant to the written advice of counsel
chosen by it with respect to any matter relating to this Agreement and (subject
to Section 4(a)(ii)) shall not be liable for any action taken or omitted in
accordance with such advice.
The Escrow Agent shall not be called upon to advise any party as to
selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
In the event of any ambiguity in the provisions of this Agreement with
respect to any funds or property deposited hereunder, the Escrow Agent shall be
entitled to refuse to comply with any and all claims, demands or instructions
with respect to such property or funds, and the Escrow Agent shall not be or
become liable for its failure or refusal to comply with conflicting claims,
demands or instructions. The Escrow Agent shall be entitled to refuse to act
until either any conflicting or adverse claims or demands shall have been
finally determined by a court of competent jurisdiction or settled by agreement
between the conflicting claimants as evidenced in a writing, satisfactory to the
Escrow Agent, or the Escrow Agent shall have
<PAGE>
9
received security or an indemnity satisfactory to the Escrow Agent sufficient to
save the Escrow Agent harmless from and against any and all loss, liability or
expense which the Escrow Agent may incur by reason of its acting. The Escrow
Agent may in addition elect in its sole option to commence an interpleader
action or seek other judicial relief or orders as the Escrow Agent may deem
necessary.
No provision of this Agreement shall require the Escrow Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
5. Indemnity. The Company shall indemnify, hold harmless and defend
---------
the Escrow Agent and its directors, officers, agents, employees and controlling
persons, from and against any and all claims, actions, obligations, liabilities
and expenses, including defense costs, investigative fees and costs, legal fees,
and claims for damages, arising from the Escrow Agent's performance under this
Agreement, except to the extent that such liability, expense or claim is
directly attributable to the gross negligence or willful misconduct of any of
the foregoing persons. In connection with any claim, action, obligation,
liability or expense for which indemnification is sought by the Escrow Agent
hereunder, the Escrow Agent shall be entitled to recover its costs from funds
available in the Escrow Account as provided in Section 2(c), provided, however,
-------- -------
that the Company agrees to pay such costs if funds in the Escrow Account are
insufficient. The provisions of this Section shall survive any termination,
satisfaction or discharge of this Agreement as well as the resignation or
removal of the Escrow Agent.
6. Grant of Security Interest; Instructions to Escrow Agent.
--------------------------------------------------------
(a) The Company hereby irrevocably grants a first priority security
interest in, pledges, assigns and sets over to the Trustee all of the Company's
right, title and interest in the Escrow Account, all funds held therein and all
Marketable Securities held by (or otherwise maintained in the name of) the
Escrow Agent pursuant to Section 2 hereof, as well as all rights of the Company
under this Agreement (collectively, the "Collateral"), in order to secure all
----------
obligations and indebtedness of the Company under the Notes and any other
obligation, now or hereafter arising, of every kind and nature, owed by the
Company under the Indenture to the holders of the Notes or to the Trustee. The
Company shall take all actions necessary on its part to insure the continuance
of a first priority security interest in the Collateral in favor of the Trustee
in order to secure all such obligations and indebtedness. Each of the Trustee
and the Escrow Agent shall have received an opinion from counsel to the Company,
on the date hereof, and annually on the anniversary of the Issue Date to the
effect that the Escrow Agreement creates a valid, perfected first priority
<PAGE>
10
security interest in favor of the Trustee in the Escrow Account and the
Collateral.
