<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
--------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------- --------------
Commission file number 0-23694
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Nucentrix Broadband Networks, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 73-1435149
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
200 Chisholm Place, Suite 200, Plano, Texas 75075
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (972) 423-9494
------------------------------
Heartland Wireless Communications, Inc.
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Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report.
Indicate by check [X] whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Shares Outstanding
----- as of May 12, 1999
------------------
Common Stock, $.001 par value 10,000,000
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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES
(Formerly Heartland Wireless Communications, Inc.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- -----------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................ $ 27,590 $ 30,676
Restricted assets - investment in debt securities.................... 1,011 1,011
Subscriber receivables, net of allowance for doubtful accounts of
$366 in 1999 and $348 in 1998.................................. 1,210 1,560
Other receivables.................................................... 2,616 1,312
Prepaid expenses and other........................................... 1,504 1,563
---------- ----------
Total current assets..................................... 33,931 36,122
---------- ----------
Systems and equipment, net................................................. 59,513 61,037
License and leased license investment, net ................................ 78,088 79,703
Note and lease receivables................................................. 3,763 3,901
Other assets, net.......................................................... 5,222 5,269
---------- ----------
$ 180,517 $ 186,032
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities not subject to compromise:
Current liabilities:
Accounts payable and accrued expenses................................ $ 14,805 $ 11,915
Current portion of long-term debt.................................... 1,846 2,019
---------- ----------
Total current liabilities................................ 16,651 13,934
---------- ----------
Long-term debt, less current portion....................................... 13,855 14,258
Minority interest in subsidiaries.......................................... 149 149
Liabilities subject to compromise.......................................... 322,781 322,781
Stockholders' equity:
Common stock, $.001 par value; authorized 50,000,000 shares, issued
19,795,521 shares.................................................. 20 20
Additional paid-in capital........................................... 261,943 261,943
Accumulated deficit.................................................. (434,524) (426,695)
Treasury stock, 13,396 shares, at cost............................... (358) (358)
---------- ----------
Total stockholders' equity............................... (172,919) (165,090)
---------- ----------
Commitments and contingencies..............................................
$ 180,517 $ 186,032
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES
(Formerly Heartland Wireless Communications, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
---------------------
(UNAUDITED)
<S> <C> <C>
Revenues................................................... $ 18,086 $ 19,099
-------- ---------
Operating expenses:
Systems operations...................................... 8,599 9,315
Selling, general and administrative..................... 9,156 9,126
Depreciation and amortization........................... 5,953 11,300
-------- ---------
Total operating expenses.............................. 23,708 29,741
-------- ---------
Operating loss........................................ (5,622) (10,642)
-------- ---------
Other income (expense):
Interest income......................................... 423 816
Interest expense........................................ (321) (10,000)
Equity in losses of affiliates.......................... -- (5,376)
Other expense, net...................................... 2 --
-------- ---------
Total other income (expense).......................... 104 (14,560)
-------- ---------
Loss before reorganization costs...................... (5,518) (25,202)
Reorganization costs.................................... (2,311) --
-------- ---------
Net loss.................................... $ (7,829) $ (25,202)
======== =========
Net loss per common share - basic and diluted.............. $ (.40) $ (1.28)
======== =========
Weighted average shares outstanding - basic and diluted.... 19,782 19,683
-------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES
(Formerly Heartland Wireless Communications, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss.......................................................... $ (7,829) $(25,202)
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
Depreciation and amortization................................... 5,953 11,300
Debt accretion and debt issuance cost amortization.............. -- 1,506
Equity in losses of affiliates.................................. -- 5,376
Other........................................................... -- 14
Changes in assets and liabilities, net of acquisitions:
Restricted assets............................................. -- (120)
Subscriber and other receivables.............................. (954) 577
Prepaid expenses and other.................................... (158) (479)
Accounts payable, accrued expenses and other liabilities...... 2,890 8,564
--------- --------
Net cash provided by (used in) operating activities... (98) 1,536
--------- --------
Cash flows from investing activities:
Purchases of systems and equipment............................... (2,534) (3,024)
Expenditures for licenses and leased licenses.................... (16) --
Proceeds from note receivable.................................... 138 --
--------- --------
Net cash used in investing activities................ (2,412) (3,024)
--------- --------
Cash flows from financing activities:
Payments on short-term borrowings and notes payable.............. (241) (356)
Payments on long-term debt....................................... (335) --
--------- --------
Net cash used in financing activities................ (576) (356)
--------- --------
Net decrease in cash and cash equivalents........................... (3,086) (1,844)
Cash and cash equivalents at beginning of period.................... 30,676 42,821
--------- --------
Cash and cash equivalents at end of period.......................... $ 27,590 $ 40,977
========= ========
Cash paid for interest.............................................. $ 391 $ 1,875
========= ========
Cash paid for reorganization costs.................................. $ 422 --
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES
(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1999
(1) Description of Business
Nucentrix Broadband Networks, Inc. (the "Company"), formerly Heartland
Wireless Communications, Inc., provides wireless broadband network and
multichannel subscription television services using up to 196 megahertz
("MHz") of radio spectrum in the 2.1 gigahertz ("GHz") to 2.7 GHz range,
primarily in mid-size and small markets in the central United States. The
Company owns the basic trading area ("BTA") authorization, or otherwise
licenses or leases spectrum allocated by the Federal Communications
Commission ("FCC") as Multichannel Distribution Service ("MDS"),
Multichannel Multipoint Distribution Service ("MMDS") and Instructional
Television Fixed Service ("ITFS"), in 87 markets. This spectrum
collectively is commonly referred to as "MMDS" and, unless otherwise noted,
is referred to in this Form 10-Q as MMDS. The Company also leases 20 MHz of
Wireless Communications Service ("WCS") spectrum from CS Wireless Systems,
Inc. ("CS Wireless") in 19 markets. CS Wireless has agreed to transfer this
spectrum to the Company. The closing of this agreement is subject to
approval by the Federal Communications Commission ("FCC") and the execution
by CS Wireless and the Company of a comprehensive agreement on two-way
frequency coordination in adjacent markets.
Currently, the Company provides multichannel subscription television
service in 58 markets, including one market operated under a management
arrangement with CS Wireless, pending consummation of an agreement to
assign this market to the Company. The Company's offerings include up to
185 digital channels from DIRECTV, Inc. ("DIRECTV") and its distributors in
51 of the 58 markets, in combination with the Company's service or as a
stand-alone offering. The Company also provides two-way high-speed Internet
access services, through developmental FCC authorizations, primarily to
businesses and small offices/home offices ("SOHOs"). The Company currently
offers Internet access in Sherman/Denison, Texas and is constructing a
similar system in Austin, Texas. The Company, through national independent
contractors, also offers technical support, e-mail, Web design and hosting,
and domain name registration and maintenance in connection with its
high-speed Internet access service.
(2) Financial Restructuring
On December 4, 1998, the Company filed a voluntary, prenegotiated Plan of
Reorganization (the "Plan" or "Plan of Reorganization") under Chapter 11 of
the U.S. Bankruptcy Code ("Bankruptcy Code"), with the prepetition support
from holders of more than 70% in principal amount of the Company's 13% and
14% Senior Notes (the "Old Senior Notes"). The Plan was approved by all
classes of creditors voting on the Plan, and was confirmed by the United
States Bankruptcy Court for the District of Delaware on March 15, 1999. The
Company emerged from bankruptcy on April 1, 1999 (the "Effective Date").
Under the Plan, as of the Effective Date, all issued and outstanding common
stock, stock options and warrants (collectively, the "Old Common Stock")
were canceled, and the Company issued 10 million shares of new common
stock, par value $.001 per share ("New Common Stock") and agreed to issue
warrants ("Warrants") to purchase 1.1 million shares of New Common Stock at
a per share exercise price of $27.63, subject to adjustment in the event of
certain sales of stock or assets of the Company. Holders of the Old Senior
Notes and holders of the Company's 9% Convertible Notes ("Convertible
Notes") received 97% and 3% of the New Common Stock, respectively. The
holders of the Convertible Notes also received Warrants to purchase 825,000
shares of New Common Stock.
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Holders of Old Common Stock were granted the right to receive Warrants to
purchase 275,000 shares of New Common Stock, subject to certain pending
securities litigation claims as set forth in the Plan.
Accordingly, the Old Senior Notes and Convertible Notes are considered
eligible for compromise under the Plan and have been classified as
liabilities subject to compromise on the Company's Consolidated Balance
Sheet as of March 31, 1999 and December 31, 1998. As of December 4, 1998,
the Company discontinued the accrual of interest and amortization of
deferred debt issuance costs and discounts to notes payable related to
liabilities subject to compromise.
Liabilities subject to compromise are comprised of the following:
<TABLE>
<S> <C> <C>
Old 13% Notes: Principal Balance $ 115,000
Accrued Interest 16,943
Unamortized Discount (2,384)
Old 14% Notes: Principal Balance 125,000
Accrued Interest 11,083
Old Convertible Notes: Principal Balance and
Accreted Interest 57,139
----------
$ 322,781
==========
</TABLE>
Pursuant to the compromise of the Old Senior Notes and the issuance of New
Common Stock, certain tax attributes of the Company must be permanently
reduced. These reductions may be applied to one or more tax items,
including but not limited to pre-bankruptcy net operating loss
carryforwards, the tax basis of certain assets and the tax basis of
subsidiary stock ("Tax Attribute Reduction.") Management is currently
considering the impact of alternatives available to the Company in
performing this Tax Attribute Reduction, but has not yet concluded which
alternative it will select.
In addition to the permanent Tax Attribute Reduction previously described,
the Company must also limit the annual deduction of pre-bankruptcy net
operating losses and "built-in-deduction" to an amount no greater than the
fair market value of the Company immediately after the restructuring,
multiplied by the long term tax exempt rate. This annual limit is currently
estimated to be approximately $7.3 million.
At the present time management is unable to determine how much, if any,
pre-bankruptcy net operating losses will be available to offset
post-bankruptcy income. In the current quarter, the Company has continued
to experience losses and does not believe that the prospective Tax
Attribute Reduction will have a material impact on these financial
statements.
The Company adopted Fresh Start Reporting as of the April 1, 1999 Effective
Date of the Plan, in accordance with American Institute of Certified Public
Accountants Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code" ("SOP 90-7") . Fresh Start
Reporting results in a new reporting entity with assets and liabilities
adjusted to estimated fair value and beginning retained earnings set to
zero. Liabilities subject to compromise will also be adjusted to zero in
connection with their cancellation under the Plan. (See pro forma financial
information at Note 8).
(3) Liquidity and Capital Resources
The Company's Condensed Consolidated Financial Statements have been
presented on a going concern basis which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business.
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The Company anticipates that additional sources of capital will be required
to fully implement its long-term business strategy, which includes
expanding the use of its spectrum through the delivery of broadband network
services, subject to receipt of requisite regulatory approval from the FCC,
such as high-speed Internet access and Internet Protocol ("IP") telephony
services, as well as the acquisition of additional spectrum in other
medium-sized markets in the United States for such use. Accordingly, the
Company is evaluating and will continue to evaluate additional sources of
capital, including the sale or exchange of debt or equity securities,
borrowings under secured or unsecured loan arrangements and sales of
assets, including operating MMDS subscription television systems and
channel rights.
There can be no assurance that the Company will be able to obtain in a
timely manner and on terms satisfactory to the Company additional capital
that will be necessary to implement its business strategy. If the Company
is unable to obtain financing in a timely manner and on acceptable terms,
management has developed and intends to implement a plan that allows the
Company to continue to operate in the normal course of business at least
into 2000. More specifically, this plan would include delaying, reducing or
eliminating the launch of new broadband network systems (including
high-speed Internet systems), reducing or eliminating new video subscriber
installations and related marketing expenditures and reducing or
eliminating other discretionary expenditures.
(4) Principles of Consolidation
The Condensed Consolidated Financial Statements include the accounts of the
Company and its majority-owned subsidiaries. Significant intercompany
balances and transactions between the entities have been eliminated in
consolidation.
On the Effective Date of the Plan of Reorganization, the Company changed
its name from Heartland Wireless Communications, Inc. to Nucentrix
Broadband Networks, Inc. and restructured its business into four
wholly-owned subsidiaries: Nucentrix Internet Services, Inc., Nucentrix
Telecom Services, Inc., Nucentrix Spectrum Resources, Inc., and Heartland
Cable Television, Inc.
(5) Interim Financial Information
In the opinion of management, the accompanying unaudited condensed
consolidated financial information of the Company contains all adjustments,
consisting only of those of a recurring nature, necessary to present fairly
the Company's financial position as of March 31, 1999 and the results of
operations and cash flows for the three months ended March 31, 1999 and
1998. These results are not necessarily indicative of the results to be
expected for the full fiscal year. The accompanying financial statements
are for interim periods and should be read in conjunction with the audited
Consolidated Financial Statements of the Company for the year ended
December 31, 1998, included in the Company's Form 10-K for the year ended
December 31, 1998.
(6) Net Loss Per Common Share - Basic and Diluted
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share" in the fourth quarter of 1997 as required by this
statement. Accordingly, the Company has presented (1) basic loss per share,
computed on the basis of the weighted average number of common shares
outstanding during the year, and (2) diluted loss per share, computed on
the basis of the weighted average number of common shares and all dilutive
potential common shares outstanding during the year.
(7) Segment Reporting
In January 1998, the Company adopted Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"). SFAS 131 requires that public companies
report operating segments based upon how management allocates resources and
assesses performance. Based on
-7-
<PAGE> 8
the criteria outlined in SFAS No. 131, the Company is comprised of a single
reportable segment -- distribution of wireless multichannel video
programming. No additional disclosure is required by the Company to conform
to the requirements of SFAS No. 131.
(8) Commitments and Contingencies
The Company is a co-defendant in two securities actions (one of which is a
purported class action). In addition, 14 current and former directors,
officers and/or employees of the Company are defendants in a third
securities lawsuit, which also is a purported class action. These actions
allege, among other things, various violations of federal and state
securities laws.
The Company also is a party to three purported class action lawsuits
alleging, among other things, that the Company overcharged its customers
for administrative late fees.
The Company intends to vigorously defend the above matters. While it is not
feasible to predict or determine the final outcome of these proceedings or
to estimate the amounts or potential range of loss with respect to the
above-referenced matters, management believes that an adverse outcome with
respect to one or more of such proceedings, which exceeds or otherwise is
excluded from applicable insurance coverage, could have a material adverse
effect on the financial condition, results of operations and cash flows of
the Company.
The Company also is a party to other legal proceedings, a majority of which
are incidental to its business. In the opinion of management, and after
consideration for amounts recorded in the accompanying consolidated
financial statements, the ultimate effects of such other matters are not
expected to have a material adverse effect on the Company's consolidated
financial position or results of operations.
The Company has entered into a series of noncancellable agreements to
purchase entertainment programming for retransmission, which expire through
2000. The agreements generally require monthly payments based upon the
number of subscribers to the Company's systems, subject to certain
minimums.
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<PAGE> 9
(9) Pro Forma Financial Information (Unaudited)
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet as
of March 31, 1999 has been prepared to give effect to (1) the Plan of
Reorganization as if it had become effective on March 31, 1999, and (2) the
application of Fresh Start Reporting.
The pro forma adjustments are based upon available information and certain
adjustments that management believes are reasonable. In the opinion of
management, all adjustments have been made that are necessary to present
fairly the Pro Forma Information.
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(DOLLARS IN THOUSANDS )
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Current assets $ 33,931 33,931
Systems & equipment, net 59,513 (2,917) (B) 56,596
License and leased license investment, net 78,088 78,088
Note and lease receivables 3,763 3,763
Other assets, net (4,750) (A)
5,222 3,802 (B) 4,274
--------- --------- ---------
$ 180,517 $ (3,865) $ 176,652
========= ========= =========
Current liabilities $ 16,651 $ 16,651
Long-term debt, less current portion 13,855 13,855
Minority interest in subsidiaries 149 149
Liabilities subject to compromise 322,781 (322,781) (A) --
Stockholders' equity(deficit):
Old common stock 20 (20) (B) --
Additional paid-in capital 261,943 (261,943) (B) --
Accumulated deficit (434,524) 318,031 (A) --
116,493 (B)
Treasury stock - 13,396 shares at cost (358) 358 (B) --
New common stock -- 10 (B) 10
New additional paid-in capital -- 145,987 (B) 145,987
--------- --------- ---------
Total stockholders' equity (deficit) (172,919) 318,916 145,997
--------- --------- ---------
$ 180,517 $ (3,865) $ 176,652
========= ========= =========
</TABLE>
(A) Reflects the discharge of debt and write-off of related debt issuance
costs.
(B) Reflects the issuance of the Company's New Common Stock to the
holders of the Old Senior Notes and the Convertible Notes, and the
allocation of reorganization value to identifiable tangible and
intangible assets, based on the fair value of the assets and the
adjustment to eliminate the Company's Old Common Stock and to reset
beginning retained earnings of the Company to zero in accordance with
Fresh Start Reporting.
In connection with the Plan of Reorganization, which became effective
on April 1, 1999, the Company expects to record an extraordinary gain of
approximately $320 million in connection with the discharge of liabilities
subject to compromise.
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<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion and analysis should be read in conjunction with the
Company's condensed consolidated financial statements and notes thereto.
