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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1996
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HEARTLAND WIRELESS COMMUNICATIONS, INC.
(Exact name of registrant as specified in charter)
DELAWARE 4841 73-1435149
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification
incorporation or Code Number) Number)
organization)
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903 NORTH BOWSER, SUITE 140
RICHARDSON, TEXAS 75081
(214) 479-9244
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
JOHN R. BAILEY
SENIOR VICE PRESIDENT-FINANCE,
CHIEF FINANCIAL OFFICER, TREASURER
AND SECRETARY
HEARTLAND WIRELESS COMMUNICATIONS, INC.
903 NORTH BOWSER, SUITE 140
RICHARDSON, TEXAS 75081
(214) 479-9244
(Name, address, including zip code, and telephone number,
including area code, of agent for service of process)
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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:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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Amount Proposed Maximum Proposed Maximum Amount of
Title of Each Class of to be Offering Price Aggregate Offering Registration
Securities to be Registered Registered Per Share Price Fee
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<S> <C> <C> <C> <C>
Common Stock ($.001 par value) . . . . . . 600,000(1) $19.525 $11,715,000 $4,040
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(1) Represents the number of shares of Common Stock initially purchasable upon
exercise of warrants. This registration statement also includes such
indeterminate number of additional shares of Common Stock as may be
issuable upon exercise of warrants as a result of antidilution provisions
contained therein.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 29, 1996
PROSPECTUS
HEARTLAND WIRELESS COMMUNICATIONS, INC.
-------------
600,000 Shares
of
Common Stock
($.001 par value)
-----------------
This Prospectus relates to an aggregate of 600,000 shares (the "Shares") of
common stock, par value $.001 per share (the "Common Stock"), of Heartland
Wireless Communications, Inc., a Delaware corporation (the "Company"), reserved
for issuance upon exercise of warrants (the "Warrants") that were issued by the
Company on April 26, 1995 pursuant to the Warrant Agreement, dated as of April
26, 1995 (the "Warrant Agreement"), between the Company and Bankers Trust
Company, as warrant agent. The Warrants entitle the holders thereof to purchase
Shares at an exercise price of $19.525 per Share until the expiration of the
Warrants on April 26, 2000. Assuming all of the Warrants are exercised, the
Company will receive proceeds in the amount of $11,715,000 before deducting
expenses payable by the Company estimated at $45,040.
The Common Stock is traded on the Nasdaq Stock Market's National Market
under the symbol "HART". On April 25, 1996, the closing price of the Common
Stock was $27 per share.
SEE "RISK FACTORS" ON PAGE 3 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SHARES OF
COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer contained herein, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities offered hereby in any
jurisdiction in which it is not lawful or to any person to whom it is not lawful
to make any such offer or solicitation. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create an
implication that information herein is correct as of any time subsequent to the
date hereof.
The date of this Prospectus is April ___, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission").
Such material filed by the Company with the Commission may be inspected by
anyone without charge at the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549, and at the
regional offices of the Commission located at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material may also
be obtained at the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C., 20549, upon payment of
prescribed fees.
The Company has filed a registration statement on Form S-3 (together with
all amendments and exhibits thereto, including documents and information
incorporated by reference, the "Registration Statement") with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the Shares. This Prospectus does not contain all the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement. Statements contained in
this Prospectus as to the contents of any document are not necessarily complete,
and in each instance reference is made to such document itself, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company which have been filed with the
Commission are hereby incorporated by reference in this Prospectus: (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1995; (ii)
the Company's Current Reports on Form 8-K dated February 23, 1996, as amended by
Form 8-K/A dated February 23, 1996 (filed with the Commission on April 8, 1996)
and Form 8-K/A2 dated February 23, 1996 (filed with the Commission on April 29,
1996) and (iii) the description of the Company's Common Stock contained in
Item 1 of the Company's Registration Statement on Form 8-A, including any
amendment or report filed for the purpose of updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to April 26, 1996 and prior to the
termination of the offering of Common Stock shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the respective
dates of filing of such documents. Any statement contained herein or in a
document all or part of which is incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any and all of the foregoing documents incorporated herein by reference
(excluding exhibits unless specifically incorporated therein). Requests for
such copies should be submitted in writing to the Company at 903 North Bowser,
Suite 140, Richardson, Texas 75081, Attention: Secretary.
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE.
THE COMPANY
The Company develops, owns and operates wireless cable television systems
primarily in small to mid-size markets located in the central United States. As
of March 1, 1996, the Company had wireless cable channel rights in 81 markets,
including 38 markets in which the Company has systems in operation serving
approximately 132,000 subscribers (the "Existing Systems"), representing
approximately 8.6 million households, approximately 7.1 million of which the
Company believes can be served by line-of-site ("LOS") transmissions (which
generally require a direct, unobstructed transmission path from the central
transmitting antenna to the antenna located on the subscriber's premises).
Certain of the wireless cable assets presently held by the Company are not
included in the discussion of the Company's business because such assets are not
a part of the Company's current long-term business plan. These assets include
wireless cable channel rights and related assets associated with the Los
Angeles, California, Memphis, Tennessee and Flippin, Tennessee markets
("Disposition Assets"). The Company is currently a party to an agreement
relating to the disposition of the Memphis and Flippin, Tennessee markets,
pursuant to which the markets would be conveyed to TruVision Cable, Inc.
("TruVision") for an aggregate consideration of approximately $5.4 million
(collectively, the "Memphis Transaction"). The Company currently anticipates
that the Memphis Transaction will close on or before April 30, 1996, after which
the Company will not retain any direct or indirect interest in such markets.
The executive offices of the Company are located at 903 N. Bowser, Suite
140, Richardson, Texas 75081 and its telephone number is (214) 479-9244.
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RISK FACTORS
Prospective investors should carefully consider the following information,
in addition to the other information contained in this Prospectus, before
exercising the Warrants to purchase the Shares offered hereby.
LIMITED OPERATING HISTORY; NET LOSSES SINCE INCEPTION
Although the Company's business commenced in 1990, it did not generate any
revenues until April 1992. Potential investors, therefore, have limited
historical information about the Company upon which to base an evaluation of the
Company's performance and a decision to invest in the Company. As of December
31, 1995, the Company has recorded net losses of approximately $19.5 million
since inception, due primarily to interest expense and charges for depreciation
and amortization of capital expenditures to develop its wireless cable systems.
Until such time as the Company substantially increases its subscriber base,
resulting in higher subscription fee revenues, it will continue to experience
losses. Because of the costs associated with launching a wireless cable
television system and expanding its subscriber base, continued growth by the
Company will tend to reduce net income, if any, or increase net losses. As a
result, the Company expects to continue to experience net losses while it
develops and expands its wireless cable systems even if mature individual
systems of the Company are profitable.
SUBSTANTIAL INDEBTEDNESS OF THE COMPANY; INSUFFICIENCY OF EARNINGS TO COVER
FIXED CHARGES
As of December 31, 1995, on a pro forma basis after giving effect to the
consummation of the Transactions (as defined herein, see "Recent Events-The
Transactions"), the Company had approximately $140.2 million of indebtedness and
the Company's consolidated subsidiaries would have had approximately $18.8
million of total liabilities. For the years ended December 31, 1993, 1994 and
1995, the Company's earnings were insufficient to cover fixed charges by
$406,000, $4,638,000 and $20,187,000, respectively. The ability of the Company
to make payments of principal and interest on its indebtedness will be largely
dependent upon its future financial performance. Many factors, some of which
will be beyond the Company's control (such as prevailing economic conditions),
will affect its financial performance. There can be no assurance that the
Company will be able to generate sufficient cash flow to cover required interest
and principal payments. If the Company is unable to meet interest and principal
payments in the future, it may, depending upon the circumstances which then
exist, seek additional equity or debt financing, attempt to refinance its
existing indebtedness or sell all or part of its business or assets to raise
funds to repay its indebtedness. There can be no assurance that sufficient
equity or debt financing will be available, or, if available, that it will be on
terms acceptable to the Company, that the Company will be able to refinance its
existing indebtedness or that sufficient funds could be raised through asset
sales. The Company's high level of indebtedness has several important
consequences, including, but not limited to: (i) significant interest expense
and principal repayment obligations resulting in substantial annual fixed
charges; (ii) significant limitations on the Company's ability to obtain
financing, make capital expenditures and acquisitions and take advantage of
other business opportunities that may arise; and (iii) increased vulnerability
to adverse general economic and industry conditions. There can be no assurance
that the Company will be profitable in the future.
MANAGEMENT OF GROWTH; INTEGRATION OF ACQUIRED BUSINESSES
The Company has experienced rapid growth in the number of its employees and
the scope of its operating and financial systems. This growth has resulted in
an increased level of responsibility for both existing and new management
personnel. The recent 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
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management of the Company to perform the management functions formerly performed
by management of each of the parties to the Transactions. To the extent that
the Company's existing management is unable to assume or perform these combined
duties, the Company could be adversely affected. There can be no assurance that
the management, systems and controls currently in place or any steps taken to
improve such management, systems and controls will be adequate in the future.
In addition, in light of the Transactions, management of the Company must
make and implement a number of strategic and operational decisions regarding the
integration of its various operations and the exploitation of its assets and
businesses. The timing and manner of the implementation of decisions made with
respect to the ongoing business of the Company will materially affect the
operations of the Company. Given the range of potential outcomes arising from
such decisions, and the interrelationships among the decisions to be made, it is
difficult to quantify with precision the composition of the Company. There can
also be no assurance that any acquired businesses will be integrated
successfully into the Company's business.
NEED FOR ADDITIONAL FINANCING FOR GROWTH
The growth of the Company's business requires substantial investment on a
continuing basis to finance capital expenditures and expenses related to
subscriber growth and system development. Although the Company believes that
its cash and cash equivalent assets will be sufficient to fund the Company's
operations and expansion through at least the end of 1996, there is no assurance
that additional funds will not be necessary to complete the launch, build-out
and expansion of all of the Company's wireless cable systems and to bring such
systems to a mature state or that any such required additional funds would be
available on satisfactory terms and conditions, if at all. In addition, the
Company's capital needs will depend in part upon the success of the Company's
efforts to sell or otherwise dispose of the Disposition Assets and the nature of
any consideration received as a result of such dispositions. To the extent
assets and markets designated for disposition are not sold, or are not sold for
cash, the Company's requirements for additional funds will be increased. There
is also no assurance that the Company will not pursue, from time to time, other
opportunities to acquire additional wireless cable channel rights and businesses
that may utilize the capital currently expected to be available for its current
markets. The amount and timing of the Company's future capital requirements, if
any, will depend upon a number of factors, including programming costs,
equipment costs, marketing expenses, staffing levels, subscriber growth and
competitive conditions, and any purchases or dispositions of assets, many of
which are not within the Company's control. Failure to obtain any required
additional financing could materially adversely affect the growth, cash flow or
earnings of the Company.
POTENTIAL SIGNIFICANT INDUSTRY TRANSACTIONS
Significant industry transactions such as acquisitions and dispositions of
channel rights, joint ventures and other business transactions between and among
participants in the wireless cable television industry have occurred with some
frequency in the past, and the Company's management expects this trend to
continue in the foreseeable future. Although the Company regularly engages in
discussions concerning such industry transactions with other industry
participants, the Company is not currently subject to any material definitive
agreements in such regard except as disclosed herein or in those documents
incorporated herein by reference. Whether the Company proceeds with any of
these discussions and whether the Company ultimately negotiates and/or
consummates any additional significant industry transactions will depend, among
other things, upon the business and prospects of the Company, industry
conditions, investment and growth opportunities available to the Company, stock
market conditions, availability and suitability of financing for such
transactions, regulatory and legal considerations, and other plans and
requirements of the Company. No assurance can be given that, if consummated,
any such significant industry transactions could be successfully integrated into
the Company's business.