(b) The Company and the Trustee hereby irrevocably instruct the
Escrow Agent to, and the Escrow Agent will (i) (A) maintain sole dominion and
control over funds in the Escrow Account for the benefit of the Trustee to the
extent specifically required herein, (B) maintain, or cause its agent within the
State of New York to maintain, possession of all certificated Marketable
Securities purchased hereunder that are physically possessed by the Escrow Agent
in order for the Trustee to enjoy a continuous perfected first priority security
interest therein under the law of the State of New York (the Company hereby
agreeing that in the event any certificated Marketable Securities are in the
possession of the Company or a third party, the Company shall use its best
efforts to deliver all such certificates to the Escrow Agent), (C) take all
steps set forth in the opinion of counsel described in paragraph (a) above to
cause the Trustee to enjoy a continuous perfected first priority security
interest under the New York Uniform Commercial Code and any applicable law of
the State of New York in all Marketable Securities purchased hereunder that are
not certificated and (D) maintain the Collateral free and clear of all liens,
security interests, safekeeping or other charges, demands and claims against the
Escrow Agent of any nature now or hereafter existing in favor of anyone other
than the Trustee; (ii) promptly notify the Trustee if the Escrow Agent receives
written notice that any person other than the Trustee has a lien or security
interest upon any portion of the Collateral (other than any claim which Escrow
Agent may have against the Escrow Account for unpaid fees and expenses) and
(iii) in addition to disbursing amounts held in escrow pursuant to any Payment
Notice and Disbursement Requests given to it by the Trustee pursuant to Section
3, upon receipt of written notice from the Trustee of the acceleration of the
maturity of the Notes or the failure by the Company to pay principal on the
Notes, and direction from the Trustee to disburse all Available Funds to the
Trustee, as promptly as practicable, after following the procedures set forth in
the fourth paragraph of Section 4(a), disburse all funds held in the Escrow
Account to the Trustee and transfer title to all Marketable Securities held by
the Escrow Agent hereunder to the Trustee. The lien and security interest
provided for by this Section 6 shall automatically terminate and cease as to,
and shall not extend or apply to, and the Trustee shall have no security
interest in, any funds disbursed by the Escrow Agent to the Company pursuant to
this Agreement. The Escrow Agent shall act solely as the Trustee's agent in
connection with its duties under this Section 6, notwithstanding any other
provision contained in this Agreement, without any right to receive compensation
from the Trustee and without any authority to obligate the Trustee or to
compromise or pledge its security interest hereunder.
<PAGE>
11
(c) Any money and Marketable Securities collected by the Trustee
pursuant to Section 6(b)(iii) shall be applied as provided in the Indenture.
(d) Upon demand, the Company will execute and deliver to the Trustee
such instruments and documents as the Trustee may reasonably deem necessary or
advisable to confirm or perfect the rights of the Trustee under this Agreement
and the Trustee's interest in the Collateral. The Trustee will take all
necessary action to preserve and protect the security interest created hereby as
a lien and encumbrance upon the Collateral.
(e) The Company hereby appoints the Trustee as its attorney-in-fact
effective upon and during the continuance of an Event of Default under the
Indenture with full power of substitution to do any act which the Company is
obligated hereto to do, and the Trustee may exercise such rights as the Company
might exercise with respect to the Collateral and to take any action in the
Company's name to protect the Trustee's security interest hereunder.
7. Termination. This Agreement shall terminate automatically ten
-----------
(10) days following disbursement of all funds remaining in the Escrow Account
(including Marketable Securities), unless sooner terminated by agreement of the
parties hereto (in accordance with the terms hereof and not in violation of the
Indenture); provided, however, that the obligations of the Company under Section
-------- -------
5 (and any existing claims thereunder) shall survive termination of this
Agreement or the resignation of the Escrow Agent; and provided further, that
-------- -------
until such tenth day, the Company will cause this Agreement (or any permitted
successor agreement) to remain in effect and will cause there to be an escrow
agent (including any permitted successor thereto) acting hereunder (or under any
such permitted successor agreement).
8. Miscellaneous.
-------------
(a) Waiver. Any party hereto may specifically waive any breach of
------
this Agreement by any other party, but no such waiver shall be deemed to have
been given unless such waiver is in writing, signed by the waiving party and
specifically designating the breach waived, nor shall any such waiver constitute
a continuing waiver of similar or other breaches.
(b) Invalidity. If for any reason whatsoever any one or more of the
----------
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effectuate, to the maximum extent possible, the parties' intent.
<PAGE>
12
(c) Assignment. This Agreement is personal to the parties hereto,
----------
and the rights and duties of any party hereunder shall not be assignable except
with the prior written consent of the other parties. Notwithstanding the
foregoing, this Agreement shall inure to and be binding upon the parties and
their successors and permitted assigns.
(d) Benefit. The parties hereto and their successors and permitted
-------
assigns, but no others, shall be bound hereby and entitled to the benefits
hereof; provided, however, that the holders of the Notes and their permitted
-------- -------
assigns shall be entitled to the benefits hereof and to enforce this Agreement.