OVERVIEW
The Company provides wireless broadband network and multichannel
subscription television services using up to 196 MHz of radio spectrum in the
2.1 GHz to 2.7 GHz range of the radio spectrum, primarily in mid-size and small
markets in the central United States. To date, the Company's principal business
has been as a wireless multichannel video programming distributor ("wireless
MVPD"), using radio spectrum allocated by the FCC as MMDS, MDS and ITFS
spectrum. This spectrum collectively is commonly referred to as "MMDS" and,
unless otherwise noted, is referred to in this Form 10-Q as MMDS. The Company
also leases 20 MHz of WCS spectrum from CS Wireless in 19 markets. CS Wireless
has agreed to transfer this spectrum to the Company. The closing of this
agreement is subject to approval by the FCC and the execution by CS Wireless and
the Company of a comprehensive agreement on two-way frequency coordination in
adjacent markets.
As a wireless MVPD, the Company provides an average of 25 analog
channels of cable television and local broadcast network programming to 58
operating markets in the central United States, including one market operated
under a management arrangement with CS Wireless, pending consummation of an
agreement to assign this market to the Company. The Company also offers up to
185 channels of digital direct broadcast satellite ("DBS") programming from
DIRECTV and its distributors in 51 of its operating markets under cooperative
marketing agreements with DIRECTV. In addition to its 58 operating markets, the
Company owns the BTA authorization from the FCC, or otherwise has aggregated
MMDS channel rights in the 2.1 GHz to 2.7 GHz range, in 29 unconstructed
markets. At March 31, 1999, the Company provided wireless multichannel video
service to approximately 157,000 subscribers, including approximately 10,000
subscribers who received DIRECTV programming sold by the Company, either alone
or in combination with the Company's MMDS programming. The Company is the
largest wireless MVPD, in terms of subscribers, in the United States.
The Company also provides two-way high-speed wireless digital
communications services primarily to businesses and small home offices
("SOHOs"). The Company currently offers high-speed Internet access in
Sherman/Denison, Texas and is constructing a similar system in Austin, Texas.
The Company, through national independent contractors, also offers technical
support, e-mail, Web design and hosting and domain name registration and
maintenance in connection with its high-speed Internet access business.
The two-way services provided in Sherman and to be provided in Austin
currently are authorized on one MDS channel in each market under one-year
"developmental" authorizations from the FCC. FCC regulations prohibit the use of
such developmental authorizations for commercial purposes without specific
authorization from the FCC. The Company believes, however, that current FCC
policy will allow the Company to provide high-speed two-way services to up to
1,000 commercial subscribers in each of these markets. In connection with the
FCC's rules on MMDS two-way communications services that were adopted in
September 1998, the FCC has stated that it will announce a one-week "filing
window" for applications for two-way authorizations. The Company expects the FCC
to open this window in the third quarter of 1999, at which time the Company
intends to file two-way applications for a number of its markets, including
Sherman/Denison and Austin. All such applications must meet FCC interference
protection rules or contain the consent of co-channel and adjacent channel
licensees in the Company's markets and neighboring markets. All complete
applications that have not been opposed within 120 days after the close of the
filing window will be granted. Although the Company believes it will be able to
file for and receive two-way authorizations to replace its developmental
authorizations in Sherman and Austin, there can be no assurance that it will
receive such authorizations in these or other markets.
As used herein, "EBITDA" means earnings before interest, taxes,
depreciation and amortization. EBITDA is discussed because it is a widely
accepted financial indicator of a company's ability to service and/or incur
indebtedness.
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<PAGE> 11
However, EBITDA is not a financial measure determined under generally accepted
accounting principles and should not be considered as an alternative to net
income as a measure of operating results or to cash flows as a measure of funds
available for discretionary or other liquidity purposes. In addition, EBITDA as
presented by the Company is not necessarily consistent with the presentation of
EBITDA by other companies.
FORWARD LOOKING STATEMENTS
Certain statements in this report relating to the Company's operating
results, and plans and objectives of management for future operations, including
plans or objectives relating to the Company's business strategy and financing
needs, are forward looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended (the "1934 Act"). These statements
can be identified by the use of forward looking terminology such as "believes,"
"expects," "may," "intends," "will," "should," or "anticipates" or comparable
terminology or by discussions of strategy. Such statements are based on an
assessment of a variety of factors, contingencies and uncertainties deemed
relevant by management, including (i) the need for additional financing to fund
the Company's build-out and operation of additional wireless broadband systems
such as high-speed Internet access systems, (ii) the continued supply of
wireless broadband customer premise and transmission equipment for two-way
Internet, data and IP telephony services provided over MMDS spectrum, (iii) the
ability to obtain two-way authorizations by the FCC for Internet and other
wireless broadband services, (iv) business and economic conditions in the
Company's existing markets, and (v) competitive products and services, as well
as those matters discussed specifically elsewhere herein. As a result, the
actual results realized by the Company could differ materially from the
statements made herein. Investors are cautioned not to place undue reliance on
the forward looking statements made in this report.
FINANCIAL RESTRUCTURING
On December 4, 1998, the Company filed a voluntary, prenegotiated Plan
of Reorganization and Disclosure Statement ("Disclosure Statement") under
Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for the District
of Delaware (the "Bankruptcy Court"). The Plan was confirmed by the Bankruptcy
Court on March 15, 1999, and became effective on April 1, 1999.
Pursuant to the Plan of Reorganization, on the Effective Date the Old
Senior Notes, Convertible Notes and all outstanding shares of Old Common Stock
were canceled and (i) in exchange for the Old Senior Notes, the Company
distributed pro rata to the holders thereof 9.7 million shares of New Common
Stock and (ii) in exchange for the Convertible Notes, the Company distributed
pro rata to the holders thereof 300,000 shares of New Common Stock and Warrants
to acquire 825,000 shares of Common Stock at a per share exercise price of
$27.63, subject to adjustment to between $12.37 and $24.74 in the event of a
purchase of all of the Company's New Common Stock or assets for cash and other
consideration. The term of the Warrants is eight and one-half years from the
Effective Date. No additional shares of Common Stock were distributed by the
Company, and the Company currently has outstanding 10 million shares of Common
Stock.
The Company also is obligated under the Plan to issue (i) Warrants to
acquire an additional 275,000 shares of New Common Stock, and (ii) up to a
maximum of approximately 56,000 shares of New Common Stock to satisfy certain
miscellaneous unsecured claims that may be allowed by the Bankruptcy Court,
including claims related to contract disputes, lease rejection claims, tort
claims (except for personal injury or wrongful death claims) and indemnity
claims. The 275,000 Warrants will be allocated first to holders of litigation
claims arising from transactions in the Old Senior Notes, to the extent any such
claims are allowed by the Bankruptcy Court, second, to the extent any Warrants
remain, pro rata among holders of litigation claims arising from transactions in
equity securities of the Company, to the extent any such claims are allowed by
the Bankruptcy Court, and third, to the extent any Warrants remain, pro rata
among holders of Old Common Stock.
Also under the Plan, the Company's old employee and nonemployee
director stock option plans were terminated, and the Company adopted a new Share
Incentive Plan ("New Stock Option Plan"). The Company is authorized to grant
-11-
<PAGE> 12
awards for a total of 900,000 shares of New Common Stock under the New Stock
Option Plan. See "Managements' Discussion and Analysis of Financial Condition
and Results of Operations - Recent Events."
NAME CHANGE/BUSINESS UNIT RESTRUCTURING
On the Effective Date of the Plan, the Company changed its name to
Nucentrix Broadband Networks, Inc. and restructured its business into the
following four wholly-owned subsidiaries: Nucentrix Internet Services, Inc.
("Nucentrix Internet"), Nucentrix Telecom Services, Inc. ("Nucentrix Telecom"),
Nucentrix Spectrum Resources, Inc. ("Nucentrix Spectrum") and Heartland Cable
Television, Inc. ("Heartland Cable").
Nucentrix Internet operates the Company's retail high-speed Internet
access business. Nucentrix Telecom was formed to test, develop and operate
wireless broadband IP telephony services, including wireless local loop voice
services. Nucentrix Spectrum was formed to own the Company's MMDS spectrum
rights, including BTA licenses, MMDS channel licenses and leases, and WCS
spectrum rights, as well as the Company's wireless transmission facilities and
site leases. Heartland Cable operates the Company's existing subscription
television business, which will continue to operate under the name Heartland
Cable Television(TM).
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1998
Revenues; Subscribers. The Company's revenues consist of monthly fees
paid by multichannel video subscribers for basic programming, premium
programming, equipment rental and other miscellaneous fees. The Company's
revenues for the first quarter of 1999 were $18.1 million, compared to $19.1
million for the first quarter of 1998. At March 31, 1999, the Company had
approximately 157,000 subscribers, compared to approximately 175,000 subscribers
at March 31, 1998. Although the Company believes it continues to successfully
attract a higher quality of subscribers, the number of subscribers has declined
since the first quarter of 1998. However, during the same time period, average
monthly revenue per subscriber increased to $35.49 in the first quarter of 1999
from $33.47 in the same quarter last year, due to a greater percentage of
subscribers purchasing premium packages and pay-per-view services at higher
average subscription rates as lower priced packages are replaced with upgraded
offerings.
System Operations Expense. Systems operations expenses include
programming costs, channel lease payments, labor and overhead, costs of service
calls and churn, transmitter site and tower rentals and certain repairs and
maintenance expenditures. Programming costs (with the exception of minimum
payments) and channel lease payments (with the exception of certain fixed
payments) are variable expenses based on the number of subscribers. Systems
operations expense was $8.6 million for the first quarter of 1999, versus $9.3
million for the first quarter of 1998. As a percentage of revenues, systems
operations expense was 47.5% for the first quarter of 1999, compared to 48.8%
for the first quarter of 1998. The decrease in system operations expense was
primarily due to lower programming costs and lower service call and disconnect
expense as a result of fewer subscribers. In addition, average monthly churn
decreased to 2.9% in the first quarter of 1999 from 3.5% in the first quarter of
1998, and service call expense as a percentage of revenue decreased to 3.6% from
4.6% in the prior period.
Selling, General and Administrative (SG&A) Expense. SG&A expense for
the first quarter of 1999 increased to $9.2 million from $9.1 million during the
same period in 1998. As a percentage of revenues, SG&A was 50.6% in the first
quarter of 1999, compared with 47.8% for the first quarter of 1998, primarily
due to lower revenues in 1999 combined with increased expenditures for marketing
the Company's Internet services.
Depreciation and Amortization. Depreciation and amortization expense
includes depreciation of systems and equipment and amortization of license and
leased license investment. The Company's policy is to capitalize the excess of
direct costs of subscriber installations over installation fees. These direct
costs include reception materials and equipment on subscriber premises and
installation labor. These direct costs are capitalized as systems and equipment
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<PAGE> 13
in the accompanying condensed consolidated balance sheet. Depreciation and
amortization expense was $6.0 million for the first quarter of 1999, compared to
$11.3 million for the first quarter of 1998. The decrease in depreciation and
amortization expense over the periods presented was due to a write down of the
related assets to estimated fair market value during 1998, in accordance with
Statement of Financial Accounting Standards No. 121.
Operating Loss. The Company generated operating losses of $5.6 million
for the first quarter of 1999, compared to $10.6 million for the first quarter
of 1998. The improvement in operating loss was primarily due to lower
programming, service call and disconnect expense as well as lower depreciation
and amortization resulting from the write down of assets to fair market value in
1998. Consolidated EBITDA was $331,000 for the first quarter of 1999, versus
$658,000 for the first quarter of 1998. EBITDA decreased over the periods
presented due to lower revenues resulting from fewer subscribers, slightly
offset by lower programming costs.
Interest Income. Interest income was $423,000 during the first quarter
of 1999, versus $816,000 for the first quarter of 1998. The decrease in interest
income was due to higher interest earnings in the first quarter of 1998 on
larger escrowed balances segregated for the payment of interest on the old
Senior Notes and higher average cash bank balances.
Interest Expense. The Company incurred interest expense of $321,000
during the first quarter of 1999, compared to $10.0 million during the first
quarter of 1998. Interest expense decreased in 1999 because the Company
discontinued the accrual of interest and the amortization of deferred debt
issuance costs on its Old Senior Notes and Convertible Notes upon filing its
voluntary petition under Chapter 11 of the U.S. Bankruptcy Code on December 4,
1998.
Equity in Losses of Affiliates. During the quarter ended March 31,
1998, the Company owned approximately 20% of the outstanding common stock of
Wireless One, Inc. ("Wireless One") and approximately 36% of the outstanding
common stock of CS Wireless. The Company had equity in losses of affiliates of
$5.4 million for the first quarter of 1998 and zero during the first quarter of
1999. Losses recorded for Wireless One reduced the Company's investment balance
to zero in November 1997. The Company continued to record losses from CS
Wireless during the first quarter of 1998. During the second quarter of 1998,
the Company wrote off $6.8 million of its excess cost in CS Wireless and then
wrote off its remaining investment balance of $11.7 million during the third
quarter of 1998 based on losses incurred by CS Wireless. In December 1998, the
Company sold its 36% equity interest in CS Wireless to CAI Wireless Systems,
Inc. Accordingly, no losses from affiliates were recorded in 1999.
Reorganization Costs. During the first quarter of 1999, the Company
incurred $2.3 million in expenses related to its reorganization under Chapter
11. These costs were for financial and legal advisors, accountants and
administrative costs.
Net Loss. The Company has recorded net losses since inception. The
Company incurred net losses of $7.8 million, or $.40 per basic and diluted
common share, during the first quarter of 1999, compared to $25.2 million, or
$1.28 per basic and diluted common share during the first quarter of 1998.
BALANCE SHEET
Other Receivables. Other receivables increased from $1.3 million at
December 31, 1998 to $2.6 million at March 31, 1999. This increase included
receivables from Direct Satellite Service ("DSS") providers for various
contractual subsidies.
Current Liabilities. Accounts payable and accrued liabilities increased
by $2.9 million from December 31, 1998 to March 31, 1999, primarily due to
amounts accrued for reorganization costs and the timing of payments for DSS
equipment purchases used to provide DIRECTV DBS programming.
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<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The wireless broadband network business is capital-intensive. Since
inception, the Company has expended funds to lease or otherwise acquire MMDS
channel rights in various markets and systems in operation, to construct
operating systems and to finance initial system operating losses. The Company's
primary sources of capital have been from subscription fees, debt financing, the
sale of common stock and the sale of MMDS channel rights that were not part of
the Company's strategic plan. The growth of the Company's business will require
substantial investment in capital expenditures for the development and launch of
wireless broadband services such as high-speed Internet services and IP
telephony services. The recent approval by the FCC of flexible two-way use of
the Company's spectrum has made available new applications such as high-speed
two-way data and fixed wireless local-loop telephony services that the Company
believes are necessary to maximize the value of its broadband spectrum, but that
will require additional capital resources to develop and implement.
The Company estimates that a launch of a new wireless broadband network
system providing high-speed Internet access and multichannel video services in a
typical market will involve an initial expenditure of approximately $850,000 to
$1.0 million for transmission equipment and tower construction, depending upon
the type and sophistication of the equipment and whether the Company is required
to construct a transmission tower. The Company believes that incremental headend
costs to launch an Internet service business in one of the Company's existing
systems will be $200,000 to $400,000. In addition, incremental costs of
approximately $465 per Single Family Unit ("SFU") MMDS video subscriber, $343
per DIRECTV-MMDS combination video subscriber and $1,100 per medium-sized
business Internet subscriber (up to 20 PCs), which may be partially offset by
installation and/or other up-front charges, for equipment, labor, overhead
charges and direct commission are required. Other launch costs include the cost
of securing adequate space for marketing and warehouse facilities, as well as
costs related to employees. As a result of these costs, operating losses are
likely to be incurred by a system during the start-up period.
Cash used in operations was $98,000 during the first quarter of 1999
compared to cash provided by operations of $1.5 million during the first quarter
of 1998. This was primarily due to lower revenues resulting from fewer
subscribers, slightly offset by lower programming costs.
Cash used in investing activities decreased to $2.4 million during the
first quarter of 1999 from $3.0 million during the same period in 1998. This
decrease was primarily due to lower capital expenditures resulting from fewer
subscriber installs in the first quarter of 1999, combined with tower equipment
purchases in 1998 related to channel construction in certain markets.
Net cash used in financing activities was $576,000 during the first
quarter of 1999 and $356,000 in the first quarter of 1998. This increase was due
to the commencement of quarterly principal payments on the Company's $15.1
million in debt incurred in connection with the acquisition of BTAs, beginning
in the fourth quarter of 1998.
At May 3, 1999, the Company had approximately $24.0 million of
unrestricted cash and cash equivalents and $1.0 million in restricted cash
representing collateral securing various outstanding letters of credit to
certain vendors of the Company.
FUTURE CASH REQUIREMENTS
During 1999, the Company intends to implement a new business plan,
subject to obtaining timely financing on acceptable terms and conditions and
subject to the emergence of one or more national manufacturers of wireless
broadband customer premise and transmission equipment for two-way Internet, data
and IP telephony services provided over MMDS spectrum. This plan consists of (1)
launching high-speed Internet access service to small and mid-size businesses in
at least 20 markets by the end of 2001, (2) increasing the Company's geographic
scope for wireless broadband network service by acquisitions or business
combinations, (3) pursuing financing alternatives to allow the Company to
develop and launch high-speed Internet access and other wireless broadband
network services in 1999 and beyond and (4) moderately growing the subscriber
base in the Company's multichannel video business which, coupled
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<PAGE> 15
with anticipated improvements in operating costs, would provide revenues
sufficient to cover substantially all operating costs of the multichannel video
business (excluding certain unallocated corporate overhead) while the Company
develops and expands other wireless broadband businesses.
Despite the Company's efforts to conserve capital and the improvement
in its EBITDA since the second half of 1997 (excluding restructuring costs), the
Company does not expect to generate sufficient cash flow to fully implement its
business strategy without raising additional capital. Accordingly, the growth of
the Company's revenue base and the implementation of its business strategy is
subject to and dependent upon obtaining additional capital on terms and
conditions acceptable to the Company and in a timely manner. Options for
obtaining such capital include the sale or exchange of debt or equity
securities, borrowings under secured or unsecured loan arrangements and sales of
assets including MMDS subscription systems and channel rights.