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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. Thomas W. Dixon, the Company's Senior Vice
President-Operations, resigned as an executive officer upon consummation of the
CS Transaction (as defined herein, See "Recent Events-The CS Wireless
Transaction") to join CS Wireless Systems, Inc. ("CS Wireless") as its Senior
Vice President-Operations. In addition, John R. Bailey, the Senior Vice
President-Finance, Chief Financial Officer, Treasurer and Secretary of the
Company, serves as Acting Chief Financial Officer of CS Wireless until CS
Wireless names a full-time Chief Financial Officer in addition to performing his
duties as an officer and employee of the Company. The Company's success is also
dependent upon its ability to attract and retain qualified employees to develop
and operate its wireless cable systems.
COMPETITION
The pay television industry is highly competitive. Wireless cable
television systems face or may face competition from several sources, such as
traditional hard-wire cable companies, satellite master antenna television
systems, direct broadcast satellites and other alternative methods of
distributing and receiving television transmissions. Further, premium movie
services offered by cable television systems have encountered significant
competition from the home video cassette recorder industry. In areas where
several local off-air VHF/UHF broadcast signals can be received without the
benefit of subscription television, cable television systems also have
experienced competition from the availability of broadcast signals generally and
have found market penetration to be more difficult. In addition, within each
market, the Company initially must compete with others to acquire, from the
limited number of channel licenses issued, rights to a minimum number of
channels needed to establish a viable system. Legislative, regulatory and
technological developments may result in additional and significant competition,
including competition from local telephone companies, from a proposed new
wireless service known as local multi-point distribution and from emerging
trends and technologies. In the Existing Systems, the Company has targeted its
marketing to households that are unpassed by traditional hard-wire cable and
that have limited access to local off-air VHF/UHF broadcast channels.
Accordingly, to date the Company has not encountered significant direct
competition from traditional hard-wire cable companies. It is likely, however,
given the markets acquired in the Transactions, that the Company will face
significant direct competition from traditional hard-wire cable companies in the
future. In addition, as the telecommunications industry continues to evolve,
the Company may face additional competition from new providers of entertainment
and data services. In particular, there are a rapidly growing number of
information and data service providers serving consumers via informal
communications networks, such as the Internet and World Wide Web. Although the
Company is unaware of any such provider delivering programming like that
available over wireless cable television, there can be no assurance that
continuing advances in technology will not make such delivery possible. Even if
such direct competition does not exist in the future, however, the Company's
services will compete, indirectly, with entertainment services generally,
including those provided by operators using evolving technology. Many actual
and potential competitors have greater financial, marketing and other resources
than the Company. No assurance can be given that the Company will compete
successfully in any or all of its markets.
GOVERNMENT REGULATION
The right to transmit on wireless cable channels is regulated by the
Federal Communications Commission (the "FCC") and the copyright for the
retransmission of local off-air VHF/UHF broadcasts is regulated by the United
States Copyright Office pursuant to the Copyright Act of 1976, as amended (the
"Copyright Act").
CABLE ACT. Pursuant to the Cable Television Consumer Protection and
Competition Act of 1992, as amended (the "Cable Act"), the FCC adopted rate
regulations exclusively for traditional hard-wire cable
<PAGE>
systems. Pursuant to the Telecommunications Act of 1996, which was enacted in
February 1996, all cable rate regulation will be eliminated after three years,
and for "small systems" as defined in such Act, and under certain other
circumstances, rate regulation will be eliminated immediately. The Company
cannot predict precisely what effect these regulations or other governmental
regulations may have on traditional hard-wire cable operators as to price and
service. While current FCC regulations are intended to promote the development
of a competitive pay television industry, the rules and regulations affecting
the wireless cable industry may change, and any future changes in FCC rules,
regulations, policies and procedures could have an adverse effect on the
industry as a whole and on the Company in particular.
COPYRIGHT ACT. Secondary transmission of a broadcast signal is permissible
only if approved by the copyright holder or if subject to compulsory licensing
under the Copyright Act. The United States Congress adopted legislation
extending the compulsory copyright licensing system to include wireless cable
systems. As a result of this action, wireless cable operators may engage in
secondary transmissions of distant programming without the copyright holder's
approval, provided that such operators file certain reports and pay certain fees
set by the Copyright Royalty Tribunal.
REGULATION OF RETRANSMISSION. Effective October 6, 1993, pursuant to the
Cable Act, local broadcasters may require that cable operators obtain their
consent before retransmitting local off-air VHF/UHF broadcasts. The FCC has
exempted wireless cable operators from the retransmission consent rules if the
receive-site antenna is either owned by the subscriber or within the
subscriber's control and available for purchase by the subscriber upon the
termination of service. In all other cases, wireless cable operators must
obtain consent to retransmit local broadcast signals. The Company has obtained
such consents in each of its Existing Systems where the Company is
retransmitting on a wireless cable channel. Such consents will be required in
the Company's other markets. There can be no assurance that the Company will be
able to obtain such consents on terms satisfactory to the Company.
OTHER REGULATIONS. Wireless cable operators are also subject to regulation
by the Federal Aviation Administration (the "FAA") with respect to the
construction of transmission towers and to certain local zoning regulations
affecting construction of towers and other facilities. There may also be
restrictions imposed by local authorities. There can be no assurance that the
Company will not be required to incur additional costs in complying with such
regulations and restrictions. No assurance can be given that new regulations
will not be imposed or that existing regulations will not be changed. Any such
new or modified regulations could have a material adverse effect on the wireless
cable industry as a whole and on the Company in particular.
DEPENDENCE ON CHANNEL LEASES; LOSS OF LICENSES BY LESSORS
The Company is dependent on leases with unaffiliated third parties for most
of its wireless cable channel rights. The Company has entered into leases for
substantially all of its wireless cable channel rights with channel license
holders, applicants for channel licenses and applicants that have had
previously-filed applications returned without prejudice by the FCC and which
will be refiled. The Company's channel leases typically cover four
instructional television fixed service ("ITFS") and/or one to four multi-point
distribution service ("MDS") wireless cable channels each. Generally, ITFS
channels may only be owned by qualified non-profit educational organizations and
in general must use a minimum of 20 hours per week per channel for educational
programming. The remaining excess ITFS channel air time may be leased to
wireless cable operators for commercial use without further restriction. MDS
channels may be owned by commercial entities and allow full-time usage without
programming restrictions. Under the rules of the FCC, the term of an ITFS
channel lease cannot exceed ten years. There is no such restriction for MDS
channel leases. ITFS licenses generally are granted for a term of ten years and
are subject to the renewal by the FCC. MDS licenses generally will expire on
May 1, 2001 unless renewed. The use of such channels by the license holders is
subject to regulation by the FCC and the Company's ability to continue to enjoy
the benefits of its leases with channel license holders is dependent upon the
continuing compliance by the channel license holders with applicable regulations
including the requirement that ITFS license holders must meet certain
educational use requirements in order to lease transmission capacity to wireless
cable operators. The remaining initial terms
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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 extensions will be required. There can be no
assurance that the FCC will grant any particular extension request or license
renewal request.
UNCERTAINTY OF GRANT OF PENDING APPLICATIONS
Applications for wireless cable licenses are subject to approval by the
FCC. Applicants with whom the Company has entered into leases have filed a
series of applications with the FCC for a number of wireless cable channels and
the Company has entered into leases for additional channels with applicants that
have had previously-filed applications returned without prejudice by the FCC and
which have been refiled. The vast majority of such leases are in the form of
lease agreements with qualified non-profit educational organizations for ITFS
channels. These ITFS applications are expected to undergo review by the FCC's
engineers and staff attorneys over the next several months. There is no limit
on the time that may elapse between filing the application with the FCC for a
modification or new license and action thereon by the FCC. Once the FCC staff
determines that the applications meet certain basic technical and legal
qualifications, the staff will then determine whether each application is
proximate to the transmit and receive-site locations of other applications.
Those applications that would result in signal interference to other pending
applications ("Competing Applications") must then undergo a comparative
selection process. The FCC's ITFS application selection process is based on a
set of objective criteria that includes whether an applicant is located in the
community to be served and the number of students that will receive the
applicant's educational programming. Thus, the outcome of the selection process
when two or more qualified applicants are competing for the same channels lends
itself to a degree of predictability that varies according to the circumstances.
Most of the Company's lease agreements with applicants for channel licenses
involve channel licenses for which Competing Applications have been filed. In
each market, the Company has carefully considered the FCC's selection criteria
in choosing the educational entities with which it has entered into lease
agreements. However, because the FCC's application review process does not lend
itself to complete certainty, and given the considerable number of applications
involved, no assurance can be given as to the precise number of applications
that will be granted. A number of competing applicants for channel licenses
have filed with the FCC petitions to deny the applications in which the Company
has acquired channel rights, based upon alleged substantive defects in the
applicant or in technical or other aspects of the application. The Company
anticipates that the FCC will deny most of the current petitions to deny the
applications in which the Company has acquired channel rights. However, no
assurance can be given as to the precise number of such petitions that will be
denied. Although the Company does not believe that any single award of a
channel license to an applicant that has filed a Competing Application or the
granting of any single petition to deny an application in which the Company has
acquired channel rights would adversely affect the Company, several of such
awards or grants could have a material adverse effect on the Company.
UNCERTAINTY OF ABILITY TO OBTAIN FCC AUTHORIZATIONS
Wireless cable systems transmit programming over wireless cable channels
that are licensed by the FCC. Generally, the Company believes that a minimum of
12 wireless cable channels are necessary to offer
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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.
INTERFERENCE ISSUES
Under current FCC regulations, a wireless cable operator may install
receive-site equipment and serve any point where its signal can be received,
subject to the interference protection rights of certain other wireless cable
systems. Interference from other wireless cable systems can limit the ability
of a wireless cable system to serve particular points, in the same manner that
interference from one television station limits the ability of a viewer to
receive another television station broadcasting on the same frequency. In
licensing ITFS and MDS stations, a primary concern of the FCC is avoiding
situations where proposed stations are predicted to cause interference to the
reception of existing station signals. Pursuant to current FCC regulations, a
wireless cable license holder is generally protected from interference within 35
miles of the transmission site. The Company's business plan involves moving the
authorized transmitter site of various of its MDS and ITFS licensed stations and
obtaining the grant of licenses to new stations that the Company will use in its
wireless cable systems. The FCC interference protection standards may make one
or more of those proposed relocations or new grants unavailable. In any such
event, it may be necessary to negotiate interference agreements with the
licensees of stations which would otherwise block such relocations or new
grants. There can be no assurance that the Company will be able to negotiate
any required interference agreements on terms acceptable to it. In the event
that the Company cannot obtain interference agreements required to implement its
plans for a given market, the Company may have to curtail or modify operations
in that market. Any substantial modification or curtailment of the Company's
operations in its markets could have a material adverse effect on its growth or
financial performance. In addition, while the Company's leases with MDS and
ITFS licensees require their cooperation, it is possible that one or more of the
Company's channel lessors may hinder or delay the Company's efforts to use the
channels in accordance with its plans for a particular market.