(e) Time. Time is of the essence of each provision of this
----
Agreement.
(f) Entire Agreement; Amendments. This Agreement and the Indenture
----------------------------
contain the entire agreement among the parties with respect to the subject
matter hereof and supersede any and all prior agreements, understandings and
commitments, whether oral or written. This Agreement may be amended only by a
writing signed by a duly authorized representative of each party.
(g) Notices. All notices and other communications required or
-------
permitted to be given or made under this Agreement shall be in writing and shall
be deemed to have been duly given and received, regardless of when and whether
received, either: (a) on the day of hand delivery; (b) three business days
following the day sent, when sent by United States certified mail, postage and
certification fee prepaid, return receipt requested, addressed as follows; (c)
when transmitted by telecopy with verbal confirmation of receipt by the telecopy
operator; or (d) one business day following the day timely delivered to a next-
day air courier:
To Escrow Agent:
Bankers Trust Company
Corporate Trust and Agency Group
Four Albany Street, 4th Floor
New York, New York 10006
Attention: Corporate Market Services
Telecopy: (212) 250-6961
Telephone: (212) 250-6531
To Trustee:
First Trust of New York, National
Association
100 Wall Street, Suite 1600
New York, NY 10005
Attention: Corporate Trust Administration
Telecopy: (212) 809-5459
Telephone: 361-2532
<PAGE>
13
To the Company:
Heartland Wireless Communications, Inc.
903 North Bowser, Suite 140
Richardson, Texas 75081
Attention: Chief Financial Officer
Telecopy: (214) 479-1023
Telephone: (214) 479-9244
or at such other address as the specified entity most recently may have
designated in writing in accordance with this Section.
(h) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) Captions. Captions in this Agreement are for convenience only
--------
and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
(j) Choice of Law. THE EXISTENCE, VALIDITY, CONSTRUCTION, OPERATION
-------------
AND EFFECT OF ANY AND ALL TERMS AND PROVISIONS OF THIS AGREEMENT SHALL BE
DETERMINED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
THE PARTIES TO THIS AGREEMENT HEREBY AGREE THAT JURISDICTION OVER SUCH PARTIES
AND OVER THE SUBJECT MATTER OF ANY ACTION OR PROCEEDING ARISING UNDER THIS
AGREEMENT MAY BE EXERCISED BY A COMPETENT COURT OF THE STATE OF NEW YORK, OR BY
A UNITED STATES COURT, SITTING IN NEW YORK CITY. THE COMPANY HEREBY SUBMITS TO
THE PERSONAL JURISDICTION OF SUCH COURTS, HEREBY WAIVES PERSONAL SERVICE OF
PROCESS UPON IT AND CONSENTS THAT ANY SUCH SERVICE OF PROCESS MAY BE MADE BY
CERTIFIED OR REGISTERED MAIL, RETURN-RECEIPT REQUESTED, DIRECTED TO THE COMPANY
AT ITS ADDRESS LAST SPECIFIED FOR NOTICES HEREUNDER, AND SERVICE SO MADE SHALL
BE DEEMED COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED, AND
HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH THE
ESCROW AGENT. ALL ACTIONS AND PROCEEDINGS BROUGHT BY THE COMPANY AGAINST THE
ESCROW AGENT RELATING TO OR ARISING FROM, DIRECTLY OR INDIRECTLY, THIS AGREEMENT
SHALL BE LITIGATED ONLY IN COURTS WITHIN THE STATE OF NEW YORK.
(k) The Company hereby represents and warrants that this Agreement
has been duly authorized, executed and delivered on its behalf and constitutes
the legal, valid and binding obligation of the Company. The execution, delivery
and performance of this Agreement by the Company does not violate any applicable
law or regulation to which the Company is subject and does not require the
consent of any governmental or other regulatory body to which the Company is
subject, except for such consents and approvals as have been obtained and are in
full force and effect.
<PAGE>
14
(l) Each of the Escrow Agent and the Trustee hereby represents and
warrants that this Agreement has been duly authorized, executed and delivered on
its behalf and constitutes its legal, valid and binding obligation.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Escrow and Disbursement Agreement as of the day first above written.