There can be no assurance that the Company will be able to obtain
capital in a timely manner and on terms satisfactory to the Company that will be
necessary to implement its business strategy and grow the Company's revenue
base. If the Company is unable to obtain financing in a timely manner and on
acceptable terms, management has developed and intends to implement a plan that
would allow the Company to continue operating in the normal course of business
at least into 2000. More specifically, this plan would include delaying,
reducing or eliminating the launch of new wireless broadband network systems
(including high-speed Internet access systems), reducing or eliminating new
video subscriber installations and related marketing expenditures and reducing
or eliminating other discretionary expenditures.
Pursuant to the compromise of the Old Senior Notes and the issuance of
New Common Stock, certain tax attributes of the Company must be permanently
reduced. These reductions may be applied to one or more tax items, including but
not limited to pre-bankruptcy net operating loss carryforwards, the tax basis of
certain assets and the tax basis of subsidiary stock. Management is currently
considering the impact of alternatives available to the Company in performing
this Tax Attribute Reduction, but has not yet concluded which alternative it
will select.
In addition to the permanent Tax Attribute Reduction previously
described, the Company must also limit the annual deduction of pre-bankruptcy
net operating losses and "built-in-deduction" to an amount no greater than the
fair market value of the Company immediately after the restructuring, multiplied
by the long term tax exempt rate. This annual limit is currently estimated to be
approximately $7.3 million.
At the present time management is unable to determine how much, if any,
pre-bankruptcy net operating losses will be available to offset post-bankruptcy
income. In the current quarter, the Company has continued to experience losses
and does not believe that prospective Tax Attribute Reduction will have a
material impact on these financial statements.
The Company adopted Fresh Start Reporting as of the April 1, 1999
Effective Date of the Plan, in accordance with SOP 90-7. Fresh Start Reporting
results in a new reporting entity with assets and liabilities adjusted estimated
to fair value and beginning retained earnings set to zero. Liabilities subject
to compromise will also be adjusted to zero in connection with their
cancellation under the Plan.
CHANGES IN METHOD FOR REPORTING SUBSCRIBERS
Periodically, the Company may implement price increases or create new
program offerings that upgrade its basic program price structure. Upon such
occurrence, the Company also may update its methodology for reporting
subscribers in multiple dwelling units ("MDUs") who are billed in bulk to the
MDU owner. These "bulk" MDU subscribers are converted to single family unit
("SFU") subscribers for reporting purposes using an equivalent basic unit
("EBU") rate that corresponds to the Company's most utilized current pricing
tier for basic programming for SFU subscribers. This rate is divided into the
total revenue from bulk subscribers to get an "equivalent" number of subscribers
for reporting purposes. Consequently, when this rate is increased, the number of
equivalent subscribers will change and normally decrease. The following EBU rate
revisions occurred during the periods presented herein.
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<PAGE> 16
Effective March 31, 1998, the Company's EBU rate was increased to
$24.99, resulting in a decrease of approximately 4,000 reported video
subscribers. On November 1, 1998, in conjunction with the Company's first
system-wide price increase, the EBU rate was increased to $26.99, resulting in a
decrease of approximately 600 reported video subscribers.
THE YEAR 2000
The Company has established an employee team to identify and correct
Year 2000 compliance issues. Information technology ("IT") systems with
non-compliant code are expected to be identified and modified or replaced with
systems that are Year 2000 compliant. Similar actions are being taken with
respect to non-IT systems, primarily systems embedded in office, communications
and other facilities. Progress of the team's efforts is being monitored by
senior management and periodically will be reported to the Company's Board of
Directors.
The Company recognizes the need to remediate and test its
mission-critical systems to ensure that individually, the systems are Year 2000
compliant and that collectively, they inter-operate in a manner that ensures
Year 2000 functionality.
The Company has evaluated its systems and identified the following
systems and functions as mission critical:
o Headend equipment/addressable systems (related to receipt and
transmission of video programming)
o Billing and collection systems
o Telecommunications systems in customer service facility
Headend Equipment/Addressable Systems. The Company has completed the
evaluation of these systems and has identified certain non-compliant features
which are being remediated through software and hardware upgrades, including all
hardware related to satellite relays which are date sensitive. Upgrade
installation and testing are expected to be substantially complete by August 31,
1999.
Billing and Collection Systems. The Company has verified Year 2000
compliance with its billing and collections software vendor and will perform
additional testing as needed, which the Company expects to be substantially
complete by August 31, 1999.
Telecommunications System in Customer Care Facility. The Company is
upgrading its telecommunications system software to be Year 2000 compliant and
has obtained documentation from the software supplier verifying Year 2000
compliance. Testing in this area is expected to be substantially complete by
July 31, 1999.
The Company's most likely worst case scenario is a temporary inability
to produce and send invoices and transmit video programming. The Company's Year
2000 efforts are ongoing and its overall plan, as well as the consideration of
contingency plans, will continue to evolve as new information becomes available.
Management does not believe the costs related to the Year 2000
compliance project will be material to its financial position or results of
operations. Currently, the Company has budgeted approximately $185,000 for Year
2000 compliance initiatives during 1999. Costs and the date by which the Company
plans to complete Year 2000 modifications are based on management's current best
estimates, which were derived using assumptions of future events including the
continuing availability of certain resources, third party compliance plans and
other factors. Unanticipated failures by critical vendors, as well as the
failure by the Company to execute its own identification and remediation
efforts, could have a material adverse effect on the success and cost of the
project, as well as its estimated completion date. As a result, there can be no
assurance that these forward-looking results will be achieved, and the actual
cost and vendor compliance could differ materially from these estimates.
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<PAGE> 17
INFLATION
Management does not believe that inflation has had or is likely to have
any significant impact on the Company's operations. Management believes that the
Company will be able to increase subscriber rates, if necessary, to keep pace
with inflationary increases in costs.
RECENTLY ISSUED ACCOUNTING PRINCIPLES
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activity" ("SFAS 133"), which requires that all
derivatives be recognized in the statement of financial position as either
assets or liabilities and measured at fair value. In addition, all hedging
relationships must be designated, reassessed and documented pursuant to the
provisions of SFAS No. 133. SFAS 133 is effective for fiscal years beginning
after June 15, 1999. The adoption of SFAS 133 will not have an impact on the
Company's results of operations, financial position or cash flow.
RECENT EVENTS
Effective April 1, 1999 and in accordance with the Company's Plan of
Reorganization, the Company adopted a new 1999 First Amended and Restated Share
Incentive Plan (the "New Stock Option Plan"). Under the New Stock Option Plan, a
total of 900,000 shares of New Common Stock have been reserved for issuance. As
of the Effective Date, Options to acquire 807,000 shares of New Common Stock had
been granted to management, other key employees and non-employee directors of
the Company.
The exercise price of Options granted as of the Effective Date is
$12.50 per share of New Common Stock. Options granted after the Effective Date
will be exercisable at a minimum of 100% of the fair market value of the New
Common Stock on the date of grant. Options will be exercisable at such time(s)
and subject to such terms and conditions as shall be determined by the
Compensation Committee. The Options will immediately vest and become exercisable
upon a "change in control" of the Company, as defined in the New Stock Option
Plan.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not exposed to material future earnings or cash flow
fluctuations from changes in interest rates on long-term debt. The Company's
long-term debt not subject to compromise, which consists primarily of $15.1
million relating to the acquisition of certain BTAs in March 1996, bears a fixed
interest rate. To date, the Company has not entered into any derivative
financial instruments to manage interest rate risk and is currently not
evaluating the future use of any such financial instruments.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On December 4, 1998, the Company filed a Plan of Reorganization under
Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the
District of Delaware. On March 15, 1999, the Bankruptcy Court confirmed the
Plan, and the Company emerged from Chapter 11 on April 1, 1999. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Financial Restructuring."
The Company is a co-defendant in two securities actions, one of which
is a purported class action. In addition, 14 current and former directors,
officers and/or employees of the Company are defendants in a third securities
lawsuit, which also is a purported class action. These actions allege, among
other things, various violations of federal and state securities laws. These
actions were filed before the Effective Date of the Company's Plan of
Reorganization.
The Company also is a party to three purported class action lawsuits
alleging, among other things, that the Company overcharged its customers for
administrative late fees.
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<PAGE> 18
The Company intends to vigorously defend the above matters. While it is
not feasible to predict or determine the final outcome of these proceedings or
to estimate the amounts or potential range of loss with respect to the
above-referenced matters, management believes that an adverse outcome with
respect to one or more of such proceedings, which exceeds or otherwise is
excluded from applicable insurance coverage, could have a material adverse
effect on the financial condition, results of operations and cash flows of the
Company.
For additional information on the above-referenced legal proceedings,
see "Item 3 - Legal Proceedings" in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
The Company also is a party to other legal proceedings, a majority of
which are incidental to its business. In the opinion of management, and after
consideration for amounts recorded in the accompanying consolidated financial
statements, the ultimate effects of such other matters are not expected to have
a material adverse effect on the Company's consolidated financial position or
results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
As discussed above in this Form 10-Q, the Company emerged from a
proceeding under Chapter 11 of the U.S. Bankruptcy Code on April 1, 1999. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Financial Restructuring."
Pursuant to the Plan, the Company amended and restated its Certificate
of Incorporation (the "Restated Certificate") to provide for the authorization
of 30 million shares of New Common Stock and 15 million shares of preferred
stock. In connection with the Plan, on the Effective Date all Old Common Stock
was canceled and the Company issued 10 million shares of New Common Stock to
holders of Old Senior Notes and Convertible Notes. The Company may issue
additional shares of New Common Stock pursuant to the exercise of Warrants or
awards under the Company's New Stock Option Plan, or in satisfaction of Class 3
Claims under the Company's Plan of Reorganization. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Financial
Restructuring." The rights of holders of New Common Stock under the Restated
Certificate are not materially different from the rights of holders of Old
Common Stock under the Company's prior Certificate of Incorporation.
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<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) EXHIBITS
<S> <C>
*3.1 Amended and Restated Certificate of Incorporation of
Heartland Wireless Communications, Inc. (filed with the
Secretary of State for State of Delaware on April 1,
1999).
*3.2 Restated Bylaws of Nucentrix Broadband Networks, Inc.
(effective April 1, 1999).
*10.1 Nucentrix Broadband Networks, Inc. Warrant Agreement
dated as of April 1, 1999.
*27 Financial Data Schedule
</TABLE>
- ---------------------
*Filed herewith.
(b) REPORTS ON FORM 8-K
During the first quarter of the fiscal year ended March 31, 1999, the
Company filed the following reports on Form 8-K:
(1) Current Report on Form 8-K dated January 19, 1999 with respect
to the entry of an order by the U.S. Bankruptcy Court for the
District of Delaware approving the Company's Disclosure
Statement, form of ballots and proposed solicitation and
tabulation procedures, fixing the date, time and place for a
hearing to consider confirmation of the Company's Plan of
Reorganization and prescribing the form and manner of notice
thereof. This Form 8-K included the final form of the
Company's Plan of Reorganization and Disclosure Statement.
(2) Current Report on Form 8-K dated March 15, 1999 with respect
to the confirmation of the Company's Plan of Reorganization
filed under Chapter 11 of the U.S. Bankruptcy Code, and a
summary of the material features of the Plan of
Reorganization.
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<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 14, 1999 NUCENTRIX BROADBAND NETWORKS, INC.
By: /s/ Carroll D. McHenry
-------------------------------------------------
Carroll D. McHenry
Chairman of the Board, President and Chief
Executive Officer (Principal Executive Officer)
By: /s/ Marjean Henderson
-------------------------------------------------
Marjean Henderson
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
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<PAGE> 21
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of Heartland
Wireless Communications, Inc. (filed with the Secretary of
State for State of Delaware on April 1, 1999).
3.2 Restated Bylaws of Nucentrix Broadband Networks, Inc.
(effective April 1, 1999).
10.1 Nucentrix Broadband Networks, Inc. Warrant Agreement dated as
of April 1, 1999.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HEARTLAND WIRELESS COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
Heartland Wireless Communications, Inc., a corporation
incorporated and existing under the laws of the State of Delaware (the
"Corporation"), hereby certifies as follows:
A. The name of the Corporation is Heartland Wireless
Communications, Inc. The original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
October 5, 1993, and restated on January 18, 1994.
B. This Amended and Restated Certificate of Incorporation has
been duly adopted in accordance with Sections 242, 245 and 303 of the General
Corporation Law of the State of Delaware and, pursuant to such provisions, this
Amended and Restated Certificate of Incorporation amends and restates the
Certificate of Incorporation of the Corporation. Provision for the making of
this Amended and Restated Certificate of Incorporation is contained in an
order, entered March 15, 1999, of the United States Bankruptcy Court for the
District of Delaware, having jurisdiction over a proceeding for the
reorganization of the Corporation commenced under Chapter 11 of the United
States Bankruptcy Code.
C. The Certificate of Incorporation of the Corporation, as
amended and restated hereby, shall, upon the filing hereof with the Secretary
of State of the State of Delaware, read in its entirety as follows:
FIRST: The name of the Corporation is Nucentrix Broadband
Networks, Inc.
SECOND: The registered office of the Corporation in the State
of Delaware is located at Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of the registered agent of
the Corporation at such address is The Corporation Trust Company.
<PAGE> 2
THIRD: The purpose for which the Corporation is organized is
to engage in any and all lawful acts and activity for which corporations may be
organized under the General Corporation Law of the State of Delaware (the
"Delaware General Corporation Law"). The Corporation will have perpetual
existence.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is Forty-Five Million (45,000,000)
shares of capital stock, classified as (i) Fifteen Million (15,000,000) shares
of preferred stock, par value $0.001 per share ("Preferred Stock"), and (ii)
Thirty Million (30,000,000) shares of common stock, par value $0.001 per share
("Common Stock"). No non-voting equity securities of the Corporation shall be
issued by the Corporation.
The designations and the powers, preferences, rights,
qualifications, limitations, and restrictions of the Preferred Stock and Common
Stock are as follows:
1. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time in
one or more classes or series, the shares of each class or series to have such
designations and powers, preferences, and rights, and qualifications,
limitations, and restrictions thereof, as are stated and expressed herein and
in the resolution or resolutions providing for the issue of such class or
series adopted by the board of directors of the Corporation as hereafter
prescribed.
(b) Authority is hereby expressly granted to and vested in
the board of directors of the Corporation to authorize the issuance of the
Preferred Stock from time to time in one or more classes or series, and with
respect to each class or series of the Preferred Stock, to fix and state by the
resolution or resolutions from time to time adopted providing for the issuance
thereof the following:
(i) whether or not the class or series is to have
voting rights, full, special, or limited, or is to be without
voting rights, and whether or not such class or series is to
be entitled to vote as a separate class either alone or
together with the holders of one or more other classes or
series of stock;
(ii) the number of shares to constitute the class or
series and the designations thereof;
(iii) the preferences, and relative, participating,
optional, or other special rights, if any, and the
qualifications, limitations, or restrictions thereof, if any,
with respect to any class or series;
2
<PAGE> 3
(iv) whether or not the shares of any class or
series shall be redeemable at the option of the Corporation
or the holders thereof or upon the happening of any specified
event, and, if redeemable, the redemption price or prices
(which may be payable in the form of cash, notes, securities,
or other property), and the time or times at which, and the
terms and conditions upon which, such shares shall be
redeemable and the manner of redemption;
(v) whether or not the shares of a class or series
shall be subject to the operation of retirement or sinking
funds to be applied to the purchase or redemption of such
shares for retirement, and, if such retirement or sinking
fund or funds are to be established, the annual amount
thereof, and the terms and provisions relative to the
operation thereof;
(vi) the dividend rate, whether dividends are
payable in cash, stock of the Corporation, or other property,
the conditions upon which and the times when such dividends
are payable, the preference to or the relation to the payment
of dividends payable on any other class or classes or series
of stock, whether or not such dividends shall be cumulative
or noncumulative, and if cumulative, the date or dates from
which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts
thereof which the holders of any class or series thereof
shall be entitled to receive upon the voluntary or
involuntary dissolution of, or upon any distribution of the
assets of, the Corporation;
(viii) whether or not the shares of any class or
series, at the option of the Corporation or the holder
thereof or upon the happening of any specified event, shall
be convertible into or exchangeable for, the shares of any
other class or classes or of any other series of the same or
any other class or classes of stock, securities, or other
property of the Corporation and the conversion price or
prices or ratio or ratios or the rate or rates at which such
exchange may be made, with such adjustments, if any, as shall
be stated and expressed or provided for in such resolution or
resolutions; and
(ix) such other special rights and protective
provisions with respect to any class or series as may to the
board of directors of the Corporation seem advisable.
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<PAGE> 4
(c) The shares of each class or series of the Preferred Stock
may vary from the shares of any other class or series thereof in any or all of
the foregoing respects. The board of directors of the Corporation may increase
the number of shares of the Preferred Stock designated for any existing class
or series by a resolution adding to such class or series authorized and
unissued shares of the Preferred Stock not designated for any other class or
series. The board of directors of the Corporation may decrease the number of
shares of the Preferred Stock designated for any existing class or series by a
resolution subtracting from such class or series authorized and unissued shares
of the Preferred Stock designated for such existing class or series, and the
shares so subtracted shall become authorized, unissued, and undesignated shares
of the Preferred Stock.