AUCTION OF BASIC TRADING AREAS
As a result of legislation authorizing the FCC to utilize competitive
bidding (auctions) for the award of initial licenses or construction permits for
certain commercial services when mutually exclusive applications have been
filed, on June 15, 1995 the FCC adopted new rules replacing lottery procedures
with auctions for the awarding of commercial licenses where two or more parties
have filed applications for the same frequencies. Auctions under the new rules
began November 13, 1995 for the award of initial commercial licenses for "Basic
Trading Areas" or "BTAs" (as defined by Rand McNally) and ended March 28, 1996;
however, the new auction rules do not apply when a license is to be renewed.
The new rules are effective although pleadings have been filed which might
result in changes in the rules, and any auctions conducted pursuant thereto.
BTA license holders that obtain an MDS license via an auction must provide
interference protection to the 35-mile protected service area of existing
license holders. Under the statutory auction authority enacted in 1993, ITFS
licenses are exempt from the auction process and applications for ITFS licenses
are expected to continue to be awarded according to the FCC's objective
criteria. The Company must file a long-form application (FCC Form 304) or a
Statement of Intention with the FCC by May 10, 1996 for each of the 93 BTAs for
which it was the winning bidder.
9
<PAGE>
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 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 via microwave frequencies from a
transmission facility to a small receiving antenna at each subscriber's
location, which generally requires a direct, unobstructed line-of-sight from the
transmission facility to the subscriber's receiving antenna. Therefore, in
communities with tall trees, hilly terrain, tall buildings or other obstructions
in the transmission path, wireless cable transmission can be difficult or
impossible to receive at certain locations without the use of signal boosters.
Consequently, the Company may not be able to supply services to certain
potential subscribers. In addition, in limited circumstances, extremely adverse
weather can damage transmission and receiving antennas as well as transmit site
equipment.
POSSIBLE ADDITIONAL CAPITAL EXPENDITURES FOR DISPOSITION ASSETS
No assurance can be given that the planned disposition of the Disposition
Assets will be consummated. Accordingly, the Company may be required to expend
additional capital to maintain certain assets and/or fund lease payments
attributable to the Disposition Assets. Further, no assurance can be given that
the disposition of the Disposition Assets will have the desired impact on the
Company's business or financial affairs.
POSSIBLE ADVERSE TAX CONSEQUENCES ATTRIBUTABLE TO THE MEMPHIS TRANSACTION AND
THE CS TRANSACTION
The cash and promissory note portion of the consideration received by the
Company and/or its subsidiaries from consummation of the Memphis Transaction and
CS Transaction will result in the recognition of gain for Federal income tax
purposes. The amount of any tax liability attributable thereto will depend upon
numerous factors, including the tax basis of the assets conveyed, the net
operating losses available to the Company and other factors. Certain of these
factors will depend upon the tax attributes of CMAX, AWS and TSC (each as
defined herein, see "Recent Events - The Transactions") as of the closing of the
Transactions. 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.
10
<PAGE>
DIFFICULTIES AND UNCERTAINTIES OF A NEW INDUSTRY
While wireless cable television is not a new technology, it is a relatively
new industry with a short operating history. Potential investors should be
aware of the difficulties and uncertainties that are normally associated with
new industries, such as lack of consumer acceptance, difficulty in obtaining
financing, increasing competition, advances in technology and changes in laws
and regulations. There can be no assurance that the wireless cable industry
will develop or continue as a viable or profitable industry.
CERTAIN SUBSIDIARIES NOT WHOLLY OWNED
The Company generally conducts its business through subsidiaries. The
Company's subsidiaries include non-operating subsidiaries that hold interests in
channels, subsidiaries that operate systems and subsidiaries that do both. The
Company also has an operating subsidiary that installs wireless cable systems in
various markets served by the Company and its subsidiaries. Certain of the
Company's subsidiaries are not wholly owned and most subsidiaries are indirectly
owned by the Company as a result of its majority ownership of other entities.
Although the Company has a sufficient interest in its subsidiaries to be able to
exercise control over them, the Company may owe a fiduciary duty to the holders
of various minority interests in its subsidiaries. Accordingly, the Company may
not exercise unfettered control over such subsidiaries and may be required to
deal with such subsidiaries on terms no less favorable to such subsidiaries than
could be obtained from unaffiliated third parties. The Company believes that
all of its dealings with its subsidiaries have been on such terms. In addition,
dividends or other distributions paid or made by such subsidiaries must be paid
or made on a pro rata basis to all stockholders.
WIRELESS ONE AND CS WIRELESS MINORITY INVESTMENTS
The Company owns approximately 26% of the outstanding common stock of
Wireless One, Inc., a Delaware corporation ("Wireless One"). Although David E.
Webb and J. R. Holland, Jr., Directors of the Company, serve as Directors of
Wireless One, the Company cannot exercise unfettered control over this
substantial investment. The Company does not control the management of Wireless
One, and is dependent upon the skill, expertise and managerial efforts of the
management of Wireless One to achieve a return on the Company's substantial
investment in Wireless One. To the extent Wireless One proves unsuccessful in
its business, the value of the Company's investment therein will be adversely
affected. Similarly, the Company owns approximately 35% of the outstanding
common stock of CS Wireless. Although David E. Webb and J.R. Holland, Jr.,
Directors of the Company, serve as Directors of CS Wireless, the Company cannot
exercise unfettered control over this substantial investment. The Company does
not control the management of CS Wireless, and is dependent upon the skill,
expertise and managerial efforts of the management of CS Wireless to achieve a
return on the Company's substantial investment in CS Wireless. To the extent CS
Wireless proves unsuccessful in its business, the value of the Company's
investment therein will be adversely affected.
AGREEMENT TO VOTE FOR BOARD DESIGNEE OF JUPITER; CO-SALE RIGHT
David E. Webb, the President and Chief Executive Officer of the Company, L.
Allen Wheeler, Vice Chairman and a member of the Board of Directors of the
Company and Hunt Capital Group, L.L.C. ("Hunt Capital"), a principal stockholder
of the Company and affiliate of J. R. Holland, Jr., the Chairman of the Board of
the Company, collectively own approximately 40.8% of the outstanding Company
Common Stock. Pursuant to the terms of a Stockholders' Agreement (the
"Stockholders' Agreement"), entered into in connection with the private
placement of $40.2 million of 9% Convertible Subordinated Discount Notes due
2004 (the "Convertible Notes"), each of Hunt Capital, David E. Webb and L. Allen
Wheeler, have agreed to vote their shares of the Company Common Stock (i) in
favor of the election to the Company's Board of Directors of one designee of
Jupiter Partners, L.P.,the purchaser of $40 million of the Convertible Notes
("Jupiter"), and (ii) in favor of the Company's Board of Directors consisting of
at least three and not more than seven members, for so long as Jupiter retains a
25% interest in the Convertible Notes originally purchased by it and/or the
shares of the Company Common Stock issued or issuable upon conversion thereof
11
<PAGE>
(the "Conversion Shares") originally issuable to it. The agreement of such
stockholders to elect Jupiter's designee to the Board of Directors may restrict
the ability of such stockholders to elect their preferred slate of directors to
manage the Company, which may result in a member of the Board of Directors
having interests that conflict with those of the other stockholders of the
Company. In addition, under the terms of the Stockholders' Agreement, each of
Hunt Capital, David E. Webb and L. Allen Wheeler have agreed that, for so long
as Jupiter holds such 25% interest, in the event of any proposed sale or series
of sales of the Company Common Stock by any such stockholder to a non-affiliate
for aggregate consideration greater than $15 million or representing in excess
of 5% of the then outstanding shares of Company Common Stock, such stockholder
shall not effect such sale unless Jupiter is permitted to participate in such
sale on a pro rata basis with such stockholder. The co-sale right may reduce
the likelihood of a change in control of the Company because any potential
purchaser of stock held by the controlling stockholders may also be required to
purchase shares owned by Jupiter.
LIMITED TRADING VOLUME AND POSSIBLE VOLATILITY OF THE COMPANY COMMON STOCK
During 1994 and 1995, the average trading volume of shares of the Company
Common Stock on Nasdaq National Market was approximately 22,800 and 33,600
shares per day, respectively. Prior to the consummation of the Transactions on
February 23, 1996, approximately 12,611,131 shares of the Company's Common Stock
were issued and outstanding, including 8,141,801 shares (of which 225,400 shares
were subject to exercisable options) held by executive officers, directors and
their affiliates. As a result of the Transactions, the Company issued
approximately 6,757,141 additional shares of Common Stock (of which 10,252
shares are held by the Company as treasury shares), resulting in substantial
increases both in the number of outstanding shares of Company Common Stock held
by persons other than executive officers, directors and their affiliates, and in
the average daily trading volume of the Company's Common Stock on Nasdaq
National Market. The market price of the Company Common Stock could fluctuate
substantially in the future for a variety of reasons, including the anticipated
increased trading volume and anticipated dispositions resulting from the
Transactions, the performance of the Company, investor expectations for the
Company and the wireless cable television industry, general economic conditions
and fluctuations in the overall stock market.
NO COMPANY COMMON STOCK DIVIDENDS
The Company has not paid dividends on the Company Common Stock since its
inception and does not anticipate paying any dividends in the foreseeable
future. In addition, provisions relating to the Company's indebtedness prohibit
the payment or accrual of dividends or any other distribution with respect to
the Company's Common Stock until such debt is paid in full.
POSSIBLE FUTURE ACQUISITIONS
The Company has in the past made a number of acquisitions and may in the
future make additional acquisitions. The Company can be expected to seek to
acquire additional channel rights, both in its existing markets and in other
markets, both directly and indirectly by acquiring other wireless cable
television providers. Such acquisitions may be in geographic areas or markets
outside of the Company's traditional focus of small to mid-size markets in the
central United States. In addition, it is possible that the Company might make
one or more acquisitions outside of the business of providing wireless cable
television services. Any such acquisitions may be made for cash, securities,
including the Company Common Stock, or combinations thereof. Under applicable
law and regulations, in many circumstances, approval by the Company's
stockholders of any such acquisitions may not be required. The Company may pay
for such acquisitions in cash or by issuing equity or debt securities. The
issuance of equity to effect or finance such acquisitions would have the effect
of reducing the percentage ownership of the Company held by each pre-acquisition
stockholder and the incurrence of indebtedness in connection with such
acquisitions could adversely affect the liquidity, results of operations and
financial condition of the Company.
12
<PAGE>
CERTAIN RESCISSION RIGHTS
On February 23, 1996, American Wireless Systems, Inc. ("AWS") became a
wholly owned subsidiary of the Company. See "Recent Events - The Transactions."
Prior to February 23, 1996, a predecessor of AWS, through an affiliate,
participated in the offer and sale of approximately $29 million of general
partnership interests in three general partnerships without registration under
any federal or state securities laws. Following an investigation by the
Commission, AWS, Steven G. Johnson, then a director and officer of AWS, Jeffrey
D. Howes, formerly a director and officer of AWS, and Dexter S. Cohen and Kevin
C. King, each of whom then owned greater than five percent of AWS common stock,
without admitting or denying any wrongdoing, consented to an SEC order to cease
and desist from committing or causing any violation and any future violations of
the securities registration provisions of the Securities Act and the
broker-dealer registration provisions of the Exchange Act. In addition,
securities administrators in 22 states also have investigated or are presently
investigating the activities related to the unregistered sale of the general
partnership interests described above. The actions taken by the various state
securities administrators range from no action taken to the issuance of 15 cease
and desist orders and consent orders pursuant to which AWS, the issuing general
partnerships and Messrs. Johnson and Howes, as officers of AWS, were required to
cease selling general partnership interests without registration, to offer
rescission to individuals who purchased general partnership interests and, in
certain cases, to pay administrative penalties. In certain cases, such parties
have entered into consent decrees with state regulatory authorities, including
an order in Arizona requiring AWS to offer to purchase such general partnership
interests sold to residents of Arizona or to pay the Arizona Corporation
Commission an amount equal to the amount of the investment made by all general
partners who are Arizona residents, or approximately $566,000, plus interest
from the time of investment. AWS has advised the Arizona Corporation Commission
that it does not intend to make such offer to purchase.