ESCROW AGENT: BANKERS TRUST COMPANY
By: /s/ Kevin Weeks
-------------------------
Name: Kevin Weeks
Title: Assistant Treasurer
TRUSTEE: FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION
By:
------------------------------
Name:
Title:
COMPANY: HEARTLAND WIRELESS COMMUNICATIONS, INC.
By:
------------------------------
Name:
Title:
<PAGE>
16
IN WITNESS WHEREOF, the parties have executed and delivered this
Escrow and Disbursement Agreement as of the day first above written.
ESCROW AGENT: BANKERS TRUST COMPANY
By:
-----------------------------------
Name:
Title:
TRUSTEE: FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION
By: /s/ Alfia Monastra
-----------------------------------
Name: Alfia Monastra
Title: Assistant Vice President
COMPANY: HEARTLAND WIRELESS COMMUNICATIONS, INC.
By:
------------------------------
Name:
Title:
<PAGE>
17
IN WITNESS WHEREOF, the parties have executed and delivered this
Escrow and Disbursement Agreement as of the day first above written.
ESCROW AGENT: BANKERS TRUST COMPANY
By:
-----------------------------------
Name:
Title:
TRUSTEE: FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION
By:
-----------------------------------
Name:
Title:
COMPANY: HEARTLAND WIRELESS COMMUNICATIONS, INC.
By: /s/ David D. Hagey
------------------------------
Name:
Title:
<PAGE>
EXHIBIT A TO ESCROW AND DISBURSEMENT AGREEMENT
Form of Payment Notice and Disbursement Request
-----------------------------------------------
[Letterhead of the Trustee]
[Date]
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attn: Corporate Trust and Agency Group
[Mr. Kevin Weeks/Ms. Jenna Kaufman]
Re: Disbursement Request No. _______
[indicate whether revised]
Ladies and Gentlemen:
We refer to the Escrow and Disbursement Agreement, dated as of March
28, 1996 (the "Escrow Agreement") among you (the "Escrow Agent"), the
---------------- ------------
undersigned as Trustee, and HEARTLAND WIRELESS COMMUNICATIONS, INC., a Delaware
corporation (the "Company"). Capitalized terms used herein shall have the
-------
meaning given in the Escrow Agreement.
This letter constitutes a Payment Notice and Disbursement Request
under the Escrow Agreement.
[choose one of the following, as applicable]
[The undersigned hereby notifies you that a scheduled interest payment
in the amount of $__________ is due and payable on ______ 15, 199_ and requests
a disbursement of funds contained in the Escrow Account in such amount.]
[The undersigned hereby notifies you that a scheduled interest payment
in the amount of $__________ is due and payable on _________ 15, 199_, which
amount exceeds the amount of remaining Available Funds in the Escrow Account.
Accordingly, you are hereby requested to disburse all remaining funds contained
in the Escrow Account such that the balance in the Escrow Account is reduced to
zero.]
[The undersigned hereby notifies you that a payment of $_________ is
due and payable on ______ __, 199_ in connection with a repurchase or redemption
of Notes, plus accrued interest, if any, pursuant to the provisions of [Section
3.07(a)] [Section 4.16] of the Indenture and requests a disbursement of funds
contained in the Escrow Account in such amount.
<PAGE>
2
[The undersigned hereby notifies you that a payment of $_________ is due and
payable on ______ __, 199_ in connection with a repurchase or redemption of
Notes, plus accrued interest, if any, pursuant to the provisions of [Section
3.07(a)] [Section 4.16] of the Indenture, which amount exceeds the amount of
remaining Available Funds in the Escrow Account. Accordingly, you are hereby
requested to disburse all remaining funds contained in the Escrow Account such
that the balance in the Escrow Account is reduced to zero.]
[The undersigned hereby notifies you that Notes equalling
$____________ in aggregate principal amount have been retired and authorizes you
to release $_______________ of funds in the Escrow Account to the Company (to an
account designated by the Company in writing), which amount represents the
interest payments on such Retired Notes.]