2. Provisions Relating to the Common Stock.
(a) Each share of Common Stock of the Corporation shall have
identical rights and privileges in every respect. The holders of shares of
Common Stock shall be entitled to vote upon all matters submitted to a vote of
the stockholders of the Corporation and shall be entitled to one vote for each
share of Common Stock held.
(b) Subject to the prior rights and preferences, if any,
applicable to shares of the Preferred Stock or any series thereof, the holders
of shares of the Common Stock shall be entitled to receive such dividends
(payable in cash, stock, or otherwise) as may be declared thereon by the board
of directors at any time and from time to time out of any funds of the
Corporation legally available therefor.
(c) In the event of any voluntary or involuntary liquidation,
dissolution, or winding-up of the Corporation, after distribution in full of
the preferential amounts, if any, to be distributed to the holders of shares of
the Preferred Stock or any series thereof, the holders of shares of the Common
Stock shall be entitled to receive all of the remaining assets of the
Corporation available for distribution to its stockholders, ratably in
proportion to the number of shares of the Common Stock held by them. A
liquidation, dissolution, or winding-up of the Corporation, as such terms are
used in this Paragraph (c), shall not be deemed to be occasioned by or to
include any consolidation or merger of the Corporation with or into any other
corporation or corporations or other entity or a sale, lease, exchange, or
conveyance of all or a part of the assets of the Corporation.
3. General.
(a) Subject to the foregoing provisions of this Certificate
of Incorporation, the Corporation may issue shares of its Preferred Stock and
Common Stock from time to time for such consideration (not less than the par
value thereof) as may be fixed by the board of directors of the Corporation,
which is expressly authorized to fix the same in its absolute and uncontrolled
discretion subject to the foregoing conditions. Shares so issued
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<PAGE> 5
for which the consideration shall have been paid or delivered to the
Corporation shall be deemed fully paid stock and shall not be liable to any
further call or assessment thereon, and the holders of such shares shall not be
liable for any further payments in respect of such shares.
(b) The Corporation shall have authority to create and issue
rights and options entitling their holders to purchase shares of the
Corporation's capital stock of any class or series or other securities of the
Corporation, and such rights and options shall be evidenced by instrument(s)
approved by the board of directors of the Corporation. The board of directors
of the Corporation shall be empowered to set the exercise price, duration,
times for exercise, and other terms of such options or rights; provided,
however, that the consideration to be received for any shares of capital stock
subject thereto shall not be less than the par value thereof.
FIFTH: The Corporation expressly elects not to be governed by
Section 203 of the Delaware General Corporation Law.
SIXTH: Subject to the rights of holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
the number of directors shall be from time to time fixed in the manner
prescribed in the bylaws of the Corporation. Qualifications for the directors,
if any, shall be set out in the bylaws.
SEVENTH: Directors of the Corporation need not be elected by
written ballot unless the bylaws of the Corporation otherwise provide.
EIGHTH: The directors of the Corporation shall have the power
to adopt, amend, and repeal the bylaws of the Corporation.
NINTH: No contract or transaction between the Corporation and
one or more of its directors, officers, or stockholders or between the
Corporation and any person (as used herein "person" means other corporation,
partnership, association, firm, trust, joint venture, political subdivision, or
instrumentality) or other organization in which one or more of its directors,
officers, or stockholders are directors, officers, or stockholders, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee which authorizes the contract or transaction, or solely
because his, her, or their votes are counted for such purpose, if: (i) the
material facts as to his or her relationship or interest and as to the contract
or transaction are disclosed or are known to the board of directors or the
committee, and the board of directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts as to his or her relationship or interest
and as to the contract or
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<PAGE> 6
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved, or ratified by the
board of directors, a committee thereof, or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at
a meeting of the board of directors or of a committee which authorizes the
contract or transaction.
TENTH: The Corporation shall indemnify any person who was,
is, or is threatened to be made a party to a proceeding (as hereinafter
defined) by reason of the fact that he or she (i) is or was a director or
officer of the Corporation or (ii) while a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent, or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or other
enterprise, to the fullest extent permitted under the Delaware General
Corporation Law, as the same exists or may hereafter be amended. Such right
shall be a contract right and as such shall run to the benefit of any director
or officer who is elected and accepts the position of director or officer of
the Corporation or elects to continue to serve as a director or officer of the
Corporation while this Article Tenth is in effect. Any repeal or amendment of
this Article Tenth shall be prospective only and shall not limit the rights of
any such director or officer or the obligations of the Corporation with respect
to any claim arising from or related to the services of such director or
officer in any of the foregoing capacities prior to any such repeal or
amendment to this Article Tenth. Such right shall include the right to be paid
by the Corporation expenses incurred in defending any such proceeding in
advance of its final disposition to the maximum extent permitted under the
Delaware General Corporation Law, as the same exists or may hereafter be
amended. If a claim for indemnification or advancement of expenses hereunder is
not paid in full by the Corporation within sixty (60) days after a written
claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, the claimant shall also be
entitled to be paid the expenses of prosecuting such claim. It shall be a
defense to any such action that such indemnification or advancement of costs of
defense are not permitted under the Delaware General Corporation Law, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its board of directors or any committee thereof,
independent legal counsel, or stockholders) to have made its determination
prior to the commencement of such action that indemnification of, or
advancement of costs of defense to, the claimant is permissible in the
circumstances nor an actual determination by the Corporation (including its
board of directors or any committee thereof, independent legal counsel, or
stockholders) that such indemnification or advancement is not permissible shall
be a defense to the action or
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<PAGE> 7
create a presumption that such indemnification or advancement is not
permissible. In the event of the death of any person having a right of
indemnification under the foregoing provisions, such right shall inure to the
benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, bylaw,
resolution of stockholders or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or
agent of the Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such an action,
suit, or proceeding, and any inquiry or investigation that could lead to such
an action, suit, or proceeding.
ELEVENTH: A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit. Any repeal or amendment of
this Article Eleventh by the stockholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation on the personal
liability of a director of the Corporation arising from an act or omission
occurring prior to the time of such repeal or amendment. In addition to the
circumstances in which a director of the Corporation is not personally liable
as set forth in the foregoing provisions of this Article Eleventh, a director
shall not be liable to the Corporation or its stockholders to such further
extent as permitted by any law hereafter enacted, including without limitation
any subsequent amendment to the Delaware General Corporation Law.
I, the undersigned duly elected, qualified and acting officer
of the Corporation, do make, file, and record this Amended and Restated
Certificate of Incorporation as of this 1st day of April, 1999.
/s/ J. Curtis Henderson
-----------------------
J. Curtis Henderson
Secretary
<PAGE> 1
EXHIBIT 3.2
- -------------------------------------------------------------------------------
NUCENTRIX BROADBAND NETWORKS, INC.
(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
----------------------------------
RESTATED BYLAWS
----------------------------------
EFFECTIVE APRIL 1, 1999
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I Officers..............................................................................................1
SECTION 1. Registered Office...........................................................................1
SECTION 2. Principal and Other Offices.................................................................1
ARTICLE II Meeting of Stockholders; Stockholders' Consent in Lieu of Meeting....................................1
SECTION 1. Annual Meetings.............................................................................1
SECTION 2. Special Meetings............................................................................1
SECTION 3. Notice of Meetings..........................................................................1
SECTION 4. Quorum......................................................................................2
SECTION 5. Organization................................................................................2
SECTION 6. Order of Business...........................................................................3
SECTION 7. Voting......................................................................................3
SECTION 8. Inspection...................................................................................4
SECTION 9. List of Stockholders.........................................................................4
SECTION 10. Stockholders' Consent in Lieu of Meeting...................................................4
ARTICLE III Board of Directors..................................................................................4
SECTION 1. General Powers...............................................................................4
SECTION 2. Number and Term of Office....................................................................4
SECTION 3. Election of Directors.......................................................................5
SECTION 4. Resignation, Removal and Vacancies...........................................................5
SECTION 5. Meetings....................................................................................5
SECTION 6. Directors' Consent in Lieu of Meeting........................................................6
SECTION 7. Action by Means of Conference Telephone or Similar Communications Equipment..................6
SECTION 8. Committees...................................................................................6
ARTICLE IV Officers.............................................................................................7
SECTION 1. Executive Officers...........................................................................7
SECTION 2. Authority and Duties.........................................................................7
SECTION 3. Other Officers...............................................................................7
SECTION 4. Term of Office, Resignation and Removal......................................................7
SECTION 5. Vacancies....................................................................................7
SECTION 6. The Chairman.................................................................................8
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 7. The President................................................................................8
SECTION 8. The Secretary................................................................................8
SECTION 9. The Treasurer................................................................................8
ARTICLE V Contracts, Checks, Drafts, Bank Accounts, Etc.........................................................9
SECTION 1. Execution of Documents.......................................................................9
SECTION 2. Deposits.....................................................................................9
SECTION 3. Proxies with Respect to Stock or Other Securities of Other Corporations......................9
ARTICLE VI Shares and Their Transfer, Fixing Record Date........................................................9
SECTION 1. Certificates for Shares......................................................................9
SECTION 2. Record......................................................................................10
SECTION 3. Transfer and Registration of Stock.........................................................10
SECTION 4. Addresses of Stockholders...................................................................10
SECTION 5. Lost, Destroyed and Mutilated Certificates..................................................10
SECTION 6. Regulations.................................................................................10
SECTION 7. Fixing Date for Determination of Stockholders of Record.....................................11
ARTICLE VII Seal...............................................................................................12
ARTICLE VIII Fiscal Year.......................................................................................12
ARTICLE IX Indemnification and Insurance.......................................................................12
SECTION 1. Indemnification.............................................................................12
SECTION 2. Insurance...................................................................................13
ARTICLE X Amendment............................................................................................13
</TABLE>
<PAGE> 4
RESTATED BYLAWS OF
NUCENTRIX BROADBAND NETWORKS, INC.
ARTICLE I
Officers
SECTION 1. Registered Office. The registered office of NUCENTRIX
BROADBAND NETWORKS, INC. (the "Corporation"), in the State of Delaware shall be
at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle, and the registered agent in charge thereof shall be The
Corporation Trust Company.
SECTION 2. Principal and Other Offices. The principal executive office
of the Corporation shall be in the City of Plano, State of Texas. The
Corporation may also have an office or offices at any other place or places
within or outside the States of Delaware and Texas.
ARTICLE II
Meeting of Stockholders; Stockholders'
Consent in Lieu of Meeting
SECTION 1. Annual Meetings. The annual meeting of the stockholders for
the election of directors, and for the transaction of such other business as may
properly come before the meeting, shall be held at such place, date and hour as
shall be fixed by the Board of Directors (the "Board") and designated in the
notice or waiver of notice thereof, except that no annual meeting need be held
if all actions, including the election of directors, required by the General
Corporation Law of the State of Delaware (the "Delaware Statute") to be taken at
a stockholders' annual meeting are taken by written consent in lieu of meeting
pursuant to Section 10 of this Article II.
SECTION 2. Special Meetings. A special meeting of the stockholders for
any purpose or purposes may be called by the Board, the Chairman, the President
or the record holders of at least twenty percent (20%) of all of the shares of
Common Stock entitled to vote at the meeting, to be held at such place, date and
hour as shall be designated in the notice or waiver of notice thereof.
SECTION 3. Notice of Meetings. Except as otherwise required by statute,
the Certificate of Incorporation of the Corporation (the "Certificate") or these
Bylaws, notice of each annual or special meeting of the stockholders shall be
given to each stockholder of record entitled to vote at such meeting not less
than 10 nor more than 60 days before the day on which the meeting is to be held,
by delivering written notice thereof to him personally, or by mailing a copy of
such notice, postage prepaid, directly to him at his address as it appears in
the records of the Corporation, or by transmitting such notice thereof to him at
such address by telegraph, cable or other telephonic transmission. Every such
notice shall state the place, the date and hour of the meeting, and, in case of
a special meeting, the purpose or purposes for which the meeting is
<PAGE> 5
called. Notice of any meeting of stockholders shall not be required to be given
to any stockholder who shall attend such meeting in person or by proxy, or who
shall, in person or by attorney thereunto authorized, waive such notice in
writing, either before or after such meeting. Except as otherwise provided in
these Bylaws, neither the business to be transacted at, nor the purpose of, any
meeting of the stockholders need be specified in any such notice or waiver of
notice. Notice of any adjourned meeting of stockholders shall not be required to
be given, except when expressly required by law.
SECTION 4. Quorum. At each meeting of the stockholders, except where
otherwise provided by the Certificate or these Bylaws, the holders of a majority
of the shares of Common Stock of the Corporation entitled to vote at such
meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business. In the absence of a quorum, a majority in
interest of the stockholders present in person or represented by proxy and
entitled to vote, or, in the absence of all the stockholders entitled to vote,
any officer entitled to preside at, or act as secretary of, such meeting, shall
have the power to adjourn the meeting from time to time, until stockholders
holding the requisite amount of stock to constitute a quorum shall be present or
represented. At any such adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted at the meeting
as originally called.
SECTION 5. Organization.
(a) Unless otherwise determined by the Board, at each meeting
of the stockholders, one of the following shall act as chairman of the meeting
and preside thereat, in the following order of precedence:
(i) the Chairman;
(ii) the President;
(iii) any director, officer or stockholder of the Corporation
designated by the Board to act as chairman of such meeting and to
preside thereat if the Chairman and the President shall be absent from
such meeting; or
(iv) a stockholder of record who shall be chosen chairman of
such meeting by a majority in voting interest of the stockholders
present in person or by proxy and entitled to vote thereat.
(b) The Secretary or, if he shall be presiding over such
meeting in accordance with the provisions of paragraph (a) of this Section 5 or
if he shall be absent from such meeting, the person (who shall be an Assistant
Secretary, if an Assistant Secretary has been appointed and is present) whom the
chairman of such meeting shall appoint, shall act as secretary of such meeting
and keep the minutes thereof.
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SECTION 6. Order of Business. The order of business at each meeting of
the stockholders shall be determined by the chairman of such meeting, but such
order of business may be changed by a majority in voting interest of those
present in person or by proxy at such meeting and entitled to vote thereat.
SECTION 7. Voting. Except as otherwise provided by law, the Certificate
or these Bylaws, at each meeting of the stockholders, every stockholder of the
Corporation shall be entitled to one vote in person or by proxy for each share
of Common Stock of the Corporation held by him and registered in his name on the
books of the Corporation on the date fixed pursuant to Section 7 of Article VI
as the record date for the determination of stockholders entitled to vote at
such meeting. Persons holding stock in a fiduciary capacity shall be entitled to
vote the shares so held. A person whose stock is pledged shall be entitled to
vote, unless, in the transfer by the pledgor on the books of the Corporation, he
has expressly empowered the pledgee to vote thereon, in which case only the
pledgee or his proxy may represent such stock and vote thereon. If shares or
other securities having voting power stand in the record of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety or otherwise, or if two or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary shall be
given written notice to the contrary and furnished with a copy of the instrument
or order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect:
(a) if only one votes, his act binds all;
(b) if more than one votes, the act of the majority so voting
binds all; and
(c) if more than one votes, but the vote is evenly split on
any particular matter, such shares shall be voted in the manner
provided by law.
If the instrument so filed shows that any such tenancy is held in unequal
interests, a majority or even-split for the purposes of this Section 7 shall be
a majority or even-split in interest. The Corporation shall not vote directly or
indirectly any share of its own capital stock. Any vote of stock may be given by
the stockholder entitled thereto in person or by his proxy appointed by an
instrument in writing, subscribed by such stockholder or by his attorney
thereunto authorized, delivered to the secretary of the meeting; provided,
however, that no proxy shall be voted after three years from its date, unless
said proxy provides for a longer period. At all meetings of the stockholders,
all matters (except where other provision is made by law, the certificate or
these Bylaws) shall be decided by the vote of a majority in interest of the
stockholders present in person or by proxy at such meeting and entitled to vote
thereon, a quorum being present. Unless demanded by a stockholder present in
person or by proxy at any meeting and entitled to vote thereon, the vote on any
question need not be by ballot. Upon a demand by any such stockholder for a vote
by ballot upon any question, such vote by ballot shall be taken. On a vote by
ballot, each ballot shall be signed by the stockholder voting, or by his proxy,
if there be such proxy, and shall state the number of shares voted.
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<PAGE> 7
SECTION 8. Inspection. The chairman of the meeting may at any time
appoint one or more inspectors to serve at any meeting of the stockholders. Any
inspector may be removed, and a new inspector or inspectors appointed, by the
Board at any time. Such shall decide upon the qualifications of voters, accept
and count votes, declare the results of such vote, and subscribe and deliver to
the secretary of the meeting a certificate stating the number of shares of stock
issued and outstanding and entitled to vote thereon and the number of shares
voted for and against the question, respectively. The inspectors need not be
stockholders of the Corporation, and any director or officer of the Corporation
may be an inspector on any question other than a vote for or against his
election to any position with the Corporation or on any other matter in which he
may be directly interested. Before acting as herein provided, each inspector
shall subscribe an oath faithfully to execute the duties of an inspector with
strict impartiality and according to the best of his ability.
SECTION 9. List of Stockholders. It shall be the duty of the Secretary
or other officer of the Corporation who shall have charge of its stock ledger to
prepare and make, at least 10 days before every meeting of the stockholders, a
complete list of the stockholders entitled to vote thereat, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to any such meeting,
during ordinary business hours, for a period of at least 10 days prior to such
meeting, either at a place within the city where such meeting is to be held,
which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held. Such list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 10. Stockholders' Consent in Lieu of Meeting. Any action
required by the Delaware Statute to be taken at any annual or special meeting of
the stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, by a consent in writing, as permitted
by the Delaware Statute.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business, property and affairs of the
Corporation shall be managed by or under the direction of the Board, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law or by the Certificate directed or required to be
exercised or done by the stockholders.