On September 29, 1995, AWS and one of the general partnerships in which
interests were sold (the "Pittsburgh Partnership") jointly sold (the "Pittsburgh
Sale") their respective interest in the joint venture operating the wireless
cable television system in Pittsburgh, Pennsylvania to CAI Wireless Systems,
Inc. ("CAI"). General partners holding approximately 72% of the general
partnership interests of the Pittsburgh Partnership (the "Pittsburgh Partners")
executed and delivered written consents to such sale, each of which included a
release of certain contingent claims including claims arising from the offer and
sale of the general partnership interests to the Pittsburgh Partners. On
February 23, 1996, in connection with the consummation of the Transactions, Fort
Worth Wireless Cable T.V. Associates, another of the general partnerships in
which interests were sold (the "FTW Partnership") sold (the "FTW Transaction")
its interest in the joint venture operating the wireless cable television system
in Fort Worth, Texas to the Company. General partners holding in excess of 78%
of the general partnership interests of the FTW Partnership (the "FTW Partners")
executed and delivered written consents to such sale, each of which included a
release of certain contingent claims including claims arising from the offer and
sale of the general partnership interests to the FTW Partners. On February 23,
1996, in connection with the consummation of the Transactions, Wireless Cable TV
Associates #38, another of the general partnerships in which interests were sold
(the "Minneapolis Partnership"), sold (the "Minneapolis Transaction") its
interest in the limited liability company operating the wireless cable
television system in Minneapolis, Minnesota to the Company. General partners
holding in excess of 88% of the general partnership interests of the Minneapolis
Partnership (the "Minneapolis Partners") executed and delivered written consents
to such sale, each of which included an assignment to the Company of certain
related parties from certain contingent claims against AWS and certain related
parties, including claims arising from the offer and sale of the general
partnership interests to the Minneapolis Partners.
There can be no assurance that the Minneapolis Partners, the FTW Partners
or the Pittsburgh Partners who did not vote in favor of the Minneapolis
Transaction, the FTW Transaction, the Pittsburgh Sale, respectively, or any
governmental agency will not institute proceedings against AWS or the Company,
as the successor to AWS, based on a failure to register the general partnership
interests in connection with a public offering or for damages based on alleged
omissions or misrepresentations of material information in connection with the
sale of such interests. No assurance can be given that a successful claim
against the predecessors of AWS could not be asserted against the Company based
on a number of theories involving
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<PAGE>
successor liability. The institution of legal action against the Company
arising out of the offer and sale of general partnership interests by AWS'
predecessors could result in substantial defense costs to the Company and the
diversion of efforts by the Company's management, and the imposition of
liabilities against the Company could have an adverse effect on the Company.
THE COMPANY
The Company develops, owns and operates wireless cable television systems,
primarily in small to mid-size markets located in the central United States. As
of March 1, 1996, the Company had wireless cable channel rights in 81 markets,
representing approximately 8.6 million households, approximately 7.1 million of
which the Company believes can be serviced by line-of-sight transmissions (which
generally require a direct, unobstructed transmission path from the central
transmitting antenna to the antenna located on the subscriber's premises).
The Company further estimates that within these markets, approximately 2.6
million LOS households, or approximately 36% of the Company's total LOS
households, are currently unpassed by traditional hard-wire cable systems. As
of March 1, 1996, the Company's 81 markets included (i) 38 markets in which the
Company has wireless cable television systems in operation, (ii) nine markets in
which the Company has wireless cable television systems under construction, and
(iii) 34 future launch markets, including 30 in which the Company has aggregated
sufficient wireless cable channel rights to commence construction of a system
and four in which the Company has leases with or options from applicants for
channel licenses that the Company expects to be granted by the FCC. As of March
1, 1996, the 38 Existing Systems were providing wireless cable service to
approximately 132,000 subscribers.
Certain of the wireless cable assets presently held by the Company are not
included in the discussion of the Company's business because such assets are not
a part of the Company's current long-term business plan. These assets include
wireless cable channel rights and related assets associated with the Los
Angeles, California, Memphis, Tennessee and Flippin, Tennessee markets. The
Company is currently a party to an agreement relating to the disposition of the
Memphis and Flippin, Tennessee markets, pursuant to which the markets would be
conveyed to TruVision Cable, Inc. for an aggregate consideration of
approximately $5.4 million. The Company currently anticipates that the Memphis
Transaction will close on or before April 30, 1996, after which the Company will
not retain any direct or indirect interest in such markets.
14
<PAGE>
The table below provides information regarding the 81 markets in which
Heartland has wireless cable channel rights that it currently intends to retain
and develop as of March 1, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SUBSCRIBERS
ESTIMATED ESTIMATED AT
TOTAL LINE-OF-SIGHT CURRENT MARCH 1,
MARKET HOUSEHOLDS HOUSEHOLDS CHANNELS(1) 1996
------ ---------- ---------- ----------- ----
<S> <C> <C> <C> <C>
EXISTING SYSTEMS
Ada, OK 27,950 20,693 32 5,680
Wichita Falls, TX 78,290 74,376 28 5,956
Midland, TX 120,037 114,035 26 4,865
Abilene, TX 86,676 82,344 23 3,674
Lawton, OK 97,023 92,172 27 7,260
Laredo, TX 313,406(2) 297,736(2) 27 6,126
Enid, OK 76,602 72,772 21 4,142
Lindsay, OK 52,266 42,646 32 3,453
Ardmore, OK 61,416 52,976 20 3,353
Mt. Pleasant, TX 33,589 26,871 16 2,110
Lufkin, TX 117,534 88,150 12 --(3)
Shaw, KS 47,223 42,763 30 3,881
Texarkana, TX 118,204 94,563 20 2,033
Stillwater, OK 54,562 40,922 20 6,365
Lubbock, TX 123,934 105,323 34 5,665
McLeansboro, IL 80,136 60,102 18 1,266
Vandalia, IL 73,593 55,195 20 1,899
Olney, IL 67,812 50,859 20 1,728
Lykens, OH 210,800 168,640 24 697
Paragould, AR 77,523 58,500 21 2,557
Sikeston, MO 69,837 52,378 24 3,008
Taylorville, IL 159,596 119,697 20 1,836
Peoria, IL 276,446 248,801 22 1,046
Manhattan, KS 56,473 42,355 20 1,336
O'Donnell, TX 68,940 65,493 20 1,568
Olton, TX 32,548 30,921 20 1,380
Monroe City/Lakenan, MO 46,376 34,782 27 1,674
Paris, TX 55,445 41,584 20 1,200
Sherman/Denison, TX 100,000 90,000 31 4,478
Harper/Freeport, IL 125,269 93,952 20 504
Corsicana/Athens, TX 69,161 62,245 23 165
Strawn/Ranger, TX 34,488 25,866 20 239
Hamilton, TX 28,551 21,413 20 --(4)
Champaign, IL 164,992 148,493 23 2,061
Austin, TX 360,000 250,000 31 12,453
Temple/Killeen, TX 110,000 80,000 35 6,737
Waco, TX 100,000 80,000 35 4,289
Corpus Christi, TX 135,000 108,000 31 15,392
--------- --------- -------
Total--Existing Systems 3,911,698 3,237,618 132,076
--------- --------- -------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED
TOTAL LINE-OF-SIGHT CHANNELS AT
MARKET HOUSEHOLDS HOUSEHOLDS LAUNCH(1)(5)
------ ---------- ---------- ------------
<S> <C> <C> <C>
SYSTEMS UNDER CONSTRUCTION(6)
Anthony, KS 15,798 11,845 16
Forrest City, AR 55,642 41,732 21
Marion, KS 53,881 40,411 19
Peaksville, MO 48,157 36,118 15
Purdin, MO 25,001 18,751 20
Sterling, KS 45,213 38,431 24
Stromsburg, NE 34,813 29,591 20
Tulsa, OK 321,922 273,634 16
Walnut Grove, IL 84,226 63,170 20
------- -------
Total--Systems Under Construction 684,653 553,683
------- -------
FUTURE LAUNCH MARKETS(7)
Adairsville, GA 205,662 154,247 16
Altus, OK 30,653 29,120 16
Amarillo, TX 106,670 101,337 26
Bellflower, MO 63,384 57,046 20
Bluffs, IL 46,389 34,792 20
Burnet, TX 24,917 18,688 16
Charlotte, TX 32,771 24,578 16
Columbia, MO 149,622 127,179 18
Crow, TX 71,421 57,137 12
Des Moines, LA 267,279 240,551 16
El Dorado, AR 54,727 38,310 16
El Paso, TX 200,000 180,000 27
Elk City, OK 26,379 21,103 16
Fischer, TX 317,039 237,779 20
Henryetta, OK 31,968 25,574 16
Holdenville, OK 50,637 45,573 20
Ingram, TX 26,235 19,679 20
Kossuth, TX 52,490 39,368 20
Lenapah, OK 51,921 38,941 12
Mayfield, KY 175,948 155,972 21
McAlester, OK 36,475 25,533 20
Miami, OK 70,820 60,197 15
Muskogee, OK 66,510 53,208 20
Portsmouth, NH 384,389 288,292 27
Powers Crossroads, GA 135,037 101,278 20
Rutledge, GA 141,370 106,028 16
Sabinal, TX 15,795 11,846 20
Seminole, OK 42,204 35,873 19
Shreveport, LA 214,315 182,168 24
Springfield, MO 139,706 118,750 16
Topeka, KS 211,762 190,586 16
Tyler, TX 233,416 186,734 14
Weatherford, OK 31,445 29,873 16
Wick, OH 336,098 268,878 20
--------- ---------
Total--Future Launch Markets 4,045,454 3,306,215
--------- ---------
Total--All Company Markets 8,641,805 7,097,516
--------- ---------
--------- ---------
</TABLE>
- -----------------------------
(1) Includes local off-air VHF/UHF channels, some of which are retransmitted by
the Company over wireless cable channels.
(2) Includes households located in Mexico, to which the Company would be
permitted to provide service in conjunction with a Mexican-owned company.
16
<PAGE>
(3) Construction of the Lufkin System was completed in December 1994. The
Company is not actively marketing its service in the Lufkin System because
it is awaiting action by the FCC to grant licenses, which would increase
the number of wireless cable channels available to the Company.
(4) The Hamilton System was launched on February 27, 1996.
(5) The Company's business strategy is generally to launch a market with
approximately 12 wireless cable channels. Although the Company has no
current intention to launch any market with less than 12 channels, the
Company will launch certain markets with more than 12 channels and may, at
some point in the future, launch one or more markets with less than 12
channels due to FCC construction deadlines or competitive considerations in
such markets. Expected channels at launch includes channels with respect
to which the Company has a lease with or an option from a channel license
holder, an applicant for a channel license or an entity that has had an
application for a channel license returned without prejudice by the FCC and
which will be refiled. In certain markets, the Company has rights to
additional wireless cable channels but does not expect to utilize such
channels upon system launch.