In connection with the requested disbursement, the undersigned hereby
notifies you that:
1. The Notes have not, as a result of an Event of Default (as
defined in the Indenture), been accelerated and become due and
payable.
2. All prior disbursements from the Escrow Account have been
Applied.
3. [add wire instructions]
The Escrow Agent is entitled to rely on the foregoing in
disbursing funds relating to this Payment Notice and Disbursement Request.
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
By:
------------------------------
Name:
Title:
EXHIBIT 12.1
<TABLE><CAPTION>
Consolidated Ratio of Earnings
to Fixed Charges
(in thousands)
Six months
Year ended December 31, ended
------------------------------------------------------------- June 30, 1996
1991 1992 1993 1994 1995
-------- --------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Loss before income taxes $ (66) $ (51) $ (406) $ (4,638) $ (20,187) $ (23,549)
Fixed charges (1) 4 8 88 279 10,907 8,447
------- ------ ------- ------- --------- ----------
Earnings(1) $ (62) $ (43) $ (318) $ (4,359) $ (9,280) $ (15,102)
======== ======= ======== ========= ========== ===========
Ratio of earnings to fixed
charges - - - - - -
======= ======= ======= ======= ========= ========
Deficiency of earnings to
to fixed charges $ (66) $ (51) $ (406) $ (4,638) $ (20,187) $ (23,549)
======= ======= ======== ========= ========== ==========
</TABLE>
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
consists of losses prior to income tax benefit and fixed charges. Fixed
charges consist of interest expense, amortization of debt issuance costs,
and one third of rental payments on operating leases (such portion having
been deemed by the Company to represent the interest portion of such
payments).
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Heartland Wireless Communications, Inc.:
We consent to (a) the incorporation by reference herein of our reports dated
March 8, 1996, on the consolidated balance sheets of Heartland Wireless
Communications, Inc. as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1995, and
the related schedule, which reports are included in the December 31, 1995
annual report on Form 10-K of Heartland Wireless Communications, Inc. and (b)
the reference to our firm under the heading "Experts" in the prospectus.
Our report relating to the consolidated financial statements of Heartland
Wireless Communications, Inc. refers to a change in 1995 in the method of
accounting for direct costs and installation fees related to subscriber
installations.
/S/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Dallas, Texas
September 23, 1996
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Heartland Wireless Communications, Inc.:
We consent to (a) the incorporation by reference herein of our report dated
October 25, 1995, on the balance sheets of TechniVision, Inc. as of May 31,
1995 and 1994, and the related statements of operations, stockholders'
deficit, and cash flows for each of the years in the three-year period ended
May 31, 1995, which report is included in Form 8-K/A-2 of Heartland Wireless
Communications, Inc. filed with the Securities and Exchange Commission on
April 26, 1996 and (b) the reference to our firm under the heading "Experts"
in the prospectus.
Our report relating to the 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.
/S/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Dallas, Texas
September 23, 1996
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Heartland Wireless Communications, Inc.:
We consent to (a) the incorporation by reference herein of our report dated
July 28, 1995, on the balance sheets of Cross Country Division as of December
31, 1994 and 1993, and the related statements of operations, division equity,
and cash flows for the year ended December 31, 1993, the period from January
1, 1994 to August 18, 1994 and the period from August 19, 1994 to December
31, 1994, which report is included in the Form 8-K/A-2 of Heartland Wireless
Communications, Inc. filed with the Securities and Exchange Commission on
April 26, 1996 and (b) the reference to our firm under the heading "Experts"
in the prospectus.
Our report relating to the financial statements of Cross Country Division
contains an explanatory paragraph that refers to a business combination in
1994 accounted for as a purchase involving assets comprising a portion of
Cross Country Division. As a result of the acquisition, financial
information of Cross Country Division for periods after August 18, 1994 is
presented on a different cost basis than that for periods before August 18,
1994 and, therefore, such information is not comparable.