SECTION 2. Number and Term of Office. The number of directors shall be
fixed from time to time by the Board. Directors need not be stockholders. Each
director shall hold office until his successor is elected and qualified, or
until his earlier death or resignation or removal in the manner hereinafter
provided.
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<PAGE> 8
SECTION 3. Election of Directors. At each meeting of the stockholders
for the election of directors at which a quorum is present, the persons
receiving the greatest number of votes, up to the number of directors to be
elected, of the stockholders present in person or by proxy and entitled to vote
thereon shall be the directors; provided, however, that for purposes of such
vote no stockholder shall be allowed to cumulate his votes. Unless an election
by ballot shall be demanded as provided in Section 7 of Article II, election of
directors may be conducted in any manner approved at such meeting.
SECTION 4. Resignation, Removal and Vacancies.
(a) Any director may resign at any time by giving written
notice to the Board, the Chairman, the President or the Secretary. Such
resignation shall take effect at the time specified there-in or, if no time
shall be specified therein, upon receipt thereof; unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
(b) Any director or the entire Board may be removed, with or
without cause, at any time by vote of the holders of a majority of the shares
then entitled to vote at an election of directors or by written consent of the
stockholders pursuant to Section 10 of Article 11.
(c) Vacancies occurring on the Board for any reason may be
filled by vote of the stockholders or by the stockholders' written consent
pursuant to Section 10 of Article II, or by vote of the Board or by the
directors' written consent pursuant to Section 6 of this Article III. If the
number of directors then in office is less than a quorum, such vacancies may be
filled by a vote of a majority of the directors then in office.
SECTION 5. Meetings.
(a) Annual Meetings. As soon as practicable after each annual
election of directors, the Board shall meet for the purpose of organization and
the transaction of other business, unless it shall have transacted all such
business by written consent pursuant to Section 6 of this Article III.
(b) Other Meetings. Other meetings of the Board shall be held
at such times and places as the Board, the Chairman, the President or any
director shall from time to time determine.
(c) Notice of Meetings. Notice shall be given to each director
of each meeting, including the time, place and purpose of such meeting. Notice
of each such meeting shall be mailed to each director, addressed to him at his
residence or usual place of business, at least two days before the date on which
such meeting is to be held, or shall be sent to him at such place by telegraph,
cable, wireless or other form of recorded communication, or be delivered
personally or by telephone not later than the day before the day on which such
meeting is to be held, but notice need not be given to any director who shall
attend such meeting. A written waiver of notice, signed by the person entitled
thereto, whether before or after the time of the meeting stated therein, shall
be deemed equivalent to notice.
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<PAGE> 9
(d) Place of Meetings. The Board may hold its meetings at such
place or places within or outside the State of Delaware as the Board may from
time to time determine, or as shall be designated in the respective notices or
waivers of notice thereof.
(e) Quorum and Manner of Acting. A majority of the total
number of directors then in office shall be present in person at any meeting of
the Board in order to constitute a quorum for the transaction of business at
such meeting, and the vote of a majority of those directors present at any such
meeting at which a quorum is present shall for the passage of any resolution or
act of the Board, except as otherwise expressly required by law or these Bylaws.
In the absence of a quorum for any such meeting, a majority of the directors
present thereat may adjourn such meeting from time to time until a quorum shall
be present.
(f) Organization. At each meeting of the Board, one of the
following shall act as chairman of the meeting and preside thereat, in the
following order of precedence:
(i) the Chairman;
(ii) the President (if a director); or
(iii) any director designated by a majority of the directors
present.
The Secretary or, in the case of his absence, an Assistant Secretary, if an
Assistant Secretary has been appointed and is present, or any person whom the
chairman of the meeting shall appoint shall act as secretary of such meeting and
keep the minutes thereof.
SECTION 6. Directors' Consent in Lieu of Meeting. Any action required
or permitted to be taken at any meeting of the Board may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by all the directors then in
office and such consent is filed with the minutes of the proceedings of the
Board.
SECTION 7. Action by Means of Conference Telephone or Similar
Communications Equipment. Any one or more members of the Board may participate
in a meeting of the Board by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other, and participation in a meeting by such means shall constitute
presence in person at such meeting.
SECTION 8. Committees. The Board may, by resolution or resolutions
passed by a majority of the whole Board, designate one or more committees, each
such committee to consist of one or more directors of the Corporation, which to
the extent provided in said resolution or resolutions shall have and may
exercise the powers of the Board in the management of the business and affairs
of the Corporation and may authorize the seal of the Corporation to be affixed
to all papers which may require it, such committee or committees to have such
name or names as may be determined from time to time by resolution adopted by
the Board. A majority of all the members of any such committee may determine its
action and fix the time and place of
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its meetings, unless the Board shall otherwise provide. The Board shall have
power to change the members of any such committee at any time, to fill vacancies
and to discharge any such committee, either with or without cause, at any time.
ARTICLE IV
Officers
SECTION 1. Executive Officers. The principal officers of the
Corporation shall be a Chairman, if one is appointed (and any references to the
Chairman shall not apply if a Chairman has not been appointed), a President, a
Secretary and a Treasurer, and may include such other officers as the Board may
appoint pursuant to Section 3 of this Article IV. Any two or more offices may be
held by the same person.
SECTION 2. Authority and Duties. All officers, as between themselves
and the Corporation, shall have such authority and perform such duties in the
management of the Corporation as may be provided in these Bylaws or, to the
extent so provided, by the Board.
SECTION 3. Other Officers. The Corporation may have such other
officers, agents and employees as the Board may deem necessary, including one or
more Assistant Secretaries, one or more Assistant Treasurers and one or more
Vice Presidents, each of whom shall hold office for such period, have such
authority, and perform such duties as the Board, the Chairman or the President
may from time to time determine. The Board may delegate to any principal officer
the power to appoint and define the authority and duties of, or remove, any such
officers, agents or employees.
SECTION 4. Term of Office, Resignation and Removal.
(a) All officers shall be elected or appointed by the Board
and shall hold office for such term as may be prescribed by the Board. Each
officer shall hold office until his successor has been elected or appointed and
qualified or until his earlier death or resignation or removal in the manner
hereinafter provided. The Board may require any officer to give security for the
faithful performance of his duties.
(b) Any officer may resign at any time by giving written
notice to the Board, the Chairman, the President or the Secretary. Such
resignation shall take effect at the time specified therein or, if no time shall
be specified therein, at the time it is accepted by action of the Board. Except
as aforesaid, the acceptance of such resignation shall not be necessary to make
it effective.
(c) All officers and agents elected or appointed by the Board
shall be subject to removal at any time by the Board or by the stockholders of
the Corporation with or without cause, subject to the terms of any employment or
other agreement that may exist between the Corporation and such officer or
agent.
SECTION 5. Vacancies. If the office of Chairman, President, Secretary
or Treasurer becomes vacant for any reason, the Board shall fill such vacancy,
and if any other
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office becomes vacant, the Board may fill such vacancy. Any officer so appointed
or elected by the Board shall serve only until such time as the unexpired term
of his predecessor shall have expired, unless reelected or reappointed by the
Board.
SECTION 6. The Chairman. The Chairman shall give counsel and advice to
the Board and the officers of the Corporation on all subjects concerning the
welfare of the Corporation and the conduct of its business and shall perform
such other duties as the Board may from time to time determine. Unless otherwise
determined by the Board, he shall preside at meetings of the Board and of the
stockholders at which he is present.
SECTION 7. The President. The President shall be the chief executive
officer of the Corporation. The President shall have general and active
management and control of the business and affairs of the Corporation subject to
the control of the Board and shall see that all orders and resolutions of the
Board are carried into effect. The President shall from time to time make such
reports of the affairs of the Corporation as the Board may require and shall
perform such other duties as the Board may from time to time determine.
SECTION 8. The Secretary. The Secretary shall, to the extent
practicable, attend all meetings of the Board and all meetings of the
stockholders and shall record all votes and the minutes of all proceedings in a
book to be kept for that purpose. He may give, or cause to be given, notice of
all meetings of the stockholders and of the Board, and shall perform such other
duties as may be prescribed by the Board, the Chairman or the President, under
whose supervision he shall act. He shall keep in safe custody the seal of the
Corporation and affix the same to any duly authorized instrument requiring it
and, when so affixed, it shall be attested by his signature or by the signature
of the Treasurer or, if appointed, an Assistant Secretary or an Assistant
Treasurer. He shall keep in safe custody the certificate books and stockholder
records and such other books and records as the Board may direct, and shall
perform all other duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Board, the Chairman or
the President.
SECTION 9. The Treasurer. The Treasurer shall have the care and custody
of the corporate funds and other valuable effects, including securities, shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the Corporation and shall deposit all moneys and other valuable effects in
the name and to the credit of the Corporation in such depositories as may be
designated by the Board. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board, taking proper vouchers for such
disbursements, shall render to the Chairman, President and directors, at the
regular meetings of the Board, or whenever they may require it, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation and shall perform all other duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board, the Chairman or the President.
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ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 1. Execution of Documents. The Board shall designate, by either
specific or general resolution, the officers, employees and agents of the
Corporation who shall have the power to execute and deliver deeds, contracts,
mortgages, bonds, debentures, checks, drafts and other orders for the payment of
money and other documents for and in the name of the Corporation, and may
authorize such officers, employees and agents to delegate such power (including
authority to redelegate) by written instrument to other officers, employees or
agents of the Corporation; unless so designated or expressly authorized by these
Bylaws, no officer, employee or agent shall have any power or authority to bind
the Corporation by any contract or engagement, to pledge its credit or to render
it liable pecuniarily for any purpose or amount.
SECTION 2. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
or otherwise as the Board or Treasurer for any other officer of the Corporation
to whom power in this respect shall have been given by the Board, shall select.
SECTION 3. Proxies with Respect to Stock or Other Securities of Other
Corporations. The Board shall designate the officers of the Corporation who
shall have authority from time to time to appoint an agent or agents of the
Corporation to exercise in the name and on behalf of the Corporation the powers
and rights which the Corporation may have as the holder of stock or other
securities in any other corporation, and to vote or consent with respect to such
stock or securities. Such designated officers may instruct the person or persons
so appointed as to the manner of exercising such powers and rights, and such
designated officers may execute or cause to be executed in the name and on
behalf of the Corporation and under its corporate seal or otherwise, such
written proxies, powers of attorney or other instruments as they may deem
necessary or proper in order that the Corporation may exercise its powers and
rights.
ARTICLE VI
Shares and Their Transfer, Fixing Record Date
SECTION 1. Certificates for Shares. Every owner of stock of the
Corporation shall be entitled to have a certificate certifying the number and
class of shares owned by him in the Corporation, which shall be in such form as
shall be prescribed by the Board. Certificates shall be numbered and issued in
consecutive order and shall be signed by, or in the name of, the Corporation by
the Chairman, the President or any Vice President, and by the Treasurer (or an
Assistant Treasurer, if appointed) or the Secretary (or an Assistant Secretary,
if appointed). In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate had not ceased to be such officer or officers of the Corporation.
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SECTION 2. Record. A record in one or more counterparts shall be kept
of the name of the person, firm or corporation owning the shares represented by
each certificate for stock of the Corporation issued, the number of shares
represented by each such certificate, the date thereof and, in the case of
cancellation, the date of cancellation. Except as otherwise expressly required
by law, the person in whose name shares of stock stand on the stock record books
of the Corporation shall be deemed the owner thereof for all purposes regarding
the Corporation.
SECTION 3. Transfer and Registration of Stock.
(a) The transfer of stock and certificates which represent the
stock of the Corporation shall be governed by Article 8 of Subtitle I of Title 6
of the Delaware Code (the Uniform Commercial Code), as amended from time to
time.
(b) Registration of transfers of shares of the Corporation
shall be made only on the books of the Corporation upon request of the
registered holder thereof, or of his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation, and upon
the surrender of the certificate or certificates for such shares properly
endorsed or accompanied by a stock power duly executed.
SECTION 4. Addresses of Stockholders. Each stockholder shall designate
to the Secretary an address at which notices of meetings and all other corporate
notices may be served or mailed to him, and, if any stockholder shall fail to
designate such address, corporate notices may be served upon him by mail
directed to him at his post office address, if any, as the same appears on the
stock record books of the Corporation or at his last known post-office address.
SECTION 5. Lost, Destroyed and Mutilated Certificates. The holder of
any shares of the Corporation shall immediately notify the Corporation of any
loss, destruction or mutilation of the certificate therefor, and the Board may,
in its discretion, cause to be issued to him a new certificate or certificates
for such shares, upon the surrender of the mutilated certificate or, in the case
of loss or destruction of the certificate, upon satisfactory proof of such loss
or destruction, and the Board may, in its discretion, require the owner of the
lost or destroyed certificate or his legal representative to give the
Corporation a bond in such sum and with such surety or sureties as it may direct
to indemnify the Corporation against any claim that may be made against it on
account of the alleged loss or destruction of any such certificate.
SECTION 6. Regulations. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these Bylaws, concerning the
issue, transfer and registration of certificates for stock of the Corporation.
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SECTION 7. Fixing Date for Determination of Stockholders of Record.
(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board, and which record date shall be not more than 60 nor less
than 10 days before the date of such meeting. If no record date is fixed by the
Board, the record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided; however, that the Board may fix a new record date for the adjourned
meeting.
(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is, adopted by the
Board, and which date shall be not more than 10 days after the date upon which
the resolution fixing the record date is adopted by the Board. If no record date
has been fixed by the Board, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the Board is required by the Delaware Statute, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office in this State, its principal place of business or an officer
or agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the Board and prior
action by the Board is required by the Delaware Statute, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than 60 days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board adopts the resolution relating thereto.
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ARTICLE VII
Seal
The Board may provide a corporate seal, which shall be in the form of a
circle and shall bear the full name of the Corporation, and the words and
figures "Corporate Seal -Delaware."
ARTICLE VIII
Fiscal Year
The fiscal year of the Corporation shall be the calendar year unless
otherwise determined by the Board.
ARTICLE IX
Indemnification and Insurance
SECTION 1. Indemnification.
(a) The Corporation shall indemnify any person who was, is, or
is threatened to be made a party to a proceeding (as hereinafter defined) by
reason of the fact that he or she (i) is or was a director or officer of the
Corporation or (ii) while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent permitted under the Delaware Statute, as the same exists or may
hereafter be amended. Such right shall be a contract right and as such shall run
to the benefit of any director or officer who is elected and accepts the
position of director or officer of the Corporation or elects to continue to
serve as a director or officer of the Corporation while this provision is in
effect. Any repeal or amendment of this Article IX, Section 1 shall be
prospective only and shall not limit the rights of any such director or officer
or the obligations of the Corporation with respect to any claim arising from or
related to the services of such director or officer in any of the foregoing
capacities prior to any such repeal or amendment to this Article IX, Section 1.
Such right shall include the right to be paid by the Corporation expenses
incurred in defending any such proceeding in advance of its final disposition to
the maximum extent permitted under the Delaware Statute, as the same exists or
may hereafter be amended. If a claim for indemnification or advancement of
expenses hereunder is not paid in full by the Corporation within sixty (60) days
after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim, and if successful in whole or in part, the claimant shall
also be entitled to be paid the expenses of prosecuting such claim. It shall be
a defense to any such action that such indemnification or advancement of costs
of defense are not permitted under the Delaware Statute, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including the Board or any committee thereof, independent legal
counsel, or stockholders) to have made its determination prior to the
commencement of such action that indemnification of, or advancement of costs of
defense to, the claimant is permissible in the circumstances nor an actual
determination by the Corporation (including the Board or any committee thereof,
independent legal counsel, or
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stockholders) that such indemnification or advancement is not permissible shall
be a defense to the action or create a presumption that such indemnification or
advancement is not permissible. In the event of the death of any person having a
right of indemnification under the foregoing provisions, such right shall inure
to the benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, bylaw,
resolution of stockholders or directors, agreement, or otherwise.
(b) The Corporation may additionally indemnify any employee or
agent of the Corporation to the fullest extent permitted by law.
(c) As used herein, the term "proceeding" means any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, arbitrative, or investigative, any appeal in such an
action, suit, or proceeding, and any inquiry or investigation that could lead to
such an action, suit, or proceeding.
SECTION 2. Insurance. The Corporation may purchase and maintain
insurance, at its expense, to protect itself and any person who is or was a
director, officer, employee or agent of the Corporation or any person who is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, limited liability
company, trust or other enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the Delaware Statute.
ARTICLE X
Amendment
Any bylaw (including these Bylaws) may be adopted, amended or repealed
by the vote of the holders of a majority of the shares then entitled to vote or
by the stockholders' written consent pursuant to Section 10 of Article II, or by
the vote of the Board or by the directors' written consent pursuant to Section 6
of Article III.
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EXHIBIT 10.1
WARRANT AGREEMENT
WARRANT AGREEMENT dated April 1, 1999 between NUCENTRIX BROADBAND
NETWORKS, INC. (f/k/a Heartland Wireless Communications, Inc.) (the "Company"),
and Harris Trust and Savings Bank, as Warrant Agent (the "Warrant Agent").
The Company proposes to issue Common Stock Purchase Warrants, as
hereinafter described (the "Warrants"), to purchase an aggregate of 1,100,000
shares (subject to adjustment as provided herein) of its Common Stock, $.001
par value (the "Common Stock"), and the shares of Common Stock issuable on
exercise of the Warrants being referred to herein as the "Warrant Shares"),
pursuant to the Company's Plan of Reorganization under Chapter 11 of the
Bankruptcy Code, dated January 19, 1999 (the "Plan of Reorganization").
The Company requests the Warrant Agent to act on behalf of the Company
and the Warrant Agent is willing so to act in connection with the issuance,
division, transfer, exchange and exercise of the Warrants.