(6) Systems in which the system head-end is under construction. Expected
channels at launch for such systems include channels with respect to which
the Company has a lease with or an option from a channel license holder or
an applicant for a channel license.
(7) Such markets include 30 markets with respect to which the Company has
aggregated sufficient wireless cable channel rights to commence
construction of a system and four markets with respect to which the Company
has a lease with or an option from an applicant for a channel license or an
entity that has had an application for a channel license returned without
prejudice by the FCC and which will be refiled. The Company expects a
substantial number of such licenses to be granted by the FCC.
RECENT EVENTS
EXCHANGE OFFER OF SENIOR NOTES
Pursuant to a Prospectus dated February 12, 1996, forming a part of a
Registration Statement on Form S-4 declared effective by the Commission on
February 12, 1996, the Company offered to exchange $1,000 principal amount of
exchange notes which have terms identical in all material respects to the Senior
Notes (as defined below), except that the exchange notes do not contain terms
with respect to transfer restrictions, for each $1,000 principal amount of 13%
Senior Notes due 2003 (the "Senior Notes") outstanding. Since the Company did
not comply with its obligations to cause such Registration Statement to become
effective on or before August 24, 1995, it was required to pay additional
interest (in addition to the scheduled payment of interest) during the first
90-day period of such default in an amount equal to 0.50% per annum at the end
of such 90-day period and additional interest of 1% per annum during the
subsequent period ending February 12, 1996.
THE TRANSACTIONS
Effective February 23, 1996, the Company, directly or through one or more
subsidiaries acquired all the assets and liabilities and succeeded to the
businesses of American Wireless Systems, Inc. ("AWS") and CableMaxx, Inc.
("CMAX") and acquired substantially all of the assets and certain of the
liabilities and succeeded to all of the businesses of the FTW Partnership, the
Minneapolis Partnership, and Three Sixty Corp. ("TSC"), the successor to
Technivision, Inc. ("Technivision") (the aforementioned five transactions
collectively referred to herein as the "Transactions"). The Transactions are
discussed below:
AWS MERGER. On February 23, 1996, the Company consummated the merger of
Heartland Merger Sub, Inc., a wholly owned subsidiary of the Company ("Merger
Sub"), with and into AWS pursuant to the Amended and Restated Agreement and Plan
of Merger dated as of September 11, 1995 ("AWS Merger Agreement") by and among
the Company, Merger Sub and AWS. Pursuant to the terms of the AWS Merger
Agreement, Merger Sub was merged with and into AWS whereupon AWS became a wholly
owned subsidiary of the Company. Under the terms of the AWS Merger Agreement,
stockholders of AWS are entitled to receive, in the aggregate, approximately
1,310,000 shares of the Company's Common Stock having an aggregate value of as
of February 23, 1996 of approximately $35 million, of which approximately
125,000 shares having
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an aggregate value as of February 23, 1996 of approximately $3.3 million are
being held in an escrow established pursuant to the AWS Merger Agreement to
satisfy certain indemnification obligations of AWS to the Company. As of March
1, 1996, options and warrants to purchase approximately 574,566 shares of AWS
Common Stock were outstanding that convert by their terms into the right to
purchase shares of the Company's common stock, subject to certain adjustments.
The assets previously held by AWS included minority interests in the wireless
cable television systems of Minneapolis, Minnesota, and Fort Worth, Texas (the
remaining interests being held by the Minneapolis Partnership and the FTW
Partnership, respectively) and certain additional rights and properties held in
connection with wireless cable television markets located in Dallas, Texas, Los
Angeles, California and Memphis, Tennessee (collectively, the "AWS Assets").
The Company will seek to sell directly to a third party the Los Angeles,
California market. The Memphis, Tennessee market is subject to a pending
contract of sale to TruVision. The Dallas, Texas market, and AWS' interest in
the Fort Worth, Texas and Minneapolis, Minnesota markets were contributed by the
Company to CS Wireless effective February 23, 1996 pursuant to the terms of a
Participation Agreement, dated December 12, 1995, as amended by Amendment No. 1
to Participation Agreement dated February 22, 1996 (as amended, the
"Participation Agreement"), by and among the Company, CAI Wireless Systems, Inc.
("CAI") and CS Wireless. See "Recent Events - The CS Wireless Transaction."
THE FTW TRANSACTION. On February 23, 1996, the Company consummated the
acquisition of substantially all of the assets of FTW Partnership pursuant to
the Amended and Restated Asset Purchase Agreement dated as of October 4, 1995
("FTW Agreement") by and between the Company and FTW Partnership. Pursuant to
the terms of the FTW Agreement, the Company acquired from the FTW Partnership
substantially all of the assets of the FTW Partnership, consisting of an
approximate 80% interest in a joint venture that owned and operated the wireless
cable television system in Fort Worth, Texas (the "FTW Venture Interest").
Under the terms of the FTW Agreement, the Company issued approximately 580,000
shares of Company Common Stock having an aggregate value as of February 23, 1996
of approximately $15.5 million to the FTW Partnership. As the owner of the FTW
Venture Interest, the Company caused the contribution, together with AWS, of the
Fort Worth, Texas market to CS Wireless pursuant to the terms of the
Participation Agreement. See "Recent Events - The CS Wireless Transaction."
THE MINNEAPOLIS TRANSACTION. On February 23, 1996, the Company consummated
the acquisition of substantially all of the assets of the Minneapolis
Partnership pursuant to the Amended and Restated Asset Purchase Agreement dated
as of October 4, 1995 ("Minneapolis Agreement") by and between the Company and
Minneapolis Partnership. Pursuant to the terms of the Minneapolis Agreement,
the Company acquired from the Minneapolis Partnership substantially all of the
assets of the Minneapolis Partnership, consisting of a 75% membership interest
in and to American Wireless Systems of Minneapolis, L.L.C., a limited liability
company that owned and operated the wireless cable television system in
Minneapolis, Minnesota (the "LLC Interest"). Under the terms of the Minneapolis
Agreement, the Company issued approximately 810,000 shares of Company Common
Stock having an aggregate value as of February 23, 1996 of approximately $21.6
million to the Minneapolis Partnership. As the owner of the LLC Interest, the
Company caused the contribution, together with AWS, of the Minneapolis,
Minnesota market to CS Wireless pursuant to the terms of the Participation
Agreement. See "Recent Events - The CS Wireless Transaction."
THE CMAX MERGER. On February 23, 1996, the Company consummated the merger
of Heartland Merger Sub 2, Inc., a wholly owned subsidiary of the Company
("Merger Sub 2"), with and into CMAX pursuant to the Amended and Restated
Agreement and Plan of Merger dated as of September 11, 1995 ("CMAX Merger
Agreement") by and among the Company, Merger Sub 2 and CMAX. Pursuant to the
terms of the CMAX Merger Agreement, Merger Sub 2 was merged with and into CMAX
whereupon CMAX became a wholly owned subsidiary of the Company. Under the
terms of the CMAX Merger Agreement, the stockholders of CMAX are entitled to
receive, in the aggregate, approximately 2.88 million shares of Company Common
Stock having an aggregate exchange value as of February 23, 1996 of
approximately $80.8 million. The assets previously held by CMAX included
certain rights and properties held in connection with certain wireless cable
television markets throughout Texas and in Salt Lake City, Utah (collectively,
the "CMAX Assets"). With the exception of the San Antonio, Texas and Salt Lake
City, Utah markets, which the Company
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contributed to CS Wireless pursuant to the terms of the Participation Agreement
(see "Recent Events - The CS Wireless Transaction"), the CMAX Assets will
continue to be used and operated by the Company in connection with its wireless
cable television business.
THE TSC TRANSACTION. On February 23, 1996, the Company consummated the
acquisition of certain assets of TSC pursuant to the Amended and Restated Asset
Purchase Agreement dated as of October 19, 1995 ("TSC Agreement") by and among
the Company, TSC and Technivision, formerly a subsidiary of TSC that has been
merged with and into TSC. Pursuant to the terms of the TSC Agreement, the
Company acquired certain assets from TSC representing substantially all of the
assets formerly held by Technivision. Under the terms of the TSC Agreement, the
Company issued to TSC approximately 1,180,000 shares of Company Common Stock
having an aggregate value as of February 23, 1996 of approximately $31.6
million, of which approximately 189,000 shares having an aggregate value as of
February 23, 1996 of approximately $5.1 million are being held in an escrow
established pursuant to the terms of the TSC Agreement to satisfy certain
indemnification obligations and secure certain post-closing covenants of TSC to
the Company. The assets previously held by TSC included certain rights and
properties held in connection with wireless cable television markets in El Paso,
Texas, Corpus Christi, Texas and Dayton, Ohio (collectively, the "TSC Assets").
With the exception of the Dayton, Ohio market, which the Company contributed to
CS Wireless pursuant to the terms of the Participation Agreement (see "Recent
Events - The CS Wireless Transaction"), the TSC Assets will continue to be used
and operated by the Company in connection with its wireless cable television
business.
THE CS WIRELESS TRANSACTION
Effective February 23, 1996, immediately following the closing of the
Transactions, the Company, CAI and CS Wireless, a Delaware corporation and
wholly owned subsidiary of CAI, consummated the Participation Agreement pursuant
to which the Company (or certain of its subsidiaries) contributed or sold to CS
Wireless the wireless cable assets and all related liabilities of the following
wireless cable television markets (the "Heartland Contributed Assets"):
(1) Maysville, Missouri
(2) Sweet Springs, Missouri
(3) Grand Rapids/Moline, Michigan
(4) Bloom Center/Napoleon, Indiana
(5) Dallas, Texas
(6) Fort Worth, Texas
(7) San Antonio, Texas
(8) Dayton, Ohio
(9) Salt Lake City, Utah
(10) Minneapolis, Minnesota
Simultaneously with the contribution and sale of the Heartland Contributed
Assets to CS Wireless, CAI (or certain of its subsidiaries) contributed to CS
Wireless (directly or by contribution of the stock of its subsidiaries) the
wireless cable television assets associated with the following markets (the "CAI
Contributed Assets"):
(1) Stockton/Modesto, California
(2) Bakersfield, California
(3) Cleveland, Ohio
(4) Charlotte, North Carolina
The combination of the Heartland Contributed Assets and the CAI
Contributed Assets in CS Wireless (the "CS Transaction") created a company with
approximately 5.7 million line-of-sight households and approximately 58,500
subscribers, as of February 29, 1996.
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In connection with the CS Transaction, the Company (or its subsidiaries)
received (i) shares of CS Wireless common stock constituting approximately 40%
of the outstanding shares of CS Wireless (35.4% following dilution for certain
additional stock issuances) (ii) approximately $28.3 million in cash paid at the
closing (iii) a promissory note in the principal sum of $25 million payable on
or before nine (9) months from the closing and secured by proceeds of a
contemplated issuance by CS Wireless of senior discount notes (which note has
been prepaid) and (iv) a promissory note in the sum of $15,000,000 payable ten
(10) years from the closing and prepayable from asset sales and certain other
events. CAI and the Company are in the process of completing certain
post-closing net working capital calculations. Components of such calculations
include the relative accounts payable, accounts receivable and related working
capital assets of the contributed systems, the number of granted channels
represented and actually contributed to CS Wireless for each market, increase or
decrease in the number of subscribers in each contributed system from the number
of subscribers stated in the Participation Agreement and related factors.