/S/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Dallas, Texas
September 23, 1996
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Form S-4 to be filed by
Heartland Wireless Communications, Inc., of our report, which includes an
explanatory paragraph which states that specified circumstances raise
substantial doubt about CableMaxx, Inc.'s ability to continue as a going
concern, dated August 25, 1995, on our audits of the consolidated balance
sheets of CableMaxx, Inc. as of June 30, 1994 and 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows
for the period December 18, 1992 to June 30, 1993 and for the years ended
June 30, 1994 and 1995, and of the consolidated statements of operations and
cash flows of Supreme Cable Co., Inc. and Subsidiaries (the "Predecessor")
for the period from July 1, 1992 to December 17, 1992. We also consent to
the reference to our firm under the caption "Experts."
/S/ Coopers & Lybrand LLP
-------------------------
COOPERS & LYBRAND L.L.P.
Austin, Texas
September 24, 1996
EXHIBIT 23.6
ARTHUR ANDERSEN LLP
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
-----------------------
Arthur Andersen LLP
Phoenix, Arizona,
September 20, 1996
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------
FORM T - 1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
----------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305 (b) (2) _________
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
13-3781471
(I. R. S. Employer
Identification No.)
100 Wall Street, New York, NY 10005
(Address of principal executive offices) (Zip Code)
----------
FOR INFORMATION, CONTACT:
Dennis J. Calabrese, President
First Trust of New York, National Association
100 Wall Street, 16th Floor
New York, NY 10005
Telephone: (212) 361-2506
----------
HEARTLAND WIRELESS COMMUNICATIONS, INC.
(Exact name of obligor as specified in its charter)
Delaware 73-1435149
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
903 North Bowser, Suite 140
Richardson, Texas 75081
(Address of principal executive offices) (Zip Code)
----------
<PAGE>
Item 1. GENERAL INFORMATION.
Furnish the following information as to the trustee - -
(a) Name and address of each examining or supervising authority to
which it is subject.
Name Address
---- -------
Comptroller of the Currency Washington, D. C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
Item 16. LIST OF EXHIBITS.
Exhibit 1. Articles of Association of First Trust of New York, National
Association, incorporated herein by reference to Exhibit 1
of Form T-1, Registration No. 33-83774.
Exhibit 2. Certificate of Authority to Commence Business for First
Trust of New York, National Association, incorporated herein
by reference to Exhibit 2 of Form T-1, Registration No.
33-83774.
Exhibit 3. Authorization of the Trustee to exercise corporate trust
powers for First Trust of New York, National Association,
incorporated herein by reference to Exhibit 3 of Form T-1,
Registration No. 33-83774.
Exhibit 4. By-Laws of First Trust of New York, National Association,
Incorporated herein by reference to Exhibit 4 of Form T-1,
Registration No. 33-55851.
Exhibit 5. Not applicable.
Exhibit 6. Consent of First Trust of New York, National Association,
required by Section 321(b) of the Act, incorporated herein
by reference to Exhibit 6 of Form T-1, Registration No.
33-83774.
<PAGE>
Exhibit 7. Report of Condition of First Trust of New York, National
Association, as of the close of business on June 30, 1996,
published pursuant to law or the requirements of its
supervising or examining authority.
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, First Trust of New York, National Association, a national
banking association organized and existing under the laws of the United States,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, and State
of New York, on the 20th day of September, 1996.
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
By: /s/ David K. Leverich
------------------------------
David K. Leverich
Vice President
<PAGE>
EXHIBIT 7
FIRST TRUST OF NEW YORK, N. A.
STATEMENT OF FINANCIAL CONDITION
AS OF 06/30/96
($000's)
06/30/96
--------------
ASSETS
Cash and Due From Depository Institutions $29,167
Federal Reserve Stock 3,658
Fixed Assets 707
Intangible Assets 82,730
Other Assets 8,084
--------------
Total Assets $124,346
--------------
--------------
LIABILITIES
Other Liabilities 6,207
--------------
Total Liabilities 6,207
EQUITY
Common and Preferred Stock 1,000
Surplus 120,932
Undivided Profits (3,793)
--------------
TOTAL EQUITY CAPITAL 118,139
TOTAL LIABILITIES AND EQUITY CAPITAL $124,346
--------------
--------------
================================================================================
To the best of the undersigned's determination, as of this date the above
financial information is true and correct.
First Trust of New York, N. A.
By: /s/ David K. Leverich
---------------------
Vice President
Date: September 20, 1996