In consideration of the foregoing and for the purposes of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the registered owners of the Warrants (the
"Holders"), the Company and the Warrant Agent hereby agree as follows:
SECTION 1. Appointment of Warrant Agent.
The Company hereby appoints the Warrant Agent to act as agent for the
Company in accordance with the instructions set forth in this Agreement, and
the Warrant Agent hereby accepts such appointment and agrees so to act.
SECTION 2. Transferability and Form of Warrant.
2.1 Registration. The Company shall maintain at the principal office
of the Warrant Agent a warrant register (the "Warrant Register") in which the
ownership of the Warrants outstanding from time to time, and divisions,
combinations, substitutions, exchanges and transfers thereof shall be
registered. The Warrants shall be numbered and shall be registered in the
Warrant Register as they are issued or delivered upon any such division,
combination, substitution, exchange or transfer, as the case may be. The
Company and the Warrant Agent shall be entitled to treat the Holder of any
Warrant, as evidenced by the Warrant Register, as the owner in fact thereof for
all purposes and prior to presentment of any Warrant for registration of
transfer as provided in Section 2.2 shall not be bound to recognize any
equitable or other claim to or interest in such Warrant on the part of any
other person.
<PAGE> 2
2.2 Transfer. The Warrants shall be transferable only on the books of
the Company by registration of such transfer on the Warrant Register maintained
at the principal office of the Warrant Agent upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In all cases of transfer by an attorney, the original power of
attorney, duly approved, or a copy thereof, duly certified, shall be deposited
and remain with the Warrant Agent. In case of transfer by executors,
administrators, guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited and remain with the Warrant Agent in its discretion. Upon any
registration of transfer, the Warrant Agent shall countersign and deliver a new
Warrant or Warrants for a like aggregate number of Warrant Shares to the person
or persons entitled thereto. The Holders may transfer the Warrants only upon
proper registration of such transaction or pursuant to an appropriate exemption
from registration.
2.3 Form of Warrant. The text of the Warrant and the Purchase Form
shall be substantially as set forth in Exhibit A attached hereto. The price per
Warrant Share and the number of Warrant Shares issuable upon exercise of each
Warrant are subject to adjustment upon the occurrence of certain events, all as
hereinafter provided. The Warrants shall be executed on behalf of the Company
by its Chairman of the Board, President or one of its Vice Presidents, under
its corporate seal reproduced thereon attested by its Secretary or an Assistant
Secretary. The signature of any such officer on the Warrants may be manual or
facsimile.
Warrants bearing the manual or facsimile signature of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them shall have ceased to hold
such office prior to the delivery of such Warrants or did not hold such offices
on the date of this Agreement.
Warrants shall be dated as of the date of countersignature thereof by
the Warrant Agent either upon initial issuance or upon division, exchange,
substitution or transfer.
SECTION 3. Countersignature of Warrants.
The Warrants shall be countersigned by the Warrant Agent (or any
successor to the Warrant Agent then acting as warrant agent under this
Agreement) and shall not be valid for any purpose unless so countersigned.
Warrants may be countersigned, however, by the Warrant Agent (or by its
successor as warrant agent hereunder) and may be delivered by the Warrant
Agent, notwithstanding that the persons whose manual or facsimile signatures
appear thereon as proper officers of the Company shall have ceased to be such
officers at the time of such countersignature, issuance or delivery. The
Company shall issue, and the Warrant Agent shall, upon written instructions of
the Chairman of the Board, President, one of the Vice Presidents, the Secretary
or an assistant secretary of the Company, countersign and deliver Warrants
entitling the Holders thereof to purchase not more than 1,100,000 Warrant
Shares (subject to Section 7 hereof and adjustment pursuant to Section 10
hereof) and the Warrant Agent shall also countersign and deliver Warrants as
otherwise provided in this Agreement.
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SECTION 4. Exchange of Warrant Certificates.
Each Warrant certificate may be exchanged for another certificate or
certificates entitling the Holder thereof to purchase a like aggregate number
of Warrant Shares as the certificate or certificates surrendered then entitle
such Holder to purchase. Any Holder desiring to exchange a Warrant certificate
or certificates shall make such request in writing delivered to the Warrant
Agent, and shall surrender, properly endorsed, the certificate or certificates
to be so exchanged. Thereupon, the Warrant Agent shall countersign and deliver
to the person entitled thereto a new Warrant certificate or certificates, as
the case may be, as so requested.
SECTION 5. Term of Warrants; Exercise of Warrants.
5.1 Term of Warrants. Subject to the terms of this Agreement, each
Holder shall have the right, which may be exercised (subject to Sections
10.1(g) and 10.1(h) hereof) until the close of business on October 1, 2007, to
purchase from the Company the number of fully paid and nonassessable Warrant
Shares which the Holder may at the time be entitled to purchase on exercise of
such Warrants.
5.2 Exercise of Warrants. Warrants may only be exercised for the
purchase of whole Warrant Shares. Warrants may be exercised upon surrender to
the Company at the principal office of the Warrant Agent, of the certificate or
certificates evidencing the Warrants to be exercised (except as otherwise
provided below), together with the Purchase Form on the reverse thereof duly
filled in and signed, and upon payment to the Warrant Agent for the account of
the Company of the Warrant Price (as defined in and determined in accordance
with the provisions of Sections 9 and 10 hereof), for the number of Warrant
Shares in respect of which such Warrants are then exercised. Payment of the
aggregate Warrant Price shall be made in cash or by wire transfer of
immediately available funds to such account as the Warrant Agent may from time
to time specify for the purpose by written notice to the Holders.
Subject to Sections 6 and 10.1(g) and (h) hereof, upon such surrender
of Warrants and payment of the Warrant Price as aforesaid, the Company shall
reasonably, promptly issue and cause to be delivered to or upon the written
order of the Holder, and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of such Warrants, together with cash, as provided in Section
12 hereof, in respect of any fractional Warrant Shares otherwise issuable upon
such exercise of Warrants. Such certificate or certificates shall be deemed to
have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Warrants and payment of such Warrant Price, as
aforesaid; provided, however, that if, at the date of surrender of such
Warrants and payment of such Warrant Price, the transfer books for the Warrant
Shares or other class of stock purchasable upon the exercise of such Warrants
shall be closed, the certificates for the Warrant Shares in respect of which
such Warrants are then exercised shall be issuable as of the date on which such
books shall next be opened and until such date the Company shall be under no
duty to deliver any certificate for such Warrant Shares; provided further,
however,
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that the transfer books of record, unless otherwise required by law, shall not
be closed at any one time for a period longer than twenty days. The rights of
purchase represented by the Warrants shall be exercisable, at the election of
the Holders thereof, either in full or from time to time in part and, in the
event that a certificate evidencing Warrants is exercised in respect of less
than all of the Warrant Shares purchasable on such exercise at any time prior
to the date of expiration of the Warrants, a new certificate evidencing the
remaining Warrant or Warrants will be delivered, and the Warrant Agent is
hereby irrevocably authorized to countersign and to deliver the required new
Warrant certificate or certificates pursuant to the provisions of this Section
and of Section 3 hereof and the Company, whenever required by the Warrant
Agent, will supply the Warrant Agent with Warrant certificates duly executed on
behalf of the Company for such purpose.
SECTION 6. Payment of Taxes.
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of Warrant Shares 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 of any Warrants or
certificates for Warrant Shares registered in a name other than that of the
Holder of Warrants in respect of which such Warrants or Warrant Shares are
originally issued.
SECTION 7. Mutilated or Missing Warrants.
In case any of the certificates evidencing the Warrants shall be
mutilated, lost, stolen or destroyed, the Company may in its discretion issue,
and the Warrant Agent shall countersign and deliver in exchange and
substitution for and upon cancellation of the mutilated Warrant certificate, or
in lieu of and substitution for the Warrant certificate lost, stolen or
destroyed, a new Warrant certificate of like tenor and representing an
equivalent right or interest; but only upon receipt of evidence satisfactory to
the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant and indemnity, if requested, also satisfactory to them. An applicant
for such a substitute Warrant certificate shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Company and
the Warrant Agent, or either of them, may prescribe.
SECTION 8. Reservation of Warrant Shares; Purchase of Warrants.
8.1 Reservation of Warrant Shares. There have been reserved, and the
Company shall at all times keep reserved, out of its authorized Common Stock, a
number of shares of Common Stock sufficient to provide for the exercise in full
of the rights of purchase represented by the Warrants outstanding from time to
time. The transfer agent for the Common Stock (the "Transfer Agent") and every
subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of any of such rights of purchase will be
irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be requisite for such purpose. The Company will keep
a copy of this Agreement, as from time to time in effect, on file with the
Transfer Agent or its successors and with every subsequent transfer agent for
any shares of the
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Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Warrant Agent is hereby irrevocably authorized
to requisition from time to time from the Transfer Agent or its successor the
stock certificates required to honor outstanding Warrants upon exercise thereof
in accordance with the terms of this Agreement. The Company will supply such
Transfer Agent or its successor with duly executed stock certificates for such
purposes and will provide or otherwise make available any cash which may be
payable as provided in Sections 5.2 and 12 hereof. All Warrants surrendered in
the exercise of the rights thereby evidenced shall be canceled by the Warrant
Agent and shall thereafter be delivered to the Company.
8.2 Purchase of Warrants by the Company. The Company shall have the
right, except as limited by law, other agreement or herein, to purchase or
otherwise acquire Warrants at such times, in such manner and for such
consideration as it may deem appropriate.
8.3 Cancellation of Warrants. In the event the Company shall purchase
or otherwise acquire Warrants, the same shall thereupon be delivered to the
Warrant Agent and be canceled by it and retired. The Warrant Agent shall cancel
any Warrants surrendered for division, combination, exchange, substitution,
transfer or exercise in whole or in part.
SECTION 9. Warrant Price.
The price per share at which Warrant Shares shall be purchasable upon
exercise of the Warrants (the "Warrant Price") shall equal $27.63, subject to
adjustment pursuant to Section 10 hereof.
SECTION 10. Adjustment of Warrant Price and Number of Warrant Shares.
The number and kind of securities purchasable upon the exercise of
each Warrant and the Warrant Price shall be subject to adjustment from time to
time upon the happening of certain events, as hereinafter defined.
10.1 Mechanical Adjustments. The number of Warrant Shares purchasable
upon the exercise of each Warrant and the Warrant Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of
Common Stock or (iv) issue by reclassification or recapitalization of
its shares of Common Stock other securities of the Company, the number
of Warrant Shares purchasable upon exercise of each Warrant
immediately prior thereto shall be adjusted so that the Holder of each
Warrant shall be entitled to receive the kind and number of Warrant
Shares or other securities of the Company which he or she would have
owned or have been entitled to receive after the happening of any of
the events described above, had such Warrant been exercised
immediately prior to the happening of such event or
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any record date with respect thereto. An adjustment made pursuant to
this paragraph (a) shall become effective immediately after the
effective date of such event retroactive to the record date, if any,
for such event.
(b) (i) In case the Company shall at any time or from time to
time
(w) distribute to all holders of its shares of Common Stock
evidences of its indebtedness or assets (excluding cash dividends or
distributions payable out of consolidated earnings or earned surplus
legally available for the payment of dividends and dividends or
distributions referred to in Subsection 10.1(a) above), or any rights,
options or warrants containing the right to subscribe for or purchase,
or convertible or exchangeable securities containing the right to
obtain upon conversion or exchange thereof, any additional shares of
Common Stock, or
(x) issue to any person any rights, options or warrants
containing the right to subscribe for or purchase, or convertible or
exchangeable securities containing the right to obtain upon conversion
or exchange thereof, any additional shares of Common Stock, and the
consideration per share for which such additional shares of Common
Stock may at any time thereafter be issuable pursuant to such rights,
options or warrants, or upon exercise of the conversion or exchange
right in such convertible or exchangeable securities, shall be less
than the then current market price per share of Common Stock
(determined pursuant to Subsection 10.1(c) hereof),
then in each case the number of Warrant Shares thereafter purchasable upon the
exercise of each Warrant shall be determined
(y) in the case of a distribution referred to in clause (w)
above, by multiplying the number of Warrant Shares theretofore
purchasable upon the exercise of such Warrant by a fraction, of which
the numerator shall be the then current market price per share of
Common Stock (as determined pursuant to Subsection 10.1(c) hereof) on
the date of such distribution, and of which the denominator shall be
the excess of (a) such then current market price per share of Common
Stock, over (b) the then fair value (as determined by the Board of
Directors of the Company, whose determination shall be conclusive) of
the portion of the assets or evidences of indebtedness so distributed
or of such subscription rights, options or warrants, or of such
convertible or exchangeable securities, applicable to one share of
Common Stock, or
(z) in the case of an issuance referred to in clause (x)
above, as provided in Subsection 10.1(b)(ii) hereof, on the basis that
(i) the maximum number of shares of additional Common Stock issuable
pursuant to all such rights, options or warrants, or obtainable upon
conversion or exchange of all such convertible or exchangeable
securities, as the case may be, shall be deemed to have been issued as
of the date for determination of the current market price, as
hereinafter provided, and (ii) the aggregate consideration for all
such maximum number of additional shares of Common Stock shall be
deemed to be the
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minimum consideration received and receivable by the Company for the
issuance of such additional shares of Common Stock pursuant to the
terms of such rights, options or warrants, or such convertible or
exchangeable securities.
An adjustment pursuant to Subsection 10.1(b)(i)(y) shall be made whenever any
such distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution. For purposes of Subsection
10.1(b)(i)(z), the date as of which the current market price of Common Stock
shall be determined shall be the earliest of (a) the record date for the
determination of stockholders entitled to receive distribution of such rights,
options, warrants, or convertible or exchangeable securities, (b) the date on
which the Company shall enter into a firm contract for issuance of the same,
and (c) the date on which the same are in fact issued.
(ii) In case the Company shall issue any additional
shares of its Common Stock for a consideration per share less than the
then current market price per share of Common Stock (determined
pursuant to Subsection 10.1(c) hereof), then in each case the number
of Warrant Shares thereafter purchasable upon the exercise of each
Warrant shall be determined by multiplying the number of Warrant
Shares theretofore purchasable upon the exercise of such Warrant by a
fraction, of which the numerator shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock plus the number of such additional
shares of Common Stock so issued, and of which the denominator shall
be the number of shares of Common Stock outstanding immediately prior
to the issuance of such additional shares of Common Stock plus the
number of shares of Common Stock which the aggregate consideration for
the total number of such additional shares of Common Stock so issued
would purchase at the then current market price per share of the
Common Stock. For purposes of this Subsection 10.1(b)(ii) the date as
of which the current market price per share of Common Stock shall be
determined shall be the earlier of (a) the date on which the Company
shall enter into a firm contract for the issuance of such additional
shares of Common Stock, and (b) the actual date of issuance thereof.
The provisions of this Subsection 10.1(b)(ii) shall not apply to any
issuance for which an adjustment is provided in Subsection 10.1(a), or
upon the issuance of any additional shares of Common Stock upon
exercise of any rights, options or warrants, or conversion or exchange
of any convertible or exchangeable securities, if an adjustment has
previously been made pursuant to Subsection 10.1(b)(i)(z) upon the
issuance of such rights, options or warrants, or of such convertible
or exchangeable securities.
(c) For the purpose of any computation under Section 10.1(b)
and Section 12 hereof, the current market price per share of Common Stock at
any date shall be the average representative closing bid price of the Common
Stock (if then traded in the over-the-counter market) or the average closing
price of the Common Stock (if then traded on NASDAQ's National Market System or
on a national securities exchange) for the five consecutive trading days ending
on the trading day immediately prior to the date as of which such computation
is made; if the Common Stock is not then quoted on the
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NASDAQ National Market or the NASDAQ Small Cap Market or listed on a national
securities exchange, the current market price per share thereof shall be the
result obtained by dividing the Company's then aggregate shareholders' equity
(as determined by its Board of Directors, such determination to be conclusive)
by the number of then outstanding shares of Common Stock.
(d) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least 1% in the number of Warrant Shares purchasable upon the
exercise of each Warrant; provided, however, that any adjustments which by
reason of this Section 10.1(d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
shall be made to the nearest one-thousandth of a share.
(e) (i) Whenever the number of Warrant Shares purchasable
upon the exercise of each Warrant is adjusted, as herein provided, the
Warrant Price payable upon exercise of each Warrant shall be adjusted
by multiplying such Warrant Price immediately prior to such adjustment
by a fraction, of which the numerator shall be the number of Warrant
Shares purchasable upon the exercise of each Warrant immediately prior
to such adjustment, and of which the denominator shall be the number
of Warrant Shares so purchasable immediately thereafter.