Following the completion of these calculations, payments will be made to or by
the parties, depending upon such calculations.
Also, in connection with the closing of the CS Transaction, CAI, the
Company and CS Wireless have entered into a stockholders agreement (the
"Stockholders Agreement"). The Stockholders Agreement provides, among other
things, that the Company and CAI will vote their shares of CS Wireless common
stock in favor of a Board of Directors of CS Wireless having nine (9) members
consisting of (i) up to four members designated by CAI (provided that at least
one of whom may not be an affiliate of either CAI or the Company); (ii) up to
three members designated by the Company (provided at least one of whom may not
be an affiliate of either CAI or the Company); (iii) the Chief Executive Officer
of CS Wireless; and (iv) the Chief Operating Officer of CS Wireless. The
Stockholders Agreement and CS Wireless' bylaws further provide that certain
major transactions will require the affirmative approval of at least 70% (or
seven of nine) of the directors of CS Wireless.
SERIES C SENIOR NOTE OFFERING
On March 28, 1996, the Company consummated the private placement of $15
million principal amount 13% Senior C Senior Note due 2003 (the "Series C Senior
Notes"). The Company placed approximately $1.9 million of the $15.9 million net
proceeds from the sale of the Series C Senior Notes into an escrow account,
representing funds sufficient to pay interest on the Series C Notes from April
15, 1996 through April 14, 1997. In connection with the issuance of the Series
C Senior Notes, the Company agreed, among other things, to file within 180 days
of the issue date a registration statement with the Commission with respect to
an offer to exchange new notes registered under the Securities Act of 1933 for
the Series C Senior Notes, which new notes will be identical in all respects
with the Series C Senior Notes, except that the new notes will not contain terms
with respect to transfer restrictions, and to cause such registration statement
to become effective within 270 days of the issue date.
USE OF PROCEEDS
Assuming that all of the Warrants are exercised, the Company will receive
proceeds of approximately $11,715,000 before deducting expenses payable by the
Company estimated at $45,040. The net proceeds to the Company from the sale of
any Shares upon exercise of the Warrants will be used for working capital and
other general corporate purposes.
DESCRIPTION OF WARRANTS AND PLAN OF DISTRIBUTION
The Shares offered hereby are being offered by the Company to holders of
Warrants. Such Shares will be offered directly by the Company, without the use
of an underwriter or placement agent. The Warrants entitle the holders thereof
to purchase Shares at an exercise price of $19.525 per Share, subject to
adjustment under certain circumstances, payable in cash or by certified or
official bank check. The warrants expire on
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April 26, 2000. A Warrant can be exercised by surrendering the certificate
representing the Warrant (the "Warrant Certificate") to the Warrant Agent
accompanied by payment of the exercise price for each Share as to which the
Warrant is being exercised. The Company will pay all documentary stamp taxes
attributable to the issue of the Shares issuable upon the exercise of Warrants;
PROVIDED, HOWEVER, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue of
any Warrant Certificates or any certificates for Shares issued upon the exercise
of the Warrants in a name other than that of the holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid. A certificate or certificates representing
the Shares purchased will be issued by the Company following the time of
exercise, together with a new Warrant Certificate if less than all of the Shares
covered by the Warrant Certificate are being purchased. The date of exercise of
any Warrant will be the date the Warrant Certificate is duly presented to the
Warrant Agent accompanied by payment of the exercise price.
The Warrant Agreement provides for adjustment of the exercise price and
the number of shares of Common Stock purchasable upon exercise of the Warrants
to protect the Warrant holders against dilution in certain events, including
stock dividends, distributions of the Company Common Stock, stock splits,
reorganizations, reclassifications, subdivisions and combinations of Common
Stock, the merger, consolidation or disposition of all or substantially all of
the assets of the Company, or the distribution pro rata to all holders of Common
Stock of assets or debt securities.
The Company and the Warrant Agent may from time to time supplement or
amend the Warrant Agreement or the provisions of the Warrant Certificates
without the approval of any holders of the Warrants in order to cure any
ambiguity, to correct or supplement any provision contained therein that may be
defective or inconsistent with the other provisions therein, or to make any
other provisions in regard to matters or questions arising thereunder that are
not inconsistent with the provisions of the Warrant Certificates and do not
adversely affect the interest of the Warrant holders.
The Company is not required to issue any Warrant Certificate evidencing a
fraction of a Warrant or to issue fractions of Shares of Common Stock on the
exercise of the Warrants. If any fraction (calculated to the nearest one-
hundredth) of a Share of Common Stock would otherwise be issuable on the
exercise of any Warrant, the Company will purchase such fraction for an amount
in cash equal to the current value of such fraction. By accepting a Warrant
Certificate, the holder thereof has waived any right to receive a Warrant
Certificate evidencing any fraction of a Warrant or to receive any fractional
share of Common Stock upon exercise of a Warrant.
The Warrant holders as such are not entitled to vote, receive dividends or
exercise any of the rights of holders of Shares of Common Stock for any purpose
until such Warrants have been duly exercised and payment of the purchase price
has been made.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain Federal income tax
considerations relevant to the ownership, exercise and disposition of the
Warrants, but does not purport to be a complete analysis of all potential tax
effects. The discussion is based upon the Code, Treasury Regulations, Internal
Revenue Service ("IRS") rulings and pronouncements and judicial decisions now in
effect, all of which are subject to change at any time by legislative, judicial
or administrative action. Any such changes may be applied retroactively in a
manner that could adversely affect a holder of the Warrants. The following
discussion assumes that holders will hold the Warrants as capital assets.
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The Company has not sought and will not seek any rulings from the IRS with
respect to the positions of the Company discussed below. There can be no
assurance that the IRS will not take a different position concerning the tax
consequences described herein or that any such position would not be sustained.
The tax treatment of a holder of Warrants may vary depending on his or its
particular situation or status. This summary does not address the tax
consequences to taxpayers who are subject to special rules such as insurance
companies, tax-exempt organizations, financial institutions, broker-dealers or
foreign entities, or aspects of Federal income taxation that may be relevant to
a particular holder based upon such holder's particular tax situation. In
addition, the description does not consider the effect of any applicable
foreign, state, local or other tax laws.
EACH HOLDER SHOULD CONSULT HIS OR ITS OWN TAX ADVISER AS TO THE PARTICULAR
TAX CONSEQUENCES TO HIM OR IT OF HOLDING, EXERCISING AND DISPOSING OF THE
WARRANTS, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN
TAX LAWS.
EXERCISE
No gain or loss will be recognized for Federal income tax purposes by
holders of the Warrants upon the exercise thereof in exchange for Shares (except
to the extent of cash, if any, received in lieu of the issuance of fractional
shares of Common Stock). A holder's tax basis in the Shares will equal the sum
of the adjusted tax basis in the Warrants plus the exercise price paid on the
exercise thereof. The holding period of the Shares received on the exercise of
the Warrants will not include the period during which the Warrants were held by
such holder. If any cash is received in lieu of fractional shares, the holder
will recognize gain or loss, and the character and the amount of such gain or
loss will be determined as if the holder had received such fractional shares and
then immediately sold them for cash.
SALE OF WARRANTS
The sale of a Warrant ordinarily will result in the recognition of gain or
loss to the holder for Federal income tax purposes in an amount equal to the
difference between the amount realized on such sale or exchange and the holder's
tax basis in the Warrant. Such gain or loss will be capital gain or loss,
provided the Shares would have been a capital asset in the hands of the Warrant
holder had the Warrant been exercised, and will be long-term capital gain or
loss with respect to Warrants held for more than one year.
Similarly, gain or loss will generally be recognized upon a sale of the
Shares received upon exercise of a Warrant in an amount equal to the difference
between the amount realized on the transfer and the holder's adjusted tax basis
in the Shares. Such gain or loss will be capital gain or loss, provided the
Shares are held as a capital asset, and will be long-term capital gain or loss
with respect to Shares with a more than one-year holding period.
LAPSE
If the Warrants lapse without exercise, the holder will recognize a
capital loss (assuming the sale or exchange of the Warrants by the holder would
have given rise to capital gain or loss) equal to the holder's tax basis in the
Warrants. Any such capital loss would be long-term if the holding period for
the Warrants exceeds one year.
ADJUSTMENTS
The conversion ratio and exercise price of the Warrants are subject to
adjustments under certain circumstances. Under Section 305 of the Code and the
Treasury Regulations issued thereunder, holders of the Warrants will be treated
as having received a constructive distribution, resulting in ordinary income
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(subject to a possible dividends-received deduction in the case of corporate
holders) to the extent of the Company's current and/or accumulated earnings and
profits, if, and to the extent that, certain adjustments in the conversion ratio
and exercise price that may occur in limited circumstances, increase the
proportionate interest of a holder of a Warrant in the earnings and profits of
the Company. Thus, under certain circumstances that may or may not occur, such
adjustment may be treated as taxable distributions to holders of Warrants
without regard to whether such holders receive any cash or other property.
THE DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE
IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO A WARRANT
HOLDER'S PARTICULAR TAX SITUATION. WARRANT HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF WARRANTS, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
EXPERTS
The consolidated financial statements and schedule of Heartland Wireless
Communications, Inc. as of December 31, 1995 and 1994, and for each of the years
in the three-year period ended December 31, 1995, have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing. The report of KPMG Peat Marwick LLP refers to a change
in 1995 by the Company in the method of accounting for the direct costs and
installation fees related to subscriber installations.
The financial statements of Technivision, Inc. as of May 31, 1995 and
1994, and for each of the years in the three- year period ended May 31, 1995,
have been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP
contains an explanatory paragraph that states that Technivision, Inc.'s
recurring losses from operations and excess of current liabilities over current
assets raise substantial doubt about the entity's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
The balance sheets of Cross Country Division as of December 31, 1993 and
1994, and the related statements of operations and division equity and cash
flows for the year ended December 31, 1993, the period from January 1, 1994 to
August 18, 1994 and the period from August 19, 1994 to December 31, 1994 have
been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP
contains an explanatory paragraph that refers to a business combination in 1994
accounted for as a purchase involving assets comprising a portion of Cross
Country Division. As a result of the acquisition, financial information of
Cross Country Division for periods after August 18, 1994 is presented on a
different cost basis than that for periods before August 18, 1994 and,
therefore, such information is not comparable.
The consolidated balance sheets as of June 30, 1994 and 1995 and the
consolidated statements of operations, stockholders' equity and cash flows of
CableMaxx, Inc. for the period December 18, 1992 to June 30, 1993 and the fiscal
years ended June 30, 1994 and 1995, and the consolidated statements of
operations and cash flows of Supreme Cable Co., Inc. and its subsidiaries (the
"Predecessor") for the period commencing July 1, 1992 to December 17, 1992,
incorporated by reference in this Prospectus have been audited by Coopers &
Lybrand L.L.P., independent certified public accountants, as indicated in their
report with respect thereto, which includes an explanatory paragraph which
states that specified circumstances raise substantial doubt about
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CableMaxx, Inc.'s ability to continue as a going concern, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing.
The financial statements of American Wireless Systems, Inc. incorporated
by reference in this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving said report.
Reference is made to said report which includes an explanatory paragraph that
describes factors raising substantial doubt about the Company's ability to
continue as a going concern.
The consolidated financial statements of Fort Worth Wireless Cable T.V.
Associates incorporated by reference in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said report.
Reference is made to said report which includes an explanatory paragraph that
describes factors raising substantial doubt about the Company's ability to
continue as a going concern.