(ii) If, at any time after any adjustment of the
number of Warrant Shares obtainable upon exercise of any Warrant shall
have been made pursuant to the foregoing Subsection 10.1(b)(i)(z) on
the basis of the issuance of rights, options or warrants, or
convertible or exchangeable securities, or after any new adjustment of
the number of Warrant Shares obtainable upon exercise of any Warrant
shall have been made pursuant to this Subsection,
(w) such rights, options or warrants or
rights or the right of conversion or exchange shall
expire, and a portion of such rights, options or
warrants, or the right of conversion or exchange in
respect of a portion of such other securities, as
the case may be, shall not have been exercised,
and/or
(x) the consideration per share, for which
additional shares of Common Stock are issuable
pursuant to such rights, options or warrants or the
terms or such other securities, shall be increased
solely by virtue of provisions therein contained for
an automatic increase in such consideration per
share upon the arrival of a specified date or the
happening of a specified event,
in any such case, such previous adjustment shall be rescinded and annulled and
the additional shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so rescinded
and annulled shall no longer be deemed to have been issued by virtue of such
computation. Thereupon, a re-computation shall be made of the effect of such
rights, options or warrants or other securities on the basis of
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(y) treating the number of additional
shares of Common Stock, if any, theretofore actually
issued or issuable pursuant to the previous exercise
of such rights, options or warrants, or such right
of conversion or exchange, as having been issued on
the date or dates of such exercise and for the
consideration actually received and receivable
therefor, and
(z) treating any such rights, options or
warrants, or any such other securities, which then
remain outstanding as having been granted or issued
immediately after the time of such increase of the
consideration per share for which additional shares
of Common Stock are issuable under such rights,
options or warrants, or such other securities;
and, if and to the extent called for by the foregoing provisions of this
Subsection 10.1(e)(ii) on the basis aforesaid, a new adjustment of the number
of Warrant Shares obtainable upon exercise of any Warrant shall be made, which
new adjustment shall supersede the previous adjustment so rescinded and
annulled.
(f) For the purpose of this Section 10.1, the term "shares of
Common Stock" shall mean (i) the class of stock designated as the Common
Stock of the Company at the date of this Agreement, or (ii) any other class
of stock resulting from successive changes or reclassification of such shares
consisting solely of changes in par value, or from par value to no par value,
or from no par value to par value. In the event that at any time, as a result
of an adjustment made pursuant to paragraph (a) above, the Holders shall
become entitled to purchase any shares of the Company other than shares of
Common Stock, thereafter the number of such other shares so purchasable upon
exercise of each Warrant and the Warrant Price of such shares shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant
Shares contained in Subsection 10.1(a) through Subsection 10.1(e), inclusive,
above, Subsections 10.1(g) and 10.1(h) below, and the provisions of Section 5
and Sections 10.2 and 10.3 hereof, with respect to the Warrant Shares, shall
apply on like terms to any such other shares.
(g) If at any time up to and including the fifth anniversary
of April 1, 1999 (the "Effective Date") the Company proposes to consolidate
with or merge into another corporation, or in the event of any proposed sale
or conveyance to another corporation of all or substantially all of the
issued and outstanding stock or assets of the Company, in any such case for
consideration consisting entirely of cash, or of cash and evidences of
indebtedness of such other corporation and/or any of its affiliates (such
indebtedness to be valued for all purposes of this Agreement at the par or
face amount thereof) (such cash and evidences of indebtedness, collectively,
"Cash"), then, as a condition to the consummation of such transaction (a
"Cash Transaction"), the Warrant Price shall be adjusted according to the
following schedule:
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(i) in the case of a Cash Transaction occurring up
to and including the first anniversary of the Effective Date, the
adjusted Warrant Price shall be equal to the result obtained by
dividing $120,000,000 by the product of (x) the number of issued and
outstanding shares of Common Stock as of the Effective Date and (y)
0.97 (such product being hereinafter referred to as the "Applicable
Share Portion");
(ii) in the case of a Cash Transaction occurring
after the first anniversary of the Effective Date and up to and
including the second anniversary of the Effective Date, the adjusted
Warrant Price shall be equal to the result obtained by dividing
$150,000,000 by the Applicable Share Portion;
(iii) in the case of a Cash Transaction occurring
after the second anniversary and up to and including the third
anniversary of the Effective Date, the adjusted Warrant Price shall
equal the result obtained by dividing $180,000,000 by the Applicable
Share Portion;
(iv) in the case of a Cash Transaction occurring
after the third anniversary and up to and including the fourth
anniversary of the Effective Date, the adjusted Warrant Price shall
equal the result obtained by dividing $210,000,00 by the Applicable
Share Portion; and
(v) in the case of a Cash Transaction occurring
after the fourth anniversary and up to and including the fifth
anniversary of the Effective Date, the adjusted Warrant Price shall
equal the result obtained by dividing $240,000,000 by the Applicable
Share Portion.
There will be no adjustment to the Warrant Price pursuant to this
Section 10.1(g) in the case of a Cash Transaction occurring subsequent to the
fifth anniversary of the Effective Date. Such adjusted Warrant Price shall
become effective upon the giving of the notice referred to therein so that the
Holders of the Warrants shall thereupon be entitled to exercise the Warrants at
such adjusted Warrant Price.
In the event of an adjustment to the Warrant Price pursuant to this
Section 10.1(g), not later than the fifth New York City business day following
the execution and delivery of the definitive agreement with respect to the Cash
Transaction giving rise to such adjustment, the Company shall give notice (a
"Special Adjustment Notice") to each Holder in accordance with Section 10.3 (i)
setting forth in reasonable detail the terms of such Cash Transaction, (ii)
stating the date agreed or proposed for consummation of the same (which shall
not be earlier than the twenty-fifth New York City business day following the
date of such notice), (iii) specifying the details of such adjustment to the
Warrant Price, and (iv) containing a statement to the effect that all
outstanding Warrants not exercised prior to 5:00 P.M., New York time, on the
twentieth New York City business day following the date of such Special
Adjustment Notice shall, as provided in Section 11 hereof but subject to the
next succeeding paragraph hereof, terminate and become void. Cash and Warrants
delivered upon exercise thereof, and the certificates evidencing the Warrant
Shares issued upon such exercise, during the period from the date
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of such Special Adjustment Notice through and including the date on which all
unexercised Warrants shall expire as aforesaid shall be placed in escrow with
the Warrant Agent (such cash to be invested by the Warrant Agent for the
account, benefit and risk of each exercising Holder in debt securities issued
by the United States of America or any agency or instrumentality thereof and
entitled to its full faith and credit, if and to the extent so directed by such
Holder). So long as the certificates evidencing such Warrant Shares and the
funds delivered in payment therefor shall remain in escrow, the persons in
whose names such certificates are to be registered in the stock transfer
records of the Company shall have no rights as shareholders arising by virtue
of the issuance of such certificates. If the Cash Transaction in question shall
be consummated not later than the 90th (or, if prior thereto the Company shall
have given written notice thereof to the Holders, the 150th) day following the
date of such Special Adjustment Notice (x) the Warrant Agent shall within five
days thereafter sell any investments acquired by it as aforesaid, and deliver
out of escrow to the Holders or as they may direct such certificates evidencing
their respective Warrant Shares and any accrued earnings on their investments,
and to the Company an amount in cash equal to the exercise price of such
Warrants originally delivered to it by the exercising Holders, and (y) the
Company shall cause the registration of the certificates evidencing such
Warrant Shares in the names of the respective holders thereof in its stock
transfer records.
Notwithstanding the foregoing, if such Cash Transaction shall not be
consummated not later than the 90th (or 150th, if extended as aforesaid) day
following the date of such Special Adjustment Notice (i) such adjustment of the
Warrant Price, such termination of unexercised Warrants and such exercise of
all Warrants exercised during the period from the date of such Special
Adjustment Notice through and including the date on which all unexercised
Warrants expired as aforesaid shall be reversed. All such Warrants, exercised
and unexercised, shall be reinstated and the Holders thereof restored to their
former positions, and in this connection the Warrant Agent shall within five
days after such 90th (or 150th) day sell any investments acquired by it as
aforesaid, and deliver out of escrow to the Holders or as they may direct their
Warrants and funds in an amount in each case equal to the sum of the exercise
price previously paid by them and any accrued earnings arising from the
investment thereof, and to the Company for cancellation the certificates
evidencing the Warrant Shares which would have been delivered to the exercising
Holders had such Cash Transaction been timely consummated.
Unless such Cash Transaction shall fail to be timely consummated as
specified in the next preceding paragraph, the Warrant Price for the Warrants
shall be adjusted in accordance with this Section 10.1(g) only for the first
proposed Cash Transaction after the Effective Date. The Warrant Price as
adjusted by reason of a proposed Cash Transaction shall in all cases be subject
to further adjustment as provided in Subsections (a) - (f), inclusive, of this
Section 10.1 for so long as the Warrants remain outstanding.
(h) If at any time up to and including the fifth anniversary
of the Effective Date the Company proposes to consolidate with or merge into
another corporation, or in the event of any proposed sale or conveyance to
another corporation of all or substantially all of the issued and outstanding
stock or assets of the Company, in any case for a consideration consisting of a
combination of Cash and equity securities of
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such other corporation and/or any of its affiliates, and/or other property,
then, as a condition to the consummation of such transaction (a "Combined
Transaction"), the Company or such successor or purchasing corporation, as the
case may be, shall execute with the Warrant Agent an agreement providing that
(i) each outstanding Warrant shall be deemed divided into two notional Warrants
(for convenience of reference, an "A Warrant" and a "B Warrant"), such A
Warrant to be a Warrant evidencing the right to purchase the total number of
Warrant Shares which might have been purchased under such Warrant being
notionally divided immediately prior to the effectiveness of such agreement,
multiplied by a fraction of which the numerator shall be the Cash component of
the purchase price of the proposed Combined Transaction, and the denominator
shall be the sum of such Cash portion and the value of the equity securities
and/or other property, comprising the balance of such purchase price, and such
B Warrant to be a Warrant evidencing the right to purchase a number of Warrant
Shares equal to the excess of the total number of Warrant Shares which might
have been purchased under such Warrant being notionally divided immediately
prior to the effectiveness of such agreement over the number of Warrant Shares
obtainable upon exercise of such A Warrant, and (ii) the Warrant Price in
respect of each A Warrant shall be adjusted as provided in Subsection 10.1(g)
as if the A Warrants represented all outstanding Warrants and the portion of
the proposed Combined Transaction allocable to the A Warrants were a Cash
Transaction, and the Warrant Price in respect of each B Warrant shall be
adjusted as provided in Section 10.5 below. (For example, if the consideration
in the proposed Combined Transaction consists of 75% Cash and 25% equity
securities (based upon fair market value of the equity securities), then a
Warrant representing 100 Warrant Shares would be notionally divided into an A
Warrant representing the right to purchase 75 Warrant Shares, subject to
adjustment as provided in Subsection 10.1(g), and a B Warrant representing the
right to purchase 25 Warrant Shares, subject to adjustment as provided in
Section 10.5.)
In the event of an adjustment to the Warrant Price of the A Warrants
pursuant to this Subsection 10.1(h), a Special Adjustment Notice shall be given
to each Holder in accordance with Subsection 10.1(g), mutatis mutandis, as to
the Combined Transaction, the A Warrants and the B Warrants, and the provisions
of the antepenultimate and penultimate paragraphs of Section 10.1(g) shall
apply in respect of said A Warrants.
Unless such Combined Transaction shall fail to be timely consummated
as specified in the penultimate paragraph of Subsection 10.1(g), mutatis
mutandis, the Warrant Price for the Warrants shall be adjusted in accordance
with this Section 10.1(h) only for the first proposed Combined Transaction
after the Effective Date. The Warrant Price as adjusted by reason of a proposed
Combined Transaction shall in all cases be subject to further adjustment as
provided in Subsections (a) - (f), inclusive, of this Section 10.1 for so long
as the Warrants remain outstanding.
Any proposed sale or conveyance of all or substantially all of the
issued and outstanding stock of the Company for a consideration which,
depending upon the election of each selling stockholder may (as to such
stockholder individually) be either a Cash Transaction or a Combined
Transaction, shall be deemed to be a Combined Transaction to which this
Subsection 10.1(h) applies unless all selling stockholders elect to receive a
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consideration consisting solely of Cash. For purposes of this Subsection
10.1(h) the respective Cash and non-Cash components of the aggregate
consideration to be paid to all selling stockholders shall be determined by
summing the respective Cash and non-Cash components of the consideration to be
paid to each selling stockholder. For purposes of this Subsection 10.1(h), if
the equity securities of the other corporation involved in such Combined
Transaction are publicly traded, they shall be valued at the average closing
price of such equity securities for the five consecutive trading days ending on
the trading day immediately preceding the date on which the notice to Holders
pursuant to this Subsection 10.1(h) is given. If not publicly traded, such
securities shall have such value, and in any event any other property
constituting a part of the purchase price in such Combined Transaction shall
have such value, as is assigned by the Company's Board of Directors, its
determination to be conclusive.
(i) Notwithstanding the foregoing provisions, the issuance of
any options or rights to purchase shares of Common Stock pursuant to any
employee benefit plan or program of the Company duly adopted and as in effect
on the Effective Date shall not be deemed to constitute an issuance of common
stock or other convertible securities to which any of the adjustment provisions
described above applies.
10.2 Voluntary Adjustment by the Company. The Company may at its
option, at any time during the term of the Warrants, reduce the then current
Warrant Price to any amount deemed appropriate by the Board of Directors of the
Company.
10.3 Notice of Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant or the Warrant Price of such
Warrant Shares is adjusted, as herein provided, the Company shall cause the
Warrant Agent promptly to mail by first class mail, postage prepaid, at the
expense of the Company, to each Holder notice of such adjustment or adjustments
and shall deliver to the Warrant Agent a certificate of a firm of independent
public accountants selected by the Board of Directors of the Company (who may
be the regular accountants employed by the Company) setting forth the number of
Warrant Shares purchasable upon the exercise of each Warrant and the Warrant
Price of such Warrant Shares after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such certificate shall be
conclusive evidence of the correctness of such adjustment. The Warrant Agent
shall be entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the
same, from time to time, to any Holder desiring an inspection thereof during
reasonable business hours. The Warrant Agent shall not at any time be under any
duty or responsibility to any Holders to determine whether any facts exist
which may require any adjustment of the Warrant Price or the number of Warrant
Shares or other stock or property purchasable on exercise thereof, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed in making such adjustment.
10.4 No Adjustment for Dividends. Except as provided in Section 10.1,
no adjustment in respect of any dividend shall be made during the term of a
Warrant or upon the exercise of a Warrant.
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10.5 Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. Except as otherwise provided in Subsections 10.1(g) and
(h), in case the Company shall reorganize its capital, reclassify its capital
stock, consolidate or merge with or into another corporation or sell, transfer
or otherwise dispose of all or substantially all of its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation,
shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then each Holder shall have the right thereafter to receive,
upon exercise of Warrants, the number of shares of common stock of the
successor or acquiring corporation or of the Company, if it is the surviving
corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of
assets by a holder of the number of shares of Common Stock for which such
Warrants are exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant Agreement to be performed and
observed by the Company and all the obligations and liabilities hereunder,
subject to such modifications as may be deemed appropriate (as determined by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of shares of the Common Stock for which Warrants are exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 10. For purposes of this Section 10.5, "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 10.5 shall similarly
apply to successive reorganizations, reclassifications, mergers, consolidations
or disposition of assets.
10.6 Statement on Warrants. Irrespective of any adjustments in the
Warrant Price or the number or kind of shares purchasable upon the exercise of
the Warrants, Warrant certificates theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in the Warrant certificates initially issuable pursuant to this Agreement.
SECTION 11. Expiration of Warrants.
At 5:00 P.M., New York time, on October 1, 2007 (or on such earlier
date as may be specified in a Special Adjustment Notes given pursuant to
Section 10.1(g) or 10.1(h), but subject to reinstatement as provided in said
Sections 10.1(g)), all outstanding Warrants shall become void and all rights of
all holders thereof and thereunder and under this Agreement shall cease.
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SECTION 12. Fractional Interests.
The Company shall not be required to issue fractional Warrant Shares
on the exercise of Warrants. The number of full Warrant Shares which shall be
issuable upon the exercise of Warrants shall be computed on the basis of the
aggregate number of Warrant Shares purchasable on exercise of the Warrants so
presented. If any fraction of a Warrant Share would, except for the provisions
of this Section 12, be issuable on the exercise of any Warrant (or specified
portion thereof), the Company shall pay an amount in cash equal to the then
current market price per Warrant Share (as defined in Section 10.1(c) above)
multiplied by such fraction.
SECTION 13. No Rights as Stockholders.
Nothing contained in this Agreement or in any of the Warrants shall be
construed as conferring upon the Holders or their transferees the right to vote
or to receive dividends or to consent to or receive notice as stockholders in
respect of any meeting of stockholders for the election of directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company.
SECTION 14. Disposition of Proceeds on Exercise of Warrants; Inspection of
Warrant Agreement.
The Warrant Agent shall account promptly to the Company with respect
to Warrants exercised and concurrently pay the Company all monies received by
the Warrant Agent for the purchase of the Warrant Shares through the exercise
of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any notices
given or received hereunder available for inspection by the Holders during
normal business hours at its principal office in New York, New York. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Agreement as the Warrant Agent may request.
SECTION 15. Merger or Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided
that such corporation would be eligible for appointment as a successor Warrant
Agent under the provisions of Section 17 hereof. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, any of the Warrants shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
original
15
<PAGE> 16
Warrant Agent and deliver such Warrants so countersigned; and in case at that
time any of the Warrants shall not have been countersigned, any successor to
the Warrant Agent may countersign such Warrants either in the name of the
predecessor Warrant Agent or in the name of the successor Warrant Agent; and in
all such cases Warrants shall have the full force provided in the Warrants and
in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignatures under its prior
name and deliver such Warrants so countersigned; and in case at that time any
of the Warrants shall not have been countersigned, the Warrant Agent may
countersign such Warrants either in its prior name or in its changed name; and
in all such cases such Warrants shall have the full force provided in the
Warrants and in this Agreement.
SECTION 16. Concerning the Warrant Agent.
The Warrant Agent undertakes the duties and obligations imposed by
this Agreement upon the following terms and conditions, and no implied duties
or obligations shall be read into this Agreement against the Warrant Agent, by
all of which the Company and the Holders, by their acceptance of Warrants,
shall be bound:
16.1 Correctness of Statements. The statements contained herein and in
the Warrants shall be taken as statements of the Company and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken by it. The Warrant Agent assumes no
responsibility with respect to the distribution of the Warrants except as
herein otherwise provided.