The consolidated financial statements of Wireless Cable TV Associates #38
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said report. Reference is made to
said report which includes an explanatory paragraph that describes factors
rasing substantial doubt about the Company's ability to continue as a going
concern.
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon for the
Company by O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, 41st Floor,
New York, New York 10112.
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INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee . . . . . . . . . . . . . . . . . . . . . $ 4,040
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . $12,000
Legal Fees and Expenses. . . . . . . . . . . . . . . . . . . . $25,000
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . $ 4,000
-------
Total $45,040
-------
-------
All fees and expenses other than the SEC registration fee are estimated.
The expenses listed above will be paid by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law (the
"DGCL"), Article VI of the Registrant's Restated Certificate of Incorporation
(the "Certificate of Incorporation") eliminates the liability of the
Registrant's directors to the Registrant or its stockholders, except for
liabilities related to breach of duty of loyalty, actions not in good faith and
certain other liabilities.
Section 145 of the DGCL provides for indemnification by the Registrant of
its directors and officers. In addition, Article IX, Section 1 of the
Registrant's Restated By-Laws requires the Registrant to indemnify any current
or former director or officer to the fullest extent permitted by the DGCL. In
addition, the Registrant has entered into indemnity agreements with its
directors, which obligate the Registrant to indemnify such directors to the
fullest extent permitted by the DGCL. The Registrant has also obtained
officers' and directors' liability insurance which insures against liabilities
that officers and directors of the Registrant may incur in such capacities.
ITEM 16. LIST OF EXHIBITS
(a) Exhibits
2.1 Letter Agreement regarding formation of the Registrant (filed as Exhibit
2.1 to the Registrant's Registration Statement on Form S-1, File No.
33-74244 (the "Form S-1"), and incorporated herein by reference)
2.2 Supplement to Letter Agreement regarding formation of the Registrant
(filed as Exhibit 2.2 to the Form S-1 and incorporated herein by
reference)
2.3 Asset Purchase Agreement among RuralVision Joint Venture, RuralVision
Central, Inc. and RuralVision South, Inc. (filed as Exhibit 2.3 to the
Registrant's Registration Statement on Form S-1, File No. 33-84408 (the
"November Form S-1") and incorporated herein by reference)
2.4 Supplemental Agreement to the Asset Purchase Agreement among RuralVision
Joint Venture, RuralVision Central, Inc. and RuralVision South, Inc.
(filed as Exhibit 2.4 to the November Form S-1 and incorporated herein
by reference)
2.5 Closing Agreement amending the Supplemental Agreement among RuralVision
Joint Venture, RuralVision Central, Inc. and RuralVision South, Inc.
(filed as Exhibit 2.5 to the November Form S-1 and incorporated herein
by reference)
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2.6 Asset Purchase Agreement between RuralVision Joint Venture and Cable
Equity Partners, Inc. (filed as Exhibit 2.6 to the November Form S-1 and
incorporated herein by reference)
2.7 Letter Agreement amending Asset Purchase Agreement between RuralVision
Joint Venture and Cable Equity Partners, Inc. (filed as Exhibit 2.7 to
the November Form S-1 and incorporated herein by reference)
2.8 Letter Agreement between the Registrant and Cross Country Wireless, Inc.
(filed as Exhibit 2.8 to the November Form S-1 and incorporated herein
by reference)
2.9 Letter Agreement between the Registrant and Cable Equity Partners, Inc.
(filed as Exhibit 2.9 to the Registrant's Registration Statement on Form
S-4, File No. 33-87076 (the "February 1995 Form S-4") and incorporated
herein by reference)
2.10 Lease Purchase Agreement between the Registrant and Choice Television of
Iowa, L.C. (filed as Exhibit 2.10 to the February 1995 Form S-4 and
incorporated herein by reference)
2.11 Asset Purchase Agreement between the Registrant and RuralVision Joint
Venture (filed as Exhibit 2.11 to the Form 8-K Current Report dated as
of December 1, 1994 and filed with the Commission on December 14, 1994
(the "Form 8-K"), and incorporated herein by reference)
2.12 Agreement for Purchase and Sales of Assets between the Registrant and
REC Services, Inc. (filed as Exhibit 2.12 to the February 1995 Form S-4
and incorporated herein by reference)
2.13 Letter Agreement among the Registrant, United States Wireless Cable,
Inc. and United States Wireless Cable Systems, Inc. (filed as Exhibit
2.13 to the February 1995 Form S-4 and incorporated herein by reference)
2.14 Letter Agreement among the Registrant, Cross Country Wireless, Inc. and
RuralVision Joint Venture (filed as Exhibit 2.14 to the February 1995
Form S-4 and incorporated herein by reference)
2.15 Extension Agreement among the Registrant, Cross Country Wireless, Inc.,
Cross Country Wireless Cable West, L.P., RuralVision Joint Venture,
RuralVision Central, Inc., RuralVision South, Inc. and Selling
Shareholders of RuralVision Central, Inc. and RuralVision South, Inc.
(filed as Exhibit 2.15 to the February 1995 Form S-4 and incorporated
herein by reference)
2.16 Note Modification Agreement among the Registrant, Cross Country
Wireless, Inc., Cross Country Wireless Cable West, L.P., RuralVision
Joint Venture, RuralVision Central, Inc., RuralVision South, Inc., the
Selling Shareholders of RuralVision Central, Inc. and RuralVision South,
Inc., the Larry D. Hudson Trust and Jerri Hudson Bell (filed as Exhibit
2.16 to the February 1995 Form S-4 and incorporated herein by reference)
2.17 Asset Purchase Agreement between Heartland Wireless Paducah, Inc. and
Cross Country Wireless, Inc. (filed as Exhibit 2.17 to the February 1995
Form S-4 and incorporated herein by reference)
2.18 First Amendment to Joint Venture Agreement between the Registrant and
Cross Country Wireless, Inc. (filed as Exhibit 2.18 to the February 1995
Form S-4 and incorporated herein by reference)
2.19 Venture Distribution Agreement between the Registrant and RuralVision
Joint Venture (filed as Exhibit 2.19 to the February 1995 Form S-4 and
incorporated herein by reference)
II-2
<PAGE>
2.20 Stock Purchase Agreement between Wireless Communications, Inc. and
Robert R. Story (filed as Exhibit 2.20 to the Registrant's Registration
Statement on Form S-4, File No. 33-65357, (the "January 1996 Form S-4")
and incorporated herein by reference)
2.21 Asset Purchase Agreement between United States Wireless Systems, Inc.
and Robert R. Story, Inc. (filed as Exhibit 2.21 to the January 1996
Form S-4 and incorporated herein by reference)
2.22 Amended and Restated Agreement and Plan of Merger dated as of September
11, 1995 between American Wireless Systems, Inc., Heartland Merger Sub,
Inc. and the Registrant (filed as Exhibit 2.22 to the January 1996 Form
S-4 and incorporated herein by reference)
2.23 Amended and Restated Asset Purchase Agreement dated as of October 4,
1995 between Fort Worth Wireless Cable T.V. Associates and the
Registrant (filed as Exhibit 2.23 to the January 1996 Form S-4 and
incorporated herein by reference)
2.24 Amended and Restated Asset Purchase Agreement dated as of October 4,
1995 between Wireless Cable TV Associates #38 and the Registrant (filed
as Exhibit 2.24 to the January 1996 Form S-4 and incorporated herein by
reference)
2.25 Amended and Restated Agreement and Plan of Merger dated as of September
11, 1995 between CableMaxx, Inc., Heartland Merger Sub 2, Inc. and the
Registrant (filed as Exhibit 2.25 to the January 1996 Form S-4 and
incorporated herein by reference)
2.26 Amended and Restated Asset Purchase Agreement dated as of October 19,
1995, between Three Sixty Corp., Technivision, Inc. and the Registrant
(filed as Exhibit 2.26 to the January 1996 Form S-4 and incorporated
herein by reference)
2.27 Participation Agreement dated as of December 12, 1995, by and among
Registrant, CAS Wireless Systems, Inc. and CS Wireless Systems, Inc.
(the "Participation Agreement") (filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated December 12, 1995 and
incorporated herein by reference)
2.28 Amendment No. 1 to Participation Agreement dated February 22, 1996
(filed as Exhibit 2.7 to the Registrant's Current Report on Form 8-K
dated February 23, 1996 and incorporated herein by reference)
5* Opinion of O'Sullivan Graev & Karabell, LLP (including the consent of
such firm) regarding legality of securities being offered
23.1* Consent of O'Sullivan Graev & Karabell, LLP (included as part of its
opinion filed as Exhibit 5 hereto)
23.2* Consent of KPMG Peat Marwick LLP, independent certified public
accountants (Heartland Wireless Communications, Inc.)
23.3* Consent of KPMG Peat Marwick LLP, independent certified public
accountants (Technivision, Inc.)
23.4* Consent of Arthur Andersen LLP, independent certified public accountants
(American Wireless Systems, Inc., Wireless Cable TV Associates #38, and
Fort Worth Wireless Cable T.V. Associates)
23.5* Consent of Coopers & Lybrand LLP, independent certified public
accountants (CableMaxx, Inc.)
II-3
<PAGE>
23.6* Consent of KPMG Peat Marwick, LLP, independent certified public
accountants (Cross Country Division)
24* Powers of Attorney (included on page II-6)
- ------------------
* Filed herewith.
ITEM 17. UNDERTAKINGS
(a) Rule 415 Offering. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement.
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the Registration Statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the Registrant pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post- effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) Filings incorporating subsequent Exchange Act documents by reference.
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration
II-4
<PAGE>
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.
(c) Request for acceleration of effective date. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the Company's Certificate of Incorporation, Bylaws or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(i) Rule 430A. The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on the 26th day of April,
1996.
HEARTLAND WIRELESS
COMMUNICATIONS, INC.
By: /s/ John R. Bailey
---------------------------------
John R. Bailey
Senior Vice President-Finance,
Chief Financial Officer, Treasurer and
Secretary (Principal Financial Officer)
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.
II-6
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 26th day of April, 1996, by the
following persons in the capacities indicated:
SIGNATURES TITLE
---------- -----
/s/ J. R. Holland, Jr. Chairman of the Board and Director
- ----------------------------
J. R. Holland, Jr.
/s/ L. Allen Wheeler Vice Chairman of the Board and Director
- ----------------------------
L. Allen Wheeler
/s/ David E. Webb President, Chief Executive Officer and
- ---------------------------- Director (Principal Executive Officer)
David E. Webb
/s/ John R. Bailey Senior Vice President-Finance, Chief
- ---------------------------- Financial Officer, Treasurer and Secretary
John R. Bailey (Principal Financial Officer)
/s/ David D. Hagey Vice President, Controller and Assistant
- ---------------------------- Secretary (Principal Accounting Officer)
David D. Hagey
/s/ Dennis M. O'Rourke Director
- ----------------------------
Dennis M. O'Rourke
/s/ John A. Sprague Director
- -----------------------------
John A. Sprague
/s/ Wes W. Watkins Director
- -----------------------------
Wes W. Watkins
/s/ Alvin H. Lane, Jr. Director
- ------------------------------
Alvin H. Lane, Jr.