16.2 Breach of Covenants. The Warrant Agent shall not be responsible
for any failure of the Company to comply with the covenants contained in this
Agreement or in the Warrants to be complied with by the Company.
16.3 Performance of Duties. The Warrant Agent may execute and exercise
any of the rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents and shall not be
responsible for the misconduct of any agent appointed with due care.
16.4 Reliance on Counsel. The Warrant Agent may consult at any time
with legal counsel satisfactory to it (who may be counsel for the Company) and
the Warrant Agent shall incur no liability or responsibility to the Company or
to any Holder in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the advice of
such counsel.
16.5 Proof of Actions Taken. Whenever in the performance of its duties
under this Agreement the Warrant Agent shall deem it necessary or desirable
that any fact or matter be proved or established by the Company prior to taking
or suffering any action hereunder, such fact or matter (unless other evidence
in respect thereof be herein specifically prescribed) may be deemed
conclusively to be proved and established by a
16
<PAGE> 17
certificate signed by the Chairman of the Board, the President, one of the Vice
Presidents or the Secretary of the Company and delivered to the Warrant Agent;
and such certificate shall be full authorization to the Warrant Agent for any
action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
16.6 Compensation. The Company agrees to pay the Warrant Agent
reasonable compensation for all services rendered by the Warrant Agent in the
performance of its duties under this Agreement, to reimburse the Warrant Agent
for all expenses, taxes (other than taxes based on income) and governmental
charges and other charges of any kind and nature incurred by the Warrant Agent
in the performance of its duties under this Agreement, and to indemnify the
Warrant Agent and save it harmless against any and all liabilities, including
judgments, costs and counsel fees, for anything done or omitted by the Warrant
Agent in the performance of its duties under this Agreement except as a result
of the Warrant Agent's negligence, intentional misconduct, bad faith or
unlawful conduct. The costs and expenses of enforcing this right of
indemnification shall also be paid by the Company. The indemnification provided
for hereunder shall survive the expiration of the Warrants and termination of
this Agreement.
16.7 Legal Proceedings. The Warrant Agent shall be under no obligation
to institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or one or more Holders shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as the Warrant Agent may
consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrants or
the production thereof at any trial or other proceeding relative thereto, and
any such action, suit or proceeding instituted by the Warrant Agent shall be
brought in its name as Warrant Agent, and any recovery of judgment (other than
in respect of a claim under Section 16.6) shall be for the ratable benefit of
the Holders, as their respective rights or interests may appear.
16.8 Other Transactions in Securities of Company. The Warrant Agent
and any stockholder, director, officer or employee of the Warrant Agent may
buy, sell or deal in any of the Warrants, or other securities of the Company or
have a pecuniary interest in any transaction in which the Company may be
interested, or contract with the Company or otherwise act as fully and freely
as though it were not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
16.9 Liability of Warrant Agent. The Warrant Agent shall act hereunder
solely as agent, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not be liable for anything which it may do or
refrain from doing in connection with this Agreement except for its own
negligence, intentional misconduct, bad faith or unlawful conduct. The Warrant
Agent shall not be liable for interest on any amount on deposit with it
pursuant to Section 10.1(g). Notwithstanding anything in this Agreement to the
contrary, in no event shall the Warrant Agent be liable for special,
17
<PAGE> 18
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits), even if the Warrant Agent has been advised of the
likelihood of such loss or damage and regardless of the form of the action.
16.10 Reliance on Documents. The Warrant Agent may conclusively rely
upon and will not incur any liability or responsibility to the Company or to
any Holder for any action taken in reliance on any notice, resolution, waiver,
consent, order, certificate, or other paper, document or instrument reasonably
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties.
16.11 Validity of Agreement, etc. The Warrant Agent shall not be under
any responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Warrant
Agent) or in respect of the validity or execution of any Warrant (except its
countersignature thereof) or in respect of the necessity or the extent of any
adjustment to the Warrant Price or the number of Warrant Shares purchasable
under a Warrant; nor shall the Warrant Agent by any act hereunder be deemed to
make any representation or warranty as to the authorization, reservation, value
or registration under securities laws of any Warrant Shares (or other stock) to
be issued pursuant to this Agreement or any Warrant, or as to whether any
Warrant Shares (or other stock) will, when issued, be validly issued, fully
paid and nonassessable, or as to the Warrant Price or the number or amount of
Warrant Shares or other securities or other property issuable upon exercise of
any Warrant or the method employed in making any adjustment to the foregoing.
16.12 Instructions from Company. The Warrant Agent is hereby
authorized and directed to accept instructions with respect to the performance
of its duties hereunder from the Chairman of the Board, the President, one of
the Vice Presidents or the Secretary of the Company and to apply to such
officers for advice or instructions in connection with its duties, and shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer or officers. Any
application by the Warrant Agent for written instructions from the Company may,
at the option of the Warrant Agent, set forth in writing any action proposed to
be taken or omitted by the Warrant Agent under this Agreement and the date on
or after which such action shall be taken or such omission shall be effective.
The Warrant Agent shall not be liable for any action taken by, or omission of,
the Warrant Agent in accordance with a proposal included in any such
application on or after the date specified in such application (which date
shall not be less than ten business days after the date any officer of the
Company actually receives such application, unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Warrant Agent
shall have received written instructions in response to such application
subject to the proposed action or omission and/or specifying the action to be
taken or omitted.
16.13. No Requirement to Expend or Risk Funds. No provision of this
Agreement shall require the Warrant Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder or in the exercise of its rights if there shall be reasonable grounds
for believing that repayment of such funds of adequate indemnification against
such risk or liability is not reasonably assured to it.
18
<PAGE> 19
16.14. Further Assurances. The Company agrees that it will perform,
execute, acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Warrant Agent for the carrying
out or performing by the Warrant Agent of the provisions of this Agreement. The
Warrant Agent shall not be required to take notice or be deemed to have any
notice of any fact, event or determination under this Agreement unless and
until the Warrant Agent shall be specifically notified in writing by the
Company of such fact, event or determination.
16.15. Incomplete Exercise or Transfer Instructions. If, with respect
to any Warrants surrendered to the Warrant Agent for exercise or transfer, the
certificate attached to the form of assignment or form of election to purchase,
as the case may be, has not be completed, the Warrant Agent shall not take any
further action with respect to such requested exercise of transfer without
first consulting with the Company.
SECTION 17. Change of Warrant Agent.
The Warrant Agent may resign and be discharged from its duties under
this Agreement by giving to the Company sixty days' notice in writing. The
Warrant Agent may be removed by like notice to the Warrant Agent from the
Company; provided, however, that the Warrant Agent may be removed immediately
upon written notice if the Company determines in good faith that the Warrant
Agent acted negligently or in bad faith or engaged in intentional misconduct or
unlawful conduct in the performance of its duties hereunder. If the Warrant
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Warrant Agent. If the Company
shall fail to make such appointment within a period of sixty days after such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Warrant Agent or by any Holder
(who shall with such notice submit his Warrant for inspection by the Company),
then any Holder may apply to any court of competent jurisdiction for the
appointment of a successor to the Warrant Agent. Notwithstanding anything
herein to the contrary, no resignation or removal of a Warrant Agent shall be
effective until a successor Warrant Agent has been appointed and accepted its
duties as such. Any successor warrant agent, whether appointed by the Company
or such a court, shall be a bank or trust company, in good standing, organized
under the laws of the United States of America or any state thereof and having
at the time of its appointment as warrant agent a combined capital and surplus
of at least $50,000,000, or a stock transfer company. After appointment, the
successor warrant agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Warrant Agent
without further act or deed; but the former Warrant Agent shall deliver and
transfer to the successor warrant agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose of transferring such property to the successor
warrant agent. Failure to file any notice provided for in this Section 17,
however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the
19
<PAGE> 20
Warrant Agent or the appointment of the successor warrant agent, as the case
may be. In the event of such resignation or removal, the successor warrant
agent shall mail, first class, to each Holder, at the expense of the Company,
written notice of such resignation or removal and the name and address of such
successor warrant agent.
SECTION 18. Identity of Transfer Agent.
Forthwith upon the appointment of any successor transfer agent for the
Common Stock, or any other shares of the Company's capital stock issuable upon
the exercise of the Warrants, the Company will file with the Warrant Agent a
statement setting forth the name and address of such successor transfer agent.
SECTION 19. Notices.
Any notice pursuant to this Agreement by the Company or by any Holder
to the Warrant Agent, or by the Warrant Agent or by any Holder to the Company,
shall be in writing, shall be given by registered or certified mail, and shall
be deemed given upon receipt as follows: (a) to the Company, at its offices at
200 Chisholm Place, Suite 200, Plano, Texas 75075, Attention: General Counsel,
with copies to Weil, Gotshal & Manges LLP, 100 Crescent Court, Suite 1300,
Dallas, Texas 75201, Attention: Martin A. Sosland; or (b) to the Warrant Agent,
to Harris Trust and Savings Bank, 1601 Elm Street, Thanksgiving Tower, Suite
2320, Dallas, Texas 75201, Attention:
Rozlynn Orr.
Each party hereto may from time to time change the address to which
notices to it are to be delivered or mailed hereunder by similar notice in
writing to the other party as provided herein.
Any notice mailed pursuant to this Agreement by the Company or the
Warrant Agent to the Holders shall be in writing and shall be mailed first
class, postage prepaid, or hand delivered to such Holders at their respective
addresses on the books of the Warrant Agent.
SECTION 20. Supplements and Amendments.
The Company and the Warrant Agent may from time to time supplement or
amend this Agreement, without the approval of any Holder in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrants and which shall not
adversely affect the interests of the Holders. Any supplement or amendment to
this Agreement which would adversely affect the interests of the Holders may be
made by the Company and the Warrant Agent only with the approval of the holders
of a majority of the outstanding Warrants. Upon such approval, such supplement
or amendment shall be binding on all Holders. Notwithstanding anything in this
Agreement to the contrary, no supplement or amendment that changes the rights
and duties of the Warrant Agent under this Agreement will be effective against
the Warrant Agent without the execution of such supplement or amendment by the
Warrant Agent.
20
<PAGE> 21
SECTION 21. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
SECTION 22. Merger or Consolidation of the Company.
The Company will not merge or consolidate with or into any other
corporation unless the corporation resulting from such merger or consolidation
(if not the Company) shall expressly assume, by supplemental agreement
reasonably satisfactory in form to the Warrant Agent and executed by such
resulting corporation and delivered to the Warrant Agent, the due and punctual
performance and observance of each and every covenant and condition of this
Agreement to be performed and observed by the Company.
SECTION 23. Applicable Law.
This Agreement and each Warrant issued hereunder shall be governed by,
and construed in accordance with, the laws of the State of Delaware.
SECTION 24. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give any person or
corporation other than the Company, the Warrant Agent, and the Holders any
legal or equitable right, remedy or claim under this Agreement. This Agreement
shall be for the sole and exclusive benefit of the Company, the Warrant Agent
and the Holders.
SECTION 25. Counterparts.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and
all such counterparts shall together constitute but one and the same
instrument.
SECTION 26. Captions.
The captions of the Sections and subsections of this Agreement have
been inserted for convenience only and shall not be deemed part of or used in
the construction of this Agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
21
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
NUCENTRIX BROADBAND NETWORKS, INC.
By: C.D. McHenry
--------------------------------
Title: Chairman and CEO
-----------------------------
HARRIS TRUST AND SAVINGS BANK,
as Warrant Agent
By: Jill Wessell
--------------------------------
Title: Vice President
-----------------------------
22
<PAGE> 23
No. R-___ EXHIBIT A
WARRANTS
NUCENTRIX BROADBAND NETWORKS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK PURCHASE WARRANTS
THIS CERTIFIES THAT, for value received , the registered
holder hereof, or registered assigns (the "Holder"), is entitled to purchase
from Nucentrix Broadband Networks, Inc., a Delaware corporation (the
"Company"), subject to the terms and conditions hereof and of the Warrant
Agreement referred to below, at any time on or after the date of this Common
Stock Purchase Warrant (the "Warrant") and until 5:00 P.M., New York time, on
October 1, 2007 (subject to earlier expiration under the circumstances
specified in the Warrant Agreement), at the purchase price of $27.63 per share
(the "Warrant Price"), _____ shares of Common Stock, $.001 par value, of the
Company (the "Common Stock"). The number of shares of Common Stock purchasable
upon exercise of this Warrant and the Warrant Price per share shall be subject
to adjustment from time to time as set forth in the Warrant Agreement referred
to below.
This Warrant may be exercised in whole or in part by presentation of
this Warrant with the Purchase Form on the reverse side hereof duly executed
and simultaneous payment of the Warrant Price (subject to adjustment) at the
principal office of Harris Trust and Savings Bank (the "Warrant Agent").
Payment of such price shall be made at the option of the Holder hereof in cash
or by wire transfer of immediately available funds to such account as the
Warrant Agent may from time to time specify for the purpose by written notice
to the Holders.
This Warrant is one of a duly authorized issue of Warrants evidencing
the right to purchase initially an aggregate of up to 1,100,000 shares of
Common Stock issued pursuant to the Plan of Reorganization (as defined in the
Warrant Agreement) under and in accordance with a Warrant Agreement dated as of
April 1, 1999 between the Company and the Warrant Agent and is subject to the
terms and provisions contained in the Warrant Agreement, to all of which the
Holder of this Warrant by acceptance hereof consents. A copy of the Warrant
Agreement, as from time to time in effect, may be obtained for inspection by
the Holder hereof upon written request to the Warrant Agent.
Upon any partial exercise of this Warrant, there shall be
countersigned and issued to the Holder hereof a new Warrant in respect of the
shares of Common Stock as to which this Warrant shall not have been exercised.
This Warrant may be exchanged at the office of the Warrant Agent by surrender
of this Warrant properly endorsed either separately or in combination with one
or more other Warrants for one or more new Warrants entitling the Holder
thereof to purchase the same aggregate number of shares as were purchasable on
exercise of the Warrant or Warrants exchanged. No fractional shares will be
issued upon the exercise of this Warrant, but the Company shall pay the cash
value of any fraction upon the exercise of one or more Warrants. This Warrant
is
23
<PAGE> 24
transferable at the office of the Warrant Agent in New York, New York in the
manner and subject to the limitations set forth in the Warrant Agreement.
The Holder hereof, until the transfer hereof has been effected on the
books of the Company by registration of such transfer on the Warrant Register
(as defined in the Warrant Agreement) maintained at the principal office of the
Warrant Agent, may be treated by the Company, the Warrant Agent, and all other
persons dealing with this Warrant as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented hereby, or to the
transfer hereof on the books of the Company, any notice to the contrary
notwithstanding.
This Warrant does not entitle any Holder hereof to any of the rights
of a stockholder of the Company.
24
<PAGE> 25
This Warrant shall not be valid or obligatory for any purpose until it
shall have been countersigned by the Warrant Agent.
DATED:
NUCENTRIX BROADBAND NETWORKS,
INC.
By:
Title:
----------------------------
(Corporate Seal)
Attest:
----------------------------
Secretary
COUNTERSIGNED:
HARRIS TRUST AND SAVINGS BANK,
as Warrant Agent
By:
----------------------------
Authorized Signature
Title:
-------------------------
25
<PAGE> 26
NUCENTRIX BROADBAND NETWORKS, INC.
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, shares of the stock provided for therein and herewith makes
payment in full for such shares in the amount of $ by delivery of cash
and/or wire transfer of immediately available funds, all in accordance with the
terms and conditions specified in the within Warrant Certificate and the
Warrant Agreement therein referred to, and requests that certificates for such
shares be issued in the name indicated below and delivered to the address
stated below:
- --------------------------------------------------------------------------------
(Please Print Name, Address and Social Security No.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
and, if said number of shares shall not be all the shares purchasable
thereunder, that a new Warrant Certificate for the balance remaining of the
Warrants under the within Warrant Certificate be registered in the name of the
undersigned Warrantholder or the Assignee below indicated and delivered to the
address stated below.
DATED:
Name of Warrantholder or Assignee:
----------------------------------------------
(Please Print)
Address:
------------------------------------------------------------------------
Signature:
------------------------------------------------------------------------
Signature Guaranteed By: NOTE: The above signature must correspond with
the name as written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
- --------------------------------- change whatever, unless this Warrant has
been assigned.
26
<PAGE> 27
ASSIGNMENT
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(Name and Address of Assignee Must Be Printed or Typewritten)
the within Warrant, hereby irrevocably constituting and appointing ____________
attorney to transfer said Warrant on the Company, with full power of
substitution in the premises.
DATED:
---------------------------------------
Signature of Registered Holder
Signature Guaranteed By: NOTE:
The above signature must correspond with
the name as written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
- --------------------------------- change whatever, unless this Warrant has
been assigned.
27
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 27,590
<SECURITIES> 1,011
<RECEIVABLES> 3,826
<ALLOWANCES> 348
<INVENTORY> 0
<CURRENT-ASSETS> 33,931
<PP&E> 59,513
<DEPRECIATION> 0
<TOTAL-ASSETS> 180,517
<CURRENT-LIABILITIES> 16,651
<BONDS> 310,456
0
0
<COMMON> 20
<OTHER-SE> (172,939)
<TOTAL-LIABILITY-AND-EQUITY> 180,517
<SALES> 18,086
<TOTAL-REVENUES> 18,086
<CGS> 0
<TOTAL-COSTS> 5,622
<OTHER-EXPENSES> (425)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 321
<INCOME-PRETAX> (7,829)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,829)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,829)
<EPS-PRIMARY> (.40)
<EPS-DILUTED> (.40)
</TABLE>