II-7
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Letter Agreement regarding formation of the Registrant (filed as
Exhibit 2.1 to the Registrant's Registration Statement on Form
S-1, File No. 33-74244 (the "Form S-1"), and incorporated herein
by reference)
2.2 Supplement to Letter Agreement regarding formation of the
Registrant (filed as Exhibit 2.2 to the Form S-1 and
incorporated herein by reference)
2.3 Asset Purchase Agreement among RuralVision Joint Venture,
RuralVision Central, Inc. and RuralVision South, Inc. (filed as
Exhibit 2.3 to the Registrant's Registration Statement on Form
S-1, File No. 33-84408 (the "November Form S-1") and
incorporated herein by reference)
2.4 Supplemental Agreement to the Asset Purchase Agreement among
RuralVision Joint Venture, RuralVision Central, Inc. and
RuralVision South, Inc. (filed as Exhibit 2.4 to the November
Form S-1 and incorporated herein by reference)
2.5 Closing Agreement amending the Supplemental Agreement among
RuralVision Joint Venture, RuralVision Central, Inc. and
RuralVision South, Inc. (filed as Exhibit 2.5 to the November
Form S-1 and incorporated herein by reference)
2.6 Asset Purchase Agreement between RuralVision Joint Venture and
Cable Equity Partners, Inc. (filed as Exhibit 2.6 to the
November Form S-1 and incorporated herein by reference)
2.7 Letter Agreement amending Asset Purchase Agreement between
RuralVision Joint Venture and Cable Equity Partners, Inc. (filed
as Exhibit 2.7 to the November Form S-1 and incorporated herein
by reference)
2.8 Letter Agreement between the Registrant and Cross Country
Wireless, Inc. (filed as Exhibit 2.8 to the November Form S-1
and incorporated herein by reference)
2.9 Letter Agreement between the Registrant and Cable Equity
Partners, Inc. (filed as Exhibit 2.9 to the Registrant's
Registration Statement on Form S-4, File No. 33-87076 (the
"February 1995 Form S-4") and incorporated herein by reference)
2.10 Lease Purchase Agreement between the Registrant and Choice
Television of Iowa, L.C. (filed as Exhibit 2.10 to the February
1995 Form S-4 and incorporated herein by reference)
2.11 Asset Purchase Agreement between the Registrant and RuralVision
Joint Venture (filed as Exhibit 2.11 to the Form 8-K Current
Report dated as of December 1, 1994 and filed with the
Commission on December 14, 1994 (the "Form 8-K"), and
incorporated herein by reference)
2.12 Agreement for Purchase and Sales of Assets between the
Registrant and REC Services, Inc. (filed as Exhibit 2.12 to the
February 1995 Form S-4 and incorporated herein by reference)
2.13 Letter Agreement among the Registrant, United States Wireless
Cable, Inc. and United States Wireless Cable Systems, Inc.
(filed as Exhibit 2.13 to the February 1995 Form S-4 and
incorporated herein by reference)
<PAGE>
2.14 Letter Agreement among the Registrant, Cross Country Wireless,
Inc. and RuralVision Joint Venture (filed as Exhibit 2.14 to the
February 1995 Form S-4 and incorporated herein by reference)
2.15 Extension Agreement among the Registrant, Cross Country
Wireless, Inc., Cross Country Wireless Cable West, L.P.,
RuralVision Joint Venture, RuralVision Central, Inc.,
RuralVision South, Inc. and Selling Shareholders of RuralVision
Central, Inc. and RuralVision South, Inc. (filed as Exhibit 2.15
to the February 1995 Form S-4 and incorporated herein by
reference)
2.16 Note Modification Agreement among the Registrant, Cross Country
Wireless, Inc., Cross Country Wireless Cable West, L.P.,
RuralVision Joint Venture, RuralVision Central, Inc.,
RuralVision South, Inc., the Selling Shareholders of RuralVision
Central, Inc. and RuralVision South, Inc., the Larry D. Hudson
Trust and Jerri Hudson Bell (filed as Exhibit 2.16 to the
February 1995 Form S-4 and incorporated herein by reference)
2.17 Asset Purchase Agreement between Heartland Wireless Paducah,
Inc. and Cross Country Wireless, Inc. (filed as Exhibit 2.17 to
the February 1995 Form S-4 and incorporated herein by reference)
2.18 First Amendment to Joint Venture Agreement between the
Registrant and Cross Country Wireless, Inc. (filed as Exhibit
2.18 to the February 1995 Form S-4 and incorporated herein by
reference)
2.19 Venture Distribution Agreement between the Registrant and
RuralVision Joint Venture (filed as Exhibit 2.19 to the February
1995 Form S-4 and incorporated herein by reference)
2.20 Stock Purchase Agreement between Wireless Communications, Inc.
and Robert R. Story (filed as Exhibit 2.20 to the Registrant's
Registration Statement on Form S-4, File No. 33-65357, (the
"January 1996 Form S-4") and incorporated herein by reference)
2.21 Asset Purchase Agreement between United States Wireless Systems,
Inc. and Robert R. Story, Inc. (filed as Exhibit 2.21 to the
January 1996 Form S-4 and incorporated herein by reference)
2.22 Amended and Restated Agreement and Plan of Merger dated as of
September 11, 1995 between American Wireless Systems, Inc.,
Heartland Merger Sub, Inc. and the Registrant (filed as Exhibit
2.22 to the January 1996 Form S-4 and incorporated herein by
reference)
2.23 Amended and Restated Asset Purchase Agreement dated as of
October 4, 1995 between Fort Worth Wireless Cable T.V.
Associates and the Registrant (filed as Exhibit 2.23 to the
January 1996 Form S-4 and incorporated herein by reference)
2.24 Amended and Restated Asset Purchase Agreement dated as of
October 4, 1995 between Wireless Cable TV Associates #38 and the
Registrant (filed as Exhibit 2.24 to the January 1996 Form S-4
and incorporated herein by reference)
2.25 Amended and Restated Agreement and Plan of Merger dated as of
September 11, 1995 between CableMaxx, Inc., Heartland Merger Sub
2, Inc. and the Registrant (filed as Exhibit 2.25 to the January
1996 Form S-4 and incorporated herein by reference)
2.26 Amended and Restated Asset Purchase Agreement dated as of
October 19, 1995, between Three Sixty Corp., Technivision, Inc.
and the Registrant (filed as Exhibit to the January 1996 Form
S-4 and incorporated herein by reference)
<PAGE>
2.27 Participation Agreement dated as of December 12, 1995, by and
among Registrant, CAS Wireless Systems, Inc. and CS Wireless
Systems, Inc. (the "Participation Agreement") (filed as Exhibit
2.1 to the Registrant's Current Report on Form 8-K dated
December 12, 1995 and incorporated herein by reference)
2.28 Amendment No. 1 to Participation Agreement dated February 22,
1996 (filed as Exhibit 2.7 to the Registrant's Current Report on
Form 8-K dated February 23, 1996 and incorporated herein by
reference)
5* Opinion of O'Sullivan Graev & Karabell, LLP (including the
consent of such firm) regarding legality of securities being
offered
23.1* Consent of O'Sullivan Graev & Karabell, LLP (included as part of
its opinion filed as Exhibit 5 hereto)
23.2* Consent of KPMG Peat Marwick LLP, independent certified public
accountants (Heartland Wireless Communications, Inc.)
23.3* Consent of KPMG Peat Marwick LLP, independent certified public
accountants (Technivision, Inc.)
23.4* Consent of Arthur Andersen LLP, independent certified public
accountants (American Wireless Systems, Inc., Wireless Cable TV
Associates #38, and Fort Worth Wireless Cable T.V. Associates)
23.5* Consent of Coopers & Lybrand LLP, independent certified public
accountants (CableMaxx, Inc.)
23.6* Consent of KPMG Peat Marwick, LLP, independent certified public
accountants (Cross Country Division)
24* Powers of Attorney (included on page II-6)
- -------------
* Filed herewith.
<PAGE>
[O'SULLIVAN GRAEV & KARABELL, LLP LETTERHEAD]
Exhibit 5
Heartland Wireless Communications, Inc.
903 North Bowser, Suite 140
Richardson, Texas 75081
HEARTLAND WIRELESS COMMUNICATIONS, INC.
600,000 SHARES OF COMMON STOCK, $.001 PAR VALUE
Dear Sirs:
We have acted as counsel for Heartland Wireless Communications, Inc.,
a Delaware corporation (the "Company"), in connection with the preparation and
filing of the Registration Statement of the Company on Form S-3 (File No.
33-____________)(the "Registration Statement") under the Securities Act of 1933,
as amended, relating to 600,000 shares (the "Shares") of Common Stock, $.001
par value (the "Common Stock"), of the Company.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of rendering
the opinions set forth below. As to certain questions of fact material to the
opinion contained herein, we have relied upon certificates or statements of
officers of the Company and certificates of public officials. In such
examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
authentic originals of all documents submitted to us as certified or
photostatic copies.
Based upon the foregoing, we are of the opinion as follows:
1. The Company is a validly existing corporation under the laws of
the State of Delaware.
2. The Shares have been duly authorized and, when issued and sold as
contemplated by the Registration Statement and the Warrant Agreement dated as
of April 26, 1995 between the Company and Bankers Trust Company, as warrant
agent, will be validly issued, fully paid and nonassessable.
We are admitted to the Bar of the State of New York and we express no
opinion as to the laws of any other jurisdiction other than the Delaware
General Corporation Law.
We know that we are referred to under the heading "Legal Matters" in
the Prospectus forming a part of the Registration Statement, and we hereby
consent to such use of our name in said Registration Statement as Exhibit 5
thereto.
Very truly yours,
/s/ O'Sullivan Graev & Karabell, LLP
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Heartland Wireless Communications, Inc.:
We consent to (a) the incorporation by reference herein of our reports dated
March 8, 1996, on the consolidated balance sheets of Heartland Wireless
Communications, Inc. as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1995, and the
related schedule, which reports are included in the December 31, 1995 annual
report on Form 10-K of Heartland Wireless Communications, Inc. and (b) the
reference to our firm under the heading "Experts" in the prospectus.
Our report relating to the consolidated financial statements of Heartland
Wireless Communications, Inc. refers to a change in 1995 in the method of
accounting for direct costs and installation fees related to subscriber
installations.
KPMG Peat Marwick LLP
Dallas, Texas
April 26, 1996
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Heartland Wireless Communications, Inc.:
We consent to (a) the incorporation by reference herein of our report dated
October 25, 1995, on the balance sheets of TechniVision, Inc. as of May 31, 1995
and 1994, and the related statements of operations, stockholders' deficit, and
cash flows for each of the years in the three-year period ended May 31, 1995,
which report is included in Form 8-K/A-2 of Heartland Wireless Communications,
Inc. to be 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.
KPMG Peat Marwick LLP
Dallas, Texas
April 26, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 23,
1996, included in Heartland Wireless Communications, Inc.'s current report on
Form 8-K/A-2 dated April 26, 1996 and to all references to our firm included
in or made part of this registration statement.
/s/ Arthur Andersen LLP
- -----------------------
Phoenix, Arizona,
April 26, 1996
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Form S-3 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
- -------------------------
Austin, Texas
April 26, 1996
<PAGE>
EXHIBIT 23.6
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 reports are included in the Form 8-K/A-2 of Heartland Wireless
Communications, Inc. to be 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 Cross Country Division contains
an explanatory paragraph that refers to a business combination in 1994 accounted
for as a purchase involving assets comprising a portion of Cross Country
Division. As a result of the acquisition, financial information of Cross Country
Division for periods after August 18, 1994 is presented on a different cost
basis than that for periods before August 18, 1994 and, therefore, such
information is not comparable.
KPMG Peat Marwick LLP
Dallas, Texas
April 26, 1996
